[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]


 
                         [H.A.S.C. No. 112-127] 

                                HEARING

                                   ON

                   NATIONAL DEFENSE AUTHORIZATION ACT

                          FOR FISCAL YEAR 2013

                                  AND

              OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS

                               BEFORE THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

         SUBCOMMITTEE ON SEAPOWER AND PROJECTION FORCES HEARING

                                   ON

                     OVERSIGHT OF U.S. NAVAL VESSEL

                     ACQUISITION PROGRAMS AND FORCE

                     STRUCTURE OF THE DEPARTMENT OF

                    THE NAVY IN THE FISCAL YEAR 2013

                     NATIONAL DEFENSE AUTHORIZATION

                             BUDGET REQUEST

                               __________

                              HEARING HELD
                             MARCH 29, 2012

                                     
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             SUBCOMMITTEE ON SEAPOWER AND PROJECTION FORCES

                    W. TODD AKIN, Missouri, Chairman
DUNCAN HUNTER, California            MIKE McINTYRE, North Carolina
MIKE COFFMAN, Colorado               SUSAN A. DAVIS, California
SCOTT RIGELL, Virginia               JAMES R. LANGEVIN, Rhode Island
TIM GRIFFIN, Arkansas                RICK LARSEN, Washington
STEVEN PALAZZO, Mississippi          JOE COURTNEY, Connecticut
TODD YOUNG, Indiana                  CHELLIE PINGREE, Maine
ROSCOE G. BARTLETT, Maryland         MARK S. CRITZ, Pennsylvania
J. RANDY FORBES, Virginia            HANK JOHNSON, Georgia
ROB WITTMAN, Virginia                BETTY SUTTON, Ohio
TODD RUSSELL PLATTS, Pennsylvania
                Tom MacKenzie, Professional Staff Member
              Phil MacNaughton, Professional Staff Member
                   Emily Waterlander, Staff Assistant




                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2012

                                                                   Page

Hearing:

Thursday, March 29, 2012, Oversight of U.S. Naval Vessel 
  Acquisition Programs and Force Structure of the Department of 
  the Navy in the Fiscal Year 2013 National Defense Authorization 
  Budget Request.................................................     1

Appendix:

Thursday, March 29, 2012.........................................    39
                              ----------                              

                        THURSDAY, MARCH 29, 2012
OVERSIGHT OF U.S. NAVAL VESSEL ACQUISITION PROGRAMS AND FORCE STRUCTURE 
OF THE DEPARTMENT OF THE NAVY IN THE FISCAL YEAR 2013 NATIONAL DEFENSE 
                      AUTHORIZATION BUDGET REQUEST
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Akin, Hon. W. Todd, a Representative from Missouri, Chairman, 
  Subcommittee on Seapower and Projection Forces.................     1

                               WITNESSES

Mulherin, Matthew J., President, Newport News Shipbuilding, and 
  Corporate Vice President, Huntington Ingalls Industries........    29
Novakovic, Phebe N., Executive Vice President, Marine Group, 
  General Dynamics Corporation...................................    26
Stackley, Hon. Sean J., Assistant Secretary of the Navy for 
  Research, Development, and Acquisition; VADM John Terence 
  Blake, USN, Deputy Chief of Naval Operations for Integration of 
  Capabilities and Resources (N-8); and LtGen Richard P. Mills, 
  USMC, Deputy Commandant for Combat Development and Integration 
  and Commanding General, Marine Corps Combat Development Command     2

                                APPENDIX

Prepared Statements:

    Akin, Hon. W. Todd...........................................    43
    Davis, Hon. Susan A..........................................    45
    Mulherin, Matthew J..........................................    91
    Novakovic, Phebe N...........................................    65
    Stackley, Hon. Sean J., joint with VADM John Terence Blake 
      and LtGen Richard P. Mills.................................    47

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mr. Coffman..................................................   113
    Mr. Courtney.................................................   113

Questions Submitted by Members Post Hearing:

    Mr. Langevin.................................................   117
    Mr. Wittman..................................................   120
OVERSIGHT OF U.S. NAVAL VESSEL ACQUISITION PROGRAMS AND FORCE STRUCTURE 
OF THE DEPARTMENT OF THE NAVY IN THE FISCAL YEAR 2013 NATIONAL DEFENSE 
                      AUTHORIZATION BUDGET REQUEST

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
            Subcommittee on Seapower and Projection Forces,
                          Washington, DC, Thursday, March 29, 2012.
    The subcommittee met, pursuant to call, at 10:04 a.m. in 
room 2118, Rayburn House Office Building, Hon. W. Todd Akin 
(chairman of the subcommittee) presiding.

