[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]


                                     
 
                         [H.A.S.C. No. 110-30]
            SUBMARINE FORCE STRUCTURE AND ACQUISITION POLICY

                               __________

                                HEARING

                               BEFORE THE

             SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                             MARCH 8, 2007

                                     
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             SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE

                   GENE TAYLOR, Mississippi, Chairman
NEIL ABERCROMBIE, Hawaii             ROSCOE G. BARTLETT, Maryland
JAMES R. LANGEVIN, Rhode Island      KEN CALVERT, California
RICK LARSEN, Washington              TERRY EVERETT, Alabama
MADELEINE Z. BORDALLO, Guam          JO ANN DAVIS, Virginia
BRAD ELLSWORTH, Indiana              J. RANDY FORBES, Virginia
JOE COURTNEY, Connecticut            JOE WILSON, South Carolina
JOE SESTAK, Pennsylvania
                  Will Ebbs, Professional Staff Member
                 Heath Bope, Professional Staff Member
               Jenness Simler, Professional Staff Member
                    Jason Hagadorn, Staff Assistant


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2007

                                                                   Page

Hearing:

Thursday, March 8, 2007, SUBMARINE FORCE STRUCTURE AND 
  ACQUISITION POLICY.............................................     1

Appendix:

Thursday, March 8, 2007..........................................    49
                              ----------                              

                        THURSDAY, MARCH 8, 2007
            SUBMARINE FORCE STRUCTURE AND ACQUISITION POLICY
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Bartlett, Hon. Roscoe G., a Representative from Maryland, Ranking 
  Member, Seapower and Expeditionary Forces Subcommittee.........     1
Taylor, Hon. Gene, a Representative from Mississippi, Chairman, 
  Seapower and Expeditionary Forces Subcommittee.................     1

                               WITNESSES

Casey, John P., President, Electric Boat Corporation.............    24
Courtney, Hon. Joseph D., a Representative from Connecticut......     2
Donnelly, Vice Adm. John J., Commander Naval Submarine Forces, 
  U.S. Navy; Rear Adm. Carl V. Mauney, Director of Submarine 
  Warfare, U.S. Navy; Rear Adm. William H. Hilarides, Program 
  Executive Officer for Submarines, U.S. Navy; and Allison 
  Stiller, Deputy Assistant Secretary of the Navy (Ship 
  Programs), U.S. Navy...........................................     3
Nash, Winfred, President, BWXT, Nuclear Operation Division.......    31
O'Rourke, Ronald, Specialist in National Defense, Congressional 
  Research Service...............................................    32
Petters, C. Michael, Corporate Vice President and President, 
  Northrop Grumman Newport News..................................    28

                                APPENDIX

Prepared Statements:

    Bartlett, Hon. Roscoe G......................................    53
    Casey, John P................................................   103
    Courtney, Hon. Joseph D......................................   143
    Davis, Hon. Jo Ann, a Representative from Virginia...........    56
    Donnelly, Vice Adm. John J. joint with Rear Adm. Carl V. 
      Mauney.....................................................    65
    Nash, Winfred................................................   137
    O'Rourke, Ronald.............................................    78
    Petters, C. Michael..........................................   123
    Rell, Hon. M. Jodi, Governor, State of Connecticut...........   141
    Stiller, Allison joint with Rear Adm. William Hilarides......    58

Documents Submitted for the Record:

    Letter submitted by John P. Casey, President, General 
      Dynamics, dated March 30, 2007.............................   149
    Letter submitted by Winfred D. Nash, President, BWXT, dated 
      March 22, 2007.............................................   150

Questions and Answers Submitted for the Record:

    Mr. Taylor...................................................   153
            SUBMARINE FORCE STRUCTURE AND ACQUISITION POLICY

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
            Seapower and Expeditionary Forces Subcommittee,
                           Washington, DC, Thursday, March 8, 2007.
    The subcommittee met, pursuant to call, at 3 p.m., in room 
2212, Rayburn House Office Building, Hon. Gene Taylor (chairman 
of the subcommittee) presiding.

 OPENING STATEMENT OF HON. GENE TAYLOR, A REPRESENTATIVE FROM 
   MISSISSIPPI, CHAIRMAN, SEAPOWER AND EXPEDITIONARY FORCES 
                          SUBCOMMITTEE

    Mr. Taylor. The committee will come to order.
    We are very fortunate today to be joined by Vice Admiral 
John Donnelly, Commander of Submarine Forces; Commander Carl 
Mauney, Director of the Submarine Warfare Division; Rear 
Admiral William Hilarides, United States Navy, Program 
Executive Officer of Submarines; and Ms. Allison Stiller, 
Deputy Assistant Secretary of the Navy for Ship Programs.
    This committee over the past few years has expressed 
concerns that our Nation has not kept pace with our submarine 
requests, with our submarine building to meet current and 
future needs. The committee hopes to address that this year and 
in the years to come. We note that there have been a number of 
submarine studies that show the submarine force shrinking in 
future years to what I think most of us would agree is an 
unacceptable level, but we are laymen. We come from all parts 
of the country, and we are not experts in the field. You people 
are. So we would welcome your testimony today. Hopefully, all 
of our concerns are your concerns and we can find common 
ground, and where we can do some good for our Navy, we hope to 
do so. We are honored to have you here.
    I now turn to my ranking member, the gentleman from 
Maryland, Mr. Bartlett.

  STATEMENT OF HON. ROSCOE G. BARTLETT, A REPRESENTATIVE FROM 
  MARYLAND, RANKING MEMBER, SEAPOWER AND EXPEDITIONARY FORCES 
                          SUBCOMMITTEE

    Mr. Bartlett. Mr. Chairman, before I forget, I would like 
to ask unanimous consent to place in the record a statement 
from our colleague, Jo Ann Davis, who cannot be here today.
    Mr. Taylor. Without objection.
    [The prepared statement of Mrs. Davis can be found in the 
Appendix on page 56.]
    Mr. Bartlett. Thank you.
    In the interest of time let me submit my opening statement 
for the record, too, so we can get right to the testimony.
    [The prepared statement of Mr. Bartlett can be found in the 
Appendix on page 53.]
    Mr. Taylor. I thank you very much.
    The Chair now recognizes the gentleman from Connecticut, 
Mr. Courtney, for an opening statement.

  STATEMENT OF HON. JOSEPH D. COURTNEY, A REPRESENTATIVE FROM 
                          CONNECTICUT

    Mr. Courtney. Thank you, Mr. Chairman.
    With that presentation, I am going to keep my remarks very 
brief to get us moving along here, but I want to thank you and 
the staff of the subcommittee and the ranking member for 
responding to my requests for this hearing. Myself and 
Congressman Langevin, and I know members from Virginia, Mrs. 
Davis and Mr. Forbes, come from a part of the country where the 
industrial base exists for building nuclear submarines, and I 
think we have got a great story to tell about the progress that 
has been made over the last few years in terms of the 
production of Virginia-class submarines. I personally saw the 
latest submarine, the USS Hawaii, which was delivered ahead of 
schedule and, according to Admiral Haney of the Groton sub 
base, was in almost perfect condition, which, again, is the 
result of a lot of hard work that both the Navy and both 
companies that produce nuclear submarines have put in over the 
last few years to make the production more efficient and to 
reassure the taxpayers of that as we consider this decision 
that they are going to have a program, a shipbuilding program, 
that they can have confidence in, and again, as you have said 
on many occasions, the decision we are making here this year is 
really not about the sub fleet today; it is about the sub fleet 
10 years and 15 and 20 years down the road, and I am looking 
forward to the testimony to help us make good decisions as we 
move forward in this session of Congress.
    [The prepared statement of Mr. Courtney can be found in the 
Appendix on page 143.]
    Mr. Taylor. Thank you.
    I would ask the witnesses--there are a couple of things 
that I would hope you would address, and to you, it is going to 
sound almost simplistic, but for the American people who are 
going to pay for these submarines, I would hope that you would 
walk them through the time it takes from the day that Congress 
authorizes a submarine to the time that you actually purchase 
the power plant for the submarine before that submarine becomes 
an operational part of your fleet. I would hope you would walk 
us through the decline in the submarine production and the 
decline in the size of the fleet, at what point the Nation 
would bottom out, what kind of concerns you have about that 
timeline. I am told it is somewhere around 2020 when we would 
reach an unacceptable number of submarines, but also how long 
it would take us to respond to that if we do not start 
responding right now, and even if we do respond right now, if 
we were to put an additional submarine in the budget this year 
and next year, how soon we can start turning this around, and 
also the need to maintain the industrial base. I think it is 
fairly obvious to everyone at this podium that there are not 
too many other things that a submarine designer can do in his 
off time to make a living. He is either designing submarines 
and building submarines or he is going on and finding another 
job, but he is not going to be dropping back and forth between 
the two.
    So, with that in mind, Mr. Forbes, do you have an opening 
statement?
    Mr. Forbes. No.
    Mr. Taylor. Ms. Bordallo, do you have an opening statement?
    Ms. Bordallo. I do not have an opening statement, but I do 
have some questions.
    Mr. Taylor. Great.
    With that in mind, who would prefer to begin?
    Admiral Donnelly. I will begin, sir.
    Mr. Taylor. Okay. Vice Admiral Donnelly, thank you.
    Vice Admiral, because the committee has a five-minute rule, 
this subcommittee does not, so within the bounds of fairness, 
if you could keep it to ten minutes or less, we would certainly 
welcome it if you can get your point across in that time.
    Admiral Donnelly. Yes, sir. Certainly, I can do that, sir. 
Chairman Taylor and Representative Bartlett----
    Mr. Taylor. Admiral, would you hold it for one second? The 
other gentleman from Connecticut is going to join us--I am 
sorry--Rhode Island, somewhere a long ways from the shores of 
the Gulf of Mexico.
    I would ask unanimous consent that the gentleman from Rhode 
Island would join the subcommittee for the day without 
objection.

   STATEMENT OF VICE ADM. JOHN J. DONNELLY, COMMANDER NAVAL 
SUBMARINE FORCES, U.S. NAVY; REAR ADM. CARL V. MAUNEY, DIRECTOR 
     OF SUBMARINE WARFARE, U.S. NAVY; REAR ADM. WILLIAM H. 
 HILARIDES, PROGRAM EXECUTIVE OFFICER, SUBMARINES, U.S. NAVY; 
  AND ALLISON STILLER, DEPUTY ASSISTANT SECRETARY OF THE NAVY 
                   (SHIP PROGRAMS), U.S. NAVY

            STATEMENT OF VICE ADM. JOHN J. DONNELLY

    Admiral Donnelly. Chairman Taylor, Representative Bartlett, 
distinguished members of the Subcommittee for Seapower and 
Expeditionary Forces, Rear Admiral Van Mauney and I thank you 
for your continued support for our men and women in uniform and 
for the opportunity to appear before you today. I am honored to 
join Deputy Assistant Secretary Stiller, Rear Admiral Mauney, 
and Rear Admiral Hilarides, and I thank you for the opportunity 
to represent the men and women of your Navy and of your 
submarine force.
    As you have requested today, we will discuss the Navy's 
required attack submarine force level, how we developed it and 
the impacts of altering the Navy's future shipbuilding plan. We 
will also address the submarine force's current operational 
tempo and fleet requirements and relate them to the future 
force structure. Our remarks will be unclassified. However, we 
are prepared to provide classified details to the committee, if 
desired.
    First, let me say something about the cornerstone of our 
force, our people. I have always been proud to be a submariner. 
My father was a submariner. My son is a submariner, and in my 
first month as a submarine force commander, I have been 
repeatedly reminded of the caliber and of the quality of my 
fellow submarine sailors. They are talented and motivated. They 
have chosen to serve their Nation on the world's finest 
submarines.
    As an example, I recently visited sailors of the USS 
Hampton just before she departed Norfolk on her way to the 
Pacific for deployment. They were well-trained, enthusiastic 
and eager to go do what they have been trained to do. At the 
end of her deployment, Hampton will pull into her new home at 
the Port of San Diego, California as part of the Quadrennial 
Defense Review.
    Moving back to the topic of operations, today's submariners 
make up a small portion of our Navy, approximately seven 
percent of our personnel who operate 24 percent of our ships. 
They are out in front, around the globe every day, providing 
our national security. Even while serving in a capacity outside 
the Undersea Enterprise, such as on Joint Staffs or in Iraq and 
in Afghanistan, these sailors use their unique talents and 
submarine force experiences to make valuable contributions to 
joint operations and the Nation's defense.
    Currently, our 14 nuclear powered ballistic missile 
submarines remain ready and vigilant, submerged in a secure and 
survivable posture, able to rapidly respond to national 
tasking. We have also brought on line the nuclear powered 
guided missile submarine with the first one, USS Ohio, 
deploying later this year.
    Now let me turn from current operations to our future force 
structure. The Chief of Naval Operations has developed a 
shipbuilding plan that builds a Navy the Nation needs--a Navy 
that is both affordable and that meets with acceptable risk the 
future national security requirements outlined in the 2006 
Quadrennial Defense Review. Force structure requirements were 
developed and validated through detailed joint campaign and 
mission level analysis and optimized through innovative 
sourcing initiatives.
    In 2005, the Chief of Naval Operations (CNO) directed an 
effort to examine existing force structure studies, including 
the 1999 Chairman of the Joint Chiefs of Staff Attack Submarine 
Study and the 2005 Decision Memorandum III Study as well as a 
number of other submarine studies, to support his decisions 
regarding the right SSN force structure mix with the Navy's 
long-term shipbuilding plan. To maximize return on investment, 
the focus was for a Navy that was able to fight the Global War 
on Terror, execute maritime security operations and win in any 
major combat operation (MCO). The SSN force structure was 
examined using a capabilities-based assessment, which included 
peacetime demand and deterrents and warfighting requirements. 
The analysis found that 48 was the minimum number of SSNs that 
presented an acceptable risk and still allowed for an 
affordable plan for long-range shipbuilding.
    There will be some increased risk during the 2020 to 2034 
time frame when the shipbuilding plan results in an SSN force 
structure below 48 to a minimum of 40 SSNs, and the Navy is 
looking to mitigate this shortfall by fully funding cost 
reduction measures and fully implementing cost reduction 
measures for the Virginia-class SSN, which met this week. It is 
anticipated that the shipbuilders will also reduce construction 
time, thereby accelerating ships to the front lines.
    Another option, Los Angeles-class and Seawolf-class 
submarines. Together, these initiatives could mitigate the 
current 14-year requirement gap to as few as six years.
    Finally, let me emphasize how important it is to sustain 
the submarine force of 48 SSNs, 14 SSBNs and 4 SSGNs. That is 
the right size and shape for our Navy and for our Nation, and 
to sustain that force we need an effective and stable 
shipbuilding plan presented by the Navy, including that program 
that builds two Virginia-class submarines per year starting in 
2012.
    I am certain that our submarines will continue to be in 
high demand, and I assure you that they will be forward-
deployed and ready for any task. Day in and day out, your 
submariners gather intelligence. They shape the environment, 
and they help avert the next conflict. Yet, they stand ready to 
act quickly and decisively if needed.
    Again, on behalf of your sailors, Navy civilians and 
families of the submarine force, I thank you for the 
opportunity to appear before you, and I stand ready to answer 
your questions.
    [The joint prepared statement of Admiral Donnelly and 
Admiral Mauney can be found in the Appendix on page 65.]
    Mr. Taylor. Thank you, Admiral.
    Secretary Stiller.

