[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]


 
                         [H.A.S.C. No. 111-18] 

                 THE NAVY LITTORAL COMBAT SHIP PROGRAM 

                               __________

                                HEARING

                               BEFORE THE

             SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                             MARCH 10, 2009

                                     
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             SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE

                   GENE TAYLOR, Mississippi, Chairman
SOLOMON P. ORTIZ, Texas              W. TODD AKIN, Missouri
JAMES R. LANGEVIN, Rhode Island      ROB WITTMAN, Virginia
RICK LARSEN, Washington              ROSCOE G. BARTLETT, Maryland
BRAD ELLSWORTH, Indiana              J. RANDY FORBES, Virginia
JOE COURTNEY, Connecticut            DUNCAN HUNTER, California
JOE SESTAK, Pennsylvania             MIKE COFFMAN, Colorado
GLENN NYE, Virginia                  THOMAS J. ROONEY, Florida
CHELLIE PINGREE, Maine
ERIC J.J. MASSA, New York
                  Will Ebbs, Professional Staff Member
               Jenness Simler, Professional Staff Member
                  Elizabeth Drummond, Staff Assistant

















                            C O N T E N T S

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                     CHRONOLOGICAL LIST OF HEARINGS
                                  2009

                                                                   Page

Hearing:

Tuesday, March 10, 2009, The Navy Littoral Combat Ship Program...     1

Appendix:

Tuesday, March 10, 2009..........................................    43
                              ----------                              

                        TUESDAY, MARCH 10, 2009
                 THE NAVY LITTORAL COMBAT SHIP PROGRAM
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Akin, Hon. W. Todd, a Representative from Missouri, Ranking 
  Member, Seapower and Expeditionary Forces Subcommittee.........     3
Taylor, Hon. Gene, a Representative from Mississippi, Chairman, 
  Seapower and Expeditionary Forces Subcommittee.................     1

                               WITNESSES

Guillory, Rear Adm. Victor G., USN, Director, Surface Warfare 
  Division, N86, U.S. Navy.......................................     7
Landay, Rear Adm. William E., USN, Program Executive Officer, 
  Ships, U.S. Navy...............................................     8
Sandel, E. Anne, Program Executive Officer, Littoral and Mine 
  Warfare, U.S. Navy.............................................    10

                                APPENDIX

Prepared Statements:

    Guillory, Rear Adm. Victor G., joint with Rear Adm. William 
      E. Landay and E. Anne Sandel...............................    54
    Taylor, Hon. Gene............................................    47

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    [The responses were communicated verbally and are not 
      available for print.]

Questions Submitted by Members Post Hearing:

    [There were no Questions submitted post hearing.]
                 THE NAVY LITTORAL COMBAT SHIP PROGRAM

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
            Seapower and Expeditionary Forces Subcommittee,
                           Washington, DC, Tuesday, March 10, 2009.
    The subcommittee met, pursuant to call, at 10:04 a.m., in 
room 2118, Rayburn House Office Building, Hon. Gene Taylor 
(chairman of the subcommittee) presiding.

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

    Mr. Taylor. The hearing will come to order. Good morning 
and welcome.
    Today the subcommittee meets in open session to receive 
testimony on the Littoral Combat Ship (LCS) program.
    Our witnesses today are Rear Admiral Vic Guillory, director 
of surface ship programs for the chief of naval operations; 
Rear Admiral Bill Landay, the program executive officer for the 
surface ship structure; and Ms. Anne Sandel, program executive 
officer for Littoral and mine warfare.
    I want to thank our witnesses for being with us.
    To call the LCS program troubled would be an 
understatement. The fact of the matter is that this program has 
so far delivered one ship--one ship.
    But a look at the plan from just two years ago, we should 
by now have at least four ships delivered, three more nearing 
completion from a fiscal year 2008 authorization, six more 
under contract from a fiscal year 2009 authorization, and today 
we should be discussing the authorization of six more ships for 
fiscal year 2010. That would be a total of 19 ships.
    So instead of having 13 delivered or under contract, with 
another 6 in this year's budget, we have 1 ship delivered that 
will likely tip the scales well above two-and-a-half times the 
original estimate, and 1 ship that might finish this summer 
with similar, if not higher, cost growth.
    The Navy canceled two previously authorized ships. No ships 
were placed under contract for fiscal year 2008, and no 
contract award has been made for the two ships authorized for 
fiscal year 2009--all of this from the program that was hailed 
as a poster child for its transformational and affordable 
acquisition strategy.
    It seems all the program has accomplished is transforming a 
realistic goal of achieving a 313-ship fleet into a very real 
disappointment in which neither competitor shows remorse for 
being a year late and hundreds of millions of dollars over 
budget.
    And from what I can see, neither competitor has a plan or 
even a desire to do any better, because they can count on the 
Navy throwing more money at their problems.
    This program is not just a lesson of over optimism, poor 
management and lack of poor oversight, even though all those 
things occurred in spades.
    The fundamental lesson is flawed strategic planning, flawed 
in the belief that the government can pass on to industry 
decisions that are inherently governmental, flawed in the 
belief that untested, unproven concepts, such as reconfigurable 
mission modules, can be incorporated into an acquisition 
program without testing and verifying the concept of surrogate 
platforms, and finally flawed to the absence of a Plan B for 
needed capability in the fleet.
    I believe it is a lack of Plan B which has tethered the 
Navy so completely to this program. Particularly in the area of 
mine warfare, the LCS is the only future they see. Dropping the 
LCS program to develop another mine warfare platform is viewed 
as unacceptable on the schedule. And they might be correct.
    However, because the Navy is at this moment stuck with 
continuing the LCS program, it does not mean its current 
strategy for buying these ships has to continue.
    I have nothing against either of the lead contractors, but 
I know this. They both contracted to build a ship for $220 
million, and they did not even come close.
    I understand the Navy was guilty of changing the design 
specifications with the implementation of the Naval Vessel 
Rules, but I fail to see how that resulted in more than 
doubling the price and slipping 18 months of schedule.
    I am also concerned that the Navy has not been able to come 
to terms with the contractors for the ships authorized last 
year. It appears to me the solution is simple. We need to bring 
true competition to this program, not the pseudo competition we 
currently have between the two poor performers, but true 
competition based on price, schedule and quality.
    I have been asking for over two years if our nation owns 
the rights to the design drawings of the ships so they can bid 
them out directly to any shipyard with the capability of 
constructing the vessels. The answer seems to be yes and no.
    I have got to believe at this point we should know every 
inch of bar, angle iron and plate in those ships, every piece 
of pipe. And every inch of weld ought to be on someone's CAD. 
And if it isn't by now, I would like to hear why.
    I understand the prepared witness testimony will address 
this question. However, I would like the witnesses today, on 
the record, to explain that position and answer in layman's 
terms, not in the language of professional acquisition 
executive, the exact claim the government has on the technical 
design rights to both the sea frame and the combat system.
    Then I would like our witnesses to explain how long it 
would take, what organization would be responsible--in 
particular who would be responsible--and how much it would cost 
to develop the technical data package described in the prepared 
statement that is required to bid ships directly to other 
shipyards or to current shipyards divorced of their lead 
contractors.
    Ranges of cost and time are acceptable. What is not 
acceptable is taking this question for the record.
    So far I have discussed just one ship, just what the Navy 
refers to as the sea frame. Today's hearing for the first time 
brings in an official responsible for the mission packages that 
are purported to give this vessel a multi-mission capability.
    Although at least one of each type of mission modules has 
been developed, I am very concerned that major components of 
the overall mission package are still under development and 
have not been thoroughly tested. Therefore, I would request 
that Ms. Sandel update the subcommittee on the remaining 
development and testing for all the mission packages.
    I would also like to know if anything in existing Navy 
platforms can operate with an LCS mission module as a stopgap 
capability filler until sufficient LCS ships are constructed.
    Everyone should understand that the current situation of 
these vessels, costing in excess of a half a billion dollars, 
cannot continue. There are too many other needs and too little 
resources to pour money into a program that was designed to be 
affordable.
    I would also like to remind all of the parties involved, 
particularly right now, that you do not want to be the program 
that is breaking the bank. From what I read in the newspapers, 
there are no protected programs in the ongoing debate on 
affordability.
    Of course, none of the witnesses sitting in front of us 
today was responsible for the program when it began. They 
inherited a mess, and they are doing their best to fix it. I 
appreciate that.
    Now is the time for frank talk on what needs to be done. We 
need the best price and the best quality we can get for these 
vessels, whether with the current lead contractors, after they 
finally get the message, or changing course and bidding 
directly with other shipyards.
    Before I ask the ranking member for his remarks, I would 
like to remind the subcommittee that competition sensitive 
information, such as current estimates of prices, are protected 
by statute.
    However, the Navy has agreed to answer these types of 
questions directly to individual members in an appropriate 
forum and under the conditions agreed to by the Navy, general 
counsel at our committee.
    I now call my friend from Missouri for any remarks he may 
wish to make.
    [The prepared statement of Mr. Taylor can be found in the 
Appendix on page 47.]

STATEMENT OF HON. W. TODD AKIN, A REPRESENTATIVE FROM MISSOURI, 
 RANKING MEMBER, SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE

    Mr. Akin. Thank you, Mr. Chairman.
    And welcome to the hearing. Thank you all for visiting us 
on what is a rather substantial topic.
    Today is my first opportunity to join the subcommittee in 
overseeing the Navy's shipbuilding program. I have already 
begun to grasp the many complexities unique to the acquisition 
of battle force ships.
    I recently had the opportunity to join Congressman Taylor 
at Austal USA in Mobile, Alabama, where the LCS-2 is under 
construction, and it is certainly an innovative ship. But even 
a newcomer to shipbuilding can see that much remains to be 
done.
    I understand this program has faced many challenges, but a 
simple principle seems to have gotten lost. The principle isn't 
exclusive to shipbuilding: in sum, the importance of 
transparency and accountability in acquisitions programs 
grounded in sound strategy. And that cannot be overstated.
    Sadly, in its early days the LCS program appears to have 
lacked accountability. Many important steps have been taken to 
rectify the situation, but the program still lacks a well-
conceived strategy.
    At various times in the last two years, the Navy has 
proposed a fly-off and down-select between these two flight 
zero ships, to be followed by a redesign for a flight one ship, 
investing in a class design services effort to convert the 
selected design to build to print and recompeting the class, 
redesigning the ships to include a common combat system in 
both, and last, an apparent desire to procure both ships from 
the existing teams with minimal changes.
    We cannot reasonably expect the industry teams to make the 
investments in facilities and designs for affordability we 
demand, if we cannot articulate what we want to buy.
    Further, we cannot reasonably expect the taxpayers to 
continue to fund ships that we cannot definitively say what we 
want. Even Obama's sweeping comments about cutting defense 
spending and weapons programs, do any of us believe we can 
defend a program for which we have no acquisition strategy and 
for which we have long since surpassed the acquisition cost 
target identified in the programs key requirements document?
    Just last week, the president stated far too often that 
spending is plagued by massive cost overruns and an absence of 
oversight and accountability. We need more competition for 
contracts, more oversight when they are carried out.
    His goal is to save $40 billion a year, and many observers 
have cautioned that this won't be possible unless he starts to 
kill major Pentagon weapons systems.
    Now, I am in no way advocating that the LCS program fall 
victim to such a cut. I have every reason to believe that this 
program represents a critical capability for our warfighters. 
Despite the cost overruns, it can still become the most 
affordable ship in the Navy's fleet.
    But there remain many questions which have not been 
answered to my satisfaction. I am going to list five of those.
    First, is the LCS program still affordable within the 
context of the overall shipbuilding program? That is, what 
would we have to give up in order to afford 55 of these ships 
at a cost of approximately half a billion dollars?
    Second, although the Navy has pushed for buying the LCS in 
substantial numbers prior to an operation evaluation of the 
first ships, given that the operational valuation of these 
ships will now be conducted within the next 18 months, would it 
be prudent to wait to procure additional vessels until the 
evaluation is complete?
    Third, the high cost of shipbuilding frequently has its 
roots in decisions we make to protect the industrial base. 
These decisions have merit.
    We want to ensure that this nation has surge capability and 
doesn't lose the national treasure that is the shipyard worker, 
but we need to be very cautious about increasing capacity for 
which the Navy lacks the volume to support.
    And the fourth question: When the Navy has canceled two 
ships, failed to award the fiscal year 2008 ship before the 
appropriations rescinded the funds, and has yet to reach 
agreement on the 2009 ships, it has elected to incrementally 
fund construction on follow-on vessels.
    Again, these decisions may be expedient in the near term to 
avoid layoffs, but will we lack here in two years discussing 
root causes of cost growth for the follow-on vessels and citing 
incremental funding?
    Fifth, I want to applaud Secretary Stackley's determination 
to control costs. He has wisely chosen not to award follow-on 
contracts if the industry teams can't demonstrate they are on 
the glide slope to $460 million.
    He has also forced behavior changes on LCS-2 to prioritize 
completion of construction. Yet if we accept delivery of ships 
or award ships that do not have all systems fully integrated, 
what bill are we leaving for a future Congress?
    Lastly, the mission packages are really what make LCS a 
valuable tool for the warfighter. The Navy has not taken 
aggressive steps to integrate and test these mission systems or 
train crews on the systems on other platforms.
    I echo the chairman's strong concern that we cannot 
continue to wait for LCS to be available in sufficient numbers 
to develop and deploy these capabilities.
    Mr. Chairman, thank you for holding the hearing today.
    Admiral Guillory, Admiral Leahy and Ms. Sandel, I look 
forward to your testimony and thank you for being with us.
    Mr. Taylor. I thank the ranking member. We have been joined 
by Mr. Stupak, who represents the Marinette area, so with 
unanimous consent I would ask that he be allowed to join the 
subcommittee for the day.
    The chair now recognizes the gentleman from Michigan for 
five minutes.
    Mr. Stupak. Well, thank you, Mr. Chairman. And it has been 
15 years since I sat on this committee. It is good to be back 
on this side of the dais. And thank you for your interest in 
the LCS program.
    You know when you take a look at this program here from 
concept to design to a functional ship--we built one up in 
Marinette Marine, the first one, Freedom, which was actually 
commissioned in Milwaukee, Wisconsin, on November 8, 2008, and 
will be stationed at San Diego naval base--this is a whole new 
ship, like I said, a new design, new concept.
    Since 9/11 we have new adversaries. We have different types 
of missions. So the Navy needed a new ship, and your target 
started from scratch on a concept to a full ship that was built 
and presented to the Navy, built up in Marinette Marine.
    Lockheed Martin had to partner with Marinette Marine to 
build the first LCS because of the strong advantage of 
constructing a ship in a mid-tier shipyard. Mid-tier shipyard 
shipbuilders facilitate competitiveness and establish 
affordable approach to a program.
    The chairman is right. We should have 19 more ships, and we 
are happy to build the next 18 up in Marinette Marine.
    But there has been some--because it was a new design, a new 
concept, constantly changing it, there were delays, but in the 
meantime as we built the first ship, since then we have had to 
lay off 150 employees at Marinette Marine.
    This week they were going to lay off another 200, but 
because of a partial award of the LCS contract to Lockheed 
Martin on February 27th, those layoffs have been--they are not 
going to do the layoffs.
    The full award of the contract and successful continuation 
of the program would stabilize the employment in this region.
    But the LCS is not only vital to the economy of northern 
Michigan, it is also immensely--production prospects for the 
U.S. and abroad--all of our allies are very excited about this 
new ship, this new class of warfare ship.
    We could bring in many, many more ships, more than just 
what the Navy needs and being built and cruised here in the 
United States. You know with the Navy there is also--besides 
warfare, we see anti-piracy operations. We see humanitarian aid 
operations, what this ship is suited for.
    The recent award of the LCS contract, the one I just spoke 
about that was partially awarded here on February 27th, has 
taken some time to get these complex negotiations done between 
the Navy and the shipbuilders.
    There were many production standards that are shifting to 
try to get these contract details without changing so we can 
get the ship that can be built at the cost of chairman spoke 
of, but not the first few.
    The lead ships are always--a lead program on anything is 
always more expensive than originally thought of, but as you 
put more ships out, that price will go down.
    As the Navy continues to fix the contract awards for ships 
authorized and funded in fiscal year 2009, I encourage the 
Navy, Lockheed Martin and General Dynamics to expediently 
address the contract details so that construction can proceed 
without further delays.
    We are willing, ready and able and can produce the type of 
ship that the Navy needs.
    So with an experienced team in place and production 
facilities on line, the program is ready for an early 
transition to full rate production. Doing so will reduce the 
costs and minimize the learning curves.
    The LCS program is not only important to my Menominee 
Marinette area, but also the future capabilities of the Navy 
and to the defense of this nation.
    So I urge the committee to consider not only the local 
impact of the award and the shipbuilding technology that we 
brought with this brand-new type of ship, but also to continue 
its discussions regarding the future of the current contracts 
and of the LCS program with the Navy, because this ship, which 
is needed with our new adversaries and the new demands on our 
country, the LCS is a ship that is appropriate to meet the 
needs of the Navy.
    And we are proud to be playing a part in building such a 
ship for the Navy and for this nation.
    Thank you, Mr. Chairman. With that, I yield back.
    Mr. Taylor. The chair thanks the gentleman from Michigan.
    Our witnesses today are Rear Admiral Victor Guillory, 
Director of Surface Warfare Division, United States Navy; Rear 
Admiral William Landay, Program Executive Officer for Ships, 
the United States Navy; and Ms. Anne Sandel, Program Executive 
Officer of Littoral and Mine Warfare.
    The chair recognizes Admiral Guillory.

   STATEMENT OF REAR ADM. VICTOR G. GUILLORY, USN, DIRECTOR, 
            SURFACE WARFARE DIVISION, N86, U.S. NAVY

    Admiral Guillory. Excuse me. Chairman Taylor, Ranking 
Member Akin, distinguished members of the subcommittee, thank 
you for the opportunity to appear before you today to address 
the Navy's Littoral Combat Ship program.
    Along with Rear Admiral Bill Landay and Ms. Anne Sandel, we 
thank the committee for its continued support and active 
interest in the Navy shipbuilding programs.
    We have prepared a written statement and asked that it be 
entered into the record.
    Mr. Taylor. Without objection.
    Admiral Guillory. I would like to begin my remarks, Mr. 
Chairman, by stating the Navy remains committed to the LCS 
program. LCS fills warfighting gaps in support of maritime 
dominance in the Littorals in its strategic chokepoints around 
the world.
    The LCS expands the battle space by complementing our 
inherent blue water capability. The LCS program will deliver 
capabilities to close validated warfighting gaps in mine 
countermeasures, surface warfare and anti-submarine warfare.
    In addition to LCS' inherent speed, agility, shallow draft, 
payload capacity and reconfigurable mission spaces, the ship is 
an ideal platform for conducting additional missions in support 
of the maritime strategy to include irregular warfare and 
maritime security operations, such as counterpiracy operations.
    The strength of LCS lies in its innovative design approach, 
applying modularity for operational flexibility. LCS has over 
40 percent internal volume, giving reconfiguration capabilities 
for up to 200 tons of equipment.
    This ability to modify the LCS' physical configuration with 
different mission packages give the operational commander 
credible options for responding to changing warfighting 
requirements.
    The Navy also remains committed to procuring 55 LCSs. We 
are systematically pursuing cost reduction measures to ensure 
delivery of future ships on a schedule that affordably paces 
evolving threats.
    Affordability will be realized through a regular review of 
warfighting requirements and applying lessons learned from the 
construction and that test and evaluation of sea frames 
admission packages.
    The Navy, as part of its annual review of its shipbuilding 
program, expect there will be sufficient force structure with 
our existing frigates and mine warfare ships until LCS delivers 
in quantity to meet deployment requirements.
    Legacy mine warfare ships and frigates are planned to be 
phased out gradually. These decommissioning to be balanced with 
LCS mission package and sea frame deliveries to mitigate 
warfare risk.
    In summary, Mr. Chairman, the Navy remains committed to the 
LCS program. A 55-ship LCS class will give our Navy the 
advantage it needs to maintain dominance in the Littorals.
    In the near term, the Navy continues to work diligently to 
find efficiencies in construction and test and evaluation 
phases so that the Littoral Combat Ships are delivered as 
deployable assets in as timely a manner as practical.
    We appreciate your strong support and the opportunity today 
to testify before the subcommittee regarding the LCS program. I 
will be pleased to answer your questions following the opening 
remarks by Admiral Landay and Ms. Sandel.
    Thank you, Mr. Chairman.
    [The joint prepared statement of Admiral Guillory, Admiral 
Landay, and Ms. E. Anne Sandel can be found in the Appendix on 
page 54.]
    Mr. Taylor. Thank you, sir.
    Admiral Landay.

    STATEMENT OF REAR ADM. WILLIAM E. LANDAY, USN, PROGRAM 
              EXECUTIVE OFFICER, SHIPS, U.S. NAVY

    Admiral Landay. Chairman Taylor, Congressman Akin, 
distinguished members of the committee, I would also like to 
thank you for the opportunity to appear here today and discuss 
the Navy's Littoral Combat Ship program.
    I appreciate your personal attention to LCS, including 
recent visits by members of the committee to some of our 
shipbuilders.
    When the LCS program was initiated, it had two overarching 
goals: to address, identify and validate the warfighter in 
requirements in the Littoral battle space and to challenge many 
of the existing processes, procedures and conventions in naval 
shipbuilding that many believed had become too slow, risk 
adverse, and focused on a narrow set of solutions sets.
    There was a belief held by some in both the Department of 
Defense (DOD) and the shipbuilding industry that we needed a 
different approach, one that allowed less conventional designs, 
greater use of commercial standards, and be focused on adapting 
existing systems available from throughout the world instead of 
along the R&D development effort.
    LCS was seen as a class of ship that would benefit greatly 
from such an approach. Today we are 6 years into this effort, 
and as we look back, the results are mixed.
    In some areas we have been successful. We have the first 
ship delivered 6 years after the program started, and based on 
initial inspections and evaluation, it is performing as 
required.
    And we are close to delivering our second ship of a 
significantly different design later this year, two ships 
delivered in the time we traditionally would be completing 
initial design studies.
    These are ships with unique capabilities to support mission 
packages, unmanned vehicle launch and recovery, open 
architectures, and a number of proven Hull, Mechanical and 
Electrical (HM&E) and combat systems from outside our 
traditional sources.
    The reduced crew size of this vessel and its reliance on 
many practices from the commercial maritime industry drove us 
to more aggressive use of electronic navigation, unmanned and 
automated engineering spaces, improved focus on human interface 
to reduce workload, and automated damage control systems 
practices, which will have a great applicability to other ships 
throughout the fleet.
    These parts of the program we have executed well.
    Unfortunately, there are other aspects of the program where 
we have not had similar success. While we wanted to challenge 
our practices and processes, in a number of cases we overlooked 
hard learned, fundamental lessons of shipbuilding.
    You must have a solid, mature design before you start 
construction. You cannot be negotiating standards and adding 
new technical requirements while you are building a ship. And 
if you have to make major changes, you need to stop and get 
them right, because rework kills productivity.
    And you must have sufficient experience to management 
dedicated to the program to be able to identify and deal with 
rapidly emerging issues.
    We have addressed these issues and LCS today in the 
following ways.
    The design for both ships is mature, and we are 
incorporating revisions to specific areas based on lessons 
learned from the construction of the initial ship, proposed 
production improvements, acceptance inspections and early 
stages of the post-delivery testing period.
    These revisions will be in place by the start of 
construction on the 2009 ships.
    The Navy has increased the staff assigned to the program 
office and at the shipyards to monitor performance. The program 
staff has grown from eight to 20 personnel, with additional 12 
billets assigned as the two lead ships complete delivery and 
post-delivery milestones this year, and more ships are placed 
under contract.
    Similar increases have been made in the waterfront 
oversight area.
    The fiscal year 2009 and fiscal year 2010 options will be 
fixed price contracts to ensure that costs and schedule 
adherence remain a primary focus both to industry and the 
government program teams.
    There are no new technical or warfighting requirements 
added to the fiscal year 2009 ships.
    We have two shipbuilding teams, who have the experience of 
building their initial ship, and we have worked to incorporate 
the lessons learned from the first ship into their follow-on 
production. Learning curve benefits should be evident on the 
fiscal year 2009 and 2010 ships.
    In closing, LCS brings a critical capability to our nation. 
The Navy is committed to controlling costs and has taken 
actions to correct issues in the program. These corrections are 
in place, and we continue to work on improving our performance 
and that of our industry teams.
    There are challenges that still remain in this program as 
we work to get to steady-state production, but we believe that 
we are prepared to handle them as they emerge.
    Again, thank you for this opportunity to appear before the 
committee, and I look forward to your questions.
    Mr. Taylor. Thank you, Admiral.
    The chair now recognizes Ms. Sandel.