 OPENING STATEMENT OF HON. W. TODD AKIN, A REPRESENTATIVE FROM 
  MISSOURI, CHAIRMAN, SUBCOMMITTEE ON SEAPOWER AND PROJECTION 
                             FORCES

    Mr. Akin. The hearing will come to order.
    Heavenly Father, we just thank you again for the freedom we 
enjoy and for the people who have sacrificed for that. We ask 
your blessing on our deliberations. Help us to be wise, help us 
to be good planners, and good stewards. And we pray that you 
help us with the somewhat busy schedule this morning, and the 
votes and all. And I pray in Jesus' name. Amen.
    Gentlemen, we have got a little bit of a curveball that has 
been handed to us because they have got votes on kind of 1-hour 
bases all through the morning. So I have talked to Assistant 
Chairwoman Davis, and we have agreed that we are going to just 
postpone making our comments and just leave those for the 
record and go directly to our witnesses and--is that the call 
for votes? We have already got votes on? Okay.
    I think what we will do is run for about 7 minutes or so, 
or maybe 10 minutes, then we will be running to vote--time for 
a cup of coffee if you haven't had one--and then we will 
probably be back I am guessing roughly 20, 25 minutes, but I 
don't know the exact number of votes. So let's just go ahead 
and proceed.
    Is it just one vote? Okay. We may be back quicker than 
that.
    [The prepared statement of Mr. Akin can be found in the 
Appendix on page 43.]
    Mr. Akin. So, Admiral Blake, do you want to go first, any--
or--okay.
    Secretary Stackley. Yes, sir.
    Mr. Akin. Sean, fire away.

STATEMENT OF HON. SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE 
  NAVY FOR RESEARCH, DEVELOPMENT, AND ACQUISITION; VADM JOHN 
   TERENCE BLAKE, USN, DEPUTY CHIEF OF NAVAL OPERATIONS FOR 
  INTEGRATION OF CAPABILITIES AND RESOURCES (N-8); AND LTGEN 
     RICHARD P. MILLS, USMC, DEPUTY COMMANDANT FOR COMBAT 
  DEVELOPMENT AND INTEGRATION AND COMMANDING GENERAL, MARINE 
                CORPS COMBAT DEVELOPMENT COMMAND