                  STATEMENT OF ALLISON STILLER

    Secretary Stiller. Mr. Chairman, Congressman Bartlett, 
members of the subcommittee, it is a privilege for Admiral 
Hilarides and me to appear before you to discuss the Navy 
submarine industrial base issues. I request that our written 
testimony be submitted for the record.
    Mr. Taylor. Without objection.
    Secretary Stiller. We thank you for this opportunity to 
discuss the acquisition side of the submarine business, and 
specifically, we will address the submarine construction and 
design industrial base, the Navy's plan to reduce the average 
per unit cost of Virginia-class to $2 billion, the fiscal year 
2005 baseline, by fiscal year 2012, and the procurement 
strategies to increase the build rate of submarines.
    The submarine industrial base is composed of two major 
components, the construction base and the design base. As you 
know, the Navy is currently procuring one Virginia-class 
nuclear attack submarine per year. Nine of the Virginia-class 
submarines are under contract with three ships delivered and 
another six under construction. The tenth will start 
construction in early fiscal year 2008. The Navy's 2013 
shipbuilding plan calls for procuring two Virginia-class 
submarines per year starting in fiscal year 2012. The submarine 
construction base will remain stable until then, when we will 
see an increase due to the two submarines per year.
    Though the submarine construction base is at a sustained 
and constant level, this does not imply that the submarine 
construction base is at its optimal level. Instead, while far 
from robust, it is at a sustaining and constant level, two 
attributes that could not have been said ten years ago.
    The submarine design industrial base has more challenges. 
The Navy has recognized the potential impact of losing a 
national submarine design capability and is taking active steps 
to mitigate this risk. We commissioned RAND to study this 
unique portion of the industrial base. They evaluated 
strategies for managing submarine design resources, including 
shipyards, critical component suppliers and the Navy itself. 
They concluded that extending the period of the design of the 
next submarine class would alleviate the concern over the 
erosion of critical design skills.
    RAND recommended that the Navy consider accelerating the 
next submarine design to mitigate excess cost delays and risks 
that a design gap would cause. They also said sustaining 
workers in excess of current demand was found to be the least 
expensive. The shipyards would be able to more efficiently 
accomplish the next design by retaining a minimum range of 800 
to 1,050 designers and engineers to perform design work during 
the design gap. The shipyards are addressing specifics of the 
critical skills problem, so RAND did not repeat that effort. 
However, RAND described the recommended sustained workforces by 
general skill category. The Navy has elected to preserve the 
critical engineering skills in two ways, first by investing 
approximately $300 million in Research, Development, Training & 
Evaluation (RDT&E) across the Five Year Defense Plan (FYDP) and 
cost design.
    Next, I would like to discuss the Virginia-class cost 
reduction plans. Cost reductions will be achieved by 
implementing a three-part approach. The first part will be 
realized by ordering two Virginia-class submarines a year 
starting in fiscal year 2012 as part of the seven ships multi-
year procurement contract with Economic Order Quantity. This 
effort will reduce the per-unit cost by $200 million in fiscal 
year 2005 dollars.
    The second part of the cost reduction initiatives estimated 
to save an additional $100 million per boat include realigning 
work between the two shipbuilders to increase production 
efficiencies, full utilization of the capital expenditure 
initiative, reducing the construction span from seven to five 
years, and modifying how we install and test nonpropulsion 
electronic systems.
    The third part of the initiative is designed for cost 
reduction and is intended to lower costs by an additional $100 
million per boat. These redesign efforts will not impact the 
ship's capabilities and will include simplifying systems, using 
lower cost components and implementing the use of technologies 
to improve construction techniques. Together, these three 
initiatives will help us reach our goal of $2 billion a copy in 
fiscal year 2012.
    Finally, I will discuss potential procurement strategies to 
increase the build rate of submarines. One option for 
increasing the build rate of submarines is to fully fund nine 
SSNs, starting at two a year in fiscal year 2010. This would 
require the next contract to cover nine instead of seven hulls 
and require an additional $5.1 billion in FCN funding in the 
FYDP. We also considered alternative financing strategies 
spanning three years that utilize either incremental funding or 
advance appropriations. For this approach, nine SSNs procured 
between fiscal years 2009 and 2013 would still require an 
additional $1.7 billion of shipbuilding conversion (SCN) 
funding within the FYDP and an additional $3.4 billion beyond 
the FYDP. Any alternative funding strategy that requires 
additional SCN funding without top-line relief would cause 
significant deviation from the Navy's 313 shipbuilding plan, 
significantly increasing the risk of destabilizing the plan and 
negatively impacting other shipbuilding programs and the 
associated industrial facilities and suppliers.
    In summary, the Navy and industry are working together to 
reduce the cost and deliver these critical platforms. We have 
established a solid foundation to meet our goal of two ships 
for $4 billion in fiscal year 2012. We have addressed the RAND 
conclusions in the near and far term, and we have concluded 
that alternative financing strategies cause significant 
downstream builds which negatively affect other aspects of the 
shipbuilding account.
    Mr. Chairman, we would like to thank you for this 
opportunity to discuss the Navy's submarine industrial base and 
look forward to answering your questions.
    [The joint prepared statement of Secretary Stiller and 
Admiral Hilarides can be found in the Appendix on page 58.]
    Mr. Taylor. Thank you, Ms. Stiller.
    Any additional opening statements?
    Admiral Hilarides. No, sir.
    Admiral Mauney. No, sir.
    Mr. Taylor. Secretary Stiller, I hear you talking of the 
advantages of multi-year procurement, the advantages of buying 
two a year. What I did not hear you say is, if all of these 
things make sense to do in 2009, 2010, why don't they make 
sense to do now. Since we know we are going to have a shortfall 
of submarines in the future, if we know that even if we start 
now we still have a shortfall but we can lessen that shortfall, 
why doesn't the Administration that has grown the defense 
budget by approximately $150 billion since they took office 
request those submarines now?
    Secretary Stiller. As I mentioned, there is the three-prong 
approach. The multi-year is part of it, and we have a multi-
year right now for the block, the first block, and what we are 
talking about is requesting authority for the next block of 
ships that we would also like to buy in a multi-year. We do see 
that providing savings, and that is about $200 million per 
boat.
    The other part of it, to get to the $2 billion a year, 
requires the investment in R&D dollars that we have talked 
about. That is $300 million that goes through the FYDP. In 
order to reduce those, simplify the systems and to introduce 
the cost reduction initiatives, it is going to take us until we 
get to 2012 before we can realize that additional $200 million 
per boat in savings, and so that is why the Department is 
focused on fiscal year 2012 to getting to $2 billion a year.
    Mr. Taylor. You keep speaking of 2012. Now, is that to 
order the ship, to fund the ship or to have the ship delivered?
    Secretary Stiller. It is to order and fund the ship. The 
ships will go----
    Mr. Taylor. So, by your admission, it is going to take five 
to seven years after that?
    Secretary Stiller. Yes, sir. One of the initiatives is to 
reduce the construction cycle time from seven to five years. 
Yes, sir.
    Mr. Taylor. I think we have an opportunity because of the 
leadership of Chairman Skelton, because of the leadership of 
Chairman Murtha to begin that process this year and the 
cooperation of some other committee chairmen who are working 
with us to move some funds around. I wish the Administration 
had been a bit more aggressive on this, but that is neither 
here nor there. The opportunity is there. I believe the need is 
there. So my question for you is:
    It is my understanding that the longest lead time for 
procurements will be for the nuclear propulsion plant.
    Secretary Stiller. Yes, sir.
    Mr. Taylor. What type of funding would you need should this 
committee, should the House, should the Senate see fit to get 
this program going sooner rather than later? What kind of 
funding would you need from that vendor to initiate this 
process?
    Secretary Stiller. Typically in submarine procurement, we 
have two years of advance procurement that comes before you buy 
the submarine. So, realistically, looking at this, you really 
could not start construction on the submarine until fiscal year 
2010 because you do require two years of advance procurement 
money. Advance procurement money in the first year is usually 
on the order of about $400 million. I will defer to Admiral 
Hilarides in case I have missed something there.
    Admiral Hilarides. No. That is correct.
    Mr. Taylor. I would hope what I have just told you is not a 
surprise to you.
    Secretary Stiller. No, sir.
    Mr. Taylor. I would also hope that given what I think is 
the move again of those important players to see this happen 
that you would begin initial conversations with those suppliers 
so that we could know exactly what that dollar amount is and so 
that, since there is a need that everyone agrees to, that we 
can start filling that need now rather than later, but we will 
need your help and guidance on that.
    Secretary Stiller. Yes, sir.
    Mr. Taylor. Is that a reasonable request?
    Secretary Stiller. Yes, sir, and as I mentioned in my 
opening statement, the multi-year procurement authority that we 
have sent over as a legislative proposal covers seven boats. If 
there are additional boats that would need to be added, that 
has to be included in the multi-year authority as well.
    Mr. Taylor. Is there any hope of additional savings with 
those additional boats? Has anyone in your office calculated 
that scenario?
    Secretary Stiller. Well, for the fiscal year 2010 boat, we 
know we will not be able to achieve $2 billion a year because 
we will not have invested the time and the resources that we 
need to get to the $2 billion goal. So a fiscal year 2010 
submarine--as I said, if we look at that alternative, it causes 
us to add $5.1 billion to the FYDP that we do not have, and if 
we do that, it is going to be part of other critical 
shipbuilding programs that are in the account. As for the 
Economic Order Quantity, I will defer to Admiral Hilarides.
    Admiral Hilarides. Sir, the two additional boats would 
cause more learning. Again, with every boat you build the 
shipbuilders learn. The costs come down as a result of that 
learning. So there would be a benefit to the follow-on ships. 
It is not exactly calculable, but in the learning curves that 
are used to project our shipbuilding costs, that is part of it. 
Economic Order Quantity--buying nine ship sets worth, over 
seven ship sets worth does lower the costs in basic economic 
principles. Yes, it would lower the cost in things that you 
bought, that the Economic Order Quantity buys, and the number 
of years from when you buy it in the Economic Order Quantity to 
when you use it determines the total amount of savings that 
accrues to Economic Order Quantity. So, since they are closer 
to 2009, there is less than there would be for the 2011 and 
2012 ships, but there is a savings that would accrue in that. 
Yes, sir.
    Mr. Taylor. Admiral, I want to give you the opportunity to 
play the devil's advocate because I would rather hear it from 
you than from anybody else, but I think we did have, to the 
best of my recollection, the Secretary of the Navy on record 
last week saying that if additional funds were made available 
that would be one of his priorities.
    Is there anything in your overall pipeline that would keep 
this from happening? For example, do you have enough sailors to 
man it? Are there enough young people processing through the 
school of Charleston to man it? Is there anything that this 
committee has missed that would tell us that this is not a good 
idea?
    Admiral Hilarides. Sir, we have not gone all the way into 
the vendor base and looked at every supplier to say, ``In this 
year, could that supplier ramp up to two per year?'' the CNO 
shipbuilding plan has brought stability to shipbuilding, and we 
have continued to stand by that plan because that stability is 
what really lets the shipbuilders make the right investments 
and get the things lined up for the most efficient production. 
In that vendor base, I know there are some pretty fragile 
suppliers. Generally, giving them additional business earlier 
is better. I do not know of any of those vendors that would 
have a problem, but I have not done the analysis to tell you 
that they would all be able to provide their equipment.
    Mr. Taylor. Would anyone else on the panel like to comment 
on that?
    Admiral Donnelly. Sir, we have 52 SSNs today, and if you 
were to authorize additional submarines in 2010 and 2011 which 
would not be delivered until 2015 and 2016, manning would not 
be an issue.
    Mr. Taylor. What if they were authorized in 2008?
    Admiral Donnelly. Well, I mean the construction would begin 
in 2010. We have enough people or we could adjust our 
recruiting and our personnel programs to accommodate it.
    Mr. Taylor. And are you in agreement?
    Admiral Mauney. I know of no other consideration that we 
have looked at to limit this particular approach.
    Mr. Taylor. The Chair recognizes the ranking member, the 
gentleman from Maryland.
    Mr. Bartlett. Thank you very much.
    One of the biggest challenges that we face in the designing 
and the building of submarines is maintaining our industrial 
design base. Clearly, if, as our chairman and I both wish, we 
could move up the calendar our commitment to two submarines a 
year, that makes it easier, but absent that, what is your plan 
to make sure that we have designers available in the future to 
design the submarines, because we are not doing that now?
    Admiral Hilarides. Yes, sir.
    The two per year really affects mostly the construction 
base. It does not do a lot for the design base. What the RAND 
study told us is that, as we come off the designs for Virginia 
and the SSGN that, as the designers drop below a critical 
minimum--and the RAND study does make an attempt to define that 
critical minimum--it says that we should do something to 
sustain those designers. Again, construction will not do it. It 
has got to be a design. By the CNO shipbuilding plan, we 
logically would start the next design in about 2012, and that 
provides a couple of years of gap between when the designers 
would go away and when they would have to come back up for 
that.
    The RAND study also did a series of sort of ``what if'' 
drills about what we might do. We are assessing those options 
and the other options that are in front of us, and we will be 
coming forward with a plan that ensures we keep those critical 
designers on the books so that they are ready to design that 
next submarine for the Nation, sir.
    Mr. Bartlett. How do we do that? If we do not have a 
submarine for them to design, how do we keep them on the books?
    Admiral Hilarides. The RAND study specifically recommended 
accelerating the design of the next SSBN and designing it in a 
different way than we have designed ships before--instead of a 
dramatic ramp-up just before you start construction, doing it 
in a more measured fashion over a longer period of time--and we 
are assessing that option. We just have not had a chance to 
fully vet that to see if that makes sense, sir.
    Mr. Bartlett. Do our authorizations and appropriations 
bills need to reflect that or do you have the option of doing 
that within the gross amount of money we give you?
    Admiral Hilarides. Sir, for now, we have the resources 
required. This issue really comes up in 2010, in fiscal year 
2010, and so the follow-on budgets, I would suspect, would 
reflect the results of our study of those plans and of our 
putting in a plan that will sustain that base.
    Mr. Bartlett. But if we moved up the procurement two years 
for two submarines a year, then the problem goes away?
    Admiral Hilarides. No, sir. Again, that is not principally 
a design effort; it is a construction effort. The design effort 
is pretty much unrelated to the Virginia-class. The Virginia 
cost-reduction efforts do help. That is, we are hiring 
designers to figure out how to change the design such that it 
can be produced more effectively, but when that work completes, 
there will still be a gap between then and when we logically 
would start the next submarine design.
    Mr. Bartlett. But if we are building these more quickly, 
wouldn't we get to the next ones quicker?
    Admiral Hilarides. Sir, the requirement for the follow-on 
SSBN is determined by the end of life of the SSBNs that are 
currently in the fleet, and so that number is not affected by 
the Virginia-class. It is affected by the Ohio-class SSBNs.
    Mr. Bartlett. So this program is independent of whether we 
ramp up the design or not?
    Admiral Hilarides. The design base is independent in a very 
large measure, and I would defer to Ms. Stiller to tell you 
there are probably some interlinkings but not in the main sense 
of the design base.
    Mr. Bartlett. So tell me, what will they be doing absent a 
design challenge? See, the problem I have is I know you can 
keep some people on board. I suspect that if they do not have 
meaningful things to do, you will not keep the best people on 
board.
    Admiral Hilarides. That is correct, sir.
    My opinion is that the best use of their time is to design 
that next SSBN, but again the Navy has not come through with 
the results of the RAND study to lay that plan in place.
    Mr. Bartlett. Is there anything you need from us to 
expedite that?
    Admiral Hilarides. Sir, I do not believe there is anything 
we need this year.
    Mr. Bartlett. Thank you.
    Thank you, Mr. Chairman.
    Mr. Taylor. I thank the gentleman.
    The Chair now recognizes the gentlewoman from Guam, Ms. 
Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman.
    Admiral Donnelly and the other gentlemen and, of course, 
our Secretary Stiller, thank you very much for your testimony 
today.
    I am interested in receiving an update on the progress 
being made on the Trident submarine conversion program, and I 
respectfully request that you discuss with the subcommittee 
today your level of satisfaction with the progress being made 
to date on this effort, and also I would appreciate your 
discussing today your level of satisfaction with the two 
converted submarines that I believe rejoined the fleet last 
year.
    Last, Admiral, I am interested in knowing more about the 
role, if any, that Guam can play or will play in supporting the 
missions carried out by the submarines.
    Admiral Donnelly. Yes, ma'am.
    We are very satisfied with the SSGN program. We have 
actually had three ships delivered to date. The Ohio was the 
first, and she will deploy later this year in the fall time 
frame. Behind Ohio is USS Florida and then USS Michigan, and 
all three of those ships have been delivered to the Navy. They 
are in various stages of sea trial, of final outfitting and 
evaluation and testing. The USS Georgia is the fourth and final 
SSGN, and we expect she will deliver in the September 2007 time 
