    [Senate Hearing 110-201]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 110-201, Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2008

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

                                    HEARING

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1547

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2008 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
    PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR
                                 OTHER PURPOSES

                                   ----------

                                     PART 2

                                    SEAPOWER

                                   ----------

                                  MAY 3, 2007

             Printed for the use of the Committee on Armed Services
    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                             2008--Part 2  SEAPOWER

                                                      S. Hrg. 110-201 Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2008

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

                                    HEARING

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                           ONE HUNDRED TENTH CONGRESS

                                 FIRST SESSION

                                       ON

                                    S. 1547

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2008 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
    PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR FOR THE ARMED FORCES, AND FOR
                                 OTHER PURPOSES

                                   __________

                                     PART 2

                                    SEAPOWER

                                   __________

                                  MAY 3, 2007

             Printed for the use of the Committee on Armed Services

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                          COMMITTEE ON ARMED SERVICES

                         CARL LEVIN, Michigan, Chairman

    EDWARD M. KENNEDY, Massachusetts     JOHN McCAIN, Arizona
    ROBERT C. BYRD, West Virginia        JOHN WARNER, Virginia,
    JOSEPH I. LIEBERMAN, Connecticut     JAMES M. INHOFE, Oklahoma
    JACK REED, Rhode Island              JEFF SESSIONS, Alabama
    DANIEL K. AKAKA, Hawaii              SUSAN M. COLLINS, Maine
    BILL NELSON, Florida                 JOHN ENSIGN, Nevada
    E. BENJAMIN NELSON, Nebraska         SAXBY CHAMBLISS, Georgia
    EVAN BAYH, Indiana                   LINDSEY O. GRAHAM, South Carolina
    HILLARY RODHAM CLINTON, New York     ELIZABETH DOLE, North Carolina
    MARK L. PRYOR, Arkansas              JOHN CORNYN, Texas
    JIM WEBB, Virginia                   JOHN THUNE, South Dakota
    CLAIRE McCASKILL, Missouri           MEL MARTINEZ, Florida

                       Richard D. DeBobes, Staff Director

                 Michael V. Kostiw, Replublican Staff Director

                                     ______

                            Subcommittee on Seapower

                   EDWARD M. KENNEDY, Massachusetts, Chairman

    JOSEPH I. LIEBERMAN, Connecticut     JOHN THUNE, South Dakota
    JACK REED, Rhode Island              JOHN WARNER, Virginia,
    DANIEL K. AKAKA, Hawaii              SUSAN M. COLLINS, Maine
    BILL NELSON, Florida                 JOHN ENSIGN, Nevada
    JIM WEBB, Virginia                   MEL MARTINEZ, Florida

                                      (ii)
    ?

                                C O N T E N T S

                                  ----------

                        CHRONOLOGICAL LIST OF WITNESSES
                 Navy Force Structure Requirements and Programs
                                  may 3, 2007

                                                                       Page
    Winter, Hon. Donald C., Secretary of the Navy....................     5
    Mullen, ADM Michael G., USN, Chief of Naval Operations...........     7

                                     (iii)

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2008

                                  ----------

                             THURSDAY, MAY 3, 2007

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

                 NAVY FORCE STRUCTURE REQUIREMENTS AND PROGRAMS

        The subcommittee met, pursuant to notice, at 3:35 p.m. in
    room SR-222, Russell Senate Office Building, Senator Joseph I.
    Lieberman (acting chairman of the subcommittee) presiding.
        Committee members present: Senators Lieberman, Reed, Webb,
    Collins, and Thune.
        Committee staff members present: Leah C. Brewer,
    nominations and hearings clerk; and John H. Quirk V, security
    clerk.
        Majority staff members present: Creighton Greene,
    professional staff member; and William K. Sutey, professional
    staff member.
        Minority staff members present: Michael V. Kostiw,
    Republican staff director; Gregory T. Kiley, professional staff
    member; and Sean G. Stackley, professional staff member.
        Staff assistants present: Fletcher L. Cork and Micah H.
    Harris.
        Committee members' assistants present: Frederick M. Downey
    and Colleen J. Shogan, assistants to Senator Lieberman;
    Jonathan Cooper, assistant to Senator Bill Nelson; Gordon I.
    Peterson, assistant to Senator Webb; Sandra Luff, assistant to
    Senator Warner; Jeremy Shull, assistant to Senator Inhofe; Jane
    Alonso, Patrick M. Hughes, and Mark J. Winter, assistants to
    Senator Collins; and Stuart C. Mallory, assistant to Senator
    Thune.

            OPENING STATEMENT OF SENATOR JOSEPH I. LIEBERMAN

        Senator Lieberman. The hearing will come to order. I thank
    everybody for coming in. I thank our friends from the public
    and the media for their patience. We had reason to go into
    closed session for the first part. Of course, I thank Secretary
    Winter and Admiral Mullen for being here. We are grateful to
    you for your service to our country and to the extraordinarily
    skillful, professional, and courageous men and women under your
    command. I hope whenever you have the opportunity you will
    convey our gratitude and our pride to them.
        I should announce in public session what I did in closed
    session. Apparently nobody was confused, but I am not Senator
    Kennedy, who usually chairs this subcommittee. Senator Kennedy
    is on the floor managing the legislation there and could not
    break for the hearing. He asked me, since I am next in
    seniority, to chair, and I am honored to do that.
        Secretary Winter and Admiral Mullen, you are faced with a
    number of critical issues that confront the Department of the
    Navy as you attempt to balance modernization needs, based on
    threat assessments for the future, against the costs of
    supporting ongoing operations, particularly in Iraq and
    Afghanistan. There are several areas of concern for the
    subcommittee today and for me personally that I would like to
    mention. I know Senator Kennedy shares these concerns.
        One is the prospects for meeting future force structure
    requirements. We are facing the prospect that the current
    Department of Navy program will lead to potentially large gaps
    between the forces that the Chief of Naval Operations (CNO) has
    said he needs and the forces that will be available to him and
    his successors. This is a matter of budget restraints and it is
    important for the public to understand that, though the
    absolute dollar number we are spending on defense now and will
    next year is large by any estimate, it still remains lower as a
    percentage of Gross Domestic Product than we have ever to my
    knowledge spent during wartime, which is what we are in.
        It is forcing the various Services, in this case the Navy,
    to make decisions that I am concerned about. I mention first
    one case. The Navy now predicts that Navy and Marine Corps
    tactical aircraft forces are facing a shortfall of as many as
    150 tactical fighters needed to outfit our 10 aircraft carrier
    air wings. With shortfalls that large, I worry, and I am sure
    you do, that we could be faced with reducing the number of
    aircraft available on short notice to the combatant commanders,
    either because we have deployed under-strength air wings or
    because we did not deploy the carrier at all because of the
    aircraft shortages. That is something none of us want.
        In another case, the CNO has said that the Navy needs to
    have 48 attack submarines to meet the requirements of the
    combatant commanders. But we are faced with the risk now of
    falling well short of that goal, down to 40, for more than 10
    years, starting some time during the next decade, that as other
    potential peer competitors continue to build submarines at a
    rapid rate.
        Other challenges facing the Navy center on acquisition
    programs. I know that the members of this subcommittee have
    special concerns about the Littoral Combat Ship (LCS) program.
    This was intended to be a ship that the Navy could acquire
    relatively inexpensively and relatively quickly. As it turns
    out, unfortunately, it looks like the LCS program may in fact
    be neither. Once again we are presented with a program with
    significant cost growth, which at least in part is driven by
    the service changing requirements after the design and
    construction contract was signed.
        The LCS situation raises significant questions about
    acquisition management within the Navy. This is not dissimilar
    from exactly the same questions raised about the other
    Services. So we want to ask today in regard to the LCS program,
    why were not the Navy and contractor teams better able to see
    the problem sooner? How could we have gotten to the point that
    the program was just months away from running out of money,
    with no alarms being sounded up the acquisition chain of
    command?
        I want to ask Secretary Winter about what actions he
    believes the Department of the Navy should take to strengthen
    acquisition oversight and restore confidence in the Navy's
    ability to manage these major acquisition programs.
        The subject of Navy force structure and acquisition,
    therefore, is of concern to us, but not a new one for the
    subcommittee. Over many years and with several different
    individuals holding the chairmanship of this subcommittee, we
    have devoted significant attention and concern to these
    subjects, as we do today. Today's hearing, I think, continues
    the strong bipartisan interest in the broader naval force
    structure issues facing the Nation today. It is in that
    bipartisan spirit of shared interest and respect that I am glad
    to call on the ranking member of the Seapower Subcommittee,
    Senator Thune, new to this lofty position, I might say, and on
    Senator Kennedy's behalf to welcome him as ranking member and
    ask him if he would like to make an opening statement now.

                    STATEMENT OF SENATOR JOHN THUNE

        Senator Thune. Thank you, Mr. Chairman. It is a pleasure to
    be joining the Seapower Subcommittee. I look forward to working
    closely with you and our other colleagues on the committee on
    naval and other matters that come before us and to improving
    and building upon the naval assets that we have in the State of
    South Dakota.
        I am also pleased to welcome Secretary Winter for our
    second panel. Admiral Mullen, I appreciate very much your
    testimony from earlier this afternoon. You have done an
    excellent job of articulating some of your challenges and of
    providing critical insights for this next discussion.
        The committee, of course, has placed priority on meeting
    the demands of current operations in Iraq and Afghanistan, and
    the Navy has contributed in important ways to those operations.
    However, we must also maintain sight of the broader role of the
    fleet, half of which may be underway on any given day to
    perform vigilance, peacekeeping, and humanitarian relief around
    the world, and to provide a level of security made possible
    only through global presence and naval superiority.
        This is an important backdrop for today's hearing, which is
    truly focused on the Navy's readiness, and by that, in many
    respects, I mean the Nation's readiness for future major
    conflict. A previous CNO, Admiral King, summed up the
    challenges of maintaining readiness in a memo to President
    Roosevelt, in which he stated: ``The fundamental United States
    policy is to maintain the Navy in strength and readiness to
    uphold national policies and interests and to guard the United
    States and its overseas possessions.''
        In time of peace, when the threats to our national security
    change with the strength and attitude of other nations in the
    world, it is frequently difficult to translate our requirements
    into terms of ships and planes and trained men. It is one thing
    to say that we must have and maintain a Navy adequate to uphold
    national policies and interests and to protect us against
    potential enemies, but it is another thing to decide what is
    and what is not the naval strength adequate for that purpose.''
        Clearly, much has changed in the world since Admiral King
    made these remarks some 60 years ago, but I think his insights
    capture the challenges that confront us today. While it is
    appropriate that we spend great efforts focusing on the details
    of how we buy the ships and aircraft for our fleet--and, Mr.
    Secretary, we look forward to your testimony in that area--I
    believe we all would agree that perhaps the greatest challenge
    before us, as Admiral King suggested, is to decide what is and
    what is not the naval strength in terms of ships and planes
    adequate to uphold our national policies and interests and to
    protect us against potential enemies.
        While we enjoy the superiority of today's fleet, I share
    the strong concerns raised by this committee these past several
    years regarding the steady decline in the size of our fleet.
    Admiral Mullen, you deserve great credit for committing to a
    plan to reverse that trend. Your shipbuilding program appears
    to balance the competing elements of capability and
    affordability.
        However, even this ambitious plan to build our Navy back to
    313 ships has to cope with shortfalls in key warfighting areas
    while also confronting significant cost risk. It would be
    extremely valuable today to gain your assessment of these
    challenges and to approach a common understanding of the
    prudent actions that would help mitigate the risks.
        It is also important to gain your assessment of progress on
    new ship programs. Clearly, Mr. Secretary, we look to learn
    from your recent experience with the Littoral Combat Ship and
    are interested in hearing of changes that you would propose to
    ensure other programs benefit by this experience. We need
    greater clarity on your plans to employ competition and balance
    industrial base factors for the Littoral Combat Ship and other
    major shipbuilding programs, including the guided missile
    (DDG)-1000 Destroyer.
        As well, we need to explore important opportunities to
    close capability gaps as we approach the next Virginia
    submarine multi-year procurement and as we consider
    alternatives for supporting Marine Corps amphibious lift
    requirements.
        Finally, the Navy's estimate for this shipbuilding program
    represents a 50-percent increase above investments of the past
    decade. I appreciate that you have met your commitment for 2008
    and would be interested in hearing your practical assessment of
    the Navy's ability to continue to finance the plan in the face
    of ever-increasing budget pressures.
        Thank you, gentlemen, for joining us. So, Mr. Chairman,
    again thank you for holding the hearing today. I look forward
    to the testimony from Mr. Secretary.
        Senator Lieberman. Thanks, Senator Thune.
        Secretary Winter, thank you for being here. We welcome your
    testimony now.

