    [Senate Hearing 110-394]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 110-394, Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2009

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 3001

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2009 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, AND FOR OTHER PURPOSES

                                   ----------

                                     PART 2

                                    SEAPOWER

                                   ----------

                           MARCH 12 AND APRIL 8, 2008

             Printed for the use of the Committee on Armed Services
    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                             2009--Part 2  SEAPOWER

    42-630 PDF

                                     ______

    2008

                                                      S. Hrg. 110-394 Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2009

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                           ONE HUNDRED TENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 3001

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2009 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, AND FOR OTHER PURPOSES

                                   __________

                                     PART 2

                                    SEAPOWER

                                   __________

                           MARCH 12 AND APRIL 8, 2008

             Printed for the use of the Committee on Armed Services

                         U.S. GOVERNMENT PRINTING OFFICE
    42-630 PDF                 WASHINGTON DC:  2008
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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                 SAXBY CHAMBLISS, Georgia
    E. BENJAMIN NELSON, Nebraska         LINDSEY O. GRAHAM, South Carolina
    EVAN BAYH, Indiana                   ELIZABETH DOLE, North Carolina
    HILLARY RODHAM CLINTON, New York     JOHN CORNYN, Texas
    MARK L. PRYOR, Arkansas              JOHN THUNE, South Dakota
    JIM WEBB, Virginia                   MEL MARTINEZ, Florida
    CLAIRE McCASKILL, Missouri           ROGER F. WICKER, Mississippi

                       Richard D. DeBobes, Staff Director

                  Michael V. Kostiw, Republican Staff Director

                                     ______

                            Subcommittee on Seapower

                   EDWARD M. KENNEDY, Massachusetts, Chairman

    JOSEPH I. LIEBERMAN, Connecticut     MEL MARTINEZ, Florida
    JACK REED, Rhode Island              JOHN WARNER, Virginia,
    DANIEL K. AKAKA, Hawaii              JEFF SESSIONS, Alabama
    BILL NELSON, Florida                 SUSAN M. COLLINS, Maine
    JIM WEBB, Virginia                   JOHN CORNYN, Texas

                                      (ii)
    ?

                                C O N T E N T S

                                  ----------

                        CHRONOLOGICAL LIST OF WITNESSES
                            Strategic Lift Programs
                                 march 12, 2008

                                                                       Page
    Payton, Hon. Sue C., Assistant Secretary for Acquisition,
      Department of the Air Force....................................     4
    Schwartz, Gen. Norton A., USAF, Commander, United States
      Transportation Command.........................................     8

         Navy Force Structure Requirements and Programs to Meet Those
                                  Requirements
                                 april 8, 2008

    Stiller, Allison F., Deputy Assistant Secretary of the Navy for
      Ships, Department of the Navy..................................    53
    McCullough, VADM Bernard J. ``Barry,'' III, USN, Deputy Chief of
      Naval Operations for Integration of Capabilities and Resources,
      Department of the Navy.........................................    60
    Amos, Lt. Gen. James F., USMC, Commander, Marine Corps Combat
      Development Command............................................    61

                                     (iii)

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2009

                                  ----------

                           WEDNESDAY, MARCH 12, 2008

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

                            STRATEGIC LIFT PROGRAMS

        The subcommittee met, pursuant to notice, at 2:18 p.m. in
    Room SR-222, Russell Senate Office Building, Senator Edward M.
    Kennedy (chairman of the subcommittee) presiding.
        Committee members present: Senators Kennedy, Martinez, and
    Sessions.
        Committee staff member present: Leah C. Brewer, nominations
    and hearings clerk.
        Majority staff member present: Creighton Greene,
    professional staff member.
        Minority staff members present: Michael V. Kostiw,
    Republican staff director; Gregory T. Kiley, professional staff
    member; and Sean J. Stackley, professional staff member.
        Staff assistant present: Fletcher L. Cork.
        Committee members' assistants present: Jay Maroney,
    assistant to Senator Kennedy; Frederick M. Downey, assistant to
    Senator Lieberman; Gordon I. Peterson, assistant to Senator
    Webb; Sandra Luff and Samuel Zega, assistants to Senator
    Warner; Mark J. Winter, assistant to Senator Collins; and Brian
    W. Walsh, assistant to Senator Martinez.

        OPENING STATEMENT OF SENATOR EDWARD M. KENNEDY, CHAIRMAN

        Senator Kennedy. The subcommittee will come to order. I
    apologize to all of our wonderful witnesses and to our members
    here. I was necessarily tied up over on the floor for a few
    moments, but I am grateful for their patience.
        We would like to welcome Senator Martinez to the committee,
    and to our subcommittee. This is a very important subcommittee
    of the Armed Services Committee dealing with force projection
    with all of its implications, and that is a matter of
    extraordinary importance and consequence at any time for our
    national security and particularly at this time.
        We are very fortunate in this whole area of national
    security to have some of the most gifted, wonderful members of
    the Armed Forces who are involved in this undertaking and
    responsibility. Perhaps not always on the front page in terms
    of the news, but front page in terms of all of us who know the
    value of their service, extending to making sure that our men
    and women are going to get to the right place at the right time
    and making sure that those who have served so well and
    gallantly and courageously and have been wounded in the course
    of battle are going to be brought home with the kind of
    attention and respect that they deserve.
        There is an extremely broad responsibility with the force
    projection in this subcommittee and we take it very seriously,
    and we are very grateful for those that serve on it.
        So, Senator Martinez, we want to thank you, and we welcome
    you to it.
        It is always a pleasure to be with my friend, Jeff
    Sessions, who is tireless in terms of his interest in the Armed
    Services Committee generally and also in terms of the workings
    of this subcommittee, and we are glad to have him aboard.
        I had a good brief but informed and interesting few minutes
    with General Schwartz earlier today.
        I have some questions to get to. We talked about a number
    of these items earlier. He will have an opportunity to talk
    about all of them this afternoon, and we will have a chance to
    talk and respond to these questions.
        My statement is both a word of welcome and a discussion
    about all of the importance of this subcommittee. I will
    include it in the record in its entirety to save us some time.
        [The prepared statement of Senator Kennedy follows:]

                Prepared Statement by Senator Edward M. Kennedy

        The subcommittee will come to order. I want to extend a welcome to
    our witnesses and thank each of you for appearing before the Seapower
    Subcommittee today.
        The subcommittee will hear today from the Honorable Sue Payton,
    Assistant Secretary of the Air Force for Acquisition, and General
    Norton Schwartz, Commander of the Transportation Command. We welcome
    both of you and thank you for your service.
        First, I always think it's important to note the heroism and
    professionalism of the coalition armed forces presently engaged in Iraq
    and Afghanistan. While we may have disagreements among policy officials
    about the war, let no one mistake that disagreement for a lack of
    support for the men and women who are serving their country in the
    Middle East right now. Our thoughts and prayers are with them and their
    families who are also called by their country to sacrifice in this war
    effort.
        Now, turning to the subject of this hearing, I would note that
    strategic lift is an important and continuing interest of this
    subcommittee. Over many years, and with several different individuals
    holding the chairmanship of this subcommittee, we have devoted
    significant energies to the subject of strategic mobility.
        Today's hearing continues the subcommittee's strong bipartisan
    interest in the broader strategic lift policy issues facing the Nation
    today. I want to take this opportunity to welcome Senator Martinez to
    the position of ranking member of the subcommittee. I have had the good
    fortune to work with a number of Senators in the leadership of this
    subcommittee, including Senators Warner, Cohen, Snowe, Sessions,
    Talent, and Thune. I believe that, in each of those cases, we have
    worked as a non-partisan team to see to the interests of the men and
    women of the Armed Forces whose programs fall within our jurisdiction.
    I look forward to continuing this approach with you, Senator Martinez,
    as we work toward a new National Defense Authorization Act.
        I believe that the Defense Department's recent experience would
    indicate to me that the current strategic lift capability may need to
    be enhanced, despite what we have seen in the Mobility Capability Study
    and the Quadrennial Defense Review. In fact, we adopted direction to
    the Department of Defense in the most recent Authorization Act to
    complete a new study of strategic mobility requirements. I want to
    thank Senator McCaskill for leading the effort to include this new
    study language.
        We have heard of a number of current issues that the subcommittee
    should hear about today. One of those is the stress on our mobility
    personnel and their equipment. Another surrounds the best method to
    solve our longer-term requirements for strategic airlift. We have the
    question of continuing the production line for the C-17 aircraft
    program. We also have the C-5 reliability enhancement and re-engining
    program (RERP) efforts and the recent Nunn-McCurdy certification that
    the RERP upgrades for the C-5 needed to continue to meet national
    security requirements.
        In the interests of time, I will conclude my comments to leave more
    time for questions.
        Once again, welcome, Senator Martinez.

        Senator Kennedy. Senator Martinez.

                   STATEMENT OF SENATOR MEL MARTINEZ

        Senator Martinez. Thank you, Senator Kennedy. I really
    appreciate your welcome.
        I am delighted to have an opportunity to serve on this
    subcommittee, and I am really looking forward to the work. I
    have endeavored to get up to speed, and there is a lot to
    learn, and I have learned a lot. I will likewise place my
    statement in the record.
        I want to thank General Schwartz and Secretary Payton for
    their appearance here today and, most of all, for their service
    to our country at these critical times.
        I appreciate very much your warm words of welcome. I look
    forward to working with you and the other members to ensure
    that we can do our part to assist a mission that is so critical
    at this time in our Nation's history. So thank you very much.
        [The prepared statement of Senator Martinez follows:]

                   Prepared Statement by Senator Mel Martinez

        Thank you, Mr. Chairman.
        I'm pleased to join you in welcoming our witnesses for today's
    hearing. General Schwartz and Secretary Payton, thank you for your
    testimony today, and more importantly, thank you for your leadership
    and service to our country every day.
        Whether supporting the global war on terror with the air bridge
    across the Atlantic, or medically evacuating critically wounded to
    receive lifesaving care in the States, or performing humanitarian
    relief operations in some distant corner of the globe, or simply
    transporting household goods for hundreds of thousands of service men
    and their families each year, U.S. Transportation Command's (TRANSCOM)
    ability to provide persistent lift of personnel and material anywhere
    in the world, virtually ``on demand,'' is vital to our Nation's
    security.
        We are deeply grateful and proud of the airmen, soldiers, sailors,
    and merchant marines who are conducting these lift operations every
    hour of every day. They've turned the remarkable into the routine.
        I am very interested in hearing your assessment of current
    operations and the health of our mobility forces. TRANSCOM has been
    central to every phase of Operations Enduring Freedom and Iraqi
    Freedom--from the employment of prepositioning stocks and the first
    deployment of troops to the current sustainment of surge forces. It's
    important that we understand what you require in order to sustain your
    high operational tempo. Equally important, we need to employ the
    lessons learned from today's operations as we size and shape the future
    strategic lift force.
        With that in mind, today's hearing should provide much-needed
    clarity regarding the plan for strategic lift aircraft. Last year's
    update to the Mobility Capabilities Study confirmed the requirement for
    ``about 300'' large airlifters, meaning the current program of 190 C-17
    and 111 modernized C-5 aircraft. The more recent review of strategic
    airlift by the Department, triggered by the C-5 re-engining program
    Nunn-McCurdy cost breach, concluded that re-engining the C-5A model
    aircraft, 60 in total, would neither be necessary nor cost effective in
    meeting airlift requirements. It was also concluded that it was not
    affordable to buy additional C-17 aircraft. Your assessment of these
    findings will be helpful.
        Meanwhile, the award of the KC-45 tanker is an important step
    toward recapitalizing the aging tanker fleet--TRANSCOM's top
    procurement priority. It is not the intent to review contract award
    details here, but it is important to gain your insights regarding how
    this tanker's capabilities promise to reshape your mission
    effectiveness. In particular, I am interested in understanding the
    operational value offered by the tanker's alternate role as an
    airlifter, and how this added cargo and passenger capacity would be
    employed in your most stressing scenario of supporting two near-
    simultaneous major combat operations.
        As well, we welcome your insights regarding the role to be
    performed by the Civil Reserve Air Fleet (CRAF) in future force
    planning. We are interested in your assessment of the health and
    viability of your CRAF partners, and your recommendations regarding
    initiatives to strengthen the CRAF program to ensure the continued
    reliability of this critical lift component.
        Finally, while much of our current focus is necessarily on matters
    of strategic airlift, we need to be looking ahead to future
    requirements to recapitalize our Sealift and Prepositioning Forces. I
    know that you are working with the Navy to define requirements for the
    Maritime Preposition Force (Future), and it will be valuable to gain
    your insights on this emerging program. As well, the age of our Fast
    Sealift Ships and the Ready Reserve Force dictate that we commit to a
    long-term recapitalization plan as we approach their replacement.
        Much to Senator Kennedy's and Senator Warner's credit, this
    subcommittee has played a significant role in support of strategic
    mobility in the past. I look forward to joining their efforts and
    working with you and your staff as we move forward to provide the
    resources necessary to support your operations, while also helping to
    shape the future TRANSCOM.
        Again, I thank you for joining us today, and look forward to your
    testimony.

        Senator Kennedy. Thank you very much.
        Senator Sessions.
        Senator Sessions. Thank you, Mr. Chairman. I have no
    statement.
        Senator Kennedy. Fine. Secretary Payton, a very special
    welcome to you.
        Ms. Payton. Thank you, sir.
        Senator Kennedy. We are grateful for your presence, and we
    look forward to your presentation.

       STATEMENT OF HON. SUE C. PAYTON, ASSISTANT SECRETARY FOR
                ACQUISITION, DEPARTMENT OF THE AIR FORCE

        Ms. Payton. Thank you. Mr. Chairman, Senator Martinez, and
    members of the subcommittee, it is my distinct honor to appear
    before you today to testify on the state of several Air Force
    mobility programs.
        I am further honored to be joined by General Norton
    Schwartz, Commander of U.S. Transportation Command (TRANSCOM),
    and the person I most consider to be our customer in
    acquisition for mobility. I look forward to discussing how the
    Air Force is committed to modernizing and recapitalizing our
    aging aircraft to protect our Nation and support our airmen,
    while providing the best value to the American taxpayers.
        In the interest of time, I will limit my opening remarks to
    the KC-45A, the C-5 modernization program, C-130J production,
    and the C-27, also known as our Joint Cargo Aircraft (JCA).
        The KC-45A is our number-one procurement priority. The KC-
    45A tankers will provide greater overall capability than the
    current inventory of 500 plus KC-135E and KC-135R tankers,
    which will take several decades to replace. While the average
    age of the fleet is over 47 years, when the last KC-135R is
    retired, it will be more than 80 years old, and it is so
    absolutely critical for the Nation to move forward on this
    program now.
        The Air Force spent an unprecedented amount of time and
    effort with the offerers, ensuring we had open communications
    and a completely transparent process. I am extremely proud of
    the KC-45A acquisition team, and I am certain that the Air
    Force selected the best overall value to the warfighter and the
    taxpayer based on the competition evaluation criteria.
        With regards to our strategic air fleet, the modernization
    of the C-5 fleet remains an Air Force priority to meet
    combatant commanders' requirements. The last time I testified
    before a subcommittee of the Senate with General Schwartz,
    Secretary Wynne had just announced the C-5 Reliability
    Enhancement Re-engining Program (RERP) was in a critical Nunn-
    McCurdy breach.
        I am very pleased to tell you that on February 14, 2008,
    the Under Secretary of Defense for Acquisition, Technology, and
    Logistics certified the restructure of the C-5 RERP. The
    certified production program consists of modernizing the
    remaining 47 C-5Bs and 2 C-5Cs.
        A key component of intra-theater airlift modernization
    effort is our C-130J. As of February 2008, we have fielded 63
    of the 87 funded C-130J aircraft. The current C-130J multi-year
    procurement contract ends in fiscal year 2008, and we will be
    using suboptimized additional procurements through annual
    contracts to procure future aircraft until a new multi-year
    procurement contract can be negotiated.
        As a joint Army-Air Force program, the JCA is uniquely
    qualified to perform time-sensitive, mission-critical resupply.
    On February 29, the Office of the Secretary of Defense (OSD)
    sent the required six reports and certification required by the
    National Defense Authorization Act for Fiscal Year 2008. We are
    now prepared to move forward with this joint program.
        The men and women in Air Force acquisition take great pride
    in delivering on our promise to deliver warfighter capabilities
    on time and on cost. I am honored to represent them in front of
    this subcommittee. I thank you again for the opportunity to be
    here. I look forward very much to your questions and comments.
        [The prepared statement of Ms. Payton follows:]

                     Prepared Statement by Hon. Sue Payton

                                  INTRODUCTION

        Mr. Chairman and members of the subcommittee, it is my distinct
    honor to appear before the subcommittee today with General Norton
    Schwartz, Commander of U.S. Transportation Command. I look forward to
    discussing with you the state of several Air Force mobility programs.
        I am proud to represent the finest acquisition workforce in the
    Department and I can honestly say we have the smartest and hardest
    working airmen developing the most advanced technology required by the
    joint warfighter. We are committed to acquiring the most capable weapon
    systems for the warfighter while being diligent stewards to the
    taxpayer and operating in an open and transparent environment ``without
    fear or favor.'' We are living in interesting times as we constantly
    balance the near-term need to equip today's warfighter on today's front
    lines securing air, space, and cyberspace, while simultaneously
    modernizing the force to ensure tomorrow's warfighter is equipped for
    success and never surprised by our adversaries.

                          ACQUISITION LESSONS LEARNED

        The Air Force is committed to improving its acquisition process
    performance. Success in this endeavor depends on setting achievable
    stable requirements, getting appropriate resources, using disciplined
    systems engineering, and managing effectively with a skilled workforce.
    Our challenge is to quickly and economically convert ideas, experiments
    and prototypes into battlefield effects. This entails more than
    creating new weapon systems; it means adopting an inherently agile and
    responsive acquisition culture. Such institutional agility will allow
    us to effectively and efficiently divest our legacy systems while
    fielding the capabilities needed to meet new global challenges.
        There are several lessons that I have learned as the Air Force
    Acquisition Executive over the past 19 months. The first lesson is that
    acquisitions of complex, highly integrated, interoperable, survivable
    systems are difficult. The challenges for developing complex weapon
    systems are not well understood outside of the acquisition community.
    The second is that source selection protests are a way of life and they
    continue to challenge the Air Force's ability to develop and field
    desperately needed systems, on time and on cost. Protests are a
    valuable check and balance in the acquisition process, but frivolous
    protests only delay desperately needed combat capability to our
    warfighter and waste valuable taxpayer dollars. Another valuable lesson
    is that the workforce must be empowered to make decisions and we need
    to have the right people with the necessary training and expertise. Our
    negotiating teams and especially our contracting officers have been
    empowered to negotiate and close the deal with industry. Additionally,
    under Air Force Smart Operations for the 21st Century, a new initiative
    called Installation Acquisition Transformation (IAT) is underway. An
    objective of this new initiative is to strategically realign the
    installation contracting organization within the Continental United
    States and move away from a tactically focused approach. With today's
    fiscally constrained environment, IAT will allow for an agile operating
    structure where we can leverage and increase the technical competence
    of our workforce while realizing cost savings through proven strategic
    sourcing techniques consistent with Office of Management and Budget
    guidance. I have also learned that the Nunn-McCurdy process, while
    difficult, results in healthier, more executable programs. I inherited
    several under funded programs with cost growth challenges, because the
    cost, schedule and performance baselines were established well in
    advance of when we could reasonably project the technical and schedule
    issues that can drive costs out of control. The lessons I have learned
    in the first year and a half of my tenure have brought focus to many
    daily efforts. However, my commitment to integrity and transparency in
    all Air Force acquisitions remains firm and the bedrock of all our
    acquisition activities.

                    FLEET MODERNIZATION AND RECAPITALIZATION

        I look forward to discussing with the committee the Air Force's top
    acquisition priority, the KC-45A, as well as the status of additional
    high-priority acquisition programs such as the C-5 modernization
    programs; continued production of the C-130J and introduction of the C-
    27 Joint Cargo Aircraft (JCA) ; as well as our efforts on alternative
    fuels certification for our aircraft inventory.
    KC-45A
        The KC-45A is our highest procurement priority and it is critical
    to the entire joint and coalition military team's ability to project
    combat power around the world. It gives America and our Allies
    unparalleled rapid response to combat and humanitarian relief
    operations. KC-45A tankers will provide increased aircraft
    availability, more adaptable technology, more flexible employment
    options, and greater overall capability than the current inventory of
    KC-135E and KC-135R tankers. The KC-45A will be able to refuel
    receptacle and probe-equipped aircraft on every mission and itself be
    in-flight refuelable. Also, the KC-45A will have an additional role to
    carry cargo, aero-medical evacuation and passengers, and be equipped
    with defensive systems to enhance its utility to the warfighter.
        The current fleet of Eisenhower-era KC-135s average 47 years old.
    The KC-45A program is based on a planned purchase of 179 aircraft and
    is the first of up to 3 recapitalization programs to replace the entire
    legacy fleet. The Air Force has budgeted approximately $3 billion per
    year for an annual production rate of 12-18 aircraft. But even with
    this level of investment, it will take several decades to replace the
    500+ Eisenhower-era KC135s. It's absolutely critical for the Air Force
    to move forward now on this program.
        As you are aware, the Air Force awarded the KC-X contract to
    Northrop Grumman, who met or exceeded the requirements of the Request
    for Proposal and provided the best overall value to the warfighter and
    the taxpayer based on the competition evaluation factors. The Air Force
    spent an unprecedented amount of time and effort with the offerors
    ensuring open communications and a completely transparent process. It
    is our Air Force goal to move forward with a program of smart, steady
    reinvestment to ensure future viability of this unique and vital U.S.
    national capability. I am extremely proud of the KC-45A Acquisition
    team on the recent award of the KC-45A tanker and the capability it
    will bring to the fight.

                           C-5 MODERNIZATION PROGRAMS

        Modernization of the C-5 fleet remains an Air Force priority to
    meet combatant commanders' requirements for on-time delivery of
    oversized and outsized cargo. This effort will bring needed capability
    to the warfighter through 2040, getting our troops and equipment to the
    fight by increasing the mission availability of C-5s with their
    unmatched out sized and oversized, roll-on/roll-off capability.
        The C-5 modernization effort is a combination of two programs. The
    Avionics Modernization Program (AMP) provides modernized avionics and
    allows the aircraft to efficiently access international airspace. The
    second program is the Reliability Enhancement Re-engining Program
    (RERP), which builds upon the C-5 AMP modification. C-5 RERP replaces
    the propulsion system and improves the reliability of over 70 systems
    and components.
        On February 14, 2008, the Under Secretary of Defense for
    Acquisition, Technology, and Logistics certified the restructure of C-5
    RERP production modernization to 47 C-5Bs and 2 C-5Cs. The C-5A
    aircraft are not included in the restructured program. However, they
    will undergo AMP modification to enable the aircraft to meet global
    Communications/Navigation/Surveillance and Air Traffic Management
    standards. We are working closely with Secretary Young and his staff to
    produce the best product for the warfighter and the taxpayer.

                          CONTINUED C-130J PRODUCTION

        The C-130J is a key component of the intra-theater airlift
    modernization effort. Air Mobility Command identified a need for 127
    combat delivery C-130Js to meet intra-theater airlift requirements.
    Through defense appropriation and global war on terrorism supplemental
    bills, Congress has funded 70 C-130Js, 10 WC-13OJs and 7EC-13OJs and as
    of February 2008, we have fielded 63 total C-13OJ aircraft. The current
    C-130J Multi-Year Procurement (MYP) contract ends in fiscal year 2008
    and we will be using suboptimized additional procurements through
    annual contracts to procure future aircraft until a new MYP contract
    can be negotiated. Fiscal year 2009 C-130J procurement is dependent
    upon the Air Force Special Operations Command's HC/MC-130
    recapitalization program and sales to the United States Marines Corps
    and coalition partners.

                          INTRODUCTION OF THE C-27 JCA

        The C-27 is a joint Army and Air Force program to procure a small
    cargo aircraft capable of providing responsive, flexible and tailored
    airlift for combat, humanitarian and homeland defense missions.
    National Defense Authorization Act for Fiscal Year 2008 language
    prohibited obligation and expenditure of appropriated funds until the
    Secretary of Defense provides specified reports to the Congressional
    Defense Committees and certifies the requirement for the aircraft. In
    the interest of openness and transparency, the Office of the Secretary
    of Defense (OSD) took the extraordinary step of delivering the draft
    Joint Intra-Theater Airlift Fleet Mix Analysis report to the
    Congressional Defense Committees before completing the sufficiency
    review. On February 29, OSD sent the required six reports and
    certification and we are prepared to move forward with this joint
    program.

                        ALTERNATIVE FUELS CERTIFICATION

        Following Presidential direction to reduce dependence on foreign
    oil, the Air Force is aggressively pursuing a broad range of energy
    alternatives. As the Department of Defense's leading consumer of jet
    fuel, we are currently engaged in evaluating alternative fuels and
    engine technologies leading to greater fuel efficiency. In 2007, we
    fully certified the B-52 to fly on a synthetic fuel blend and
    demonstrated C-17 operations. In 2008, we expect to certify both the C-
    17 and B-1B, demonstrate F-22 operations, and conduct ground testing on
    the engines that power the F-16 and F-15. The remainder of the U.S. Air
    Force aircraft fleet is expected to be tested and certified by early
    2011. Other Air Force technology efforts continue to explore high-
    efficiency aerodynamic concepts, advanced gas turbines and variable
    cycle engines providing higher performance and greater fuel efficiency.

                                   CONCLUSION

        The dynamic and threatening environment in which the U.S. military
    operates requires an agile and responsive acquisition enterprise. To
    meet the requirements of our joint and coalition warfighters, we must
    continue to focus our efforts on modernizing and recapitalizing our
    aging weapon systems. The men and women in Air Force Acquisition take
    great pride in delivering on our promise and I am honored to represent
    them in front of this committee. Thank you again for the opportunity to
    be here today and I look forward to your comments and questions.

        Senator Kennedy. Thank you very much, Madam Secretary.
        General Schwartz?

     STATEMENT OF GEN. NORTON A. SCHWARTZ, USAF, COMMANDER, UNITED
                     STATES TRANSPORTATION COMMAND

        General Schwartz. Chairman Kennedy, Senator Martinez, and
    Senator Sessions, it is my privilege to be with you today,
    representing the more than 155,000 men and women of TRANSCOM.
    We are a supporting command, and our number-one mission is to
    provide outstanding support to the warfighter and to the Nation
    by rapidly delivering combat power and sustainment to the Joint
    Force Commander, providing the utmost care in moving our
    wounded from the battlefield to world-class medical treatment
    facilities, and redeploying our folks home to their families.
        As the Department's Distribution Process Owner, TRANSCOM
    also leads a collaborative effort within the defense logistics
    community to improve the Department of Defense (DOD) supply
    chain. We execute our global missions through our component
    commands--the Army Surface Deployment and Distribution Command,
    the Navy Military Sealift Command, and the Air Force Air
    Mobility Command.
        Our effectiveness is the direct result of the hard work and
    dedication of these true professionals, and I am grateful to
    you, Mr. Chairman, and all of Congress for this needed support
    that you provide.
        I could not be prouder of the TRANSCOM team or our national
    partners. Today, we are supporting the global war on terrorism
    and keeping our promises to the warfighters. The delivery of
    much-needed Mine-Resistant Ambush Protected (MRAP) vehicles to
    protect our troops continues to be a top priority.
        To date, we have delivered more than 3,800 MRAPs to the
    U.S. Central Command (CENTCOM) theater, delivered almost
    exclusively by air in the early stages. As production rates
    have climbed, we have reached a balance between air and surface
    modes of transportation to optimize distribution.
        We continue to advance normalized transportation operations
    throughout CENTCOM. In 2007, we initiated the first U.S.-
    flagged commercial cargo flights into Afghanistan and Iraq
    since combat operations began and increased the use of
    alternative air and seaport facilities in the region, thus
    broadening our capability to provide the best possible support
    to our warfighters.
        We have also focused on improving quality of life for our
    people. Through the Families First program, we are improving
    household goods shipments, as this recurring event affects the
    lives of our servicemembers and certainly their families. We
    now protect household goods shipments with full replacement
    value. In addition, the Defense Personal Property Shipping
    System, the Web-based software, which will better facilitate
    household moves, will be fully integrated into all shipping
    offices later this year.
        We are also transforming the military deployment and
    distribution enterprise by incorporating commercial best
    practices where it makes sense. Much like the Fortune 500
    companies, which realize savings through transportation
    management services, our Defense Transportation Coordination
    Initiative (DTCI), in partnership with the Defense Logistics
    Agency and the Services, will use a commercial transportation
    coordinator to help manage a significant portion of DOD routine
    freight movements.
        Over the next few weeks, we will implement DTCI at three
    continental United States locations, and we are encouraged by
    the potential savings and improved support we can provide as
    DTCI expands to additional sites throughout the coming year.
        It is through a combination of military and commercial
    capabilities that TRANSCOM fields a transportation and
    distribution system that is unmatched anywhere in the world. As
    we look to the future, rapid global mobility will continue to
    be a key enabler and ensuring the appropriate mix of lift
    assets is vitally important to this mission.
        Mr. Chairman, my top airlift priority is recapitalization
    of the tanker fleet. I am encouraged that the KC-45 is now
    under contract, albeit under protest. The KC-45 with multi-
    point refueling, significant cargo and passenger carrying
    capability, and appropriate defensive systems will be a game-
    changing platform for the future of global mobility.
        I am also encouraged by the Department's decision to
    certify the C-5 modernization program. The Nation needs the
    outsized and oversized lift capability provided by a reliable
    C-5 to complement the C-17. We are optimistic that the newly
    certified program will deliver the needed reliability and
    performance to make the C-5 a more productive platform.
        Despite our very substantial military force structure,
    TRANSCOM will always depend on a mix of Government and
    commercial assets. We should guard against overbuilding the
    organic airlift and sealift fleets, which could place our long-
    standing commercial partnerships at risk. A critical national
    capability for projecting military power and sustaining forces
    is a viable Civil Reserve Air Fleet (CRAF). The continued
    success of the CRAF relies upon the strengths of our U.S.-
    flagged airlines.
        We are beginning to look toward a post-Operation Iraqi
    Freedom timeframe, when lift requirements will subside. Given
    that eventual reality, we are looking at innovative ways to
    encourage continued participation, thus ensuring the long-term
    health of the CRAF program.
        I am grateful to you, sir, and to the subcommittee for
    allowing me to appear before you today to discuss these and
    other important issues. I thank you for the essential support
    you provide in enabling our capabilities. I look forward, sir,
    to your questions.
        Thank you, sir.
        [The prepared statement of General Schwartz follows:]

              Prepared Statement of Gen. Norton A. Schwartz, USAF

     INTRODUCING THE UNITED STATES TRANSPORTATION COMMAND (USTRANSCOM) 2008

    Mission/Organization
        USTRANSCOM, a unified combatant command (COCOM), serves as the
    ``quarterback'' of the Joint Deployment and Distribution Enterprise
    (JDDE) whose purpose is to project national security capabilities,
    provide end-to-end visibility of forces and sustainment in transit, and
    rapidly respond to support joint logistics requirements. Through our
    component commands, the Army's Surface Deployment and Distribution
    Command (SDDC), the Navy's Military Sealift Command (MSC), the Air
    Force's Air Mobility Command (AMC) and our national and commercial
    partners, we execute military and commercial transportation, terminal
    management, aerial refueling and global patient movement through the
    Defense Transportation System (DTS). As designated in 2003, re-
    designated in 2006, codified in the 2006 Unified Command Plan, and now
    institutionalized in Department of Defense (DOD) instructions,
    USTRANSCOM is the DOD's Distribution Process Owner (DPO) and is leading
    a collaborative effort with JDDE partners across the defense logistics
    community to increase the precision, reliability and efficiency of the
    DOD supply chain. By increasing collaboration, employing expeditionary
    tools and streamlined systems, adapting our business models and
    ensuring an appropriate mix of lift assets, we keep our promises to our
    warfighters and the Nation, today and tomorrow.

                     KEEPING PROMISES TO THE NATION IN 2007

    Global War on Terrorism Update
        In 2007, USTRANSCOM overcame many challenges to meet the
    warfighter's requirements for the global war on terrorism, including
    Operations Iraqi Freedom (OIF), Enduring Freedom (OEF) and Noble Eagle
    (ONE). AMC, in collaboration with our commercial partners, moved
    1,475,427 passengers on deployment, redeployment, sustainment, and rest
    and recuperation missions. This indispensable relationship with
    commercial industry freed our organic aircraft to airlift 167,396 short
    tons of vital cargo into the U.S. Central Command (USCENTCOM) theater.
    Additionally, we airdropped 3,350 short tons of critical supplies for
    coalition forces in Afghanistan.
        Our aging AMC tankers also delivered 168 million gallons of fuel to
    U.S. and coalition aircraft in support of OEF/OIF and helped secure our
    skies in support of ONE by flying more than 333 sorties and offloading
    2.3 million gallons of fuel to combat air patrol fighters and support
    aircraft.
        MSC and SDDC's contributions in OIF and OEF were equally
    impressive, delivering 916,000 short tons/17,850,000 square feet of
    cargo. MSC's point-to-point tankers also delivered over 1.79 billion
    gallons of fuel supporting worldwide DOD requirements.