    STATEMENT OF E. ANNE SANDEL, PROGRAM EXECUTIVE OFFICER, 
              LITTORAL AND MINE WARFARE, U.S. NAVY

    Ms. Sandel. Chairman Taylor, Ranking Member Akin, 
distinguished members of the subcommittee, good morning. My 
name is Anne Sandel.
    Mr. Taylor. Ms. Sandel, you going to either have to turn on 
your mic or get closer to it.
    Ms. Sandel. Good morning. Chairman Taylor, Ranking Member 
Akin, distinguished members, I am Anne Sandel, the program 
executive officer for Littoral mine warfare.
    I welcomed the opportunity to be here today to testify 
before the committee and to talk about the Littoral and Mine 
Warfare (LMW) programs, which have made significant 
contributions in developing and acquiring and maintaining 
operationally superior and affordable systems, providing 
assured access for U.S. and coalition forces to Littoral.
    Our efforts are sharply focused to meet the joint 
warfighting forces requirements for dominance and for system 
access.
    Today I am here specifically to discuss the LCS mission 
modules program and share with you the progress we have made in 
designing, developing, procuring, integrating and testing the 
mission modules for the Littoral Combat Ship.
    The Navy has completed the rollout for the first of each 
type of mission package, has installed the mission package 
computing environment within LCS-1, and has initiated American 
Customer Satisfaction Index (ACSI) integration testing for the 
anti-submarine warfare mission package.
    Each package provides warfighting capabilities for the one 
of three focused mission areas: mine countermeasures, which are 
detection and neutralization of mine threats; surface warfare 
for maritime security missions and defeating small boat 
attacks; and antisubmarine warfare, countering the shallow 
water diesel submarine threat.
    These mission packages can be changed out over a 96-hour in 
port period so the ship is reconfigured and optimized for a 
different mission.
    Mission package reconfiguration in LCS affords the 
combatant commander of flexible response to changing 
warfighting environments and is one of the signature design 
elements of the LCS class.
    The quantity of each mission package type differs, based on 
analysis of projected operational requirements. Therefore, 
mission packages are developed and procured separately from the 
sea frame, a revolutionary concept to shipbuilding.
    Employing an open business model facilitates upgrades to 
the LCS to warfighting capabilities as the threats evolve, and 
the open concept also helps us to reduce the total ownership 
cost of LCS over the years to come.
    Again, we appreciate the sport of the House Armed Services 
Subcommittee, and I personally thank you for the opportunity to 
talk to today, and I look forward to answering your questions.
    Mr. Taylor. The chair thanks all of our witnesses.
    Admirals, again, I very much appreciate your many, many 
years of service to our nation and the hardships of your time 
you spent away from your families, and the hardships you have 
endured.
    My frustration is not with your service records. My 
frustration is with your program.
    If 60 Minutes were to walk through your door, put a 
microphone in front of you and say, ``Admiral, you got 
something that was supposed to be a simple ship, mass-produced 
for about $220 million apiece. They are 18 months behind 
schedule, $300 million over schedule. Apparently every inch of 
the second vessel was welded by hand rather than by machine, 
and I don't see any plans that any future vessels are going to 
be produced any cheaper or any faster. And by the way, the 
competition that was supposed to be winner take all is now you 
have basically said, `No, we are going to build some of each,' 
so you got two D-minus students, who are being graded on a 
curve, and so they have automatically got a C now, because they 
are only competing against each other.''
    Tell me how you would answer that question.
    Admiral Guillory. Well, sir, I would like to start.
    If, as you laid out, they walk through the door with a 
microphone and asked me about LCS, I think I would start out by 
reassuring them that the requirements for the ship was based 
upon a lot of study and a lot of analysis.
    It clearly focused on the capability gaps in three major 
areas, as Ms. Sandel has laid out.
    Mr. Taylor. Admiral, it is not about the need for the 
vessel. It is about the delivery and the cost of the vessel. No 
one is doubting the need. What we are doubting is whether or 
not these vessels at the present time are affordable, whether 
the next series is going to be any more affordable, that they 
will be built on time, because these weren't built on time.
    So what has changed between vessels one and two that gives 
you, or more importantly, this Congress, which has to look the 
American taxpayer in the eye, any confidence that any follow-on 
vessels are going to be any closer to being on time and 
anywhere near the original projected cost?
    I ought to also remind you that the price of aluminum is 
one-half of what it was two years ago, the price of copper is 
down just as dramatically, that there are machine shops and 
shipyards all over this country that are desperate for work.
    And so the question would be, what makes you feel you owe 
these two shipyards anything, as far as the future, and what 
steps are you taking to broaden your base of suppliers and turn 
some of these opportunities into savings for the taxpayer and a 
fleet in the Navy saying sooner rather than later?
    Admiral Landay. Mr. Chairman, let me take that part of the 
question, since it is directed more at the acquisitions side.
    I would tell you today we have far more confidence in our 
ability to understand and have in fact mitigated the risk of 
these ships, because we have in fact built one and are about 85 
percent complete on the other second one.
    Initially, as we have discussed before, we started a 
design, and we started construction before our design was 
complete. Our designs now are very complete.
    We have learned a lot of lessons in the course of the 
construction of the first two ships, from the imposition of 
Naval Vessel Rules to changes to rework that. In some cases the 
government required of them and in some cases the contractors 
had themselves.
    We have learned those lessons, and we have incorporated 
those into the follow-on ships starting with the fiscal year 
2009 ships.
    We have implemented or seen the yards implement 
infrastructure improvement, going to the modular manufacturing 
facilities. We have seen infrastructure improvements being put 
in place that will start to come online this year that will 
continue to improve their processes.
    We have spent a fair amount of time over the last year with 
both of the companies, going back and looking at specifications 
that we put in place that may have driven costs and having a 
discussion with them on whether we would still leave those in 
place or whether we could remove those.
    We worked very hard with both companies to ensure that the 
design package that will be in place for the second ship is far 
more complete and incorporates many of the lessons learned that 
we made during the course of the first ship.
    So we have done a lot to ensure that what happened on the 
first ship is not in place to happen on the second ship. And we 
also know that across our history, shipbuilders, good 
shipbuilders--and we believe both of these are good 
shipbuilders--get better as they get to go to the second and 
third ships in the series.
    And so we do believe that the learning curve that we would 
expect to see from any good shipbuilders we are going to see in 
these two ships as they go down to the next set of ships.
    Having said that, there is a very strong focus with us with 
those shipbuilders to ensure they are focused on costs and they 
are focused on price.
    And one of the reasons why we have not yet awarded our 
fiscal year 2009 ships is because we continue to have very 
strong discussions with both shipbuilders in areas where we 
believe there can be some cost savings or where they believe we 
are driving costs into their program.
    So I would tell you today we believe we are much more 
confident that we understand these ships. The shipbuilder you 
know, will get better over the next set of ships.
    Mr. Taylor. Well, Admiral, since you said that, this 
subcommittee has about $14 billion a year to build 10 or 12 
ships, and that is what we have to do, assuming that those 
ships are going to last for 30 years in order to get to a 300-
ship Navy.
    We have to deal in hard numbers. So having said, you did 
not mention the price of aluminum being down. You did mention 
that you think the shipyards would do better next time.
    So what do you anticipate the cost of LCS-3 and LCS-4 to 
be? What should this subcommittee budget?
    Admiral Landay. Well, sir, again, I am reluctant to talk 
costs to you in this----
    Mr. Taylor. Sir, we have to talk costs.
    Admiral Landay. But I am in the middle of the contract 
negotiations.
    Mr. Taylor. You may be reluctant all day long, because at 
the moment I have got to tell you, Admiral, I don't think this 
ship is a bargain. I think these suppliers are taking advantage 
of our nation, and I am very reluctant to allocate a dime.
    Now, we are going to work with the will of the 
subcommittee, but I think we need some reassurances that you 
have prices under control, and that translates into hard and 
fast numbers.
    Admiral Landay. Well, yes, sir, and again, I would be happy 
in a closed session to tell you what we think those numbers 
are, based on the ongoing contract discussions.
    What I can tell you is we understand that there is a cost 
cap. And as Secretary Stackley talked to you, we are working to 
ensure that we are driving both of these ships toward that cost 
cap for fiscal year 2010.
    Now, what we are going to--the cost of the ship is going to 
be in fiscal year 2009 will be a function of what the end 
results of the contract discussions are. But I will tell you 
they are on a path to get toward the cost cap.
    Mr. Taylor. The chair recognizes Mr. Akin.
    Mr. Akin. Thank you, Mr. Chairman.
    I have a couple of bites and quick questions, and then 
maybe some little longer. The first thing is in terms of this 
program, is it really clear that there is one person in charge 
of this program?
    Admiral Landay. Yes, the program manager and then the 
Program Executive Officer (PEO), the job that I have, are 
responsible for executing the acquisition part of it.
    The Chief of Naval Operations (CNO), Admiral Guillory, as 
part of N86 (Surface Warfare Division), is responsible for 
setting the requirements consistent with the way that we do 
most ship classes.
    And then Ms. Sandel has the mission packages under the 
broad auspice of my responsibility as PEO ships and the program 
manager.
    Mr. Akin. One of the things that I learned early on--I used 
to work for IBM--is if you have something that is really an 
important project, you need to have one person, who has got the 
responsibility for it, held accountable for it.
    And so when I am looking at something, which is more than 
100 percent over budget and 18 months late, it says to me 
somewhere along the line something went wrong.
    I guess maybe backing up a little bit, was the $250 million 
ship--was that something that was just a pipedream to begin 
with?
    Were these things low bid by both builders, knowing that 
the thing would go up, and they just basically said, ``Hey, the 
way the game is played, quote a low number, get the contract, 
and then jack it up.''
    Is that the way we do it? Or is there anything that we have 
to prevent bidders from doing that?
    Admiral Guillory. Sir, I will start with that question. The 
220 number that was initially estimated for the cost of the 
Littoral Combat Ship, the sea frame, the ship itself, was based 
upon a number of factors.
    Those factors included the fact that it was being built on 
commercial standards. The strategy was to look at what would be 
commercially available, propulsion, hull mechanical and 
electrical systems, and take advantage of the attributes that 
have been demonstrated in the commercial sector and deliver to 
the ship the high-speed, shallow draft warship that we----
    Mr. Akin. So stop just a minute. So what you are saying is 
that 220 was based on a commercial hull design, not the Navy 
higher requirements type of hull design. Is that right?
    Admiral Guillory. Yes, sir. That is correct.
    Mr. Akin. Okay. Then we made the decision to go from a 
commercial type hull to a hull that had all kinds of additional 
capabilities, take shock and everything like that, so it is 
much different and heavier than a commercial hull would be. Is 
that correct?
    Admiral Guillory. Yes, sir. Naval Vessel Rules----
    Mr. Akin. And who made--so as soon as you do that, you make 
the hull much more expensive, right?
    Admiral Guillory. There is cost associated with 
strengthening the ship.
    Mr. Akin. So who made that decision to go from the 
commercial to a Navy standard hull, then?
    Admiral Guillory. Well, that was a Navy decision, and it 
was a decision made based upon the recommendations from the 
technical community. It was based upon the survivability needs 
for a warship that is going to go in harm's way and 
survivability requirements for a ship to do that, which 
commercial standards could not meet.
    Mr. Akin. Okay. Okay. So what you have already--what you 
are telling me is is we started with one idea, which was a 
commercial type hull. Then we threw that strategy aside and 
went to a more robust kind of hull.
    I am not questioning whether which one is better or not. I 
don't know. But I know one thing, and that is you are changing 
your mind as you are going along, right? You start with a 
commercial hull. Now you say we are going to go to a more 
robust kind of hull that will cost more money.
    Were there other major kinds of changes in the design, 
which also resulted in this more than doubling of its cost? 
Well, if you had to pick the three things that kept us from the 
$200 million to the $400-something million, what are the three 
biggest contributors to those costs increasing?
    Admiral Landay. Well, I would say the change to Naval 
Vessel Rules----
    Mr. Akin. The hull design, basically?
    Admiral Landay. The hull design. Yes, sir.
    Mr. Akin. Okay. The second thing would be what?
    Admiral Landay. We did that while we were getting ready, or 
had already awarded the contract and were in fact in the early 
stages of construction, so it required us to do a lot of 
concurrent design change as we were going, which ends up 
driving you into a lot of rework into the program.
    Mr. Akin. Which is still the same point, which is we 
changed the hull design.
    Admiral Landay. Yes, sir.
    Mr. Akin. Okay. So that is the biggest single one. What is 
the second biggest single one?
    Admiral Landay. Again, the rework, as I mentioned, kind of 
related to that.
    I would say that the third key piece of this is in any new 
program, the cost growth, the unknown unknowns were more 
significant than we expected. We always expect that there are 
going to be some. I think we found there to be more than we had 
expected in both of these yards--again, not unique to those 
yards----
    Mr. Akin. What were those unknown unknowns connected with? 
What were the main ones?
    Admiral Landay. I would say that, again, the design, the 
use of American Bureau of Shipping standards, which is a new 
process that we had in place, and some confusion initially as 