       STATEMENT OF HON. DONALD C. WINTER, SECRETARY OF THE NAVY

        Secretary Winter. Thank you very much, Senator Lieberman,
    Senator Thune, distinguished members of the subcommittee. Thank
    you for the opportunity to appear here this afternoon. I
    respectfully submit my statement for the record and I applaud
    Congress and this committee in particular for its increasing
    interest in shipbuilding. This is an area that needs attention
    from all sides and it is an area in which I have focused most
    of my time in working to improve our efforts. I have taken
    action to hold both contractors and the Navy responsible and
    accountable for our shipbuilding program.
        At the same time, I am working hard to establish an
    attractive business environment for building naval ships. The
    Department of the Navy recognizes that we will fail to achieve
    our shipbuilding and thus force structure goals if we do not
    correct the number of serious deficiencies in our acquisition
    programs and processes. I am reviewing the Department's major
    shipbuilding programs and I am working to improve our overall
    processes.
        I can assure you that I share your frustration and disquiet
    over the problems that we have encountered in many of our
    programs. I can also assure you that your Navy is leaning
    forward and beginning to build the ships and submarines that
    our country needs for the future.
        Over the past years, we have executed a major shipbuilding
    research and development program that has set the stage for a
    major force transformation in the Navy's structure. We are in
    the early stages of development and production of more classes
    of new ships than we have produced in recent times. This will
    result in the transformation of the fleet and will position it
    to deal with a very uncertain future.
        But, as you have seen, such a grand transformation will not
    be without problems. You have my promise and commitment to
    oversee the management of these programs and I request your
    continued support in helping me to get our Navy shipbuilding
    program in position to deliver on our requirements. Putting our
    shipbuilding programs on a more solid footing is an urgent
    priority. With your help, we can succeed in building the fleet
    we need in our Nation's defense.
        Thank you very much and I look forward to answering your
    questions.
        [The prepared statement of Secretary Winter follows:]

                  Prepared Statement by Hon. Donald C. Winter

        Thank you for inviting me to appear before the Senate Armed
    Services Committee, Subcommittee on Seapower. The support that this
    committee provides to the Navy and Marine Corps is greatly appreciated.
        A strong Navy is key to maritime dominance and is a critical aspect
    of our National Defense Strategy. We need a force structure of 313
    ships. The process of acquiring new ships is challenging and the budget
    is tightly wound. Many of our past problems have resulted from
    constantly changing requirements and shipbuilding plans. If the
    Department of the Navy is to succeed in acquiring and maintaining the
    required numbers of ships, we need a plan, we need to stick to it, and
    we need to closely manage the execution of the plan. The 313-ship plan
    that was promulgated over the past 2 years is our goal. The force
    produced by this plan will satisfy our requirements for blue, green,
    and brown water capabilities.
        The biggest challenge we face is acquisition of new ships. We
    cannot build the quantities or qualities of ships that are required
    unless we correct several shortfalls.
        I have initiated a review of our major shipbuilding programs while
    simultaneously working to institutionalize key acquisition reform
    initiatives. The recent challenges associated with the Littoral Combat
    Ship (LCS) and other shipbuilding programs point to a number of issues
    that we are addressing. In the long-term, I am initiating the following
    actions:

             Re-assert Navy control over the entire shipbuilding
            acquisition process. Control over acquisitions also means
            decoupling decision points.
             Establish the Navy as the lead systems integrator to
            optimize the overall capability of the fleet.
             Use the shipbuilding contract process to incentivize
            contractors to design for production and sustainment.
             Use independent cost estimates for the trade-offs and
            decisions thus increasing reliability of the cost estimation
            process.
             Assure that detail design and construction contracts
            are supported by mature specifications.
             Develop an acquisition workforce capable of providing
            knowledgeable program oversight.

        I am working to develop solutions that are in the best overall
    interest of the taxpayer, the Navy, and the industry that supports
    shipbuilding.
        In reviewing specific programs, my focus thus far has been on LCS,
    LPD-17, T-AKE, and Virginia class submarines. In past discussions, I
    have noted our efforts to bring the production cost of Virginia class
    submarines down to $2 billion in fiscal year 2005 dollars. We are
    making considerable progress in this area and must achieve that goal by
    2012, when we shift to two units per year.
        The early experience with the LCS has been disappointing and must
    be corrected to assure that we construct these vitally needed ships in
    a timely and cost effective manner. I am restructuring the program to
    address cost and programmatic issues. This restructuring will result in
    the cancellation of one of the fiscal year 2006 ships and will require
    the funding allocated for the fiscal year 2007 ships to be used to
    offset cost and schedule issues associated with the fiscal year 2005
    and other two fiscal year 2006 ships. I am redoubling efforts to manage
    for the success of the lead ship efforts. My proposal is to reduce buys
    for fiscal year 2008 and fiscal year 2009 from what was previously
    planned and position the program to down-select to a single design in
    fiscal year 2010. It is critical that the Department of the Navy take
    this action early to assure this vital program is technically sound and
    affordable.
        With respect to DDG-1000, CVN-78, MPF(F), and LHA(R), I plan to
    conduct detailed reviews of each of these programs to address potential
    issues early in these programs. Each of these programs must be properly
    initiated and closely monitored to assure success.
        To make our shipbuilding plan work, there are several areas where I
    need your help. I will need your support for the LCS restructuring plan
    I have noted previously. I will need your patience as we transform mine
    warfare shipboard capabilities to a LCS-centric structure. It is
    imperative that we move to this more capable force and retire less
    capable assets. A second area where we require your support is in
    modifying language regarding the number of aircraft carriers required.
    As we have noted, there will be a short period of time between the
    period when U.S.S. Enterprise (CVN-65) is retired and the Gerald Ford
    enters service when it will be necessary to reduce our carrier force
    from eleven to ten units. We will be able to meet operational
    requirements during this period with limited risk by carefully
    scheduling maintenance activities. A third challenge we are working
    through is getting amphibious lift right.
        I applaud Congress and this committee in particular for its
    increasing interest in shipbuilding. I acknowledge the desire of many
    Members to increase force structure at a faster rate than the
    Department of the Navy can afford to execute. My biggest concerns
    regarding changes to our annual shipbuilding plan relate to the budget
    and to the shipbuilding industrial base. Any additions to the
    shipbuilding budget that have unfunded out year liabilities will
    disrupt our delicate plan to achieve the desired long-term force
    structure. With respect to the shipbuilding industrial base, Hurricane
    Katrina has complicated the ability of the industrial base to surge,
    thus reducing flexibility to execute increased procurement rates. I am
    exploring opportunities to work with our industrial partners to restore
    our shipbuilding industrial base flexibility.
        In summary, your Navy is leaning forward and building the ships and
    submarines our country needs for the future. Over the past years we
    have executed a major shipbuilding research and development program
    that has set the stage for a major transformation in the Navy's force
    structure. We are in the early stages of development and production of
    more classes of new ships than we have produced in recent times. This
    will result in a transformation of the fleet and position it to deal
    with a very uncertain future. But, as you have seen, such a grand
    transformation will not be without problems. You have my promise to
    actively manage these programs and I request your support in helping me
    to get our Navy's shipbuilding program in position to deliver the fleet
    it needs.

        Senator Lieberman. Thank you, Secretary Winter.
        Admiral Mullen, do you have an opening statement for this
    open session?

        STATEMENT OF ADM MICHAEL G. MULLEN, USN, CHIEF OF NAVAL
                               OPERATIONS

        Admiral Mullen. No, sir.
        [The prepared statement of Admiral Mullen follows:]

                Prepared Statement by ADM Michael G. Mullen, USN

        Chairman Kennedy, Senator Thune, and distinguished members of the
    Seapower Subcommittee, it is a privilege to appear before you
    representing the brave men and women, sailors and civilians of the
    United States Navy. We appreciate the long standing support we have
    received from your subcommittee.

                                  INTRODUCTION

        We are a maritime nation involved in a long, irregular and global
    war that extends far beyond Iraq and Afghanistan. The threat we face
    breeds within failing states and the undergoverned spaces of the world
    and preys upon those weakened by poverty, disease, and hatred. It
    thrives where there is no rule of law and spreads through cyberspace
    and the vast maritime commons in this age of globalization.
        We are also confronted by nation-states determined to develop
    sophisticated weapons systems, including nuclear arms. We cannot allow
    ourselves to be fixated on one threat alone. Our national security is
    dependent upon a strong Navy that can keep the sea lanes free, deter
    aggression, safeguard our sources of energy, protect the interests of
    our citizens at home and reassure our friends abroad. We must never
    relinquish overmatching capability and capacity.
        While our ground forces are engaged in Iraq and Afghanistan, Navy's
    ability to deliver two unique attributes--global reach and persistent
    presence--continues to support our worldwide responsibilities and
    provide a powerful deterrent force in day-to-day operations and as our
    Nation's ``Strategic Reserve.'' As we face the rapidly changing
    security environment, there is no alternative to a well-balanced fleet.
        As I testified before Congress last year and earlier this year, I
    identified three priorities addressed by our fiscal year 2007 budget:
    Sustain Combat Readiness, Build a Fleet for the Future, and Develop
    21st Century Leaders. We have made progress in all three and our fiscal
    year 2008 budget reaffirms our commitment to these priorities. In
    today's testimony, I will focus on building a fleet for the future,
    placing particular emphasis on strengthening our core warfighting
    capabilities and increasing our military capacity.

                                FORCE STRUCTURE

        In 2005, the Navy conducted extensive analysis to determine the
    minimum required force structure needed to meet the security demands of
    the 21st century with an acceptable level of risk. In February 2006,
    Navy submitted a 30-year shipbuilding plan that would provide
    approximately 313 ships by 2020 with warfighting capacity and
    capability to meet the expected threat and security demands. Our
    recently submitted fiscal year 2008 Annual Long Range Plan for
    Construction of Naval Vessels (30-year shipbuilding plan), essentially
    unchanged from our 2007 submission, is intended to provide the
    shipbuilding industry with sufficient predictability to maintain
    critical skills and to make business decisions that increase efficiency
    and productivity in order to meet the Navy's projected shipbuilding
    requirements.
        Navy's force structure requirement was developed and validated
    through detailed joint campaign and mission level analysis, optimized
    through innovative sourcing initiatives (e.g. Fleet Response Plan
    (FRP)), adaptive force packaging) that increase platform operational
    availability. Importantly, the future battle force was measured against
    the anticipated threats for the 2020 timeframe.
        The future Navy will remain sea based, with global speed and
    persistent presence provided by forward deployed and surge-ready forces
    through the FRP. To maximize return on investment, the Navy must be
    balanced to fight an asymmetric war against the evil of terrorism, to
    help secure the maritime commons through strong partnerships and
    Maritime Security Operations, to deter would-be aggressors and, when
    necessary, to fight and win Major Combat Operations (MCO). This
    capabilities-based battle force can be disaggregated and distributed
    worldwide to support the operational demands of our combatant
    commanders.
        Our force structure strategy is balanced between new construction
    and modernization for ships, and recapitalization and sustainment for
    aircraft. It is critical to our strategy for us to have vigorous
    modernization and sustainment programs to achieve the expected service
    life of our ships and aircraft in the face of rapidly escalating global
    threats using advanced technologies. Modernization and sustainment
    optimizes our capital investments.
        With 38 ships currently under contract for construction, we can see
    the future fleet taking shape. In 2006, we christened the first Freedom
    Class littoral combat ship, amphibious assault ship Makin Island,
    amphibious transport dock ship Green Bay, guided-missile destroyers
    Gridley and Sampson, nuclear attack submarine (SSN) Hawaii, auxiliary
    dry cargo ships Alan Shepard and Sacagawea, and the aircraft carrier
    George H.W. Bush. We commissioned the SSN Texas and the guided-missile
    destroyer Farragut. We also rolled out the first EA-18G Growler. By the
    end of fiscal year 2007, our fleet's net size will have grown from a
    low of 274 ships in March 2007 to 279, including 5 newly commissioned
    ships.
        Navy is in the process of evaluating the impact global developments
    have had on our risk assumptions in our force plan and ultimately
    whether or not this should affect our future Battle Force. We are
    further evaluating lessons learned from the recently identified
    Littoral Combat Ship (LCS) cost overruns. Whatever the outcome of these
    evaluations, we will work closely with our partners in industry to
    control requirements and costs, and provide the industrial base the
    stability it needs to become more productive.
        Future platforms and combat systems must be designed and built with
    the knowledge that we plan to continually upgrade them over their
    lifetime. An Open Architecture approach to software acquisition and
    development of integrated weapons systems is a critical part of this
    business model. Free and open competition in which the best ideas win
    is the goal.
        To facilitate the stability required to achieve reduced costs in
    this constrained industrial sector, the fiscal year 2008 President's
    budget submission made no changes in ship acquisitions in fiscal year
    2008 from PB07 to PB08. Navy has a long-range vision to maximize reuse
    of ship designs and components, and to employ a business model that
    encourages the use of open architecture and mission systems modularity.
        The next major challenge in building a fleet for the future is to
    deliver a long range aviation procurement plan. Much work has been done
    analyzing joint warfighting capabilities and capacity based on threat
    and risk assessments driven by Defense Planning Guidance. Consideration
    has also been given to affordability, industrial capacity and
    production times associated with next generation aviation warfare. The
    Navy will work to deliver a stable aviation build plan that transforms
    and balances aviation capabilities with respect to conventional and
    irregular warfare, reduces excess capacity, and achieves technological
    superiority through cost-wise investments in recapitalization,
    sustainment and modernization programs.
        Resourcing critical maritime and joint effects, the President's
    budget procures 188 aircraft in fiscal year 2008, with a goal of
    eventually reducing average aircraft age from 74 percent to 50 percent
    of expected service life. The plan is structured to support required
    economic order quantity (EOQ) investments and facilitate Multi-Year
    Procurement (MYP) contracts.