frame. Those ships will be on a slightly different patrol 
cycle. They will have two crews, and the plan is that one crew 
will operate the ship, once it is forward-deployed, for about 
75 days, and then the ship will pull into port and do a crew 
swap, and then the next crew will do about a 21-day voyage, 
repair, maintenance period, and then we will take the ship out 
for 75 days. We will do three of those cycles, and then the 
ship will return to its home port of either Bangor, Washington 
or Kings Bay, Georgia--we plan to put two SSGNs in Bangor and 
two in Kings Bay--and then we go through about a 100-day 
maintenance period where more extensive maintenance would be 
performed, and then the cycle would repeat. We do plan, as you 
know, to use Guam as one of those forward-staging bases where 
the crew swaps and voyage repairs will occur. We do have some 
dredging projects in the harbor to enable that much larger 
submarine to get into the pier in Guam, and we are very excited 
about the capability that these ships bring to the Navy, and we 
look forward to the first deployment of Ohio this year.
    Ms. Bordallo. Thank you. Thank you very much, Admiral, and 
we want to thank you all for discussing it with me prior to 
this meeting and giving me the date of the arrival of the 
nuclear sub, the USS Buffalo. Thank you.
    Thank you, Mr. Chairman. I yield back.
    Mr. Taylor. Thank you.
    The Chair recognizes the gentleman from Virginia, Mr. 
Forbes.
    Mr. Forbes. Thank you, Mr. Chairman. Thank you for holding 
this hearing.
    I want to thank all of our witnesses for their patience in 
working with us to educate us on these matters.
    The first question I have is just the timeline. I am trying 
to go through the sequencing and make sure I understand it. If 
Chairman Taylor had it within his power to write you a check 
today and say ``we want to bring on line a new sub or a new 
carrier,'' give me the timeline before it would be deployed 
from today, if he presented the check to you today.
    Admiral Hilarides. Sir, if I may, the basic timeline is 
this: two years prior to authorization, we need two years 
advance procurement (AP) to buy long lead materials. In the 
propulsion plant, there is a small tranche of one year advance 
procurement that gets the rest of the government furnished 
equipment in place, and then the year of authorization starts 
the clock on the construction, but really your two years on the 
clock that you asked. By the tenth ship of the Virginia-class, 
we believe will be at a five-year construction span, somewhere 
close to that. So about five years from that authorization that 
ship would go out to sea on its trials.
    We also intend to change the construction such that that 
ship does not require a shipyard period after that, but what we 
call the ``post shakedown availability.'' Our intent would be 
to reduce that to the smallest possible. So, about a year after 
that delivery, so the sixth year after authorization, she would 
start her pre-overseas movement workup and about six months 
after that she would deploy.
    So, from today, from the AP, it is 7 plus about 2, and from 
the authorization, it is the 5 plus 2.
    Mr. Forbes. So, doing your math, if you would tell me 
exactly how many years of the years you have just told me from 
today--if Mr. Taylor presents you with a check, tell me what 
the total number of years would be before it would be deployed.
    Admiral Hilarides. That would be 11, sir.
    Mr. Forbes. That is 11 years.
    So, if today he could say we need a new sub, we would be 
looking at 11 years before we could have it deployed?
    Admiral Hilarides. Yes, sir.
    Mr. Forbes. Any idea on the carrier?
    Secretary Stiller. The carrier has four years of advance 
procurement funding required. The construction cycle of the 
carrier--Mr. Petters can best answer this on the second panel, 
too--is longer than the submarine. It has got a seven-year 
construction cycle, and then it has a similar on the back end 
of how long you have to do your workups and your trials before 
you deploy. So I would add about four more years to your number 
from the submarine.
    Mr. Forbes. So, from 11, you would give me 15?
    Secretary Stiller. Yes, sir.
    Mr. Forbes. So, if Mr. Taylor were to authorize that today 
and he had it in his power, that would be 15 years?
    Mr. Taylor. Mr. Forbes, I understand my limitations. ``if 
this committee.''
    Mr. Forbes. ``if this committee.''
    Fifteen years. If whoever would come in here and we had 11 
years for a sub, it would be 15 years from today. Now----
    Admiral Donnelly. Mr. Forbes, if I may, I am not sure that 
Admiral Hilarides has got the math exactly right.
    As I understand it for a submarine, it is two years advance 
procurement, five years construction. That is seven years. Then 
with the PSA and the POM workup, it would be nine years.
    Mr. Forbes. So your total would be nine years?
    Admiral Donnelly. Nine years for a submarine.
    Mr. Forbes. So 9 years for a sub, 15 years for a carrier.
    Is my time about up?
    Can you tell me--we hear all the time the words 
``acceptable level of risk.'' can you tell us what that means, 
anybody?
    Admiral Donnelly. I assume you are talking about the 
period----
    Mr. Forbes. When we are told how many subs we need, we are 
always told 48 subs is an acceptable level of risk, and that is 
kind of like giving a symbol of this is the certification. That 
is okay. You know if you have it.
    So what is an ``acceptable level of risk''? How do we 
define that?
    Admiral Donnelly. That is a tough question, sir.
    I look at this as a shortfall. Under the current 30-year 
civilian plan, in 2020 we will dip below 48 submarines, and we 
will remain below 48 fast attack submarines until 2033, so that 
is a 14-year period when our force levels will be below the 
minimum required force level of this most recent 2005 study. So 
there is risk associated with that. Quantifying that risk is a 
function of your assumptions about what that future from 2020 
to 2033 will look like. So we are undertaking a number of steps 
to mitigate that risk such as if those shipbuilders can deliver 
the ship in 60 months as opposed to 72 months. That will 
accelerate two ships to the front line, and that will help fill 
that shortfall period.
    As I mentioned in my oral statement, we have identified 19 
hulls, by hull number, and that we could extend their service 
lives based on their fuel remaining. Now, that would require 
some additional maintenance periods for those ships, but we 
think we could get 10 additional 6-month deployments from those 
19 ships, and that would further mitigate that shortfall period 
but not completely.
    Mr. Forbes. My time is up, but let me just state my concern 
and maybe you could get back to me either privately after this 
or in writing.
    I look at our Quadrennial Defense Review (QDRs), and I 
recognize that just a few years ago, when we looked at a 
country like China, for example, we felt they were not going to 
be involved in carriers. You know, that was the wording we were 
getting. That was what we were hearing. Then many of us 
thought, oh, yes, they are going to be involved in carriers. We 
wrote about that. We talked about it. Then, all of a sudden, we 
get the satellite imagery of their retrofitting the carrier 
that they are doing. We find them at the Moscow air show, 
looking at planes that would only fly on the Super Carrier. We 
now have, you know, the generals coming out and saying they 
will have carriers on line or could have in about 2010.
    We also had the same problem looking at subs. You know, we 
had language that indicated they were not concerned about their 
having a sub program. We then find out they have got underwater 
docking bases and what they are doing with the Kilos and the 
production of subs that are there.
    My concern is, when we are looking at an acceptable level 
of risk, we better be calculating some of that and factoring it 
in because we cannot afford 9-year windows and 15-year windows 
if we find out it is different 2 years from now or 3 years from 
now, and I think that is one of the things this subcommittee is 
very much concerned about. Are we allocating those risks?
    My time is up. The Chairman has been very lenient with me, 
but at some point in time I would love to have that discussion 
with you or maybe it is something we can get our hands around 
and look at what we are projecting on that.
    Mr. Chairman, thank you.
    Mr. Taylor. Thank you, Mr. Forbes.
    The Chair recognizes the gentleman from Connecticut, Mr. 
Courtney.
    Mr. Courtney. Thank you, Mr. Chairman.
    Before I forget, there is a statement, actually, from the 
Governor of Connecticut, which I wanted to submit to the 
record.
    Mr. Taylor. Without objection, it will be added to the 
record.
    [The prepared statement of Mr. Rell can be found in the 
Appendix on page 141.]
    Mr. Courtney. Thank you, Mr. Chairman.
    As a new member up here talking to other new members about 
this issue, obviously coming from where I come from, it is 
obvious why this issue, the question of the size of our sub 
fleet, is an important one for the national security of this 
country, but frankly some folks who are not from my region or 
perhaps from Virginia sometimes are a little confused about why 
in the sort of post-Cold War era this is a need for our 
Nation's national defense, and I thought maybe we could just 
step back from the prior discussion about production schedules 
and ask you, Admiral Donnelly, if you could sort of comment on 
what you see the need is for submarines so that, as we 
deliberate on this question of the size of the fleet, people 
clearly understand why it is important.
    Admiral Donnelly. Yes, sir.
    The submarine force has been active around the world in the 
past year. We have provided submarine deployments for each of 
the regional combatant commanders and for U.S. Strategic 
Command (USSTRATCOM), of course, and for Special Operations 
Command. Submarines are not a Cold War relic. They are a highly 
modern sensor suite, strike platform that utilizes stealth, 
endurance, mobility, persistence to gather intelligence, to be 
forward in what we call ``intelligence preparation'' of the 
battlefield. You could think of a submarine as a scout that is 
out every day, walking the ground and providing valuable 
information about the environment. There is a deterrent value 
in the submarine because of its stealth. It is never seen. It 
may be there. It may not be there. We are using submarines 
extensively in the global war on terror. Using their stealth 
capability and their impressive intelligence-gathering 
capabilities, we can and have been gathering intelligence that 
is briefed at the very highest levels of our government and of 
our military. We are monitoring the activities and the plans of 
the enemy, and our submarines are very heavily employed 
throughout the world. I would be happy to provide classified 
details in an off-line session.
    Mr. Courtney. Admiral Mauney, do you want to comment on 
that?
    Admiral Mauney. Yes.
    I would add that we also participate in a number of other 
activities. We are working with our allies to build a coalition 
of nations that respect national interests and global security. 
We have an active program in the Pacific and in fact in all of 
the geographic areas.
    Additionally, we are cooperating with our own forces to 
maintain our dominance of the areas in which we need to operate 
to be prepared to gain access if directed by our national 
leaders, and those complement the global war on terror with a 
longer view toward maintaining our national security.
    Mr. Courtney. Thank you.
    Again, a lot of people may be watching this through webcast 
or through the press, and again, members on this committee, I 
think, have the benefit of great briefing papers from staff, 
and just so that there is some clarity as far as the public who 
may be listening or interest in this issue, again, I just want 
to clarify comments that have been made earlier about what is 
going to happen in the future, starting in 2013. I believe that 
was the year that you mentioned, Admiral Donnelly, when there 
is going to be a rate of decommission that is going to affect 
the size of the fleet.
    Again, maybe you can state for the record so we can make 
sure that that is clearly stated what is actually going to 
happen starting around that time frame.
    Admiral Donnelly. Sir, the date is 2020 under the current 
shipbuilding plan, and at that point, we will be 
decommissioning large numbers of our Los Angeles-class 
submarines that were built at a rate of about five a year. 
Although, by that time, we will be building two a year 
Virginia-class, the two a year increase does not offset the 
five per year decrease because of the end of life. So there is 
a 13-14 year period from 2020 to 2033 when our projected force 
levels will drop below 48, which is our best estimate of the 
minimum number we need to meet the combatant command 
requirements in wartime and peacetime.
    Mr. Courtney. Again, just to be clear, because the staff 
has given us the benefit of this with their materials, there 
actually will be a period where it will dip close to 40 within 
that decade or so.
    Admiral Donnelly. Yes, sir. The year 2027 to 2028. The 
number bottoms at 40 and then begins to come back up.
    Mr. Courtney. So to follow up on Mr. Forbes' question about 
acceptable levels of risk, what we have to decide here is 
really whether or not the decisions we make today which will 
have an effect on that number down the road, using our best 
possible judgment, is actually an acceptable level of risk for 
our Nation. I mean that is pretty much the decision we have 
before us; isn't that correct?
    Admiral Donnelly. Yes, sir. I think that is an important 
consideration in the decision, and as I mentioned before, we 
are looking at a number of initiatives that we can use to also 
mitigate that risk. Given the number of hulls, it will be what 
it is, and then there will be a shortfall, I think, regardless 
of what action this committee takes. You know, we will be 
paying the price of a long period of time when we did not build 
submarines in sufficient numbers from about in the 1990's. So 
my job and the job of my successors will be to take what we 
have and to do the best we can through the various, innovative 
techniques. We have already begun that process in the 
redistribution of attack submarines from the Atlantic to 
Pacific, which will shorten transit times and which will 
provide more presence for the given number. We are also looking 
at a number of other alternatives that we might be able to 
employ to get us through that period.
    Mr. Courtney. That kind of involves looking into a crystal 
ball, to some degree, as the world changes, and nothing is 
static in terms of security challenges.
    Admiral Donnelly. Exactly, sir.
    Mr. Courtney. Just one other follow-up question if I could, 
Mr. Chairman.
    Secretary Stiller, when you talked about the design part of 
our industrial base--and actually, we have some folks who are 
here in the audience, listening very anxiously to your 
testimony, and I welcome them from my district--there is also 
the production piece of the industrial base also, which I 
believe brings a skillset which may not be quite as technically 
trained as maybe the designers and engineers, but clearly at 
the production level it is not assembly line production when 
you build a submarine, and we are seeing stress as far as that 
part of the industrial base.
    Would you agree?
    Secretary Stiller. Well, sir, I think we are seeing--as I 
said in my oral statement, we are seeing a much more steady 
pace in the production industrial base than we did, say, ten 
years ago when we had a hiatus in submarine construction, and 
so, looking at the health of the design of the industrial base 
versus the production industrial base, yes, sir, there are 
critical skills there that we need to maintain, and we look 
very closely at that and at the one-year ramping to two-year. 
We feel very confident that the skillsets that we need there on 
the production side are there, and yes, we do value them as 
well.
    Mr. Courtney. Again, I would respectfully point out that in 
the last 18 months there are about 2,000 jobs that have been 
eliminated at Electric Boat because of this production 
schedule, and if we stay on track to 2012, before we go up to 
two a year, based on everything I know, that workforce is going 
to continue to be under a lot of pressure because it is just 
not sustainable without some of the repair and maintenance work 
that may not be there at Electric Boat, and you know, I can 
just tell you, as someone who stood outside those factory gates 
at 5:30 in the morning, greeting people, it is getting older in 
terms of the people who are there doing the production work, 
and I really think that--again, I applaud the fact that the 
Navy has used the foresight with the RAND study to look at 
preserving those design and engineering skills, but there is 
another piece to this, too, in terms of where the shipbuilding 
schedule is sort of leaving the production side of the equation 
as well, and you do not have to comment on that. If you would 
like, you certainly are welcome to, but that is certainly, I 
think, another of the challenges that we have as a committee 
and as a Congress to make sure that the whole workforce is 
looked at in terms, again, of these decisions that we are about 
to make.
    Secretary Stiller. Yes, sir.
    Mr. Courtney. All right. Thank you, Mr. Chairman.
    Mr. Taylor. Thank you, Mr. Courtney.
    The Chair now recognizes the gentleman from Rhode Island, 
Mr. Langevin.
    Mr. Langevin. Thank you, Mr. Chairman.
    I want to thank you all for your testimony here today.
    Mr. Chairman, I want to thank you for allowing me to rejoin 
the committee today. I have enjoyed my work on the Intelligence 
Committee, but I certainly miss the work on the Armed Services 
Committee, and I welcome the opportunity to return today.
    If I could just start with one question with respect to the 
work our submarines do in the field, and I believe it was 
Admiral Mullen who had testified previously before the Armed 
Services Committee that right now our submarines are only able 
to meet about 60 percent of the mission requests of our 
combatant commanders in the field right now.
    Do you concur with that number, Admiral Donnelly?
    Admiral Donnelly. Yes, sir. If I could, just to clarify, 
the combatant commanders submit requests for forces, and those 
requests go to the Joint Staff where they are evaluated and 
validated and prioritized, and the Joint Staff ranks those as 
critical, high priority, priority, and routine, and then it 
allocates the available forces to the combatant commanders 
accordingly, so that becomes my requirement is the Joint Staff 
validated allocation. I am meeting 95 percent of my requirement 
in all of the critical mission requests and about 95 percent of 
the high priority, but overall, if you go back to the original 
requests from the combatant commanders, Admiral Mullen is 
exactly right. I think it is 62 percent of those original 
requests that are actually being satisfied after that global 
force management process and the allocation.
    Mr. Langevin. I just said we recognize that as a 
significant number that are going unfulfilled, and again, these 
are from combatant commanders in the field.
    Going to Mr. Forbes' question, does the Navy's future 
submarine force structure plan to provide adequate capability 
against emerging threats? Mr. Forbes mentioned China. How does 
the plan address China's growing submarine fleet?
    Admiral Mauney. Yes, sir.
    Our analysis and Admiral Donnelly's opening statement 
briefly covered the three more recent--the Joint Staff in 1999, 
the program decision in 2003 and 2005--and the Navy's force 
structure analysis considers the range of what our Intelligence 
Community sees, and using their best analysis, it provides an 
estimate. That estimate has risk associated with it. There are 
unknowns. We use those estimates in parallel with detailed 