we build our business rules on how we would look with American 
Bureau of Standards, which drove a fair amount of re-look and 
multiple looks at the design, which then slowed the design 
down.
    On LCS-1 we had a problem with the reduction gear 
initially. It turned out to be much longer than we thought, 
which again caused us to do some concurrent redesign. You know 
so that I would say would be the second key piece that we found 
in it. And then----
    Mr. Akin. That was LCS-1. You had something in the 
reduction gear.
    Admiral Landay. Yes, sir. In the initial design----
    Mr. Akin. How big is that compared to just this completely 
redesigning the hull?
    Admiral Landay. It ended up being about a 26-week 
implication and a fair amount of rework.
    Mr. Akin. So timewise, it hurt us.
    Admiral Landay. Yes, sir. And then----
    Mr. Akin. Cost?
    Admiral Landay. And then as a result of that, what we did 
at the time--again, not understanding how long I think that 
total delay was going to be--we tried to continue concurrent 
construction around that and then got ourselves in a situation 
where we had to come back and do a fair amount of rework as 
that period stretched out.
    Mr. Akin. It seems to me that what I am seeing, and I don't 
want to overdo my time here, Mr. Chairman, but what it seems 
like to me, there is a pattern from the start, and that was 
that we have been changing our mind as we go along. And that, 
as you know, is deadly to a project.
    Admiral Landay. Yes, sir.
    Mr. Akin. You start with the concept we are going to go 
with a more commercial, cheaper hull, and then just when you 
get that started building, then you go and change it to a more 
robust warfighting kind of, which is a different design, and it 
is going to raise the cost of whole lot.
    And now we have gotten to the point where we have built two 
different trial ships, and we are talking about building some 
more of them. And the Navy is even saying now, ``Oh, we kind of 
like both of them.'' You know we are going to have every single 
ship. The Navy is going to be a custom ship, if we don't have 
discipline to say, ``You have got to make a decision. You are 
going to have to stick with it.''
    If we keep changing the requirements, we haven't even had a 
chance to test either one of them. We are going to start to buy 
more of them. It seems like from just a couple of weeks since I 
took the trip, it seems like it is a little hazy as to exactly 
what is our acquisition strategy.
    We are going to get--you know we have got this one started, 
the other one partly started. We have got to buy some of it. We 
are going to buy four, and then we are going to test them. We 
are going to partly test them. And we are going to get both of 
them. Do the Marines like--what--one better than the other?
    It seems like there are a lot of questions, where there is 
not a clear-cut this is where we are starting, this is what it 
is going to look like, and it is clearly defined. It doesn't 
seem like we are nailing things down.
    And the indecisiveness seems like it is costing us a whole 
lot of money. Do you want to respond?
    Admiral Landay. Yes, sir. Well, I would certainly tell you 
in the 2009 and the fiscal year 2010 ships, what we have told 
both of the shipbuilders, and what we have put in our request 
for proposal, is we are going to build exactly the same ship we 
built for LCS-1 and LCS-2, that we are not changing 
requirements in that either--technical requirements or 
warfighting requirements--and that there are some, you know, 
things we learned in shipbuilding that would tweak the design.
    So to your question of a lot of change which drove it, we 
clearly recognize that. That is not going to be the case in 
fiscal year 2009, 2010----
    Mr. Akin. But we are not getting much of a bargain on the 
third and fourth ships, are we? They are about the same cost as 
the first two, aren't they?
    Admiral Landay. Well, again, there is, we believe--I mean 
we are working with the companies to drive that cost again 
toward the goal of $460 million in the cost cap----
    Mr. Akin. Are they going to----
    Admiral Landay. I think we are going to----
    Mr. Akin. Before they are going to give you a real good 
price, they are going to want to know how many they are going 
to build of these.
    Admiral Landay. Absolutely. Yes, sir.
    Mr. Akin. And it seems like to me I am not quite sure why 
we are going to build the third and the fourth till we know 
which one of the two we are going to choose.
    And I am a little reluctant to say you know when you say, 
``Well, we want to buy both of them.'' Now again, you--what you 
are doing, you are making decisions, which just drives the cost 
of ships up.
    And somewhere along the line, we got to--I don't want to 
overdo the questions, but you can see why we have some concerns 
about what is going on, I think.
    Admiral Landay. Yes, sir.
    Mr. Akin. Thank you, Mr. Chairman.
    Mr. Taylor. The gentlewoman from Maine is recognized now 
for five minutes.
    The gentleman from Maryland, Mr. Bartlett, for five 
minutes.
    Mr. Bartlett. Thank you very much.
    Clearly, these ships were very much over cost and behind 
schedule. And the reasons for that are both the industry and us 
here in Congress. We have already talked about the Naval Vessel 
Rules increasing the cost and probably stretching out the 
schedule.
    But a second thing that we in this committee were really 
complicit in was agreeing to the original schedule on how soon 
we put the ship in the water that enormously increased cost and 
stretched out the schedule, because a lot of things that that 
should have been upside down were now done in the water, which 
is very much more expensive and stretches the thing out.
    So mistakes are made on both sides, and it is a little 
unfair to lay all of this increase in costs and stretch out of 
the schedule to the industry, because we were complicit in some 
of that.
    Well, we now have the first Freedom class Littoral Combat 
Ship delivered, and I am told that the crew is pretty happy 
with its performance.
    But clearly, affordability, as our chairman so aptly 
pointed out, remains a critical objective for this program. No 
matter how desirable it is, there comes the cost at which it is 
too expensive to afford, and we are going to put the money 
somewhere else.
    I understand you have continued to work with the industry 
teams to refine the design and drive down the cost. Other 
successful surface combatant programs, such as the Arleigh 
Burke-class, achieved a significant savings by streamlining the 
production process.
    Understand that the acquisition of specific long lead-time 
items could reduce the ship construction schedule by as much as 
20 percent, which would be about 10 months.
    What are your thoughts regarding an advance procurement 
that would acquire long lead materials to expedite this much-
needed ship?
    Admiral Landay. Yes, sir. We believe advance procurement is 
a vital tool to continue to drive the cost of this program and 
any program down, the ability to buy long lead material or 
specialty material certainly an example.
    Had we used a long lead or an advance procurement (AP) 
strategy on the reduction gear on LCS-1, we would have run into 
the same problem, but we would have seen it much earlier in the 
process, or even before we started. So we certainly agree that 
an AP strategy is one that will help us as we go forward.
    Mr. Bartlett. Multi-year procurements have proven to be a 
sound investment strategy. They permit industry to accomplish 
long-term planning and result in significant savings to the 
government and the taxpayers. Most importantly, they introduce 
the stability that many of our acquisition programs need.
    Have you evaluated the savings that could be achieved on 
the Littoral Combat Ship program by implementing multi-year 
procurement? What would the Navy want--when would the Navy want 
to begin implementing such an approach?
    Admiral Landay. Well, yes, sir. We definitely have looked 
at multi-year procurements, block buy procurements, the 
economic order quantity (EOQ) savings that you potentially get 
out of such a strategy. And one of our goals is to get to those 
kinds of strategies as quickly as possible.
    One of the key things we want to make sure we do in our 
fiscal year 2009 ships is ensure that we do in fact have the 
design issues resolved as we had proposed.
    And so our current strategy right now is to tie our fiscal 
year 2009 and fiscal year 2010 ships together in a common buy 
to start getting some pressure and quantity savings through 
those ships.
    And so it would be in the fiscal year 2011 time period that 
I think we would be looking to go to a block, multi-year, or 
somewhere in that timeframe is where we would see that from an 
acquisition strategy perspective.
    Still having some of the discussions within the Navy on 
exactly where you want to go, but that would be the timeframe 
that I would see us looking at it.
    Mr. Bartlett. Thank you. When the Littoral Combat Ship was 
first pitched to the Congress, it was a revolutionary idea, 
where you would have a ship that was capable of multi missions 
and that its mission could be changed during the fight. You 
wouldn't have to leave the fight and steam to port somewhere to 
put on the new mission packages.
    Now that is an impossibility, because we do not have a 
medium lift helicopter that is large enough to change these 
mission packages during the fight.
    And so the utility, the capabilities of the Littoral Combat 
Ship I think have been enormously diminished, because we now 
have to leave the fight, steam to port to change the mission 
packages, and then come back to the fight.
    I know the argument is made that, gee, a larger medium lift 
helicopter wouldn't fit on the deck, and it is just because we 
designed it. We could easily change that. It now fits the 60. 
We could easily change that so that it would fit a medium lift 
helicopter.
    Don't you think that the absence of this ability to change 
the packages during the fight seriously degrades the overall 
capabilities of the Littoral Combat Ship?
    Admiral Guillory. Yes, sir. I would like to answer that 
question. The requirements for the LCS to change mission 
packages in response to an operational commander's tasking is 
to do it in a 96-hour period, and then the Concept of 
Operations (CONOPS) is designed to do it in port.
    That includes changing out the mission packages and also 
doing the required testing in that period, to then return the 
ship to sea and to the fight.
    The 60 Romeo and 60 Sierra series aircraft are designed to 
support that mission area, and those aircraft meet the 
requirements for the ships, sir.
    Mr. Bartlett. That maybe your program now, sir, but that is 
not what was pitched to the Congress when the Littoral Combat 
Ship was first sold to us. They were going to change the 
mission packages during the fight. You now cannot do that, and 
so you have to steam away and come back.
    It wasn't 96 hours before. It was just a few hours, very 
few hours, when this thing was pitched to us.
    Thank you very much, Mr. Chairman.
    Mr. Taylor. The chair thanks the gentleman.
    The chair now recognizes the gentleman from Washington, Mr. 
Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    First, for Ms. Sandel. On page eight of the testimony, it 
is noted that contract options for mission modules to be 
exercised annually.
    My understanding one of the themes of the LCS, one of the 
themes of this hearing, as well as themes of the several 
previous hearings on LCS, has been the whole idea of 
controlling the requirements or understanding the requirements.
    So what can you tell us about the mission module 
acquisition strategy that gives us some comfort that there will 
be some control on the requirements, especially as--if we are 
going to be going on a year-to-year annual contract, that the 
next contract after year one won't add, you know, the next five 
things to the contract that things will be really neat and 
really cool to have as part of the mission module package, and 
then year two to year three, and year three to year four?
    Ms. Sandel. That is an excellent insight, and I am going 
to----
    Mr. Larsen. Can you like just get right into that 
microphone?
    Ms. Sandel. Yes, sir.
    Two pieces to that I believe that we have identified in the 
way that this acquisition is structured for the procurement of 
the mission systems and then for the mission packages.
    The mission systems, which comprise the mission packages, 
each have their own independent industry partner or warfare 
center procuring agent that we have identified, so there are at 
least about 22 different mission systems comprising the three 
separate mission areas that ultimately end up being a package.
    So that is one level of indenture that we have the ability 
to drive down and to cost and schedule and award these on 
separate contracts for each mission system. And that is another 
level of detail we could certainly be due either to walk you 
through.
    So that is one particular area of control with regard to 
requirements creep and scope growth that those particular 
mission systems, without the--often have sponsors you know--or 
the fleet encouragement and direction, we would not drive cost 
or schedule or scope increase.
    The second piece to that is the annual award or the re-
award with the addressing the mission package integration 
production and award of the integrator that produces the 
package itself.
    So you have the system that comprises it with the support 
equipment, all the infrastructure, all the things that happen 
that have to become a mission package.
    That is the production and assembly contract that has been 
awarded in 2006. And that then becomes an annual event that we 
re-look and determine have they met the cost and schedule.
    Mr. Larsen. Is there a cost cap on that contract?
    Ms. Sandel. Yes, sir. Currently, it is a $159 million 
value, and that 10-year period of performance is predicated on 
past performance. So if they don't meet their warranty 
requirements and term requirements for that year, they will not 
be continuing into the future.
    Mr. Larsen. $159 million per year? $159 million per year?
    Ms. Sandel. A $159 million ceiling complete.
    Mr. Larsen. Per year.
    Ms. Sandel. No, sir.
    Mr. Larsen. Okay. Overall?
    Ms. Sandel. Yes.
    Mr. Larsen. Okay. Okay. Over 10 years.
    Ms. Sandel. Yes.
    Mr. Larsen. All right.
    And just remind me. Is that then going to be run much like 
the--so is a contract awardee a system integrator?
    Ms. Sandel. He is not a system integrator in the sense that 
we have typically grown up with. It is a package production and 
assembly, so it is a greater role, taking multiple disparate 
mission systems, putting them together within the container, 
the computing environment, all the handling equipment.
    So it is a level of detail and experience required that we 
are working closely together with the individual and the 
organization.
    Mr. Larsen. Okay.
    Mr. Chairman, the reason I asked those questions, and I 
know that in the grand scope of a $460 million, $500 million 
ship, this might not be the greatest cost driver, or 
potentially greatest cost driver, but it would remind us that 
we are going to use the ship without mission packages that 
are--you know, that were and are affordable. So I think we are 
going to have to watch that aspect of it as well.
    Admiral Landay, are you responsible for the assessment of 