                          BUILD A FLEET FOR THE FUTURE

        As we adapt to asymmetric threats and the challenges of irregular
    warfare, we cannot lose sight of Navy's core warfighting competencies.
    We must continue to improve performance in anti-submarine and mine
    warfare, anti-surface warfare, anti-air warfare, strike warfare,
    ballistic missile defense, and other core maritime superiority
    missions. We will continue to mature our FRP to ensure combat ready,
    surge-capable forces are available to meet any contingency.
        We have worked hard with Congress and industry to start to create
    stability between our shipbuilding plans and industrial base. We must
    continue to fund and build a balanced, effective Battle Force of about
    313 ships . . . the minimum force required to guarantee the long-term
    strength and viability of U.S. naval sea and air power with acceptable
    risk. We recognize the need to control requirements, maintain program
    stability, curb costs, and encourage best business practices. We need
    support for sustained funding of our shipbuilding account--consistent
    with the 30-year plan--that is critical to provide our partners in
    industry the stability they need to curb cost growth and sustain our
    vital shipbuilding industrial base.
        To build a fleet for the future and ensure the superiority of our
    future fleet, we seek congressional support in the following areas:

             11 Carrier Force. The 30-year shipbuilding plan
            recognizes that as a result of the retirement of U.S.S.
            Enterprise in fiscal year 2013, the number of aircraft carriers
            will drop to 10 for a period of approximately 33 months, until
            the U.S.S. Gerald Ford enters active service. Legislative
            relief is required from the National Defense Authorization Act
            for Fiscal Year 2007 requiring a carrier force of 11. In
            developing the 30-year shipbuilding plan, Navy conducted
            extensive analysis that concluded the temporary drop to a
            carrier force of 10 for 33 months, from fiscal year 2013
            through fiscal year 2015, is an acceptable short-term risk.
             Littoral Combat Ship. The LCS program remains of
            critical importance to our Navy providing mine warfare, anti-
            submarine and anti-surface warfare capabilities. Extensive
            force structure analysis, as reflected in the 30-year
            shipbuilding plan, establishes a requirement for 55 LCS. Navy
            is committed to satisfying this valid requirement.
              Current cost estimates exceed established thresholds for
            detail design and construction of LCS-1, the lead Lockheed
            Martin hull. This recent cost growth (to some extent the result
            of unrealistic schedule and cost constraints, unstable
            specifications at time of contract award, design-build
            concurrency, subcontractor performance delays impacting
            critical path, rework due to design changes, and Engineering
            Change Proposal scope increases) has provided an opportunity to
            reinforce the Navy's commitment to providing warfighting
            capability through affordability. The Navy executed a pause in
            the construction of LCS-3, the second Lockheed Martin hull, to
            conduct a thorough review of the program, and to examine both
            internal and external factors relating to the acquisition and
            contracting processes, practices, and oversight and the related
            impact on cost. Negotiations failed to achieve a proper
            balancing of risk at an executable price for the Navy, which
            has led to the termination of construction of LCS Hull #3.
              On 12 April 2007, Navy terminated the contract with Lockheed
            Martin for construction of LCS Hull #3 since the cost-to-risk
            balance was considered unaffordable. The Navy remains committed
            to bringing LCS capability into the fleet to address emerging
            Long War and MCO capability requirements. Our LCS acquisition
            strategy is executable, affordable, and in the best interests
            of the Navy.
             Virginia Class MYP. The Navy remains committed to
            reduce Virginia acquisition costs to $2 billion (fiscal year
            2005 dollars) per hull concurrent with a build rate of two
            ships per year starting in fiscal year 2012. Two items
            requested this year are critical to achieving this goal. The
            first is authority in the National Defense Authorization Act
            for Fiscal Year 2008 to enter into a MYP contract with EOQ in
            fiscal year 2009. This would provide the Navy a significant
            negotiating advantage, send a clear signal to industry
            regarding the Navy's commitment to future submarine
            procurement, and reduce risk. The Navy anticipates $2.9 billion
            (13 percent) of savings compared to annual (single ship)
            procurement contracts by using a 5-year/7-ship MYP contract for
            Virginia class submarines starting in fiscal year 2009.
              The second item critical to achieving cost reduction and an
            increased build rate of two submarines per year is the Virginia
            class cost reduction investment contained in the fiscal year
            2008 budget request. As detailed in the recently delivered
            Report to Congress on Virginia Class Cost Reduction, the Navy
            plans to achieve its cost goal for the program through
            construction performance improvements, design changes that
            reduce cost, and by increasing the procurement rate under a MYP
            contract with EOQ authority. The cost reduction investment
            funds are vital to implementing the needed construction
            performance improvements and design changes.
              As identified in the 30-year shipbuilding plan, even with a
            build rate of two Virginia class submarines per year commencing
            in 2012, the number of nuclear attack submarines will fall
            below the desired 48 submarine fleet identified in the 30-year
            shipbuilding plan from about 2020 through 2034. This apparent
            shortfall, however, can be managed through several risk
            mitigation efforts. First, stationing 60 percent of our attack
            submarines in the Pacific, as recommended in the 2006
            Quadrennial Defense Review, will reduce critical response times
            in the Pacific. Second, by adjusting patrol times of our attack
            submarines, we can ensure greater operational availability
            without significantly impacting our sailors and their families.
            Finally, by pursuing an integrated approach to undersea warfare
            queuing through multiple sensors (e.g. Unmanned Undersea
            Vehicles, the P-8A Multi-Mission Aircraft, SH-60R/S
            helicopters), we can improve critical target detection,
            tracking, and sensor-to-shooter response times to fully support
            the requirements of our combatant commanders for attack
            submarine presence worldwide. Other initiatives under review
            include reducing build time of the Virginia class SSN from 72
            to 60 months and considering modest hull-life extensions on a
            small number of SSNs.
             Split Funding for Zumwalt class DDG. The DDG-1000
            Zumwalt class destroyer brings much needed stealth, counter
            air, and surface fire support to the fight. The Tumblehome hull
            provides a reduced radar cross section and acoustic signature
            while its Dual Band Radar represents a significant increase in
            air defense capability in the cluttered littoral environment.
            With the Advanced Gun System and associated Long Range Land
            Attack Projectile (LRLAP) DDG-1000 will provide volume and
            precision fires in support of Joint forces ashore. A Global
            Positioning System-guided, 155 millimeter round, LRLAP will
            provide all-weather fires capability out to 83 nautical miles.
            Open architecture and reduced manning will provide the Navy
            life cycle cost savings and technology that can be retrofit to
            legacy ships. DDG-1000 is the harbinger of our future fleet,
            taking major steps in advanced warfighting, reduced manning, a
            fully integrated power/propulsion system, and an open
            architecture design.
              The support of Congress for last year's split funding request
            is greatly appreciated. This year Navy requests the second half
            of split year funding for dual lead ships of the Zumwalt class
            destroyer to maximize competitive efficiencies and focus design
            efforts. Split funding will also lend stability to the
            shipbuilding industrial base. This funding strategy supports
            the current budget structure, enhances future competitive
            opportunities, and limits liability for appropriations in
            future years.
             Joint Strike Fighter. The F-35 Joint Strike Fighter
            (JSF) remains the cornerstone of Navy's continuing superiority
            in air warfare. Although risk associated with the recent 2 year
            slip in the carrier variant of the F-35 will be mitigated by a
            modest increased buy of F/A-18E,F variants, there should be no
            doubt that JSF is a much more capable aircraft to which the
            Navy is fully committed. I encourage your continued strong
            support of this program to guard against further delays in
            production.
             Legacy Aircraft Replacement. As our aging, legacy
            aircraft reach the end of the service lives, funding for
            follow-on programs becomes critical. Among these programs are
            the P-8A Multi-mission Maritime Aircraft (MMA), the F/A-18E/F
            and JSF, the EA-18G airborne electronic attack aircraft, the V-
            22 tilt-rotor aircraft, and the MH-60R/S and CH-53K
            helicopters. Navy's RDT&E program is also vital to this effort.
             Anti-submarine warfare (ASW). Submarines with
            improving stealth and attack capability--particularly modern
            diesel attack submarines--are proliferating worldwide at an
            alarming rate. Locating these relatively inexpensive but
            extremely quiet boats presents our Navy with a formidable
            challenge. Navy is pursuing a distributed and netted approach
            to ASW. Some of the key ASW programs we must continue to
            develop and field as quickly as possible include: Surface Ship
            Torpedo Defense System; High Altitude ASW Weapon Concept;
            Deployable Distributed Autonomous system; Reliable Acoustic
            Path Vertical Line Array, and Aircraft Carrier Periscope
            Detection Radar.
             SONAR Restrictions. ASW is a very complex and
            challenging warfighting competency in which to achieve and
            sustain the required level of expertise. Therefore every
            opportunity we have to gain and maintain proficiency at the
            ship/unit level, and every opportunity we have to integrate
            units in complex scenarios is crucial to our readiness.
            Unfortunately, our ability to train in the same manner in which
            we fight is under attack in public forums, including the
            courts. Thus far, we have seen little scientific basis for the
            claims lodged against the Navy. However, these allegations
            present the potential for severe restrictions on our continued
            ability to train effectively, as we saw in RIMPAC 2006 wherein
            we lost 3 days of valuable ASW training with active sonar
            because of a court restraining order. Navy is currently
            executing a comprehensive plan of action to cover all our at-
            sea training areas with environmental compliance documents by
            the end of 2009. We are committed to maintaining an open
            dialogue, continuing to advance our scientific understanding of
            the impacts of sonar on marine mammals, and complying with the
            relevant statutes. We have consistently made this clear as an
            organization in our debate on this issue. Maintaining
            proficiency in ASW is a daily challenge, and while our long-
            term compliance documents are being developed, we cannot afford
            to stop training. We owe it to our sailors to ensure they
            receive the training they need to fight and win.
              The Marine Mammal Protection Act (MMPA) requires permits for
            activities that may affect marine mammals. This includes
            military activities, including certain Navy activities at sea.
            The National Defense Authorization Act of 2004 included a
            provision that authorizes the Secretary of Defense to grant
            exemptions to the MMPA for certain military activities critical
            to our national defense. On 23 January 2007, the Deputy
            Secretary of Defense granted Navy a National Defense Exemption
            (NDE) for 2 years covering mid-frequency active (MFA) sonar
            activities for major exercises and in major operating areas, as
            well as the use of Improved Explosive Echo Ranging sonobuoys.
            The NDE will help Navy continue to conduct the sonar training
            necessary for our national defense while protecting marine
            mammals through established mitigation measures.
             Naval Expeditionary Combat Command (NECC). NECC is
            developing into a true force of choice in phase zero (pre-
            conflict) and phase V (reconstruction) operations, and is a
            vital part of our Nation's Long War against terrorism. All new
            forces--Riverine, Expeditionary Training Group, Maritime Civil
            Affairs and Maritime Expeditionary Security Force--will meet
            full IOC objectives in fiscal year 2007. Riverine deployed its
            first squadron to Iraq in March to provide area security at
            Haditha dam and interdiction operations on the Euphrates River.
            Your continued support of our Riverine capability and capacity
            is vital. Our second Riverine Squadron was established on 2
            February 2007 and our third Squadron will be stood up this
            June.
             Sea Basing and Expeditionary Warfare. It would be
            difficult to consider any future expeditionary missions without
            recognizing the need for a sea base from which to employ Joint/
            Multinational Capabilities across the full Range of Military
            Operations. Seabasing provides operational maneuver and assured
            access to the Joint/Multinational forces while significantly
            reducing our footprint ashore, thereby minimizing the need to
            obtain host nation permission and/or support. These operational
            characteristics will prove increasingly vital in the post-
            Operation Iraqi Freedom/Operation Enduring Freedom political-
            military security environment. Navy is exploring innovative
            operational concepts combining seabasing with adaptive force
            packaging that will further support national security policy
            and the combatant commanders' objectives worldwide. Our 30-year
            shipbuilding plan provides for seabasing that covers the
            spectrum of warfare from Joint Forcible Entry to persistent and
            cooperative Theater Security Cooperation.
              Over the last several years, my staff and that of the
            Commandant's Marine Corps Combat Development Center, and Marine
            Corps Headquarters, have worked diligently to develop a
            strategy for amphibious warfare that is relevant to the myriad
            challenges we face in the complex security environment of the
            21st century. The investment strategy we have embarked upon
            represents the Navy-Marine Corps shared vision of the future
            and a significant investment of time and resources for both our
            Services. This vision was further validated by the Naval
            Operating Concept signed by the Commandant of the Marine Corps,
            General Hagee, and me last summer.
              Based on a foundation built upon well-defined analytical
            underpinnings, our staffs agreed on an investment program that
            would provide a capable, agile, and affordable response force.
            Specifically, our investments in tomorrow's Navy reflect a
            commitment to build the fleet of the future, with the
            capability and capacity to fight and win the Nation's wars,
            including amphibious operations from the sea. This commitment
            supports the operational forces in the assault echelon and
            provides protection for the Maritime Prepositioning Force--
            Future (MPF(F)) to ensure its survivability in any hostile
            environment.
              The ability of our future fleet to meet the demand signal for
            amphibious forces must be viewed in the aggregate. Given the
            cost of ships today, we cannot discount the value of ships
            procured to support prepositioned equipment. Prepositioned
            assets must be included in the overall force availability
            equation--ignoring MPF(F) as the lift component of an
            additional Marine Expeditionary Battalion (MEB) would be
            incongruous with today's fiscal environment. The capabilities
            provided by the MPF(F) mitigate concerns regarding the
            operational availability of the assault echelon force required
            to deliver 2.0 MEB lift, vehicle square footage, and passenger
            requirements. As reflected in our 30-year shipbuilding plan, we
            believe 30 amphibious ships will meet these requirements, when
            supported by, and supporting, the MPF(F).
             Ballistic Missile Defense. Missile tests on the Korean
            Peninsula and by Iran, along with the proliferation of
            ballistic missile technology, underscore the growing need for a
            robust, sea-borne ballistic missile defense system. Last year,
            the Navy made further progress on our Aegis Ballistic Missile
            Defense (BMD), the sea-based component of the Missile Defense
            Agency's (MDA) Ballistic Missile Defense System (BMDS). It
            enables surface combatants to support ground-based sensors and
            provides a capability to intercept short- and medium-range
            ballistic missiles with ship-based interceptors (SM-3). The
            Sea-Based Terminal effort will provide the ability to engage
            Short Range Ballistic Missiles (SRBMs) with modified SM-2 Blk
            IV missiles from Aegis BMD capable ships.
              In May, 2006, U.S.S. Lake Erie (CG 70) successfully engaged
            and intercepted a LANCE short-range test target with a modified
            SM-2 Block IV missile in a Navy-sponsored BMD demonstration. As
            a result, the Navy is modifying the remaining inventory of 100
            SM-2 Block IV missiles, and MDA is modifying the Aegis BMD
            program to support sea-based terminal engagements. In June,
            2006, Navy successfully achieved a second engagement of a
            separating SRBM target with the AEGIS BMD system.
              Last week, the Navy successfully engaged and destroyed a non-
            separating exo-atmospheric short-range ballistic missile, while
            simultaneously engaging a low altitude cruise missile. This
            successful engagement brings the tally to 8 successful
            intercepts in 10 flight tests and underscores the value of this
            sea-borne ballistic missile defense capability in an era of
            rapidly proliferating ballistic missile hardware and
            technology.
             Research and Development. To achieve the speed of war
            Navy is pursuing Innovative Naval Prototypes--revolutionary
            ``game changers'' for future naval warfare. These initiatives
            have resulted in the development of an electromagnetic rail-gun
            prototype; new concepts for persistent, netted, littoral anti-
            submarine warfare; technologies to enable seabasing; and the
            naval tactical utilization of space.
             Public Shipyard Loading. As we work with industry on
            shipbuilding cost reduction, we must ensure legislation and
            policy support best business practices and efficiencies.
            Apportioning work based upon funding quotas to drive
            workloading in public naval shipyards potentially diverts
            efficiency opportunities away from the private sector. Public
            yards provide vital services for nuclear propulsion and
            submarine work, and these critical competencies must be
            maintained. However, our first priorities in shipyard loading
            should be quality, efficiency, and cost savings. We seek your
            assistance in removing restrictions on our workloading
            flexibility.