analysis of potential situations in which our submarines and, 
in fact, all of our forces would be employed to determine how 
they perform given the design criteria that we use in building 
submarines and surface ships and aircraft.
    From that performance, we look at how many we would need. 
Generally, you come up with a range of submarines--48 being 
what we call the ``sweet spot''--in the range of 45 to 50, 
which is the minimum number several studies have come up with. 
Those allow us to perform the critical missions in warfighting 
as we would postulate them. That warfighting consideration is 
then done in additional analysis, in parallel, using peacetime 
forward presence. As Admiral Donnelly mentioned, we have been 
providing about 10 submarines a year forward presence to the 
combatant commanders to accomplish the missions that we have 
been required by the Joint Staff to accomplish.
    One of the assumptions that you make is how much is that 
going to change over time, and the assumption that was made was 
that this force structure, or this forward presence number, is 
about right given what our Intelligence Community forecasts for 
the future, and that is the force structure of about 45 to 50 
will meet both the 10 submarines of forward presence per year 
as well as our warfighting needs as we have analyzed it.
    Mr. Langevin. But even given that, you recognize, according 
to Admiral Donnelly's testimony, that in the outyears, 2028 and 
2029, our force structure, our submarine force structure, drops 
below or to about the level of 40. We are going to be at a 
significant disadvantage, and that troubles all of us.
    Because I know my time is limited, if I could, I would like 
to go back to the issue of the multi-year contract and getting 
two subs per year. As to the multi-year procurement plan, I 
guess estimates are it saves us about $80 million per ship. 
Going back to the chairman's question, if we were to add more 
ships into the mix, adding an eighth or a ninth, what does that 
do in terms of bringing costs down using multi-year contracts? 
What do we expect to save?
    Secretary Stiller. Right now, for the second multi-year 
contract that we have been talking about in fiscal year 2009 
through fiscal year 2013, we assess the savings to be about 
$200 million per boat, and we have not--and as Admiral 
Hilarides said earlier, there would be some if you added an 
additional submarine, one or two. There would be additional 
savings that we have not yet calculated because of the learning 
that you would see with two boats a year. Would it be 
significantly more? No. I mean it is not going to be another 
$200 million, but there would be some savings, but we have not 
calculated that.
    Admiral Hilarides. We just have not run those numbers, sir.
    Mr. Langevin. Okay. If I could ask one last question.
    We talked about and you mentioned here today the fact that 
we can get the build cost down to about $2 billion per ship. 
Could you discuss in more detail the design changes you deem 
most important for the cost reduction, obviously, and design 
and describe the elements in your budget request to support 
those efforts?
    Admiral Hilarides. Sir, there are about 300 different 
initiatives that we are working on, and they have, some of 
them, a relatively small cost effect on a per hull basis, but 
additively, they will get us to the target that we need. We are 
shooting for more than $100 million out of these cost reduction 
initiatives, but in order to do that, we have these, and many 
of them are small ones, simple things like taking out hydraulic 
pipes and valves and putting in electric actuators, changing 
the way we buy government furnished equipment, and some big 
ones that would involve major changes to the structure of the 
ship. They are all under evaluation in terms of how well we can 
execute them, how much cost they take out and their impact on 
the capability of the ship. That analysis is going on this 
year, and our shipbuilders have been very, very helpful in 
helping us sort all of that out. They have been the source of 
many of those ideas. We will put that hull package together, 
and it will form the basis of the cost reduction, and again 
there are about 300 that are under assessment, and as we decide 
to incorporate them, then we and the shipbuilders agree on the 
amount of savings that accrue, and then we put those in play, 
and again the goal will be to have the predominance of the 
savings in place by the fall, and we have just started that 
process with the shipbuilders.
    Mr. Langevin. How much weight are you giving to the 
government's investing in the capital equipment up front? 
Sometimes the SSR is reticent to invest in that equipment, 
particularly if we do not know if ships are going to be built, 
so it will not necessarily make the investment. If it is not 
used, it is a big waste of money.
    What about the government's funding some of the upfront 
costs of investing in the capital equipment? Could you comment 
on that and what degree that would achieve a significant 
savings?
    Admiral Hilarides. Yes, sir.
    The current contract has some contract incentives that the 
shipbuilders have made great use of. It is called Capex. Ms. 
Stiller referred to it in her opening statement. That 
incentivizes and helps the shipbuilder get the capital 
investment required to improve the shipyards. Both of our 
shipbuilders have made good use of that, continue to propose 
projects under that contract's capital expenditure that are 
helping us bring the cost of those ships down. We would intend 
in the next multi-year to work to have those incentives be in 
place as well, and of course, that would be part of the 
negotiations that would go in, but it has been so successful 
for us that we would intend to continue that as a going-in plan 
to those negotiations, sir.
    Mr. Langevin. That is good to hear.
    I want to thank the panel for your testimony here today and 
for answering our questions, and thanks for the job you do.
    Thank you, Mr. Chairman. I yield back.
    Mr. Taylor. Thank you, Mr. Langevin.
    It would be the Chair's intention to now recognize those 
members who came after the gavel, so that would be Mr. 
Ellsworth, Mr. Wilson should he return, and Mr. Sestak.
    The gentleman from Indiana, Mr. Ellsworth.
    Mr. Ellsworth. Thank you, Mr. Chairman.
    Thank you all for your testimony. I apologize for being 
late, so I may have missed something. You know, I think a lot 
of my questions got answered in some of the other questions, 
but I would ask--you know, Mr. Courtney sounded out about how 
many job losses when we cannot estimate it in the shipyard and 
cannot estimate how much they need when they are waiting for 
our Federal Government to decide how many ships we need, but 
how does that trickle down? If you will, tell me how that 
trickles down.
    Also, I do not want to assume that everything that goes 
into a sub is made there at the shipyard. There are outside 
contractors, and I guess I would ask how difficult that is to 
find the people who are making the equipment that is not the 
hull or in the ship, keeping them out there hanging, and then, 
in turn, is it a concern that it goes--and I do not know this--
to foreign companies, and if that is the case, is there the 
concern for either foreign companies that make that equipment 
and foreign materials that go into our equipment, and would 
that be a concern if that is the case?
    Secretary Stiller. I am going to start and then turn to 
Admiral Hilarides for the specifics on the submarine vendor 
base.
    One of the goals of the SSN 313 plan has been to introduce 
stability into the ship so that the shipyards can plan, and we 
have made no changes as we submitted the budget from fiscal 
year 2007 to fiscal year 2008 to the shipbuilding plans so that 
the industry can plan and understand the industry even at the 
sub vendor level to know what the Navy's plans are for 
construction not only in submarines but across the board in 
carriers, amphibious ships, auxiliary ships, and SARC 
combatants. We do have a monitor on critical vendors, and I am 
going to turn that over to Admiral Hilarides, who is a 
specialist on the submarine side. We are in a soul search 
situation in a lot of cases there.
    Admiral Hilarides. Yes. The vendor base is fragile, and I 
think, in Ms. Stiller's testimony, she said it is sustainable 
but not optimal, and I think that is true of our vendor base as 
well. We do not have foreign vendors producing things for the 
submarine. We have U.S. suppliers for the things that go into 
the ship, and we see some stress on those suppliers, but we do 
not see anything that makes us say we have to go look at 
alternate suppliers or develop foreign suppliers for the ship, 
so it is not optimal but stable.
    Mr. Ellsworth. Mr. Chairman, thank you. Like I said, most 
of my questions were answered, so I yield back.
    Mr. Taylor. I thank the gentleman.
    The gentleman from Pennsylvania, Mr. Sestak.
    Mr. Sestak. I apologize for being late.
    Admiral, if you put some submarines in Guam, if you had a 
dry dock there to do the maintenance, rather than how you have 
been doing it by bringing them back to Hawaii or when they have 
been brought all the way back to California, and you put the 
training facilities in Guam, what is the difference in the 
operational availability with the investment of those 
submarines in Guam?
    Admiral Donnelly. It would clearly improve the operational 
availability. I do not have the exact number. The limiting 
factor, of course, is when we send the ship out of Guam for 
maintenance, the PERSTEMPO rules then require us when the ship 
gets back to Guam to stay in home port for as long as she was 
gone.
    Mr. Sestak. So, if you had the training facilities and the 
dry dock there, this would probably cost $1 billion, I would 
imagine--I just pulled that out of the air--but whatever it is, 
my limited understanding is the operational availability would 
be quite significantly changed. Is that wrong? You would not 
have to worry about the PERSTEMPO.
    Admiral Donnelly. I think it would improve. Clearly, we are 
getting about 48 days of mission time per year above--for the 
Guam boats, 48 mission days above what a rotational deployment 
submarine would provide.
    Mr. Sestak. Is it possible to get that figure, Admiral?
    Admiral Donnelly. I can provide that to you, sir.
    Mr. Sestak. Okay. Admiral, also, why not put more out there 
if, really, the only remaining force of import as far as the 
submarine fleet might be is, let us just say, China, and if 
time is of essence in getting there, why don't we put more out 
there?
    Admiral Donnelly. Well, there are certainly some 
infrastructure challenges with doing that--family housing, 
enlisted bachelor quarters, all of the MWR hospitals, schools.
    Mr. Sestak. Is there anything being done to say how much 
more it would cost with the difference of, let us say, 11 
submarines out there?
    Admiral Donnelly. Something is being done.
    Mr. Sestak. Could I see that?
    Admiral Donnelly. I do not have that with me, but we will 
provide it to you, sir.
    Mr. Sestak. The other one I was curious about--and I only 
bring that up because there are scenarios when time matters as 
we all know. I mean China is so different from the Soviet 
Union.
    Admiral, the Joint Staff attack submarine study, the number 
of oppressants was 68; is that correct?
    Admiral Mauney. Yes, that is correct.
    Mr. Sestak. And that is kind of the joint, non-naval kind 
of study?
    Admiral Mauney. It was conducted by the Joint Staff, 
relatively independent of the Navy, but it included Navy 
personnel, and certainly I think Admiral Donnelly's predecessor 
contributed when questions were asked.
    Mr. Sestak. The reason I bring it up is do you remember 
what the wartime scenarios were and what the number of 
submarines were based upon.
    Admiral Mauney. We have reviewed those. Yes, sir.
    Mr. Sestak. The launch of China to Korea and Russia into 
Poland, should we update that study for wartime requirements 
since it is such a major part of the testimony and for the 
analysis, potentially, of the different wartime scenarios?
    Admiral Mauney. The details of the study, of course, as you 
know, are classified, sir, and we can certainly discuss those 
in a different forum if you would desire.
    As to whether the study should be invaded, as you know, 
also, other studies--PDM-3 and then the Navy's force structure 
study--did review the assumptions, conclusions and used a more 
recent campaign analysis to determine their conclusions.
    Mr. Sestak. The last question is of the distributed Anti-
Submarine Warfare (ASW) task force. The ASW, how does that 
dovetail well? I guess this is yours, Admiral. How does that 
work?
    Admiral Mauney. The current Navy's ASW doctrine is a total 
force doctrine. It envisions a number of different elements of 
the concept of operations, which includes distributed forces, 
aviation, submarines, surface ships, and a layered approach to 
the problem.
    So I think submarines are an important part of ASW. They 
are capable and continue to be part of this total picture.
    Mr. Sestak. Is there still the effort to pursue this 
distributed ASW concept, the one with, for instance, the 
advanced deployable system, which I gather has just been 
canceled; is that right?
    Admiral Mauney. There is an effort. Admiral Mullen has 
reiterated in the last six to eight months on a number of 
occasions that ASW is a priority of his in terms of the Navy 
and the Navy's capabilities. We continue to look at these 
distributed approaches and have several projects in the works 
that were funded by Task Force AFW and continue under the 
resource sponsors today and will deliver in due course, or we 
will continue to learn if they are not effective, if that turns 
out to be the case.
    Mr. Sestak. But that system is canceled?
    Admiral Mauney. Yes, sir. The advanced deployable system 
concept of operations was examined by the fleet. And for 
reasons which included the tethering of specific ships to the 
communications from those systems at a pretty short leash, 
Fleet Forces Command determined that was not a viable concept 
considering the other concepts in ASW. We will complete that 
program in the near future with a test of the system, and we 
will carry those lessons into additional examinations and 
projects of the future for ASW.
    Mr. Sestak. So it is the tethering that was the challenge?
    Admiral Mauney. Yes, sir. That is my understanding.
    Mr. Sestak. So technologically it could work, but it is 
that short tether that they can't roam once they leave and run 
away.
    Admiral Mauney. The tether that was the issue that was 
identified to me, and the system, as I understand it, has not 
yet been fully tested. That is scheduled for later this year, 
but did meet the general attributes that were attributed to the 
system in the initial documentation.
    Mr. Sestak. Thank you.
    Mr. Taylor. We have been pretty lenient with the five-
minute rule with your questions.
    Mr. Sestak. The Navy has, by and large, by my 
understanding, has been justified for structure on presence. 
And so the reason I was curious on the warfighting scenario is 
that is important to what you are using today. In particular, 
as you have worked at Guam and other places, what is the most 
efficient way to achieve that? That is what I am most 
interested in, because the study did say, the GS Study, 68. I 
think it was 55, and I think it came in at 68 at the end. Is 
that correct, Admiral?
    Admiral Mauney. Yes. That is correct. It wasn't 100. I 
think it was 55 to 68.
    Mr. Sestak. It actually went to 68 and 155, but the select 
came in with 68. So the present number, I understand, was what 
the war-time scenario, which I gather was subsumed within that, 
which we look at for it, which I think might be the same or is 
the smaller number.
    Admiral Mauney. The studies considered both warfighting and 
presence, and they are both presented to decision-makers who 
end up measuring and assessing the risk. In this case it was 
the Navy leadership, and the number of 48 was the balance that 
they selected from a number of considerations. I would say that 
it is not only for force presence, but it is concepts from the 
analysis based on different warfighting scenarios as well.
    Mr. Sestak. I don't think there is a more versatile 
platform than the submarine for presence or warfare.
    Just how you take those warfare scenarios and do what you 
just said, take the presence and bring them together and look 
at some operational base in a strategic operation of ours, and 
how much you want to put there to help meld those two to a less 
efficient way was the reason for my questions.
    Thanks very much, Mr. Chairman.
    Mr. Taylor. Thank you, Mr. Sestak.
    Admiral Donnelly, for the record, since on several 
occasions Congress has been accused of building and buying 
platforms that the Nation didn't need or the military didn't 
want, for the record, should Chairman Skelton, should Chairman 
Murtha, both of our Senate counterparts, show their willingness 
to build this additional platform for this year? Would you 
prefer to have it this year or wait for the Administration here 
to build the program?
    Admiral Donnelly. Sir, that is an excellent question.
    Mr. Taylor. That is why you make the big bucks.
    Admiral Donnelly. No. I am the submarine force commander, 
but I am also a naval officer, and I would say I am a naval 
officer first and submariner second.
    Of course, I would love to have two additional submarines, 
as you suggest. We could use them. They would greatly mitigate 
the problem that we will have between 2020 and 2033.
    But--and I would have to qualify this--the CNO has built a 
shipbuilding plan, a 30-year shipbuilding plan, that balances 
across the Navy for surface ships, logistic ships, amphibious 
ships and submarines, and takes into account the industrial 
base across the entire Nation, not just the submarine 
shipbuilders. And as a naval officer, I honestly support the 
CNO's 30-year shipbuilding plan because it has balance across 
it. There are periods when our aircraft carriers dipped below 
the minimum number that we would like, as the submarines did, 
too. But in balance, that is the right plan for the Nation.
    Mr. Taylor. If you had the assurances at the top line so 
that no other programs would suffer as a result, what would 
your answer be?
    Admiral Donnelly. That we would have to have two additional 
shipbuilders. And that is consistent with, I think, Admiral 
Mullen's testimony that I heard as well.
    Mr. Taylor. As a matter of curiosity, what would the hull 
capacity of that ship be?
    Admiral Hilarides. Addition is not my strong suit, as I 
indicated earlier.
    Mr. Taylor. I think we have got that.
    Admiral Hilarides. I believe it would be the 786.
    Mr. Taylor. Seven hundred eighty-six. Would you know a cap 
vendor that could possibly have a cap that says USS Missouri ? 
I have a very strong feeling that could seal the deal. Just as 
a suggestion.
    And the CNO, the Secretary of the Navy, was also asked the 
same question.
    We thank our panel very much. We thank you for your service 
to the Nation and the men and women that you represent here 
today. We will try to get to those ships sooner rather than 
later.
    Any additional questions for this panel?
    Okay. This panel is dismissed. Thank you.
    The subcommittee now welcomes our second panel: Mr. John 
Casey, President of Electric Boat Corporation; Mr. Mike 
Petters, Corporate Vice President and President of Northrup 
Grumman Newport News Shipyard; Mr. Winfred Nash, President of 
BWXT Nuclear Operations Division; and Mr. Ronald O'Rourke, 
senior naval analyst, Congressional Research Service. So we 
welcome you for your testimony.
    It is the tradition of this committee to have the witnesses 
stay within five minutes. Without objection, I would be asking 
to ask unanimous consent to let them speak up to ten minutes.
    Hearing no objection, so ordered.
    Who would like to begin?