    Secretary Stackley. Yes, sir. Mr. Chairman, distinguished 
members of the subcommittee, thank you for the opportunity to 
appear before you today with Vice Admiral Blake, and Lieutenant 
General Mills to discuss Navy shipbuilding. And thank you, of 
course, for your steadfast support in support of our Navy, 
Marine Corps, sailors, and marines who are meeting the Nation's 
commitments around the world.
    And with the permission of the committee I would like to 
make a brief opening statement and provide a more formal 
opening statement for the record.
    Today we are a battle force of 282 ships, nearly half of 
which on any given day are under way performing missions around 
the globe: supporting operations in Afghanistan; providing 
maritime security along the world's vital sea lanes of 
communication; missile defense in the Mediterranean and Sea of 
Japan; intelligence, surveillance, and reconnaissance where 
needed, as needed; global presence at sea; and with embarked 
Marine expeditionary forces ready to move ashore, conducting 
antipiracy patrols, global partnership stations, humanitarian 
assistance, training to ensure constant readiness in 
preparation for the next deployment, next operation, and all 
the while quietly, reliably on patrol providing strategic 
deterrence.
    In support of the defense strategic guidance we are 
building towards a battle force of 300 warships, platforms that 
will provide our sailors and marines the capability and, two, 
the capacity needed to maintain our maritime superiority today 
and for the foreseeable future. This objective is cast 
alongside the fiscal realities that come with the Budget 
Control Act of 2011, and so in reshaping our shipbuilding plan 
of a year ago to reflect the priorities of the new defense 
strategy and the new budget top line this year's shipbuilding 
plan strikes a balance between capacity, capability, 
affordability, and the industrial base.
    We have important work to do as we continue to assess, 
plan, and execute in order to close out-year gaps and risks 
identified by the long-range shipbuilding plan. In doing so, we 
need to drive the equation to deliver the full capability our 
warfighters need at the lowest possible cost.
    The Secretary of the Navy remains strongly committed to 
investing in shipbuilding and we have put that commitment to 
work over the last year. Since this time last year two 
destroyers, a submarine, a dry cargo ammunition ship have 
joined the fleet and the LPD [Landing Platform Dock Ship] San 
Diego and submarine Mississippi will commission this spring. 
Another half-dozen ships are being christened while keels have 
been laid for the lead ship of the DDG 1000 class [USS Zumwalt 
Class Destroyer], the next littoral combat ship, the next 
Virginia, and the next T-AKE ship [Dry Cargo/Ammunition Ship].
    In total, since December 2010 we have awarded contracts to 
procure 38 ships, including options--most competitively 
awarded, all fixed-price contracts, and we are on track to 
increase that number to 40 this spring with the anticipated 
awards of the next Amphibious Assault Ship, LHA 7, and the 11th 
and final ship of the LPD 17 [USS San Antonio] class. Stable 
production and mature designs represented in these fixed-price 
contracts provide an important degree of certainty to our 
industrial base in an otherwise uncertain period in defense 
spending.
    We recognize, however, that we must remain focused 
relentlessly on improving affordability in shipbuilding 
programs, but we must sustain our planned investment in 
modernizing the current force. To this end, our fiscal year 
2013 budget request includes funding for 10 ships and asks for 
multiyear procurement authority for the Virginia class and the 
DDG 51 Arleigh Burke class.
    The shipbuilding program includes 41 ships to be procured 
over the 5 years of the 2013 Future Years Defense Program, a 
reduction in ship count compared to the 2012 Future Years 
Defense Program, reflecting the fact of life top-line 
reductions consistent with the Budget Control Act of 2011. 
However, within these controls we have been careful to maintain 
priority on the capabilities called for in the new defense 
strategy.
    The strength of our shipbuilding plan is closely coupled 
with the strength of our shipbuilding industrial base. The 
critical skills, capabilities, and capacities inherent to our 
new construction shipyards and weapon systems developers 
inarguably underpin the U.S. Navy's dominant maritime position. 
Accordingly, in the course of balancing resources and 
requirements in the formulation of the shipbuilding plan, the 
effect of program decisions on the industrial base must be 
closely weighed.
    Over the past several years the Navy has placed a priority 
on increasing shipbuilding rates and providing stability for 
the shipbuilding industrial base. Stability translates into 
retention of skilled labor, improved material purchasing and 
workforce planning, strong learning curve performance, and the 
ability for industry to invest in facility improvements; all 
resulting in more efficient ship construction and a more 
affordable shipbuilding program.
    The strategy going forward must continue to center upon 
improving affordability. One of the greatest challenges to our 
future shipbuilding program, and therefore to elements of our 
industrial base, is the rapidly increasing cost of our ship 
programs. To this end, in addition to the emphasis on stability 