    Support to other Combatant Commanders
        Operations in the USCENTCOM area of responsibility (AOR) were our
    primary focus this past year. USTRANSCOM rapidly deployed five
    additional U.S. Army Brigade Combat Teams (BCT) to help stabilize Iraq,
    while simultaneously supporting on-time force rotations. Working in
    concert with our JDDE partners, we deployed 19 and redeployed 14 BCTs,
    and rotated 2 Air Expeditionary Forces and 3 Marine Air-Ground Task
    Forces.
        Delivering Mine-Resistant Ambush Protected (MRAP) vehicles was also
    a high priority. We rapidly delivered over 1,657 lifesaving MRAPs both
    by air and sea while simultaneously maintaining high levels of force
    deployment and redeployment operations. Concurrently, we moved over
    25,000 improved armor kits for U.S. High Mobility Multipurpose Wheeled
    Vehicles, ensuring our warfighters received the latest advances in
    vehicle protection.
        Turkey is a key ally in the global war on terrorism, and our
    operations through Incirlik Air Base are vital to our efficient
    intermodal distribution into Iraq. This year we delivered over 66,000
    short tons of cargo via aircraft flying out of Incirlik, 10,000 short
    tons and 144 cargo aircraft sorties more than in 2006.
        We continue to advance and normalize transportation operations
    throughout USCENTCOM. In 2007, we initiated the first U.S.-flagged
    commercial cargo flights into Afghanistan and Iraq since combat
    operations began and increased the use of alternative air and seaport
    facilities to augment the redeployment flow of containers that would
    otherwise go through Kuwait. These operations broaden our capability to
    provide the best possible support to the COCOMs.
        The availability of direct commercial cargo capacity presents
    opportunities for cost savings and efficiencies. Through our air cargo
    tender program, we moved more than 126,000 short tons of intra-theater
    cargo via commercial air carriers vice military aircraft or ground
    convoys. This capability saved $258 million and freed 14,168 C-130
    missions for other requirements. More importantly, the 67,500 pallets
    moved by commercial air resulted in fewer ground convoys, mitigating
    the risk to U.S. forces. Additionally, we contracted with commercial
    shipping companies to deliver increasing amounts of containerized cargo
    directly to Iraq, through the port of Umm Qasr, reducing the need for
    overland transportation from outlying regional ports. This created new
    jobs for Iraqi truckers and port workers, helping to accelerate the
    economic revitalization and stabilization process in the region.
        Our quick response capability proved vital in supporting Lebanon in
    its recent battle against internal insurgents. USTRANSCOM rapidly
    airlifted over 480 short tons of ammunition from the U.S., sealifted
    over 5,600 coalition-supplied artillery shells and moved 130 vehicles
    plus support equipment from Europe to Lebanon. This rapid support was
    instrumental in Lebanon's ability to defeat Fatah al-Islam and maintain
    its sovereignty.
        While operations in USCENTCOM remain a primary focus, we are
    mindful of our global commitments. In the U.S. European Command AOR,
    USTRANSCOM rotated 7,752 peacekeepers into the Darfur region to support
    the African Union Mission in Sudan as it executed its transition of
    authority to the United Nations Mission in Sudan.
        In U.S. Southern Command (USSOUTHCOM), USTRANSCOM conducted 10
    detainee movement operations from Guantanamo Bay, Cuba, repatriating 70
    detainees to various points around the globe. We also airlifted over
    1,400 passengers and 1,500 short tons of cargo to support Presidential
    visits to Brazil, Uruguay, Colombia and Guatemala, strengthening key
    regional partnerships.
        In the U.S. Pacific Command (USPACOM) AOR, in addition to providing
    forces and sustainment for OEF-P (Philippines), we set records in
    Operation Deep Freeze, airlifting over 1,900 short tons of cargo and
    5,000 passengers, and sealifting 11.9 million gallons of fuel and 12
    million pounds of cargo into McMurdo Station, Antarctica, in support of
    the National Science Foundation. In a successful proof of concept, a C-
    17 conducted the first-ever airdrop at the South Pole, delivering 35.5
    short tons of cargo.
        At home, USTRANSCOM maintains strong partnerships with U.S.
    Northern Command (USNORTHCOM) and non-DOD organizations such as the
    Federal Emergency Management Agency (FEMA). We have synchronized plans
    to support civil authorities during catastrophic events like hurricanes
    and the devastating wildfires that swept across parts of California.
    Working closely with these partners, USTRANSCOM moved over 250
    passengers and 360 short tons of cargo and provided urgently needed
    command and control, aerial firefighting and aero-medical evacuation
    elements to reduce the loss of life and property.
        We also support the geographic COCOMs through exercises, which
    provide critical training and serve as a venue to refine business and
    deployment and distribution processes. For example, the Republic of
    Korea Reception, Staging, Onward Movement and Integration and Ulchi
    Focus Lens exercises in the USPACOM AOR allowed us to integrate new
    command and control processes and capabilities to better support the
    joint warfighter. USSOUTHCOM's Panamax, the largest 2007 multinational
    exercise involving more than 30 ships, 12 aircraft, and 7,500 personnel
    from 19 nations, also gave us ample refinement opportunities.
    Additionally, we tested our Containerized Ammunition Distribution
    System (CADS). During Exercise Turbo CADS 2007, we shipped 1,133
    container loads of munitions to five ports using an MSC-chartered
    commercial container ship, which substantially increased USPACOM's
    wartime munitions readiness and prepared commercial ports to augment
    typical host nation ports used for ammunition shipments. Finally,
    during USNORTHCOM's Ardent Sentry 2007, an exercise centered on
    deployment and employment of Homeland Defense Quick Reaction Force and
    Joint Task Force--Civil Support elements, we successfully exercised our
    new Theater Distribution Management Portable Deployment Kit, a
    manportable suite equipped with Radio Frequency Identification,
    satellite communication and other technologies to provide in-transit
    visibility for unit deployments and cargo movements. The future kit
    will provide Global Positioning System-based, passenger manifesting and
    cargo accountability capability.

    Improving DOD Supply Chain Management
        In our role as the DPO, USTRANSCOM declared 2007 the ``Year of
    Metrics'' and made great strides to develop the JDDE Performance
    Measure Framework. This framework allows us to better evaluate supply
    chain performance, reliability and cost, gain insight into system
    behavior and identify ways to drive tangible improvements. Using
    ``Voice of the Warfighter'' surveys, we conducted 200 face-to-face
    interviews with logisticians across 4 COCOMs to validate the key
    performance indicators that will both measure and drive supply chain
    performance to meet COCOM and warfighter expectations. Representative
    outcomes include substantial improvement in delivery times and better
    alignment of shared business processes across supply, transport, and
    end user segments of the DOD supply chain to improve support to the
    warfighter.
        Another significant improvement in supply chain management will be
    the Joint Shipment Manager construct, a collaborative effort between
    USTRANSCOM, Defense Logistics Agency and USPACOM operations analysts
    and local commercial transportation experts. This construct will place
    a distribution hub near Defense Distribution Center Pearl Harbor to
    maximize transportation efficiencies between the Oahu ports and the
    distribution center. The arrangement will offer customer service and
    delivery time improvements across more than 150 transportation lanes
    with the potential for a 12 percent net reduction in annual operating
    costs.

    Supporting the Warfighter
        Our support for the warfighter includes improving quality of life.
    Through the Families First program we are improving household goods
    shipments, as this recurring event directly affects the lives of our
    servicemembers and their families. In 2007, SDDC and its partners moved
    1.63 billion pounds in household goods. Families First will benefit the
    large portion of DOD that moves each year by allowing personnel to rate
    transportation service providers online, obtain counseling via the web
    and file personal property claims directly with the provider. The
    Defense Personnel Property System (DPS), which will provide these web-
    based capabilities and help manage the 680,000 annual shipments of
    household goods, reached initial operational capability in November
    2007 and will be fully integrated into all 136 shipping offices by
    September 2008. We also began implementing Full Replacement Value
    protection for household goods shipments. This enhancement was made
    possible by the John Warner National Defense Authorization Act for
    Fiscal Year 2007 and will be fully implemented for all shipments by
    March 1, 2008.
        Perhaps the most important of all our missions is the movement of
    injured warfighters from the battlefield to world-class medical
    treatment facilities. This is a complex, time-sensitive process
    requiring close collaboration with doctors, military hospitals and our
    aero-medical evacuation crews to move injured personnel at exactly the
    correct time to the correct place. In 2007, we transported over 9,900
    patients from the USCENTCOM AOR and over 16,000 patients globally. We
    continue to improve an already superb process by chartering the Global
    Patient Movement Joint Advisory Board to develop a joint critical care
    transport capability, standardize the theater Patient Movement
    Requirements Centers and implement joint electronic medical records.
        Should the worst occur and a warfighter perish in the defense of
    our Nation, USTRANSCOM ensures the most dignified transport from the
    battlefield to final destination. This year, we transported 837 of our
    fallen heroes aboard military or military-contracted aircraft to the
    airfield nearest the interment.
    leading the joint deployment and distribution enterprise transformation

    Process and Systems Transformations
        As DOD's DPO, we are leading transformation of the JDDE to meet the
    changing environment of current operations and to improve performance
    to meet the needs of the future force. A key enabler of this
    transformation is our initiative to implement a single transportation
    tracking number. Much like commercial industry, this will allow
    decisionmakers to more easily track warfighting capability in the DOD
    pipeline.
        As DOD's functional proponent for Radio Frequency Identification
    (RFID) and related Automated Identification Technology (AIT), we are
    taking a corporate approach to synchronize the myriads of ongoing AIT
    efforts with the Services, DLA and other partners. We published a
    concept of operations and developed an implementation plan to transform
    the current AIT environment and improve asset visibility. We
    implemented active RFID technology at our strategic ports to provide
    detailed cargo movement information. Through the Alaska RFID
    Implementation project and Joint Regional Inventory Material Management
    initiative, we have installed passive RFID technology at selected
    military installations in Alaska, California, and Hawaii.
        Another major initiative, Theater Enterprise Deployment and
    Distribution, takes an enterprise view of the JDDE to identify
    performance gaps or shortfalls and provides the foundation for
    instituting common joint processes, establishing intra-theater
    organizational relationships and applying common Information Technology
    (IT) support. This effort is yielding positive results.
        Our transformation includes moving toward private industry
    arrangements geared toward performance and integrated customer-focused
    solutions, such as our Defense Transportation Coordination Initiative
    (DTCI). DTCI has quickly evolved from a concept to a fully-integrated
    and operationally-focused program office. In August 2007 we partnered
    with the Defense Logistics Agency (DLA) and the Services to contract a
    commercial transportation services coordinator to help manage DOD
    continental United States (CONUS) freight. This partnership will
    provide visibility of CONUS freight movements, enabling load
    consolidation, increased use of cost effective intermodal solutions and
    intelligent scheduling. Today, many Fortune 500 companies using
    transportation management services witness cost savings of 7-15
    percent. Our comprehensive analysis shows incorporating such commercial
    best practices could yield cost savings of up to 15 percent annually
    over the 7-year contract.
        Managing the portfolio of IT systems is key to meeting the ever
    increasing need for information. Historically, IT resources have been
    managed and acquired as stand-alone systems rather than integral parts
    of a net-centric capability. This often results in duplicative
    investment in the same or similar systems, limiting the ability to
    share information and fully incorporate doctrine, organization,
    training, materiel, leadership and education factors. As the
    Distribution Portfolio Manager, we are aligning IT with warfighter
    needs through enterprise level planning, integrated architectures and
    warfighter preferred performance measures.
        An example of our alignment efforts is the convergence of DLA's
    Integrated Data Environment (IDE) logistics system and USTRANSCOM's
    Global Transportation Network (GTN). The creation of an IT backbone
    through the IDE/GTN Convergence (IGC) allows us to more closely operate
    with DLA, provides a common data environment for the DOD supply/
    transportation enterprise and facilitates development of new
    applications riding on that backbone. For instance, in June 2007 we
    fielded a Motor Carrier Compliance capability, which allows us to
    determine carriers' compliance with contractual requirements for
    electronic status of movement and Government bills of lading. IGC will
    also make possible the spring 2008 fielding of World Wide Express/
    International Heavyweight Express air carrier shipment status
    compliance.
        The migration of surface port information from the Worldwide Port
    System into the Global Air Transportation Execution System (GATES) is a
    similar effort, providing a single web-based port processing and
    manifesting system for DOD. GATES will also link to external systems,
    thus enhancing information sharing across DOD and in-transit visibility
    for the warfighter. Other transformation initiatives include Common
    Operational Picture for Distribution and Deployment, which fuses
    information from multiple systems to present one distribution and
    deployment picture to the user; and the Single Load Planning concept,
    which combines features of the Automated Air Load Planning System and
    the Integrated Computerized Deployment System to allow air and surface
    load planning on a single web-based application.
        Business process reengineering and continuous process improvements
    are at the heart of USTRANSCOM's ongoing transformation. Agile
    Transportation for the 21st Century (AT21) is an effort to implement
    distribution industry best practices using commercial off-the-shelf
    tools and then transition to commercial optimization and scheduling
    technologies. This transition will improve transportation planning,
    improve forecast accuracy and increase on-time delivery of forces and
    supplies to combatant commanders at a lower cost to the Services. When
    fully operational, AT21 will provide the warfighter full distribution
    pipeline visibility and enable throughput management at critical ports
    and waypoints around the world.
        In collaboration with the Air Force and Defense Finance and
    Accounting Service, we are replacing outdated, unreliable billing and
    accounting processes and systems. The Defense Enterprise Accounting and
    Management System (DEAMS) will transform the financial management of
    our $10 billion enterprise. When fully fielded, DEAMS will set a new
    standard for effective and efficient stewardship of Defense Working
    Capital Fund resources.
        AMC is transforming its relationships with the air components of
    the COCOMs at the Air Operations Centers. By summer of 2008, AMC will
    integrate strategic and theater mobility missions planning and
    execution information across coalition, Joint, and Air Force systems.
    Globally, AMC will have unprecedented ability to plan and report
    aircraft movements into, around, and out of COCOM AORs and provide
    USTRANSCOM visibility of in-theater air assets for air refueling,
    airlift and air medical evacuation missions.
        Finally, in the area of patient movement we are continuing
    development of the TRANSCOM Regulating and Command & Control Evacuation
    System (TRAC2ES). TRAC2ES will reach full operational capability in
    2010 and provide access to information on available transportation
    assets, retrospective trend analysis, improved in-transit visibility,
    automated data sharing and global web-based user training.
    Organizational Realignment/Personnel Issues
        Although vital to what we do, the JDDE is more than just processes
    and systems. We are focused on initiatives that provide for the needs
    of the warfighter. First, we are developing organizational structures,
    both in the distribution network and at USTRANSCOM, to enhance JDDE
    responsiveness.
        Joint Deployment Distribution Operations Centers (JDDOC), resident
    in each geographic AOR, continue to aid COCOMs in improving integration
    of strategic and theater distribution. As each COCOM tailors the JDDOC
    to best meet theater needs, USTRANSCOM assists with the development of
    performance-based metric framework as part of the organization.
        A good example of the JDDOC's value is our previously mentioned
    support of Lebanese Armed Forces (LAF). USEUCOM and USCENTCOM's JDDOCs
    facilitated movement of donated munitions to the LAF by tapping into
    regional expertise, as well as by reaching back to national partners in
    the U.S. to maximize intra-theater and inter-theater lift. This unique
    mission was possible because of the established collaboration across
    our JDDOCs.
        Another emerging capability is Joint Task Force-Port Opening (JTF-
    PO), an on-call, jointly trained, world-wide deployable team which
    enables the rapid opening of ports. JTF-PO was designed with the
    command and control capability and in-transit visibility technology to
    support geographic COCOMs and sustain domestic first responders. It has
    been endorsed by the COCOMs and demonstrated in national level, Joint
    Chiefs of Staff and multi-national exercises.
        The JTF-PO Aerial Port of Debarkation (APOD) combines Air Force and
    Army units to open an airport and prepare it for logistics operations
    in as little as 24 hours. A JTF-PO APOD was fully operational during
    Ardent Sentry 07, responding to 23 military and 9 commercial airlift
    missions, handling over 1,400 short tons and processing nearly 900
    passengers. We are currently fielding the Seaport of Debarkation
    capability to open a seaport in a comparable fashion.
        The Base Realignment and Closure (BRAC) process has presented a
    unique opportunity to establish a modern command and control structure.
    Our BRAC initiatives are estimated to save the taxpayer $1.2 billion
    over the next 20 years as we realize efficiencies resulting from
    consolidation. SDDC's move to Scott Air Force Base in 2007 is the most
    visible of our comprehensive consolidation efforts. This organizational
    realignment along with the new USTRANSCOM facility housing SDDC and
    other critical functions has facilitated consolidation activities.
        One such consolidation is our new ``Fusion Center'', which co-
    locates SDDC, MSC, and AMC planners with our command staff, allowing
    air, surface and sea transportation teams of experts to approach
    movement requirements planning from an integrated, intermodal
    perspective. This includes combining SDDC, AMC, and USTRANSCOM networks
    and moving to joint certification and accreditation by USTRANSCOM of
    all transportation working capital fund-resourced systems.
        A second consolidation of SDDC, MSC and AMC analysts made our
    vision for a Joint Distribution Process Analysis Center (JDPAC) a
    reality. While not fully operational until 2010, the JDPAC is primed to
    co-lead the Mobility Capabilities and Requirements Study (MCRS) with
    OSD and already contributes to the Joint Staff Operational Availability
    studies and the OSD Analytical Agenda. The JPDAC is also building the
    foundation to conduct a bi-annual Future Mobility Assessment. JDPAC
    supports the geographic COCOMs through several ongoing or planned
    projects to include Guam infrastructure and shared logistics studies
    for USPACOM; infrastructure, theater airlift and throughput studies for
    USCENTCOM; and airlift and distribution studies for U.S. Africa Command
    (USAFRICOM). We expect significant expansion of our analytical
    capabilities this year with initial delivery of programmatic and
    distribution modeling and simulation tools, and in time, JDPAC will
    bring unprecedented distribution modeling and simulation capability,
    research techniques and sophisticated engineering tools to bear on
    complex distribution problems.
        Finally, the Acquisition Center of Excellence (ACE) combines common
    carrier acquisitions and contract functions under one authority. ACE
    produces synergies and efficiencies in securing national transportation
    and distribution service contracts by centralized procurement of air,
    surface and ocean transportation.
        In parallel with BRAC transformation, our Joint Intelligence
    Operations Center-Transportation (JIOC-TRANS) reached initial
    operational capability in 2007. JIOC-TRANS enhances our ability to
    anticipate emerging global events and warn transportation and
    distribution decisionmakers by collaborating with the National
    Intelligence Community and intelligence components of the other COCOMs.
        In concert with the Defense Finance and Accounting Service, we
    established a Billing Center at Scott Air Force Base. Typically, cargo
    movement within the DTS requires the billing of segmented
    transportation events by mode. When changing transportation modes,
    bills may be generated for each mode used. In addition, cargo movement
    via ship may generate three separate bills for loading the ship at the
    Port of Embarkation, for the actual sealift and for unloading at the
    Port of Debarkation. As it matures, the Billing Center will generate a
    single consolidated bill for each customer that includes all
    transportation modes and billable events.
        USTRANSCOM is also examining ways to achieve efficiencies in
    container management. Preliminary analyses indicate opportunities to
    clarify responsibilities and command relationships by consolidating
    authority, strategiC-level planning and funding in a DOD-level
    Executive Agent organization.
        We are developing military and civilian personnel to manage
    deployment and distribution for warfighters in joint, interagency, and
    multinational environments. These joint logisticians will ensure the
    viability and vitality of the JDDE. We developed a competency model for
    Defense deployment and distribution. The Joint Staff has validated and
    is planning to use it as a starting point to develop a broader
    competency model for joint logistics. We have also teamed with the
    Industrial College of the Armed Forces to enhance joint logistician
    training in the classroom. In its third year, the Supply Chain
    Management program has 43 graduates with 27 enrolled for 2008.
    Maintaining Airlift Readiness for Mission Execution
        Rapid global mobility is a key enabler to the effectiveness of the
    joint force. As response times shrink from weeks to hours, our ability
    to rapidly aggregate and move operational capabilities forward depends
    on versatile, ready, and effective mobility forces.
        However, much of our mobility force structure requires
    modernization. My top air mobility priority is the recapitalization of
    our aging tankers from a fleet of Eisenhower--era KC-135s and Reagan--
    era KC-10s to the more capable KC-45, having multi-point refueling,
    significant cargo and passenger carrying and defensive system
    capabilities. The KC-45 will fulfill its primary refueling role, and
    have the flexibility to contribute to an array of enhanced mobility
    solutions, mitigating some short-term risk and/or mission load in other
    areas. The Air Force must recapitalize this fleet and retire those
    remaining KC-135s that are no longer safe to fly or that are no longer
    mission effective.
        The KC-10 fleet must also be modified to operate in the global
    airspace environment to remain viable through approximately 2040. AMC
    is examining ways to modernize the KC-10 to comply with international
    airspace requirements, address obsolescence and provide a path for
    future avionics upgrades.
        Our National Defense Strategy requires a viable fleet of strategic
    airlift aircraft. The C-17 is, and will continue to be, a key mobility
    asset. We are approaching the end of the procurement program of C-17s,
    with the fiscal year 2007 supplemental extending the fleet to 190
    aircraft. Should C-5 modernization falter, we will need to sustain C-17
    production.
        The outsized and oversized, roll-on/roll-off capability provided by
    the C-5 is essential to meet global mobility requirements. However,
    this year the C-5 had the lowest departure reliability and mission
    capable rates among the airlift fleet. Modernizing the C-5s with
    avionics upgrades, new engines and other reliability enhancements is
    necessary to increase aircraft availability, enable access to
    international airspace and foreign airfields, reduce fuel consumption
    and extend the useful life of this unique asset through 2040. AMC must
    modernize the C-5 fleet while closely managing the costs of the
    program, for which Under Secretary of Defense for Acquisition,
    Technology and Logistics (USD(AT&L)) certification is pending.
        Intra-theater airlift is a key component of our global mobility
    force. We currently have grounded three and restricted 24 Air Force C-
    130s due to center wing box (CWB) problems, and another 40 aircraft
    have been temporarily repaired. The Air Force's C-130 CWB replacement
    program for combat delivery C-130H1s is funded thru fiscal year 2013.
    Funding stability for CWB is critical to maintaining intratheater
    airlift operational effectiveness. Additionally, C-130 variants have
    faced challenges of noncompliance with global air traffic requirements,
    aircraft avionics equipage and sustainment. The Avionics Modernization
    Program will modify 222 combat delivery C-130H2/2.5/3s. USD(AT&L)
    directed the Air Force to develop an investment strategy for satisfying
    the capability of the remaining 166 C-130 aircraft, which includes 47
    C-130H1s and 10 LC-130s.
        While the C-130 remains a workhorse for intra-theater lift, the C-
    27 will fulfill the joint force need to support dispersed tactical
    elements and go the ``last tactical mile''. Acquisition of the C-27,
    coupled with the repair and replacement of the CWB on select C-130s,
    and additional C-130J procurement will provide the right mix of
    aircraft to meet COCOM requirements.
        A modern tool in our tactical airlift arsenal is the Joint
    Precision Airdrop System (JPADS). JPADS provides precision airdrop from
    higher altitudes with a four-fold increase in accuracy over previous
    ballistic airdrop systems and the ability to deliver to multiple drop
    zones on a single pass. Today, over 250 JPADS systems are supporting
    operations in OIF/OEF. An additional advantage of the JPADS technology
    is the ability to apply the JPADS Mission Planning System to
    conventional airdrop delivery methods. These drops, termed Improved
    Container Delivery System (ICDS), produce a refined release point
    enhancing ballistic load accuracy by 60 percent while allowing
    deployment from higher and less vulnerable operating altitudes. On
    average, JPADS/ICDS delivers more than 400,000 pounds of cargo each
    month. Since being deployed to OIF/OEF in July 2006, JPADS/ICDS has
    eliminated the need for many ground convoy supply missions, thus
    removing countless personnel from dangerous roadways.
        The ability to rapidly offload cargo with our Tunner and Halvorsen
    loaders cannot be overlooked. The Air Force has funded the full
    complement of 318 Tunners, but only 392 of 538 Halvorsens. We strongly
    support Air Force acquisition of the remaining assets to properly
    outfit our global mobility force.
        Distinguished Visitor (DV) airlift is a key component of the global
    mobility force. Our senior leaders often require immediate and
    sometimes simultaneous airlift to carry out diplomatic and other
    missions in an ever-changing strategic environment. In partnership with
    the Joint Staff and Services, we are facilitating collaborative
    scheduling processes, policy and technology initiatives as well as
    working to modernize our DV fleet with the Senior Leadership Command,
    Control, and Communications System-Airborne (SLC3S-A) package. SLC3S-A
    offers our senior government officials communications and information
    management capabilities comparable to those available in their
    permanent government office environments, while they travel globally
    aboard U.S. Government aircraft.

    Maintaining Sealift Readiness
        On the sealift side, our efforts focus on targeted investments in
    readiness, leveraging commercial capabilities and improvements in
    maintaining our organic fleet. In previous years, we ``right-sized''
    the strategic sealift fleet by transferring older, lower utility ships
    out of the Ready Reserve Force (RRF). The RRF, which is owned and
    operated by the Maritime Administration, now consists of 44 ships, down
    from 102 in 1994. We used the savings generated from retiring the
    vessels to extend the service life of the remaining vessels, fund
    efficiency and safety enhancements and leverage our commercial partners
    to recapitalize lost capacity.
        We are also working with MSC to recapitalize aging tankers and
    extend the service life of our Fast Sealift Ships (FSS). International
    regulations and commercial refinery standards limit tankers loading and
    discharging at most worldwide oil terminals to a maximum age of 25
    years. This will place MSC's tankers beyond their useful life in 2010.
    As such, MSC contracted for new tankers, which will be built in a U.S.
    shipyard. Additionally, MSC completed an Outyear Engineering
    Requirements Assessment for the FSSs that determined the FSS platforms
    could safely and economically operate through 2033. This extends their
    military useful service life to approximately 60 years vice the
    originally planned 50 years.
        In 2007, MSC conducted a successful test activation of a small T1
    size tanker under a unique contingency contract supporting our
    strategic capabilities in the Far East. We also replaced our 40-year-
    old Offshore Petroleum Discharge System (OPDS). This year MSC chartered
    a new U.S.-built, U.S.-flagged and U.S.-crewed vessel for this mission.
    Replacing our OPDS vessel with a modern technology ship greatly
    enhances our capability to support the warfighter with fuel over the
    shore when access to prepared ports is denied.
        To further shore up our strategic sealift capability, we fully
    support the Navy's effort to exercise purchase options on U.S.-
    manufactured ships employed in the Maritime Prepositioning Ships
    program. Apart from the support they provide for the Marine Corps'
    prepositioning requirements, these ships have a dual use of providing
    transportation capacity for surge and sustainment missions.

    Maintaining Infrastructure Readiness
        Infrastructure is the cornerstone of our ability to project
    national power. We continue our close coordination with the Department
    of Transportation (DOT), the Federal Highway Administration and the
    States to balance peacetime and wartime surface movement requirements
    on the U.S. highway system. In advance of the reauthorization of
    surface transportation legislation, we are updating the Strategic
    Highway Network as part of our Highways for National Defense Program,
    focusing on congestion, condition and capacity issues along our
    intermodal deployment routes. We urge Congress to address national
    defense public highway needs in future national highway programs.
        With many of our strategic seaports operating at or near capacity,
    we are also examining our infrastructure to ensure it is capable of
    meeting national security requirements. SDDC has initiated Port Look
    2008 to examine ways to optimize the use of U.S. strategic commercial
    and military seaports.
        We are also looking to expand our reach into regions of increasing
    national interest and potential instability, most notably Africa,
    Southeast Asia, and South America. USTRANSCOM personnel visited all the
    geographic COCOMs to better understand emerging contingency plans and
    to champion the need for mobility-capable cooperative security
    locations. Additionally, we led Global En-Route Infrastructure Steering
    Committee meetings to prioritize joint military construction projects
    to expand key global mobility capabilities while ensuring current
    mobility infrastructure remains viable.

    Protecting our Forces
        Protecting our forces is key to accomplishing our global mission.
    Our Critical Infrastructure Program (CIP) is fostering information
    sharing among DOD, DOT, U.S. Coast Guard, Transportation Security
    Administration (TSA) and the COCOMs. The CIP mitigates identified risks
    to our critical worldwide physical and cyber transportation
    infrastructures.
        Our components are improving threat protection in their mission
    areas. SDDC implemented waterside barriers, improved security equipment
    and optimized guard positions at our seaports. AMC continues to field
    the Large Aircraft Infrared Countermeasures system to protect mobility
    aircraft from advanced manportable missiles. MSC is integrating Navy
    Embarked Security Teams to secure our sealift assets. Finally, we are
    working with the Joint Staff on individual protective equipment and
    technological improvements in Chemical, Biological, and Radiological
    warfare defense capabilities.
        We support all initiatives to authenticate drivers and workers in
    the distribution supply chain. This year, we improved interoperability
    between the Defense Biometric Identification System and TSA's
    Transportation Worker Identification Credential (TWIC) programs. SDDC
    began issuing biometric credentials to our commercial truck drivers
    holding security clearances who haul arms, ammunition, explosives and
    classified items. We are also seeking TSA's approval to accept DOD
    credentials in lieu of TWIC.
        Improving supply chain security includes protecting our Military
    Ocean Terminals. We must provide a trained and capable security force
    at adequate levels to protect critical infrastructure. We continue to
    work on improvements using both technical and personnel solutions. In
    partnership with the Joint Non-Lethal Weapons Directorate, we tested
    several promising pieces of equipment that would enhance waterway
    control. We are also conducting manpower surveys to adequately address
    the workload concerns of our anti-terrorism and force protection
    personnel.

    Fiscal Stewardship
        While we are focused on effectiveness in our supporting role, we
    are decidedly mindful of costs and constantly look to find efficiencies
    due to our stewardship of a significant portion of the Nation's
    treasure. Since 2003, we avoided over $1.6 billion in costs. We
    achieved the majority of these savings by shifting to less costly
    transportation modes attributable to forward stocking initiatives at
    Defense Distribution Center, Kuwait. We realized additional savings by
    incorporating challenge protocols to validate requests for high-cost
    transportation options and negotiating least-cost transportation
    solutions. As a large consumer of hydrocarbons, we began using
    alternative fuels. Twenty-five percent of our diesel fuel consumption
    this year was bio-diesel and 11 of 12 AMC bases are now equipped to
    handle and issue bio-diesel fuel. Similarly, 6 percent of our unleaded
    fuel was issued as E-85, and 4 of 12 bases are equipped to manage E-85.

    Maintaining Partnerships
        Mutually supporting relationships are essential to the success of
    any enterprise and ours is no different. The Civil Reserve Air Fleet
    (CRAF) is a critical partner in our Nation's ability to project and
    sustain forces. Our legislative initiative is aimed at preserving CRAF
    viability by providing a prudent amount of assured business to our
    commercial airline partners, thus incentivizing them to maintain
    sufficient aircraft availability to meet future DOD needs.
        In addition to CRAF, the Maritime Security Program (MSP) and the
    Voluntary Sealift Agreement (VISA) U.S.-flag commercial sealift
    carriers remain a critical partner in our Nation's ability to project
    and sustain forces by providing the Department of Defense with assured
    access to commercial U.S.-flag ships as well as U.S. mariners to
    support national security requirements during war or national
    emergency.
        Our commercial sealift partners accessed through the Universal
    Services Contract (USC) are also vital to our mission. USC provides
    worldwide intermodal transportation services through the DTS, and is a
    cost-effective means to transport less than shipload lots of equipment
    and supplies by leveraging commercial trade routes and existing
    commercial capacity. Although traditionally focused on port-to-port
    transportation services, efforts are underway to improve the USC by
    asking our commercial sealift partners to expand service to cover the
    entire end-to-end distribution process, include provisions for prime
    vendor direct booking and improve claims resolution mechanisms.
        In an increasingly global environment, we continue to work with our
    allies to ensure smooth distribution operations. Strategic airlift
    capability is increasing as Australia, Canada and the United Kingdom
    now have C-17s, and a consortium of NATO and Partnership for Peace
    nations is planning to procure C-17 aircraft as well. The imminent
    acquisition of new air refueling aircraft by a number of allies and
    ongoing discussions with other countries on how to best assist in
    providing and acquiring air refueling, airlift and sealift support, on
    a reciprocal, reimbursable basis, bodes well for our global
    distribution operations. Over the past year we have made excellent use
    of international agreements by using the acquisition and cross-
    servicing authorities provided by law to offer and obtain reimbursable
    logistic support in more than 20 countries.
        In addition, we are working to develop closer ties with other
    government agencies by making them aware of the unique capabilities and
    expertise we can provide through the Joint Interagency Coordination
    Group (JIACG). The JIACG, now resident at each COCOM, is reaping
    benefits today via close partnering with USAID, FEMA, the Department of
    State and others to bring all elements of national power to bear and
    incorporate lessons learned from recent events into current planning.

    Looking Ahead
        As the Services evolve to meet future challenges, we must work in
    concert with them, anticipating their need for innovative mobility and
    distribution strategies. We are continuously exploring new ways to
    support future force requirements. Through our Deployment and
    Distribution Enterprise Technology research and development program we
    leverage emerging technologies to deliver enhanced joint warfighting
    capabilities. Program successes include the JPADS-Mission Planner,
    which improved airdrop delivery accuracy to isolated areas; and the
    Joint Modular Intermodal Container, which enhanced unit deployment and
    theater distribution. Leveraging successful prototype testing, we have
    transitioned the Wireless Gate Release System to the Air Force. This
    system significantly decreases the cost of airdrop operations by
    doubling C-130 JPADS delivery capacity and reducing damage to
    airdropped cargo bundles. This year we will provide improved
    distribution modeling tools for the JDPAC, deliver a web-based
    application to optimize the execution of worldwide Operational Support
    Airlift, and begin development of a Lightweight Trauma Module to
    improve the already superb en route care of injured personnel. Next
    year we will partner with the services to pursue mesh network, tags,
    and tracking technologies to enhance asset visibility and develop a
    collaborative Single Load Planning Capability. We ask Congress to fully
    fund DOD's modest Deployment and Distribution Enterprise Technology
    program.
        We continue to participate in the capabilities-based assessment of
    Sea Basing, spanning the range of military operations in the 2015-2025
    timeframe. The success of Sea Basing relies heavily on advances in
    cargo handling, ship-to-ship cargo transfers, high-speed connectors and
    sea state mitigation through sea state four.
        AMC produced the Global Mobility Concept of Operations and the 2008
    Air Mobility Master Plan outlining future mobility force operations to
    2025. The framework centers on five operational capabilities: airlift,
    air refueling, expeditionary air mobility operations, space lift and
    Special Operations Forces mobility.
        One of our greatest challenges lies in supporting the recently
    activated USAFRICOM. With Africa significantly lacking infrastructure
    to support air, land and sea transportation, we will undoubtedly
    advocate for targeted infrastructure improvements. In doing so, we must
    remain flexible to rapidly changing requirements while being sensitive
    to the often fragile geopolitical climate that exists in many parts of
    Africa.
        To make sure we judiciously meet these challenges, we have
    initiated a Global Access and Infrastructure Assessment (GAIA) to
    examine current global access and infrastructure capabilities on a
    region-by-region basis. GAIA will highlight gaps in coverage to ensure
    sufficient infrastructure exists to fully support future mobility
    operations. GAIA will also provide the infrastructure baseline
    assessment for the next MCRS.
        All these challenges require a flexible, dynamic Command Corporate
    Services environment to improve the precision, reliability, and
    efficiency of the entire DOD Supply Chain.

                                 FINAL THOUGHTS

        We have been entrusted with the authority to lead and transform the
    DOD Distribution System and the awesome responsibility of serving the
    geographic combatant commanders as they execute our Nation's most
    demanding military missions. Of the future, we know only that major
    conflicts will be joint and combined, involving all services and
    national and international partners acting in an interdependent manner.
    In this environment, we are challenged to be forward-leaning and
    forward-thinking and to anticipate and meet the needs of our
    warfighters across the globe. I am extremely proud of the USTRANSCOM
    team and our national partners. Today, we are supporting the global war
    on terrorism while providing consistent precision and velocity to
    deliver combat forces and humanitarian relief in support of national
    objectives. We are also good stewards of our national resources, and in
    our role as the DOD DPO, we will continue to look to the future,
    constantly reexamining our capabilities, forces and processes while
    implementing enterprise-wide changes ever mindful of cost, value and
    efficiency. With all that the Nation has placed in our trust, a promise
    given by us will be a promise kept.