the frigate and minesweeper availability and capabilities to 
fill in the gap left from the lack of LCS deployment?
    Admiral Landay. No, sir, not me. That is really an Office 
of the Chief of Naval Operations (OPNAV) function.
    Mr. Larsen. Then could you talk to that plan?
    Admiral Guillory. Yes, sir. The frigates will--of which we 
have 30 in inventory right now, active ships--begin leaving the 
inventory in our 30-year shipbuilding plan beginning in 2010, 
and throughout the next decade, they are decommissioned.
    The mine countermeasures ships reach their service lives 
near the end of the decade, approximately 2016, 2017 timeframe, 
and then they begin to exit the inventory or are 
decommissioned.
    LCS, as it comes aboard, is not a replacement for the 
frigates, but will do many of the missions that frigates do 
today. It will execute those missions with a 40-man crew, as 
opposed to a nearly 200-man crew that the Oliver Hazard Perry-
class guided missile frigates (FFGs) currently have when they 
go to sea.
    Of course, the mine countermeasure ships that we have today 
responding to combatant command (COCOM) combatant commander 
demand signals around the world, the Littoral Combat Ship with 
the mine countermeasure mission packages would essentially take 
up the watch in those areas.
    And so we are closely examining the 30-year shipbuilding 
plan and the decommissioning plan to ensure that it's balanced 
and that we ramp up the capacity of LCS mission packages sure 
as the decommissioning of frigates and mine countermeasure 
ships occur.
    Mr. Larsen. And I understand that. We are not talking about 
a one-to-one replacement, but we are certainly talking about 
capabilities replacing capabilities.
    And so what are you thinking in terms of frigate 
decommissioning and the capabilities that frigates have 
compared to the LCS capability that would, let us call it, 
supplement or complement it?
    Are we going to be delaying frigate decommissioning in 
order to accommodate the delays in the LCS capabilities?
    Admiral Guillory. I believe that we will continue to 
examine the decommissioning plan and the ramp-up plan of LCS. I 
mean, as we have all recognized, we have had delivery 
challenges with Littoral Combat Ship.
    And we will have to continue to monitor that as we go 
forward to ensure as LCS is delivered and are deployable ready, 
that is matched up with what the frigates--as frigates are 
leaving the inventory, because many of the missions that the 
frigates do today, LCS will also do.
    And so at this point we believe we have it right, that the 
decommissioning plan is balanced with the Littoral Combat Ship 
delivery and the mission package delivery. But that is under 
constant review, continual review.
    Mr. Larsen. Oh, it is still under review.
    Admiral Guillory. Yes, sir.
    Mr. Larsen. Yes. Okay. Thank you. Yes, sure.
    Admiral Landay, in your testimony you kept talking about 
the package of ships over 2009 and 2010 is the exact term you 
used, but over 2009 and 2010 we will do this, or over 2009 and 
2010 we will do this, but then when you talk about warfighting 
capability, you actually didn't mention 2010 ships.
    You said there would be no new warfighting capabilities on 
the 2009 ships, but then you neglected to talk about ships in 
2010. Are you telling us that you are going to be adding 
different, new capabilities on the 2010 ships?
    Admiral Landay. No, sir. Right now our strategy about, 
again, the 2009 ships or the key contract ones, but our 
strategy is basically to get the shipbuilders into serial 
production, where we can drive the efficiencies in production 
and cost, the recurring cost out of those programs as fast as 
we can.
    There is right now and nothing on the horizon that would 
cause us, that we see, to put either warfighting or additional 
technical requirements into those packages.
    And in our request for proposal that is out on the street, 
we ask them to bid us the fiscal year 2009 baseline and the 
same baseline as options for the fiscal year 2010 ships. So 
right now we do not see any additional requirements that will 
come into either of those two ships.
    Mr. Larsen. Okay. A broader question is we noted in our 
separation memo for the securing, and I haven't heard it being 
interesting questions were being addressed in testimony, the 
vessels currently are too expensive to build at a rate 
necessary to fulfill the goal of 55 vessels without forcing 
other trade-offs.
    There is an interesting headline in one of the dailies here 
on Capitol Hill about the Air Force budget, the debate about 
tankers and long-range bombers, which I have a direct somewhat 
of an interest in.
    But the question, though, remains is what kind of trade-
offs are you making? I mean if we are going to get to 55 LCS by 
a certain date to get to a 313, 319-ship Navy, what are the 
trade-offs that are being made? And the most obvious one within 
the Navy shipbuilding is the Arleigh Burke-class guided missile 
destroyer (DDG-51) versus the Zumwalt-class guided missile 
destroyer (DDG-1000).
    I just would be interested to understand what the Navy's 
position is today on that trade-off.
    Admiral Guillory. Sir, I think I would say it is not a 
trade-off as more as it is a all hands effort to continuing to 
look at the requirements, to look at the cost versus 
capabilities, and to review that in a transparent way to take 
every opportunity to weigh those requirements and perhaps 
reduce requirements, if it makes a ship more affordable and 
still not compromise the warfighting requirements for the ship.
    That process, just in my domain as director of surface 
warfare, is one that I spend a lot of my time involved with, 
preparing assessments, preparing recommendations to review the 
requirements, the individual key performance parameters and key 
attributes for the ship, to ensure that we have it right to 
meet the warfighting requirements, but perhaps if it is 
reducing those requirements are changing those requirements 
would make the ship more affordable in the near term or 
lifecycle costs, to also make sure the leadership has that to 
make a determination and try to continue to drive down the 
cost.
    You know it is not a destination so much as it is a 
something that it is part of will we do now all the time with 
LCS. And again, it is a commitment I think for the long-term, 
sir.
    Mr. Larsen. Well, I will just end here. I think that we are 
going to continue to provide guidance to help the Navy with 
some decisions, and I will also note that we don't sometimes do 
a very good job of providing that guidance on what I would yet 
call trade-offs.
    If we are going to have a $14 billion shipbuilding budget, 
then in our world I think there are--we do look at it as trade-
offs, because it is a limited amount of dollars, and what the 
Navy builds over a certain period of time to get to a certain 
number of ships is going to require some tough decisions not 
just by you, but by us on this side of the microphone as well.
    Thank you.
    Admiral Landay. Sir, and if I could just add in to what 
Admiral Guillory said, you know the other piece of it from the 
acquisition side is, as we have talked about, for us to 
continue to drive the cost of those ships down.
    Now, as Mr. Bartlett mentioned, certainly when they get to 
multi-year procurements, Economic Order Quantity purchases 
(EOQs), there are acquisition opportunities that drive some of 
those costs now. We, equally and very closely with the N86 
folks, are looking at cost trade-offs, the cost of 
requirements, what we may be doing to impact those.
    So I would tell you there is a very ongoing and rigorous 
and vigorous affordability initiative that is in place that I 
think will continue to key up as we go.
    And we have been successful on many programs when we start 
doing that--Virginia, DDG-51 is a good example of as you get 
into serial production, there are more opportunities to 
continue to go after some of those affordabilities, and we are 
doing that as well.
    Mr. Larsen. Thank you.
    Thank you, Mr. Chairman.
    Mr. Taylor. The chair recognizes the gentleman from 
Virginia, Mr. Wittman, for five minutes.
    Mr. Wittman. Thank you, Mr. Chairman.
    Admiral Landay, in looking at the specifications on the 
second Littoral Combat Ship, I see that it is outfitted with a 
foreign manufactured main propulsion diesel engine, and I was 
wondering have these engines been certified by the American 
Bureau of Shipping, and do they meet the Navy's specifications 
as outlined in the contract.
    And if not, can you tell us when these engines would be 
brought into compliance with the Navy's specifications and when 
they would be certified by the American Bureau of Shipping.
    Admiral Landay. Yes, sir. They are required under Naval 
Vessel Rules in our contract with the prime General Dynamics to 
Meet American Bureau of Shipping Naval Vessel Rule 
requirements.
    So the engines will in fact be classed and certified under 
that. The engines have been through just about all of those 
certifications. There is one additional test that is ongoing 
right now, but the company is required to meet that test, and 
the prime contractor will ensure that they do meet that test.
    So they will comply with Naval Vessel Rules as outlined by 
American Bureau of Shipping and concurred with by the Navy 
technical authorities.
    Mr. Wittman. So that is going to be taking place. He said 
they are in the process of doing that. Do you have a hard stop 
time when that is to be achieved?
    Admiral Landay. Well, sir, the remaining test is what they 
call a 1,500-hour run test. You know basically it is about a 
60-day test by the time you do it.
    Obviously, as sometimes happens in those tests, something 
will come up. They will have to stop the test, kick something, 
look at it, and then start the test up again.
    But we anticipate that they should have that test completed 
at or close to delivery of the ship. They have already passed 
through 500-hour tests, a number of other tests on there. This 
is the long-term endurance test, but they are required to meet 
that.
    And if they don't meet that, it will be under--you know by 
the time we take delivery, it would be a warranty item to the 
manufacturer and the prime contractor.
    Mr. Wittman. Thank you.
    I am also concerned about the suggestions for moving this 
LCS program to other shipyards. And this process in the past 
has cost more than $100 million when executed on previous 
surface combatant programs. And as you know, it has resulted in 
significant schedule delays.
    And I was wondering what is your estimate of the additional 
cost and further delays that would result on the program, if 
the acquisition strategy were significantly changed?
    Admiral Landay. Obviously, any time, as we have talked 
before, that you change your acquisition strategy or your 
process in midstream, there are some implications to that.
    We, as we have looked at bringing a second source in as a 
possibility, we have looked at what we did back in previous 
days with you know some of our other destroyers.
    I would tell you a very broad, raw estimate of this would 
be on the order of about $60 million per ship, and probably 
about 18 months to 2 years per sea frame in order to have in 
place a package that we think we could compete very 
effectively.
    Then obviously, the next issue is it becomes another the 
yard in a--or lead ship in a new yard. It will be a function of 
how well that yard is able to ramp up.
    The advantages at this point we wouldn't anticipate 
bringing new design, new package to that yard. It would be a 
pretty solid design.
    But obviously, as with anybody, there is a ramp up when you 
start the first shipping go to the second one.
    Mr. Wittman. I want to go back and talk a little bit more 
about acquisition strategy. In looking at the acquisition 
strategy, it appears that there is not a clear or approved 
acquisitions strategy for LCS.
    And I know that the Navy has proposed several different 
strategies over the last three years from a fly-off between two 
ships followed by a down-select, to a fly-off and possible 
down-select, to converting the selected design, to build a 
print and recompeting the class, to buying both vessels from 
the existing teams.
    And I was wondering with the increasing emphasis on 
acquisition reform, and we just had a meeting this morning 
talking about how we perform that process, why should the Navy 
continue to procure vessels for which there is no acquisition 
strategy?
    And again, we have been back and forth on this. I know 
there is a lot of consternation about those portions of the 
program where we have had some problems.
    But it seems like to me if we are ever going to get to a 
point to clearly move forward this program, there has to be a 
clearly defined acquisition strategy.
    And I am just wondering where are we going with that, and 
when will that acquisition strategy be defined?
    Admiral Landay. Well, obviously, as I mentioned, we have a 
strategy for the fiscal year 2009 and 2010 ships, as I talk to 
you.
    One of the discussions that we will have as we go forward 
in our acquisition strategy is are we in fact going to go and 
down-select to a single ship, or are we going to stay with the 
two-ship design?
    Each design brings--because of the way that we did that--
brings capabilities that we think have real value to us. When 
you talk a 55-ship class, and you potentially talk 25, 27, 
depending on how split that up, potentially of each one of 
those, there is still a pretty sizable class and enough 
opportunity in there to get learning and to get benefit out of 
that.
    So I would tell you right now it is not a specific time 
where we would look at a down-select or going to a single one. 
It is really getting the ships out to the fleet and to getting 
input from the fleet, from the operators, balanced always, of 
course, to the cost of the ships.
    You know if we find out one ship turns out to be 
significantly more expensive than another, then that becomes 
part of the discussion in our acquisition strategy.
    But as we have always said before, one of the key inputs we 
want to make sure we get is get both designs out there 
operating so that we can get a good assessment of the pros and 
cons of each one of the designs.
    Admiral Guillory. Sir, if I may just add one additional 
factor, that while the first two ships do give us a learning 
opportunity, and not only for the sea frames themselves, but 
for the mission package development and the launch and recovery 
systems, we appreciate the committee's support for the 2009 and 
2010 ships, because those ships address the capacity issue, the 
fact that we need the ships today for missions that we have 
today.
    And if those ships were here today and deployable ready 
today, I would have little doubt that they would not find 
themselves perhaps off the coast of Somalia or other places in 
the world where econo-piracy threatens our ships and our 
commercial traffic.
    So there is prudence in learning from the two ships, and 
there is a plan to do that. However, there is also a compelling 
need I believe, certainly from my perspective, to address the 
capacity and capability gap that we have today.
    And the ships in 2009 and 2010 will go a long way to 
addressing that, sir.
    Mr. Wittman. Thank you, Mr. Chairman.
    Mr. Taylor. The gentleman from Michigan, Mr. Stupak, for 
five minutes.
    Mr. Stupak. Thank you, Mr. Chairman. And thank you again 
for your courtesy in allowing me to do this, sitting in on this 
hearing today.