discussed above the Navy is establishing affordability 
requirements and investing in design for affordability for 
future ship programs; mandating use of open system design; 
leveraging competition where it exists in shipbuilding; 
employing fixed-price contracts to control cost for ships and 
weapon systems in production; imposing strict criteria limiting 
disruptive changes to contracts; investing in industry-wide 
manufacturing process improvements through the National 
Shipbuilding Research Program; and incentivizing capital 
investment in facilities where warranted.
    Ultimately, we recognize that as we balance requirements, 
affordability, and industrial base considerations it is ever 
more important that our shipbuilding plan closely align with 
the priorities outlined in the new defense strategy. And it is 
equally important that we--Navy and industry--continue to 
improve the affordability within our programs in order to build 
the Navy that our sailors and marines need for future force.
    Mr. Chairman, thank you for the opportunity to appear 
before you today. We look forward to answering your questions.
    [The joint prepared statement of Secretary Stackley, 
Admiral Blake, and General Mills can be found in the Appendix 
on page 47.]
    Mr. Akin. Well, thank you for your comments. And I think 
because of the fact we have got 7 minutes left on the vote we 
are going to scoot and then come back for the testimony.
    And, Mr. Stackley, appreciate your comments. I will have a 
question or two on the Virginia class here, but we will take a 
break and get back to you. I am hoping maybe it is in as short 
as, oh, 10 or 15 minutes now maybe.
    Thank you.
    [Recess.]
    Mr. Akin. Subcommittee will come to order again and we will 
continue with the testimony.
    Mr. Stackley, I believe you were finished with your opening 
comments. You had some things for the record which we will 
accept for the record.
    And then, who is going to go next?
    Admiral, you want to be next, and then General? Okay.
    Admiral Blake. Sir, I don't have an opening statement. We 
were all on Mr. Stackley's statement.
    Mr. Akin. You were all on Mr.--so we are ready for 
questions, then?
    Admiral Blake. Yes, sir.
    Mr. Akin. Well, you guys get things done in a hurry. That 
is good.
    Okay. I guess first off the question I have is I understand 
for purposes of budgeting and trying to make the numbers fit, 
which we all have to do--we live within those constraints to a 
degree, perhaps those of us in Congress less so even than 
yourselves--but somehow or other just the logic of the Virginia 
class--we have got those things building on, you know, two-a-
year kind of cycle and all of a sudden what we are going to do 
is to break that, not build one for 1 year, and somehow, then, 
we go back to the two-a-year cycle in the years that follow.
    It seems to me that there are some costs for making that 
kind of a decision in the sense it interrupts the supply chain 
and the labor force. And ultimately, we are--it seems like from 
a need point of view the--those ships, there is a very high 
demand on them. So could you comment on what is the kind of 
hidden cost of doing this and is there some way, perhaps, that 
we could try to move that up so we stay on that two-a-year 
build cycle?
    Secretary Stackley. Yes, sir. Let me start with the build 
cycle. As you are--the committee is well familiar, the Virginia 
class program was at a one-per-year rate for an extended period 
of time and then set the target to get to two boats per year by 
2012. And in fact, the program achieved that in 2011 by driving 
down program cost.
    So the goal of what was referred to as ``2 for 4''--which 
is $4 billion--``in 2012''--this is all old-year dollars--
became ``2 for 4 in 11.'' So the program didn't just drive 
costs down but actually tuned production for two boats per year 
through the vendor base, through the shipyards. And it is 
important not just for affordability reasons but also for the 
force structure.
    The Navy's requirements for 48 boats near-term and long-
term is in jeopardy as we look out ahead to the decade of late 
2020s and 2030s. Because of that extended period of one boat 
per year that creates a force structure valley out in the 
2030s. So everything we can do to sustain two boat per year 
procurement and production rate is critical for affordability 
and for national security.
    Mr. Akin. The affordability is--first of all, the national 
security is farther out, a little bit longer term, or is it all 
the way along the line?
    Secretary Stackley. It is farther out. It is in the late 
2020s and 2030s is when we see the force structure numbers 
start to draw down----
    Mr. Akin. Okay.
    Secretary Stackley [continuing]. But the concern is you 
have to address that now.
    Mr. Akin. Right.
    Secretary Stackley. You can't wait until then to prop your 
numbers back up. So the one boat that you are looking at in the 
2014 year is of concern from both cost and force structure.
    Now, the way we end up there, this goes back to the impact 
of the Budget Control Act. Two boats per year was a priority 
and remains a priority for the Navy as it built the budget, but 
when the top line came down the impact was felt greatest in the 
2014 year and we lost the second Virginia in 2014 along with a 
second destroyer in 2014 in that regard.
    Now, we are using the multiyear--the 5-year multiyear to 
try to mitigate the impact in terms of the industrial base, in 