        Senator Kennedy. Thank you. Thank you very much for your
    testimony and also for your dedication to the service of our
    country.
        We will do 10-minute rounds, and I ask that the clerk let
    me know when I have about a minute and a half left.
        Secretary Payton, there has been a lot of interest in
    Congress over the Air Force's February 29 decision to award the
    tanker to Northrop Grumman. I understand that Boeing filed a
    protest of the award yesterday. So, according to the bid
    protest rules, the Government Accountability Office (GAO) has
    100 days to issue the decision. That means we might not have a
    GAO decision of the protest until sometime in June.
        The tanker program does not fall within the jurisdiction of
    this subcommittee, but I thought I would offer you an
    opportunity to say anything that you are able about the award,
    the process leading up to the award, or about the protest. Then
    I would ask General Schwartz to do the same.
        As I say, it is not directly in the jurisdiction of this
    subcommittee, but there is a lot of interest in it. Perhaps you
    want to? We had a briefing on this yesterday.
        Ms. Payton. Yes.
        Senator Kennedy. I think it is an issue that is topical.
        Ms. Payton. Yes, sir. Thank you very much for the
    opportunity to explain the process that was followed for the
    tanker competition. The process that was followed was an effort
    to make sure that all the offerers understood every single
    detail about the requirements and the capabilities desired by
    the Air Force and by our customer, Air Mobility Command (AMC),
    who defined the requirements.
        The requirements were approved by the Joint Requirements
    Oversight Council (JROC) in November 2006. We had several draft
    Requests for Proposals (RFPs) that we coordinated with the
    offerers so that we could get a thorough understanding that
    they knew what was being requested in the competition. We did
    put the final RFP out, after a lot of meetings, on January 30,
    2007.
        We continuously encouraged questions and answered every
    question that came into us. We had well over 500 evaluation
    notices that are well-documented because we wanted to make sure
    that people really knew what we wanted, and we didn't want a
    confusion at a debrief, where someone might stand up and say,
    ``I had no idea that this was a requirement.'' To put it very
    succinctly, we did an awful lot more in this particular source
    selection than in any other source selection to be open,
    transparent, and fair to the offerers.
        We also had a DOD Inspector General investigation in the
    middle of source selection, which is very rare. The DOD came in
    to make sure that we had traced all those requirements from the
    JROC into the system requirements document that was part of the
    RFP to make sure we hadn't dropped any requirements or added
    any requirements. They did a very thorough review and found
    that everything was totally in accordance with good practices.
        We had the GAO come in in the middle of source selection to
    take a look at our acquisition strategy. As well, they
    determined that we were following all the regulations of the
    Federal Acquisition Regulations and that we had a solid
    process.
        We had OSD send in an independent review team that
    thoroughly looked at everything that was going on. Were the
    people in the source selection evaluation team, as they
    debriefed the people in the source selection advisory council,
    were all of those factors flowing into the advisory council?
    Were all of the factors that the advisory council were aware of
    flowing into the SSA?
        They looked at were the offerers being treated fairly as
    well, and were we following all the rules and regulations and
    documenting all of the findings that we had? They, too, said
    that this was probably the best, most unprecedented
    coordination that has ever been done, to their knowledge. The
    group included the director of all defense procurement----
        Senator Kennedy. This is enormously important, and I just
    limited myself to 10 minutes at the start of it. So maybe you
    could wrap up a little bit here?
        Ms. Payton. I was just about to conclude. Yes, sir.
        Senator Kennedy. Then I think I will come back to the topic
    because I have some technical questions on the subject matter
    which we are going to get into. But this is very interesting
    and very valuable, so I don't want to suggest that it isn't.
        Ms. Payton. Yes, and that was the last thing, yes, sir,
    that happened. We had the DOD team that included an Army
    expert, an acquisition and Navy expert, lawyers, and the person
    that is the director of the defense procurement group within
    OSD.
        We feel very confident that sound processes were followed,
    that our motives were pure throughout the entire process, and
    that we had no fear and no favor from anyone in this process.
    We did what was right for providing best value to our
    warfighter and the taxpayer. Thank you.
        Senator Kennedy. Good. Let me go on, General Schwartz, to
    some of the important matters that I think we hopefully will be
    able to address. One, last November, you responded to a letter
    from Chairman Levin asking your personal and professional
    opinion about how many C-17 aircraft to buy, if any, beyond the
    190 aircraft that were planned.
        If I can paraphrase your response, you said that given the
    uncertainty about the C-5A modernization program, you couldn't
    recommend terminating the C-17 production at this time. You
    went on to say that you thought 205 C-17 and 111 C-5s is the
    correct fleet mix for the future.
        Without objection, the two letters will be made part of the
    record.
        [The information referred to follows:]

        Senator Kennedy. So, General Schwartz, now the Under
    Secretary  has  certified  the  C-5  RERP  to  continue,  at
    least  for  the  C-5B. Does the mix now of 205 C-17s and 111 C-
    5As still represent your personal and professional view of the
    fleet needed to meet your requirements?
        General Schwartz. Mr. Chairman, it does.
        Senator Kennedy. General Schwartz, Secretary Young's Nunn-
    McCurdy certification of the C-5 RERP upgrade indicated several
    actions that were planned, including providing the Avionics
    Modernization Program (AMP) upgrading for all 111 C-5s and
    requiring the Air Force institute performance-based logistics
    and lean Six Sigma process improvements to the maintenance
    activity for all 111 C-5 aircraft be improved capability and
    lower operating cost.
        Is there funding in the budget and the Future Years Defense
    Program to complete the AMP and improve logistics for the C-5s?
        General Schwartz. Mr. Chairman, I understand that is the
    case. Ms. Payton can confirm that. But of course, it is
    important to perform the avionics modernization on the
    airplanes that do not receive the full-up reliability
    improvement in order to assure that the aircraft can access
    controlled airspace of the future. That is essential and is
    also required for safety of flight reasons.
        But as I understand it, sir, both programs now are properly
    funded.
        Senator Kennedy. How will the AMC respond to these
    directions for improving logistic support for the C-5?
        General Schwartz. Sir, there is an effort underway in the
    AMC. It is consistent with a larger Air Force program called
    AFSO21, which is essentially lean in the Air Force. It is clear
    that there is a place for improvement, probably in maintenance
    of all of our airplanes, but certainly true in the C-5 and in
    the spare parts inventory and so on.
        But I remain convinced, Mr. Chairman, that the C-5
    reliability improvement program will make a very substantial
    difference, in the reliability of the airplane--for example, we
    currently schedule two airplanes to make one. That is just the
    reality. That will be less the case in the future. Importantly,
    the improved airplane will also perform much better, carry
    more, fly higher, use less gas, exactly the kinds of things
    operators treasure.
        Senator Kennedy. I am going to include John Young's letter
    for the record.
        [The information referred to follows:]

        Senator Kennedy. On page 2 of that, he goes into talking
    about the importance of retention and operation, C-5A are
    required, the AMPs, and the next paragraph, the logistical
    aspects, which you have referred to.
        Secretary Payton, the DOD-approved cost estimate of the C-5
    RERP has shown that there was, indeed, a breach of the Nunn-
    McCurdy threshold for the C-5 RERP modernization. The Cost
    Analysis Improvement Group (CAIG), which produced that approved
    estimate derived a constant-dollar cost estimate of
    acquisition, unit cost of $92 million, $92.4 million versus
    $60.5 million originally estimated.
        While this increase was unfortunate, the estimate only
    reflects half the increase that the Air Force derived, as the
    service cost position reporting the Nunn-McCurdy violation in
    the first place. Can you explain why the Air Force estimate was
    so much higher than the CAIG?
        Ms. Payton. Yes, sir. In trying to get affordability and
    cost growth under control and inheriting many programs that
    were costed at a 50 or 40 or 30 percent confidence level to
    begin with, I have set the stage so that the person who
    inherits the job after me will get programs that are costed at
    a higher level of confidence.
        If 10 things can go wrong on a program and you only have
    enough money to fix 4 of them, i.e., you would be at a 40
    percent confidence level in your amount of money allocated,
    that puts our acquisition workforce in a terrible situation. So
    I have indicated that an 80 percent to 90 percent confidence
    level should be the funding level for our program, so that our
    acquisition people do have enough money in order to pay for
    things when things go wrong that you weren't counting on.
        So the reason our Air Force cost estimate was higher is
    because they calculated it at an 80 percent confidence level,
    having a few more engineers, having a little bit more time in
    the schedule in case things go wrong, rather than at a 50
    percent confidence level, which is what the OSD CAIG calculates
    cost at.
        Senator Kennedy. That is an interesting concept and one
    which I can see has value if it is constantly used. Of course,
    there was at least an argument made that the estimate by the
    Air Force was so prohibitively high that it is sure to
    terminate the whole program. Therefore, when they came back in
    at the lower cost, which is the real cost, they found that it
    made sense in terms of the value of the program.
        So I think we want to find out it is important in terms of
    accounting, but also what the impact is going to be, just as we
    want to make sure that we are going to have truth in accounting
    in terms of it and consistency in the accounting. When I heard
    those figures that are going out and said that is the end of
    the program, and most other people thought it was the end of
    the program, and then we heard there were some in the Air Force
    who wanted the end of the program, this is a pretty easy way to
    end it.
        Then we found out that the costs were not really related,
    were double what were the real costs on it. So it raised some
    serious questions, and I think you have given us an
    explanation.
        Ms. Payton. Yes, sir. I have had other programs that have
    come before me, and I have insisted on an 80 percent confidence
    level so that acquisition doesn't get cost overruns. We
    estimate them so low, and all of a sudden, they are 30 percent
    overrun when, in fact, they were not funded properly to begin
    with.
        So I am trying to set the stage for my successors for all
    programs.
        Senator Kennedy. This is for all programs, right?
        Ms. Payton. For all programs, sir. For all programs I have
    a memo and guidance out that we will no longer lowball these
    programs. They must be funded properly so our acquisition
    workforce has a fighting chance to maintain its integrity and
    to deliver on time and on cost.
        Senator Kennedy. My time is up, but I would be interested
    what the results are. At 80 percent, do you have a consistent
    fact that you are missing the target because you are using at
    80 percent versus if you had used, what, the 50 percent? I am
    not an accountant, and I don't know.
        Ms. Payton. I would be glad to follow up with you.
        [The information referred to follows:]

        Of the 35 acquisition category 1, non-space programs, 9 are funded
    in the 80-90 percent confidence level. The remaining programs either do
    not have a specific confidence level assigned to the cost estimate, are
    funded at the 50 percent confidence level per the Office of the
    Secretary of Defense Cost Analysis Improvement Group, or were baselined
    before the SAF/AQ guidance.

        Senator Kennedy. But with that, there is going to be some
    issues in terms of the merits of a particular kind of system.
    It would be interesting for us to know, using the higher
    figure, the accuracy of that.
        Ms. Payton. Yes, sir. The C-5 program, to begin with, was
    under estimated. We baselined it way, way too early before we
    had any data. We do this in a very poor manner, and so we came
    up with a number, ``I think it will be about this.'' We
    breached Nunn-McCurdy because I think we baselined it way too
    low to begin with.
        So I am trying to put some discipline in the process. We
    have great cost estimators, but we always pick the low number.
    We should start picking a higher number so that we can give our
    acquisition people a fighting chance to be successful.
        Senator Kennedy. Thank you.
        Senator Martinez.
        Senator Martinez. Thank you, Mr. Chairman.
        You spoke eloquently, I think, about the process on the KC-
    45A, and I had the benefit of also, Secretary Payton, hearing
    you yesterday. I want to just commend you for the very even-
    handed way that you have made your presentation in both
    instances.
        Ms. Payton. Thank you.
        Senator Martinez. As someone who does not have a direct
    stake in the outcome, I must say that it sounds like a process
    that, well, obviously, the protest is undergoing. So I
    shouldn't comment on it. But it just does seem like you are
    providing the kind of information that is helpful to us.
        General Schwartz, on that same subject, if I could ask,
    could you describe for us, you had determined this to be the
    top priority of your command, the tanker fleet. They currently
    fly out of MacDill Air Force Base in my backyard in Tampa. I
    was just wondering if you could speak to us about the
    importance of the KC-45's passenger and cargo capability and
    what it will do for your airlift mission? Also, does this
    capability add to your ability to operate at greater capacity
    and greater efficiency?
        General Schwartz. Certainly, sir. I think it is important
    to recognize that while other countries have modest
    capabilities in this area now--France, Italy, Japan, the U.K.,
    so on--we have a unique capability to project American military
    power that the tankers give us.
        It allows us to establish the air bridge through which we
    move airlift aircraft, pack passengers, and cargo. It allows us
    to put fighter aircraft and bomber aircraft into an area of
    responsibility (AOR) to perform missions as required. Likewise,
    it supports the intelligence, surveillance, and reconnaissance
    capability of the Armed Forces with air-breathing sensors. It
    is a fundamental and almost a uniquely American capability.
        The dilemma is, is that 500 of our 550 or so airplanes are
    aging. They were manufactured not long after I was born. While
    we have modified and improved the KC-135 over the years, we
    need a successor platform. We made the case, which was
    validated by the JROC, that in today's environment what we
    needed was an airplane that certainly could do the refueling
    mission, but needed to offer more versatility than just to do
    refueling.
        Throughout the Armed Forces, sir, single-point platforms,
    single-mission platforms, are not necessarily the best
    solution. You want to have versatility. Doors, floors, and
    defensive systems in a tanker-type airplane provide that type
    of versatility so that you can carry passengers. You can carry
    cargo. You can air refuel on the same sortie, and you can
    position the airplane in threat airspace that at the moment we
    very carefully manage with regard to the KC-135 and the KC-10.
        The bottom line is, sir, we need an airplane of the 2000s,
    not of the 1950s. That is exactly, it appears to me, what the
    Air Force has selected.
        Senator Martinez. Tell me, General Schwartz, about this
    very sensitive mission that you spoke of, which is transferring
    of injured service men and women from the theater to critical
    care facilities, which I know you place a great deal of
    importance on that. Can you tell us and give us an update
    regarding your continued efforts to improve this vital mission,
    and let us know also of any further support that Congress might
    provide you in this vital area?
        General Schwartz. This is a mission which is a moral
    imperative. We have a contract, Senator, with our kids, and
    that is if they get banged up on the battlefield that we will
    leave no stone unturned to return them to the best medical care
    on the planet.
        I honestly believe that we and part of what we do
    underwrites the All-Volunteer Force because if the kids stop
    believing that, they will stop volunteering. So, our capacity
    to do this has just multiplied because of modern aircraft.
        In the old days, when we had C-141s and KC-135s and so on,
    these were adequate. But they were not designed with good
    power, good lighting, or good environmentals--temperature
    control, pressurization, and so on. Modern airplanes do that,
    like the C-17, to a T. So if we put a superb medical crew in
    the back, they actually have an intensive care unit that is as
    good as anything on terra firma. We have fortunately in the
    last 2\1/2\ years only lost one troop that passed away while
    returning from the CENTCOM AOR, returning to the United States.
        It is a tribute, sir, to both the aircrews in the
    airplanes, the equipment on the birds, and, most importantly,
    the medical teams that provide that care. That capability is
    embedded in the KC-45 requirement. There is no doubt in my mind
    that we will use that airplane to perform that function, and it
    will do it exceedingly well. Profoundly important mission.
        Senator Martinez. Let me ask both of you if you could
    comment on the working relationship with our commercial
    transportation partners and supporting labor organizations that
    allows you to do your mission and to supplement your mission. I
    am speaking of CRAF specifically.
        General Schwartz. Yes, sir. If I may, Madam Secretary?
        Ms. Payton. Please.
        General Schwartz. The United States Government, sir, can
    never own all of the assets it would need in a major surge. Our
    secret weapon, frankly, at the TRANSCOM is this capacity to
    blend both organic U.S. Government-owned resources and
    commercial resources to best effect. This happens both in the
    airlift and the sealift communities.
        Let me start with the sealift first. It is important to
    recognize, sir, that all of our sealift assets, even those that
    are owned by the Navy and those that are owned by the Maritime
    Administration, are operated by U.S. Merchant Mariners,
    civilian U.S. Merchant Mariners. In my opinion, that is the
    fifth Service. They are dedicated, patriotic Americans, and
    they do a terrific job.
        The same thing is true on the airlift side, where roughly
    95 percent of the passengers that we move--and we move a lot--
    we have moved 5 million passengers since September 11--moves on
    commercial platforms. Roughly 40 percent of the cargo that we
    move moves on commercial platforms, and so that is very
    important. The way we get access to these platforms is through
    the CRAF. Once again, those are crewed by American civilian
    aviators.
        So, it is vitally important, sir, preserving those two
    capabilities and structuring the incentives that allow American
    industry to support the Government when we need to surge is
    something that I think is very important for the future.
        I just would close, sir, by commenting that one of the
    things that you hold me accountable for is maintaining the
    balance between the organic fleet and the commercial
    capability. As I mentioned in my opening remarks, I caution
    about overbuilding the organic fleet because if that occurs, it
    competes in peacetime with that preference cargo, the
    incentives that we offer our commercial partners. So that is
    one of the reasons that I believe 205 is the right number of C-
    17s.
        Thank you, sir.
        Senator Martinez. While you are on that subject, would you
    also comment on the recapitalization needs that you might be
    seeing in terms of our seagoing lift assets?
        General Schwartz. Yes, sir. We are in a period at the
    moment where there is not a need to initiate a new sealift
    program. You may recall, sir, that both in the immediate
    aftermath to the first Gulf War, there was a considerable
    investment made by Congress in sealift capability. Those
    platforms will remain viable through about 2020.
        So we won't have to seriously consider successor platforms
    until program year 2012, the 2012 program. We are a couple of
    years out from that. But at that point, 2 years from now, it
    will be time for us to think about the recapitalization of the
    fast sealift ships.
        You may recall those were the old SEALAND ships, the high-
    speed SL-7s that DOD bought and converted, and they will go out
    to about 60 years. At that point, it will be time to replace
    them.
        Senator Martinez. My time has expired. Thank you both very
    much.
        General Schwartz. Thank you, sir.
        Senator Kennedy. Senator Sessions.
        Senator Sessions. Thank you, Mr. Chairman.
        The Navy recently awarded contracts for the joint high-
    speed vessel. What role do you expect them to play, when will a
    lead contractor be decided, when do you expect them to enter
    into the fleet, and how many?
        General Schwartz. Sir, I will have to do this for the
    record in terms of when they will be delivered. I don't have
    that off the top of my head. However, the last program summary
    I saw was that there were going to be three Navy and five Army
    platforms. This is an important capability, and the reason is,
    is because not everything has to fly.
        If you can move units, coherent units on a surface
    platform, which is what the high-speed vessel will allow us to
    do is to move a Marine company, for example, very effectively
    over, say, distances from in the western Pacific from Okinawa
    to Korea, or similar arrangements in the Gulf. These are
    excellent platforms, again, for moving coherent units where you
    have port capability.
        It is an important initiative. It is one which the regional
    commanders who I support certainly endorse--U.S. Pacific
    Command and CENTCOM, in particular. The first increment of
    that, I am quite certain, will be eight platforms. I will give
    you the delivery schedule for the record.
        [The information referred to follows:]

        [Deleted.]

        Senator Sessions. All right. Secretary Payton, with regard
    to the tanker and the procedures that were utilized, there were
    lease arrangements which fell apart and much embarrassment over
    that. Congress, as part of our response and mandate to DOD,
    required that this contract be bid, did it not?
        Ms. Payton. Yes, sir.
        Senator Sessions. When Congress required that, issues such
    as components, labor requirements, or other issues in existence
    at the time that Congress had originally passed, were the
    standards that you had to follow when you executed the
    contract.
        Ms. Payton. Yes, sir.
        Senator Sessions. So some Members of Congress that are
    complaining to you about how you conducted the process forget
    we set up the process of how bids should be conducted, and then
    we directed the Air Force to bid this contract, and do you feel
    like you followed those requirements?
        Ms. Payton. Absolutely.
        Senator Sessions. Are you satisfied that the aircraft
    chosen will be a superior product for the military personnel
    who will use them?
        Ms. Payton. No doubt. Yes, sir.
        Senator Sessions. General Schwartz, would you comment on
    that?
        General Schwartz. Sir, I am content with the selection
    process.
        Senator Sessions. Will the aircraft today, General
    Schwartz, the aircraft that has been selected, how does it
    compare to the existing aircraft? Do you get savings and
    benefits from having this more modern aircraft in addition to
    just eliminating a fleet that is getting more and more costly?
        General Schwartz. Senator Sessions, I think the short
    answer is this: the 707 was a magnificent machine in its day,
    and it was designed to fly once every 3 days. Airplanes today,
    particularly commercial variants, are designed to fly three
    times a day. That kind of utility, that kind of productivity,
    will change the way we do business.
        That is really the thing that is exciting. The versatility
    that is inherent in the airframe to both refuel and to lift and
    to do it with a modicum of self-protection is a game changer,
    in my view.
        Senator Sessions. With regard to your comments about lift
    and the commercial sector, the Army Reserve unit I used to be a
    member of for 10 years--I was a part of the Military Sealift
    Command, and we contemplated and had leases with ships, and in
    a crisis, we didn't expect that we would have enough military
    ships to lift everything that we needed, but we had a priority
    lease with regard to those shipping companies that they would
    immediately bring their ships to the service of the country for
    whatever needs we might have, along with their crews.
        First of all, is that essentially what you are doing with
    the Air Force, and is that a big cost saver?
        General Schwartz. That is essentially the process that we
    have both on the airlift and the sealift side. Clearly, if the
    U.S. Government owned the assets and the networks that we take
    the commercial networks out there that we take advantage of,
    some have estimated that the cost of it would be $50 billion.
        Senator Sessions. In extra cost if you tried to maintain
    that as a force?
        General Schwartz. Exactly. Exactly. The truth, this is a
    particularly advantageous arrangement where, for a relatively
    modest incentive, we are assured that both our airline partners
    and our sealift partners will present their vessels or their
    aircraft typically within 48 hours, a little bit longer for the
    sealift folks depending on where their ships are, and support
    America's business.
        Senator Sessions. I think striking that right balance,
    people might disagree where it is. But I absolutely agree it is
    just not feasible for us to maintain all these ships sitting
    with no real mission, and then for a certain number of months,
    they might all be used. It makes more sense to have the kind of
    contracts in place that allows you to call up commercial
    aircraft that are well-maintained and can be utilized
    immediately.
        With regard to I think you mentioned, there is considerably
    more cargo and considerably more personnel lift capability in
    these new tanker aircraft. Mr. Chairman, the fuel--you probably
    know, but I didn't until some time ago--is just in the wings.
    The main cargo area is open for personnel and any cargo. So you
    get a considerably amount more of cargo and personnel lift
    capability with this?
        General Schwartz. We certainly do, and that is not a
    trivial matter.
        Senator Sessions. Secretary Payton, do you know the details
    of the numbers on that offhand?
        Ms. Payton. Yes, sir, I do. I think relative to the
    winner--the successful offer and the unsuccessful offer, I
    can't really give those particular numbers out at this time.
        This was a tanker first. It has incredible offload capacity
    at 1,000 nautical miles and 2,000 nautical miles. So from a
    tanker perspective, it will take many less tankers to refuel
    many more receivers and to stay in the air for a much longer
    time.
        Relative to passengers, hundreds of more passengers can be
    carried. Aeromedical evacuation as well is hugely improved with
    either one of these tankers. So it is a great multi-mission
    aircraft, but tanking is job one.
        Senator Sessions. Thank you, and I know it remains the Air
    Force's number-one priority for recapitalization. You mentioned
    multi-point refueling. What does that mean, Secretary Payton or
    General Schwartz?
        Ms. Payton. Do you want to take that?
        General Schwartz. I would be happy to. In other words, this
    airplane will be able to refuel both from the boom for those
    typically Air Force aircraft that have a boom and receptacle
    sort of refueling arrangement. Or at the same time, there will
    be wing pods, which allow refueling what we call probe and
    basket. Typically, the United States Navy uses that. So the
    baskets come back out of the pods and the Navy aircraft can
    refuel.
        So you can refuel both off the pods and the boom
    simultaneously.
        Ms. Payton. As well with our coalition partners who
    typically use the drogue or the basket side of it, yes.
        General Schwartz. Right.
        Senator Sessions. Thank you very much.
        Senator Kennedy. Thank you very much. I have just a final
    couple of questions.
        Secretary Payton, what is the status of those negotiations
    for buying any C-17 beyond the 180 aircraft in the original Air
    Force program?
        Ms. Payton. From an acquisition point of view, we have no
    requirements to procure any additional C-17s. I do understand
    that some have been put in the supplemental. So a request went
    in in the supplemental.
        The requirement side of the world is handled by the uniform
    service relative to operations and readiness, and once those
    requirements are approved and funded, then the acquisition
    workforce kicks into work. But at this point, relative to
    acquisition, I have no new requirements to procure any more C-
    17s.
        Senator Kennedy. If there are, are you including
    negotiation of options for buying some number of C-17 with the
    final appropriations in 2008?
        Ms. Payton. No.
        Senator Kennedy. If not, would you be conducting all new
    negotiations for any 2008 aircraft?
        Ms. Payton. No, sir. We don't have any negotiations in work
    for C-17s. As a matter of fact, a primary concern right now is
    that factory and the amount of money it costs to close it down.
    So if we are not going to buy more, then we need to figure out
    how to fund the closedown of it. If we are, then we won't know
    that until the supplemental is approved later this year, I
    understand.
        Senator Kennedy. The point I am getting to is whether you
    consider any of these options in terms of negotiating for
    expansion of C-17s?
        Ms. Payton. I believe we have been provided unsolicited
    proposals. But at this time, we are not looking at those
    because we have no money, and it would violate the law to try
    to do something without any money.
        Senator Kennedy. Let me ask you, General Schwartz, just to
    conceptually and just briefly with the looking down the road in
    terms of national security and defense and where we are, where
    we are going to be, how do you see the expansion of the
    Services, which are being looked at, all the different types
    and changes, how do you consider those potential changes as you
    are planning now in terms of the future?
        General Schwartz. There are a number of matters out there
    that do need to be factored into what is the right fleet size
    and mix. Some of those factors include, at the moment, changes
    related to the size in the ground forces, both the Marine Corps
    and the Army. Some of that relates to the equipment, which
    needs to be transported. This tends to grow over time. It
    rarely gets smaller.
        Likewise, the plans that the combatant commanders have to
    employ the force influence how quickly one must close the
    force. Every several years, we do what we call a mobility
    study, sometimes called a capability study, sometimes called a
    requirements study. This time, upcoming, sir, it will be both.
        The so-called mobility, capability, and requirement study
    (MCRS) 2008 will look at all of these factors to offer the best
    assessment on what is the right size of the force and what is
    the best fleet mix. Now, there is another study underway as
    well, directed by Congress, known at least in our lingo as
    McCaskill-Tauscher, which is due in January 2009. The Institute
    for Defense Analyses is going to do that one.
        The DOD study, which we are a full partner in, MCRS, will
    be due later in 2009. We are working hard to synchronize those
    two efforts so that they don't get disconnected.
        One final comment, sir. You asked me earlier about 205
    C17s. A key factor in 205 is this question about the growth in
    the ground forces. I believe that the growth in the ground
    forces is not to provide the country with a capability to surge
    more brigades in a short period of time. In other words, say,
    for the sake of argument, our current plan is 20 brigades, that
    the additional brigade equivalents that will come onboard are
    not there to take it to 25, but rather to reduce the tempo on
    the ground forces that, in some cases, are pulling 15-month
    tours now or longer, or 7 months for the Marine Corps or maybe
    a little longer--to reduce that tempo.
        I think that is the case. The studies will reconfirm that
    is, in fact, what the Department intends. But that is certainly
    my understanding of where we are at and is why I remain
    confident that 205 is the right number.
        Senator Kennedy. I want to thank you very much. We might
    have some questions for the record from the other members who
    weren't here.
        General Schwartz. Understood, sir.
        Senator Kennedy. We're very grateful, and we appreciate and
    we applaud you. We weren't always in this kind of circumstance
    in terms of airlift in recent years.
        General Schwartz. Right.
        Senator Kennedy. So you deserve very considerable credit to
    get us up to the shape that we are in, and we are very
    impressed with it. Thank you very much.
        General Schwartz. To you, sir, and Congress, who enabled us
    to do it.
        Ms. Payton. Yes, sir.
        Senator Kennedy. Thank you. The subcommittee stands
    adjourned.
        [Questions for the record with answers supplied follow:]

                Questions Submitted by Senator Edward M. Kennedy

                            C-5A AIRCRAFT READINESS

        1. Senator Kennedy. General Schwartz, Secretary Young's Nunn-
    McCurdy certification of the C-5 Reliability Enhancement and Re-
    engining Program (RERP) upgrade indicated several actions that were
    planned, including providing the Avionics Modernization Program (AMP),
    upgrade to all 111 C-5s, and requiring that the Air Force institute
    performance-based logistics and Lean Six Sigma process improvements to
    the maintenance activities for all 111 C-5 aircraft to improve
    capability and lower operating costs. Is there funding in the budget
    and the Future Years Defense Program to complete the AMP and improve
    logistics support for the C-5 fleet?
        General Schwartz. The current budget funds the AMP modification for
    the remaining fleet. Additionally, reliability will be improved through
    the RERP effort on the B models and through a change in the logistics
    philosophy used on the entire fleet. The C-5 is moving from a ``fly-to-
    fail'' system to a scheduled inspection and maintenance program,
    similar to the commercial world. These programs are also funded in the
    current budget.

        2. Senator Kennedy. General Schwartz, how will the Air Mobility
    Command respond to these directions for improving logistics support for
    the C-5 fleet?
        General Schwartz. The Air Mobility Command efforts to improve
    logistics support for the C-5 fleet include Aircraft Availability
    Improvement Programs such as Maintenance Steering Group (MSG-3) and the
    C-5 Regionalized Isochronal Inspection program (C-5 RISO). MSG-3 is an
    inspection philosophy that alters the traditional fly-to-fail approach
    to maintenance. At the same time, it moves the C-5 community to a more
    proactive condition-based approach to aircraft maintenance. The RISO
    reduces the number of inspection facilities across the country and the
    subsequent manpower associated with these facilities. Additionally, it
    minimizes simultaneous inspections and maximizes inspection
    proficiency. Together, these programs will improve overall reliability
    and make additional aircraft available to the warfighter.

                         STATUS OF THE C-17A PRODUCTION

        3. Senator Kennedy. Secretary Payton, Congress added 10 aircraft to
    the budget request in fiscal year 2007 and has authorized 8 aircraft in
    fiscal year 2008. Congress has not yet acted on the final Department of
    Defense (DOD) supplemental appropriations for 2008. What is the status
    of the negotiations for buying any C-17 aircraft with the fiscal year
    2007 funds?
        Ms. Payton. An Undefinitized Contractual Action was issued December
    18, 2006, for the 10 additional aircraft so the contractor could begin
    work. The first aircraft is scheduled to deliver in November 2008 and
    the last will deliver in July 2009. The Air Force is in preliminary
    stages of negotiations, with contract definitization anticipated in
    July 2008.

        4. Senator Kennedy. Secretary Payton, are you including negotiation
    of options for buying some number of C-17 aircraft with the final
    appropriations for 2008? If not, would you be conducting all new
    negotiations for any 2008 aircraft?
        Ms. Payton. We have not included any options for C-17 aircraft
    identified in the fiscal year 2008 appropriations. Boeing would be
    required to submit a new certified proposal for 2008 aircraft.

                            C-5 RERP COST ESTIMATING

        5.  Senator  Kennedy.  Secretary  Payton,  the  DOD-approved  cost
    estimate  of  the C-5 RERP showed that there was indeed a breach of the
    Nunn-McCurdy thresholds for the C-5 RERP modernization. The Cost
    Analysis Improvement Group (CAIG), which produced that approved
    estimate, derived a constant dollar cost estimate of acquisition unit
    cost of $92.4 million, versus the $60.5 million originally estimated.
    While this increase was unfortunate, this estimate only reflects half
    the increase that the Air Force derived as the service cost position in
    reporting the Nunn-McCurdy violation in the first place. During the
    hearing, you said that the primary reason for this was that you were
    funding the program to the 80-90 percent confidence level, and that
    this is now standard practice for major Air Force acquisition programs.
    Could you provide the committee a list of all Air Force major
    acquisition programs and identify the confidence level assumed in
    building the cost estimates for the current program?
        Ms. Payton. Of the 33 acquisition category 1, non-space programs, 9
    are funded in the 80-90 percent confidence level. The remaining
    programs either do not have a specific confidence level assigned to the
    cost estimate, are funded at the 50 percent confidence level per the
    Office of the Secretary of Defense CAIG, or were baselined before the
    SAF/AQ guidance.

                                     ______

                  Questions Submitted by Senator Mel Martinez

                          ONGOING MOBILITY OPERATIONS

        6. Senator Martinez. General Schwartz, U.S. Transportation Command
    (TRANSCOM) has been central to virtually every major U.S. global
    operation, providing persistent support to the regional commanders.
    Mission requirements have been highly varied--supporting forces in Iraq
    and Afghanistan, providing humanitarian relief, moving patients
    worldwide to provide critical care; all while supporting steady state
    global operations. How would you assess the current readiness of the
    mobility fleet of aircraft and ships, and that of the men and women
    operating this fleet, given the operational tempo of these ongoing
    operations?
        General Schwartz. [Deleted.]

        7. Senator Martinez. General Schwartz, how does your strategic
    airlift requirement address and account for the stand-up of U.S. Africa
    Command (AFRICOM) and the Grow the Force initiative?
        General Schwartz. The strategic airlift requirement is based upon
    comprehensive analysis of all the major airlift missions required to
    support the National Military Strategy. The 2005 Mobility Capability
    Study provides the most recent analysis but did not include the recent
    stand-up of the U.S. AFRICOM and the Grow the Force initiative. The
    congressionally-directed Airlift Fleet Mix Analysis and the Department
    of Defense Mobility Capabilities and Requirements Study, to be
    completed in January and May 2009 respectively, will consider a number
    of emerging operational issues, to include future AFRICOM needs and the
    Grow the Force initiative requirements.

            UNITED STATES TRANSPORTATION COMMAND PROGRAM PRIORITIES

        8. Senator Martinez. General Schwartz, there are a number of major
    programs--ongoing and future--which comprise TRANSCOM's end-to-end lift
    capability. C-17 production, C-5 modernization, tanker fleet
    recapitalization, C-130 modernization, and Joint Cargo Aircraft are
    primary examples. To some extent, the capabilities provided by these
    programs overlap. Strategic lift aircraft, for example, are performing
    tactical lift. Likewise, the future Joint Cargo Aircraft may take
    pressure off of tactical airlift requirements. Meanwhile, you've
    expressed the importance that the future tanker be capable of cargo and
    passenger lift. While this reflects smart management of limited
    resources, these programs are also competing with each other for
    procurement funding. Could you please outline your program priorities
    as they pertain to ensuring balanced capability across the full
    spectrum of lift requirements?
        General Schwartz. Rapid global mobility is essential to the
    effectiveness of the future force and I am comfortable that the current
    funding levels in the President's budget adequately address these
    mobility priorities with manageable risk.
        With that in mind, my top mobility priority of recapitalization of
    our aging tanker fleet is funded at the Program of Record. Continued
    funding support and minimizing delays in the KC-X program is critical
    to the TRANSCOM mission. Additionally, legacy mobility platforms must
    remain funded at the requested levels in the President's budget. Any
    reductions in programmed funding for the C-5 AMP and RERP or C-130 AMP
    and center wing box translate into additional risk. While I support the
    programmed fleet of 190 C-17s, in conjunction with the modernization of
    a portion of the C-5 fleet, I would favor a modest increase in the C-17
    programmed fleet from 190 to 205 aircraft. Finally, LAIRCM installation
    on the C-37/C-40 fleet must remain fully funded as requested in the
    President's budget. LAIRCM equipped C-37/C-40s will free up C-130s and
    C-17s currently tied to missions requiring defensive systems.

        9. Senator Martinez. General Schwartz, recognizing that we are
    always bound by fiscal constraints, are you satisfied that this year's
    budget request adequately addresses these priorities?
        General Schwartz. Rapid global mobility is essential to the
    effectiveness of the future force and I am comfortable that the current
    funding levels in the President's budget adequately address these
    mobility priorities with manageable risk.
        With that in mind, my top mobility priority of recapitalization of
    our aging tanker fleet is funded at the Program of Record. Continued
    funding support and minimizing delays in the KC-X program is critical
    to the TRANSCOM mission. Additionally, legacy mobility platforms must
    remain funded at the requested levels in the President's budget. Any
    reductions in programmed funding for the C-5 AMP and RERP or C-130 AMP
    and center wing box translate into additional risk. While I support the
    programmed fleet of 190 C-17s, in conjunction with the modernization of
    a portion of the C-5 fleet, I would favor a modest increase in the C-17
    programmed fleet from 190 to 205 aircraft. Finally, LAIRCM installation
    on the C-37/C-40 fleet must remain fully funded as requested in the
    President's budget. LAIRCM equipped C-37/C-40s will free up C-130s and
    C-17s currently tied to missions requiring defensive systems.