     STATEMENT OF JOHN P. CASEY, PRESIDENT, ELECTRIC BOAT 
                          CORPORATION

    Mr. Casey. I am John Casey, President of Electric Boat 
Corporation. With me today, along with my personal staff, are 
the leaders of the two unions of Electric Boat (EB), Ken 
Delacruz and John Wardy, and collectively we speak for the 
talent and capability that resides in southeastern Connecticut 
and Rhode Island.
    Mr. Chairman, Ranking Member Bartlett and other members of 
the committee, we are really pleased and excited about the fact 
that you scheduled this hearing today to talk about submarine 
procurement rates. I am pleased to be joined on the panel with 
Mike Petters, the government's nuclear vendor from BWXT, and 
naval analyst and a great thinker, Ron O'Rourke.
    I would like to request my written submittal become part of 
the record and just cover the highlights here.
    I did ask that some pictures be distributed to you all that 
really exemplify some of the recent successes of Virginia. 
There is a picture of the bow of the USS New Hampshire recently 
delivered from Newport News, and you can see that is fully one-
quarter of the entire ship. You can see a picture of the stern, 
part of which was built at Newport News, part of which was 
built at Quonset Point. Together they were joined there, and 
they were recently shipped up, as recently as yesterday 
afternoon. In fact, I was on the phone with the admiral when 
that barged shipment went by with the stern of that vessel.
    We have also got the midsection there of 777, and I believe 
you have got the USS Hawaii at sea with the beautiful sunset in 
the background from this past December, a ship that was 
delivered ahead of its schedule, created over a decade ago. You 
all talked about the time frame for these vessels. That ship 
was delivered ahead of its schedule. It was delivered a decade 
ago.
    You have requested our view on five topics related to the 
most complex weapons system known to man. These five topics are 
the Virginia-class Acquisition Strategy, the CNO's cost 
challenge, the USS Virginia CAPEX program, our ability both in 
terms of infrastructure and people to up the procurement rate 
in advance of 2012, and any alternate funding strategies that 
we might be able to conceive.
    Submarine procurement--in answer to the first question 
relative to acquisition strategy, submarine procurement has 
fluctuated dramatically, as you see in my written testimony. 
There have been three significant policy changes in the last 
ten years. Over a decade ago, there was a plan to sole-source 
submarine production. Over a decade ago there was a plan to 
start two ships per year, and during that ensuing decade, there 
was a six-year period where only one submarine was delivered to 
the United States Navy as a result of a holiday taken from 
submarine shipbuilding activities.
    The current plan, as we discussed, keeps one a year in the 
budget until fiscal year 2011, and there are two starting in 
fiscal year 2012. Of that, ships that have been authorized, in 
Block I there are four ships, Block II there are six ships. 
Five of those six were bought in a multiyear procurement. So 
when I refer to those blocks, it is just for reference point of 
view.
    The plan, as you have all discussed already, will create, 
in essence, a force-level shortfall, and the Navy testified 
that they are trying to mitigate that, including using 
activities we have, accelerate production down to five years as 
a means of getting more ships to the fleet sooner.
    My primary concern as a shipbuilder is the cyclical demand 
this one-per-year production rate or procurement rate will 
cause to the people that work on the waterfront in my Groton 
front shipyard. The plan needs to be stable. It needs to be 
increased in terms of volume in order to achieve the $2 billion 
ship. They need to be bought in a multiyear procurement. We 
need to be a two-year. We need to use economic quality 
techniques, and the government vendors need advanced 
procurement moneys. In fact, we could use advanced procurement 
moneys in the shipyard to accelerate manufactured items that we 
build that are very similar to the items that are bought 
through the vendor base.
    There was a question asked during earlier testimony, I 
think it was by Mr. Ellsworth, regarding the national vendor 
base. I think it is interesting to point out the approximately 
$20 billion that have been obligated for submarine procurement 
to date. Almost $7 billion of that money, not counting me, 
Mike, or the nuclear vendor, are allocated to vendors across 
the country. In fact, there are over 15 States in this country 
where over $100 million of submarine pieces and parts are 
manufactured.
    We are working very closely with the Navy to reduce the 
cost. And the cost has three major constituents: the 
government-provided material, the contractor-furnished 
material, and the shipyard labor we use to build these ships. 
We are working with the Navy through a model. We are working on 
inherent costs, the design; structural costs, the schedule; 
systemic costs, the way we acquire materials; and realized 
cost, the efficiency of our people in a shipyard. We are not 
just leaning on the people. We are looking at all four key 
elements of cost.
    The total cost, of course, on the labor side has two 
components. There are the number of hours you spend and how 
much you charge per hour.
    Dollars we charge per hour include absorption of overhead. 
Electric Boat has been very aggressive at cutting down on our 
overhead expenses. If we took the future procurement rates, 
pricing rates, excuse me--the future pricing rates in the early 
1990's, and applied those to the programs for the next decade, 
we would have had a certain cost for the products we have 
produced for the United States Navy.
    Through our aggressive re-engineering, we have reduced 
those costs by $2.7 billion, and 95 percent of those savings 
have been accrued for the United States Government.
    Meeting the $2 billion challenge will require support from 
all of us, all of the stakeholders, including the ones at the 
table, but the Navy as well. And it also presumes that there 
aren't any significant perturbations for the global economy, 
including major commodity pricing changes. Working together, we 
can make it happen. It cannot be done if we only buy one ship 
per year.
    There was also a question on the Capital Expenditure 
program, in particular on our Virginia class. This Capital 
Expenditure (CAPEX) program is one where a portion of the 
profit that we would ordinarily receive is allocated to CAPEX, 
tied to the CAPEX process.
    CAPEX incentive payments equal the invested costs; 50 
percent of that profit or of that cost can be applied when a 
project is authorized, including Navy authorization, 50 percent 
when it is implemented.
    There are three recent very successful examples: light 
metal fabrication facility, a coatings facility, and a 
transportation project. The total investment was about $30 
million. The total savings are about $270 million over the life 
of the program, approximately an 8-to-1 return. There is a 
significant balance of money remaining. My teammate will talk 
about some of the items he has done at his yard. It is a good 
method to incentivize shipbuilders to make investments they 
might not otherwise make.
    The next question they asked was about increasing 
production prior to 2012, And I love this question. I love it 
because, as an example, at 5 o'clock this morning, I am at the 
gym--in fact, it happens to be in your district, Mr. Langevin--
practicing Ashtanga yoga. Somebody comes over to me and says, 
``John, can I ask you a personal question?''
    I said, ``Certainly.'' ``Will there be any more layoffs 
this year?''
    I have answered that question almost every day, every day 
for the last ten years of my life. EB has the infrastructure in 
place to build up to three SSNs per year. Minimal investment 
will be required in tools and equipment to accelerate this 
production. Our workforce can grow. We grew--in fact, we were 
so small, we were 1,500 people until 1998. We doubled the size 
of that workforce in the Groton waterfront to support the 
Navy's maintenance requirements. But we have sustained this 
low-submarine-production-rate environment because we had the 
Jimmy Carter multimission platform being built, because we had 
an SSGN program, and because the Navy asked us to participate 
in maintenance work. Those things, I am told, two are gone, and 
the third one is going away. All those are now happening at the 
same time.
    There is no new submarine design for the first time in the 
history of naval nuclear power. Continued rollout for Electric 
Boat at current levels and maintenance work could actually save 
$65 million on Virginia-class procurement rates during the next 
ten years.
    As far as alternative funding strategies are concerned, 20 
of 30 planned Virginia ships have, in fact, been contracted or 
authorized. There are, in fact, in my opinion, more options 
through acquisition processes and strategies to acquire those 
remaining 20 ships more efficiently than the first 10. The 
traditional approach, multiyear procurement, using advanced 
procurement moneys like the $70 million we recommended be put 
into the advance procurement line this year to get us going 
early, that isn't to get to two a year necessarily, that is to 
make sure we reduce the cost of the ones we are building in 
Block II, to allow the shipyards themselves to use advanced 
procurement money for the parts we manufacture. We don't all 
just assemble. There are some things that can't be bought that 
we manufacture. And to expand the use of economic or quantity 
of moneys. And one last item would be to authorize the Navy to 
procure one set of main machinery as a spare. Every program 
would have a main machinery spare. That would avoid any 
potential for that particular piece of equipment of hindering 
our ability for delivering that next ship as soon as possible.
    A more difficult option that hasn't been considered would 
be to--think about this for a second. There have been on Block 
II ships about $7 billion obligated already. Because of the 
time it takes to build ships, we will not use all of those 
funds until we deliver the last ship of that block. So in my 
mind, there is an opportunity to look at Virginia-class 
procurement from a programmatic point of view rather than 
looking at it from a ship-by-ship point of view. I am not an 
expert in that area. Clearly you are going to have to ask 
people in the Office of Management and Budget (OMB) and the 
Treasury whether or not those alternatives are acceptable.
    Let me wrap up, and I probably have taken more than the 
allotted time.
    The Virginia program metrics are outstanding, in my 
opinion. The cost is under control. It is predictable. We are 
achieving the schedules that we sent many, many years ago, and 
the Navy has testified to the performance of these vessels, 
including testimony that the first ship reached initial 
operational capability this past Monday.
    Three of the first ten ships have been delivered. Seven 
remain. The submarine cost reduction plan is under way. We can, 
in fact, meet the challenge if, in fact, we are given the 
opportunity to do so. We have two ships per year. Your support 
is absolutely critical to our success here.
    So I have talked about product, I have talked about the 
performance, and as the leader of the organization, I have to 
close with the people. That is what makes the difference in 
these vessels going to a place that cannot otherwise sustain 
human life. Many of us go on these initial sea trials. There 
are thousands of people that participate in the creation of 
these vessels. When you put yourself inside of one, you have to 
be satisfied that the people who are participating in that 
process have their heads in the game. And they do, and I am 
proud of them, and we have got to make sure we preserve that.
    Thank you. I would be glad to take your questions.
    Mr. Taylor. Thank you.
    [The prepared statement of Mr. Casey can be found in the 
Appendix on page 103.]
    Mr. Taylor. Who would like to go next?
    The Chair recognizes Mr. Petters.

 STATEMENT OF C. MICHAEL PETTERS, CORPORATE VICE PRESIDENT AND 
            PRESIDENT, NORTHROP GRUMMAN NEWPORT NEWS

    Mr. Petters. Thank you, Mr. Chairman.
    Mr. Chairman, Ranking Member Bartlett, and distinguished 
members of the Seapower and Expeditionary Forces Subcommittee. 
I would like to thank you again for this opportunity to appear 
before you to discuss Virginia-class submarine program and the 
acquisition policy for the submarines.
    In your invitation, Mr. Chairman, you asked me to address 
several questions, and I believe Mr. Casey has sort of 
highlighted those. I responded to all of your questions in my 
written testimony, and I request that that be accepted into the 
record.
    For my statement, I would like to discuss just two of those 
questions, if I might. First, you asked if the Electric Boat 
Newport News team could meet the Navy's challenge of two 
submarines for $4 billion in 2012 in 2005 dollars, and my 
response to that is a solid yes.
    You also asked if we have the ability to accelerate 
production to two submarines a year before 2012. If the 
question is can we do it, the answer to that is another solid 
yes. If the question is should we do it, that response is 
obviously more complicated, and you have heard some testimony 
already on that today. That answer is clearly a function of 
stability of the entire shipbuilding base and the shipbuilding 
plan, as the CNO has already testified, and I will talk a 
little bit more about that in a minute.
    First, let me tell you why I have so much confidence in the 
Virginia-class program. This confidence comes from our 
experiences in the past year and on the continuing strength of 
the team relationship. As partners, we have struggled together, 
learned together, and today we are succeeding together. And 
together the team accomplished much in 2006.
    In June, Newport News delivered USS Texas, the second 
submarine to the Virginia class and importantly our first 
submarine delivery in 10 years, and I can tell you I rode that 
initial sea trial, and I agree 100 percent with Mr. Casey, you 
rely on everybody to have their head in the game when you go 
out on that first dock.
    We are all very proud of the way we have reentered the 
submarine business at Newport News, and we recognize the 
important role that the Congress played in making this happen, 
and we are very grateful. The Nation is very well served by 
having two great shipyards in the submarine business.
    In August, we closed a pressure hull on the fourth ship, 
USS North Carolina, well ahead of this milestone for USS Texas. 
This came as a result of applying lessons learned from USS 
Texas as well as the third ship in the class, USS Hawaii, which 
our partners delivered in December. And we are now marching 
toward an April 21st christening for USS North Carolina, 
followed by the launch on May 5th with sea trials, and delivery 
at the end of this year.
    Importantly, USS North Carolina is the first of our ships 
with a shortened construction schedule, and we have been able 
to do this because of the innovation, sharing lessons learned, 
and significant movement down the construction learning curve. 
Reduced schedules will result in lower costs, and this is one 
of the ways we will achieve the Navy's cost target.
    We also finished our work on USS New Hampshire and shipped 
our final module to our partners at Electric Boat, as Mr. Casey 
pointed out. USS New Hampshire was the first of the class to 
have a 1,600-ton bow supermodule. This unit included the sail 
for the first time, a production change that will save the 
program many manhours. Newport News will install this sail on 
this unit for every ship regardless of which yard is to deliver 
the ship to the Navy. Also important is the fact that we 
delivered this module with greater work content than any 
previous module while achieving an 18 percent reduction in 
manhours from our work on USS Hawaii.
    So I am confident in our ability because of the strength 
and creativity of this team, that the team continues to show, 
and because of what we have accomplished this past year in 
terms of manhours and schedule reductions.
    Now, I am also confident because of the progress we are 
making in reducing the cost and construction. As shipbuilders, 
we are focused on reducing the 40 percent of costs attributable 
to labor and the 25 percent of the cost of material we provide 
for construction. We have made tremendous progress in both 
areas, and we will only get better.
    We are seeing the benefits of learning on each ship we 
work. We are implementing design and process changes to make 
each ship more produceable and more affordable. These changes 
provide manufacturing, schedule and material savings with input 
coming from a submarine industrial base and actual cost returns 
on completed production efforts ensuring we are attacking true 
costs.
    And we are working on value streams to cut across the 
entire shipyard through our Progress Excellence Initiative. As 
you know, the remaining third of the costs of each submarine is 
government-furnished equipment, or GFE, and I know the Navy is 
working to vigorously to reduce these costs as well. By 
combining the savings shipbuilders are working to achieve and 
savings the Navy plans to achieve, I know we can meet the $2 
billion price per ship goal, and the last element of those 
savings will come from volume. The sooner we start producing 
two submarines per year, the sooner we will see the benefits of 
being able to order material in larger quantities, and the 
sooner we will be able to reduce the time between similar 
construction jobs, which will increase our learning. And 
learning translates to lower labor costs.
    Now, this leads me to your question of supporting 
accelerated production of two submarines per year. Over the 
last couple of years, we have invested in our facilities to 
reduce construction costs. These investments are also integral 
to the protection of two ships per year. We have invested our 
capital carefully in facilities and equipment that are multiuse 
to benefit all of the Navy programs we work at Newport News. We 
have used the capital incentives in the Block II contract to 
make changes that are reducing costs and schedules, and I 
provide some very specific examples of that in my written 
testimony.
    We can successfully start early production as long as we 
are able to procure from the submarine industrial base material 
components we need. Acceleration will require all of us to 
adjust existing work plans and schedules and to take the 
necessary steps to ensure we have skilled craftsman with the 
required certifications to do this expanded work.
    This careful and detailed planning cannot, however, be 
accomplished overnight. Authorization and funding must be 
received in sufficient time for the industrial base in our 
shipyards to proceed.
    I promise you that we at Newport News will respond to the 
decision to accelerate production enthusiastically and 
energetically. Yet a decision to accelerate production must not 
come at the price of destabilizing the entire shipbuilding 
plan. There must be balance. I remain mindful of the painful 
lessons about stability that all of us in the shipbuilding 
industry have learned. We all welcome the stability inherent in 
the CNO's 30-year shipbuilding plan, and it is important to all 
of us that accelerating the production of submarines does not 
destabilize the entire plan.
    In the year that has elapsed since my last appearance 
before you, the Electric Boat Newport News team has 
accomplished a great deal. We are proud of what our people have 
achieved with their hard work. To ensure our Navy has the 
number of ships it needs when it needs them, we must continue 
to take weeks and months out of our production schedules. We 
are doing just that today, and we are committed to doing more.
    I welcome the attention of Congress and this subcommittee 
in particular to the submarine needs of our Navy.
    Shipbuilders are skilled men and women who choose this 
difficult occupation because of their strong belief in America 
and a desire to contribute to our Nation's security. All of us 
on the Electric Boat Newport News team are working hard to 
build the most cost-efficient and highly capable nuclear-
powered submarines for the world's greatest Navy. It is work we 
are very privileged to perform.
    Thank you, and I look forward to your questions.
    Mr. Taylor. Thank you.
    [The prepared statement of Mr. Petters can be found in the 
Appendix on page 123.]
    Mr. Taylor. The Chair recognizes Mr. Nash.