terms of the cost impact, but in fact, there is an unavoidable 
impact through every element of cost, whether it is material 
procurement and economic order quantities, whether it is 
learning across both of the shipyards that are involved in 
producing the Virginia, whether it is the business base rates 
impact at both yards, impact to the second-tier suppliers. So 
there is a cost impact that--while we retain nine boats across 
the multiyear there is a cost impact by having that single boat 
in 2014.
    Mr. Akin. So part of what is going on here, you could maybe 
make a parallel to we were talking about building some ships 
out in San Diego and you had a place where you have a demand 
for a whole lot of welders, then there is a year where you 
don't need any welders, then you need a whole lot more welders. 
And the fact is it is hard to, you know, turn things on and 
off.
    And from a logic point of view you would say you want to 
try to smooth that demand and we have got the same problem. We 
have got to burp financially 2014 and because of the numbers 
you had to plane off two ships. Which, from a more practical 
point of view, if you weren't just exactly to the line of the 
numbers, would make a whole lot of sense to keep them in the 
budget and under different budget circumstances would be a 
priority. Is that correct?
    Secretary Stackley. Yes, sir. And along those lines, the 
reality is that if you take the nine-boat Virginia multiyear, 
and if we had the top line to add that 10th boat in 2014 that 
would not just save the cost of that 10th boat but throughout 
the follow ships all their costs would come down. So what we 
stare at is an upfront investment cost to get the boat but 
downstream savings that offset the upfront investment.
    Mr. Akin. So in a way, if you could build the boat the 
first thing you get an extra submarine----
    Secretary Stackley. Yes, sir.
    Mr. Akin [continuing]. Which is desirable, particularly in 
the 2020s. The second thing is it keeps the cost of additional 
boats somewhat lower as well, because you have smoothed the 
demand over that time period.
    Secretary Stackley. Yes, sir.
    Mr. Akin. I am at least open-minded to looking at this, see 
if there is something that we can do that perhaps DOD 
[Department of Defense] can't do to take a look at that 
problem. Unless you have a strong or rigorous objection I am 
going to ask our staff people to take a look at that.
    Anybody want to jump in on this particular point or 
subject? Would you like to----
    Mr. Courtney. Sure, Mr. Chairman.
    Again, just as Mr. Stackley said, the two-a-year was pulled 
up from 2012 to 2011, which was partly because of, again, the 
great work in terms of bringing costs down; but it was also 
because Congress intervened. Again, we, in fact, pushed the 
advanced procurement add-on in the 2007-2008 budget cycle, 
which provided that opportunity to get to two in 2011.
    And as you said, Mr. Chairman, you know, hopefully we can 
facilitate a solution to this problem that we just discussed 
here today, again, using, hopefully, this subcommittee as sort 
of the tip of the plane, which is, again, exactly what happened 
in 2007.
    And I guess, you know, the--well, I am sure your office 
would be able to give us information in terms of, you know, 
what the costs would be in--for 2013 in terms of trying to fix 
this problem as well as maybe other strategies to, again, get 
to that 10 in the Block IV contract.
    Secretary Stackley. Yes, sir. As you well know, the 
submarine is procured over multiple years, so 2013 would be an 
advance procurement year for a second boat in 2014.
    Now, one of the challenges that the Department needs to 
guard against is basically getting partial funding for an 
additional boat and leaving the Department with a significant 
bill in 2014, recognizing that that is the difficult year for 
us. So we will provide additional information to your staff so 
you can see what we see across the FYDP for the Virginia 
multiyear--the nine-boat versus the 10-boat and the challenges 
that we faced with the budget.
    Mr. Courtney. And just one other quick follow up, is this--
you will also give us the impact in terms of the fleet size 
over the next couple decades, which should, I think, show some 
pretty dramatic benefit if we are able to really fill that 
hole. The ripple effect lasts for years, and I know you have 
already worked on some of those----
    Secretary Stackley. Yes, sir.
    Mr. Courtney [continuing]. Metrics.
    Secretary Stackley. Yes, sir. In fact, that information is 
included in our long-range shipbuilding report, but we can lay 
it out graphically for you, as well.
    [The information referred to can be found in the Appendix 
on page 113.]
    Mr. Akin. Thank you. I think I have used up my time all 
fair and square.
    Let's see. Who is going to be next? Is it Mr. Courtney, 
or----
    Mr. MacKenzie. It was going to be Mr. Courtney.
    Mr. Akin. Okay, so you are okay? Okay.
    Somebody has got to have a question here.
    Mr. Hunter.
    Mr. Hunter. Thanks, Mr. Chairman.
    Gentlemen, thank you all for your service. Of course, you 
guys get that a lot. I think you are serving in a very tough 
position right now due to what is happening--not a fun time to 
be doing what you are doing. There have probably been better 
times where you like to be in the position that you are in. So 
thanks for doing what you are doing.