                C-5 RELIABILITY ENHANCEMENT RE-ENGINING PROGRAM

        10. Senator Martinez. Secretary Payton and General Schwartz, the
    Under Secretary of Defense recently completed his review of the C-5
    RERP in conjunction with the program's Nunn-McCurdy cost breach; and he
    certified that the most cost-effective  way  to  meet  your  strategic
    airlift  requirements  is  to  re-engine  the  51  C-5B  and  C-5C
    aircraft,  only. He  also  reviewed  options  for  procuring
    additional  C-17 aircraft and rejected those options as not meeting
    requirements and more costly to the taxpayer; ultimately concluding
    that procurement of additional C-17 aircraft was not affordable. Do you
    agree with the course the Under Secretary has set for strategic airlift
    programs, particularly in view of the priority placed on the tanker
    program within the TRANSCOM portfolio?
        Ms. Payton. I support the Department's decision as outlined in the
    C-5 Nunn-McCurdy certification.
        General Schwartz. Based on current analysis, the Under Secretary is
    pursuing a prudent acquisition approach in accordance with the
    President's budget. As always, we must reassess our strategy if and
    when future studies indicate a need for change.

        11.  Senator  Martinez.  General  Schwartz,  in  response  to
    questions  regarding C-17 aircraft on the Unfunded Priority List, the
    Air Force has indicated that the C-17 acquisition objective has been
    increased to 248 aircraft--an increase of 58 above current program and
    43 above your sweet spot. What impact would this increase to your C-17
    fleet have on your ability to manage a balanced airlift force,
    including your Civil Reserve Air Fleet (CRAF) partners, in a cost
    effective manner?
        General Schwartz. A fleet of 248 C-17s assumes the retirement of
    all 59 C-5As and one-for-one replacement by C-17s to the C-5A units.
    All C-5A units are assigned to the Guard or Reserve. The C-17s would
    fly the same number of hours as the C-5s they replace. As a result,
    expanding the C-17 fleet to 248 and retiring the C-5As would have no
    effect on our CRAF partners.

        12.  Senator  Martinez.  Secretary  Payton,  I  understand  that
    three  re-engined C-5 aircraft are currently conducting flight testing.
    Could you provide your assessment of the performance of these re-
    engined aircraft in meeting their reliability objectives?
        Ms. Payton. As of April 7, 2008, the three SDD aircraft have
    successfully completed a total of 276 flights while accumulating
    approximately 840 hours flight time. Overall, the flight test program
    has executed over 76 percent of ground and flight specification test
    points. Both Lockheed Martin Aeronautics Company and Air Force
    Developmental Test Organization reliability performance tracking
    efforts indicate the three modified C-5M aircraft are meeting
    reliability requirements and are, in fact, exceeding requirements in
    several areas. Our assessment of the most recent data, as reported by
    the Air Force Developmental Test Organization, indicates that
    reliability and maintainability specifications will be met. The C-5M
    propulsion system, the cornerstone of C-5 RERP accounting for 54
    percent of the expected Mission Capable Rate (MCR) improvement, is
    exhibiting exceptional reliability performance during flight testing as
    shown on the attached chart.

        13. Senator Martinez. Secretary Payton, if the three re-engined C-5
    aircraft that are currently undergoing flight testing are not meeting
    their objectives, what would you attribute the cause for this shortfall
    and what actions are underway to correct it?
        Ms. Payton. Our assessment of the most recent data, as reported by
    the Air Force Developmental Test Organization, indicates that
    reliability and maintainability requirements will be met.

        14. Senator Martinez. Secretary Payton, the prime contractor for
    the C-5 aircraft proposed to mitigate cost growth through long-term
    purchase agreements with his vendors and not-to-exceed (NTE) pricing
    with the Air Force. Could you provide an update on your current
    acquisition strategy for this program, and your progress in completing
    negotiations for the contract?
        Ms. Payton. Our contract now establishes NTE prices for the 49
    aircraft to be modified to the RERP configuration over 7 lots. We have
    negotiated fixed prices for Lots 1 through 3 and expect to be on
    contract by 30 April with these prices. The prices will be subject to
    economic price adjustment for unusual economic impacts on only the
    propulsion system and the pylons.
        Prices for Lots 4 through 7 will be negotiated as fixed prices
    prior to funding of each option. We continue to pursue cost-reduction
    initiatives for all lots.
        The fixed prices and the NTE prices are based on a buy profile of 1
    in fiscal year 2008, 3 in fiscal year 2009, 5 in fiscal year 2010, 7 in
    fiscal year 2011, 11 in fiscal year 2012, 11 in fiscal year 2013, and
    11 in fiscal year 2014. The Air Force is committed to funding for this
    buy profile.

        15. Senator Martinez. Secretary Payton, what structure and
    incentives are you incorporating to improve upon the C-5 aircraft
    program cost estimates?
        Ms. Payton. Fixed prices, subject to adjustment for unusual
    economic fluctuation, have been negotiated for Lots 1 through 3. Fixed-
    price arrangements provide maximum incentive on a contractor to reduce
    costs in order to maximize profit within the negotiated price.
        Our contract also establishes NTE prices for Lots 4 through 7.
    These prices will be negotiated prior to award/funding of the options
    for each lot. The contractor is encouraged within this NTE structure to
    reduce costs; future profit negotiations will consider whether the Air
    Force significantly benefits from the contractor's efforts to reduce
    cost or improve schedule or performance.
        We will work with the contractor and with the Defense Contract
    Management Agency (DCMA) to closely track actual costs during
    production. For example, we are requiring Earned Value Management
    reporting. We are also working with DCMA and the contractor to improve
    the company's estimating system. All of this information will
    facilitate negotiation of fair and reasonable prices for Lots 4 through
    7.

        16. Senator Martinez. Secretary Payton, understanding that a
    significant percentage of the C-5 aircraft program's cost growth is
    associated with government costs, what specific measures are you taking
    to curb this cost growth on the program, and how would you judge the
    likely effectiveness of these measures?
        Ms. Payton. Two factors caused C-5 RERP production cost growth
    associated with Other Government Costs (OGC): (1) underestimation at
    Milestone B of required Government Furnished Equipment (GFE); and (2)
    growth in Engineering Change Orders (ECO) and Mission Support costs,
    which were calculated by applying a factor to the increased total
    contract cost.
        Completion of the C-5 RERP modification on the three SDD aircraft
    enabled a more complete understanding of the GFE required for
    Production, both in terms or actual items required and cost. Using this
    actual data, which was lacking at Milestone B, is a more effective way
    to develop program cost.

                        KC-45 TANKER AIR LIFT CAPABILITY

        17. Senator Martinez. General Schwartz, a discriminating
    requirement for the KC-45 tanker is the ability of the aircraft to be
    alternatively employed as an airlifter for passenger and cargo
    transport. The KC-45 lift capability was not included in the analysis
    for the Mobility Capabilities Study. However, this capability should
    significantly reduce your risk in meeting requirements in support of
    major combat operations. Are you able to quantify the magnitude of this
    lift contribution in terms of either million ton miles per day or C-17
    equivalents?
        General Schwartz. During the first weeks of wartime surge
    operations (periods of peak demand for both airlift and aerial
    refueling), the KC-45 is dedicated for use in its primary role as a
    tanker supporting deployment and employment operations. Million Ton-
    Miles per Day (MTM/D) is a wartime surge metric. The AMC does not plan
    to credit any MTM/D contributions from the KC-45 to the wartime surge
    equation; a policy consistent with the way we evaluate KC-10
    performance today. However, AMC will use the KC-45s to meet airlift
    demands for CRAF transload of passengers and bulk cargo when the CRAF
    cannot operate in threatened environments. During periods of reduced
    aerial refueling demand, the KC-45 can also contribute effectively to
    organic delivery of passengers and cargo to locations and environments
    not served by commercial industry. The KC-45 lift capacity was not
    included in analysis for the MCS nor will it be included in our current
    MCRS analysis since those studies are in the 2012 to 2017 timeframe and
    the KC-45 will not reach FOC. Finally, it is inappropriate to equate
    KC-45 with C-17 capability. The KC-45 is not designed to carry the
    oversize and outsize equipment delivered by C-17s or access the austere
    environments visited by C-17s.

                            CIVIL RESERVE AIR FLEET

        18. Senator Martinez. Secretary Payton and General Schwartz, the
    DOD has submitted a legislative proposal to guarantee that a proper
    amount of assured business for CRAF partners will be available in the
    future. Would you please explain the importance of having U.S.-flagged
    commercial airline capability to carry outsize cargo within the CRAF
    program, and then, the importance of your proposed assured business
    model to the health of the CRAF program?
        Ms. Payton. I defer this question to General Schwartz because U.S.
    TRANSCOM manages the CRAF contract with commercial air carriers.
        General Schwartz. A U.S-flag commercial airline outsize cargo
    capability is not something we currently require in the CRAF as this
    need is met by our C-5 and C-17 fleet.
        We believe the assured business proposal is an integral part of the
    strategy to ensure the continuing viability of the CRAF program when
    DOD movement requirements return to pre-September 11 levels. The
    Department has a study underway to determine what other incentives or
    alternative organizing principles are needed to assure the CRAF program
    remains attractive to U.S. air carriers. I do, however, believe that
    the assured business concept will be a key part of the Department's
    business relationships with our CRAF partners.

        19. Senator Martinez. Secretary Payton and General Schwartz, has
    there been a trend away from medium-sized air cargo carriers that would
    jeopardize these partners' participation in CRAF?
        Ms. Payton. I defer this question to General Schwartz because U.S.
    TRANSCOM manages the CRAF contract with commercial air carriers.
        General Schwartz. There is no trend by the TRANSCOM to move away
    from medium-sized air cargo carriers. Both large- and medium-sized
    cargo carriers make essential contributions to the Defense
    Transportation System (DTS).

        20. Senator Martinez. Secretary Payton and General Schwartz, as the
    global defense landscape changes and we bring units back from overseas
    to the United States, how does that affect the business relationship
    with our CRAF partners?
        Ms. Payton. I defer this question to General Schwartz because U.S.
    TRANSCOM manages the CRAF contract with commercial air carriers.
        General Schwartz. Current Operation Iraqi Freedom/Operation
    Enduring Freedom (OIF/OEF) requirements sustain Civil Reserve Air Fleet
    (CRAF) carriers with wartime airlift business that will be greatly
    reduced post OIF/OEF. Current CRAF business is approximately $2.5
    billion a year. Historically, the total pre-September 11 annual CRAF
    business was approximately $500-600 million per year. The tenuous state
    of the airline industry raises additional and significant concerns over
    CRAF viability post OIF/OEF-especially for the smaller CRAF charter
    carriers, both cargo and passenger. Careful consideration of
    legislative proposals, such as the CRAF Assured Business proposal
    currently before Congress, together with other possible incentives will
    be required to help assure a viable CRAF with adequate participation/
    capability in the future. As directed by Congress, DOD has contracted
    with Institute for Defense Analyses (IDA), a Federally Funded Research
    and Development Center, to study the future of CRAF to include
    potential impacts of a drawdown on our industry partners. That report
    is scheduled to be provided by the Secretary to Congress no later than
    September 30, 2008.

        21. Senator Martinez. Secretary Payton and General Schwartz, to
    what extent are your maritime partners, through the Maritime Security
    Program and Voluntary Intermodal Security Agreement Program, similarly
    affected by DOD business volatility?
        Ms. Payton. I defer this question to General Schwartz because U.S.
    TRANSCOM manages the CRAF contract with commercial air carriers.
        General Schwartz. Each of our strategic sealift partners enrolled
    in the Maritime Security Program and the Voluntary Intermodal Sealift
    Agreement will be affected differently depending on the percentage of
    their business model that is predicated on DOD business. In the global
    war on terrorism, DOD business for some carriers may be as little as 1
    percent while others could be as much as 60-70 percent. One of the
    TRANSCOM's highest priority initiatives for 2008 is to assess the
    expansion of the DTS business base in order to bring other Federal
    departments and agencies ship movements under the DOD distribution
    umbrella, increasing the amount of DOD cargo and lessening the effect
    of the loss of DOD specific cargo.

                                MILITARY SEALIFT

        22. Senator Martinez. General Schwartz, the Navy is formulating a
    program to procure Maritime Prepositioning Force (Future) (MPF(F))
    ships, which, in addition to providing prepositioning of equipment for
    operational forces, would be available for routine tasking by the
    combatant commanders. How does the Navy's employment plan for this
    future MPF capability integrate with your vision for meeting
    prepositioning mission requirements?
        General Schwartz. The Navy's MPF(F) will constitute a component of
    our Nation's Global Prepositioning Materiel Capabilities and support a
    wide spectrum of Joint forces operations. MPF(F) will significantly
    improve the way we project cargo into an objective area; decreasing
    reliance on access to secure ports and airfields, and speeding the
    closure time of critical materiel.
        Doctrine to integrate MPF(F) with other naval forces and ensure it
    complements the DTS is still being developed. TRANSCOM will remain
    engaged in this process and duly consider the future capabilities of
    MPF(F) vessels in the development of overall strategic sealift
    requirements.

        23. Senator Martinez. General Schwartz, Operation Iraqi Freedom
    placed heavy demands on prepositioned equipment. How would you assess
    progress to restore the readiness of the preposition force for future
    contingencies?
        General Schwartz. Each of the Services has a sound strategy for
    reconstituting and revitalizing their preposition force. It will take a
    few years to reach the intended end-state but the reconstituted force,
    by incorporating a combination of recent lessons learned and
    modernization initiatives, will be better suited to support the
    combatant commanders future contingencies. Current operations influence
    timelines in the case of both the Army and Marine Corps. One of the
    Army's Large Medium-Speed Roll-on/Roll-off (LMSR) vessels is in full
    operating status and reconstituted with prepositioned stock; five more
    LMSRs will reset with Army Prepositioned Stock-3 cargo between 2010 and
    2013 in accordance with Army Prepositioning Strategy 2015. Full
    reconstitution of the Marines' MPF is expected by 2012. Two former Army
    LMSRs are scheduled for transfer to the MPF (one in April 2008 and one
    in April 2009). Additional acquisitions and alternatives to accommodate
    MPF growth are being considered.

        [Whereupon, at 3:15 p.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                                      2009

                                  ----------

                             TUESDAY, APRIL 8, 2008

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

         NAVY FORCE STRUCTURE REQUIREMENTS AND PROGRAMS TO MEET THOSE
                                  REQUIREMENTS

        The subcommittee met, pursuant to notice, at 2:41 p.m. in
    room SR-222, Russell Senate Office Building, Senator Edward M.
    Kennedy (chairman of the subcommittee) presiding.
        Committee members present: Senators Kennedy, Sessions,
    Collins, and Martinez.
        Majority staff member present: Creighton Greene,
    professional staff member.
        Minority staff members present: David M. Morriss, minority
    counsel; and Sean J. Stackley, professional staff member.
        Staff assistants present: Jessica L. Kingston and Benjamin
    L. Rubin.
        Committee members' assistants present: Jay Maroney,
    assistant to Senator Kennedy; Gordon I. Peterson, assistant to
    Senator Webb; Sandra Luff, assistant to Senator Warner; Todd
    Stiefler, assistant to Senator Sessions; Mark J. Winter,
    assistant to Senator Collins; and Brian W. Walsh, assistant to
    Senator Martinez.

        OPENING STATEMENT OF SENATOR EDWARD M. KENNEDY, CHAIRMAN

        Senator Kennedy. Good afternoon. The hearing will come to
    order. We welcome Deputy Assistant Secretary of the Navy for
    Ships, Allison Stiller. We want to thank you for a long period
    of service for the Navy, and not without its challenges.
        We thank you very much for your dedication.
        Ms. Stiller. Thank you very much.
        Senator Kennedy. We also welcome Barry McCullough, who's
    Deputy Chief of Naval Operations for Integration of
    Capabilities and Resources. We thank you very much for being
    here, Admiral. General Amos, Commander, Marine Corps Combat
    Development Command, we thank you very much. We know you've had
    recent service over in Iraq and we thank you. We thank all of
    our panel for their important public service and service to our
    country.
        We are faced, all of us and the Services, with a number of
    critical issues that confront the Department of the Navy in
    balancing modernization needs against the costs of supporting
    ongoing operations in Iraq and Afghanistan. Within that general
    area there are several specific concerns for the subcommittee
    today.
        One of these is in the prospects for meeting future force
    structure requirements. We're facing the prospect that the
    current Department of the Navy program will lead to potentially
    large gaps between the forces that the Chief of Naval
    Operations (CNO) and the Commandant of the Marine Corps have
    said they need and the forces that will be available to their
    successors.
        In one case, the CNO has said that the Navy needs to have
    48 attack submarines to meet the combat commanders'
    requirements. We're faced with the risk of falling well short
    of that goal for more than 10 years starting during the next
    decade.
        In another case, the Navy now predicts the Navy and Marine
    Corps tactical aircraft forces are facing a shortfall of at
    least 125 tactical fighters needed to outfit our active air
    wings, 10 aircraft carrier air wings, and 3 Marine Corps air
    wings. With shortfalls that large, we could be faced with
    drastically reducing the number of aircraft available on short
    notice to the combatant commanders, either because we have
    deployed understrength air wings or because we did not deploy
    the carrier at all because of these aircraft shortages.
        I mention the aviation situation not because we will deal
    with it in detail this afternoon, but to illustrate that we
    will not be able to look to Navy aviation to be a bill-player
    for the problems of the shipbuilding portfolio.
        Other challenges face the Navy centering on acquisition
    programs. We have had special concern about the Littoral Combat
    Ship (LCS). This was intended to be a ship that the Navy could
    acquire relatively inexpensively and relatively quickly. As it
    turns out, the LCS program will be neither. Once again, we are
    presented with a program with significant cost growth, which at
    least in part was driven by the Service changing requirements
    after the design and construction was signed and making poor
    original cost estimates.
        The LCS situation raises significant questions about
    acquisition management within the Navy. For example, why
    weren't the Navy and contract teams better able to see the
    problems sooner? At the time we marked up the National Defense
    Authorization Bill for Fiscal Year 2008, the subcommittee
    believed that the second LCS team, led by General Dynamics, was
    likely to experience the very same difficulty as the Lockheed
    Martin team. You'll recall the Navy had terminated the contract
    on the second Lockheed Martin LCS, the LCS-3, earlier last
    year.
        During the middle of the markup, the committee heard from
    Secretary Winter and Admiral Mullen, who both claimed that
    things were not as bad with General Dynamics' part of the
    program as they had proven to be on the Lockheed Martin ships.
    They made these assertions despite the Navy's own internal
    estimates to the contrary.
        Late in 2007, the Navy finally realized it was facing the
    same situation with General Dynamics as it faced with Lockheed
    Martin and tried to get General Dynamics to sign up to a fixed-
    price contract for the two ships or face outright cancellation
    on the second ship, just as the Navy had done with Lockheed
    Martin. The Navy and General Dynamics could not reach an
    agreement, so the Navy terminated the contract for the second
    vessel, the LCS-4, for the convenience of the government.
        In summary, the Navy was still viewing the LCS program too
    optimistically as late as May last year, again just months away
    from having to terminate the contract for LCS-4. I would be
    interested in hearing from Secretary Stiller about what actions
    the Department has taken to strengthen the acquisition
    oversight and restore confidence in the Navy's ability to
    manage major acquisition programs.
        We have also been waiting too long for better definitions
    of requirements in a couple of areas. First, the Navy was
    supposed to already have reached some better definition of
    requirements for the next generation cruiser, called the CG(X).
    The longer these definitions wait, the less likely it is the
    Navy will be able to maintain the intended schedule of awarding
    the first ship of that class in 2011.
        We also are waiting for indications from the Navy about
    whether they will comply with the requirements that this new
    ship be nuclear powered or whether they will be seeking a
    waiver from that requirement from the Secretary of Defense. If
    that ship is to be nuclear powered, work would have to begin
    immediately on the design of such a ship to have a chance of
    starting construction any time before the middle of the next
    decade.
        Another area where the Navy has had trouble defining the
    requirements that has been a problem is the Maritime
    Prepositioning Force-Future (MPF-F) program. While the
    subcommittee has heard for several years about the
    contributions that such a force could make to Marine Corps and
    Navy operations, we have seen that the procurement of certain
    ships within that objective has been delayed each year as
    resolution of questions about the requirements and capabilities
    keep being deferred.
        There are other concerns, but in the interest of time I'll
    conclude with the following note. The subject of Navy force
    structure and acquisition is 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 energies to these subjects. Today's
    hearing continues the subcommittee's strong bipartisan interest
    in the broader naval force structure issues facing the Nation
    today. It is in that bipartisan spirit that I again welcome
    Senator Martinez to the Seapower Subcommittee for the first
    year as serving as the ranking member of the subcommittee. I
    look forward to all of your testimony this afternoon and other
    issues facing the Department of the Navy, and we'll ask Senator
    Martinez for any comments he'd like to make.
        [The prepared statement of Senator Kennedy follows:]

                Prepared Statement by Senator Edward M. Kennedy

        The subcommittee will come to order. I want to welcome Secretary
    Stiller, Admiral McCullough, and General Amos to the subcommittee this
    afternoon. We are grateful to you for your service to the Nation and to
    the valorous and truly professional men and women in the whole Navy and
    Marine Corps team.
        You are faced with a number of critical issues that confront the
    Department of the Navy in balancing your modernization needs against
    the costs of supporting ongoing operations in Iraq and Afghanistan.
        Within that general area, there are also several specific concerns
    for the subcommittee today. One of these is in the prospects for
    meeting future force structure requirements. We are facing the prospect
    that the current Navy program will lead to potentially large gaps
    between the forces that the Chief of Naval Operations (CNO) and the
    Commandant of the Marine Corps have said they need and the forces that
    will be available to their successors.
        In one case, the CNO has said that the Navy needs to have 48 attack
    submarines to meet combatant commander requirements, but we are faced
    with the risk of falling well short of that goal for more than 10 years
    starting during the next decade.
        In another case, the Navy now predicts that Navy and Marine Corps
    tactical aircraft forces are facing a shortfall of at least 138
    tactical fighters needed to outfit our active air wings, 10 aircraft
    carrier air wings, and 3 Marine Corps air wings. With shortfalls that
    large, we could be faced with drastically 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 these aircraft shortages. I
    mention the aviation situation, not because we will deal with it in
    detail this afternoon, but to illustrate that we will not be able to
    look to naval aviation to be ``bill-payer'' for problems in the
    shipbuilding portfolio.
        Other challenges face the Navy, centering on acquisition programs.
    We have had 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, the
    LCS program will be neither. Once again we are presented with a program
    with significant cost growth which, at least in part, was driven by the
    Service changing requirements after the design and construction
    contract was signed and making poor original cost estimates.
        The LCS situation raises significant questions about acquisition
    management within the Navy. For example, why weren't the Navy and
    contractor teams better able to see the problems sooner? At the time we
    marked up the National Defense Authorization Bill for Fiscal Year 2008,
    the subcommittee believed that the second LCS team, led by General
    Dynamics, was likely to experience the very same difficulties as the
    Lockheed Martin team. We all recall that the Navy had terminated the
    contract on the second Lockheed Martin LCS, LCS-3, earlier last year.
        During the middle of markup, the Committee heard from Secretary
    Winter and Admiral Mullen (then CNO) who both claimed that things were
    not as bad with the General Dynamics part of the program as they had
    proven to be on the Lockheed Martin ships. They made these assertions
    despite the Navy's own internal estimates to the contrary.
        Late in 2007, the Navy finally realized that it was facing the same
    situation with General Dynamics as it had faced with Lockheed Martin,
    and tried to get General Dynamics to sign up to a fixed-price contract
    on the two ships or face outright cancellation on the second ship (just
    as the Navy had done with Lockheed Martin).
        The Navy and General Dynamics could not reach and agreement, so the
    Navy terminated the contract for the second vessel (LCS-4) for the
    convenience of the government.
        In summary, the Navy was still viewing the LCS program too
    optimistically as late as May last year, again just months away from
    having to terminate the contract for LCS-4.
        I would be interested in hearing from Secretary Stiller about what
    actions the Department is taking to strengthen acquisition oversight
    and restore confidence in the Navy's ability to manage major
    acquisition programs.
        We have also been waiting too long for better definitions of
    requirements in a couple of areas: first, the Navy was supposed to have
    already reached some better definition of requirements for the next
    generation cruiser, called CG(X). The longer these definitions wait,
    the less likely it is that the Navy will be able to maintain the
    intended schedule of awarding the first ship of that new class in 2011.
    We also are waiting for indications from the Navy about whether they
    will comply with the requirement that this new ship be nuclear powered,
    or whether they will be seeking a waiver from that requirement from the
    Secretary of Defense. If this ship is to be nuclear powered, work would
    have to begin immediately on the design of such a ship to have any
    chance of starting construction anytime before the middle of the next
    decade.
        Another area where the Navy has had trouble defining the
    requirements has been a problem is the Maritime Prepositioning Force-
    Future program. While the subcommittee has heard for several years
    about the contribution that such a force could make to Marine Corps and
    Navy operations, we have seen the procurement of certain ships within
    that objective being delayed each year as the resolution of questions
    about the requirements and capabilities keeps being deferred.
        There are other concerns, but in the interest of time I will
    conclude with the following note: the subject of Navy force structure
    and acquisition is 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 energies to these subjects.
        Today's hearing continues the subcommittee's strong bipartisan
    interest in the broader naval force structure issues facing the Nation
    today. It is in that bipartisan spirit that I again welcome Senator
    Martinez to the Seapower Subcommittee for his first year of serving as
    ranking member on the subcommittee.
        I look forward hearing your testimony this afternoon on these and
    other issues facing the Department of the Navy.

                   STATEMENT OF SENATOR MEL MARTINEZ

        Senator Martinez. Thank you, Mr. Chairman. I very much
    appreciate your kind words of welcome and I look forward to
    continuing to work in the bipartisan fashion that this
    subcommittee needs to have in order to accomplish our common
    goals.
        I also am pleased to welcome the witnesses, Secretary
    Stiller, Admiral McCullough, and General Amos. We thank you for
    your service to our Nation and thank you for joining us today.
        This morning the Armed Services Committee received
    testimony on operations in Iraq and I know the more than 24,000
    marines assigned to the Multi-National Force have performed
    remarkably, particularly in Al Anbar Province. Likewise, the
    Navy has made vital contributions in the theater. Over 10,000
    sailors are augmenting ground forces in a variety of roles.
        Without question, marines, sailors, soldiers, and airmen in
    combat are our number one priority. However, while the
    committee focuses on meeting the demands of these current
    operations, we must also take a longer view to ensure the
    readiness of our fleet and fleet marine force for future
    conflict.
        The Navy reports as much as half of our ships are under way
    on any given day supporting the global war on terror and
    performing vigilance, peacekeeping, and humanitarian relief
    missions around the world. We're accustomed to and indeed our
    National Security Strategy is built upon freedom of the seas, a
    freedom that is made possible only through global presence and
    naval superiority. Absent a credible challenge at sea over the
    past 2 decades, however, the fleet has drawn down to 280 ships
    and it's in jeopardy of slipping further.
        I share the strong concern raised by the subcommittee these
    past several years regarding this decline in the size of our
    fleet. Particularly today as we witness rapid expansion by
    competitor navies, most notably that of China, we must guard
    against shortfalls to our numbers of aircraft carriers,
    submarines, amphibious ships, and surface combatants.
        The CNO has presented Congress with a shipbuilding plan to
    reverse this trend and build the Navy back to 313 ships. Even
    this plan, however, which strives to balance capability with
    affordability, must cope with shortfalls in key warfighting
    areas while confronting significant cost risk. The cost
    estimate for building this future Navy exceeds the investments
    of the past 15 years by greater than 50 percent. Arguably, this
    is a bill that has come due as a result of the long lapse in
    ship construction following the end of the Cold War.
        In the 2009 budget request, however, it falls four ships
    and $1.5 billion short of the shipbuilding plan presented to
    this subcommittee just 1 year ago. This is a disturbing leading
    indicator of challenges ahead. It is important today to gain
    your candid assessment of these challenges, to hear from you
    regarding progress on new ship programs and regarding the
    health and welfare of the industrial base.
        As well, I look forward to your practical assessment of the
    Navy's ability to finance a shipbuilding plan in the face of
    ever-increasing budget pressures and competing priorities. In
    the end, we need to arrive at a common understanding of the
    Navy and Marine Corps's priorities and risks and the prudent
    actions available to the administration and Congress that would
    mitigate these risks.
        I also join the chairman in my concern over the LCS
    program. I want to make sure that we have this on track and are
    moving forward adequately, because without that component of
    the new shipbuilding program I don't think we can meet that
    goal of a 313-ship Navy.
        I thank you again for joining us. I thank you for your
    tremendous service, and I look forward to your testimony here
    before us today.
        Thank you, Mr. Chairman.
        [The prepared statement of Senator Martinez follows:]

                   Prepared Statement by Senator Mel Martinez

        Thank you, Mr. Chairman.
        I'm also pleased to welcome our witnesses. Secretary Stiller,
    Admiral McCullough, and General Amos, thank you for joining us.
        Earlier today, the committee received testimony on operations in
    Iraq, where the 24,000 marines assigned to the Multi-National Force
    have performed remarkably in the Al Anbar Province. Likewise, the Navy
    has made vital contributions in-theater with over 10,000 sailors
    augmenting ground forces.
        Without question, marines, sailors, soldiers, and airmen in combat
    are our number one priority. However, while the committee focuses on
    meeting the demands of these current operations, we must also take `the
    longer view' to ensure the readiness of our Fleet and Fleet Marine
    Force for future conflict.
        By the Navy's reports, as many as half of our ships are underway on
    any given day supporting the global war on terror, and performing
    vigilance, peacekeeping, and humanitarian relief missions around the
    world. We are accustomed to, and indeed our National Security Strategy
    is built upon freedom of the seas--a freedom that is made possible only
    through global presence and naval superiority.
        Absent a credible challenge at sea over the past two decades,
    however, the Fleet has drawn down to 280 ships and is in jeopardy of
    slipping further. I share the strong concerns raised by the committee
    these past several years regarding this decline in the size of our
    fleet. Particularly today, as we witness rapid expansion by competitor
    navies, most notably China, we must guard against shortfalls to our
    numbers of aircraft carriers, submarines, amphibious ships, and surface
    combatants.
        The CNO has presented to Congress a shipbuilding plan to reverse
    the trend and build the Navy back to 313 ships. Even this plan,
    however, which strives to balance capability with affordability, must
    cope with shortfalls in key warfighting areas while confronting
    significant cost risk.
        The cost estimate for building this future Navy exceeds investments
    of the past 15 years by greater than 50 percent. Arguably, this is a
    bill that has come due as a result of the long lapse in ship
    construction following the end of the Cold War.
        The 2009 budget request, however, falls four ships and $1.5 billion
    short of the shipbuilding plan presented to this subcommittee just 1
    year ago. This is a disturbing `leading indicator' of challenges ahead.
        It is important today to gain your candid assessment of these
    challenges; to hear from you regarding progress on new ship programs,
    and regarding the health and welfare of the industrial base. As well, I
    look for your practical assessment of the Navy's ability to finance the
    shipbuilding plan in the face of ever-increasing budget pressures and
    competing priorities. In the end, we need to arrive at a common
    understanding of the Navy's and Marine Corps' priorities and risks, and
    the prudent actions available to the administration and to Congress
    that would mitigate these risks.
        Again, thank you for joining us. I thank you for your tremendous
    service to our country, and I look forward to your testimony.

        Senator Kennedy. Thank you very much.
        Secretary Stiller, we'd be delighted if you'd lead off,
    please.