        Additional information on some of Navy's priority warfighting
    programs is offered in the attached Annex I.

                                   CONCLUSION

        Our Navy is truly a bargain, costing the taxpayers less than 1
    percent of GDP. But as we strive to sustain combat readiness, build a
    fleet for the future and develop 21st century leaders, we cannot allow
    ourselves to take this for granted. We must be mindful of the need to
    maintain a strong Navy now, and after our ground forces return home.
        It has been just over 20 years since Congress passed the Goldwater-
    Nichols Department of Defense Reorganization Act of 1986, subsequently
    signed into law by President Reagan. While this landmark legislation
    established a clean chain of command running from the President through
    the Secretary of Defense and Chairman of the Joint Chiefs directly to
    the unified combatant commanders, and increased synergy among services
    by providing for shared procurement and development of technologies, it
    also precluded Service Chiefs from participating in the acquisition
    process beyond the identification of requirements.
        Without direct involvement in the entire acquisition cycle, Service
    Chiefs have little control over the mechanisms that drive efficiencies
    and best business practice in our major acquisition programs. Yet, the
    chiefs bear the responsibility of providing the right capabilities and
    capacity to meet the demands of our combatant commanders. I believe we
    should explore putting the Service Chiefs, and their military
    expertise, back into the acquisition chain of command and to hold them
    accountable for their procurement programs.
        Our Nation depends upon a strong Navy with the global reach and
    persistent presence needed to provide deterrence, access, and
    assurance, while delivering lethal warfighting capacity whenever and
    wherever it is needed. Our Navy is fighting the global war on terror
    while at the same time providing a Strategic Reserve worldwide for the
    President and our unified and combatant commanders. As we assess the
    risks associated with the dynamic security challenges that face us, we
    must ensure we have the Battle Force, the people, and the combat
    readiness we need to win our Nation's wars.
        Simply reacting to change is no longer an acceptable course of
    action if our Navy is to successfully wage asymmetric warfare and
    simultaneously deter regional and transnational threats: Two
    Challenges, One Fleet. Our Nation's security and prosperity depend upon
    keeping our shores safe and the world's maritime highways open and
    free.