    First question, General Mills, on amphibs [Amphibious 
Assault Ship]--you probably saw this one coming--what is the 
Marine Corps' bottom line number on amphibs?
    General Mills. Sir, we have been I think clear and 
consistent on our requirement, which is the assault echelons 
for two MEBs [Marine Expeditionary Brigade] to be delivered by 
amphibious warships to the point where they are needed. Over 
the years we have accepted more and more risk to the number of 
ships who actually deliver that force. And in partnership with 
the Navy we have arrived at a figure of 30 operationally ready 
ships at the time that we need them at the place that we need 
them ready to sail.
    Mr. Hunter. So to have 30 operational ships how many total 
ships is that? How many ships would you have being in dock and 
getting fixed up? Four or five?
    General Mills. Sir, the plan that we have right now calls 
for, I believe, 32 over the course of the 30-year shipbuilding 
plan. It chases a slightly larger number in the out years. But 
again, our requirement has been 30 operational ships at the 
point of need.
    Mr. Hunter. With that, I would just--I am just curious--
they are not getting 30 operational ships. The strategy 
shifted, you can argue that there is more need for amphibs now 
than there was even--unless we think there aren't going to be 
anymore humanitarian crises or bad people in places that we 
would have to ship marines to. So I am just curious about that, 
because we are below that by two ships at some points, one in--
right now, I believe, so----
    Admiral Blake. So let me sort of widen the aperture on that 
and as we looked at it, the Navy and the Marine Corps sat down 
and we came to the conclusion that it was 38 ships fiscally 
constrained to 33. Currently in the inventory we have 29 ships 
and we are going to build to 31 by 2013, and then that number 
will drop back down to 30.
    When we had to apply the strategy and we had to understand 
for the two MCO [Major Contingency Operation] requirement, we 
looked at it and we said what do we need in order to hit the 
requirement? And the position taken was that we needed to have 
30 operationally available.
    So what you are looking at is if, in fact, you need to 
address it from that perspective then what we want to do is we 
want to say, all right, we know we are going to have to build 
to that number. We want to get to that number and that is our 
goal. And so what we ended up having to, if you will, look at 
was how were we going to mitigate that?
    So when we are at 31 ships we are--we would have to, if you 
will, push out the door 30 in order to hit the number--
operationally ready. So we have taken risk and we recognize we 
have taken risk, but our eventual goal is to get us back to 
around 33 ships in order to be able to push out 30 
operationally ready.
    Mr. Hunter. Let me ask you this: Do you agree with the two 
MEB requirement and the--do you--would you validate the process 
by which the Marine Corps came up with their numbers?
    Admiral Blake. You mean the two MCO requirement? That is a 
valid requirement.
    Mr. Hunter. No, the two MEB requirement.
    Secretary Stackley. No. Two MEB--he----
    Mr. Hunter. The way that he got to his numbers--the way 
that General Mills got to his numbers--would you validate the 
process that the Marine Corps used to analyze what they need 
and the risk assessment that they did to say, here is the 
number of ships that we need, or did the Navy do a different 
type of analysis?
    Admiral Blake. No. The Navy and Marine Corps sat down and 
it was not done separately; it was done--we did it in 
conjunction with each other.
    Mr. Hunter. If you were to build the amphibs where would 
you prioritize? I mean, where would you take money out of to be 
able to get the Marine Corps to where they need to be?
    Admiral Blake. Here is the issue we deal with: I don't have 
the luxury of dealing with any single issue in isolation; I 
have to deal with it across the entire----
    Mr. Hunter. Well, we can. That is why I am asking.
    Admiral Blake. Well, we have to deal with it, though, 
across the entire portfolio.
    Mr. Hunter. Sure.
    Admiral Blake. And so what we have to do is we have to 
balance the requirement for amphibs, the requirement for 
surface combatants, the requirement for the carriers, the 
submarines--every category of ships that we have. And so when 
we do that we then have to say, all right, as we balance across 
that where are we going to be able to assume more risk? And 
that is how we--that is how we end up where we are.
    Mr. Hunter. So you are saying there is less risk but still 
risk in the Marine Corps being short on amphibs than there are 
in the other--the rest of the picture?
    Admiral Blake. No. I am saying that we have assumed risk in 
all areas. The best example I can give you: It was only a short 
time ago, if we tried to fill all the COCOM [Combatant Command] 
needs we said the number was around 400 ships we would need in 
the fleet. Today--and we see no abatement in that commitment or 
the----
    Mr. Hunter. No--signal.
    Admiral Blake. Today we look at it and we see that we 
would--if we wanted to hit 100 percent of all the COCOM 
requirements we would need in excess of 500 ships. So what we 
end up having to do is we go through the global management 
process and we look at it and we say, here are our highest 
priorities, these are how we are going to address them, and 
then we have those units available and we push that----