    STATEMENT OF ALLISON F. STILLER, DEPUTY ASSISTANT SECRETARY OF
               THE NAVY FOR SHIPS, DEPARTMENT OF THE NAVY

        Ms. Stiller. Mr. Chairman, Senator Martinez, Senator
    Collins: It's a privilege for Lieutenant General Amos, Vice
    Admiral McCullough, and me to appear before you today to
    discuss Navy shipbuilding. I request that Vice Admiral
    McCullough's and my written statement be entered into the
    record.
        Senator Kennedy. Without objection.
        Ms. Stiller. The Department is committed to build an
    affordable fleet at or above 313 ships, tailored to support the
    National Defense Strategy, the recently signed Maritime
    Strategy, and the 2006 Quadrennial Defense Review (QDR). For
    the first time in a long while, the Navy's budget does not
    include funding for any lead ships. This year a total of seven
    ships are included in the fiscal year 2009 President's budget:
    one Virginia-class submarine, one DDG-1000-class ship, two
    LCSs, two T-AKEs, and one Navy Joint High-Speed Vessel (JHSV).
    In addition, although not part of the Navy's 313-ship force
    structure, the Navy will procure 1 JHSV for the Army in fiscal
    year 2009.
        I'll now elaborate on the specifics of the request. The
    Navy is requesting $2.1 billion of full funding for one
    Virginia-class submarine in fiscal year 2009 and advanced
    procurement for the fiscal year 2010 boat, and advanced
    procurement for two boats in fiscal year 2011. The Virginia-
    class construction program is continuing to make progress
    toward realizing CNO's goal of buying two Virginia-class
    submarines for $4 billion as measured in fiscal year 2005
    dollars, starting in fiscal year 2012.
        Because of your support with the addition of advanced
    procurement funding last year, the Navy has accelerated the
    production of two Virginia-class submarines per year from
    fiscal year 2012 to fiscal year 2011. Two months ago, the Navy
    awarded contracts for the construction of the dual DDG-1000
    lead ships to General Dynamics-Bath Iron Works and to Northrop
    Grumman Shipbuilding. The fiscal year 2009 President's budget
    request of $2.55 billion provides full funding for the third
    ship of the DDG-1000-class and advanced procurement for the
    fourth ship. With recent approval from the Defense Acquisition
    Executive (DAE) for the follow ship acquisition strategy, the
    Navy intends to utilize fixed-price incentive fee contracts
    through a competition for quantity.
        The Navy remains committed to the LCS program and LCS
    remains a critical warfighting requirement for our Navy. The
    fiscal year 2009 President's budget request includes $920
    million for two additional LCS sea frames. The Navy also
    intends to execute the fiscal year 2008 appropriation for one
    sea frame, utilizing the remaining funding and material from
    the terminated ships. Under an acquisition strategy approved in
    January 2008 by the DAE, the fiscal years 2008 and 2009 awards
    will be for fixed-price incentive fee contracts based on a
    limited competition between the current LCS sea frame prime
    contractors.
        The fiscal year 2009 President's budget request also
    provides for procurements of two T-AKEs in the National Defense
    Sealift Fund.
        The JHSV program is currently in the technology development
    phase. Lead ship award is anticipated in late fiscal year 2008,
    with delivery of the first vessel in 2011. The fiscal year 2009
    President's budget request includes $187 million for the
    construction of the first Navy-funded JHSV and $173 million for
    the second Army-funded vessel. We worked diligently to
    stabilize our shipbuilding plan and move into serial
    production.
        The Navy remains committed to ensure fiscal responsibility
    in shipbuilding acquisition programs, as evidenced by the
    cancellation of LCS-3 and LCS-4 last year.
        Mr. Chairman, we'd like to thank you for this opportunity
    to discuss the Navy's shipbuilding budget request for fiscal
    year 2009. Vice Admiral McCullough would like to remark briefly
    on a day in the Navy. Thank you.
        [The joint prepared statement of Ms. Stiller and Admiral
    McCullough follows:]

         Joint Prepared Statement by Allison F. Stiller and VADM Barry
                                McCullough, USN

        Mr. Chairman and distinguished members of the subcommittee, thank
    you for the opportunity to appear before you today to address Navy
    shipbuilding. The Department is committed to the effort to build an
    affordable 313-ship fleet by 2020 tailored to support the National
    Defense Strategy, the Maritime Strategy, and the 2006 Quadrennial
    Defense Review. This year a total of seven ships are included in the
    fiscal year 2009 President's budget, one Virginia-class SSN, one DDG-
    1000, two littoral combat ships (LCSs), two T-AKE, and one Navy Joint
    High Speed Vessel (JHSV). In addition, although not part of the Navy's
    313-ship force structure, the Navy will procure 1 JHSV for the Army in
    fiscal year 2009.
        The Department has updated the Long-Range Strategic Shipbuilding
    Plan with an eye on further stabilizing workload and funding
    requirements. A stable plan will enable the shipbuilding industry to
    maintain critical skills and to make business decisions that increase
    efficiency and productivity in order to meet the Navy's projected
    shipbuilding requirements. In addition to a stable shipbuilding plan,
    the Department has been exploring alternatives with the shipbuilding
    industry to mitigate workload fluctuations among shipyards to maintain
    a stable and skilled workforce across the industry sectors. The
    Department requests consideration of a general cost cap exception to
    allow the Department to work with industry to better level load work
    across the industrial base.
        We still face challenges. In response to cost increases in the lead
    ships of the LCS class, the Navy has slowed the initial rate of
    production to reduce risk; however, the Navy remains committed to the
    program to fill critical warfighting gaps that exist today. In an area
    of success, the innovative design and build practices being implemented
    by Virginia-class are already showing promise and can serve as a model
    for other programs. Bringing the cost of the Virginia-class fast attack
    submarine down to $2 billion (fiscal year 2005 $) per hull by fiscal
    year 2012 remains a challenge and is currently within $50 million of
    target.
        The Gulf Coast shipyards have struggled since Hurricane Katrina.
    Over the last year the Navy and Northrop Grumman Ship Systems have
    worked at a ship portfolio level to reset the schedule baselines and
    have adjusted the associated contracts accordingly. Additionally, six
    Gulf Coast shipbuilders were awarded contracts in 2007 under Section
    2203 of Public Law 109-234, Emergency Supplemental Appropriations for
    Defense, The Global War on Terror and Hurricane Recovery 2006. The
    purpose of these contracts is to expedite recovery of shipbuilding
    capability in areas affected by Hurricane Katrina by repairing and/or
    replacing shipbuilding facilities, to make lasting improvement in
    shipyard facilities that would result in measurable cost reductions in
    current and future Navy shipbuilding contracts, and to improve the
    ability of shipbuilding facilities on the Gulf Coast to withstand
    damage from potential hurricanes or other natural disasters.
        Lastly, we are actively working with our Allies to exchange best
    practices and lessons learned on shipbuilding efforts. A Shipbuilding
    Quadrilateral forum has been established which includes the U.S.,
    United Kingdom, Canada, and Australia to discuss systematic trends that
    are emerging in shipbuilding programs. The forum serves to discuss,
    compare and contrast acquisition matters such as contracting practice
    and industry trends. In addition, the Navy is partnering with the
    United Kingdom to support the new missile compartment design for their
    Vanguard-class replacement.
        As noted earlier, the Department proposes procurement of seven new
    construction ships as part of the 2009 President's budget request. Each
    of these ships as well as other significant Navy shipbuilding programs
    are discussed below.

                                 VIRGINIA-CLASS

        Currently, four Virginia-class submarines have been delivered to
    the Fleet and six more are under construction. In the past year, the
    Navy commissioned U.S.S. Hawaii (SSN-776), the third boat of the
    Virginia-class, christened the fourth submarine of the class, North
    Carolina (SSN-777), and laid the keel for the fifth submarine, New
    Hampshire (SSN-778). In 2008 we will deliver and commission two
    submarines. North Carolina (SSN-777), the fourth submarine, just
    delivered last week and will commission in May. New Hampshire (SSN-
    778), the fifth submarine is scheduled to deliver in October, 6 months
    ahead of the April 2009 contract delivery date. In January 2008, the
    seventh, eighth, and ninth hulls were named Missouri (SSN-780),
    California (SSN-781) and Mississippi (SSN-782), respectively.
        The Virginia-class construction program is continuing to make
    progress toward realizing the Chief of Naval Operation's goal of buying
    two Virginia SSNs for $4 billion as measured in fiscal year 2005
    dollars, starting in fiscal year 2012. General Dynamics Electric Boat
    and Northrop Grumman Newport News (NGNN), will continue to jointly
    produce these submarines and are working to reduce the construction
    time and cost of these ships in concert with the program office. In
    this budget, the production of two Virginia-class submarines per year
    has accelerated to start in fiscal year 2011 vice fiscal year 2012. The
    fiscal year 2008 congressional plus-up for advanced procurement was
    instrumental to this effort. Negotiations for an eight-ship multi-year
    procurement contract will begin soon, and we anticipate signing that
    contract in late 2008. The Navy requests approval for the next multi-
    year contract.

                               DDG-1000 DESTROYER

        This multi-mission surface combatant, tailored for land attack and
    littoral dominance, will provide independent forward presence and
    deterrence and operate as an integral part of joint and combined
    expeditionary forces. DDG-1000 will capitalize on reduced signatures
    and enhanced survivability to maintain persistent presence in the
    littoral in future scenarios. The program provides the baseline for
    spiral development to support future surface ships. DDG-1000 with the
    Advanced Gun System and associated Long-Range Land Attack Projectile
    will provide volume and precision fires in support of joint forces
    ashore. The dual band radar represents a significant increase in air
    defense capability in the cluttered littoral environment. Investment in
    open architecture and reduced manning will provide the Navy life cycle
    cost savings and technology options that can be retrofit to legacy
    ships thus allowing adaptability for an uncertain future. The program
    continues to execute on cost and schedule.
        This month, the Navy awarded contracts for construction of the dual
    lead ships to General Dynamics Bath Iron Works and to Northrop Grumman
    Shipbuilding. Ship detail design and the design of the mission system
    equipment are on track to support the start of production. The fiscal
    year 2009 President's budget request of $2.55 billion provides full
    funding for the third ship of the class, and advanced procurement for
    the fourth ship. With recent approval from the Defense Acquisition
    Executive for the follow ship acquisition strategy, the Navy intends to
    utilize fixed-price incentive fee contracts for the follow ships
    awarded through a competition for quantity.

                              LITTORAL COMBAT SHIP

        LCS will be a fast, agile, and networked surface combatant with
    capabilities optimized to assure naval and joint force access into
    contested littoral regions. LCS will operate with focused-mission
    packages that deploy manned and unmanned vehicles to execute a variety
    of missions, including anti-submarine warfare, anti-surface warfare and
    mine countermeasures. LCS will also possess inherent capabilities to
    support homeland defense, Maritime Interception Operations, and Special
    Operation Forces.
        The Navy remains committed to the LCS program, and LCS remains a
    critical warfighting requirement for our Navy to maintain dominance in
    the littorals and strategic choke points around the world. However, the
    Navy identified significant cost increases on the order of 100 percent
    for the lead ships in the LCS class, due to unrealistic contractor
    proposals, development difficulties and changes from a commercial
    baseline. The Navy believes that active oversight and strict cost
    controls are needed to deliver these ships to the fleet over the long
    term. The Navy demonstrated strong oversight when it terminated the
    contracts for LCS-3 and LCS-4 in 2007.
        It is vital that the Navy continue through first-of-class
    construction challenges to complete LCS-1 and LCS-2. When these ships
    are delivered, the Department will be able to better evaluate their
    costs and capabilities. LCS-1 and LCS-2 are currently scheduled to
    deliver to the Navy in 2008. The Navy will seek congressional support
    to complete the reprogramming of fiscal year 2007 LCS shipbuilding
    funds to complete LCS-1 and LCS-2.
        The fiscal year 2009 President's budget request includes $920
    million for two additional LCS seaframes. The Navy also intends to
    execute the fiscal year 2008 appropriation for one seaframe, utilizing
    the remaining funding and material from the terminated ships. The Navy
    will also seek congressional support for the reprogramming of these
    funds for the fiscal year 2008 procurement. Under an acquisition
    strategy approved in January 2008 by the Defense Acquisition Executive,
    the fiscal year 2008 and 2009 awards will be for fixed-price incentive
    fee contracts, based on a limited competition between the current LCS
    seaframe prime contractors. These ships will be designated as Flight 0+
    and will include all existing approved engineering changes developed
    from lessons learned, along with any current improvements to
    construction or fabrication procedures. The Navy will incorporate
    further lessons learned from LCS-1 and LCS-2 sea trials into these
    ships prior to production. Any such changes will be minimized to those
    essential for safety and/or operability. Acquisition strategies for
    fiscal year 2010 and follow ships are under Navy review.

            LEWIS AND CLARK CLASS DRY CARGO/AMMUNITION SHIP (T-AKE)

        T-AKE was designed to replace the Navy's aging combat stores (T-
    AFS) and ammunition (T-AE) shuttle ships. Working in concert with an
    oiler (T-AO), the team can perform a ``substitute'' station ship
    mission which will provide necessary depth in combat logistics. The
    fiscal year 2009 President's budget request provides for procurement of
    two T-AKEs in the National Defense Sealift Fund. Fourteen T-AKE hulls
    are covered under a fixed-price incentive contract with General
    Dynamics National Steel and Shipbuilding Company. Three of the T-AKEs
    are to support MPF-F program requirements. Major accomplishments for
    the year include the christening of T-AKE-4 (Richard E. Byrd) in May
    2007 and the delivery of T-AKE-3 (Alan Shepard) in June 2007 and T-AKE-
    4 in November 2007. T-AKE-5 (Robert E. Peary) launched in October 2007.
    Progress continues on the follow on ships including the keel laying for
    T-AKE-6 (Amelia Earhart) in June 2007 and T-AKE-7 in November 2007. T-
    AKE-8 commenced construction in October 2007. The construction contract
    option for the T-AKE-10 and long lead time material for the T-AKE-11
    were exercised in January 2008. The fiscal year 2009 funding is to
    complete funding for two ships (T-AKE-11 and T-AKE-12).

                            JOINT HIGH SPEED VESSEL

        High speed connectors will facilitate the conduct of sustained sea-
    based operations by expediting force closure and allowing the
    persistence necessary for success in the littorals. Connectors are
    grouped into three categories: inter-theater, the Joint High Speed
    Sealift, which provides strategic force closure for the continental
    United States-based forces; intra-theater, the JHSV that enables rapid
    closure and sustainment of Marine forces; and the Joint Maritime
    Assault Connector, to move troops and resources from the sea base to
    shore. These platforms will link bases and stations around the world to
    the sea base and other advanced bases, as well as provide linkages
    between the sea base and forces operating ashore. JHSV is currently in
    the Technology Development Phase. The Capabilities Development Document
    was Joint Requirements Oversight Council (JROC)-approved in January
    2007. Milestone B is anticipated in fiscal year 2008 with delivery of
    the first vessel in 2011. The fiscal year 2009 President's budget
    request including research and development (R&D) is $186.8 million for
    the construction of the first Navy-funded JHSV and $173.0 million for
    the second Army-funded vessel.
        The Navy also continues with important new construction and
    modernization programs. These programs are outlined below.

                                     CVN-21

        CVN-78, the lead ship of the CVN-21 program will replace U.S.S.
    Enterprise (CVN-65). CVN-21 warfighting capability improvements
    include: 25 percent increase in sortie generation rate, ship's force
    reduction approaching 800 billets with an additional 400 billets
    reduction including airwing and embarked staff, nearly three-fold
    increase in electrical generating capacity, restoration of Service Life
    Allowances, and enhanced Integrated Warfare System to pace future
    threats. These capability improvements will ensure that the CVN, the
    centerpiece of the Navy's Carrier Strike Group, continue to pace
    projected threats. The major critical technologies and capabilities
    planned for integration into the lead ship include: Electromagnetic
    Aircraft Launch System, Advanced Arresting Gear, Joint Precision
    Aircraft Landing System, Improved Survivability, Enhanced Flight Deck
    and Improved Weapon and Material Handling.
        The National Defense Authorization Act for Fiscal Year 2007
    authorized the Navy to enter into construction contracts for the first
    three ships of the CVN-78 class and provided for 4-year funding of the
    first three ships beginning with construction of the Gerald R. Ford
    (CVN-78) in fiscal year 2008. Non-recurring investment in the class
    design is $5.7 billion and the cost of the lead ship (excluding all
    nonrecurring costs) is $8.1 billion ($TY), nearly $300 million less
    than the projected cost to buy a Nimitz-class aircraft carrier in the
    same timeframe. The President's budget request for fiscal year 2009
    included $2.7 billion as the second of the four funding increments
    planned for CVN-78. The Navy released the Request for Proposal for
    Detail Design and Construction of the lead ship in July 2007 and NGNN
    responded with their contract proposal on October 31, 2007. Contract
    negotiations are ongoing.

                                  CVN-68 CLASS

        George H.W. Bush (CVN-77), is the 10th and final Nimitz-class
    nuclear powered aircraft carrier. The construction of CVN-77 has
    proceeded rapidly following the launch in October 2006. The aircraft
    catapults began testing in January of this year by `launching' dead-
    loads. Sea trials will commence this fall. The George H.W. Bush is
    expected to deliver near the end of this calendar year. The
    commissioning date has been set for January 10, 2009. The President's
    budget for fiscal year 2009 requests $20.5 million for the completion
    of government responsible mission critical and safety system
    installations reflecting operational needs to deploy the George H.W.
    Bush at a readiness condition appropriate for the defense of America's
    freedom. The program remains within the congressionally enacted $6,057
    million cost limitation.

                    CVN-68 CLASS REFUELING COMPLEX OVERHAUL

        The CVN-68 Class Refueling Complex Overhaul (RCOH) program spans
    40+ years across the Nimitz-class. During each RCOH, 35 percent of a
    carrier's total Service Life Maintenance plan is performed, as well as
    depot level mid-life recapitalization that extends the service life of
    Nimitz-class carriers out to approximately 50 years. Refueling of the
    ships' nuclear reactors, warfighting modernization, and repair of ship
    systems and infrastructure are also completed to meet future missions.
    These combined upgrades support a reduction in operating costs, achieve
    expected service life, and allow the Nimitz-class to deter projected
    threats well into the 21st century. This program is critical for the
    class to achieve its service life and retain combat relevance. The
    President's budget for fiscal year 2009 requests $124.5 million in
    fiscal year 2009 to facilitate the acceleration of the execution start
    date for U.S.S. Theodore Roosevelt (CVN-71) to September 2009, and
    $21.4 million advanced procurement for U.S.S. Abraham Lincoln (CVN-72)
    RCOH. This acceleration provides additional 2 months of operational
    availability to the carrier fleet during the critical 2012-2015 period
    before the commissioning of the Gerald R. Ford (CVN-78) and adds
    approximately 1 million manhours to NGNN's fiscal year 2009 workload
    keeping 300 NGNN skilled workers employed.

                   WASP (LHD-1)-CLASS AMPHIBIOUS ASSAULT SHIP

        The Wasp (LHD-1)-class comprises multi-purpose amphibious assault
    ships whose primary mission is to provide embarked commanders with
    command and control capabilities for sea-based maneuver/assault
    operations as well as employing elements of a landing force through a
    combination of helicopters and amphibious vehicles. Seven LHDs have
    been delivered to the fleet. The last of the LHD-1-class, U.S.S. Makin
    Island (LHD-8), is scheduled to be delivered in November 2008. Although
    a modified repeat of the previous seven ships, this ship introduced gas
    turbine propulsion system with all electric auxiliary systems and
    eliminated the steam plant and steam systems.

          LHA(R) GENERAL PURPOSE AMPHIBIOUS ASSAULT SHIP (REPLACEMENT)

        The LHA(R) Assault Echelon ships will provide the Nation with
    forcible entry capability and forward deployed contingency response
    forces. These ships will provide enhanced hangar and maintenance spaces
    to support aviation maintenance and increased jet fuel storage and
    aviation ordnance magazines. The LHA(R) Assault Echelon ship is the
    functional replacement for the aging LHA-1-class ships that reach the
    end of their extended service life in 2011-2015. The Detail Design and
    Construction contract for the lead ship, LHA-6, was awarded on June 1,
    2007, with a contract delivery date of August 31, 2012.

                      LPD-17 CLASS AMPHIBIOUS WARFARE SHIP

        The LPD-17 San Antonio-class of amphibious warfare ships represents
    the Department of the Navy's commitment to a modern expeditionary power
    projection fleet that will enable our naval force to operate across the
    spectrum of warfare. The Navy took delivery of the first LPD-17 in the
    summer of 2005, and operational evaluation began in the spring of 2007.
    LPD-18 (U.S.S. New Orleans) and LPD-19 (U.S.S. Mesa Verde) were
    commissioned in March 2007 and December 2007, respectively. LPD-19 will
    undergo shock trials this summer. There are five ships currently under
    construction. LPD-20 (Green Bay) is expected to deliver this year, and
    LPD-21 (New York) has been launched and will be christened in March
    2008. LPDs-22-24 are in various stages of the construction phase, and
    the option for construction of LPD-25 was exercised on December 21,
    2007. The fiscal year 2009 President's budget request includes funding
    for outfitting/post delivery efforts on LPDs 20-24 and program closeout
    efforts required following delivery of the final LPD-17-class ship. The
    San Antonio-class ship replaces four classes of older ships--the LKA,
    LST, LSD-36, and the LPD-4--and will have a 40-year expected service
    life. San Antonio class ships will play a key role in supporting the
    ongoing global war on terrorism by forward deploying marines and their
    equipment to respond to crises abroad.

                 MARITIME PREPOSITIONING FORCE (FUTURE) (MPF-F)

        MPF-F provides a scalable, joint, sea-based capability for the
    closure, arrival, assembly and employment of up to a MEB-sized force.
    It will also support the sustainment and reconstitution of forces when
    required. MPF-F is envisioned for frequent utility in Humanitarian
    Assistance/Disaster Relief, Noncombatant Evacuation Operations, Theater
    Security Cooperation, and other Littoral Combat Operations as well as
    major combat operations. When coupled with an Expeditionary Strike
    Group or Carrier Strike Group, MPF-F will provide the Nation with a
    highly flexible operational and logistics support capability that
    enables rapid reinforcement of the Assault Echelon of an Amphibious
    Force in anti-access or denial environments. In March 2006, the Defense
    Acquisition Board approved program entry into the Technology
    Development Phase. An R&D plan is currently being executed and the
    program is progressing on track. The fiscal year 2009 President's
    budget request includes $41.8 million R&D for ongoing risk reduction
    and technology development, and advance procurement for the fiscal year
    2010 MPF Aviation Ship.

                               DDG MODERNIZATION

        The DDG-51 modernization program is a comprehensive 62-ship program
    designed to modernize the Hull, Mechanical, and Electrical (HM&E) and
    Combat Systems. These combined upgrades support a reduction in manpower
    and operating costs, achieve expected service life, and allow the class
    to pace the projected threat well into the 21st century. This program
    is critical for the class to achieve its service life and retain combat
    relevance.
        The first DDG to be modernized will be DDG-51 with an HM&E
    availability in fiscal year 2010. Congress provided additional funds to
    this program with $50 million SCN in fiscal year 2005, $50 million in
    SCN in fiscal year 2006, and $30 million in OPN in fiscal year 2007.
    The HM&E alterations are being developed in SCN new construction in
    order to minimize development costs and mitigate technical and schedule
    risk. The President's budget for fiscal year 2008 included the addition
    of robust warfighting upgrades. The President's budget request for
    fiscal year 2009 includes $316 million which supports the Flight I and
    II ship modernizations starting in fiscal year 2010.

                             CRUISER MODERNIZATION

        Twenty-two cruisers remain in service and are planned for
    modernization. A comprehensive Mission Life Extension is critical to
    achieving the ship's expected service life and includes the All
    Electric Modification, Smartship, Hull Mechanical & Electrical system
    upgrades and a series of alterations designed to restore displacement
    and stability margins, correct hull and deck house cracking and improve
    quality of life and service onboard. Cruiser Modernization bridges the
    gap to future surface combatants and will facilitate a more rapid and
    affordable capability insertion process. The first full modernization
    is CG-52 commencing in February 2008. The President's budget request
    for fiscal year 2009 includes $413 million which will modernize two
    cruisers.

                                     CG(X)

        CG(X) is envisioned to be a highly capable surface combatant
    tailored for Joint Air and Missile Defense and Joint Air Control
    Operations. CG(X) will provide airspace dominance and Sea Shield
    protection to Joint forces. The Maritime Air and Missile Defense of
    Joint Forces Initial Capabilities Document was validated by the JROC in
    May 2006. Under the Navy's current program of record, the program
    procures its first ship in fiscal year 2011 with follow-on construction
    in fiscal year 2013.
        The results of the Navy's Analysis of Alternatives for the Maritime
    Air and Missile Defense of Joint Forces capability are currently within
    the Navy staffing process. Resulting requirements definition and
    acquisition plans, including schedule options and associated risks, are
    being evaluated in preparation for CG(X) Milestone A, planned to occur
    in fiscal year 2008. This process includes recognition of the
    requirement of the National Defense Authorization Act for Fiscal Year
    2008, that all major combatant vessels of the United States Navy strike
    forces be constructed with an integrated nuclear power plant, unless
    the Secretary of Defense determines this not to be in the best interest
    of the United States.
        Regardless of the Navy's selection of a particular preferred
    alternative, vital R&D efforts must continue in fiscal year 2009. These
    engineering development and integration efforts include systems
    engineering, analysis, computer program development, interface design,
    Engineering Development Models, technical documentation and system
    testing to ensure a fully functional CG(X) system design. The fiscal
    year 2009 President's budget request will continue maturation of the
    CG(X) design based on the preferred alternative selected.

                           OHIO-CLASS SSGN CONVERSION

        The Ohio-class SSGN Conversion Program continues to be a successful
    transformational program. All four ships, U.S.S. Ohio (SSGN-726),
    U.S.S. Florida (SSGN-728), U.S.S. Michigan (SSGN-727), and U.S.S.
    Georgia (SSGN-729), have been delivered to the Fleet. The SSGNs
    completed their Operational Evaluation and had its Initial Operational
    Capability declared on November 1, 2007. Additionally, U.S.S. Michigan
    will complete testing with the Advanced SEAL Delivery System in March
    2008. U.S.S. Ohio, the first SSGN to complete conversion, is now
    deployed in the Pacific Ocean and has already conducted its first crew
    exchange in Guam.

                      SSBN ENGINEERED REFUELING OVERHAULS

        The Ohio-class SSBN Engineered Refueling Overhaul (ERO) Program
    will continue with the fiscal year 2009 authorization for the start of
    the industrial period for the fifth submarine, U.S.S. Tennessee (SSBN-
    734). In addition, fiscal year 2009 includes advance procurement
    funding for U.S.S. Pennsylvania (SSBN-735) and U.S.S. West Virginia
    (SSBN-736) which will start in fiscal year 2010 and fiscal year 2011,
    respectively. These EROs are the one-time depot maintenance period near
    the mid-point of the SSBN service life, where the nuclear reactor is
    refueled, major equipment is refurbished, class alterations are
    installed, and SUBSAFE unrestricted operations maintenance is
    accomplished.

                               SHIP INACTIVATIONS

        The Navy remains committed to reducing and eliminating any
    environmental risks posed by its inactive ships by reducing the size of
    the inactive ship inventory. This inventory has been reduced from a
    high of 195 ships in 1997 to 62 ships today. The Navy plans to
    decommission 29 ships between fiscal year 2009 and fiscal year 2013, of
    which 23 will be designated for disposal upon decommissioning and 6
    will be retained for future mobilization purposes.
        The Navy utilizes six disposal methods to reduce the inventory of
    non-nuclear inactive ships, including Foreign Military Sales transfers;
    interagency transfers to the Maritime Administration, U.S. Coast Guard,
    or other agencies; donations for memorial/museum use; domestic
    dismantling; experimental use/fleet training sink exercises; and ship
    reefing. While fleet training sink exercises are not a disposal method,
    since the primary purpose is weapons effectiveness testing or fleet
    training, it does contribute to inventory reduction.

                                    SUMMARY

        The Navy is committed to ensure fiscal responsibility in
    shipbuilding acquisition and modernization programs.

      STATEMENT OF VADM BERNARD J. ``BARRY'' McCULLOUGH III, USN,
          DEPUTY CHIEF OF NAVAL OPERATIONS FOR INTEGRATION OF
           CAPABILITIES AND RESOURCES, DEPARTMENT OF THE NAVY

        Admiral McCullough. Chairman Kennedy, Senator Martinez, and
    Senator Collins: I'm honored to appear before you today with
    Ms. Stiller and General Amos to discuss Navy force structure
    requirements and the fiscal year 2009 budget request.
        Before we begin, I'd like to share with you what your Navy
    accomplished on March 19. The fleet is 280 ships strong, with
    140 ships, or 50 percent, underway. There are over 332,000
    Active Duty, 70,000 Reserve, and 178,000 civilians serving in
    the Navy; 6,300 sailors are deployed around the world in
    support of the global war on terror.
        Beginning in the Caribbean and eastern Pacific, Hawaii, our
    newest Virginia-class submarine, along with Cromlin, Simpson,
    Steven W. Groves, and Navy P-3s, are conducting
    counternarcotics operations in support of U.S. and
    participating nations' drug control programs.
        In the European theater, Dallas is in the Mediterranean
    participating in the North Atlantic Treaty Organization
    operations, monitoring maritime activity to detect, deter, and
    respond to terrorism and other transnational threats. Nassau,
    Nashville, and San Jacinto are conducting maritime and theater
    security operations. Fort McHenry and Swift arrive in Monrovia,
    Liberia, as part of the Africa Partnership Station, supporting
    an exercise delivering humanitarian assistance and medical
    goods in conjunction with U.S. Marine Forces Europe and Project
    Hope.
        In the Central Command (CENTCOM) area of operations,
    supporting Operation Iraqi Freedom (OIF) and Operation Enduring
    Freedom (OEF), Harry S. Truman Carrier Strike Group is
    underway, while the Tarawa Expeditionary Strike Group conducts
    port visits in the Arabian Gulf. Riverine forces are conducting
    a variety of missions in country, while in the air, Navy
    airborne intelligence, surveillance, and reconnaissance assets
    are providing critical intelligence to Navy and Special
    Operations Forces. EA-6B Prowlers are supporting efforts on the
    land.
        Carney, Hopper, and Winston Churchill are conducting
    maritime security operations, while off the west coast of
    Africa, Oscar Austin is supporting counter-piracy operations
    with coalition forces.
        In the Pacific theater, Nimitz Carrier Strike Group is
    underway in the western Pacific providing presence, while Kitty
    Hawk completes her first day of at-sea training since
    completing a maintenance period. Essex Expeditionary Strike
    Group is en route to Yokosuka, Japan, for a port visit after
    completing exercises with Republic of Philippines forces, while
    Ohio is in Guam after participating in the binational exercise
    Key Resolve/Foal Eagle.
        In Indonesia, Harpers Ferry and marines from the 31st
    Marine Expeditionary Unit (MEU) participate in field exercises
    and provide medical and dental civic action programs. In the
    eastern Pacific, Peleliu and elements of the 15th MEU are
    underway, preparing for a summer deployment, while Carrier
    Airwing Two completes embarkation on Abraham Lincoln and is in
    the progress of performing carrier qualifications at the start
    of a 7-month deployment in support of OIF and OEF.
        Finally, in the mid-Pacific Lake Erie, which last month
    launched a modified SM-3 missile and successfully intercepted
    and destroyed an inoperable satellite containing a toxic
    hazard, was in Pearl Harbor finishing her last day of material
    inspection with the Board of Inspection and Survey.
        These are everyday examples of the balanced capability set
    the 2009 fiscal year shipbuilding program will provide to meet
    the challenge the Nation faces with a reasonable degree of
    risk. The Navy's 313-ship force structure represents the
    minimum number of ships the Navy requires, the minimum
    capacity, if you will, to provide global reach, persistent
    presence, and warfighting effects expected of Navy forces as
    outlined in the National Defense Strategy, the 2006 QDR, and
    the recently signed Maritime Strategy.
        I thank you for this opportunity to discuss the Navy
    shipbuilding program with you and look forward to answering
    your questions.
        Senator Kennedy. Thank you very much.
        General Amos?

     STATEMENT OF LT. GEN. JAMES F. AMOS, USMC, COMMANDER, MARINE
                    CORPS COMBAT DEVELOPMENT COMMAND

        General Amos. Thank you, Chairman Kennedy, Senator
    Martinez, and Senator Collins: Thank you for the opportunity to
    appear before you today and talk to you about your Marine
    Corps.
        As we meet here this afternoon, we have a little over 2,000
    marines that have landed in the southeastern part of
    Afghanistan--I know you're aware of that--from the 24th MEU.
    It's not completely on the ground yet, but they'll be flowed in
    within the next couple of weeks. Early elements of the lead
    elements of the Second Battalion, Seventh Marines Reinforced,
    from Twentynine Palms, are on the ground as well.
        When it's all said and done, there'll be 3,500 marines and
    sailors down in the Helmand Province, arguably probably the
    most dangerous part of all of Afghanistan. So on behalf of
    those 3,500 marines and sailors and the 24,000-plus that we
    have in the Al Anbar Province in Iraq, I want to thank you for
    your strong support for the last 5 years of heavy combat for
    the marines.
        Senator Kennedy. General, where is more dangerous, do you
    think, to those 3,200 that have arrived down there in southern
    Afghanistan, or to the marines in----
        General Amos. I think the area where the marines are going
    to be in the Helmand Province, down with the Canadians and the
    Brits, Mr. Chairman, is probably the most dangerous area and
    the most unstable area of Afghanistan right now.
        Senator Kennedy. Is that more dangerous, less dangerous
    than Iraq?
        General Amos. For us it's more dangerous. The western part
    of Iraq, the Al Anbar Province, was the early part that saw the
    awakening from the sheiks. So there's always danger there. I
    don't want to misrepresent it. But that area has turned around
    for us, for the marines.
        I also carry a message from the families, the wives, the
    children, the parents of our marines and sailors, the husbands.
    I want to thank you again for your strong support for the last
    5 years.
        I come to you today with really just two comments. The
    first one is, by nature the Marine Corps is a light and
    expeditionary force. Arguably, we have been on land now for the
    last 5 years. But we're going to return to our roots, which is
    our naval heritage. But we need to be able to return as a light
    force, light enough to be able to get someplace quickly, with
    enough punch to complete the mission.
        That mission can be something as benign as working the
    tsunami relief. It can be something not as benign, but
    important, as removing 17,000 civilians from Lebanon 2 years
    ago when that crisis took place. It can also come right to our
    home, our home ports and our countrymen, with the Hurricane
    Katrina operations. So everything from what we call phase zero
    operations all the way to the right of the spectrum, where it's
    major combat operations, your Marine Corps needs to be light
    and expeditionary.
        So as you see our programs come before you--you'll see
    efforts, for instance the Joint Light Tactical Vehicle, you'll
    see an effort for us to try to keep the weight of that vehicle
    down so that we can get it off the ships and get it across
    beaches, carry it underneath helicopters, and that kind of
    thing.
        So everything we do, from the way we recruit young men and
    women and promise them, really, hardship, to the equipment we
    buy and the way we train, are all focused through the filter of
    expeditionary operations.
        My second point, Mr. Chairman, is that we're a maritime
    force. As I said earlier, we've been on land now for the last 5
    years, but our CNO and our Commandant understand that our
    synergy and our greatest strength is when we come together as a
    naval force who go aboard ships. So as we grow the force to
    202,000, thank you for your support for that, but as we do
    that, as we back out of Iraq, somewhere down the road we'll be
    able to get back aboard ships, and that's exactly where the
    Commandant of the Marine Corps wants to take us.
        We will come from the sea more than likely for future naval
    operations, and when we do we'll come from amphibs and we'll
    come through sea bases and we'll come through MPF-F. So I'd ask
    for your support as we take a look at the amphibious
    requirements, we take a look specifically for the 10th LPD-17.
    We need that ship, and I ask for your continued support for the
    14 ships, the program of record, for the MPF-F.
        Mr. Chairman, I ask that you take my statement for the
    record and I'm prepared to answer any questions that you have.
        Senator Kennedy. Without objection.
        [The prepared statement of General Amos follows:]

               Prepared Statement by Lt. Gen. James F. Amos, USMC

                                I. INTRODUCTION

        Chairman Kennedy, Senator Martinez, and distinguished members of
    the Seapower Subcommittee; it is my privilege to report to you on
    Marine Corps shipbuilding and force structure requirements.
        We know these next few years will be challenging--not only in the
    immediate conflict in Iraq, but in subsequent campaigns in the long war
    on terror. This is a multi-faceted, generational struggle that will not
    be won in one battle, in one country, or by one method. Many of the
    underlying causes of the current conflict will persist in the coming
    decades and may be exacerbated by States and transnational actors who
    are unwilling or unable to integrate into the global community. In this
    environment, the Marine Corps must be able to rapidly adapt to broad
    strategic conditions and wide-ranging threats. We remain faithful to
    our enduring mission--to be wherever, whenever our country needs us and
    to prevail over whatever challenges we face. We have done this and will
    continue to do so by recruiting and retaining the best of our Nation's
    sons and daughters, training them in tough, realistic scenarios and
    providing them the best equipment available. We are confident that with
    your continued support, your Corps will remain the Nation's force in
    readiness and continue to fulfill its congressionally-mandated mission
    of being the most ready when the Nation is least ready.

                           II. LOOKING TO THE FUTURE

    Strategic Vision Group
        To improve our capacity to anticipate, the Commandant of the Marine
    Corps established a Strategic Vision Group (SVG) in June 2007. This
    group is designed to assist the Commandant in determining how best to
    posture the Marine Corps for successful service to the Nation in the
    years to come. The Group studies the future state of the world,
    considers the most likely world conditions and threats, and then
    conducts assessments of our military, political, and economic power to
    derive implications for the country, the Department, and the Marine
    Corps from now through 2025. For example, the SVG characterizes the
    most likely future conflicts as a blurred mix of irregular and
    conventional warfare in which terrorists, extremists, and criminals may
    become the most lethal and dominant enemy. Additionally, the SVG
    discerned that enemy states may adopt similar asymmetric tactics and
    techniques that will make access to operating areas ashore and
    subsequent operations, including combat, more challenging. Armed with
    these critical assessments, the SVG will translate them into tangible
    products addressing implications to national security and Marine Corps'
    continued readiness and relevance.
        The SVG has made significant progress in synthesizing inputs from
    United States and allied strategic assessments, and has established
    relationships with a wide community of subject matter experts and
    related sister Service efforts. The Group has briefed our senior
    leadership on assessments of the 2025 security environment, the key
    patterns and trends that can be foreseen impacting the strategic
    context, and future operational environments. Most significantly,
    recent assessments prompted development of the Commandant's overarching
    Marine Corps Vision and Strategy. This document will provide a
    comprehensive, actionable, and compelling narrative that describes how
    the Marine Corps will continue to serve as the Nation's ``force in
    readiness'' for the 21st century and will be published in June 2008.