        Senator Lieberman. Thank you. I will proceed.
        I want to get back to some of the questions I raised in my
    opening statement here about the stress on the capital programs
    of the Navy. I mentioned we are in danger of falling below the
    Navy's own requirement of having 48 attack submarines for a 14-
    year period beginning in 2020. It sounds a long way away, but
    it is not that long away, and unless we start to act on it it
    is going to be a problem for us.
        In 2028, the number of attack submarines is expected to
    fall to 40 under the current shipbuilding plan, not only below
    the Navy's current requirement, but also far below the
    historically estimated need of submarines. In fact, in 1999,
    just 8 years ago, the Joint Chiefs of Staff (JCS) concluded
    that the Navy needed to have 55 attack submarines in the near-
    term and 68 to 72 subs by the middle of the next decade. So we
    are obviously far short of that estimate.
        I say parenthetically what you know because you live with
    it. Namely, that the current 30-year shipbuilding plan calls
    for maintaining a 313-ship fleet as a minimum. In recent years,
    the estimates of the necessary fleet size from respected people
    have gone as high as 380. Meanwhile, the current Navy stands at
    about 279 ships.
        So I say all this to just say again that we have a problem
    and in my opinion we are not spending enough. The recent
    incident, which has been publicly described, with China and a
    sub coming into the area where the Kitty Hawk Battle Group was
    and public reports that China is producing as many as two and a
    half subs per year and is rapidly closing the overall fleet
    strength gap, seems to indicate to me anyway that we need a
    much greater number of ships and subs than we are currently
    procuring.
        Admiral, I wanted to ask you to respond to this question.
    The Navy has repeatedly testified that it needs 2 years of
    advance procurement funding before construction in a given sub
    in order to have the parts that require a long lead time.
    However, the Congressional Research Service has said that the
    2-year advance procurement is not necessary, that Congress can
    fund the entire sub construction program in a single year,
    which means that the finished product would take 2 years longer
    at the back end. In fact, that was done in 1988 when Congress
    funded the construction of two aircraft carriers in a single
    year, including advance procurement.
        So, acknowledging both the budget pressure you are under
    and the need in my opinion to accelerate to 2009 the date by
    which we start building two subs a year, provided we enter into
    a multi-year contract to save costs, why should Congress not
    begin to fund two subs a year in 2009?
        Admiral Mullen. Senator, the basis for this, as you
    indicated, is the 313-ship future force structure plan. We are
    275 ships today. By the end of the year, I actually hope in the
    commissioning, one of which is later this week, to head north
    in terms of stopping the free fall. We talked earlier about, or
    I have talked consistently about having a balanced fleet. The
    48 submarines was the warfighting analysis that we went through
    extensively and I am very comfortable with that number and very
    comfortable with that number against the 1999 JCS study.
        That said, the plan you speak to, we do fall to 40
    submarines. We have looked in the last year at ways to mitigate
    that and we are looking at possibilities of extending some hull
    life for a deployment, for an additional deployment. The hull
    lives of our nuclear attack submarines have gone from 30 years
    to 33 and now it looks as though there is a possibility some of
    them could be extended as one way.
        We want to reduce the time it takes to construct the
    Virginia class submarine from 72 months to 60 months. That
    makes more submarines available. I also have the option of
    keeping them deployed longer for a period of time to mitigate
    that.
        With reasonable assumptions about those three specific
    possibilities, I can mitigate that eight submarine gap that you
    described in that timeframe down to about three submarines. We
    will continue to work that. So as I indicated, we would look to
    mitigate this. We are working very hard on that and we
    certainly intend to do that.
        But I share your concern in your opening statement about
    the pressure. I have been doing these budgets since the mid-
    1990s and we are, the Navy now, I am under extraordinary
    pressure across my people accounts, my operations accounts, as
    well as my procurement accounts, and the heart of those
    procurement accounts are ships, submarines, and airplanes, and
    balancing that in the environment in which I am finding myself
    right now is a real challenge.
        The cost growth we cannot tolerate or we are not going to
    be able to build the ships, the cost growth you speak to in
    LCS; we are not going to be able to meet this plan. We have to
    control that. So we are working hard in a very constrained
    environment to get there, and I am comfortable that we have
    worked hard in these mitigation areas, but it is early and it
    is still a concern.
        Senator Lieberman. I appreciate that we share that concern.
    I do want to say that the very mitigating circumstances, the
    program to mitigate the impact of a gap where we fall
    substantially below the 48 submarines, is really a pressure
    that we ought not to be putting you under, and frankly the
    submarine force. I worry about whether we are pushing the subs
    structurally beyond what they can handle. I am certainly
    worried if one of the mitigating policies is to extend
    deployments, what that will do to the morale of the submarine
    force because, as you well know, they already deploy at a
    pretty good rate.
        Admiral Mullen. Well, Senator, they would not be major
    extensions. This is a month or 2. It is not an exceptional
    period of time. We certainly would never take the risk, if
    there was any concern with material failure, would not do that.
        I did not answer your question about can we buy it all in 1
    year. The 3-year buy is basically a function of, obviously,
    affordability in a given year and also what I can execute to
    build the submarine. Clearly, that has been how a submarine has
    been built and the time line that we have had it. Could you
    appropriate all the money to do that or could we, could the
    Hill do that? Yes, absolutely. But the challenge will be
    executing that money in a meaningful way, and so it has been
    that, again it has been that balance.
        We have done that with other programs, but that has been
    it, the way we have built submarines.
        Senator Lieberman. My time is up and I thank you. We will
    continue on this exchange. We have been going at it for a few
    years already.
        But I do want to say with some pride, and also to express
    my appreciation to the Navy, that the submarine building
    program has been going forward at a very good cost control, on
    a cost control basis, and the speed of delivery. Everything is
    relative, but when we start to talk about getting the cost of a
    submarine down to $2 billion, which it looks like we can do,
    that is a lot of money. But compared to some of the other
    shipbuilding programs, it is not so bad.
        Admiral Mullen. Senator, the other thing, and I will try
    not to fill this up, but if I buy a $2 billion submarine in
    2009, get to two a year, I have nothing in 2010 and 2011. I
    have no resources applied against that. So the program comes
    back to me to fill that up. Again, we are in a plan right now
    to get to two in 2012. That is several billion dollars, $4 to
    $5 billion that I currently do not have in the program.
        Senator Lieberman. Well, if you and I and a few others can
    get to two subs in 2009, we will take care of 2010 and 2011.
        Admiral Mullen. Yes, sir.
        Senator Lieberman. That is an expression of faith.
        Admiral Mullen. Yes, sir.
        Senator Lieberman. Senator Thune.
        Senator Thune. I have a feeling submarines are going to be
    really well-covered on this subcommittee.
        A question for you, Admiral, or for Secretary Winter, and
    that has to do with affordability of the LCS. It is critical in
    order to achieve the large numbers--55 ships, I think, is the
    goal that the Navy has determined it needs--that we start
    making some headway here. I harken back, I guess, to what the
    plan was for affordability was. One, keep it simple in its
    design; do not change the requirements; maximize competition;
    and leverage the smaller shipyards, which would be more
    efficient, building smaller, simple ships, and speed up the
    process to avoid the cost growth that often comes with time.
        I think the full committee and this subcommittee in
    particular has been in your corner on affordability. But we
    appear to be on a path that doubles the $220 million estimate
    for these ships. Mr. Secretary, I appreciate your efforts to
    stabilize this program, but I would like to have you explain,
    if you could, how the Navy and the industry's original
    estimates ran so far askew. Second, since the Navy's estimates
    indicate cost growth for both industry teams building their
    first ship, why has the Navy only taken corrective action on
    one contract and how do you intend to control cost for the
    remaining ships under both contracts?
        Secretary Winter. Sir, let me address both questions there.
    First of all, relative to the reasons that we are in a cost
    overrun situation, I think it really is due to the over
    optimism that was created at the beginning of the program. I
    believe that as we look backwards we were not as realistic as
    perhaps we should have been relative to the cost estimates, in
    particular the cost estimates for the lead ships. We are now
    having to deal with that and one of the unfortunate aspects of
    initiating a contract which is underfunded is that often things
    are not done as well as they should be in the beginning, and it
    is at the early stages of the program where much can be done to
    reduce the overall cost of a ship.
        I do believe, though, that with a total buy on the
    magnitude of 55 ships, which is the current program, there is
    huge opportunity out there to be able to motivate the type of
    business case, to provide the rewards that industry would be
    looking for, for a significant investment in a modern
    production capability, and in fact we may be able to afford two
    production capabilities. That would enable us to work through a
    leader-follower arrangement and be able to maintain competition
    in the long run.
        Working through the issues that we are going through right
    now, developing a competitive base, and being able to leverage
    the quantity buys that we are talking about in the future, all
    will hopefully lead us to a more affordable cost position on
    this particular vessel.
        Relative to the General Dynamics (GD) position and compared
    to the Lockheed position, we have established formal tripwires,
    if you will, associated with the performance parameters that GD
    is engaged in right now and Lockheed has already worked
    through. Should GD exceed any of those tripwires, it is our
    intention to pursue the same remedies that we sought with
    Lockheed Martin relative to containing their costs and seeking
    a renegotiation of the contract.
        At this point in time, GD has not exceeded any of those
    tripwires. I will note that we have kept those tripwires, the
    specifics there, confidential and have not shared them with the
    contractor, specifically to ensure that we have an honest and
    open assessment and there is no opportunity or motivation for
    gaming any of the particular parameters associated with that.
        Senator Thune. The contracts for both industry teams place
    the Navy in the position of financing 100 percent of the cost
    overrun. How do you balance the risk on future major programs
    to avoid finding ourselves in a similar position?
        Secretary Winter. I believe, sir, in future major programs,
    in the production phase at least, we very much need to go to
    cost structures, fixed-price incentive type structures, which
    enable us to share the cost risk appropriately between the
    contractor and the Navy. When we are talking about initial
    development phases, where there are very high uncertainties and
    it is difficult to obtain a fixed-price bid from a contractor,
    we will probably still have to go with cost reimbursable
    contracts. But even there, there are mechanisms that are
    available to us to provide cost and schedule incentives that
    share that risk with the contractor.
        Senator Thune. Given the cost pressures on the shipbuilding
    program, what impact do the increased cost and delays in the
    LCS program have on the balance of the Navy's plan?
        Secretary Winter. Well, the significant impact that it has
    had is the need to reprogram or request reprogramming authority
    for the fiscal year 2007 funding to be able to be used for the
    completion of the vessels that still are under contract. In the
    out years, we are hopeful that the cost reductions associated
    with the strategy we are going to with the selected
    configuration and the quantity buy that will enable the cost
    efficiencies associated with a modern production facility, that
    those mechanisms will enable us to minimize the cost impact to
    the overall shipbuilding program.
        We need to go through that, though. We need to understand
    exactly how much we are going to be able to get by way of
    investment in those facilities and the leverage that that will
    provide us. But I am very hopeful that we will be able to