    Mr. Hunter. I understand.
    I am going to yield back in just 1 second.
    So I would take from your statement, then, that you did go 
through a prioritization process and the amphibs are not at the 
top of that list. And second, when you say that you assume risk 
all the way around I would argue that when you do your risk 
assessment and you prioritize your needs the fact that the 
COCOMs wanted more ships and needed more ships due to the 
international environment and where we find ourselves with the 
world today, going down is probably--it is going the wrong way.
    We all know that, but I would argue that your 
prioritization--I would like to see that, if you don't mind, 
the way that you analyzed this and the way that you said, hey, 
we are going to keep them there to make sure that we have this 
over here. That is all I am asking for.
    Admiral Blake. Okay. When we put it together we do it 
across the entire spectrum; we don't--and by that I mean, as we 
look at the entire requirement we say, this is what we need to 
do in order to be able to meet the COCOM demand signal.
    And, for example, we not only took out, as you are aware, 
for decommissioning, looked at two amphibs, we also looked at 
seven cruisers additionally. As Mr. Stackley just mentioned, we 
knew 2014 was our hardest year and we had to go in there and, 
if you will, rephase or shift to the right a destroyer and a 
submarine. So in addition to that we had to look at our small 
surface combatants and we had to mitigate those numbers.
    So we have to do it across the entire portfolio. We can't 
just go and focus on one single area. We have to balance it 
across the entire system for ourselves.
    Mr. Hunter. Thank you.
    I yield back.
    Mr. Akin. Yes, I am going to allow a little piggybacking 
here.
    Originally, General, what you needed in the MEB was 18 
ships. Is that correct? A couple years ago that is what we 
thought was the right number.
    General Mills. Sir, I believe it was 17 was----
    Mr. Akin. Seventeen?
    General Mills [continuing]. For MEB----
    Mr. Akin. Okay, and that left, what is it, about four for 
getting repaired or whatever it is?
    General Mills. Yes, sir.
    Mr. Akin. Okay. And so we have gone from 17 down to what is 
it now--not quite 15? You are going to be 14 or 15, somewhere 
in there?
    General Mills. Sir, it is 15. It is 15. And that is an 
assumption of more risk, obviously, and an understanding that 
the MAGTF [Marine Air-Ground Task Force] commander would have 
to scrub his equipment list prior to embarkation, but we feel 
that 15 is acceptable at this point.
    Mr. Akin. What would be scrubbed from that list?
    General Mills. Sir, that would depend, I think, on the--
where he was going, what his mission was. He would take a look 
at his entire equipment list, decide what was specifically 
needed forward initially for what his mission was, and then he 
would reduce those things--perhaps logistics, maybe some of his 
heavy armor, for instance. Again, depending on what that 
mission set was going to be when he arrived, what he actually 
needed on the ground.
    It is not unusual to do that. MAGTF commanders who go 
forward routinely leave things back that they can call forward 
if they need them. So I would say it would depend on what his 
mission was, where he was going, what the threat was when he 
arrived.
    Mr. Akin. Thank you.
    Okay, Mr. Langevin.
    Mr. Langevin. Thank you, Mr. Chairman.
    Gentlemen, thank you for being here this morning and for 
your great service to our country. I would like to turn back, 
if I could, to talking about the Virginia class submarine and 
the possibility of adding the second boat--one of the--one boat 
that is left outside the FYDP and talking about alternative 
funding.
    So obviously we have previously seen alternative funding 
mechanisms in ship programs such as the LHDs, LHAs, the Nimitz 
class carriers, and the DDG 1000, as well as the USS Jimmy 
Carter. And I know we have talked a little bit about the 
alternative funding this morning, but with a little more 
specificity with that in mind, and knowing that the most unmet 
demand signal from our combatant commanders is for submarines, 
what alternative funding options have you considered for 
procuring the fiscal year 2014 boat?
    Secretary Stackley. Yes, sir. The principal alternative 
funding mechanism that we took a look at was incremental 
funding. And so we do use incremental funding today for 
aircraft carriers, large-deck amphibs, and when we looked at 
the funding constraint we had with the top line and moved the 
2014 boat out of the FYDP, that is a constraint in the near 
term that gives away savings in the longer term, okay, so not 
only did we move the boat out and we moved the funding for that 
boat out, but we also lost the savings or the efficiencies that 
we would have been able to hold on to through continuous 
learning, through EOQ [Economic Order Quantity] material, et 
cetera.
    So that is a top line constraint. The reality is in 
shipbuilding your--what we refer to as your outlay rates are 
stretched out over time. So in a full funding policy, where you 
put all the money up front in the year of procurement, a lot of 
that money sits idle waiting for the expenditures in the course 
of building submarine over 5 to 6 years. So if you unlock full 
funding then all of a sudden--and you get closer to cash flows, 
which is more in tune with incremental funding, what it says is 