                             SCIENCE AND TECHNOLOGY

        By always keeping an eye to the future, advances in science and
    technology (S&T) provide an immediate, measurable advantage to our
    warfighters and provide for development and implementation of concepts
    only dreamed of 20 years ago. In light of this importance, the
    Secretary of the Navy, the Chief of Naval Operations (CNO), and the
    Commandant recently completed and published a combined Naval S&T
    Strategic Plan that establishes objectives and provides direction to
    ensure our investments are focused on accomplishment of Navy and Marine
    Corps visions and goals. This plan identifies, as objectives, our five
    most critically needed technology enhancements:

             lightening the load of our dismounted marines and
            sailors through new materials and technologies that are both
            lighter and that provide enhanced protection;
             the application of robotics to ground logistics
            delivery and a cargo unmanned aerial vehicle to rapidly move
            logistics on a distributed battlefield;
             high-fidelity immersion simulation in support of small
            unit ground tactical training;
             improved vehicle survivability for our future family
            of tactical vehicles through application of new construction
            materials such as synthetic armor;
             persistent intelligence, surveillance, and
            reconnaissance technologies aimed specifically at providing
            tactically relevant intelligence in all phases of a broad
            spectrum of operations.

       III. PROVIDE OUR NATION A NAVAL FORCE THAT IS FULLY PREPARED FOR
        EMPLOYMENT AS A MARINE AIR-GROUND TASK FORCE (MAGTF) ACROSS THE
                              SPECTRUM OF CONFLICT

    Long War Concept
        The Marine Corps' concept of force employment to meet the need for
    counterinsurgency and building partnership capacity is outlined in our
    February 2008 concept of employment ``The Long War: Send in the
    Marines.'' This employment concept further explains how the Marine
    Corps will support the National Defense Strategy and multi-national
    efforts in the global war on terrorism/Long War. This publication is
    nested within our major concepts and strategies: the Maritime Strategy,
    the Naval Operations Concept, and Marine Corps Operating Concepts for a
    Changing Security Environment. The focus of this new Long War concept
    is to increase the Marine Corps' global, persistent forward presence,
    tailored to build partnership capacity for security, while adapting
    existing forces and creating new capabilities for an uncertain future.
    Through these efforts, we will better enable multi-national
    partnerships to address existing regional challenges, while mitigating
    the conditions that allow irregular threats to proliferate.
        Although we will continue to develop our full spectrum
    capabilities, this war will place demands on our marines that differ
    significantly from those of the recent past. Paramount among these
    demands will be the requirement for marines to train and mentor the
    security forces of partner nations in a manner that empowers their
    governments to secure their own countries. This long war strategy helps
    posture our Corps to serve as the Nation's expeditionary force-in-
    readiness--able to answer the call when needed.

    Maritime Strategy
        The October 2007 Maritime Strategy reaffirms our naval character
    and reemphasizes our enduring relationship with the Navy, and now, the
    Coast Guard. Current combat operations limit our ability to
    aggressively commit forces to strategy implementation at this time.
    However, as we increase our end strength to 202,000 marines and as
    security conditions continue to improve in Iraq, the Marine Corps will
    transition our forces to forward presence in other priority areas and
    other battles in the Long War. The Maritime Strategy notes that, ``Our
    ability to overcome challenges to access and to project and sustain
    power ashore is the basis of our combat credibility.'' Our means of
    projecting power is the congressionally-mandated mission of amphibious
    forcible entry. The same flexible, expeditionary capabilities that
    enable forcible entry also have great utility in enabling the wide
    range of missions needed to counter the growth of extremist movements
    and terrorism. Such expeditionary capability and readiness require a
    high level of proficiency and long-term resourcing and is not a
    capability we can create on short notice.
        Today, information moves almost instantaneously around the world
    via cyberspace, and while people may quickly travel great distances by
    air, the preponderance of materiel still moves the way it has for
    millennia--by sea. Whenever the United States has responded to conflict
    around the globe, the vast majority of United States Joint Forces,
    their equipment, and supplies have been transported by sea. In the
    first half of the 20th century, demonstrating considerable foresight
    and innovation, U.S. Navy and Marine Corps leaders developed the
    capabilities necessary to establish sea control and project power
    ashore where and when desired. In the latter half of the same century
    the importance of these capabilities waned, as the United States
    enjoyed the luxury of extensive basing rights overseas, to include
    secure ports and airfields.
        In recent years, this network of overseas bases has been
    dramatically reduced, even as we are confronted by a variety of
    strategic challenges and are locked in a global struggle for influence.
    The ability to overcome political, geographic, and military challenges
    to access has re-emerged as a critical necessity for protecting vital
    interests overseas. Fortunately, the United States possesses an
    asymmetric advantage in that endeavor: seapower. Our ability to cross
    wide expanses of ocean and to remain persistently offshore at a time
    and place of our choosing is a significant national capability. This
    means that the Navy-Marine Team can use the sea as both maneuver space
    and as a secure operating area to overcome impediments to access.

    Seabasing
        The approach for overcoming these impediments is called Seabasing.
    The Joint Seabasing concept--particularly when using aircraft carriers
    and amphibious ships with embarked marines--mitigates reliance on ports
    and airfields in the area of operations. It is the ideal method for
    projecting influence and power ashore in a selectively discrete or
    overt manner--from conducting security cooperation activities, to
    providing humanitarian assistance, to deterring and, when necessary,
    supporting major combat operations.
        The seabasing capability currently employed by the Navy-Marine
    Corps team, however, is limited in its ability to support large joint
    operations. The sealift transporting the preponderance of the joint
    force's materiel is still dependent upon secure ports and airfields.
    Recognizing the importance of seabasing to 21st century needs, the Navy
    and Marine Corps evolved a robust body of conceptual work and, with
    other joint partners, produced a Seabasing Joint Integrating Concept.
    This concept defines Joint Seabasing as ``the rapid deployment,
    assembly, command, projection, reconstitution, and re-employment of
    joint combat power from the sea, while providing continuous support,
    sustainment, and force protection to select expeditionary joint forces
    without reliance on land bases within the Joint Operations Area. These
    capabilities expand operational maneuver options, and facilitate
    assured access and entry from the sea.''
        Just as the amphibious innovations championed by the Navy-Marine
    Corps during the 1920s and 1930s benefited the entire joint and allied
    force in World War II, the Navy-Marine Corps seabasing initiatives
    currently underway are expanding into more comprehensive joint and
    interagency endeavors. The ability to conduct at-sea transfer of
    resources, for both ship-to-ship and ship-to-shore purposes, has
    emerged as a key enabler for deploying, employing, and sustaining joint
    forces from the sea. Building upon the cornerstones provided by
    amphibious ships and aircraft carriers, initiatives include developing
    high-speed intra-theater connectors, surface connectors, and Maritime
    Prepositioning Force (Future) (MPF-F). These initiatives--as well as
    others--will be employed in combination to achieve an increasingly
    robust capability to reduce the joint force's reliance on ports and
    airfields in the objective area.
        Together, the Navy and Marine Corps provide the Nation with its
    capability to rapidly project and sustain combat power ashore in the
    face of armed opposition. When access is denied or in jeopardy,
    forward-postured and rapidly deployable Marine forces are trained and
    ready to create and exploit seams in an enemy's defenses by leveraging
    available joint and naval capabilities, projecting sustainable combat
    power ashore, and securing entry for follow-on forces. The Marine
    Expeditionary Force (MEF) is the Nation's premier forcible entry force.
    Two Marine Expeditionary Brigades (MEB) provide the assault echelon
    that fights from amphibious ships. These forces launch from over the
    horizon to strike inland objectives and fracture the enemy's defenses.
    They are reinforced by a brigade of marines employed through MPF-F.
    Collectively, these capabilities provide an ability to respond to
    crisis across the spectrum of operations without reliance on
    infrastructure or basing ashore.
        In recent years our amphibious and prepositioned capabilities have
    been in high demand across the spectrum of operations. These
    capabilities have enabled over 85 commitments, such as the recent
    Lebanon noncombatant evacuation and tsunami and Hurricane Katrina
    relief operations, since the end of the Cold War--doubling the rate at
    which they were employed during that superpower stand-off. Considering
    this demonstrated utility, the modest investment of 34 amphibious ships
    and MPF-F is not too much of an investment to secure the United States'
    ability to conduct forcible entry operations; ensure strategic access
    and retain global freedom of action; strengthen existing and emerging
    alliances and partnerships; and establish favorable security
    conditions.

                         IV. SHIPBUILDING REQUIREMENTS

        Based on strategic guidance, in the last several years the Navy and
    Marine Corps have accepted risk in our Nation's forcible entry
    capacity, and reduced amphibious lift from 3.0 MEB assault echelon (AE)
    to 2.0 MEB AE. In the budgetary arena, the value of amphibious ships is
    too often assessed exclusively in terms of forcible entry--discounting
    their demonstrated usefulness across the range of operations and the
    clear imperative for marines embarked aboard amphibious ships to meet
    Phase 0 demands. The ability to transition between those two strategic
    goalposts, and to respond to every mission-tasking in between, will
    rely on a strong Navy-Marine Corps Team and the amphibious ships that
    facilitate our bond. The Navy and Marine Corps have worked diligently
    to determine the minimum number of amphibious ships necessary to
    satisfy the Nation's needs.
        The Marine Corps' contribution to the Nation's forcible entry
    requirement is a single, simultaneously-employed two MEB assault
    capability--as part of a seabased MEF. Although not a part of the MEF
    AE, a third reinforcing MEB is required and will be provided through
    MPF-F shipping. Each MEB AE requires 17 amphibious warfare ships--
    resulting in an overall ship requirement for 34 amphibious warfare
    ships. However, given current fiscal constraints, the Navy and Marine
    Corps have agreed to assume a degree of operational risk by limiting
    the AE of each MEB by using only 15 ships per MEB--in other words, a
    Battle Force that provides 30 ``operationally available'' amphibious
    warfare ships.

    Amphibious Ships
        In that 30-ship Battle Force, 10 aviation-capable big deck ships
    (LHA/LHD/LHA(R)), 10 LPD-17-class ships, and 10 LSD class ships are
    required to accommodate the MAGTF capabilities. In order to meet a 30-
    ship availability rate--based on a CNO-approved maintenance factor of
    10 percent--a minimum of 11 ships of each of the current types of
    amphibious ships are required--for a total of 33 ships. The CNO has
    concurred with this requirement for 33 amphibious warfare ships, which
    provide the ``backbone'' of our maritime capability--giving us the
    ability to meet the demands of harsh environments across the spectrum
    of conflict.
        The LPD-17 San Antonio-class of amphibious warfare ships represents
    the Department of the Navy's commitment to a modern expeditionary power
    projection fleet enabling our naval force to operate across the
    spectrum of warfare. The LPD-17 class replaces four classes of older
    ships--LKA, LST, LSD-36, LPD-4--and will have a 40-year expected
    service life. It is imperative that 11 of these ships be built to meet
    the minimum of 10 necessary for the 2.0 MEB AE amphibious lift
    requirement. Procurement of the 10th and 11th LPDs remains a priority.

    Maritime Prepositioning Force (Future)
        Capable of supporting the rapid deployment of three MEBs, the
    legacy Maritime Prepositioning Force (MPF) is a proven capability used
    as a force deployment option in selected contingencies to close forces
    on accelerated timelines for major combat operations and, in
    combination with amphibious forces, to rapidly and simultaneously react
    to crises in more than one theater. The next and necessary evolution of
    this program is fielding of the MPF-F Squadron. MPF-F is a key enabler
    of Seabasing and will build on the success of the legacy MPF program.
    It will provide support to a wide range of military operations with
    improved capabilities such as at-sea arrival and assembly, selective
    offload of specific mission sets, and long-term, sea-based sustainment.
    From the sea base, the squadron will be capable of prepositioning a
    single MEB's critical equipment and sustainment for delivery offshore--
    essentially creating a port and airfield at sea. While the MPF-F is not
    suitable for independent forcible entry operations, it is critical for
    the rapid build up and sustainment of additional combat forces once
    entry has been achieved by our AE. The MPF-F, along with two legacy MPF
    squadrons, will give our Nation the capacity to quickly generate three
    MEBs in support of multiple combatant commanders. The MPF-F squadron
    composition decision was made in May 2005 and is designed to consist of
    three aviation-capable big-deck ships, three large medium-speed roll-
    on/roll-off ships, three T-AKE supply ships, three Mobile Landing
    Platforms, and two dense-packed container ships. Many of these will be
    crewed by civilian mariners and, as stated earlier, are not designed to
    conduct forcible entry operations.

    Ship Modernization
        Amphibious and maritime prepositioning ship modernization is vital
    to maintaining our Nation's maritime forward presence and expeditionary
    capabilities. Two decades of equipment growth and recent armor
    initiatives have impacted the capability and capacity of our present
    amphibious and maritime prepositioning ship fleets that were designed
    to lift an early 1980s naval force. We are monitoring the Navy's
    progress in upgrading and extending the service lives of our big-deck
    amphibious assault support ships to ensure those vessels are uniformly
    outfitted with up-to-date sea-based communications and network
    capabilities, and will be able to compensate for increased weight and
    density of Marine Corps assets as a result of armoring initiatives. We
    must ensure that the dock landing ship fleet is recapitalized to
    accommodate 21st century Marine Corps forces. Moreover, we are actively
    working with the Navy to incorporate newer, more flexible ship
    platforms from the existing Military Sealift Command fleet into our
    aging Maritime Prepositioning Ships program. As we reset these ships,
    changes are necessary to ensure future afloat prepositioning platforms
    can accommodate our updated tables of equipment and sustainment support
    requirements.

                        V. RIGHT-SIZING OUR MARINE CORPS

        To meet the demands of the Long War, and prepare for other
    contingencies for which the MAGTF is uniquely capable, our Corps must
    be sufficiently manned, well trained, and properly equipped. To fulfill
    our obligations to the Nation, and with the approval of the President
    and Congress, we are growing our end strength to 202,000 Active
    component marines. Our decision to grow to 202,000 marines was based on
    national strategic guidance combined with increasing operational
    forward presence requirements, and was guided by the Department of
    Defense's 1:2 unit deployment-to-dwell ratio policy. The additional end
    strength will result in three balanced MEFs--balanced in both capacity
    and capability--and will ensure the Marine Corps can meet increasing
    combatant commander demands for expeditionary forces.
        The development of Marine Corps force structure has been the result
    of a thorough and ongoing process that supports the combatant
    commanders and accomplishes our title 10 responsibilities. The process
    addresses each pillar of combat development--Doctrine, Organization,
    Training, Materiel, Leadership and Education, Personnel, and
    Facilities--and identifies our required capabilities and the issues
    associated with fielding them. We have front-loaded structure for
    recruiters and trainers to support this growth and have phased the
    introduction of units balanced across the MAGTF. The increase in
    capacity will be gradual, as we stand up new units and add end strength
    through fiscal year 2011, while we simultaneously grow mid-grade
    enlisted and officer leadership--a vital part of our growth that cannot
    be developed overnight. In addition to personnel, this growth includes
    expansions of our infrastructure to provide suitable housing and
    support facilities, and the right mix of equipment for the current and
    future fight.
        Our engagements thus far in Iraq and Afghanistan have been a Total
    Force effort--our Reserve Forces continue to perform impressively. As
    our Active Force increases in size, our reliance on our Reserve Forces
    should decrease--helping us achieve the 1:5 deployment-to-dwell ratio.
    We believe our current authorized end strength of 39,600 Selected
    Marine Corps Reserves is the right level. As with every organization
    within the Marine Corps, we continue to review the make-up and
    structure of our Reserve to ensure the right capabilities reside within
    Marine Forces Reserve units and our Individual Mobilization Augmentee
    program.

    Building Educational and Training Structure
        As part of our holistic growth plan, we are increasing training
    capacity and reinvigorating our pre-deployment training program to
    provide support to all elements of our MAGTFs. In accordance with the
    Secretary of Defense's Security Cooperation guidance, we are developing
    training and education programs to build the capacity of allied and
    partner nations. We are also developing the capability to conduct
    large-scale MAGTF exercises within a joint, coalition, and interagency
    context to maintain proficiency in core warfighting functions such as
    combined arms maneuver, amphibious operations, and maritime
    prepositioning operations. Finally, our budget request supports our
    training and education programs and training ranges to accommodate the
    202,000 Grow the Force effort.
        World-Class Marine Corps University (MCU)
        Our success in the Long War hinges on a multi-dimensional force
    well trained for the current fight, but educated for the next.
    Historically, our Corps has produced respected leaders who have
    demonstrated intellectual agility in warfighting; however our current
    deployment tempo places our Professional Military Education (PME)
    programs at risk. We must maintain the steady flow of thinkers,
    planners, and aggressive commanders who can execute effectively across
    the entire spectrum of operations. Last year we conducted a
    comprehensive `health of PME' assessment which identified six areas
    necessary for the creation of a world-class MCU: students, curriculum,
    educational programs, staff, policy, and infrastructure. We have world-
    class students and faculty as evidenced by Marines' performance on
    today's battlefields. We have made substantial improvements in our
    curricula by integrating irregular warfare instruction while
    maintaining a balance with conventional and amphibious warfare. Seeking
    to ensure readiness for the next challenge, this year we added Iran and
    China faculty chairs. We must however, correct significant
    infrastructure and information technology deficiencies. It is crucial
    that resources to support our MCU master plan be committed and approved
    to support this critical effort. With proper investment and your
    support, the MCU will become a world-class educational institution to
    match its world-class students.
        Center for Irregular Warfare
        In 2007, we established the Center for Irregular Warfare (CIW) as
    our primary agency for identifying, coordinating, and implementing
    Marine Corps irregular warfare capability initiatives. The CIW reaches
    out through the Center for Advanced Operational Culture Learning
    (CAOCL) and Security Cooperation Education and Training Center (SCETC)
    to other military and civilian agencies. Last year, the CAOCL expanded
    beyond pre-deployment unit training by offering operational culture,
    regional studies, and limited language courses for officer PME
    programs. Thus far, approximately 2,100 new lieutenants have been
    assigned regions for career long-term study through the regional
    learning concept, which are being expanded this year to include
    sergeants, staff sergeants, and captains. Both officer and enlisted
    marines will receive operational culture education throughout their
    careers.
        Since early 2006, the SCETC has formalized our military advisor
    training curricula, and in fiscal year 2007 trained over 30 transition
    teams. In fiscal year 2008, the SCETC is scheduled to train over 100
    teams (over 2,000 marine advisors) and we will stand up a Training
    Advisory Group to manage global sourcing of future transition and
    security cooperation teams.

                                 VI. CONCLUSION

        Our Nation rightfully has high expectations of her Corps--as she
    should. Your marines are answering the call around the globe,
    performing with distinction in the face of great hardships. As they
    continue to serve in harm's way, our moral imperative is to fully
    support them--we owe them the full resources required to complete the
    tasks we have given them. Now more than ever, they need the sustained
    support of the American people and Congress to simultaneously maintain
    our readiness, reset the force during an extended war, and to modernize
    to face the challenges of the future. Again, we thank you for the
    opportunity to report to you on their behalf.

        Senator Kennedy. First of all, Admiral McCullough, the Navy
    is projecting a shortfall, as I mentioned, of the F-18 aircraft
    during the next decade. According to Navy testimony, that
    shortfall could be as large as 125 aircraft short of the number
    required to support the 10 aircraft carrier wings and 3 Marine
    Corps. In my opening statement I asserted that anyone looking
    to solve the shipbuilding problems could not look to naval
    aviation to be a bill-payer. Do you agree with that assessment?
        Admiral McCullough. Yes, sir. The way I look at this is
    particularly from the Navy. The 125 shortfall is for the
    Department. The Navy shortfall commencing in 2017 is
    approximately 69 strike fighter aircraft. There are several
    ways we've worked at that. We're looking  at  life  extensions
    from  a  fatigue  life  standpoint  on  the  F/A-18 A through
    Ds to 10,000 hours, on the F/A-18 E and Fs to 9,000 hours, to
    try to mitigate the effects of that strike fighter shortfall.
        Senator Kennedy. We'd appreciate your keeping us abreast of
    your assessment, both of the life expectancy of the planes,
    what's necessary to get it, and also how that fills the gap.
        Secretary Stiller, one of the big decisions in shipbuilding
    is to fund the third DDG Land Attack Destroyer in fiscal year
    2009 or whether to delay it a year and perhaps even truncate it
    at a total of two ships, as some have suggested. Such
    discussions usually included buying some form of DDG-51 Aegis
    destroyers, either in the 1-year delay or continuing until the
    Navy's ready to buy the CG(X), the next generation cruiser.
        The Navy had intended to sign the contracts for two lead
    ships in 2007, but recently completed negotiations and signed
    the contracts almost a year later than planned. In part, the
    Navy delayed the award while they switched the shipyard
    responsible for building the first ship. The Navy plan for the
    fiscal year 2009 ship is to award a fixed-price contract for
    that ship.
        Since it's taken so long to sign the lead ships contracts,
    which are cost plus contracts, and since very little actual
    ship construction information will be available at the time the
    contractors have to submit their bids for fiscal year 2009
    ship, why would the Navy believe that you'll be able to sign
    these contracts in a timely fashion in 2009?
        Ms. Stiller. Yes, sir. One is that we took several steps as
    we took a pause on DDG-1000. We didn't stop the activity on the
    detailed design. So the detailed design has been continuing
    right along, as well as procurement of long lead items as
    authorized by the DAE.
        While we didn't sign the actual construction contract until
    about a month ago, we were proceeding incrementally, in fact,
    there are a couple things that make us feel very confident that
    we could sign fixed-price deals in 2009. That's because part of
    what we've authorized the shipbuilders to do is to build a
    complex machinery block to prove out the translation of the
    design from the product model into the production floor, so to
    speak.
        That's ongoing. That will wrap up at Bath Iron Works this
    summer and at Northrop Grumman a little later in the year. But
    that will inform their bids.
        Senator Kennedy. So you don't feel that you lost the time?
        Ms. Stiller. No, sir. From the original when we thought we
    would start on the lead ship, there was about a 5-month slip.
    But we still feel that we were doing the prudent things to
    continue the program and that the 2009----
        Senator Kennedy. That's manageable, you think?
        Ms. Stiller. Yes, sir.
        Senator Kennedy. Why would the Navy believe that the
    contractors would be willing to take a larger portion of the
    risk to build the ship for roughly $2.5 billion in a fixed-
    price contract, when the first ship cost more than $3 billion
    and the shipyards will have very few actuals upon which to base
    their bids?
        Ms. Stiller. There are a couple of reasons. First of all,
    they will be significantly far along in design when they start
    production. They'll be about 85 percent. For example, LCS was
    less than 25 percent along. So they should be getting the
    return data right away.
        Also, what I talked about, what we've carved out for both
    of them to do is a complex machinery block, and that work will
    be done before the bids are due, so they will have that return
    data, and we feel comfortable that that will prove to them and
    the Navy that they understand the design and what these ships
    truly cost.
        Also, the other element is the material that's under
    procurement. A good portion, I'd say 98 percent, of the long
    lead material and some of the other commodities are already
    under fixed-price contracts for the lead ship. They understand
    the material portion of the ship.
        Senator Kennedy. So you're on track on those and feel
    confident about it?
        Ms. Stiller. Yes, sir.
        Senator Kennedy. General Amos, I mentioned the MPF in my
    opening statement, where defining the requirements has been a
    problem. I know that it's been prudent to take sufficient time
    upfront to define the requirements for any major program. But
    the MPF program appears to be taking longer than anyone had
    originally estimated.
        While the subcommittee has heard for several years about
    the contribution such a force would make to the Marine Corps
    and Navy, we have seen the procurement of certain ships
    designed to support the MPF program, such as the Mobile Landing
    Platform (MLP), being delayed each year as the resolution of
    questions about requirements and capabilities has been
    deferred.
        What clarification can you give us about when requirements
    will be defined for these new ships, and when will we see the
    plans for building these new ships stabilize?
        General Amos. Mr. Chairman, we just completed about 3 weeks
    ago the Commandant's Title 10 war game on sea basing, and it
    was joint and combined. Eleven nations participated, over 300
    folks from the Office of the Secretary of Defense (OSD) and the
    interagency. The whole idea was sea basing. Buried in there, in
    the middle of all of that, was MPF-F. It's an important part of
    the whole sea basing concept.
        But MPF-F is not sea basing, but it is certainly the key
    enabler, and it is the heart and soul of our Nation's ability
    to do sea basing in the future, vice the kind of sea basing we
    do right now, where you pull up with a single ship and you
    can't offload necessarily in stream, it's difficult to offload
    at high sea states. So MPF-F will provide us that capability.
        The good news is that in the Future Years Defense Program
    (FYDP) there are three of these MLPs. We're actually going to
    start cutting steel on the MLP within the next couple of years
    and we'll see that. I predict when that ship pulls alongside a
    large, medium-speed, roll-on/roll-off (RORO) ship and lowers a
    ramp onto the MLP and the first 70-ton tank comes off of that,
    when you have landing craft, air cushions up there to take it
    ashore, it's going to revolutionize sea basing and our whole
    perspective on that in the future.
        So, Mr. Chairman, I think we have the requirements
    identified. I think what we've done is we've just done a poor
    job of being able to pass that message across to both Congress
    and OSD and the American people.
        Senator Kennedy. Conceptually it certainly makes a good
    deal of sense. But there have been the questions about the
    implementation.
        Let me ask you about the urgent needs process, General.
    According to recent reports, the Marine general in command of
    the forces in western Iraq sent the urgent request on February
    17, 2005, for 1,169 mine resistant ambush protected (MRAP)
    vehicles, and the urgent request was apparently lost in the
    bureaucracy of Marine Corps combat development and never made
    it up to the senior levels of the Marine Corps. As we all know,
    it took the Secretary of Defense personally getting involved in
    2007 to fix a broken bureaucracy and a get sufficient number of
    MRAP vehicles to forces in Iraq.
        Last June, Secretary Gates stated: ``The way I put it to
    everyone is that you have to look outside the normal
    bureaucratic way of doing things, and so does industry, because
    lives are at stake. For every month we delay, scores of young
    Americans are going to die.''
        In this morning's Senate Armed Services Committee hearing,
    General Petraeus thanked the committee for their support in
    delivering the MRAP vehicles to Iraq, calling them lifesavers.
        If proper MRAP procurement had begun in 2005 in response to
    the known threats, hundreds of deaths and injuries could have
    been prevented. The Marine Corps questioned the press reports
    about the issue, but a Naval Audit Service report last
    September said the Marine Corps had not established adequate
    oversight of the urgent needs requirement process. This process
    at the time of our audit was ineffective.
        The Marine Corps has asked the Pentagon's Inspector General
    (IG) to examine the allegations. The real question is whether
    the Marine Corps today is adaptive enough to meet urgent needs.
    There are many success stories with rapidly fielding urgent
    needs in the last few years, including small unmanned ground
    and aerial vehicles, hand-held electronic translators, and
    Quick Clot, a granular mineral material that speeds the natural
    clotting process and limits blood loss.
        But many of these successes have involved the Army's urgent
    needs system. The Army's rapid equipping force has been in
    place for years. It seems to be a more responsive system for
    addressing urgent needs, including the practice of deploying
    many of its members to forward teams throughout Iraq and
    Afghanistan to identify needs and then assess how well rapidly
    fielded equipment works.
        So I'm concerned, General Amos, that the changes the Marine
    Corps seems to be making to the system are only bandaid
    solutions, more importantly, that not enough of the changes are
    long term. If too much of the system is being fixed in informal
    meetings or by personal intervention of senior leaders, that
    doesn't fix the bureaucracy for the future.
        So what actions are you specifically taking to make changes
    to the urgent needs process and to codify these changes so that
    the entire culture with respect to urgent needs is fixed in the
    Marine Corps?
        General Amos. Mr. Chairman, I truly appreciate your concern
    in this area. There are probably a number of urgent needs in
    2003, 2004, and 2005 that have my personal signature on them
    from Iraq. So I'm very sensitive to this and I do appreciate
    exactly what you said.
        As I look back on 2005--and I was there, had come up from
    Camp Lejeune and was part of the meeting when the decision was
    made to buy the M-1114s. I know you've been briefed on that, as
    your staff has. But honestly, at the time we thought--the
    Commandant did and the senior leadership did--we were doing
    exactly the best thing for the Marines as a result of our IG
    that had just come back and said the Marines want the up-
    armored Humvee.
        I look back now, like you, I regret that we didn't have the
    foresight to buy the MRAPs in 2005. They have saved lives and
    they are a critical enabler. But what we've done since the
    Naval Audit report has come in--and they talked about three
    major things. They said you need to have some type of
    overarching order that defines roles and responsibilities; you
    need to have a tracking system that allows visibility up and
    down the chain; and you need to establish controls and provide
    oversight, in other words metrics. We've done that.
        In 2006 we've had a Lean 6 Sigma effort that's come in,
    that came in before I went there and took command. The results
    of that are right now an electronic system in cyberworld where
    when a requirement comes in from the fleet--and it has to come
    in from our warfighters; it can't be just somebody that's in
    WestPac that's not affiliated with warfighting necessarily. But
    when that urgent need comes in, we see it, I see it
    automatically right here as well as my other generals, my
    colonels, and the folks that process this thing.
        We see it. It comes in, it flows. We've reduced the amount
    of time. We have visibility. We've done everything, I think,
    that we ought to be doing as responsible stewards of the lives
    and requirements of our young men and women. So I think we're
    there.
        I'd like to give you two examples of what just took place
    within the last about 2 weeks to talk about the value of this
    cyber system, this virtual network where everybody gets to see
    it. The 24th MEU that's on the ground in Afghanistan right now,
    the commander about 2 weeks before he deployed, so just about a
    month ago, said: I need tier two unmanned aerial vehicles. We
    don't have any with the MEU. That's not an integral part of a
    MEU. That came in signed by the three-star. I saw it. It came
    into the process. I looked at it and I said: We need to get
    moving on this right away because this MEU is going to deploy
    immediately.
        While this thing was grinding its way--and I say
    ``grinding'' not in the slow term, but I mean working its
    process--it went right to the head of Marine Aviation, went
    over to the Naval Air Systems Command, and we already have it
    under contract, and the Scan Eagles will be in theater here
    within the next probably 2 weeks.
        The second thing they asked for is a counter-mortar radar.
    We don't have that. That's not part of a battalion's normal
    fix. That thing popped up. I saw it about 2 weeks ago and said:
    Let's buy it; it's in the system; it's commercial off-the-
    shelf; other forces have it.
        So, Mr. Chairman, I appreciate what you're saying. I think
    we understand and we have the system in place.
        Senator Kennedy. I thank you. My time is up, and I think
    it's impressive, what you've said and what you've done. We want
    to make sure that it's going to be a system that's going to
    remain in place.
        General Amos. Yes, sir.
        Senator Kennedy. Perhaps I'll be a little bit more specific
    and ask if you'd give me a note on this about how you're
    working on this.
        [The information referred to follows:]

        Senator Kennedy. Just finally, Admiral McCullough, I'm
    interested always in mine warfare. General Amos talks about how
    we're coming in from the sea and returning to the sea, and this
    mine warfare has been an area which we've been interested in
    for some period of time. I'm going to submit some questions
    just on that.
        The last question, if I could ask, Admiral, I understand,
    since the time that the U.S.S. Cole was in Aden and they had
    that tragedy there, that naval ships don't go back into Aden. I
    was in preparation for the Petraeus hearing and someone
    mentioned to me that this has some significance, because
    they're trying to make the point that al Qaeda is making is
    that once the United States leaves it doesn't come back, and
    they were using the fact that there had been the attack on the
    Cole and we haven't had a Navy ship that's come back into Aden.
    They used other examples, the Khobar Towers in Saudi Arabia;
    once Americans have left places they don't come back, and if
    they leave in Iraq they're not going back.
        It was just an interesting point. I see you down here at
    the other end of the table. I don't know whether you want to
    make a quick comment on this or whether there's a reason that
    they don't come. I know it was rare that they went there, but
    if you want to submit something later; it's a sort of an off-
    the-wall question.
        Admiral McCullough. Yes, sir. I'll have to check on whether
    we've put anybody back into Aden. I'm not sure that that's
    totally correct, but I'll get that answer.
        Senator Kennedy. Yes, that would be fine.
        Admiral McCullough. We've used Aden as a refuel point for
    ships that were independently deploying to Fifth Fleet to
    execute maritime security operations, both going in and coming
    out, and that's what we used Aden for. We didn't use it a lot,
    but that's what we used it for.
        Senator Kennedy. Okay. If you could just let me know I'd
    appreciate it. Thanks very much.
        [The information referred to follows:]

        No U.S. ships have pulled into Aden, Yemen, in any capacity, since
    U.S.S. Cole's terrorist attack in October 2000. This includes port
    visits or servicing stops.

        Senator Kennedy. Senator Martinez.
        Senator Martinez. Thank you, Mr. Chairman.
        Admiral McCullough, one of the things we've been discussing
    is the need for there to be a floor of a 313-ship Navy. From
    your perspective, what is the optimal number of ships that we
    should have in our Navy, obviously 313 being the goal?
        Admiral McCullough. Senator, we look at the 313 number as a
    capability-based force structure based on a 2020 threat. As we
    speak to our component commanders globally, specifically in
    Pacific Command with Pacific Fleet and in CENTCOM with
    Commander, United States Navy Central Command, there's always a
    higher demand for presence than we have in theater.
    Specifically, Admiral Willard would like to get at the
    southwestern Pacific.
        I don't have a specific number to give you, but I'll tell
    you that in a lot of ways capacity becomes a capability of its
    own. So I'll get back to you on a higher number, but CNO has
    specifically said we believe we can do the Nation's bidding in
    accordance with the Maritime Strategy with moderate risk with a
    313 capability-based force structure.
        Senator Martinez. I know there are some challenges in
    funding this and in the budget and so forth for this, and I was
    just wondering. The CNO has emphasized that he will control the
    costs by controlling requirements.
        Admiral McCullough. Yes, sir.
        Senator Martinez. But in spite of this, the Congressional
    Budget Office believes that the Navy has underestimated
    shipbuilding costs by $3 to $4 billion per year, suggesting
    further cuts are necessary to meet the overarching requirement
    for the 313-ship Navy. So, Admiral, my question is, how has the
    CNO's direction to control requirements translated into policy
    and practice? It would be good to know exactly examples where
    we've done that in the reduction of shipbuilding costs.
        [The information referred to follows:]

        A full force structure assessment occurs as a part of the
    Department of Defense's (DOD) Quadrennial Defense Review (QDR). In
    2005, the Navy conducted a comprehensive, capability-based Force
    Structure Assessment to support POM-08. The Navy's ship force structure
    requirement of 313 ships is based on detailed campaign and mission
    analysis of 4 warfighting scenarios (3 major contingency operations
    (MCO), plus global war on terror), using ship types projected to be in
    the fleet in 2020 through 2024 and the current DOD planning guidance to
    wage two nearly-simultaneous conventional campaigns. Subsequent
    campaign analysis for MCO and in-depth global war on terror analysis
    validated capability and capacity requirements of the 313-ship force
    structure. The analytic baseline supporting the 313-ship plan, although
    significantly updated with new warfare analysis since 2005, continues
    to support the quantities of ships by class in the original baseline.
    The next QDR will provide an opportunity to readdress the basis of the
    current planning guidance, which if changed, will affect the inputs
    into Navy's next comprehensive, capability-based Force Structure
    Assessment and produce an updated requirement.
        The current President's budget 2009 represents the best overall
    balance between procurements to meet operational requirements and
    affordability. The Navy has examined the feasibility of increased
    shipbuilding investment in fiscal year 2009. Given current industrial
    base capacity, the Navy's plan to achieve the 313-ship mix required by
    the fiscal year 2020 timeframe, and other competing Navy requirements
    that must be met, $12.4 billion in the fiscal year 2009 budget request
    is sufficient and represents the necessary resources to achieve the
    required warfighting capability on time. In addition, the Navy's plan
    increases shipbuilding investments from $12.4 billion in fiscal year
    2009 to over $17.9 billion in fiscal year 2013.
        It is a significant challenge to get the number of ships we need
    with the right capabilities within the Navy's overall funding level;
    however, the Navy is committed to achieving a force structure of at
    least 313 ships, with the necessary warfighting capability that the
    Navy will need by fiscal year 2020.