    recoup a significant amount of the increase in cost.
        Senator Thune. I want to jump to one other subject here
    quickly and that is the Joint Strike Fighter (JSF) gap. The
    Government Accountability Office recently released a study
    titled ``Tactical Aircraft: DOD Needs a Joint Integrated
    Investment Strategy.'' It made several conclusions: One, the
    Department of Defense (DOD) does not have a single integrated
    investment plan for recapitalizing and modernizing its tactical
    air forces; and that without a joint integrated investment
    strategy it is difficult to evaluate the severity of capability
    gaps or, alternatively, areas of redundancy.
        In light of the Navy's concerns over a strike fighter gap,
    how do you respond to those findings? Given the Navy's
    additional competing need to recapitalize its fleet of ships,
    how would you assess affordability of the Navy's aviation
    procurement plans?
        Admiral Mullen. One of the things that came out of the
    shipbuilding effort that we put forth was to try to stabilize
    it. One of the results of that was the desire on the part of
    many senior leaders in the Navy to stabilize the aviation plan
    as well, because it too had seen instability in recent years.
    So we are about there right now, this year and next year, to
    basically figure out how many aircraft we need and how we can
    stabilize it, with the same underpinning philosophy, so that
    industry can plan, not have significant changes every year, and
    then produce what we need at best cost and in a timely way.
        Specifically for me, for the Navy, the strike fighter
    shortfall--and I think your initial number was on the order of
    110 planes. I have seen numbers as low as 40 or 50 and as high
    as over 200. The numbers I am very comfortable with is a
    shortfall starting in about 8 to 10 years of 47 to 71 planes,
    depending on whether we buy 40 or 50 a year at a certain price.
    The highest numbers are at a very low production rate, at a
    very high price.
        From the standpoint of the programs that I need, I need the
    JSF. I need it for its range, its payload, its stealth, its
    sustainability. So I am committed to that. Where I find myself
    is in the middle here, because I find myself buying more F-18
    Es and Fs, and they are great airplanes, but they are not the
    planes I need to populate the entirety of my air wings in the
    future. I have to get to JSF and that is the plan right now.
        I will not talk about the DOD strategy, but I can tell you
    within the Navy the strategy is to get to JSF as quickly as we
    can, and yet there are some acquisition challenges we want to
    be mindful of with where this program is as well.
        I also have a challenge, a very clear challenge, with Jim
    Conway and I, the Commandant of the Marine Corps, because I
    basically fund Marine Corps aviation, and how we balance that
    inside the requirements that we both have is also a significant
    challenge. He and I are committed to working through that, and
    that is part of this shortfall as well.
        So I recognize the shortfall is there. I know we have to
    stabilize this plan in the very near future. But it is going to
    take a significant amount of additional procurement investment
    to get there and really mitigate that shortfall.
        Senator Thune. Thank you.
        Thank you, Mr. Chairman.
        Senator Lieberman. Thanks, Senator Thune.
        Senator Reed.
        Senator Reed. Thank you very much, Mr. Chairman. Senator
    Lieberman has asked these wonderful questions about submarines.
    He has grasped the mettle of naval policy, the submarine. It is
    the most key element, so thank you.
        Senator Lieberman. We stand together.
        Senator Reed. We stand together.
        Mr. Secretary and Admiral Mullen, thank you not only for
    being here today, but for your great service to the Nation.
    Following on this issue of submarines, we have talked a lot in
    this open session about force structure, but there is also the
    industrial base issue, which is absolutely critical, not just
    to submarine construction, but to all naval shipbuilding
    programs.
        One of the areas of concern is that this is the first time
    in many, many years we have not had an active design program
    for a submarine. The recent RAND report suggested the that
    design for the new Trident, the new ballistic missile
    submarine, be accelerated. Mr. Secretary and Admiral, could you
    comment on that?
        Secretary Winter. Yes, Senator, pleased to. We have
    recently been going through several iterations of a plan to
    create the next generation strategic deterrent for the Navy.
    One of the things that I have been fairly insistent on is
    ensuring that that is a complete integrated strategic plan,
    going through everything from the warhead to the missile to the
    boat itself. I think we now have a good laydown of a plan. We
    have worked through the aspects with United States Strategic
    Command in terms of ensuring that we have a current set of
    requirements and a good forecast of where those requirements
    may evolve in the future, both on the nuclear and the non-
    nuclear side. That will be factored into the overall design
    study activities for the future, the Ohio class replacement, if
    you will, activities.
        Initially, those will be mostly design studies as we go
    through the overall assessment of alternatives that can provide
    the basis for that strategic deterrent, and it will later on
    evolve into preliminary design efforts for the replacement
    activity. We do want to focus on getting to the right objective
    in the long-term and making sure that we have a good systems
    engineering process that we are factoring through. With that,
    we will phase in the individual design activities as the
    requirements support.
        Senator Reed. Thank you, Mr. Secretary.
        Admiral, do you have any comments?
        Admiral Mullen. Well, I would only echo that and say we
    recognize the criticality of this industry base or the design
    base. We are very committed, and Secretary Winter has led this
    effort, to really understand where we are and how we sustain
    it, which includes, could include various options. It is
    underpinned by the belief that if we lose it we cannot get it
    back, and the Nation cannot afford that.
        Senator Reed. Thank you.
        Senator Lieberman pointed out that there has been some
    significant advances in lowering the cost of submarine
    construction. In fact, the selected acquisition report
    estimated a reduction of about 3 percent of the total Virginia
    class submarine program. That I think is significant and I hope
    you share that feeling.
        But second, there are also opportunities within that cost
    reduction for additional research and design work to further
    accelerate reductions. Is that something that you are
    considering, Mr. Secretary or Admiral?
        Secretary Winter. Yes, sir, we are considering both
    additional research and development activity. As you are
    probably aware, we have a number of efforts going on right now
    in terms of design modifications for the Virginia class, which
    are principally oriented towards reduction of costs, design for
    production, enhancements for that vessel. We are also engaged
    in a number of activities in terms of advanced submarine design
    and construction, including some promising activities in
    coordination with the Defense Advanced Research Projects
    Agency.
        Senator Reed. Thank you, Mr. Secretary.
        Admiral, let me ask another question. That is, as we both
    understand, our colleagues in the House adopted a measure that
    I believe would fund an additional set of Virginia class
    components, not specific to a hull.
        Secretary Winter. Yes, sir.
        Admiral Mullen, is that an approach you think has merit?
        Admiral Mullen. I do. I think it does have merit. As you
    said, it is not tied to a specific hull. In terms of--and it
    really gets to the issue that both you and Senator Lieberman
    are raising, which is to get the cost of the business down. It
    will allow us to continue to reduce risk over the long-term.
        I think it is an investment in long-term cost reduction
    here, both in this program and--one group I would really like
    to pat on the back is Electric Boat has done incredible work to
    help us reduce this cost. It is very clear when you go there
    that they are aboard to try to make this happen
    enthusiastically and as partners, and it is part of that
    strategic partnership I think we need to make to sustain, to
    have an outstanding industrial base for the future.
        Senator Reed. Thank you.
        Mr. Secretary, any further comments?
        Secretary Winter. I would just add that in shipbuilding in
    general, and in particular in submarine construction,
    maintaining the pace of work is very critical to efficient
    production. This is not a business where just-in-time inventory
    works. Having long lead items worked in advance so as to ensure
    that the pace of production is able to be maintained is a very
    good way of reducing the risk of program execution.
        Senator Reed. Thank you.
        One final question, Admiral Mullen, is that the Marine
    Corps stated a requirement for a minimum of 30 operational
    amphibious ships.
        Admiral Mullen. Right.
        Senator Reed. You are actually planning, as I understand
    it, to reduce the inventory of these ships. But your rationale
    I think for being able to meet the Marine Corps needs is that
    you can provide 100 percent readiness of these ships. Can I
    understand your rationale and is it feasible?
        Admiral Mullen. Yes, sir. General Conway and I certainly
    have agreed that the requirement is for the availability of 30
    ships. Based on historic availability, doing the math, you need
    33 to do that. Now, that is how we have done it historically.
    What I have committed to him is to provide him the lift he
    needs.
        We have 31 ships, amphibious ships, in the 30-year
    shipbuilding plan and we have to look at how we are going to
    fight in the future and specifically how we are going to move
    this 2.0 Marine Expeditionary Brigade into the fight. General
    Conway and I have agreed to figure out a way together to make
    that work. It could include higher availability of ships. Some
    of it depends on, obviously, the warning time you would have
    and that kind of thing.
        We are also building the Maritime Preposition Force Future
    ships, a significant investment there, which also has the
    potential to help us move marines to the fight. So there is an
    awful lot. It is a very complex set of variables and it is also
    a very important part of how we build the sea base for the
    future, which I think is going to become more and more
    important in terms of availability of footprint ashore and the
    requirement, not just from the Navy and Marine side but from a
    joint perspective, to be able to flow combat power through a
    sea base.
        Senator Reed. Thank you very much.
        Thank you, Mr. Chairman.
        Senator Lieberman. Thank you.
        Senator Collins.
        Senator Collins. Mr. Chairman, I would be remiss if I did
    not welcome our new ranking member. Perhaps the Senator from
    South Dakota will be more dispassionate on the Navy's budget
    than the rest of us around this table. But I hope that our new
    ranking member will take a great deal of guidance from the
    Senator from Connecticut, the Senator from Rhode Island, the
    Senator from Virginia, and the Senator from Maine on such
    issues as submarines, aircraft carriers, destroyers. I just
    want to offer you all the guidance in the world on those
    important issues, as we welcome you to your new and very
    important position.
        It is amazing to me that our last ranking Republican was
    from Missouri and now we have one from South Dakota. There
    seems to be a pattern here.
        Mr. Secretary, thank you so much for being here today. Last
    year we approved the funding for the dual lead ship design for
    the DDG-1000 and also funding for construction. This ship is
    obviously critical to the 313-ship plan that the CNO has put
    out. I am concerned that, although the design contracts were
    awarded to both yards in August of 2006, that the construction
    contracts have yet to be awarded.
        My concern is that this delay will begin to have an impact
    on the shipyard employees, on the vendor and subcontractor
    base. There is a lead time in getting the necessary
    subcontractor contracts in place and we cannot proceed with
    that until the contract is awarded. So this is a concern to me.
        I am also concerned that any further delays in the award of
    the construction contract will have an impact on overall cost
    and could well drive up costs.
        Could you update us on the status of the award of the
    construction contract?
        Secretary Winter. Yes, Senator. I asked for a short hold be
    placed on the award and contracting there to ensure that the
    lessons learned from LCS were properly factored into the DDG-
    1000 contract. I have now been satisfied that that has been
    done and I recently authorized the Assistant Secretary of the
    Navy for Research, Development, and Acquisition to proceed to
    the finalization and definitization of those contracts.
        Senator Collins. Thank you. That is good news indeed. Do
    you have a timetable for going forward on the contract?
        Secretary Winter. I believe we are very close, in a matter
    of weeks hopefully. I would hesitate to give you a definitive
    schedule, but I would be happy to get you an update as soon as
    possible.
        Senator Collins. Thank you.
        [The information referred to follows:]