STATEMENT OF WINFRED NASH, PRESIDENT, BWXT, NUCLEAR OPERATIONS 
                            DIVISION

    Mr. Nash. Chairman Taylor, Congressman Bartlett, and 
members of the committee, my name is Winfred Nash, President of 
BWXT's Nuclear Operation Division.
    As a long-term supplier of heavy components, including 
nuclear power units, I believe I bring a unique perspective on 
the critical issues before you today. BWXT could support a 
procurement rate of two Virginia-class shipsets per year in 
2008 and beyond. The additional volume would produce a nine 
percent savings over current prices and would also yield an 
eight percent savings in the next Ford-class carrier shipset.
    Mr. Taylor. May I interrupt? Just for the record, I presume 
you would be willing to make that commitment in writing?
    Mr. Nash. Yes, sir.
    Mr. Taylor. Thank you.
    Mr. Nash. An option to drive down costs and to protect 
schedules, short of authorizing a second Virginia-class 
submarine before 2012, is to fund advance procurement for a 
second shipset in 2008 at $400 million, which would not only--
would not be designated for a specific submarine, but would 
roll forward for future use. A revolving inventory captures the 
savings associated with a second submarine shipset without 
impacting the Navy's planned shipbuilding budget in 50 years. 
It also provides Congress flexibility in funding future 
submarine procurements.
    Another critical reason for rolling--for having a rolling 
shipset is the systemic stress that will result from the 
commercial nuclear renaissance. Nuclear power has become an 
attractive option for a number of nations. Higher commercial 
demands could significantly affect price and the availability 
of raw materials, labor, and facilities. A revolving shipset 
would substantially alleviate these problems.
    Expanding nuclear propulsion to a new class of surface 
combatant would also have a cost benefit to existing programs.
    Fluctuations in the Ford-class shipset production schedule 
would allow BWXT to support an additional near-term procurement 
beyond a second Virginia-class submarine. Depending on the 
Navy's requirements, this could reduce shipset costs an 
additional five percent.
    In conclusion, BWXT can support a second Virginia-class 
shipset in 2008 and beyond, which would yield production cost 
savings across the entire Navy program--nuclear program. 
Additionally, we can support a new class of nuclear-powered 
surface combatants.
    Thank you for the opportunity to testify. I would like to 
submit a more detailed written statement for the record.
    Mr. Taylor. Without objection. Thank you.
    [The prepared statement of Mr. Nash can be found in the 
Appendix on page 137.]
    Mr. Taylor. The Chair now recognizes Mr. O'Rourke.