    Admiral Landay, you spoke in your testimony about solid and 
mature design. Do you believe you have that solid and mature 
design now for the LCS?
    Admiral Landay. Yes, sir, we do, certainly for LCS-1, which 
we are taken through the initial acceptance testing. We believe 
we have a solid design there. Now, there are pieces of the 
design package that we are continuing to work through.
    We believe we have a solid design for LCS-2, and we will 
assess that when we get that ship delivered and go through 
testing as well.
    Mr. Stupak. LCS-1 Freedom was just built up in my neck of 
the woods there--Menominee Marinette area.
    When you look back at that design, now that you have been 
through the first one, is it realistic to expect that the ship 
can be purchased at $220 million or $250 million?
    Or now that you have a design down, when you have gone from 
commercial to your Navy standards for the hull and propulsion 
issue, is it realistic with hindsight not to say that the ships 
are going to cost only $220 million or $250 million?
    Admiral Landay. Well, no, sir. I think as we look at the 
ship as we currently have it designed today, we would not be 
able to build that ship for $220 million. That is a true 
statement.
    We believe we can build it for less than the first ship 
cost, as we get in those production efficiencies and 
affordability. But yes, sir, I do not think we would be able to 
build that for $220 million.
    Mr. Stupak. When you talk about your production 
efficiencies and long leads, so ship number 20 should be 
significantly less than ship number one. Ship number 40 should 
be less than ship number 20, on down the line, correct?
    Admiral Landay. Yes, sir.
    Mr. Stupak. Freedom LCS-1, which is already--it is in San 
Diego right now--any problem with the workmanship, the quality 
of that ship?
    Admiral Landay. No, sir. Actually, she is in Norfolk right 
now doing a post-delivery. She will be going to San Diego later 
on. We still have additional testing to do with her here on the 
East Coast before we send her over--and testing, I mean things 
we were unable to do in the Great Lakes do because of 
requirements and restrictions of there.
    You know all the ships have issues that pop up. That is why 
we do a pretty thorough shakedown and testing, but we have not 
heard anything from the crew or our process with it.
    Mr. Stupak. So as far as the craftsmanship, there is no 
problem there. The problem with the first one was design 
changes, different standards that the Navy had put in on the 
ship, then. This is not a problem with the yard.
    Admiral Landay. Well, yes, sir. I mean obviously then there 
is also production efficiencies, and you know I think in some 
cases both yards assumed they could build the ship more 
efficiently than it turned out that they could in a lead ship.
    I think they have learned from that, and we certainly 
expect that the next ship--they would produce it more 
efficiently.
    Mr. Stupak. Okay.
    Let me ask you this question. Both shipyards have planned 
to improve their production capabilities. And hopefully, this 
will lower the cost of the ships.
    What other benefits does the Navy realized by using the 
same yards to build the ships? Could you just in layman's 
terms? What other benefits are there besides repeat in 
production? Do we see a taxpayer savings?
    Admiral Landay. Well, obviously, as you mentioned, the 
repeat and the learning curve, as we call it, as the yards get 
more efficient, as the production process is improved, as the 
workforce see opportunities to streamline the process is one of 
the key issues, obviously, as you get more production in a 
yard, there is a tendency in that yard to put more 
infrastructure in place themselves to support the continued 
moving down the production line.
    Obviously, if there is additional Navy work that goes into 
a yard as they perform well in one program and maybe have an 
opportunity to compete for other, there is a sharing of 
overheads and other things across those yards.
    Mr. Stupak. In your testimony or answer to a question, you 
indicated--or maybe it was the other admiral--with the frigate, 
you have 200 people on, and LCS you are going to 40 people.
    Is that cost savings figured in over 30 years, the life of 
the ship, as to the value to the Navy? And is that part of what 
cost factor you look at?
    Admiral Guillory. Yes, sir. That was part of our calculus, 
considering the lifecycle cost of the ship. From my experience, 
manpower continues to be the most expensive single element of a 
program over the life of that program.
    And it is just amazing to think that the missions and the 
capability this ship will be able to deliver with essentially a 
40-person crew--and many of the missions we have today are done 
by frigates--is a huge step forward, and I think it will be 
reflected in the overall lifecycle cost of that ship.
    Mr. Stupak. Do you have any estimation what is the cost of 
going from 200 to 400 sailors on a ship?
    Admiral Guillory. No, sir, but we can provide that 
information to you, sir.
    Mr. Stupak. Then may I ask one more question, if I may, Mr. 
Chairman?
    You indicate there is much interest in the LCS by other 
countries, our allies. Have any of the allies placed an order 
for any of the ships, or appear to be working with you to place 
such an order?
    Admiral Landay. No, sir. There are no orders currently 
placed by any other country. There has been significant 
interest from a number of countries.
    So there have been discussions, answering questions with 
them, you know through the typical process, but so far there 
has not necessarily been an order. I think they are waiting to 
you know see the performance of the ship as we go through our 
post-delivery test and trials.
    But I can tell you there is significant interest. We have 
had riders on the ship, and there continues to be great 
interest in it.
    Mr. Stupak. Thank you. I have no further questions.
    Mr. Chairman, again, thank you for your courtesies.
    Mr. Taylor. The chair thanks the gentleman from Michigan.
    Admiral, on my visits to the yards, I have seen Captain 
Murdock there, and I would presume Captain Murdock's job is to 
make sure that the ribs, the frames, the scantlings are all 
there, that he has got some sort of a set of specs that he is 
checking, that he has an original set of plans that he is 
checking against what is being done to make sure that what the 
shipyard is doing is matching what you have on paper. Is that 
correct?
    Admiral Landay. Yes, sir. And the design is actually the 
shipyard's design. The design is endorsed by the American 
Bureau of Ships (ABS) under the Naval Vessel Rules, and then 
both ABS and the Navy supervisor shipbuilding ensure that the 
ship is built to the design that we certified.
    Mr. Taylor. Does he use computer-assisted drafting in order 
to generate those specs that he uses to ensure that the 
shipyard is following?
    Admiral Landay. Yes, sir. They use commercial computer-
aided design (CAD) programs that are available.
    Mr. Taylor. Okay. So I would think using that, he ought to 
know every pound of aluminum that goes into one and every pound 
of steel that goes into the other. Is that correct?
    Admiral Landay. Yes, sir.
    Mr. Taylor. So what percentage of the cost of those vessels 
is materials--raw materials--not engines, just steel and 
aluminum to get the hulls?
    Admiral Landay. I don't know that off the top of my head, 
sir. I could get that for you. I just----
    Mr. Taylor. Well, Admiral, the point that I hopefully am 
making is anyone who can read the commodities section of the 
paper knows what the price was and the price of aluminum is 
one-half of what it was two years ago.
    We have a nation that is $11 trillion in debt mostly 
because we are not doing a good enough job in trying to find 
some bargains for the taxpayers. So who in your organization is 
responsible for putting a pencil to how much actually goes into 
those vessels and how much we ought to be saving now over 2 
years ago?
    Admiral Landay. Well, part of that is the ongoing contract 
discussions with both----
    Mr. Taylor. No, sir. Who in your organization? I would like 
a name, Admiral.
    Admiral Landay. Well, the program manager and then myself 
as the final source selection authority for the next contracts. 
That is one of the things that we have in there.
    One of the discussions we have had with both companies in 
the original bids that they gave us for the fiscal year 2009 
ships, you know they were based on a certain timeframe in which 
we would have got the prices.
    We asked both companies to go back and see what they could 
get, reductions in those prices based on new prices of the 
material.
    At the same time, there are affordability initiatives that 
we work with both of the companies to try to drive the 
neighbor, manpower and even material out of it.
    Mr. Taylor. One thing at a time.
    Admiral Landay. Sir?
    Mr. Taylor. So if I called your program manager and said, 
``What did you pay for this deal a couple of years ago, and if 
you had to buy it again today,'' he could give me an answer 
this afternoon?
    Admiral Landay. Sir, he should be able to.
    Mr. Taylor. Okay.
    What percentage of LCS-1 was welded by hand, as opposed to 
on a panel line?
    Admiral Landay. I could get that for you. I don't know.
    Mr. Taylor. Who in your organization would know that?
    Admiral Landay. The program manager and his team would know 
that.
    Mr. Taylor. Could Captain Murdock give you an off-the-top-
of-his-head estimate?
    Admiral Landay. We could get it for you, sir. We can get 
it. We can get it for you. He doesn't necessarily----
    Mr. Taylor. Well, would you say 100 percent was done by 
hand?
    Admiral Landay. No.
    Mr. Taylor. Okay. Would you say 90 percent was done by 
hand?
    Admiral Landay. I think about half.
    Mr. Taylor. Okay.
    On the Austal ship, which is LCS-2, what percentage of that 
ship was welded by hand?
    Admiral Landay. Certainly higher than that. I think it is 
closer to about 70 percent.
    Mr. Taylor. Okay. You are now speaking with the shipyards 
about building 3 and 4. Marinette would get 3. Austal would get 
4.
    What percentage of LCS-3 do you expect to be welded by 
hand, and what percentage on a panel line?
    Admiral Landay. Certainly, we would expect LCS-3 to be 
less. Again, I would have to go back into the contract 
discussions in your bids.
    Mr. Taylor. Well, how much? Admiral, what is your goal?
    Admiral Landay. Pardon?
    Mr. Taylor. If we can see things like panel lines save 
money over hand welding----
    Admiral Landay. Right.
    Mr. Taylor [continuing]. Speed the process----
    Admiral Landay. Right.
    Mr. Taylor [continuing]. Wouldn't it be reasonable that the 
Navy is telling the contractor this is how much I expect to be 
done by machine next time?
    Admiral Landay. No, sir. What we tend to tell the 
contractor is that we want to see the ship built at the 
cheapest cost consistent with your processes and infrastructure 
at the time.
    Mr. Taylor. Admiral, with all due respect, we have opposite 
challenges. Their goal is to make as much money as they can for 
the shareholders. Our goal should be to deliver a first-class 
ship to the Navy at a reasonable cost to the taxpayers. Those 
are different goals.
    Admiral Landay. But both of us have the same goals, because 
they will deliver a good cost to their shareholders, and be 
able to deliver a good product to our ships, if in fact they 
continue to drive the cost of their ships down, we get 
ourselves into serial production.
    In fiscal year 2010, they have an opportunity competitively 
to potentially win some more ships, so it is definitely in 
their interest to drive the target price of their ships down 
consistent with----
    Mr. Taylor. Admiral, with all due respect for your many 
years of service, I respectfully disagree. I really have seen 
no effort on the part of either contractor to try to improve 
their process, because right now all they got to do is compete 
with that other guy, who is also not doing much to improve his 
process.
    And if the Navy isn't going to step in and say you have to 
do a better job, who is?
    Admiral Landay. Well, we have told them that they have to 
do a better job. We have not stepped in and told them 
specifically how to build their ship and their process. In 
Austal, as an example----
    Mr. Taylor. But, well, Admiral, wait. Admiral, if I may, 
because the subcommittee also funds the David Taylor Research 
Center. And we spent a lot of money out there, and there are a 
lot of very smart people out there.
    Admiral Landay. Right.
    Mr. Taylor. And I thought the purpose of their research 
center, one of the many purposes, was to find more affordable 
ways to build more ships.
    Admiral Landay. Right.
    Mr. Taylor. So why isn't the expertise of David Taylor 
being turned loose to find a more affordable way to build what 
was supposed to be an affordable warship that is now 18 months 
late and 100 percent over budget?
    Admiral Landay. Specifically on David Taylor, again I think 
there are processes as we develop them through our ManTech 
program or our research and development (R&D) program through 
the National Shipbuilding Research Program (NSRP) and those 
organizations that moved those R&D concepts out into their 
shipbuilders, now there is an avenue to do that.
    Mr. Taylor. When I walked through Austal shipyard a couple 
of weeks ago, I saw absolutely no effort being made to save the 
taxpayers a dime.
    Admiral Landay. Well, I----
    Mr. Taylor. Like Orange County choppers when we ought to be 
kicking out Hondas.
    Admiral Landay. You are talking about down in Austal, sir?
    Mr. Taylor. Yes, sir.
    Admiral Landay. I can tell you in Austal there is over a 
$100 million investment going on in there to get them to a 
modular manufacturing facility. That facility will be online in 
the May timeframe. It is about halfway done.
    If you remember coming into the yard, off to the left you 
saw a big building that was being built. Many of the processes 
that we expect them to be able to do in that modular 
manufacturing facility, which we think will have a significant 
improvement in their productivity, we are testing out right 
now, and some of that work that you saw in the back part of 
that shop.
    There is a major investment going on in that yard, and 
there is a significant investment planned for the other yard to 
work many of those specific areas.
    Mr. Taylor. And Admiral, did Austal make that investment, 
or did the taxpayers make that investment?
    Admiral Landay. I believe it was the state made the 
investment.
    Mr. Taylor. State taxpayers.
    Admiral Landay. Yes, sir.
    Mr. Taylor. And if I am not mistaken, some of that was also 
Katrina money.
    Admiral Landay. Yes, sir.
    Mr. Taylor. Okay.
    Admiral, I asked in my opening statement how long would it 
take and what organization would be responsible and how much 
would it cost to develop the technical data package that is 
required to build the ships directly in a free and open 
competition.
    Admiral Landay. Yes, sir. And our estimate at this point, 
as we have looked through that, is on the order of about $60 
million per ship, probably 18 months in order to have that 
package ready to go, from when we snap the baseline.
    And one of the key issues, when you want to get to a build 
to print concept, where basically we are going to contract with 
a shipyard, and we are going to evaluate the shipyard not on 
the performance of the ship, but on the performance of the 