        Admiral McCullough. Sir, when we submitted the 2009
    shipbuilding plan to Congress we looked at what we had said: in
    fiscal year 2005 dollars to execute the plan, that we needed
    about $13.4 billion a year. Our review prior to submitting the
    2009 plan, because of the escalation in material and some labor
    requirements in the various yards, said that we should probably
    have funded that to about $14.6 billion a year, which in 2007
    dollars is about $15.7 billion a year. So right now we believe
    the plan's based on $15.7 billion a year and escalated out
    through 2020.
        Additionally, the CNO asked us to look at a different way
    to couch a shipbuilding plan, because we think we understand
    relatively well the costs in the near years and through the
    FYDP and probably to some degree out through what we call the
    near term, to 2020. Beyond 2020, the ships in the shipbuilding
    plan are replacements for ships that were built in the late
    1970s and 1980s and are just our best estimate on what they'd
    be in a per-unit replacement.
        Requirements generation, we've worked with the Marine Corps
    and the secretariat to develop an acquisition governance
    process which gets senior Navy leadership much more involved in
    major acquisition decisions at an earlier point. We call it the
    six gate review process. The CNO or the Commandant are
    responsible for the first three gates, which involve
    development of the initial capabilities document, the guidance
    to work through the analysis of alternatives, and approval of
    which alternative is selected, and then development of the
    capabilities development document that goes into the joint
    capabilities integration and development system process.
        At that point, the Assistant Secretary of the Navy for
    Research, Development, and Acquisition, starts to chair the
    gate reviews. We have developed a process called a system
    design specification (SDS) that goes into the overarching
    requirements, technical requirements that exist currently in
    the Navy, to better specify what requirements we put in the
    Request for Proposals (RFPs) with the contractor.
        Once we agree on the SDSs and the capabilities development
    document is approved by the Joint Requirements Oversight
    Council (JROC) process, we come together and develop the RFP.
    This goes through another gate review that's approved by the
    Assistant Secretary of the Navy for Research, Development, and
    Acquisition.
        The way I liken this to is when we used to develop key
    performance parameters (KPPs) in the capabilities development
    document. They're high level requirements, like a ship will go
    so many knots for X number of miles, or it'll have so many
    weapons tubes in it, and it'll have threshold and objectives in
    those requirements. We then gave that to the acquisition
    community and expected them to develop detailed requirements to
    pass to industry. We didn't always do that very well.
        So the SDS will provide adequate detail to industry, so
    that if I had asked for a CTS Cadillac that the specifications
    I give to industry tell them I want a CTS Cadillac and can't be
    interpreted to mean I want a Ford F-150 pickup truck.
        So I think through that process we better control our
    requirements, because throughout the process we review the
    health of the program, the budget, and the cost estimates. This
    process has been recently implemented and I think that's
    probably what the CNO was referring to.
        Senator Martinez. Ms. Stiller, if you could focus on the
    requirements discipline that is necessary, but not enough to
    reduce costs, and what is the acquisition organization doing to
    improve cost estimates and to elevate cost control in the
    shipbuilding contracts?
        Ms. Stiller. Yes, sir. Just to echo what Admiral McCullough
    said, I have one tangible example that came out right after we
    went through the LCS review. We were in the process of getting
    ready to issue the RFP for the JHSV, and we took a pause and
    worked with the requirements community and what I call the
    technical community that's writing the building codes to say,
    do we really want these features to be designed to Coast Guard
    specs, naval vessel rules, or military specs.
        We came up with a detailed matrix, which is part of what a
    SDS will do, that will tell you what specifications you want to
    build that ship. So we delayed the RFP release until we knew we
    had it right and we had agreement across the board. That's one
    example.
        But what we're doing on the acquisition side to improve the
    independent cost estimates is, we're using realistic indices.
    We've seen escalation on certain materials, like nickel for
    example rose 700 percent in 1 year. Instead of using just
    standard OSD inflation indices, we're looking at the indices
    that are specific to shipbuilding--copper, steel, aluminum.
    Whatever goes into a ship, we're watching those and factoring
    those into our cost estimates.
        We look at cost estimating relationships as it relates to
    ships we've built in the past and what that means to future
    ships. As we get through a bunch of these lead ships and we
    start to get into serial production--that's why I commented I'm
    very happy we don't have lead ships in this budget--it helps us
    to inform our cost estimates for the future ships, and we're
    using those as well.
        We look at obsolescence and we work with the shipyards to
    understand where we might have obsolescence issues in the
    vendor base, so that we can factor that in as well.
        Another tool that we've given to all the program managers
    is restrictions on the type of changes that they can approve.
    Changes for safety items or test and trial deficiencies, for
    example, they have the ability to make the change. If the
    change is I want more or somebody else tells me I want more,
    they have to come and ask approval through the process. That
    will greatly reduce the number of changes that are introduced
    during the design and construction of a vessel.
        Senator Martinez. Thank you.
        My time's about to expire, but let me ask one last
    question. Admiral, regarding the situation at Mayport, the
    Environmental Impact Statement has now been completed and I was
    wondering what your plans were for future funding of Mayport,
    particularly to complete any of the improvements that need to
    be made. Are you at all familiar with what I'm talking about?
    We need some dredging, wharf upgrades, and things of that
    nature.
        Admiral McCullough. Yes, sir, I'm familiar with that and
    I've dealt with it on the periphery. I'd like to take that
    question for the record and have the right folks get you the
    correct answer.
        Senator Martinez. I'd like to know when is completion of
    the strategic laydown study so that we may know when a decision
    may be made on that.
        Admiral McCullough. Yes, sir.
        [The information referred to follows:]

        Only the Draft Environmental Impact Statement (EIS) has been
    completed. The Final EIS will not be completed until November 2008. A
    Record of Decision (ROD) on a preferred alternative for the Mayport EIS
    will follow in December 2008. The Navy will fully consider operational,
    financial, and environmental factors before making decisions regarding
    the homeporting alternatives being evaluated in the EIS. If the Navy's
    preferred alternative requires military construction (MILCON), these
    requirements will be balanced with the Navy's other programming
    priorities.
        The plan for future funding of Mayport depends upon the alternative
    chosen in the ROD. Should the ROD select an alternative to move any
    ships to Mayport, funding will be requested in order to meet the
    desired date of initial operating capability (IOC). For example, in
    order to make a 2014 IOC date for CVN homeporting at Mayport, several
    supporting MILCON projects would need to be programmed beginning in the
    fiscal year 2010 budget.

        Senator Martinez. Thank you.
        Senator Kennedy. Senator Collins.
        Senator Collins. Thank you.
        Ms. Stiller, I want to take up where the chairman left off
    on the DDG-1000. Some House members have proposed terminating
    the DDG-1000 after building just the two lead ships and instead
    building more DDG-51s, which the Navy has not asked for.
        So first let me get you on record: Does the Navy oppose
    that plan?
        Ms. Stiller. Right now, ma'am, the program of record is
    seven DDG-1000s. That was signed out in the 30-year
    shipbuilding plan.
        Senator Collins. So that's a yes, right?
        Ms. Stiller. Yes, ma'am.
        Senator Collins. In addition to the many capabilities that
    would be sacrificed if we went back to the DDG-51 instead of
    proceeding to the DDG-1000, there are also some important cost
    considerations. The DDG-51 is coming to the end of that class
    of ships. Has the Navy done an estimate of how much it would
    cost to restart the DDG-51 line?
        Ms. Stiller. Ma'am, we've looked at it in a couple of ways
    because that information has been requested from the House.
    Some estimates indicate if you built one ship it would be $2.1
    billion and if you built two it would be $3.3 billion if you go
    back to DDG-51. However, I expressed concern when I testified
    before the House Armed Services Committee that I don't
    necessarily understand all the subvendor implications, because
    the last multi-year was signed in 2002 and we did an economic
    order quantity.
        I have agreed to work with the shipbuilders to try to
    understand the subvendor implications, and I don't have that
    data yet. They're going to come see me in a couple of weeks.
    But there may be some subvendor implications that we were not
    aware of when we cost this. But right now those were the
    estimates, yes, ma'am.
        Senator Collins. If there are those implications, that
    presumably would increase the cost still further, correct?
        Ms. Stiller. Yes, ma'am.
        Senator Collins. In addition, has the Navy looked at the
    total life cycle cost, the total operational costs of the DDG-
    1000 versus the DDG-51?
        Ms. Stiller. Yes, ma'am. As part of all program
    documentation that we take forward to the DAE, we have to look
    at the total ownership cost of those vessels. I don't have the
    comparison between DDG-1000 and DDG-51. I'll have to take that
    for the record. But I'll be happy to provide that for you.
        Senator Collins. As luck would have it, I do have that
    information. It's my understanding that the Navy has estimated
    that the DDG-1000, when you look at the total life cycle costs,
    that it actually costs less to operate the DDG-1000 over 35
    years than the DDG-51. In fact, the estimate that I have from
    the Navy is that it's $4.5 billion less to operate 10 ships
    over 35 years.
        Setting aside that issue for just a moment, isn't there a
    considerable cost savings that results from the far smaller
    crew size that is needed to operate the DDG-1000 compared to
    the DDG-51?
        Ms. Stiller. Yes, ma'am. Certainly manpower reductions will
    save you over the life of the class. There are additional
    maintenance costs, though, when you do that. When you take
    sailors off, there's going to be more shoreside maintenance
    that will have to be done. But overall I do believe there is a
    net savings. I hear your numbers. I'll make sure that I go back
    and verify those.
        [The information referred to follows:]

        The Navy has not stated that it would cost roughly the same amount
    of money to procure and maintain one DDG-51 ship as it would a DDG-1000
    ship. The unit costs for the final ships of the DDG-51 class (procured
    in fiscal year 2005) are lower than the projected unit costs for the
    follow ships of the DDG-1000 class. However, the Navy does expect that
    a DDG-1000-class ship will have a lower annual total operating and
    support (O&S) cost per ship than a DDG-51 class ship. This comparison
    is based on the Navy service cost estimate for DDG-1000 O&S costs
    compared to a composite across all ships of the DDG-51 class based on
    reported O&S cost data. The overall lower DDG-1000 per ship annual O&S
    cost is primarily due to the decreased ship manning for DDG-1000 as
    compared to DDG-51. This decreased manning affects both direct mission
    personnel costs and indirect support costs (such as installation and
    personnel support costs). The Navy is currently updating the O&S cost
    estimate for DDG-1000 based on the current design and life cycle
    support strategy.

        Senator Collins. Thank you.
        It's my understanding that the crew size for the DDG-1000
    is projected to be only 148 sailors. Admiral, if I'm wrong on
    that feel free to jump in.
        Admiral McCullough. Yes, ma'am. The core crew on the DDG-
    1000 is 114 crew members. The aviation detachment 28, so the
    total for the ship is about 142.
        Senator Collins. 142, and that compares very favorably with
    the DDG-51. The crew size for that I believe is something in
    the neighborhood of 346 or so; is that correct?
        Admiral McCullough. Yes, ma'am, depending on what variant
    of the ship and what we've done to take efficiencies in Smart
    Ship and drive the crew size down. But it's in excess of 300
    folks, yes, ma'am.
        Senator Collins. So we're talking about a ship that is more
    capable and yet can be operated with about half the crew size;
    is that accurate?
        Admiral McCullough. It's much more capable in the littoral,
    given the radar suite that we put on it, the signature
    reductions that we've put into the ship, and yes, ma'am, it has
    less than half the crew size on it.
        Senator Collins. Admiral, could you speak to some of the
    other capabilities that the DDG-1000 would give the Navy that
    it does not currently have with the DDG-51, fine ship though
    that is?
        Admiral McCullough. Yes, ma'am, DDG-51's a great ship.
        DDG-1000 has 10 technological advancements on it, and I'll
    do the best I can without a cheat sheet in front of me. It has
    an integrated electric drive fight-through power system that's
    a 78 megawatt power plant, and it is electric drive. It has a
    significantly reduced acoustic signature that rivals the
    signature of some of our attack submarines. It has a thermal
    suppression system that reduces the infrared signature of the
    ship.
        The hull form is specifically designed to reduce the wake,
    which is a significant portion of the radar cross-section of
    the ship. So the ship has a very, very small radar cross-
    signature compared to a DDG-51.
        Senator Collins. So it's stealthier?
        Admiral McCullough. Yes, ma'am.
        We put two advanced gun systems on it that are unmanned 155
    millimeter tubes, that are designed to shoot a long-range land
    attack projectile that has a nominal range in excess of 60
    miles with a very small circular error probability. So it's
    very accurate. It's GPS-guided. The system is designed so it
    can have multiple rounds simultaneously impact the target at
    that range.
        The gun system is totally unmanned. I would tell you from
    the work that we've done from computer simulation and actually
    shot the gun at Dugway Proving Grounds in Utah, if you looked
    at the computer simulation of the gun and compared it to the
    real gun firing, you can't tell which one's which until the
    breach block opens on the gun.
        We have fired the long-range land attack projectile from a
    155 tube. I believe it was at Point Mugu. We fired it at a
    barge approximately 60 miles at sea. We put a video camera on
    the barge. The barge owner was not as convinced as we were what
    the accuracy of the projectile would be. They made us insure
    the barge. You can see the projectile splash off the barge
    where it was supposed to.
        The SPY-3 radar, the X-band radar on that ship, provides
    the ship with periscope detection as well as very high fidelity
    in the littoral. So it reduces the clutter of the radar and
    enables it to see targets over land much better than what a
    SPY-1 can do.
        The last one's the fire suppression system, which enables
    us to reduce the crew size.
        Senator Collins. Thank you, Admiral. I think it's clear
    that it is an extraordinarily capable ship which will be able
    to be operated with half the crew size, which has life cycle
    costs that are extremely favorable, and that we should proceed
    with it.
        If I could just ask one more quick question of Ms. Stiller.
    Ms. Stiller, how important is the DDG-51 modernization program
    to achieving the goal of a 313-ship Navy?
        Ms. Stiller. DDG modernization is an important component.
    But I'll defer to Admiral McCullough for the requirements.
        Admiral McCullough. Modernization of our current fleet is
    the heart of the 313 force structure plan. If you look at 2020
    and look at the battle force inventory, the majority of the
    ships that make up the battle force inventory are sitting at
    the pier today.
        We historically don't do a good job with ships if we don't
    modernize the combat systems. If you look at the 993-class
    DDGs, we decommissioned them at about 17 years, which was half
    their engineered service life. The Baseline 1 cruisers we
    decommissioned at about 20 years. That was about half of their
    expected service lives. The Spruance-class destroyers we
    decommissioned at an average age of 22 years, which was half of
    their estimated service life roughly.
        If you don't modernize the combat system and you can't pace
    the current threat, the ships have a tendency to become
    irrelevant. So the combat systems and hull, mechanical, and
    electrical modernization program that we've put in for the 47
    cruisers in the DDG-51s is a key cornerstone of the 313 plan,
    and Bunker Hill is in her modernization right now.
        Senator Collins. Thank you.
        I would just conclude my questioning by saying to the
    chairman that the most efficient way to undertake that
    modernization of the DDG-51s, a modernization that we just
    heard is critical to achieving the goal of a 313-ship fleet, is
    to return those ships to the building yards, which have the
    expertise to do the retrofits in a most efficient manner.
        Thank you, Mr. Chairman.
        Senator Kennedy. I never thought of that before. That's a
    real interesting observation.
        Senator Collins. I know the chairman wants to save money at
    all times and the best way is to bring them back.
        Senator Kennedy. Bring them home, bring them home.
        Senator Collins. Thank you, Mr. Chairman.
        Senator Kennedy. Senator Sessions.
        Senator Sessions. Thank you. I'm not surprised that Senator
    Collins had all that information when she asked that question.
    She's not trained as a lawyer, but she usually knows the answer
    before she asks.
        Let me ask a few questions about the LCS. I'm a little
    worried about that. But first let me compliment the Navy on a
    decade of work that is designed to transform the Navy into an
    effective fighting force that can utilize less personnel, more
    firepower, and more capabilities. I hope we continue to do
    that, but we don't need to weaken the Navy in the process. So I
    hope you'll keep us advised.
        As I understand it, I think it's clear that the Navy has
    placed, Secretary Stiller, the LCS at the center of its
    procurement and at the center of its 313-ship Navy. How many of
    those LCS ships are planned to be part of the 313-ship Navy?
        Ms. Stiller. The plan is still for 55 LCS as part of the
    313 plan.
        Senator Sessions. At one point it was as high as 82, I
    believe, in one of the plans.
        The LCS vessel has outstanding capabilities in areas, for
    example, like the Persian Gulf, would it not?
        Ms. Stiller. Yes, sir. I'm going to defer to Admiral
    McCullough.
        Senator Sessions. Admiral McCullough, I guess I'll ask you.
        Admiral McCullough. Yes, sir. The ship's designed as a
    focused mission ship. It has very good capability in mine
    warfare and in the anti-surface warfare area that we looked
    extensively at scenarios in the Arabian Gulf, yes, sir.
        Senator Sessions. It's not exactly a replacement of any
    other ship. It's more of a new capability for the Navy; is that
    correct, Admiral?
        Admiral McCullough. Yes, sir, that's correct.
        Senator Sessions. What are some of the new capabilities
    that you expect to achieve from that ship?
        Admiral McCullough. It has significant enhancements in the
    mine warfare area, specifically with a remote mine-hunting
    vehicle that tows an SQS-20 sonar, which is a very accurate
    sonar, to find mines.
        Senator Sessions. Let me mention that Senator Kennedy I
    think for years has rightly been concerned about mines and the
    threats of mines to major vessels. One mine can neutralize
    hundreds of millions of dollars of ship capability.
        The LCS clearly is an advancement in our anti-mine
    capability?
        Admiral McCullough. Yes, sir.
        Senator Sessions. Would that be one of its top
    capabilities? It's the first one you mentioned.
        Admiral McCullough. We've delivered the first mine mission
    package. It came out just last fall. It had the remote mine-
    hunting vehicle, the SQS-20A sonar. We're working on an
    Airborne Mine Neutralization System. It also included an
    Airborne Laser Mine Detection System and the support equipment
    that goes with that.
        We're working on some additional capability which involves
    putting a 30-millimeter gun on the ship to neutralize mines.
    The system's called the Rapid Airborne Mine Clearance System.
    We're also working on a program where it can detect mines over
    the beach. So this will have a significant mine warfare
    capability to enable us to maintain access against people that
    would use mines as an anti-access strategy.
        Senator Sessions. Compared to capabilities, this ship also
    has personnel demands?
        Admiral McCullough. Yes, sir. The core crew on the ship is
    40 folks. There are 15 folks that go with the mission packages
    and about 20 or 22 that go with the aviation detachment on a
    ship.
        Senator Sessions. So 60 or so even with the packages and
    capabilities.
        Admiral McCullough. 75, yes, sir.
        Senator Sessions. Fuel mileage? It depends on how fast it
    goes, right?
        Admiral McCullough. It depends. Yes, sir, it depends on how
    fast it's traveling. The threshold KPP for the ship is 40
    knots. Both of the ships use large gas turbine engines as well
    as diesel engines to propel them. So even with the advanced
    hull-form and General Dynamics variant, they still burn a lot
    of fuel when they go fast, yes, sir.
        Senator Sessions. But just to ask you, Admiral McCullough,
    the Navy remains committed to this ship to being 55 of the 313
    ships we envision in the Navy?
        Admiral McCullough. Yes, sir, that's correct.
        Senator Sessions. We have one today.
        Admiral McCullough. Yes, sir.
        Senator Sessions. Now, Secretary Stiller, I have been
    concerned. I can't complain too much. I have to admire
    Secretary Winter for saying we're going to challenge the costs,
    we're going to keep costs down. Basically, you've put a hold on
    both versions now of the ship. Explain to me in simple English
    where we are in terms of bringing this ship up to the 55 we're
    supposed to have. Are we going to be behind? Does this
    represent any lack of commitment on behalf of the Navy to the
    ship, or do you remain committed to it as a critical part of
    the future navy combat system?
        Ms. Stiller. Yes, sir, we are committed to the LCS program.
    Right now LCS-1 is about 82 percent along in her construction.
    She'll go to builder's trials here in May. LCS-2 is about 68
    percent along and she'll launch in late April.
        We have one ship in 2008 and two in 2009 that we are in the
    process of running a limited competition between the two primes
    for the total of three. Ideally, one would have one and the
    other would have two. That RFP was just released and so the
    contractors are in the process of working up their proposals.
    The Navy's hope is to award toward the latter part of the
    summertime the 2008 ship as well as the options for the 2009
    ships.
        As for getting to 55, I believe in the 313 plan we still
    get there before 2020. It's in 2019. So we've laid out a ramp-
    up of quantities that will get us there by 2019.
        Senator Sessions. I can't criticize you if you need to
    examine the expense, examine the capabilities, and make a good
    decision. But I do think that you have to be aware that in the
    environment we operate under that if we delay something too
    long and we can't make up our minds it can allow Congress to
    take money and spend it on other things.
        If it's a critical part of your shipbuilding capability,
    Admiral, and your needs for the warfighter, we don't need to
    dawdle around here. We need to work out the problems, challenge
    the contractors if need be, and get this thing moving.
        Do you understand the dangers that we can have with
    uncertainty in the procurement process?
        Ms. Stiller. Yes, sir, absolutely. That's why we are moving
    forward as quickly as we can on the 2008 and 2009 procurements,
    which will also be in a fixed-price environment, recognizing
    the cost cap imposed by Congress as well.
        Senator Sessions. Thank you.
        Senator Martinez [presiding]. Thank you.
        I want to focus on the LCS, but I want to make sure that we
    talk a little bit about the amphibious lift requirements,
    General Amos. My understanding is that the Marine Corps has
    long had a requirement for three amphibious brigades to conduct
    amphibious assault, but fiscal constraints reshaped this
    requirement for operationally available amphibious lift to two
    brigade assault echelons.
        So how does this requirement for two brigade assault
    echelons translate into numbers and types of amphibious ships,
    and what are the assumptions and related risks in sizing this
    amphibious force?
        General Amos. Senator Martinez, you're absolutely correct.
    There has been risk that has been taken already as we went from
    three Marine Expeditionary Brigades worth of assault echelon,
    which equates to forcible entry, our Nation's ability to
    project forces from the sea ashore in an environment or a
    nation that doesn't want us to be there. So we went from 3 to
    2.5 and we're down to 2.0 right now.
        That number of marines and that requirement requires just a
    little bit over 17 ships to hold that many marines, 17 ships
    per Marine Expeditionary Brigade. A decision was made 2 years
    ago by the Commandant and the CNO to accept the level of risk,
    further level of risk, and allow those total numbers to get
    down to 15 per Marine Expeditionary Brigade.
        So that's a total of 30 ships. Now, just like anything
    else, like airplanes and whatever, everything's not up 100
    percent of the time. Things are in maintenance, things are in
    overhaul. So if you just take the historic average of
    maintenance and availability, you need about 34 ships. You need
    a little bit more than 34, but 34 ships to bring those two
    brigades worth of marines ashore.
        Now, it's important to note that the mix inside that is
    important, and that's why in my opening statement I talked
    about the 10th LPD and I talked about the importance of that
    ship and the capabilities it brings. It's a 25,000-ton ship. It
    is an enormous ship and it's very, very capable.
        So we're looking at a proper mix inside those 15 ships: 5
    big-deck what we call LHA-LHD ships, 5 LPD-17 ships, and 5 LSD-
    41, or 49 ships to bring up the total of 15 to put in there. So
    that's how we got to the total requirement agreed to by the CNO
    and the Commandant of 34 ships. It's really about 33: 11 big
    decks, 11 LPD-17s, and 11 LSDs.
        Senator Martinez. We need to fix the problem. My question
    to you would be, what would be your priorities in terms of
    fixing the capabilities and the shortfalls? From your
    perspective, how would you like to see this proceed?
        General Amos. I know the Commandant's number one unfunded
    priority for this year is the 10th LPD. Right now there is the
    LPD-17 line scheduled to be closed in fiscal year 2009. There
    is money applied to that, $103 million, and what the Navy and
    the Marine Corps--I'll just speak for the Marine Corps--what
    the Marine Corps would like to see happen is to have that 10th
    LPD fully funded with global war on terror funds and get that
    thing underway and under contract.
        Senator Martinez. Ms. Stiller, if that was not to take
    place what would then happen to the industrial base for the
    shipbuilding of that particular class of ship?
        Ms. Stiller. If you look at the industrial base and where
    we are in the LPD production, I would say that you could wait
    until fiscal year 2010 to buy that ship with a little bit more
    risk, but beyond that you would definitely end up with a cold
    production line.
        Senator Martinez. One last question, General Amos. As you
    indicated in your opening remarks, the role of the marines in
    Iraq and Afghanistan has been a land-based role, not the
    traditional role of the Marine Corps in expeditionary warfare.
    Is there a need for you, for the Marine Corps, to rebuild this
    fundamental expertise through the ranks of the Corps in order
    to retain the full skills and capabilities required to project
    power ashore from the sea?
        General Amos. Sir, there is. The Commandant talked to his
    leadership about that. We have really a couple of generations
    of young company-grade officers now that have never even been
    aboard a ship, because we've been focused solely, narrowly on
    the set of operations that we're doing in Iraq and Afghanistan.
    So we understand that.
        One of the driving factors behind growing the Marine Corps
    to 202,000 was to give us a little bit of elasticity in the
    deploying units. Right now--and I know you know this, Senator--
    there's a large percentage of our front-line combat units that
    are on about a one-to-one dwell to rotation. They're gone for 7
    months, they're home for 7 months. It's a bit of a ruse because
    they're home really for probably 6 to 5 months because they
    spend 30 days at Twentynine Palms away from their family, then
    they're going to rotate early so that they can go over there
    and relieve the unit that they're going to take their spot. So
    somewhere between 5 to 7 months is the time they're home.
        So if we grow the force we get a little bit more dwell,
    hopefully two-to-one, which is our goal. Then when we do that,
    that now allows us, the senior leadership, to be able to say:
    Okay, you're going to go a year from now or 14 months from now,
    you're going to go back into Iraq, you're going to go into
    Afghanistan, instead of saying 5 months from now and we have to
    start training immediately.
        So that allows us the opportunity to do some full-scale
    operations and training. We're building that capability right
    now with the growth of the force and with the training plans
    that come underneath my command down at Quantico. So we
    recognize it. We need to be able to do it. Quite honestly, it's
    a Title 10 responsibility that Congress has given us and we're
    not doing that right now.
        Senator Martinez. Thank you all very much.
        The hearing is adjourned.
        [Questions for the record with answers supplied follow:]

                Questions Submitted by Senator Edward M. Kennedy

                              LITTORAL COMBAT SHIP

        1. Senator Kennedy. Secretary Stiller and Admiral McCullough, you
    are having particular problems with the Littoral Combat Ship (LCS) that
    are very much in the news. Admiral Clark said he wanted this relatively
    inexpensive ship in a hurry to meet the projected threat in the
    littorals. Now we find that we will not get these ships in a hurry, nor
    will they be as inexpensive as we were led to believe. What is the Navy
    doing to meet this urgent threat that the LCS was intended to address
    with the LCS program delayed as it has been?
        Ms. Stiller and Admiral McCullough. The Navy is accepting greater
    risk by addressing littoral threats with current force structure of
    mine countermeasures ships and multi-mission ships. However, there will
    be capability gaps until LCS delivers in capacity.

        2. Senator Kennedy. Secretary Stiller and Admiral McCullough, have
    you investigated deploying mission modules on other Navy combatant
    vessels?
        Ms. Stiller and Admiral McCullough. The Navy is examining options
    to deploy selected LCS mission modules on other combatant vessels. In
    February 2008, Secretary Young (USD, AT&L) directed the Secretary of
    the Navy to conduct an analysis of alternative (AoA) platforms and
    develop a concept of operations (CONOPs) for mine countermeasures (MCM)
    capability fielding with and without LCS. The analysis and CONOPs will
    be submitted with the fiscal year 2010 MCM Master Plan and should also
    include forward staging and system sparing considerations.

        3. Senator Kennedy. Secretary Stiller and Admiral McCullough, if
    you are just accepting greater risk for the interim, why didn't the
    Navy just plan from the beginning to accept that greater risk for some
    period of time and get the LCS program right in the first place?
        Ms. Stiller and Admiral McCullough. The LCS program was designed to
    address warfighting gaps in MCMs, surface warfare, and anti-submarine
    warfare. Because of the compelling and urgent warfighting need, the LCS
    program attempted to meet a faster schedule than typical Navy programs.
    With a constrained price, tight schedule, two different designs at two
    different shipyards, and demanding performance requirements, LCS took
    on much higher risk than other programs. The rapid schedule also forced
    a large degree of concurrency between design and construction.
        In order to reduce program risk to acceptable levels, the Navy has
    restructured the program to accommodate known cost and schedule
    estimates. LCS remains a program of maximum importance to the Navy, and
    the Navy continues to monitor it closely. Warfighting requirements to
    fill the capability gaps remain compelling and consistent; therefore,
    the requirement for LCS remains unchanged.

                              ACQUISITION REFORMS

        4. Senator Kennedy. Secretary Stiller, it seems that the LCS should
    provide plenty of educational opportunities for how not to manage a
    major acquisition program. Unfortunately, it appears that many of the
    lessons learned from the LCS program were actually lessons ignored. We
    were in such hurry we ignored almost all of the lessons we learned
    painfully in previous years about how not to buy major weapons systems.
    For example, we picked the ship platform without having conducted any
    analysis to see whether there were other, more capable or less
    expensive solutions to the problem we faced. We changed requirements
    after we signed the contract. We did not have an adequate number of
    people with the right acquisition experience to oversee the shipyards.
    What steps have you taken or are you planning to take to improve the
    Navy's ability to acquire major systems on time and on cost?
        Ms. Stiller. On February 26, 2008, we issued SECNAVNOTE 5000, which
    instituted an Acquisition Governance Improvement Six-Gate reporting,
    reviewing, and oversight process that provides specific criteria for
    areas such as requirements, funding, and technical performance
    including a Probability of Program Success tool. This new process
    ensures that the various stakeholders from the resources, requirements,
    and acquisition communities address and revisit at defined intervals
    issues associated with technical maturity, affordability, and program
    health. We are currently developing new guidance addressing system
    design methods; the use of independently-chaired engineering technical
    review boards; and responsibility for Configuration Steering Boards to
    monitor requirements changes as well as consider cost and funding
    availability. It is important to note that the success of all these
    initiatives is heavily dependent on personnel with the correct training
    and experience commensurate with responsibilities assigned. While we
    are working to ensure we have the personnel with the requisite skill
    sets, this is an area where there is a shortage in both government and
    industry.

        5. Senator Kennedy. Secretary Stiller, I know that previous
    uniformed Navy leaders, including Admiral Mullen, have complained about
    a lack of transparency between the officers responsible for setting
    requirements and the acquisition system trying to meet those
    requirements. What steps should be or have been taken to break down
    these barriers?
        Ms. Stiller. On February 26, 2008, we issued SECNAVNOTE 5000, which
    instituted an Acquisition Governance Improvement Six-Gate reporting,
    reviewing, and oversight process. Its purpose is to ensure early and
    frequent involvement and collaboration among the leadership of the
    requirements, resources, and acquisition communities. New changes to
    both DOD Instruction 5000.2 and SECNAVINST 5000.2 include additional
    emphasis on requirements discipline. Configuration Steering Boards will
    oversee any changes to the requirements baseline. In addition, the
    Department of the Navy will implement a Systems Design Specification
    which will provide more clarity to the Capability Development Document
    (CDD)/CPD development process and convert and interpret operational
    specifications into affordable design requirements.

                        AIRCRAFT CARRIER FORCE STRUCTURE

        6. Senator Kennedy. Admiral McCullough, Congress argued at length
    over the past several years about letting the aircraft carrier force
    structure fall below 12. That was contentious enough. Again this year,
    the Navy is proposing legislation that would permit a temporary
    reduction in the number of aircraft carriers from 11 to 10 in the
    middle of the next decade. Assuming that Congress were to agree to
    allow this temporary reduction, what steps is the Navy proposing to
    take between now and then to mitigate this drop in force structure that
    impinges on the ability of future Chiefs of Naval Operations to meet
    requirements of the combatant commanders?
        Admiral McCullough. The Navy remains fully committed to an 11-
    carrier force; however, it is fiscally imprudent to operate 11 carriers
    between CVN-65 inactivation and CVN-78 commissioning. For the duration
    of this force structure gap, Navy can meet projected operational
    requirements with moderate risk by mitigating the operational impacts
    through the selective rescheduling of carrier maintenance
    availabilities and the inherent flexibility provided by the Fleet
    Response Plan (FRP). Ongoing process improvement events focus on
    reducing the time between the end of construction/maintenance
    availabilities to ship Initial Operational Capability/Major Combat
    Operations (MCO) Surge Readiness. Additionally, the maturity of FRP,
    increased experience with the Refueling Complex Overhaul program, and
    refinement of the Continuous Maintenance concept allows Navy to improve
    carrier operational availability. Navy will have the force structure to
    maintain six carriers deployed or available within 30 days plus an
    additional carrier available within 90 days. Accordingly, Navy will
    continue to work with the combatant commanders through the Joint Staff
    to best mitigate operational risk during this timeframe.

                                  COST CONTROL

        7. Senator Kennedy. Secretary Stiller, we all know that the Navy
    will have difficulty affording the shipbuilding procurement programs
    that will meet our requirements and maintain the 313-ship that Admiral
    Mullen and Admiral Roughead have identified as the requirement. What
    steps are you taking or proposing to help constrain the rising costs in
    the shipbuilding account?
        Ms. Stiller. The Navy's shipbuilding plan recognizes the need for
    careful management of requirements and aggressive cost control
    measures. This can only be achieved in partnership with industry by
    utilizing realistic assumptions, instilling discipline in shipbuilding
    requirements, and driving more industry and government investments to
    reduce cost. Given the importance of requirements-containment and cost-
    reduction to the viability of the shipbuilding plan, the Navy continues
    to evaluate each ship class and identify cost reduction opportunities
    while balancing warfighting requirements, costs, and industrial base
    realities.
        The Navy plans to make greater use of other contract incentives,
    such as multi-year procurements, fixed-price contracts (when and where
    appropriate), and increased use of competition. These efforts are
    expected to contribute to real cost containment in future shipbuilding
    plans. The Navy's shipbuilding plan requires a balance among
    operational requirements and risk, affordability, and industrial base
    utilization. Additionally, use of gates in oversight of shipbuilding
    programs to better integrate the requirements and the acquisition
    community in order to further stabilize the programs have been
    implemented. The Navy's long-range vision reduces the types and models
    of ships, maximizes the reuse of ship designs and components, and
    implements open architecture for software and hardware systems.
        The Navy continues to work with shipbuilders to strive for level
    loading of production facilities. Workload peaks and valleys are
    mitigated through work share opportunities and regional outsourcing.