        On September 25, 2007, the Navy decided to resequence delivery of
    the first ship set of DDG-1000 mission systems government-furnished
    equipment (GFE) to General Dynamics Bath Iron Works (BIW) vice Northrop
    Grumman Ship Systems (NGSS). The Navy has received cost proposals from
    both BIW and NGSS reflecting the GFE resequencing and is entering
    negotiations with the two shipyards for lead ship production. The Navy
    anticipates completing negotiations no later than January 2008.

        Senator Collins. Admiral Mullen, we have talked many times
    about the reduced life cycle costs of the new DDG-1000 because
    of the reduced crew size and other efficiencies. We also have a
    challenge as far as extending the life, the useful life of the
    DDG-51 class and making sure that we get the full number of
    years originally envisioned in order to achieve your goal of
    the 313-ship fleet.
        Could you comment on the importance of modernizing that
    class of ships in order to achieve your goal?
        Admiral Mullen. Yes, ma'am. Absolutely vital. We have in
    the 2008 program both modernization money for the cruisers, the
    Aegis cruisers, as well as the Aegis destroyers. We do not have
    a good history here of modernizing our ships, and we cannot
    afford to do that. So it is vital that these programs be
    supported.
        I am not talking about just over here. Clearly that is
    important, but that is internal to the Navy. Historically, we
    do not have a good record of doing that. So we recognize that
    and I recognize that as part of this 313-ship plan, that we
    have to do that and get these ships to their hull life.
    Typically, it is when we decommission ships, it is not
    because--surface ships--it is not because their hulls are worn
    out; it is because their combat systems are not modernized.
    That is what we have to invest in and that is what this program
    is all about.
        Senator Collins. Thank you.
        Secretary Winter, in February, the Commander of Naval Sea
    Systems Command, Vice Admiral Paul Sullivan, briefed the Maine
    and New Hampshire delegations on the Navy's latest Naval
    Shipyard Business Plan for 2008 through 2013. I know this is an
    issue that you have put a great deal of time and effort into
    and that you have emphasized to Naval Sea Systems Command
    (NAVSEA) the need to use all four of the Navy's public
    shipyards as efficiently as possible. I am grateful for the
    personal effort that you have put into this plan.
        Now, obviously NAVSEA faces certain constraints in
    distributing workload among the four shipyards. But I am
    concerned upon reviewing the plan that the Navy's plan may not
    fully acknowledge the specializations that each of the
    shipyards has. For example, Portsmouth Naval Shipyard in
    Kittery, ME, its expertise is with attack submarines. It was
    also called the gold standard during the Base Realignment and
    Closures Commission. We are very proud of that.
        Puget Sound specializes in ballistic missile submarines.
    The Senator from Virginia's shipyard focuses on aircraft
    carriers. So there are different expertises that are available.
    Does the Navy intend to try to optimize the specific and
    unusual skill sets that each shipyard has so as to ensure that
    we get the best value as we allocate the work among the four
    shipyards?
        Secretary Winter. Thank you for the question, Senator. As
    you noted, I put a bit of personal time into this. I do feel a
    level of stewardship responsibility regarding all four of the
    yards.
        As you noted, we have requested that the Navy look at this
    from an optimization perspective and the overall objective here
    is to optimize the operational availability of the various
    ships in the most cost effective manner. Major consideration of
    that is the most effective utilization of the skills that are
    resident at each of the facilities. So that will be a very
    significant factor in terms of the allocation of availabilities
    to the individual yards, as well as the timing to be able to
    take maximum advantage of the work force that is resident at
    the individual yards.
        Senator Collins. Thank you. I look forward to continuing to
    work with you on all of these issues.
        Secretary Winter. I would be pleased to.
        Senator Collins. Thank you both.
        Senator Lieberman. Thank you, Senator Collins.
        Senator Webb, welcome.
        Senator Webb. Nice to be here, Mr. Chairman.
        Senator Lieberman. I note that, following the exchange
    between Senator Collins and Senator Thune, I never really
    stopped to notice this before, that all of us on this
    Subcommittee, both parties--this is a bipartisan inclination--
    except for Senator Ensign and Senator Thune are coastal
    Senators.
        Senator Collins. I do not think that is a coincidence.
        Senator Lieberman. We are not running your time, Jim.
        Senator Webb. I would not be so optimistic about the
    Senator from South Dakota. I think there are rivers in South
    Dakota.
        Senator Thune. Thank you very much.
        Senator Webb. We are going to soon see the Riverine Warfare
    Center in Sioux City. I can remember when I was Secretary of
    the Navy 20 years ago we spent a lot of time talking to Senator
    Stevens about strategic homeporting in Alaska.
        Senator Thune. Mr. Chairman, I would show great deference
    to all my colleagues, coastal state colleagues here, on
    shipbuilding issues and only ask in exchange that you show
    deference to me when it comes to farm programs. [Laughter.]
        Senator Lieberman. It is a deal.
        Senator Webb's time should start now.
        Senator Webb. Thank you, Mr. Chairman.
        Mr. Secretary, first I would like to congratulate you and
    express my appreciation for the work you have done on trying to
    tighten up the business side of this. We cannot increase the
    force structure in the way that many of us would like without
    having the efficiencies built into it. I think that what you
    have done over the past couple of months is very commendable.
        Secretary Winter. Thank you, sir.
        Senator Webb. As a starting point on these force structure
    issues, I have to look back to the time when Admiral Mullen and
    I graduated from the Naval Academy 39 years ago. We had 932, I
    think, ships in the United States Navy. It went down to 479 in
    the post-Vietnam drawdown. We got it up to 568 when I was
    Secretary of the Navy. We are down to 270----
        Admiral Mullen. '5.
        Senator Webb.--275 Navy ships, which is roughly half that,
    now. There are different eras and different national
    requirements. But I think truly today when you look at what has
    happened, we have a number of budget restraints that are based
    on the inevitable strategic mousetrap, from the ground forces
    being burned up in Iraq, weapons system, force structure,
    replenishment, all those sorts of things. Inevitably when this
    happened, our strategic forces tend to pay.
        I would like to ask, Admiral Mullen, in an ideal strategic
    world, not in a budgetary sense but in an ideal strategic
    world, looking at the responsibilities of the United States
    around the world, where would you see the Navy force structure?
        Admiral Mullen. Certainly north of 313 Navy ships. Senator
    Lieberman or--I am sorry, Senator Thune I think talked about
    380 as well, and that was one of the estimates that was out
    there 3 or 4 years ago. I think you hit at one of the most
    vital parts of how we have these discussions in the world that
    we are living in right now, which is what is the strategic
    appetite and how are we going to resource it.
        I am extremely concerned about the long-term ability of
    naval forces, Navy and Marine Corps, to be out and about in the
    ways that we need to be in the unpredictable world that we
    have. That said, back to the point the Secretary made, our
    operational availability right now is a whole lot better than
    it used to be. We have invested an awful lot of money and
    resources. So today 40 percent of the ships that we have are
    deployed, which is a very high number and they are doing
    exceptionally well.
        313 Navy ships was really minimum risk. I have not done any
    current analysis, sort of unbounded, to say without those
    bounds what should it be. But I would describe it more as the
    maximum acceptable risk is where we are right now, and I am
    very comfortable saying that.
        Senator Webb. What was the end result of the experiment I
    was reading about that was in the papers a year or 2 ago with
    rotating ships' crews and keeping ships themselves on station?
        Admiral Mullen. We call that Sea Swap, and we just finished
    the second phase of that, the second series of three ships.
    There are many lessons that came out of that. Probably the most
    significant is that it does pretty well on cruisers,
    destroyers, and smaller ships. Trying to scale it up to the big
    ships is going to be a difficult problem.
        But I think in the manning constructs, we are in the middle
    of changing sea-shore rotation. I think in manning constructs
    in the future that there will be pieces of that that we will
    roll into. I talked about availability of ships, even
    availability of submarines. Would we consider rotating a crew
    as opposed to bringing a submarine back off a deployment, for
    example, or a cruiser or a destroyer? I think those are things
    that come out of the lessons that we learned there to make
    these incredibly important platforms and large capital
    investments mean more to what we are doing in terms of our
    overall country's security.
        Senator Webb. Potentially be a force structure multiplier.
        Admiral Mullen. Yes, sir, absolutely.
        Senator Webb. Secretary Winter, you used two phrases which
    I think were pretty important in terms of how we are making
    these decisions. One is that we are all fiduciaries here,
    because so much of this procurement cycle is beyond the next,
    say, 5 years, et cetera.
        The other is ``pace of work.'' I have a question relating
    to keeping this pace of work from falling into the bath tub and
    coming back out again when we lose so many good people. We have
    been told that the Newport News Shipyard, which is the largest
    employer in the entire Commonwealth of Virginia, that there is
    going to be one of these dips between 2009 and 2012 when a
    great percentage of work is done and before we pick up I
    believe on two submarine projects starting in fiscal year 2012.
        Is there a way for the Navy to take steps in conjunction
    with the business community to prevent that sort of hiatus?
        Secretary Winter. Well, sir, we have been working that in
    several aspects. First of all, I think the plan and the profile
    there of work has been pretty well understood and has been very
    stable for the last at least year. So there has been a basis of
    planning.
        Second of all, we are trying to utilize the one yard
    construct, which enables a sharing of personnel between the
    public and private yards in particular down in the Tidewater
    region.
        Thirdly, we will be looking very carefully at emergent
    opportunities for additional work availabilities that may come
    up within this time period and will see what we can do in terms
    of being able to use those to help retain the critical skills
    that are available at Newport News.
        Senator Webb. Thank you.
        Admiral Mullen, I would like to associate myself with the
    views of Senator Warner on this Oceana problem. He would have
    been here, but he is down with the Queen of England today.
        Senator Lieberman. That is what senior Senators get to do.
    I speak as a junior Senator.
        Senator Webb. He actually said he did this during the
    Bicentennial as well, so I guess he deserves a return visit.
        Senator Lieberman. But not during the Centennial.
        Senator Webb. That is right.
        Senator Warner mentioned his belief that the facility at
    Fort Pickett might be an acceptable alternative and it has the
    advantage of already being a government-owned facility with
    respect to clearances and that sort of thing. I know you have
    stated your views that this is outside of the tactical radius
    or the training radius that has been heretofore defined.
        But I am just wondering if you could clarify for us what
    your thoughts are on the different options that are available
    since that one site in North Carolina apparently is not going
    to work.
        Admiral Mullen. Yes, sir, and I appreciate the question. I
    was asked that--actually, I was down in Norfolk on Tuesday and
    I was asked that question. Clearly, we are--the requirement for
    the outlying field is a very significant one. I appreciate
    Senator Warner both making that offer and that we have--what I
    said was tied to the requirement at the time, which was we had
    drawn a line at 50 miles and obviously Fort Pickett is further
    away than that specifically.
        But what I also said in my statement and it did not
    necessarily register in all the quotes was that my lens is wide
    open on this. The Secretary has indicated in discussions with
    Senator Warner, we are willing to look at other options and
    certainly include Fort Pickett, and that is really where I am.
        The criteria that Fort Pickett was excluded from was back
    when we first considered outlying fields. We are having
    challenges clearly in North Carolina. We want to get this
    right. We are trying to balance it between two bases, Cherry
    Point and Oceana, which is what constrained us to some degree.
    But we are willing to look at all options at this point in
    time, and be consistent with the process that we have used
    today.
        Senator Webb. I appreciate your clarification.
        Admiral Mullen. Thank you, sir.
        Senator Webb. Thank you, Mr. Chairman.
        Senator Lieberman. Thank you very much, Senator Webb.
        Gentlemen, I think Senator Thune and I will go one or two
    more questions and then let you depart. I appreciate it very
    much.
        This is to Admiral Mullen. Just when I thought I got the
    pronunciation right as ``Litt-OR-al,'' you said ``LITT-or-al''
    just a while back, and I want you to clarify for me which is
    the preferred pronunciation of the LCS.
        Secretary Winter. We disagree, sir. [Laughter.]
        Admiral Mullen. I actually use both terms.
        Senator Lieberman. We have noticed.
        Admiral Mullen. How about a waffle answer?
        Senator Lieberman. But you do not waffle on anything else,
    so that is all right.
        Anyway, we talked about the concerns about the escalation
    in cost of the LCS program, heading up to close to two times,
    am I right, what we originally hoped it would be? We have some
    very big acquisition programs, carriers and destroyers,
    actually multi-billion dollar programs, and of course the subs,
    which we talked about.
        Admiral, I appreciate very much what you said about
    Electric Boat (EB). That will mean a lot to the workers up
    there. That is appreciated.
        Secretary Winter, let me ask you more generally considering
    this, and particularly the problems on the LCS. I have great
    regard for your management abilities. What steps are you taking
    or are you planning to take to improve the Navy's ability to
    acquire these major systems on time and on cost? In some sense,
    I am not looking for compliments for EB, but what--if you care
    to--you do not have to answer. But I am curious, what worked
    there and what lessons can you draw from that to the others?
        Secretary Winter. Well, sir, I think there are a number of
    factors. First of all, we have to have a very firm
    understanding of what it is that we are buying. That to a great
    extent has to be defined by the Navy at the outset and
    eventually handed over to the industrial team for the final
    definitization of design compatible with the construction
    facilities.
        Second of all, we have to have an agreed to, realistic cost
    and schedule basis for the program. I think we have gone a long
    way to doing that on the Virginia class.
        Lastly, I think we need to have an acquisition force that
    is properly sized and skilled, with the right backgrounds to
    engage in the oversight of the activity. In particular, I
    believe that on the naval reactor side with the submarine
    efforts we have a very stable and mature acquisition
    organization and it has been able to provide that type of
    oversight. You couple that in with established and well
    understood relationships between the Navy and the contractor
    team and I think you have all the possibilities of a very
    efficient and effective acquisition program.
        Senator Lieberman. That is interesting. So part of it is
    the experience of the acquisition force?
        Secretary Winter. Most definitely, sir. I think that we
    have seen that, not only in the Navy, but I think we have seen
    that in other services as well.
        Senator Lieberman. We have for sure. So what do you do to
    try to make sure you improve the acquisition force across the
    board?
        Secretary Winter. Well, sir, I think it is going to take a
    while to do this, but I believe that we have to emphasize and
    accelerate the process of training individuals in acquisition.
    I think we have to make sure that the individuals who are
    selected for that have the basic engineering and experience in
    the development of ships from an operator's perspective before
    they get involved in the acquisition side.
        I think we have to recognize that it is a multi-year
    investment, that we have to take the individuals, give them the
    various opportunities in programs which are ongoing, and give
    them the opportunity to build up the experience base before
    they take responsibility for either an existing program or in
    particular a new program.
        In that regard, sir, if I could, I think we have to
    recognize that when we start new programs there are additional
    demands that are placed on the acquisition team, and in
    particular in those circumstances we have to make sure that we
    provide some of our best and most experienced individuals to be
    able to lead that from the Navy perspective.
        Senator Lieberman. Thanks. Well, we are going to keep in
    touch with you on that and urge you to be as demanding as you
    have to be to have this be what you want it to be.
        I have one more sort of open-ended question, but I am going
    to save it until the end for Admiral Mullen and yield to
    Senator Thune at this time.
        Senator Thune. Thank you, Mr. Chairman.
        Senator Warner, who could not be here today, had asked that
    there be two letters included in the record. The first is a
    letter from him to the Secretary dated April 19, 2007, which
    urges the Navy to consider existing military locations in
    Virginia, including Fort Pickett, for a new outlying landing
    field (OLF). The second is a letter from Senator Warner to the
    Secretary dated April 20, 2007, which thanks the Secretary for
    his time in a phone conversation where the Secretary confirmed
    that the Navy would consider locations in Virginia, including
    Fort Pickett, as a viable option for an OLF.
        [The information referred to follows:]