specific work package that I gave him under the contract, is to 
ensure that we have incorporated all of that change.
    So under a build to print concept, for example, we would 
not want to go into build to print contract until we had been 
through our post-shakedown availability through all of our 
testing, all of our evaluation, to ensure that the ship that we 
would put under that contract has got a very solid baseline, 
and we understand what it is.
    Now, having said that, there are a lot of things that you 
got to do in preparation for that.
    One is to clean up the drawing. So in a new ship--you know 
first of a class, you have a drawing. The shipyard came up with 
the drawing. We start to build that ship. We find issues, 
interferences, changes, whatever it is. We annotate. The 
shipyard does those drawings.
    When you get done, what you want to go back in is clean up 
all those drawings, make sure all those changes, revisions, 
modifications are fully incorporated into the drawing.
    We are doing that right now with the fiscal year 2009 in 
both of the shipyards, so we are taking those first steps. But 
what we would really want to do before we would get to a build 
to print concept is to define what that baseline is, because 
any change I make after that baseline is all going to be change 
on me, and it is going to be change to the target, not change 
on the share lines.
    Mr. Taylor. Okay. So just for clarification, if this 
committee wanted to reserve all of our options as far as a free 
and open competition on follow-on ships, we would have to 
allocate approximately $60 million per design.
    Admiral Landay. Yes, sir. That would be our estimate at 
this point.
    Mr. Taylor. To be expended at David Taylor, or where?
    Admiral Landay. We haven't necessarily decided where it 
would be. Well, there are a couple of ways that we could do it. 
One of them would be to go out. Some of that is this. Some of 
that would be to the individual shipyards to clean up, as I 
said, the work packages they have in place.
    And then we would have either a subsequent design agent 
that could be Naval Sea Systems Command (NAVSEA) or that could 
be a contractor like Gibbs & Cox or somebody like that, who 
builds then that design package for us out of the designs that 
we get.
    So when you think build to print, you have got to remember 
that it is going to be more than just the hull of the ship and 
the distributed systems. It is really the entire integrated 
ship that you want to look at, so it is the combat systems 
implications, the cables, the testing.
    You know how do you test that ship? How are you going to 
put all that in? That all becomes part of an integrated data 
package, if we are going to go to build to print for the entire 
ship.
    But it would be a third-party source in our mind, who 
would--you would take that design responsibility, and whether 
that would be the Navy under NAVSEA or whether that would be 
you know one of the other design houses, we haven't decided 
that yet.
    Mr. Taylor. Admiral, given that, what are the chances that 
the mission modules will be ready prior to LCS-2 going to sea?
    Admiral Landay. The mission modules? Well, there are some 
mission modules that are currently ready right now.
    Ms. Sandel. Yes, sir. If you would allow me, we delivered, 
as you are aware, initial mission modules in each system with 
Anti-Submarine Warfare (ASW) and mine countermeasures and the 
Surface Warfare (SUW).
    We are in varying levels of technical maturity and testing 
in every one of those areas, so we have timed ourselves to be 
in sequence to the sea frame.
    We have intentionally slowed down in some areas of design 
and development and testing in order to pay this sea frames so 
that we are not delivering ahead of need, but having them 
available for the testing required to be able to support the 
requirements.
    We have intentionally taken the same steps back to go ahead 
and pace ourselves to not buy things in advance and having them 
sitting on the dock awaiting a sea frame. So we are in lockstep 
as far as alignment of schedules.
    Mr. Taylor. Has any thought been given to putting those 
modules on other platforms?
    Ms. Sandel. Sir, we have been asked by your organization to 
take a look at alternative platform studies, and that is in 
process right now, and Admiral Guillory may want to speak to 
that little bit more.
    But we have analysis ongoing, as well as experimentation to 
design the desire. How will we do this, and if it is feasible, 
and how would you go about it.
    Mr. Taylor. And when should we expect an answer on that?
    Ms. Sandel. The language requested it be submitted with the 
submission of the fiscal year 2010 budget.
    Mr. Taylor. So we should already have it?
    Ms. Sandel. It is in process to be submitted. Yes, sir.
    Mr. Taylor. The chair recognizes the gentleman from 
Pennsylvania, Admiral Sestak.
    Mr. Sestak. Thank you, Mr. Chairman. I apologize. I was at 
another committee on healthcare, which is kind of why I 
initially got into this line of work.
    I wanted to ask--and if these have been asked, I would 
apologize. I jotted down a few notes while I was in the other 
hearing--at the end of January, you had said you were going to 
award a contract for the two fiscal year 2009 ships, and they 
were going to be bundled into the three that will be the fiscal 
year 2010.
    Does a delay on that have to do it all with that they are 
having problems meeting that cap, the $460 million cap, for the 
fiscal year 2010 ships?
    Admiral Landay. Well, I will say that the real focus on the 
fiscal year 2009 ships and the way we had proposed that was we 
wanted the fiscal year 2010 ships to be options when they 
provided us their bids for the fiscal year 2009 ships.
    And the intent is to try to get both more pricing pressure 
and more economic or the quantity opportunities for the 
shipbuilders buy them potentially being able to look at four--
you know, four, three, two or one, depending on how that 
worked.
    So right now the delay--and again, our goal had been in the 
January timeframe. It was really going to be function of when 
both sides could come to agreement. The delay has been as much 
in trying to continue to work through affordability and cost 
reduction efforts on both sides on the 2009 ship----
    Mr. Sestak. Does the delay have anything to do with their 
having problems meeting that cost cap fiscal year 2010 ships?
    Admiral Landay. Well, we will see when we get their final 
work. But, yes, sir, that is one of the key drivers that we are 
working very hard, is that we are on a path to do that, and 
everybody understands that is one of the requirements.
    Mr. Sestak. I guess is LCS-2--has the price--have you had 
any budget growth on that since what was in the fiscal year 
2009, what was presented in the fiscal year 2009 budget?
    Admiral Landay. We will be able to deliver the ship for the 
money that we had in the budget. Yes, sir. I mean there have 
certainly been some cost growth that eating into the program 
manager's reserves into the program.
    Mr. Sestak. About how much?
    Admiral Landay. I can get it to you, sir, separately.
    Mr. Sestak. Do you think it would--in a GAO study that was 
done and other times, they have talked about the aircraft 
carrier being funded at a confidence level of less than 40 
percent and ships being funded--and I understand perhaps the 
LCS initially--at less than 50 percent confidence factors for 
the prices that you provide Congress in the budget.
    Do you think at this stage of the game with the issues that 
have been attendant to the LCS in costing, confidence, as you 
come forward again, that we should cost it now to at least 80 
percent costing factor?
    What is the downside of telling us we have got an 80 
percent confidence factors, that that is what the real price 
is?
    Admiral Landay. Yes, sir. I think at an individual program 
level--you know if you just looked at LCS stand-alone, 
certainly you would like to do that. When you look across all 
of the shipbuilding programs and the balance, obviously, that 
the department needs to do in terms of risk versus capability, 
I think that is really the trade that we have to make.
    Mr. Sestak. So is the $460 million--is that at 80 percent 
confidence factor in your pricing right now?
    Admiral Landay. No.
    Mr. Sestak. What is it?
    Admiral Landay. I would say it is probably 50 percent.
    Mr. Sestak. So there is a 50 percent chance at best that we 
might hit the $460 million.
    Admiral Landay. As we currently, yes, sir, as we currently 
have the ship designed, absent any affordability--now, again, 
you get into multi-years and EOQs, and that helps to drive that 
cost down.
    Mr. Sestak. I will ask you a question. I guess that my 
overarching question is the Navy has been able to afford $12 
billion to $14 billion per year for Navy shipbuilding, but you 
came forward last year and said we now need $20 billion, which 
is I guess about an 80 percent or so increase.
    With 50 percent confidence factors coming forward and less 
on other types of vessels, what kind of confidence do you have 
that if we almost double your procurement budget, that is going 
to get us--I mean how are you going to afford all this?
    I mean what is the confidence of having come forward last 
year and told us that your procurement budget has to leap from 
$12 billion, $20 billion or $22 billion, and yet we are kind of 
getting confidence factors of 50 percent or less when you come 
forward?
    How comfortable are you with that $22 billion?
    Admiral Guillory. Sir, the question you ask certainly goes 
beyond the information I am prepared to provide a response to. 
And I think we will take that for the record and get back to 
you on that.
    But if I may say that, the confidence factor also reflects 
the maturity of the program, too.
    And if you look at the Arleigh Burke-class and the--you 
know as we are still in building 1/08 it is coming down. The 
building wait is now--the confidence factor in funding that 
ship is certainly different than the confidence factor of 
funding an LCS, and that is pretty understandable.
    So it is a combination of statistics and numbers, but it is 
also a confidence factor based upon the maturity, and also the 
priorities of across the shipbuilding portfolio.
    And ideally, certainly as a resource sponsor, I would be 
very grateful if all my ships were funded to the 80 percent 
level or some higher percentage. However, I do recognize that 
that is----
    Mr. Sestak. Excuse me. I wasn't talking about funding at 
that level. I was just asking should you come to Congress and 
let us know that when we buy the new aircraft carrier, it is 
only at a 35 percent confidence factor. That was my only 
question, not to what funding.
    Let me then bring it back to LCS, one final question. What 
is the status of the Navy's stated intentions in the July 2007 
testimony to move to a common combat system for LCS? I may have 
missed that in the----
    Admiral Landay. No, sir. We continue to look across the 
board at opportunities to go common across the two sea frames. 
We did in fiscal year 2007 do an initial study on a common 
combat system. The look at the time, based on the assumptions 
that we used in that study, was about a wash.
    The savings that you would get lifecycle from a training 
infrastructure perspective were offset by the impacts from a 
nonrecurring engineering of making changes to the ships.
    We currently have a second study that we have just started, 
as the Navy has gone to its objective architecture, which 
should give us more flexibility. We are going back and taking 
another look at that.
    So we are continuing to look at those opportunities, but 
unless we see there to be a significant trade-off, we right now 
don't have anything in place on the fiscal year 2009 or 2010 
ships to go to that.
    However, I would say in our fiscal year 2010 contract, one 
of the things we have asked shipyards to give us, in addition 
to the price for a ship, is also to break that price down and 
give us options to buy essentially a core sea frame without a 
combat system, the cost of buying a combat system, and then the 
cost of buying a combat systems equipment in there as a----
    Mr. Sestak. So you may or may not go to a common combat 
system. Is that what I should take up?
    Admiral Landay. Well, in fiscal year 2009 or 2010, I do not 
expect----
    Mr. Sestak. But then perhaps maybe later.
    Admiral Landay. We are looking at it. And it all depends on 
what the business case will play out.
    Mr. Sestak. Thank you.
    My question--I didn't mean to ask the question that you 
really weren't here for testimony. I guess the reason I asked 
it is that I have been quite struck by the demands of the 
Nation for accountability and clarity of the mortgage security 
issues on Wall Street.
    I wonder if we ourselves in the Defense Department here in 
Congress might want to have more of that transparency upfront 
on how confident are we about this mortgage we are actually 
taking out on our future for our children. How good is that 
price you know in a sense, that you come forward with all the 
time?
    And I was quite struck by the GAO study, although I was 
cognizant of it in a prior life, of how good these confidence 
factors are, because we tend to sometimes berate people for 
coming forward and telling us it is going to cost more, but 
maybe for you upfront that LCS would come in for less than 50 
percent confidence factor, we might approach it differently.
    But thanks for your comments.
    Admiral Landay. Yes, sir.
    Mr. Taylor. The chair thanks the gentleman.
    The chair now recognizes the gentleman, the ranking member 
from Missouri, Mr. Akin.
    Mr. Akin. Thank you, Mr. Chairman.
    I just have a couple of quick questions. First of all, is 
this ship mostly viewed as a Navy ship in terms of its use, or 
does the Marine Corps have a sense that this is something that 
they would be using as well?
    Admiral Guillory. This is a Navy ship, and with its payload 
capacity, it is certainly--there are opportunities perhaps to 
bring Marines aboard and execute missions, but right now it is 
essentially a Navy ship. Yes, sir.
    Mr. Akin. I understand that all the ships are Navy ships, 
but I just got to think that there has got to be a difference. 
Some of them are specifically designed for the Marine Corps. 
This is not specifically designed for Marine Corps use. Is that 
right?
    Admiral Guillory. No sir.
    Mr. Akin. Okay. So there may be some cross applicability. 
You might be able to put some Marines on board, but it is being 
used as a Navy platform for naval use, as opposed to Marine 
use. Is that correct?
    Admiral Guillory. Yes, sir. That is correct.
    Mr. Akin. Okay.
    Second thing. I think I heard in terms of these different 
missions packages, I thought what I heard you saying was that 
these things will be ready to plug in, and they will be fully 
integrated when we take acceptance of the ship. Is that 
correct, or did I misunderstand?
    Ms. Sandel. If I may, yes, sir, it is at varying levels of 
technical maturity. As the program was originally envisioned 
and laid out, there was a spiraled development of the mission 
packages themselves.
    So the systems that comprise those mission packages many 
times were developmental items or engineering design models or 
a low rate initial production, so we have always understood 
that we took the design as it was in progress, and it was being 
tested and developed, and then ultimately going to be fielded.