 STATEMENT OF RONALD O'ROURKE, SPECIALIST IN NATIONAL DEFENSE, 
                 CONGRESSIONAL RESEARCH SERVICE

    Mr. O'Rourke. Thank you for the opportunity to appear 
today. With your permission, I would like to submit my 
statement for the record.
    When the Virginia-class began procurement in the mid-
1990's, the Navy anticipated going to two per year in fiscal 
year 2002. That was pushed back to fiscal year 2012. If the 
Navy had begun to procure in 2004, we wouldn't be talking today 
about the projected attack submarine shortfall.
    One option for mitigating the shortfall is to take steps 
that a force of less than 48 subs can, for a time at least, 
look more like a force of 48. These steps are possible, but 
they could have some potential disadvantages such as using a 
submarine line more quickly. That could eventually force boats 
to retire before age 33, which could reduce the size of force 
in the long run below what it otherwise might be.
    A second option for mitigating the shortfall is to extend 
submarine life beyond 33 years. A 1- to 3-year extension could 
reduce the shortfall, while a 4-year extension could eliminate 
it. The feasibility and cost of extending service life would 
need to be examined.
    The third option for mitigating the shortfall is to procure 
one to four additional submarines between fiscal year 2008 and 
fiscal year 2011. My statement shows a number of options that 
mitigate the shortfall or eliminate it by combining surface 
life extension with procurement of one to four additional boats 
between fiscal year 2008 and fiscal year 2011. Those additional 
boats could be funded using either traditional funding with 
advanced procurement, single-year funding with no advanced 
procurement, incremental funding, or advanced appropriations. 
These options would permit funding for the boats to be placed 
in various fiscal years, but they would not substantially 
change the true amount of funding that would ultimately be 
needed to procure the boats.
    Some testimony to the full committee last week suggested 
that two years of advanced procurement funding are required to 
fund the procurement of the submarine, and consequently that no 
additional submarines could be procured until fiscal year 2010. 
That is not really the case. Although submarines are normally 
procured with two years of advanced procurement, a submarine 
can be procured without advanced procurement funding or with 
only one year of advanced procurement funding. And, Mr. 
Chairman, if you don't mind, I want to say that again. Although 
subs are normally procured with two years advanced procurement, 
a submarine can be procured without advanced procurement 
funding or with only one year of advanced procurement funding.
    Congress in the past has procured nuclear-powered ships for 
which no prior-year advanced procurement funding had been 
provided. Congress did it in fiscal year 1988 with two nuclear-
powered aircraft carriers and could do it today with 
submarines. Congress thus has the option of procuring 
additional submarines in fiscal year 2008 and 2009 if it wants 
to. Doing so wouldn't materially change the way the subs would 
be built. The process would still include about two years of 
advance work on components and an additional six weeks of 
constructional work on the ship itself. The outlay rate would 
be slower, and the interval between the official year of 
procurement and the boats entering into service would be 
longer.
    Some other testimony to the full committee last week 
suggested that if you procured two boats in a certain year, it 
wouldn't be good to go down to one boat the following year then 
back up to two boats the next because it would stress the 
workforce. I am not sure I agree with that either. If you 
procure two boats in a certain year followed by one boat the 
next, in other words, a total of three boats in 24 months, the 
schedule for producing them could be phased such that you could 
start one boat every eight months. That might actually help the 
workforce and the rest of the industrial base transition from 
the current rate of one boat every 12 months to the planned 
eventual rate for one boat every six months. The Navy's own 30-
year shipbuilding plan anticipates going to a two-one-two 
pattern.
    The Navy's goal to reduce the cost of each Virginia-class 
boat to two billion in constant 2005 dollars as a condition for 
two per year in fiscal year 2012 is the goal that the Navy has 
set for itself. Congress can take that goal into account, but 
it doesn't have to control congressional action. Congress can 
decide to fund two per year in fiscal year 2012 or some other 
year even if the 2 billion goal isn't met.
    My statement includes several schedules and funding 
approaches for procuring one to four additional submarines 
between fiscal year 2008 and fiscal year 2011, and in 
connection with that, there were questions from two of the 
Members about the cost effects of increasing the number of 
boats under the next multiyear from a total of seven to a total 
of nine and what effect that might have on further reducing the 
costs to the boats.
    In response, I can tell you that the current MYP includes 
five boats, and the Navy at the time of that MYP being approved 
estimated it would reduce the cost of each boat by about $80 
million. But the Navy actually proposed seven boats, and the 
Navy at the time estimated that if seven boats had been 
included in that MYP, the savings would have been $115 million 
per boat, or about 35 million more per boat if you had seven 
boats in that MYP instead of five.
    So if you take the new MYP that the Navy is proposing and 
increase it from seven to nine, you might see an increase in 
average savings per boat something along the lines of $35 
million per boat. It might be something less because the 
economies of scale are not as tremendously increased going from 
seven to nine as they are from five to seven. But I think it is 
something in that neighborhood that we might be looking at.
    The statement also discusses the attack submarine force-
level goal and options preserving submarine design and 
engineering base.
    Mr. Chairman, this concludes my statement, and I will be 
happy to respond to any questions the subcommittee might have.
    [The prepared statement of Mr. O'Rourke can be found in the 
Appendix on page 78.]
    Mr. Taylor. I am going to briefly follow up your statement 
and direct your observation to the gentleman from the private 
sector.
    How accurate do you think Mr. O'Rourke is in reflecting 
those additional savings? Should we have the two ships? Mr. 
Nash is already on record.
    Mr. Casey. I believe he is entirely accurate.
    Mr. Petters. I agree with that, too, sir. Our effort is to 
get to $2 billion by 2012. If you increase the volume between 
now and then, you start to move that price in sooner than 2012. 
Whether you--I don't believe you can get there in 2010, but I 
think that it does bring it in closer.
    In terms of the multiyear procurement, the $80 million for 
five ships going to--I believe he said 115- for seven ships, 
whether you can get another 35- for two more ships or not, I am 
not sure that that is exactly right. I think it is a good 
ballpark to go check.
    Mr. Taylor. The Chair would request of you gentlemen on 
your official letterhead a statement to that extent.
    [The information referred to can be found in the Appendix 
on page 149 and 150.]
    Mr. Taylor. Now, this is just the first of four steps that 
we have to take to make this happen. We are going to have to 
speak to our Senate colleagues, the appropriators. I think we 
all want to see this happen. But it is one thing to say 
something in passing; it is another thing to have something in 
your official capacity on your company letterheads, and I would 
ask that be done.
    And now I yield to the gentleman from Maryland.
    Mr. Bartlett. Mr. O'Rourke, the appropriators had told us 
that they would like to increase shipbuilding by five next 
year. The Navy has told us that a submarine couldn't be one of 
those because we have a two-year lead time for procuring some 
of the lead-time items. You have just testified that we have, 
in the past, avoided that. Would you tell us how we accommodate 
what we have been led to believe is an obligatory two-year 
delay because of these long-lead-time items?
    Mr. O'Rourke. Submarines are typically, normally or 
traditionally procured with two years of advanced procurement 
funding. It doesn't have to be done that way. You can fund the 
entire cost of the ship right up front or some major portion of 
the cost of the ship up front and declare that to be the year 
of procurement, and move on the next year and put another 
submarine in that next year if you want. These are all options 
for Congress. It does not have to be done the way that it 
usually is done. And Congress did it with a couple of aircraft 
carriers in fiscal year 1988, and that is a much bigger issue 
than doing one additional submarine in this year's budget. That 
was a $6 billion addition that Congress put in that year.
    Mr. Bartlett. Mr. Casey and Mr. Petters, do you agree with 
that statement?
    Mr. Casey. Mr. Bartlett, it is clear to me that if we can 
find a way to commence the activities that lead to two ships 
per year in the next one or two years, we can accelerate the 
production of the costs closer to the $2 billion level.
    There is no need that we have as a shipbuilder to wait for 
the advance procurement (AP) moneys or for that money for the 
nuclear components to be built before we start building a ship. 
We just have to make sure we work together with the government 
who manages the vendor and make sure the parts are available to 
put in the ship when it is time to put them in the ship so we 
don't extend the total scheduled time to construct the vessel.
    So what I understand Mr. O'Rourke to say is you can 
eliminate and award AP altogether and authorize the ship's 
construction right now, work together in a collective fashion 
on an integrated schedule, which would have the net effect of 
reducing the overall time to construct the vessel. We did that 
very successfully on the USS Jimmy Carter recently when the 
Navy engaged Electric Boat to manage the entire vendor-based 
things that they would ordinarily manage themselves.
    I am not suggesting that for the nuclear material. What I 
am suggesting is an opportunity to integrate the schedules 
together to make sure we get the pieces and parts when we need 
them, whether you define them as advanced procurement or part 
of the initial procurement process.
    Mr. Bartlett. So if we move forward to 12 years from now, 
we would have an additional submarine if we authorized and 
funded that procurement this year.
    Mr. Casey. I think the number was more like nine years.
    Mr. Bartlett. We are going to be building some others, too. 
But in 12 years, we would have more.
    Mr. Casey. Yes.
    Mr. Bartlett. And in nine years, we would have an extra.
    Mr. Casey. Yes, sir.
    Mr. Petters. I think I agree with everything Mr. Casey 
said, and I think I would amplify that there has been a lot of 
testimony today that a significant part of our savings is 
driving the schedule down to a five-year construction schedule, 
and we are trying to drive the seven-year plan down to five 
years.
    Whether you can do that and integrate the procurement of 
the what we call long lead today and still be able to make it 
in five years or not I think would be something we would have 
to go spend some time and look at.
    But, in general, I think that working things in parallel 
rather than working them in series could be, and would be, seen 
as a great way to reduce risk, and you may actually have a net 
positive effect there instead of a negative.
    But I think we have to look at what the impact on the 
schedule would be.
    Mr. O'Rourke. When I say that Congress has the option of 
procuring these additional ships now rather than in fiscal year 
2010 or fiscal year 2011 or fiscal year 2012, my statement does 
not depend on any change in the way that the ships are built. 
You can still build them the normal way with two years of 
advanced work and six years of construction time. Over time, 
eventually you have stacked up a lot of boats up front, and 
over time the shipyards would catch up with that even if they 
continue to build boats at the normal rate and they would 
eventually enter service.
    So the shipyards are right that there is a potential for 
changing the way the boats are built that may compress the 
construction time, but my own testimony about Congress's 
options for funding additional ships now rather than later does 
not depend on it. You don't have to assume that to believe that 
Congress has the option.
    Mr. Bartlett. I was privileged to travel with our Chairman 
to shipyards all over the world. The last leg of those visits 
was to shipyards in our country, and we had the privilege of 
visiting Electric Boat. And I was impressed that you were 
really working very hard to be more efficient and reduce costs.
    We were scheduled to go to Newport News, but a hurricane 
was also scheduled to go there, and we decided not to compete 
with the hurricane for a reception at Newport News. And so we 
now are planning in the very near future to make that visit, 
too. And I will be pleased if I can find at Newport News the 
same commitment to cutting costs and achieving greater 
efficiency than we saw--that we saw at Electric Boat.
    Mr. O'Rourke, there is a suspicion that when we designate a 
risk as being acceptable, that that is an accommodation to the 
reality imposed by budgets that we can't have any more 
resources. One of our Members Mr. Forbes asked, how do you 
characterize that as acceptable? If that is all you can get, 
that obviously has to be acceptable. As you look over their 
shoulders, how would you characterize the risk that we will 
have if we drop from 48 attack subs to 40?
    Mr. O'Rourke. I guess what I would say is I think it raises 
the question if 48 is acceptable, and you go below 48, are you 
now at a level of risk that is less than acceptable?
    Mr. Bartlett. But they are telling us that 40 is an 
acceptable risk. We have some suspicion that we characterize 
risk to be acceptable when it is unavoidable.
    Mr. O'Rourke. And in last year's hearing on this topic, we 
talked about low, moderate, and high risk, and I think last 
year the Navy characterized the risk of that situation as 
moderate.
    Mr. Bartlett. How would you characterize it?
    Mr. O'Rourke. I would say the same thing as I did last 
year. If we dip below the force level, we are running the 
operational risk that is something now more than moderate, 
something closer to higher risk.
    Mr. Taylor. The Chair recognizes the gentleman from 
Connecticut Mr. Courtney.
    Mr. Courtney. Just to follow up on that last question, Mr. 
O'Rourke, the determination that 48 was the right target by the 
Navy last year, that is not the first time that we have sort of 
gone through that exercise in recent years. I mean, they have 
actually had different numbers in the past; isn't that correct?
    Mr. O'Rourke. That is right. There has been an evolution in 
the attack force level goal that affects the outcomes of a 
number of studies, some of which became official in terms of 
being folded into things like the Quadrennial Defense Review 
(QDR) for that coming year.
    Mr. Courtney. And a number of those have been since the end 
of the Cold War; isn't that correct?
    Mr. O'Rourke. That is right.
    Mr. Courtney. The Navy has concluded that the Navy needed a 
larger number than 48 in the past.
    Mr. O'Rourke. And some of those studies have indicated a 
need for 55 or more submarines, and one of those that has been 
mentioned a number of times already was the 1999 JCS study. But 
there were others as well. There are some people that believe 
that 48 is not, in fact, sufficient, that a higher number like 
55 or more is better. There are debates on both sides of the 
issue.
    Mr. Courtney. Mr. Casey, you alluded in your testimony to a 
lot of the progress that has been made in terms of proficiency 
in the recent delivery of the new submarines, and I was 
wondering if you could elaborate in terms of quantifying how 
much savings you have been able to create.
    Mr. Casey. I think the most recent and best example I could 
use was that the USS Hawaii, which was recently delivered to 
the Navy this past December, was delivered for 2 million 
manhours less than the Virginia, the previous ship delivered 
from Electric Boat. We expect to stay on that learning curve. I 
think we have about 85 percent of our--this has unionized 
people as well, which is not typical in industry, but we have 
85 percent of the people in our shipyard, unionized and not, 
participating in activities to improve the safety of how we do 
the work and reduce the cost of the work that is done and 
improve the quality of the work that is done.
    We are working very closely with the vendors. I think that 
question was asked relative to accelerating procurement rates. 
I think the most important information we could provide them is 
to make sure they know that we are going to buy these two 
ships, and I think we will have some great response from them.
    But let me summarize that and pile it together by stating 
this: We are heading into a period of time where we are trying 
to dramatically reduce the cost, reduce the schedule, at the 
same time one ship per year without the maintenance work on our 
waterfront causes these eruption cycles. We are going to have 
to find a way to change the size of the waterfront workforce by 
about 1,000 people during the years we deliver a ship compared 
to the years when we don't deliver a ship.
    If we get to two a year, that goes away. We can stabilize 
that workforce, and we don't have to be as concerned about 
finding something for those people to do in the intervening 
years.
    I believe there are opportunities to look at in the 18 
ships that are home-ported in the Groton area, and where there 
are availabilities on those vessels that do not require moving 
of the vessels, the Navy has, in fact, asked us to participate 
in maintenance in some of those vessels. If we can stabilize 
that workforce and absorb the shipyard overhead via the 
maintenance work, that can have the net effect of reducing the 
cost of Virginia, as I think the number I gave was about $65 
million over the next 10 years.
    So those are some examples to answer your question.
    Mr. Courtney. Thank you.
    When Secretary Stiller was here earlier, she seemed to 
almost suggest that accelerating the production levels to two 
subs a year would almost put at risk the Navy's plan for 
bringing down the costs, and I just wondered, Mr. Petters, if 
you want to comment on that as well.
    Mr. Casey. There are three major constituents in this cost-
reduction activity. One is the economic water quality vendor 
base, about a third of the cost of the ship is contractor-
furnished material, about a third of the cost of the ship is 
government-furnished material, and about a third of the cost of 
the ship is the labor.
    So on the government-furnished material, that portion of it 
is, in some way, impacted, but in a very small way by these 
design activities.
    What she specifically was talking about are the inherent 
costs and the design of the ship are part of that cost-
reduction package that gets us to a $2 billion vessel measured 
in 2005 dollars. Nevertheless, we will reduce the cost of ships 
by accelerating procurement no matter when it is done. The more 
ships we build, the less dollars per ship will be charged. I 
don't think there is any question on it. If we buy one at a 
time, however, we will not be able to achieve the cost savings 
that are designed.
    But she is specifically referring, I believe, to the fact 
that some of the design activities we are engaged with today, 
for example, eliminating sonar sphere, will take a couple, 
three years to complete. And that particular design 
modification will not be implemented on that first ship if it 
is authorized this year. It is still a good thing to do. Still, 
the ships get cheaper. They may not get down to the $2 billion 
level. I think that was her point.
    Mr. Petters. I think so, too.
    Mr. Courtney. And Mr. Ellsworth actually had to leave, and 
he wanted me to ask a question of Mr. Nash, and I think he kind 
of alluded to when he had the opportunity to speak to the 
admirals earlier about decreased workloads on the vendors 
outside of the Virginia and Connecticut and the industrial 
base, which includes you as well, and he wanted me to ask you 
to comment on that.
    Mr. Nash. Without question, the fact that we are at one 
Virginia per year, and we have an aircraft carrier every five 
years, it is definitely a minimum level that we can operate the 
industrial base. As a result of that, a lot of our subvendors 
that supply a lot of our materials are our sole source as a 
result of that, and they have also had to bring in additional 
work to make sure they can maintain critical mass to continue 
to support the submarine and aircraft program as a result of 
that.
    So if we were to go below that in terms of one Virginia per 
year and something less than one aircraft carrier for five 
years, I think we are going to be in a situation where we are 
going to have to be maintaining resources and not have them a 
lot--a whole lot to do. So from that standpoint, I think we 
really need to look at the second Virginia as early as we 
possibly can.
    And I would like to make one other point that Congressman 
Bartlett had asked earlier. In 1998, the country was interested 
in building two carriers per year, and the way they were able 
to achieve that is they used a floating set of heavy equipment 
for that aircraft carrier to do that. And that is where I think 
the $4 million we have, maybe here this year, may be an 
opportunity to buy a rotating or revolving set of heavy 
equipment that could expedite the fabrication of a submarine 
program.
    Mr. Courtney. Thank you, Mr. Chairman.
    Mr. Taylor. The Chair recognizes the gentleman from 
Virginia.
    Mr. Forbes. Thank you, Mr. Chairman.
    I want to say to Mr. Casey and Petters both, these pictures 
are very impressive, but they still don't do justice to the 
real thing. When you see it, it makes us all proud, and we 
thank you for the great job that you both do.
    Mr. Petters, Mr. Bartlett made the statement that the 
hurricane stopped him from coming to Northrup Grumman and 
Newport News. I am going to give you my time. If you could tell 
us today in a nutshell the changes to the design process, 
engineering, or construction of subs that Northrup Grumman and 
Newport News has implemented in order to reduce costs and make 
them more efficient. And also if you give us the recommendation 
of what you would like to see done that would help create more 
efficient procedures; what would they be?
    Mr. Petters. Thank you, sir. That is a loaded question, so 
I will try to describe the universe here in 25 words or less.
    First of all, Congressman Bartlett, I would invite you 
again to come visit us. I know you had the chance to visit us 
once, and I invite the whole committee to come at a time of 
your choosing to see what we have going on at the shipyards. 
Our overall scheme of thinking about business in the shipyard 
is you combine investment and people with investment in your 
processes to yield really great performance.
    We have invested significantly in our workforce over the 
last ten years from a leadership standpoint as well as from a 
skilled training perspective to make sure that we have and are 
able to forecast the need for the kinds of skills that we will 
need for the ships of the future.
    We have also invested very heavily in our processes. On my 
first day as president, we stood up an organization in the yard 
known as Process Excellence, which would facilitate our Lean 
and Six Sigma efforts throughout the shipyard. We actually 
validate the cost savings that we get out of those programs. We 
put them in two buckets, a risk-reduction bucket and a cost-
savings bucket, which is what the Navy sees.
    Today we have validated $55 million worth of savings there 
that goes in those two buckets, and we think that is just the 
beginning. That process looks at all of our value streams 
across the whole waterfront of the shipyard. We look at the 
pipe value stream as it goes from one end of the shipyard to 
the other. We look at the steel value stream as it goes from 
one end of the shipyard. We look at the electrical value 
stream. We have been investing in our planning processes and 
our--and we have been looking hard at our overhead, all of the 
things that we have to do to drive efficient performance into 
operation.
    We combine that investment and process with some very 
thoughtful investments in our facilities. Since the beginning 
of 2002, we have invested nearly $400 million in our facilities 
to improve the efficiency of building aircraft carriers and 
submarines, and we have already planned for another $300 
million of investment to do exactly that.
    You know, I said earlier the questions that we were asked, 
can we go to two submarines a year; yes, we can do that. Should 
we? Yes, if we can keep it--keep the stability in place. I have 
to emphasize that. I have a chance in this role to see the--I 
see the submarine base, but I also see the aircraft carrier 
base. I see the carrier repair base. I see all of those bases, 
and I see that all of those bases are fragile, and to find 
balance has been a very tricky thing for the Navy to work its 
way through.
    I would just ask that we--if we have a plan, let us stick 
to it, and let us not disrupt our plan.
    My friend here from BWXT Mr. Nash has talked about how 
minimal we are at one submarine a year and one carrier every 
five years. In fact, the Navy's plan today has one submarine a 
year until 2012, when we go to two, and we have one carrier 
every four years. There is a carrier in this year's budget 
request, but there is also one in 2012. In my experience, that 
is the first time the Navy has made a commitment to put the 
next carrier in the budget at the same time as this carrier is 
in the budget. Those are signs of stability that I think we 
can't ignore.
    And so while I am very hopeful that the committee can lean 
forward and find a way to move ahead on this program, I 
encourage you to do that in a way that is not disruptive to 
stability, because that would then have an effect in my yard 
relative to the people and the process things and the capital 
investments that we have made there. We are on a fine balance, 
and we need to keep that.
    Mr. Forbes. Thank you, Mr. Chairman.
    Mr. Taylor. The Chair recognizes the gentleman from Rhode 
Island, Mr. Langevin.
    Mr. Langevin. Thank you, Mr. Chairman.
    Again, gentlemen, thank you for being here.
    Chairman, again, my thanks for allowing me to rejoin the 
committee today. I have enjoyed my six years on the Armed 
Services Committee, and I am so proud of the men and women in 
uniform who defend this country every day. We have the finest 
fighting force on the face of the planet because of the men and 
women who wear the uniform; and I have said this many times, 
but it is equally important that we have companies like those 
that are represented here today that build the finest equipment 
for our men and women in uniform, that help them to do their 
jobs effectively and keep them safe. So thank you all for your 
patriotism and for your hard work.