        8. Senator Kennedy. Secretary Stiller, given this cost concern, why
    has the Navy chosen again this year to not provide any funding for the
    National Shipbuilding Research Program (NSRP), the one program where
    the Navy was providing matching funding for industry to help make
    itself more efficient?
        Ms. Stiller. Although NSRP was put in place with the major goal of
    reducing the cost of shipbuilding and repair, there was a lack of
    direct focus on specific shipbuilding programs. The focus was on cross-
    shipyard collaboration to implement initiatives that were applicable
    industry-wide. Navy and industry collaboratively have decided to
    transform NSRP from its previous structure to a mechanism that will
    address ship-specific initiatives. This new construct will align with
    corporate Navy philosophy to reduce the cost of our shipbuilding
    programs. While it is no longer a dedicated line item in the budget,
    Navy is still committed to NSRP.

                                  CG(X) RADAR

        9. Senator Kennedy. Secretary Stiller and Admiral McCullough, the
    cost of pursuing ballistic missile defense has been very high. I am
    very concerned about ensuring that we spend no more than is necessary
    to achieve that capability in order to hold down those costs. We know
    that the DDG-1000 program is developing new radars as part of the
    ship's combat system. One of those radars is the Volume Search Radar
    (VSR). Some have asserted that the Navy and the contractors could
    modify the VSR to make it larger for comparatively little cost, and by
    doing so could avoid the very high cost of developing totally new
    radars for the Navy's next generation cruiser, the CG(X) class. I know
    that you have not published the CG(X) AoA, but I will ask this question
    anyway. Would it be possible to upgrade the VSR radars from the DDG-
    1000 to do more than serve as the primary sensor on the CG(X)? If so,
    would that course be substantially cheaper than developing totally new
    radars for CG(X)?
        Ms. Stiller and Admiral McCullough. No, it is not technically
    feasible to upgrade VSR to meet integrated air and missile defense
    requirements for CG(X). VSR, as designed, does not contain the critical
    technologies required to provide the minimum capabilities required to
    satisfy the integrated air and missile defense requirements set.
    Incorporating these capabilities into the VSR is not technically
    achievable.
                                     ______

                   Questions Submitted by Senator Bill Nelson

                                    STRATEGY

        10. Senator Bill Nelson. Ms. Stiller and Admiral McCullough, what
    is the status of the strategic laydown study? Has it been completed? If
    not, when will it be delivered to Congress?
        Ms. Stiller and Admiral McCullough. Conducted yearly as part of an
    internal review, the Strategic Laydown and Dispersal study is currently
    still ongoing and is not yet complete. The Strategic Laydown and
    Dispersal was developed as part of a working process used to inform
    Navy decisions on the potential future alignment of fleet capabilities
    and operations. As part of an ongoing Navy process, the Strategic
    Laydown and Dispersal was not developed with the intent to produce a
    public document.

        11. Senator Bill Nelson. Ms. Stiller and Admiral McCullough, the
    National Defense Authorization Act for Fiscal Year 2006 requires the
    Navy to maintain 11 operational carriers. Does the Navy plan to deviate
    from this law?
        Ms. Stiller and Admiral McCullough. The Navy continues to work with
    Congress through established legislative processes to identify a
    position that is both fiscally and operationally responsible. The Navy
    is committed long-term to a minimum of 11 operational carriers.

        12. Senator Bill Nelson. Ms. Stiller and Admiral McCullough, please
    detail the Navy's plan to address Navy leadership's goal of strategic
    dispersion.
        Ms. Stiller and Admiral McCullough. The Chief of Naval Operations
    (CNO)-directed Strategic Laydown and Dispersal plan was designed to
    inform Navy decisions on where ships of the 313-ship Navy could be
    homeported based on steady state security postures and potential
    contingency operations in the 2020 time frame. The Strategic Laydown
    and Dispersal takes into account response times, analysis of
    requirements for regional presence and deployment locations, as well as
    infrastructure capabilities and capacities.
        The Strategic Laydown and Dispersal is just one aspect of a more
    comprehensive and complex analysis of our Naval Forces. There are
    multiple ongoing efforts that also contribute to developing the force
    structure, personnel, and infrastructure needed to execute the New
    Maritime Strategy and support the future fleet.

        13. Senator Bill Nelson. Ms. Stiller and Admiral McCullough, how
    will the Navy carry out this goal with respect to dispersing its
    Atlantic Fleet aircraft carriers among more than one port?
        Ms. Stiller and Admiral McCullough. A decision with respect to
    Atlantic Fleet carrier dispersal has not yet been made. There are
    multiple ongoing efforts that inform this decision. The Navy will fully
    consider operational, financial, and environmental factors before
    making decisions regarding the homeporting alternatives being evaluated
    for its Atlantic Fleet aircraft carrier force.
        The Mayport Draft Environmental Impact Statement (DEIS) was
    released to the public on 28 March 2008. This DEIS reviews and assesses
    several potential action alternatives for comparison. Upon completion
    of the public comment period, efforts will begin to incorporate public
    and agency comments and develop the Final EIS. Originally planned to
    close on 12 May, the public comment period is being extended to 27 May
    2008. This limited extension of the public comment period recognizes
    the importance of public review and comment on the DEIS while allowing
    Navy decision-making to proceed on a reasonable timeline.
        While not exclusively concerned with a single class or ship
    location, the Strategic Laydown and Dispersal study is part of a larger
    Navy process to inform future decisions on the potential alignment of
    fleet assets, capabilities, and operations. This effort is exploring
    several disposition alternatives without presupposing the results of
    the Mayport DEIS.

                         ENVIRONMENTAL IMPACT STATEMENT

        14. Senator Bill Nelson. Ms. Stiller and Admiral McCullough, the
    Navy recently released a DEIS on Mayport Naval Station to look at home
    porting options for additional ships. In addition, the Navy also
    released a DEIS on Naval Air Station Jacksonville. According to the
    Congressional Research Service and the Senate Committee on Environment
    and Public Works, it is unusual for a DEIS to omit a preferred
    alternative. The Navy included a preferred alternative in the NAS
    Jacksonville DEIS. Why did the Navy omit a preferred alternative in the
    Mayport DEIS?
        Ms. Stiller and Admiral McCullough. The Navy did not identify a
    preferred alternative in the DEIS released on 28 March 2008 because the
    Navy has not selected one. Not stating a preferred alternative in the
    DEIS is authorized under NEPA and CEQ regulations. While the DEIS does
    thoroughly examine environmental factors, the selection of a preferred
    alternative will also consider force laydown implications, total costs,
    and other relevant factors. Analysis of these other factors is not yet
    complete. The Navy will identify a preferred alternative based on all
    these factors in the final EIS scheduled for release in November 2008.

        15. Senator Bill Nelson. Ms. Stiller and Admiral McCullough, when
    will the Navy provide a preferred alternative in the Mayport DEIS?
        Ms. Stiller and Admiral McCullough. The Navy did not identify a
    preferred alternative in the DEIS released on 28 March 2008, because
    the Navy has not selected one. While the DEIS does thoroughly examine
    environmental factors, the selection of a preferred alternative will
    also consider force laydown implications, total costs, and other
    relevant factors. Analysis of these other factors is not yet complete.
    The Navy will identify a preferred alternative based on all these
    factors in the final EIS scheduled for release in November 2008.
                                     ______

                  Questions Submitted by Senator Mel Martinez

                                VALVES AND PUMPS

        16. Senator Martinez. Ms. Stiller, recent reports indicate that a
    group of important Navy suppliers, valve and pump manufacturers, may be
    in jeopardy of going out of business or filing for bankruptcy due to
    numerous asbestos lawsuits. Are you aware of this issue?
        Ms. Stiller. Yes. The Valve and Pump Coalition (VPC) met with me on
    April 1, 2008, to inform the Navy of the wave of asbestos litigation
    being brought against their industry, and the risk the VPC foresees for
    the pump and valve industrial base as a result of this litigation. The
    VPC consists of Buffalo Pumps and Leslie Controls. As a result of this
    meeting, the Navy has been assessing the potential impacts to national
    defense and the domestic industrial base if pump and valve vendors go
    out of business due to asbestos litigation.

        17. Senator Martinez. Ms. Stiller, these lawsuits have the
    potential to disrupt the supply of certain valves and pumps for our
    ships. If this disruption were to occur, would it pose a significant
    problem for our ships and operations?
        Ms. Stiller. The disruption of our valve and pump supply could
    potentially have an impact to our shipbuilding programs. The severity
    of the impact would depend on which and how many vendors had supply
    disruptions, and the suddenness, duration, or finality of the
    disruption. If any vendor went out of business, it is reasonable to
    expect that its product line could be purchased by the remaining
    vendors; there would likely be a gap in engineering continuity; and
    there would likely be some impact to ship design, construction, and in-
    service support. While it is possible to transition the data required
    to produce another vendor's product to a new vendor, it is expected to
    cause cost increases and time delays for the Navy's programs.

        18. Senator Martinez. Ms. Stiller, how do you plan to solve this
    problem?
        Ms. Stiller. While the loss of any pump and valve supplier to our
    shipbuilders will have an impact on Navy programs, it is possible that
    the Navy could qualify other vendors to supply pumps or valves for Navy
    programs. Development costs and time would be required for this option.
    However, the Navy could procure a stockpile of equipment and spare
    parts as a means of minimizing schedule and service delays.

                                  SONAR DOMES

        19. Senator Martinez. Ms. Stiller, is the Navy satisfied with the
    performance of the surface ship and submarine sonar domes currently
    supplied to the fleet?
        Ms. Stiller. The Navy is satisfied with the performance of the
    surface ship sonar domes currently supplied to the fleet by B.F.
    Goodrich, Jacksonville, FL. The rubber and composite domes for the FFG
    class have performed well, as have the sonar dome rubber windows for
    both the CG and DDG classes.
        The Navy is also satisfied with the performance of sonar domes and
    sonar dome boots being procured for Virginia-class submarines.

        20. Senator Martinez. Admiral McCullough, does the Navy have a
    requirement or a plan to seek a second source for sonar dome
    production?
        Admiral McCullough. Sonar domes and boots are procured for surface
    ships and submarines from the only presently-qualified vendor, B.F.
    Goodrich, Jacksonville, FL. There is no current plan to seek a second
    source; however, the Navy is conducting a Small Business Innovation
    Research (SBIR) effort to explore alternative solutions.

                                    MAYPORT

        21. Senator Martinez. Admiral McCullough, now that the EIS has been
    completed, what are your plans for future funding for Mayport?
        Admiral McCullough. Only the DEIS has been completed. The Final EIS
    will not be completed until November 2008. A Record of Decision (ROD)
    on a preferred alternative for the Mayport EIS will follow in December
    2008. The Navy will fully consider operational, financial, and
    environmental factors before making decisions regarding the homeporting
    alternatives being evaluated in the EIS. If the Navy's preferred
    alternative requires MILCON, these requirements will be balanced with
    the Navy's other programming priorities.
        The plan for future funding of Mayport depends upon the alternative
    chosen in the ROD. Should the ROD select an alternative to move any
    ships to Mayport, funding will be requested in order to meet the
    desired date of initial operating capability (IOC). For example, in
    order to make a 2014 IOC date for CVN homeporting at Mayport, several
    supporting MILCON projects would need to be programmed beginning in the
    fiscal year 2010 budget.

        22. Senator Martinez. Admiral McCullough, we have been told that
    the final decision may hinge on the completion of a strategic lay-down
    study. When do you expect this strategic lay-down study to be
    completed?
        Admiral McCullough. Conducted yearly as part of an internal review,
    the Strategic Laydown and Dispersal study is currently still ongoing
    and is not yet complete. The Strategic Laydown and Dispersal was
    developed as part of a working process used to inform Navy decisions on
    the potential future alignment of fleet capabilities and operations. As
    part of an ongoing Navy process, the Strategic Laydown and Dispersal
    was not developed with the intent to produce a public document.

        23. Senator Martinez. Admiral McCullough, how much money does the
    Navy plan on including in the fiscal year 2010 budget for Mayport wharf
    upgrades and dredging?
        Admiral McCullough. In addition to the fiscal year 2009 P-999 Alpha
    Wharf project ($14.9 million), the 2009 President's budget (PB-09)
    request includes MILCON restoration projects for Bravo Wharf (P-888;
    $30.0 million) in fiscal year 2010 and Charlie Wharf (P-777; $20.8
    million) in fiscal year 2011. The PB-09 request also includes O&MN
    funds for maintenance dredging: fiscal year 2010 ($5 million), fiscal
    year 2012 ($6 million), and fiscal year 2014 ($6 million). The fiscal
    year 2010 President's budget request is still under development. The
    investments currently programmed for fiscal year 2010 and beyond will
    be given full consideration and prioritized against all Navy
    requirements.
                                     ______

                  Questions Submitted by Senator Jeff Sessions

                               HAWAII SUPERFERRY

        24. Senator Sessions. Ms. Stiller, an important part of having a
    capable Navy is having available substantial lift capabilities for both
    inter-theater and intra-theater lift. Combatant commanders identified
    both a near-term and a long-term requirement for high-speed intra-
    theater surface lift and there is now in the budget a plan to procure a
    substantial number of Joint High Speed Vessels (JHSV) to meet that
    requirement. However, with the current building schedule we won't see
    the first of those ships until 2012 or 2013 and it will be a decade or
    more before we see a significant JHSV capability on the water, which
    means that we will have a substantial shortfall in intra-theater lift
    capabilities for many years to come. I understand that the Navy has
    been considering for the last few months a plan to install national
    defense features (NDF) on one or more of the Hawaii Superferry ships
    that have been built or are being built in the United States and will
    be in the Voluntary Intermodal Sealift Agreement (VISA) program. Are
    you aware of this issue?
        Ms. Stiller. The Navy is reviewing the operational requirements
    that could be met by the Hawaiian Superferry company's unsolicited
    proposal which identified specific changes to be funded under the NDF
    program. The bridge to the JHSV program is currently being met by the
    Military Sealift Command (MSC)-leased vessels M/V Westpac Express and
    HSV-2 Swift. Although the NDF program is a cost-effective means to
    provide for surge sealift or resupply capability by providing active,
    crewed ships with proven mechanical reliability and desirable
    performance capabilities, it is not meant to support continuous
    operations and the ships are only used in times of national
    emergencies.

        25. Senator Sessions. Ms. Stiller, would it be fair to say that the
    Navy and the Marine Corps would benefit from having available on call a
    high speed ferry like the Hawaii Superferry with substantial NDF
    already installed?
        Ms. Stiller. The Navy and Marine Corps are currently reviewing what
    requirements the Hawaiian Superferry, with the proposed NDF features
    installed, could provide in meeting wartime surge operations.

        26. Senator Sessions. Ms. Stiller, wouldn't this give the combatant
    commanders some much needed near-term capability?
        Ms. Stiller. The NDF program is designed to ensure that the
    Department of Defense can obtain militarily-useful commercial cargo
    ships in times of national emergencies. The NDF program funds
    installation of militarily-useful features on U.S.-built vessels during
    construction or conversion. NDF funding also pays for any increased
    costs during commercial operations that are directly attributable to
    the NDF. The NDF program is a cost-effective means to provide for surge
    sealift or resupply capability by providing active, crewed ships with
    proven mechanical reliability and desirable performance capabilities.
    The NDF program is not meant to support continuous operations and the
    ships are only used in times of national emergencies. Each proposal
    submitted for NDF must be addressed on its own merit, and consideration
    of the business case for the Navy must be taken into account.
                                     ______

                  Questions Submitted by Senator Susan Collins

                                      DDG

        27. Senator Collins. Ms. Stiller, given the focus and concern on
    cost of Navy shipbuilding in general and the DDG-1000 specifically,
    please tell me what the impact would be on cost of the first two ships,
    as well as the impact on the stability of the program's industrial base
    if the program were terminated after first two ships.
        Ms. Stiller. If the fiscal year 2009 President's budget request for
    DDG-1000 is not funded, it will impact warfighting capability gaps,
    cost, and the shipbuilding industrial base. The cost of the first two
    ships, now under contract to General Dynamics Bath Iron Works and
    Northrop Grumman Shipbuilding, will significantly increase due to the
    lack of the shipbuilders' ability to spread shipyard overhead cost
    among multiple ships. Additionally, the cost of the mission systems
    equipment for the lead ships will increase for similar overhead cost
    increases. The loss of this workload would also likely impact costs on
    other Navy contracts at these shipbuilders. Finally, the lack of a
    fiscal year 2009 ship will likely impact the shipbuilding industrial
    base including workforce stability and may endanger the future
    viability of the Nation's major shipyards.
        Each shipbuilder's lead-ship cost proposal was based on a seven-
    ship program of record DDG-1000 workload. The cancellation of the
    program would affect vendors that are currently under contract and
    building class-specific systems and components that would not be
    incorporated in large numbers or at all on future ships, including
    systems such as the Dual Band Radar (Raytheon/Lockheed Martin),
    Advanced Gun System (BAE Systems), Integrated Power System (Converteam/
    DRS Technologies), Advanced Vertical Launch System (Raytheon/BAE
    Systems), and Total Ship Computing Environment Infrastructure
    (Raytheon). Hundreds of system and component vendors employing
    thousands of people in 49 States would also be impacted. To date, total
    of $13.2 billion has been invested in the program: $6.3 billion spent
    on research and development (R&D) and $6.9 appropriated for lead ships
    construction and advance procurement for the third ship. Terminating
    the program would provide little return on this investment and a
    decades' worth of development effort.
        The Navy continues to stress that a stable plan will enable the
    shipbuilding industry to maintain critical skills and to make business
    decisions that increase efficiency and productivity in order to meet
    the Navy's projected shipbuilding requirements. Terminating the program
    would produce the opposite effect. Most importantly, the cancellation
    of future ships would deny the Fleet critical capabilities and limit
    the introduction of next-generation capabilities to deal with known and
    anticipated threats.

        28. Senator Collins. Ms. Stiller and Admiral McCullough, the
    current Navy shipbuilding request of $14.1 billion in the fiscal year
    2009 budget does not meet the $15.8 billion the Navy has estimated it
    needs to meet its own 30 shipbuilding plan, and the CNO has stated that
    the cost of a nuclear-powered cruiser would be $600 to $700 million
    more per ship. Do you see any way that the Navy can afford to build
    nuclear-powered surface combatants?
        Ms. Stiller and Admiral McCullough. There is always a balance that
    must be achieved in the shipbuilding accounts. Our first priority is to
    get the capabilities we need on the schedule we need them. However,
    these priorities are always tempered by affordability and the impact of
    any single program on the resources available to support other programs
    within that sector of the Navy's accounts. Clearly accommodating the
    upfront cost for a nuclear-powered cruiser would be difficult and will
    pose a challenge with respect to the limited resources we have within
    the shipbuilding sector. This may result in a need to request
    additional funding from the Office of the Secretary of Defense (OSD) or
    Congress to meet the direction provided in last year's National Defense
    Authorization Act.
        The greatest concern regarding affordability of nuclear cruisers
    would not be whether we can afford to build the ships but rather what
    the impact is on the remaining resource demands the Navy faces after
    funding these nuclear cruisers to the appropriate resource level. As
    the Navy prepares for Milestone A and selection of a preferred design
    alternative, including consideration of ships with a nuclear-power
    option, the Navy will continue to assess the potential impacts on the
    remaining shipbuilding program.

        29. Senator Collins. Ms. Stiller and Admiral McCullough, aside from
    the dramatically increased costs, is it even practical to replace the
    current power plant in the DDG-51 or DDG-1000 with a nuclear power
    plant?
        Ms. Stiller and Admiral McCullough. No, it is not practical to
    replace the current power plant in the DDG-51 or DDG-1000 with a
    nuclear power plant.
        The specific capability needs as well as unique ship integration
    constraints of the DDG-51 and DDG-1000 compared to existing nuclear-
    powered ships would necessitate a wholly new nuclear propulsion plant
    design and/or significant hull redesign for these applications. Given
    the extensive redesign of the DDG-51 and DDG-1000 to incorporate
    nuclear propulsion, this effort would take many years and several
    billion dollars to complete and therefore is impractical.
                                     ______

                   Questions Submitted by Senator John McCain

                UNFUNDED REQUIREMENT FOR 10TH LPD-17 CLASS SHIP

        30. Senator McCain. Ms. Stiller, the Navy and Marine Corps have
    included a 10th LPD-17 class ship as a top priority on the unfunded
    requirements list again this year. With the ninth and currently last
    ship of the class starting construction, what would be the impact to
    the shipbuilding industrial base and to the Navy's ability to procure a
    future LPD-17 if funding is not provided in 2009 for this ship?
        Ms. Stiller. There are currently five LPD-17 class ships under
    construction. As LPD-25, the 9th LPD-17-class ship, is not expected to
    deliver until February 2012, there is currently a backlog of LPD work.
    To avoid a production break impact, the 10th ship would need to be
    appropriated no later than fiscal year 2010. The Navy is revisiting the
    10th LPD-17 as part of fiscal year 2010 budget deliberation.

                             FUTURE CRUISER, CG(X)

        31. Senator McCain. Admiral McCullough, the Navy's program includes
    about $3 billion in R&D towards a future missile defense cruiser,
    CG(X), in 2011. The 2008 National Defense Authorization Act requires
    that CG(X) be nuclear-powered unless the Secretary of Defense
    determines that it is not in the national interest. What is the status
    of the Navy's AoA for the CG(X), and when will Congress have sufficient
    insight to the program to be able to support this year's budget
    request?
        Admiral McCullough. The results of the Maritime Air and Missile
    Defense of Joint Forces (MAMDJF) AoA, more commonly referred to as the
    CG(X) AoA, were delivered to the Staff of the CNO in January 2008. The
    CNO Staff is reviewing the comprehensive and lengthy report. A series
    of internal Navy reviews have been conducted, and will continue, until
    decisions in several critical areas are made. The Navy will select a
    service-preferred alternative for CG(X) and then provide a
    recommendation to OSD at a Milestone A Defense Acquisition Board (DAB)
    anticipated in fiscal year 2008. Once complete, the AoA Report will be
    forwarded from CNO via SECNAV's OSD. Following approval of the AoA, the
    Navy will seek Milestone A approval for the CG(X) program from the
    Defense Acquisition Executive. The Navy will be able to provide further
    detail on the AoA results and the Navy's selection of a preferred
    alternative to Congress upon Milestone A approval.
        Regardless of the selected alternative, the President's fiscal year
    2009 budget request for the CG(X) budget funds vital efforts in
    requirements analysis, technology development, and ship design activity
    that need to continue.

        32. Senator McCain. Admiral McCullough, the press has reported that
    the Navy has determined that if it is to be nuclear-powered, CG(X)
    would use a scaled version of the CVN-21 reactor plant. Has the Navy
    determined whether this reactor plant could be installed in the DDG-
    1000 hullform?
        Admiral McCullough. Yes, the Navy has determined that the CVN-78
    reactor plant cannot be installed in the DDG-1000 hull form. The
    nuclear-powered CG(X) option will have a hull form which will be
    designed to accommodate the CVN-78 reactor plant.

        33. Senator McCain. Admiral McCullough, what is the Navy's range of
    cost estimates for building a nuclear-powered CG(X)?
        Admiral McCullough. The MAMDTF AoA includes cost analysis for the
    potential use of nuclear propulsion for CG(X).
        Navy leadership is reviewing the AoA results. The Navy will select
    a service preferred alternative for CG(X) and then provide a
    recommendation to OSD at a Milestone A DAB anticipated in fiscal year
    2008.
        The Navy's fiscal year 2006 Report to Congress on Alternative
    Propulsion Methods for Surface Combatants and Amphibious Warfare Ships
    indicated an upfront nuclear acquisition cost premium of $600-$700
    million in fiscal year 2007 dollars per ship for a medium surface
    combatant. This premium is over and above the acquisition cost of a
    fossil fueled ship. While the nuclear-power variant includes a higher
    upfront acquisition cost than the fossil fuel variant, it will be
    offset over the life cycle by lower operations and support costs
    completely or to some degree depending on ships OPTEMPO, energy
    demands, and fuel prices.

        34. Senator McCain. Admiral McCullough, what is the Navy's plan for
    certifying the two surface combatant shipbuilders, Bath Iron Works and
    Ingalls Shipbuilding, for nuclear ship construction?
        Admiral McCullough. The Navy currently has no plans to certify
    General Dynamics Bath Iron Works (BIW) and Northrop Grumman
    Shipbuilding-Gulf Coast (NGSB-GC) for nuclear-powered ship
    construction. Northrop Grumman Shipbuilding-Newport News and General
    Dynamics Electric Boat are the Nation's two authorized and experienced
    nuclear qualified construction shipyards. However, non-nuclear sections
    of future nuclear-powered ships could be built by other shipyards
    currently experienced in naval surface combatant construction (BIW and
    NGSB-GC). The method and location of construction of potential nuclear-
    powered surface combatants have not yet been determined.

                            NATIONAL SECURITY CUTTER

        35. Senator McCain. Admiral McCullough, the National Security
    Cutter (NSC), constructed for the Coast Guard Deepwater program, would
    appear to provide a low cost alternative for certain naval missions.
    Has the Navy reviewed the capabilities offered by the NSC, and if so,
    could you provide your assessment regarding the suitability of this
    ship to meet low-mix missions envisioned by the Maritime Strategy?
        Admiral McCullough. Yes, the Navy has reviewed the capabilities of
    the Coast Guard's NSC. The NSC cannot fulfill key requirements within
    the naval warfare mission that the Navy's LCS is designed to achieve,
    including survivability, crew size, sprint speed, draft, and the
    ability to embark and employ focused mission packages. The CONOPs and
    design specifications for the two ships are not compatible.

             LCS is built to Naval Vessel Rules to provide Level 1
            survivability. NSC is built to commercial standards and was not
            designed to operate in the same threat environment.
             LCS has a crew size requirement of 75, including core crew,
            mission package detachment and aviation detachment. NSC's crew
            size is 143.
             The LCS has a sprint speed of 40+ knots. NSC's sprint speed
            is 28 knots.
             LCS draft is approximately 13 feet. The NSC's draft is 21
            feet. This fundamentally limits the areas where the ship can
            effectively operate.
             LCS has been designed and purpose-built to carry and operate
            focused naval warfare mission packages that address Joint
            Staff-approved capability gaps in MCMs, surface warfare, and
            anti-submarine warfare. The NSC does not have the shipboard
            interface nor the footprint availability required to receive
            and operate these mission packages, nor does it have the
            organic capability to execute the specific LCS gap filler
            capability and therefore cannot fulfill the role of LCS.

        The Navy and LCS Program Office have partnered with the Coast Guard
    Deepwater program to share useful information, identify risk
    mitigations to new technology, and to ensure commonality where it is
    practicable and cost effective (e.g., common 57mm gun, common air
    search radar, and associated crew training programs).

               OHIO-CLASS BALLISTIC MISSILE SUBMARINE REPLACEMENT

        36. Senator McCain. Admiral McCullough, funding for development of
    the Ohio-class ballistic missile submarine replacement is included in
    the Future Years Defense Program, with procurement of long lead
    material within the decade. However, the Navy's long-range shipbuilding
    plan does not include procurement funding required to replace the Ohio-
    class ballistic missile submarines. What are the projected procurement
    costs for this strategic program, and how does the Navy propose that it
    be funded?
        Admiral McCullough. The Navy is working to define the initial
    capabilities for the Sea-Based Strategic Deterrent, which will describe
    the attributes required for strategic deterrence influence for the
    follow-on capability to the Ohio-class SSBN. This capability analysis
    will support an AoA planned to commence in fiscal year 2009. The
    Shipbuilding and Conversion, Navy (SCN) estimated cost will be
    developed at the conclusion of the AoA in the fall of 2009.
        The Navy anticipates commencing R&D efforts for the follow-on to
    the Ohio-class SSBN in fiscal year 2010. However, since the Ohio-class
    SSBN replacement has neither been designed, nor the program developed,
    any cost estimate for SCN at this time would be premature.

           SEA BASING AND THE MARITIME PREPOSITIONING FORCE (FUTURE)

        37. Senator McCain. Admiral McCullough, how does the Navy intend to
    man and equip the large deck amphibious ships included in the Maritime
    Prepositioning Force Future, and what warfighting role is planned for
    these ships in amphibious assault operations?
        Admiral McCullough. The CDD for the MPF-F large deck amphibious
    ships has not yet been finalized. One option being considered calls for
    the MPF-F large deck aviation ships to be manned and operated by a MSC
    civilian crew while in a prepositioned status. MSC crews would be
    augmented by Active Duty Navy/Marine Corps and civilian contractor
    personnel who are charged with maintaining the prepositioned equipment
    and certain ship systems.
        Once operationalized, the MSC crew will be augmented by Navy and
    Marine Corps personnel to fully man required functions to employ forces
    ashore, such as the air department, ordnance department, combat
    information center, and ship's company. MSC crews would continue to
    provide non-warfighting support in propulsion, ship auxiliaries, and
    housekeeping.
        Excluding the self defense systems except crew served weapons the
    MPF-F LHA(R)s will be identical (with fact of life changes) to the
    legacy design.
        The MPF-F big decks, as part of the MPF-F, will deliver the
    Vertical Assault element of a reinforcing Third Marine Expeditionary
    Brigade (MEB) to complement the two MEBs delivered by Assault Echelon
    shipping in an MCO. MPF-F's big decks will also provide a substantial
    contribution to the sustainment of forces operating ashore by creating
    an air base at sea to generate ample sorties for air delivery of
    supplies and support of aircraft maintenance.

        38. Senator McCain. Admiral McCullough, has the Navy established
    capstone requirements to provide for defense of the sea-base ships,
    which by themselves lack the self-defense and damage control
    capabilities of amphibious warships?
        Admiral McCullough. A Capstone System Threat Assessment (ONI-CTA-
    003-06) was completed in May 2006. Additionally, on 15 January 2008 the
    Joint Staff for Intelligence (J-2) and Defense Intelligence Agency
    (DIA) certified concurrence with the assessed threat as laid out in the
    MPF-F Capability Development Document's threat section. The assessments
    identify potential, projected, and technologically feasible threats to
    MPF-F and will be used as the basis for threat delineation. It is
    anticipated that the primary threats shall be from aircraft, ships,
    submarines, coastal defense units armed with anti-ship cruise missiles,
    theater ballistic anti-ship surface-to-surface missiles, and air-,
    ship-, and submarine-launched mines. Secondary, but significant,
    threats also come from submarine-launched torpedoes; tactical air-to-
    surface missiles; other ordnance carried by sea- and land-based
    aircraft (fixed and rotary-wing); chemical, biological, and nuclear
    weapons; and in the future, directed energy weapons. When operating in
    the littoral environment, additional threats may be encountered from
    coastal artillery, multiple rocket launchers, small boats, and atypical
    sources such as torpedoes from coastal defense sites. A tertiary threat
    will include preemptive attacks or covert action from Special
    Operations Forces, combat divers and terrorists. Command, control, and
    communications (C3) electronic attack and electronic support systems
    may support the weapons threats.
        An MPF-F program-sponsored Sea Shield analysis was conducted for an
    approved MCO scenario. The scenario used an approved Multi-Service
    Force Deployment (MSFD) document for 2012 with friendly and threat
    capabilities extrapolated out to 2024. MPF-F was included in the force
    laydown operating from a sea base and delivering a MEB ashore from over
    the horizon. The Navy's Seabasing and Sea Shield pillars, Marine Corps
    Combat Development Command's Seabasing Integration Division, Naval Sea
    Systems Command, elements of the Joint Staff, and OSD's Program
    Analysis and Evaluation Branch participated in the development of the
    analysis. While operating in a threat environment, MPF-F will be
    protected by other Naval Sea Shield and/or other Joint or Combined
    forces commensurate with the threat. The analysis showed that an
    appropriate level of Sea Shield was attained to protect the MPF-F.

                              LITTORAL COMBAT SHIP

        39. Senator McCain. Admiral McCullough, the two versions of the LCS
    are very different, yet reportedly both meet Navy requirements. The
    Navy has previously stated the intent to gain efficiencies in
    construction and lifecycle by conducting a downselect once these ships'
    capabilities have been fully tested. What is the current Navy's plan
    for downselecting to a single design and opening up competition for
    construction?
        Admiral McCullough. The acquisition strategy for fiscal year 2010
    and out-year ships is under Navy review. OSD will conduct a Milestone B
    prior to fiscal year 2010 procurement. The Navy and OSD will consider
    the questions of down-selecting seaframes and the transition to full
    and open competition as part of the fiscal year 2010 acquisition
    strategy deliberations.

        40. Senator McCain. Admiral McCullough, what is the Navy's current
    estimate for follow ship costs on the program, and how is the Navy
    leveraging its plan to build a large number (55) of these ships to
    drive these costs down?
        Admiral McCullough. The statutory cost cap for LCS is $460 million
    per ship. However, execution within that cost cap will be a challenge
    as this estimate was based on its applicability to the fifth and sixth
    ships of the class and on two ships being appropriated in fiscal year
    2008. This procurement plan would have allowed increased sharing of
    some program costs between seaframes.
        The Navy believes that additional design maturity, production
    progress on LCS-1 and 2, and a competitive contract award between
    incumbent suppliers will enable the use of fixed-price incentive terms
    for the fiscal year 2008 ship appropriated by Congress and the two
    fiscal year 2009 ships that the Navy is requesting.
        When these first two ships are delivered, the Navy will be able to
    better evaluate their costs and capabilities, and to make decisions
    regarding the best manner to procure the remainder of the class. The
    acquisition strategy for fiscal year 2010 and outyear ships has not yet
    been formulated. OSD will conduct a Milestone B prior to fiscal year
    2010 procurement. The Navy and OSD will consider the questions of
    single seaframe assessment and the transition to full and open
    competition.

                           DDG-1000 DESTROYER PROGRAM

        41. Senator McCain. Admiral McCullough, the committee has strongly
    supported the DDG-1000 Destroyer, and views it as a critical capability
    for the future Navy. When considering that greater than $5 billion has
    been invested in new technologies for this ship, it's difficult to
    understand how the Navy has determined that a seven-ship program is the
    right size for the dollars invested and the missions envisioned for the
    class. How many DDG-1000 Destroyers are needed to meet the Marine Corps
    requirement for naval gunfire support in support of MCOs?
        Admiral McCullough. The Navy requires seven multi-mission DDG-1000s
    to support MCOs and to maintain presence in forward operating areas to
    support the warfighting needs of the combatant commanders, including
    meeting Marine Corps naval gunfire support. U.S. Marine Corps fire
    support requirements are specifically addressed with DDG-1000 Advanced
    Gun System and its Long-Range Land Attack Projectile which will meet 90
    percent of the Marine Corps' call for fires requirement within 5
    minutes.

        42. Senator McCain. Admiral McCullough, what are the accompanying
    assumptions regarding the availability of DDG-1000 ships to meet this
    mission, when accounting for depot maintenance and other employment
    factors?
        Admiral McCullough. The requirement for seven DDG-1000 ships in the
    Navy's Annual Long-Range Plan for Construction of Naval Vessels for
    fiscal year 2009 was based on analysis that included the following
    assumptions: intermediate and depot level maintenance periods and
    availability timelines, DDG-1000 employment across the globe, potential
    warfighting requirements, affordability in filling the Naval Fires
    warfighting gap, and acceptable risks.

        [Whereupon, at 3:56 p.m., the subcommittee adjourned.]