    So when we get to the point that we have the mission 
package for the mine countermeasure system, for instance, it 
will have the systems embedded in it that have been designed to 
interface standard. It will have the supporting equipment, and 
it will be ready for testing on the sea frame and in accordance 
with the sea frame schedule.
    However, the interesting part is, like we have talked about 
controlling costs on the contract, this is also one aspect, 
that this is unusual. We have the ability to test the very 
detailed level of testing on these mission systems, which are 
individual programs of record, prior to their being 
incorporated into the mission package.
    So each program is walking through its testing regime as it 
comes to the sea frame. So we have gotten a delivery of an 
asset that has been fully tested, understood to perform, then 
is integrated into the package and delivered for the end-to-end 
testing to make sure the interfaces are all available and 
forming.
    Mr. Akin. I thought I heard sort of a yes and a kind of yes 
and a kind of no answer, I think.
    What I am hearing you say is, yes, the mission packages 
will be available and integrated, and they can be plugged into 
the ship, but they are in a state of spiral development, which 
means that they may or may not work or may be changed 
significantly over a period of time. Is that correct?
    Ms. Sandel. I would state that slightly differently. Yes to 
your first part. Second, they will work, because we will not 
deliver a component or mission system to the package for end-
to-end testing that wasn't performing.
    Mr. Akin. How many different separate mission packages are 
there total?
    Ms. Sandel. In individuals, we have the mine countermeasure 
mission package, the surface warfare mission package, and the 
anti-submarine mission package. They are comprised of 
individual numbers and quantities, depending on the 
requirements and the sponsor.
    Those are comprised of 8 to 10 systems in each area, so you 
have a complexity level where you are delivering systems to be 
integrated to be tested in a mission package.
    So you are going to have technical development as you move 
forward and----
    Mr. Akin. So there are three missions packages at this 
point, totally?
    Ms. Sandel. Yes, sir.
    Mr. Akin. Okay.
    I come back to the first question I asked the beginning of 
the hearing, and I felt like I got a kind of maybe, sort of 
answer.
    My question is, is there one person who is being measured 
and held accountable for the delivery or, from the Navy point 
of view, who is in charge of this program, makes all the 
decisions and can say, ``Yes, I understand you want to do this, 
this and this. We have looked at it all, and this is my 
decision. This is what we are going to do, and this is how we 
are going to move forward.''
    Is there any one person in charge? I understand the idea of 
the team concept of leadership. I understand it is good to get 
a lot of input from different people. I understand breaking a 
project into component parts.
    But ultimately somebody has got to be held accountable, and 
somebody has to make the decisions. Is there one person who 
this is their baby, and they are held accountable for it in the 
Navy?
    Admiral Landay. Yes, sir. The acquisition----
    Mr. Akin. What is his name, and what position is it?
    Admiral Landay. Captain Jim Murdock, sitting behind me, who 
is the acquisition program manager at this point, is the person 
responsible for delivering the LCS program.
    Now, Captain Murdock does not have the authority, for 
example, to change requirements of the program. Captain Murdock 
does not have the authority, nor do I, to change the missions 
of the program.
    His job is, as we build the ship as it has currently been 
laid out by OPNAV folks to those requirements, and if we cannot 
do that, then we will go back to the OPNAV folks and explain to 
them what the issues are, and then that will be keyed up.
    But in terms of do their bring the ship to the capabilities 
that have been given to us by the CNO, the program manager is 
the one person responsible for the ship.
    Mr. Akin. So can the mission requirements or parameters or 
specifications on the ship be changed?
    Admiral Landay. Yes, but not by Captain Murdock. Captain 
Murdock would go back to Admiral Guillory, and collectively we 
would go to the senior Navy leadership and say, ``The cost of 
this requirement to get there is far more than we expected. 
There is an impact.'' And we would have that discussion with 
them.
    This is part of the process that has changed as a result of 
early LCS lessons learned.
    Mr. Akin. Who is it who is--so there is no one further up 
the line, then, that basically is in charge, that could 
basically make that decision. It is all a group decision 
whether or not you are going to change a requirement of this or 
that. Is that right?
    Admiral Guillory. No, sir. For general requirements 
generation, I am responsible for staffing back and taking it 
forward to the chief of Naval operations----
    Mr. Akin. Right.
    Admiral Guillory [continuing]. Admiral Roughead.
    Admiral Roughead is authorized to approve key attributes 
for the ship. Key performance parameters are approved by the 
Joint Requirements Oversight Council (JROC), the Joint Staff, 
the chairman of Joint Chiefs of Staff, and of which the ship 
has 10 key performance parameters.
    It has 37 key attributes. Attributes include launch and 
recovery of aircraft, what type of sea state that the ship 
ought to be able to do that in. Those are the authority of the 
chief of naval operations to approve or to change.
    Mr. Akin. I guess what I am getting at is I don't 
understand your organizational structure that well. Maybe it is 
all just crystal clear to you who is responsible for what, but 
from my point of view, when I look at the big picture, this 
thing looks like the rudder has been shot out of it, and it is 
just drifting all over the place as a program.
    And it seems like, because of the fact that you start with 
one number and one set of parameters and you change it, and it 
doubles the cost of the ship.
    And then now we have got these two different ships, and it 
is not quite clear which one you are going to buy, and yet you 
still want to build more both of them. It just seems to me like 
the whole thing is wandering some.
    And it seems to me that there should be one person, who 
ultimately has got to have to make those decisions and have a 
game plan and start moving forward with it.
    And what you are telling me is well, it is sort of yes and 
sort of no. And I understand there needs to be input, but 
somebody's got to be in charge of it. And it seems to me like 
it is drifting.
    Maybe I am mistaken, but at least the data seems to suggest 
there is a lot of changes that have been moving through this 
program, which have been very expensive.
    I will let you respond.
    Admiral Landay. Well, I would say on the acquisition side, 
clearly--and we have identified that up front--there have been 
some changes to this program, which drove costs.
    One of the outcomes of that is, as we went back and looked 
at our process and we said as these changes were coming into 
the program, how did senior Navy leadership understand and were 
informed and had the ability to influence and make decisions on 
those changes?
    Before, our process was probably not as clean, so the 
secretary has put in a what I call six-gate two-bat pass 
process to where now we periodically on the acquisition side 
will go back to the larger organization, which includes the 
Assistant Secretary of the Navy for Research, Development and 
Acquisition (ASN (RD&A)), the U.S. Secretary of the Navy 
(SECNAV) acquisition representative and the CNO staff, or the 
commandant if it affects the Marine Corps, and we walk them 
through that.
    So you know Mr. Sestak's comment about confidence. We would 
have those discussions with them. If we come in and sat now and 
say, ``The cost of this ship is growing, because we can't 
figure out how to get through a certain requirement,'' instead 
of just continuing to grow the cost, we now have a mechanism, a 
better mechanism to go back and have that discussion with 
Admiral Guillory and the OPNAV.
    But in the end there is two pieces of it. There is a 
requirements levied by the operational side, the CNO. The 
acquisition community under ASN (RD&A) is responsible for 
executing that. And together at that point, CNO, SecNav, ASN 
(RD&A) as a staff is where those two pieces come together.
    So if there is a requirements trade, the CNO has to be part 
of that. If there is an acquisition implication of that, then 
the acquisition side of it. So it is the way that the process 
is set up to work.
    Mr. Akin. Thank you very much.
    Mr. Taylor. I guess I will open this up to the panel. Will 
the second LCS be delivered with a functional combat system?
    Admiral Landay. Yes, sir. It is our goal right now that we 
would deliver that ship to meet with all the capabilities that 
it needs. As you know, we----
    Mr. Taylor. Do you have the time set for that, Admiral?
    Admiral Landay. We are looking for delivery in the 
September timeframe.
    Mr. Taylor. So by September it is going to have a 
functional combat system.
    Admiral Landay. Yes, sir.
    Mr. Taylor. Admiral, several of us have touched on it, but 
I am going to give you an analogy that I continue to be 
troubled with.
    I guess all of us at one time or another have hired someone 
to paint our house. Sometimes you do it by the job, or if you 
trust the person, you do by the hour.
    I am getting the impression we hired someone to paint our 
house on a fairly trust--you know I trust you, he trusts me. 
But I come to my house, and he is using a one-inch brush, and I 
am paying him by the hour.
    I think it is every bit my right to say, ``You know what? 
You are not trying to save me any money. You are trying to drag 
this out.'' That is the impression I get with both of these 
builders.
    And I have seen--again, I want to give you this opportunity 
while we still have time, to tell me what they are doing--not 
building additional buildings to get people out of the weather, 
but what are they doing to automate their processes, because we 
know a huge portion of the cost of this vessel is the welds--in 
addition to the metal, the welds. And there are a heck of a lot 
of welds on that Trimaran.
    So what steps, concrete steps, are being taken to automate 
that process, because I will use the analogy. The subcommittee 
visited the Hyundai yard about two years ago. It was fortunate 
to spend about four hours in that yard.
    In the four hours I was there, I saw them doing everything 
from making propellers on-site, shafts on-site, bearings on-
site, making the engine on-site. And every Saturday, another 
hull was launched.
    The four hours I was there, I never heard a grinder, which 
meant that every well was being cut perfectly, so someone 
didn't have to go back and fix it. Every cut of the metal was 
being done perfectly, so someone didn't have to go back and fix 
it.
    When I visit Austal, when I visit Marinette, I hear a lot 
of grinders. I hear a lot of mistakes getting fixed by somebody 
doing manual labor to undo it.
    So what is being done, and particularly who in your 
organization is walking through there, knowing that we are 
basically their only customer and saying, ``You know what? 
There is a better way to do this, and we expect you to do 
that.''
    Who is doing that?
    Admiral Landay. I would tell you that the key--the overall 
program team is doing that combination of our supervisor of 
shipbuilding, who is our lead waterfront technical 
representative in the program office.
    So we have lots of discussions with the companies. We, for 
example, just recently put together a team about 2 months ago 
that was program folks, shipyard folks, and outside 
shipbuilding experts to walk stem to stern both of those ships 
with the companies and look for opportunities where we would 
propose back to them and say, ``There should be a better way to 
do this. You are welding too much pipe. You need to start 
bending pipe. You are doing too much effort in here.''
    And so there is a very aggressive effort to--with them--I 
mean they are a part of this--to look for those opportunities.
    We have seen in what has been proposed to us in the fiscal 
year 2009 program. We have seen where they have also proposed 
production efficiencies.
    We have seen where the companies have told us under some of 
their company award or in capital expenditure (CAPEX), if we go 
down that path, additional equipment that they would buy, be it 
pipe bending machines or other things to improve their process.
    The Austal facility that I mentioned to you, that modular 
manufacturing facility, is not just a building. It is to take 
that facility and walk down similar lines that you saw before 
in the Hyundai plant that you talked about, about getting us 
into a more logical, leaned out manufacturing process.
    There are always going to be additional things we can do, 
but the first step of this that we thought was particularly 
critical, and we see both companies doing, is looking to 
improve the lean processes they have in place to make this more 
modular, to get the production inefficiencies out of their 
process.
    And then from there, if there are additional investments 
that they need to make in terms of infrastructure machines, the 
companies have both indicated plans where they would go forward 
and do that.
    But from the Austal, you know what you saw in that one shed 
it is exactly those processes that we see the company working 
very hard to improve and the result of why they went to this 
modular manufacturing facility.
    Mr. Taylor. Okay, for the record it is my understanding 
that the materials for LCS-3 and LCS-4 have already been 
purchased, so we are not really going to get any savings as a 
result of the price of commodities going down.
    But for the record, should we want to continue with these 
programs, I would like to know the difference between what we 
paid for the first two ships--that is for each--and what it 
would cost if we bought those materials today.
    For the record, I would like to know what percentage of 
each of those vessels was welded by hand, what percentage was 
done by machine, and what is your target for vessels 3 and 4 
and vessels 5 and 6.
    Admiral Landay. Yes, sir.
    Mr. Taylor. Okay. When should I expect those answers, 
Admiral?
    Admiral Landay. We should be able to get you percentages of 
ships of 1 and 2, I would say by today; 3 and 4 and 5 and 6 I 
just need to go back and you know take a look through the 
contract. I would say by the end of the week I should be able 
to tell you what those are.
    [The information referred to was communicated verbally and 
is not available for print.]
    Mr. Taylor. Okay. Thank you, sir.
    Mr. Akin.
    Again, we want to thank our witnesses. In fairness to the 
workers at Marinette, I do want to say that I had the 
opportunity to visit LCS-1 in Norfolk. The commanding officer 
of the ship was ecstatic with its performance. And I think in 
fairness to those workers, they should know that.
    In fairness to the taxpayers, it was 18 months late and 
over twice over budget. It is the latter that we need to 
improve, and it is the latter that I hope the Navy is focused 
on improving.
    But I want to thank our witnesses for being with us.
    This hearing is adjourned.
    [Whereupon, at 12:05 p.m., the subcommittee was adjourned.]

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