    If I could, just so that I am clear on the question of 
whether to rebuild the submarines with or without advance 
procurement. What is preferable, and are there significant cost 
savings so that I am clear whether we build it without advance 
procurement money or we do it with it?
    Mr. Casey. I think Mr. O'Rourke is probably the most 
experienced on the difference between the two of them.
    My perspective is as a shipbuilder. If I am authorized to 
build a ship and I am funded at the levels I need progressively 
over the five-year construction cycle, whether you call it 
advance procurement, whether you call it initial ship 
construction authorization, it does not make a lot of 
difference to me. As long as I know I have a contract to go 
uild a ship and I am authorized to start, I will do that as 
efficiently as I can. And, in fact, we are not satisfied with 
how efficient we are on the last one, trying to make each 
successive build in less hours, a shorter time than its 
predecessor. So I do not have a strong preference.
    We have made some recommendations. Assuming the committee 
follows the traditional path, the recommendations include $70 
million in advance procurement, money to allow our vendors that 
we buy material from to avoid a gap, if you will, so they can 
get the material to us in time to start, assuming the multiyear 
procurement contract occurs on existing Navy schedule.
    We have recommended that the government is authorized to 
buy a ship spare main propulsion unit so they can have that 
main propulsion unit available to us when the first multiyear 
contract ship will sign, and it will not interfere with our 
ability to get the schedule to build the ship down to reduce 
the cost. We think there are opportunities in the economic 
order quantity area for you to go further, and of course, the 
nuclear vendor, Mr. Nash, testified that he would like to get 
going, but I do not have a strong preference on how it is done.
    We have made some recommendations, as I said, using 
traditional funding approaches. There are alternatives; Mr. 
O'Rourke laid out some great ones, and you all probably have 
some good ones that we have not even thought of, but as long as 
you get us going and can give the Navy the authority they need 
to contract with us to start the construction process, we will 
get it done within the commitments that we have made.
    Mr. Langevin. Can you identify a cost saving element? Are 
there more cost savings one way or the other?
    Mr. Casey. Yes. I think that from a cost savings 
perspective--and I probably fumbled that a little when Mr. 
Courtney asked it--relative to the vendor base, we have to have 
a sum of money that authorizes us to buy ships in a multiyear 
procurement process. We oftentimes refer to that as ``economic 
order quantity money.'' with the monies that can be saved 
through that overall process--you know, about $200 million, in 
that range, something like that--driving a ship schedule from 7 
years down to 5 years and the rest of the construction 
improvements that we are forecasting, you know, it might be in 
the range of $100 million or something like that.
    We have to have the engines available to make that 
schedule, and we have to have materials purchased from the 
vendor base in order to achieve those reduced schedules. If we 
take our normal seven years, the reason it normally takes seven 
years is, the first year we are awarded a contract, we are sort 
of waiting for material to be built by the vendor base so we 
can start in a meaningful way.
    Last, you know, the cycles that are existing, the labor 
rates that we are able to avoid if two per year is accelerated, 
will yield considerable savings, and I think the number would 
be about $65 million. If it is two per year, it is a similar 
number. If we can find some way to avoid these wild swings in 
the requirements for the Groton warfront personnel, we have the 
potential to save a significant amount of money on this 
program.
    Mr. O'Rourke. Mr. Langevin, also just to answer your 
question, whether you do it for a couple of years with AP money 
up front or you fully fund it in a single year with no AP 
money, that single change, in and of itself, is not going to 
make any substantial change in the cost of the ship.
    The outlay rate will be slower because you have banked all 
of the money for the entire cost of the ship up front, and some 
of it will have to wait a little longer to be spent, but the 
actual cost of the ship, itself, of that one change, is not 
going to change very much.
    However, if you do this, if you procure a submarine in 
2008, for example, with a single year of full funding, as part 
of the initiative to get the two per year earlier or to include 
more than seven boats in the multiyear that the Navy is looking 
for, for 2008 through fiscal year 2012, then that would reduce 
the cost of the submarines. The one change, in and of itself, 
of AP or no AP, that is fairly transparent to the cost of the 
ship; but if it is part of a broader strategy to get to two per 
year or to include a regular number of folks in the multiyear 
that the Navy is looking at, then that would reduce the cost of 
the ships.
    Mr. Petters. I would just add that, in my experience, there 
is a whole host of different ways that you can create a funding 
mechanism for, you know, advanced procurement, advanced 
appropriations, incremental funding, those kinds of things. 
Most of the time when we are up here, they are looked at as 
accounting changes, and we kind of look at it like the area on 
the curb is always the same, you know, in aggregate, but I 
think that there are opportunities depending on the way that 
you approach this. I think there are opportunities when you are 
out, when you are back at the shipyard, to look at some of 
these mechanisms as reduction mechanisms, which then translates 
to some lower cost.
    So I think that is another way of saying what Ron has said, 
that if you did fund the entire ship in 2008 and you allow not 
only some work to go on in advanced procurement, but also at 
the shipyards to facilitate and to move ahead and to work 
slightly in parallel, maybe we do not get the ``begin 
procurement to delivery'' time all the way down to five years, 
but maybe we address some of the cycles that John has going on 
at Groton which drive some significant costs down, and so the 
area of the curb would diminish. And I think that is a real 
challenge as we look at all of these things, because we tend to 
look at them here just as if they are accounting tricks or 
accounting exercises, but in fact, there are real operations on 
the other end of that, that depending on the method that you 
choose, could have some impact.
    Mr. Nash. In terms of whether you fund the ship all at one 
time or whether you have AP funding for like two years in 
advance of the funding of the platform itself, we would have to 
work very closely with the shipyards to see how that type of 
funding approach would work because there is a certain amount 
of lead time, especially in some of our heavy forgings, that 
just takes a couple of years before you can get with the 
vendors to get it into their cycle to enable them to produce 
those, to be able to meet the current schedules we have with 
the shipyard today.
    So there would have to be some additional integration and 
discussion with the shipyard on how we would do that to be sure 
that we would not end up with long lead items that we produce 
and that we end up holding the shipyard up, because once you 
start holding the shipyard up, that is a significant amount of 
cost. We cannot be caught in that trap.
    Mr. Petters. Which is why I keep coming back. You cannot 
assume that we could do it in five years from today. There 
would have to be some integration and some sort of schedule put 
out that would integrate both of those factors.
    Mr. O'Rourke. And the option, as I presented, does not 
require even assuming the achievements of any of that. I 
presented these options solely on the basis of proceeding with 
the construction of boats as we normally would, which is why 
the outlay would be slower. As to anything that Mr. Petters has 
talked about, if you can achieve it, then you can get some 
additional savings, but I am not even going that far in 
outlining the option in my own statement.
    Mr. Langevin. What are the other things that the government 
could do to take some of the pressure off of the shipyards with 
respect to capital outlays/capital improvements that need to be 
made at the other shipyards that would make shipyards more 
efficient? What are the things that the government could or 
should do in helping to purchase that equipment so that the 
risk is not all on the shipyard in the event that, you know, we 
do not get to building the number of ships that we feel we need 
to or that new technologies could come on the market that 
replace the old equipment that you just invested in? Are there 
things that the government could be doing in those areas?
    Mr. Casey. I believe the capital expenditure (CAPEX) 
program on the Virginia-class that we have today is a model 
that could work across the entire shipbuilding industry. There 
are a lot of ways to apply that particular model in the case of 
Virginia. As I tried to explain, the process is tied to the 
fees or to the profit we are eligible to earn on the contract, 
but there are other alternatives.
    I think the key is to make sure that there is some sort of 
incentive that is tied to the existing contracts, but there has 
to be an understanding of what the purpose of that investment 
will be in the long term. So, when the government gets involved 
and sort of absorbs what we refer to as the ``cost of money,'' 
if you will, it makes those hurdle rates a lot easier to 
rationalize from an industrial point of view.
    But I think that the model that we have is a good model, 
and I think it can be expanded. It happens to be submarine-
specific on this given program. There may be some opportunities 
to look at cross-program models.
    Maybe, Mike, you will want to comment on that.
    Mr. Petters. I think John brought up the right point.
    The way the shipbuilding industry is structured today, in 
order to attract capital, you really have to get the return on 
the ship you are working on because of the way the contracts 
are set up. The beauty of the CAPEX program and the submarine 
program is that the submarine force has recognized that if you 
actually look at what the return is over the class of ships, 
then it makes sense for the government to invest in that 
capital improvement in such a way that the corporations can 
invest in it as well.
    We have done something a little bit different on the 
carrier program than what we do on the submarine program 
because we are not now dealing with a production run of 30 
ships. But in that case, the Carrier Program Office has come 
back, and they have looked at some of our major facility 
improvements, and they have incentivized some of those as well.
    We put up shareholder money for those investments to the 
tune of nearly $200 million, but some of the incentives paid to 
us for making those investments will get us to the point where 
we are close to the hurdle rates that we need to justify those 
incentives, and I think that is the principal issue that you 
need to look at. I would respectfully request that the 
committee look at how do you make investments that would be 
bigger than just a particular contract you are looking at, 
because the accounting rules that we have, the financial rules 
that we have, make it very hard for us to just go and make 
investments that we have to capture all----
    Mr. Taylor. Mr. Langevin, may I interrupt for a minute?
    I would like to invite all of the panel to the hearing to 
address that, which is on Tuesday, the 20th. We would welcome 
your input.
    Proceed, Mr. Langevin.
    Mr. Langevin. Thank you, Mr. Chairman.
    Mr. O'Rourke, would you like to comment on that?
    Mr. O'Rourke. No.
    Mr. Langevin. Then my final question would be--you know, I 
have been one of the biggest proponents, along with many of my 
colleagues, in pushing up the build rate to a year sooner than 
2012. It looks like, right now, according to what we have heard 
from the appropriators, that we are going to be building five 
ships this year, one of which would be an additional submarine.
    Does that get us to the point where we have protected our 
design base that it protects our industrial base? I mean, it is 
obviously important from a national security perspective so 
that we have a submarine force that protects the Nation, that 
meets the requirements of the Combatant Commanders, that 
protects the ability to design and build these submarines; and 
I am concerned, as many have been, that we could lose that 
capability or degrade it significantly, and that will get 
harder and harder to come back from. We do not want to be in 
the position of Great Britain, for example, that is just now 
trying to reconstitute its submarine building capability.
    So how much pressure does that take off of us if we, in 
fact, do get to start building----
    Mr. Casey. In and of itself, the authorization of an 
additional ship will not preserve the design capability that 
exists in this country, namely of the submarines. There are 
other activities that are required, one of which is related to 
the Virginia-class program, which is what is referred to as the 
design for an affordability study that the Navy discussed 
separately, level loading or accelerating the next strategic 
platform design, which I believe Admiral Hilarides has 
testified to. It would also alleviate that concern to a large 
extent.
    But as to the authorization of the ship, I cannot answer in 
the affirmative that that would, in and of itself, satisfy the 
requirements to sustain the design capabilities in this 
country.
    Mr. Petters. I agree with that answer.
    Mr. O'Rourke. Yes. I, actually, wanted to amplify that a 
little bit.
    The Navy talked during the first panel about the option of 
accelerating the start of the design work on the SSBN, and that 
does appear to be emerging as the major option or the major 
element of the strategy for preserving submarine design and 
engineering bases, especially in the wake of the conclusions 
reached by the RAND report.
    But one other option that is available to Congress, which 
Mr. Casey just mentioned, is to expand the scope of the already 
planned redesign work on the Virginia-class to include a 
greater number of projects than what the Navy has funded, and 
that, too, is an option for Congress. In fact, it is something 
that Congress has added money for in prior year budgets. It 
could continue to do so in the fiscal year 2008 and subsequent 
budgets.
    Mr. Langevin. Very good. Good point. Thank you.
    Thank you, gentlemen, for your testimony.
    Mr. Chairman, I yield back.
    Mr. Taylor. Thank you.
    The Chair recognizes the gentleman from Maryland.
    Mr. Bartlett. I have one quick question. Thank you very 
much for your testimony.
    I am having a little trouble understanding the concern for 
instability with the one-ship, two-ship, one-ship procurement. 
Since it takes several years to build a ship, if I have nine 
ships to build and I have five years to build them, I think I 
would spread that work out evenly over the five years rather 
than having twice as much work in years one, two, three, and 
four as I have in year five. Am I missing something?
    Mr. Casey. I think the way you just explained it is a 
little different than what I thought I was answering.
    If we stick with the existing plan today, we have one ship 
planned to be authorized in fiscal year 2009, one in fiscal 
year 2010, one in fiscal year 2011. Right now, we are building 
one ship a year from the block, too, so these ships that we are 
building today, the last of which will be funded in this fiscal 
year we are in now, fiscal year 2008, are built at a rate of 
one per year.
    There is only one ship in the water, an Electric Boat, 
every other year. The other ship is at Newport News in the 
water. We have been able to mitigate the fluctuations in those 
skill-based people, those skilled craftspeople--for example, 
the radiological control people, the people who operate the 
vessel. We have been able to mitigate that through our 
involvement in maintenance and repair activities.
    Now, that is going away. That is going to our naval 
shipyards, as I have been told, so that will put us in the 
position of having a ship in the water one year when we deliver 
a ship and then no ship in the water for a year, a ship in the 
water for one year and then no ship in the water; and I hope 
that helps clarify the issue.
    When we get to two ships per year, there will be one in the 
water every year, an Electric Boat. That is why the two per 
year has for a long time been such an important priority 
relative to the industrial base view of the world, at least 
Electric Boat.
    Mike can certainly answer a little differently, I think, 
because of the----
    Mr. Bartlett. That is a different concern than the one I 
was addressing.
    We have been led to believe that we inject instability into 
the shipbuilding base if we procure one ship, two ships, one 
ship. I am not having trouble understanding that since it 
takes, what, five years to seven years, whatever it is, to 
build a ship. You know, I would simply spread that work out so 
that I would have an even workload and be thankful for that 
second ship every other year. Am I wrong?
    Mr. Petters. Well, sir, I think that--as I see it, I think 
that there are two definitions of ``stability.'' when I think 
of ``stability,'' I think of, if you decide to add a second 
submarine to the plan at the expense of, say, a surface 
combatant coming out of the plan or the carrier being delayed 
for another year or something like that which would create some 
changes in the plan of record because you had to take the money 
that was designated for these other things and put them into 
the submarine, that sort of instability would be very 
detrimental to the entire industry.
    If, on the other hand, you are thinking of ``stability'' as 
being, once we go to two submarines per year, we can never go 
back to one submarine per year, I think, as long as--I will 
speak for myself. As long as I know that the plan is one-two-
two, one-two, whatever that plan is and we just stick to it, I 
can accommodate that. I can make that work as long as we stick 
to it.
    My concern on ``stability'' is not about whether we go from 
one submarine to two and then back to one. My concern on 
``stability'' would be, if you go to two and it causes you to 
do something to other types of ships in the plan that would 
affect the base--you know, the overall industrial base that is 
out there. I think that would be a big problem for me; it would 
be a big problem for the industry.
    Mr. O'Rourke. Representative Bartlett, my point along those 
lines in my opening statement referred back to some testimony 
the Navy gave a week ago where they said that if you did two 
boats in a given year, then went back down to one, then back up 
to two, that could stress the workforce.
    In my own view, I disagree with that because the shipyards 
can phase the total volume of work that they will understand 
that they are getting, and it can actually represent a way of 
helping the workforce transition from a steady rate of one per 
year to a steady rate of two per year.
    If, in between, Congress finds that it can only give one or 
two extra boats during this four-year period, Congress, in my 
view, can entertain the option of scheduling them so that it 
results in two, one, two, one, so that the average rate of 
about one-and-a-half boats per year could actually help make 
that transition.
    I am sure the shipyards would love to go directly from one 
per year to two per year, but if Congress decides it can only 
afford to get one or two extra boats this period rather than 
three or four, then, in my view, Congress should not feel it 
has to avoid examining options for adding those one or two 
boats that would have a one, two, one, two schedule. I do not 
think that is detrimental. In fact, it might actually be 
helpful in transitioning to the eventual higher rate.
    Mr. Casey. A simple way to think about it, if I understood 
you correctly, is three ships every two years is better than 
two ships every two years.
    Mr. Bartlett. That is how I would see it, sir. Thank you 
very much.
    Mr. Nash. Chairman Taylor, I would like to add one thing.
    I am not backing off the nine percent, but I want to be 
sure. There was one assumption when I said there was a nine 
percent savings as a result of the second Virginia-ship set. 
That is assuming that the projections we have right now for the 
second aircraft carrier will be funded on the schedule that is 
predicted to be scheduled as shown in the contract.
    Mr. Taylor. Mr. Nash, I am going to ask you an unusual 
question.
    Because of the hurricane in the part of the country where I 
live, there is now very fierce competition for labor, and I am 
a proponent of our next generation of cruisers being in power.
    Could we, playing devil's advocate, get to the point where, 
if we were to add the second submarine and continue this and 
then follow that up with the desire to go--to build the next 
generation of cruisers with nuclear power, could we find 
ourselves in a situation where the cost of that plant actually 
goes up? Or is your industrial base capable of handling that, 
and does it relate, in your mind, to continuing the reduction 
in cost of those power plants?
    Mr. Nash. With the hardware that we provide, we could 
support that and, also, as a result of that, we believe there 
would be about a five percent reduction in the overall cost to 
the naval reactor program if we could do that.
    Mr. Taylor. I was hoping that was the answer, but I had to 
at least throw the other thing out there.
    I will open this up to the panel because you are so 
knowledgeable. Looking for ways to avoid the bottom of the 
valley as far as the number of vessels and knowing that, for 
example, the block line cruisers will retire very early, is 
there anything that we could or should be doing to the 688s now 
that could help get the additional two or three or four years 
that we would need to avoid that slump?
    Mr. Casey. I guess I will take a shot at that.
    You know, I think that the Navy should really be the one 
answering this, but the questions I would ask them would be: 
How could we extend the hull life? One of the limitations on a 
Los Angeles-class submarine, or any submarine, are the number 
of cycles on the hull. Every time you go test it, you cycle the 
hull, and it is limited to the number of cycles it can see.
    Second is the life of the fuel. How much fuel is in the 
ship? How much gas is in the tank, so to speak? So one of those 
two things. It limits the life of every submarine.
    How much is left on each of those 688-class ships that are 
in the fleet today? I cannot answer that. I do not have that 
information, but I am sure the Navy is in a position to provide 
details on that.
    Mr. Petters. Mr. Chairman, I would just add that I think 
John has got it right. As far as the end of life of ships go, 
one of the things that we have seen at the end of life of these 
ships is that the cost of maintenance on an older ship starts 
to go up more than linearly, and it is----
    Mr. Taylor. Can that be avoided with enough preventive 
maintenance?
    Mr. Petters. I think there is a tradeoff there about how 
much investment you want to make in it, because some of the 
systems, for instance, that you put on the ship that were built 
in the 1980's may not--the people who built those systems may 
not be around, so you have to go redesign some of those 
systems.
    Now, you are talking about what kind of investment would 
you make. My suggestion on this issue is that the way to deal 
with the force structure issue is not on the back end of the 
life cycle; it is on the front end of the life cycle. The build 
rate on the front end is what really drives the force 
structure. I mean, you can do some things like maybe do another 
refueling or maybe do a couple of system reengineerings to keep 
a couple of ships out there, but that is a Band-Aid fix. I 
think that dealing with the issue on the front end is a lot 
more efficient because you are not dealing with the increased 
cost of maintenance, and you are making investments in the 
right kind of technologies, and you are doing it on the 
baseline. So----
    Mr. Taylor. Mr. O'Rourke, any suggestions?
    Mr. O'Rourke. Among other things, you would have to look at 
the operational implications of husbanding electrical cycles 
and husbanding core life. If you are going to run the ships 
slower and not submerge them as often, what does that do to the 
utility of the submarines during the years that you are 
operating them?
    Plus, there are some issues you mentioned that are things 
we can do now that can head this off. There is simply the 
strict aging of materials and brittlement of materials and so 
on; and the way to get at that is to go in there and replace 
it. But that simply trades a maintenance cost later for doing a 
maintenance cost now, and again, when you look at the economics 
of that, it may not make sense. So this strict aging of 
materials could be a limiting factor also in addition to the 
ones that the other witnesses have mentioned.
    Mr. Taylor. The last thing I would mention is an 
observation that the Shipbuilding Caucus and I had at breakfast 
this morning, and I, for one, am pleased about the very helpful 
work of our Congressman Skelton and Congressman Murtha.
    I would certainly encourage all of you to participate to 
the greatest extent you can in the hearing in a couple of 
weeks. I would welcome to know, for example, if there is an 
option of a multiyear procurement for these submarines, two 
additional ships that we intend to buy, what savings, if any, 
does that bring. But again, I see a lot of things, a lot of 
hurdles that we have to cross to make these things happen, 
getting at least temporarily shorter, and as to all of those 
who have a desire to see the Navy build more submarines now and 
more ships now, I would certainly encourage those of you who 
can work with us to work with us on that.
    Mr. Ranking Member.
    Mr. Forbes.
    Mr. Courtney.
    Mr. Courtney. Done.
    Mr. Taylor. Thank you very much for being with us.
    The meeting is adjourned.
    [Whereupon, at 5:35 p.m., the subcommittee was adjourned.]
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                   DOCUMENTS SUBMITTED FOR THE RECORD

                             March 8, 2007

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?

      
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             QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD

                             March 8, 2007

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                   QUESTIONS SUBMITTED BY MR. TAYLOR

    Mr. Taylor. Is there any hope of additional savings with those 
additional boats? Has anyone in your office calculated that scenario?
    Mr. Casey. [The information referred to can be found in the 
Appendix on page 149.]
    Mr. Taylor. Is there any hope of additional savings with those 
additional boats? Has anyone in your office calculated that scenario?
    Mr. Nash. [The information referred to can be found in the Appendix 
on page 150.]

                                  
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