        Senator Thune. I would like to ask a question. Admiral
    Mullen, the ongoing operations in Iraq and the demand for
    ground forces has resulted in the deployment of thousands of
    sailors and individual augmentees to United States Central
    Command (CENTCOM). You have pointed to the contributions of
    these individuals with pride, noting that there are more
    sailors supporting operations in the ground in the CENTCOM area
    of responsibility (AOR), over 12,000, than the Navy has at sea
    in that AOR.
        We have seen reports from General Mosely, however,
    expressing concern that ongoing demand for these augmentees is
    hurting morale and retention in the Air Force. Similar concerns
    could be expressed by Navy personnel who do not feel that they
    signed up for ground duty. Are the demands being placed on the
    Navy for individual augmentees excessive or becoming difficult
    to meet?
        Admiral Mullen. No, sir, they are not. In fact, I was with
    many of them over the holidays in both Iraq and Afghanistan and
    they are making a huge difference. They know they are making a
    difference and they are very proud of what they are doing. I
    have tried to keep a very close eye on what I would call the
    red lines that would give me concern, and we are just not there
    yet.
        Senator Thune. Do you see any negative impact on morale and
    retention as a result of ongoing operations?
        Admiral Mullen. No, sir. In fact, our recruiting numbers
    are good, our retention numbers are good. I think it was at
    actually the Senate hearing I did last time where I indicated
    for the first time I had seen first-term retention this year
    dip below 50 percent. That is our goal. That really got my
    attention. I am happy to report that the monthly that just came
    in a couple days ago, it is back above 50 percent for this
    year.
        So we paid a lot of attention to that, and I just have not
    seen the kind of impact. In fact, the individual augmentees
    that I have spoken to, whether they are in Guantanamo Bay, the
    Horn of Africa, Bahrain, Iraq, Afghanistan, have been
    incredibly positive. It is almost 13,000; it is over 13,000
    right now today.
        Senator Thune. Given that number, do you consider a maximum
    number of sailors that can be assigned to Army and Marine Corps
    units in CENTCOM without harmful effects on the readiness of
    the Navy? Do you have a threshold or a maximum number?
        Admiral Mullen. We work pretty hard to try to predict how
    many more there will be and there has been a gradual increase.
    But I do not see anything in the future over the next 2 or 3
    years as I am able to predict that requirement that is going to
    raise this level dramatically higher so that it would have that
    kind of impact.
        Senator Thune. Thank you, Mr. Chairman.
        Senator Lieberman. Thanks, Senator Thune. Thanks very much.
        I have a question that is not the particular purview of
    this subcommittee, but rather of our Personnel Subcommittee.
    You are still reducing Navy personnel, are you not?
        Admiral Mullen. Yes, sir.
        Senator Lieberman. What numbers are you at now?
        Admiral Mullen. At the end of 2007, I will be at about
    340,000. We are actually asking for another 12,000 to come down
    in the 2008 budget. That gets me to about 328,000. I am going
    to settle out at about, between 320 and 325, is the plan, and
    we have a plan to do that.
        Senator Lieberman. You are confident that you can handle
    what we are asking you to do with those numbers?
        Admiral Mullen. Yes, sir. But I am at that point, I have
    gotten to a point where that is enough. You are hitting at what
    I believe is as big an issue as we have in the Department, is
    how we are going to compensate and how we resource that aspect.
    Our most vital part of our overall Navy--actually, it is all
    the services--are people, and the costs continue to go up.
    Adequately making sure we have the resources to do that in the
    future is really going to be critical.
        Senator Lieberman. Absolutely.
        Let me just ask you this final open-ended question. It is
    about the future. Here we are very focused on Iraq,
    Afghanistan, the threat of the global war on terrorism and al
    Qaeda. We are investing in a lot of programs--and I am speaking
    about the Navy now, of course--that, they have some real
    significant relevance, of course, to the global war on
    terrorism. But some of these I know are also against a hedge of
    a future peer competitor. Even now, in the global war on
    terrorism, we have increasing worries about Iran.
        I wonder if you would talk a little about what you see as
    the kind of future geopolitical, geostrategic environment that
    you are asking us to fund the Navy to meet, and specifically,
    to the extent that you are able in open session, talk a little
    bit about China and Iran?
        Admiral Mullen. I believe without, obviously, getting into
    the very, very, getting into the middle of the political debate
    about Iraq--and I believed this for years--that there will be a
    time when we come out of Iraq and out of Afghanistan. I think
    it is--and I have talked to Jim Conway about this and my open-
    ended--I mean, my open arms to him is welcome aboard, let us
    get under way, because I think it is really vital for the
    country to be out and about, which is what the Navy and Marine
    Corps can do, and it does it obviously with a very strong Navy.
        Very difficult to predict, just based on what our
    predictions have been in recent years, what is going to happen
    and where the difficulties might be. It gets back to this, one
    of the concepts that I talk about is this 1,000-ship Navy,
    global partnerships in a very dangerous world, where you have
    weapons, weapons of mass destruction, drugs, immigration
    challenges, fishing violations, etcetera, and 90 percent of
    what moves in and out of most countries in the world goes by
    sea. So secure sea lanes to afford the opportunity for those
    economies to thrive are vital.
        Navies do that and we know how to do that. Then
    specifically, the western Pacific is a vital region. Obviously
    you have both China and India, thriving new economies, and
    there is going to continue to be a global adjustment associated
    with those economic engines and the transparency of China's
    intent is not clear.
        You indicated earlier they are building 2 submarines a year
    or more than that, they are building 10 surface combatant ships
    a year or more than that. It has been very difficult to
    understand exactly why. They are building a Navy that is
    certainly more capable than the challenge they might have with
    Taiwan if we had a problem with the situation up near her, off
    the coast in Taiwan or near Taiwan.
        So it is the strategic intent specifically with her. I was
    recently in India and the focus there is very much on a more
    regional, broader--focus of the Indian Navy is a broader,
    regional focus, and they also share those kinds of concerns. So
    it is the transparency piece. China is buying technology,
    developing weapons, and creating challenges for us in other
    domains that I could not talk to in an open forum, that we are
    all very concerned about.
        That said, what Admiral Fallon did out there when he was
    United States Pacific Command, engaging military to military, I
    think is vital.
        With Iran, Iran sits at the heart of, obviously, the sea
    lane through which 60 percent of the world's oil resources
    travel. It is a vital, critical sea lane. We have been there,
    the United States Navy has been there since the late 1940s. We
    are going to be there a long time. Preserving that sea lane and
    preserving it so that a global economy can thrive is key as
    well.
        I am concerned about what Iran is speaking about, what they
    are doing. Their taking these 13 British sailors and marines
    recently is just another example. Their rhetoric is strong.
    Clearly they could--they have the capability to shut down that
    strait for a period of time.
        [Additional information follows:]

        During my testimony, I indicated concern about Iran's recent
    capture of the 13 British sailors and marines. I would like to correct
    the record to show that there were 15 British sailors and marines
    recently captured by Iran, not 13.

        I worry a lot about the Middle East, quite frankly, just
    the broader Middle East, outside of a discussion about Iraq and
    Afghanistan. Stability there is really critical. Naval forces
    as they are today, we have two carriers that are there today.
    Naval forces are a really important part of that stability.
        That does not even speak to what may happen in other parts
    of the world. We are engaged in Africa, east and west coast, as
    a Navy. We are engaged down in South America in a positive way,
    to prevent and deter. A strong Navy has always been a great
    deterrent and a great strength of this country, and that is why
    I am concerned about building the Navy that we need for the
    future.
        Senator Lieberman. Thanks for that very thoughtful answer.
    We are concerned, too, and we want to keep the Navy as strong
    as we possibly can.
        I thank you, Secretary Winter, for your testimony, for your
    service. Admiral Mullen, obviously the same to you.
        We are going to keep the record of the hearing open for 10
    days in case you want to add anything or we want to ask you a
    few more questions.
        Senator Thune, do you want to make any conclusion?
        Senator Thune. Just to also express my appreciation for
    your outstanding service, Admiral and Mr. Secretary. We thank
    you for all that you do and for those that serve under you.
    Please convey our deepest appreciation to them for their
    service.
        Secretary Winter. Thank you very much.
        Admiral Mullen. Thank you, sir.
        Senator Lieberman. Thank you. The hearing is adjourned.
        [Questions for the record with answers supplied follow:]

                 Questions Submitted by Senator Saxby Chambliss

     SURFACE SHIP TORPEDO DEFENSE AND ANTI-TORPEDO TORPEDO DEFENSE SYSTEMS

        1. Senator Chambliss. Admiral Mullen, the Navy has previously
    responded to a prior congressional inquiry that torpedo defense is an
    important ship survivability capability, and included Surface Ship
    Torpedo Defense (SSTD) in the recent CNO unfunded priority submission.
    Recent Navy budget submissions and congressional staffer briefs
    indicate that the Navy has decremented the fiscal year 2008 SSTD Anti-
    Torpedo Torpedo (ATT) developmental funding by half ($15 million) and
    that the AN/WSQ-11 torpedo defense system intended for high value units
    is no longer funded for development. Please explain the Navy's intent
    with respect to expeditiously fielding an improved torpedo defense
    capability for Navy ships, particularly high value ships most
    susceptible to a torpedo attack.
        Admiral Mullen. The Navy recognizes that improved SSTD capability
    using ATT is a funded requirement and is working to expeditiously
    deliver this capability in accordance with technology maturity and
    available resources. The Navy's intent is to initially integrate ATT
    capability on Ticonderoga class guided missile cruisers and Arleigh
    Burke class guided missile destroyers that are equipped with the SQQ-
    89A(V)15 Combat System. These cruisers and destroyers (CRUDES) have
    fire control and launcher systems that are modifiable for the ATT
    application, and the SQQ-89A(V)15 configuration provides threat torpedo
    detection, classification, and localization (DCL) capability.
    Improvements to CRUDES DCL capability were planned for testing in
    fiscal year 2007, but this testing has been deferred to fiscal year
    2008 due to the unavailability of ships. Integration of the SSTD and
    its subsystems in CRUDES ships is a first step toward fielding an
    effective SSTD on high value, large deck ships. The Navy plans to
    leverage technologies developed and tested for CRUDES platforms to
    improve high value ship torpedo defense. The fiscal year 2008 budget
    submission reduced ATT development in favor of higher priority Navy
    programs and while evaluating DCL technology maturity. The impact of
    this reduction will be a 2-year delay to ATT initial operating
    capability. The Navy is willing to accept this risk in order to fund
    higher priority programs.

        2. Senator Chambliss. Admiral Mullen, Congress has continued to
    support development of the ATT capability. In light of recent funding
    decrements, please explain the Navy's intent and plan to field the ATT
    capability for SSTD protection.
        Admiral Mullen. The Navy's intent is to initially integrate ATT
    capability on Ticonderoga class guided missile cruisers and Arleigh
    Burke class guided missile destroyers that are equipped with the SQQ-
    89A(V)15 Combat System. These CRUDES have fire control and launcher
    systems that are modifiable for the ATT application, and the SQQ-
    89A(V)15 configuration provides threat torpedo detection,
    classification, and localization capability. The Navy plans to leverage
    technologies developed and tested for CRUDES platforms to make future
    improvements to other ship classes, including aircraft carriers.
        The Navy's plan is to utilize an evolutionary acquisition approach
    to deliver increments of ATT capability to the warfighters. Increment I
    plans to field the multi-mission hardware baseline and the first ATT
    software spiral to prosecute salvos of threat torpedoes. Increment II
    plans to field the software for enhanced salvo capability. Increment
    III plans to field the weapon and software for offensive Anti-Submarine
    Warfare capability. The Navy is drafting a capability development
    document and planning for an ATT Milestone B review in fiscal year
    2008.

        3. Senator Chambliss. Admiral Mullen, Congress has expressed
    concern regarding the increasing capability of threat torpedoes to
    engage surface ships, as well as the increased potential of the Chinese
    Navy's ability to engage surface ships with anti-ship torpedoes. The
    Navy has indicated that new construction ships (CVN, DDG-1000, LCS,
    etc.) will be outfitted with standard and effective torpedo
    countermeasures. However, recent Navy actions to reduce the SSTD
    developmental funding line and not fund the proposed AN/WSQ-11 system
    for Navy high value units appear counterproductive to enhancing the
    capability of Navy ships to defend themselves against a torpedo attack.
    Please explain the Navy's plan to provide each new construction class
    ship with a robust torpedo defense system.
        Admiral Mullen. The Navy intends to utilize the appropriate torpedo
    defenses to meet the unique requirements for each new construction ship
    class within available resources. As with other mission areas, the Navy
    will maximize the undersea defense capabilities of the Carrier Strike
    Group (CSG) by utilizing joint integrated operations.
        The Littoral Combat Ship (LCS) baseline design has space and weight
    reserved for a torpedo detection, classification, and localization
    (DCL) system that is compatible with the class's sprint speed as well
    as its space and weight requirements. The LCS Concept of Operations
    (CONOPS) minimizes time in submarine danger areas. Unmanned surface and
    subsurface vehicles are planned for threat submarine detection. Anti-
    Submarine Warfare (ASW) helicopters will be used for threat submarine
    detection and prosecution prior to engagement with LCS in its mission
    areas. If LCS is alerted to a nearby threat submarine, it will exploit
    its high sprint speed and maneuverability to move to an area out of
    torpedo range. The Navy plans to leverage current and future
    development efforts to provide LCS with torpedo DCL and countermeasure
    capabilities.
        DDG-1000 will incorporate the Integrated Undersea Warfare (IUSW)
    suite with the AN/SLQ-25D (NIXIE), AN/SQQ-89A(V)15, and Launched
    Expendable Acoustic Decoy System (LEADS) for its baseline torpedo
    defense. Further, DDG-1000 is designed with space and weight reserve to
    accommodate the Anti-Torpedo Torpedo (ATT). These systems, incorporated
    into DDG-1000's Total Ship Computing Environment (TSCE), will integrate
    Undersea Warfare combat management, fire control, command and control,
    and defensive countermeasures, enabling DDG-1000 to engage undersea
    threats in both littoral and open ocean environments.
        Aircraft carrier (CVN) protection uses an integrated CSG approach
    for torpedo defense that includes early detection and prosecution of
    undersea threats by maritime
    patrol aircraft, submarines, and CRUDES ships. CVN defensive capability
    is provided by the AN/SLQ-25C NIXIE system. To further improve high
    value ship torpedo defense in the future, the Navy plans to leverage
    technologies developed and tested for CRUDES platforms, including ATT.

        [Whereupon, at 4:48 p.m., the subcommittee adjourned.]