there is asset in the budget that we submitted for nine boats 
to fund that second boat in 2014 on a cash flow basis, and then 
there are savings downstream that you get by adding that 10th 
boat that offsets the upfront cost that we would have 
incurred----
    Mr. Langevin. And that goes to the heart of my second 
question. Yesterday the subcommittee was told that should a 
fiscal year 2014 boat be added into the block buy it would 
effectively 25 percent self-fund through efficiencies gained in 
the future year of boats. So how does the Navy weigh these 
efficiencies in the budgeting process?
    Secretary Stackley. Yes, sir. Now this goes back to the 
funding policy. So in a full funding policy we have to put 100 
percent of that boat up across the fiscal year 2013 year, which 
is the advance procurement year, and the fiscal year 2014 year, 
which is the full funding year. So while we have those 
potential savings by adding that boat we didn't have the top 
line to make room for that boat within full funding so we could 
not--complying with full funding policy, we did not have 
adequate top line to get to that second boat in fiscal year 
2014.
    Mr. Langevin. So did you complete your answer on the 
alternative funding?
    Secretary Stackley. I think I covered that. The way the 
math works, if you were relieved from full funding policy, in 
fact, we would not be requesting additional funding across 2013 
and 2014; we would have downstream savings and that would make 
the boat affordable. But within the constraints of full funding 
it is not affordable in 2013 and 2014.
    Mr. Langevin. Well, I know that we are all anxious to work 
with you to see what we can do to get that fiscal year 2014 
boat added within the FYDP if possible.
    Last question I had is, I am following with great interest 
the ongoing development of the AMDR [Air and Missile Defense 
Radar]. Can you share with us how development is going and how 
you plan to integrate this capability into the existing naval 
force structure?
    Secretary Stackley. Yes, sir. The development is going 
great. We have got three industry competitors that are working 
on the development. They have each been able to leverage other 
systems that have been developed using the technology 
associated with the AMDR radar, and so when we kicked off the 
competition they were well out in front in terms of level of 
maturity of the technology.
    We are going through--I will call it a small scale 
prototype development to demonstrate, you know, proficiency of 
the respective designs that will be leading to a downselect. I 
am very upbeat on the progress we are making on AMDR and I am 
highly confident that that program is right on step to support 
introduction on 2016 DDG 51.
    Mr. Langevin. Very good.
    Thank you, gentleman.
    And I yield back, Mr. Chairman.
    Mr. Akin. Thank you.
    Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman.
    Admiral Blake, Secretary Stackley, General Mills, thank you 
so much for joining us. We appreciate the opportunity.
    Secretary Stackley, I want to begin with you. In reviewing 
the long-range plan for construction for naval vessels for 
fiscal year 2013 it seems like to me we continue to push the 
difficult decisions, the more expensive decisions outside of 
the FYDP. And in looking at the FYDP from 2013 to 2017 we are 
going to construct 41 ships, 16 of which--that is 39 percent--
are the relatively inexpensive LCS [Littoral Combat Ships] 
ships. Also within that, there is no funding for the weapons 
modules, which we know in order for there to be capable 
warships we have to have those weapons modules onboard.
    In the next 5 years, from 2018 to 2022, we are building 52 
ships, 15 of which--that is 29 percent--are also LCSs. 
Additionally, those 52 ships include the Ohio class replacement 
and we are going from building 9 SSNs [Nuclear Propulsion 
Attack Submarine] to building 12 SSNs in addition to some 
large-deck amphibs. So as you can see, we are still 
constructing a relatively large number of the less expensive 
LCS ships.
    In short, from 2013 to 2017 we buy 11 fewer warships than 
from 2018 to 2022 and we also buy a much higher percentage of 
the less expensive warships in the immediate years, and then in 
the out years we are buying the more expensive ships. I 
understand this makes the math looks better; I understand the 
budget restraints that we are in right now.
    But I think we have to be asking ourselves the broader 
perspective picture, and that is this: Is this in the best 
interest of national security, not just based on today's needs 
but what we project out into the future? Is it right for the 
Navy? And is it right for the industrial base? I am concerned 
at all those different levels--our capabilities both on the 
defensive side and our industrial base capabilities.
    So I would like to get your reflection on this trend that 
we are seeing in the shipbuilding plan.
    Secretary Stackley. Yes, sir. I am going to share this 
response with Admiral Blake, but let me first start by 
describing balanced force. It is a combination of what your 
force structure requirement is driven by several factors. One 
is the capability, another is the capacity, it is global 
presence requirements, it is response to major combat 
operations, as well as lesser scale operations. And a balanced 
force is necessary to meet that full range of missions that are 
called for within affordability top line, you know, 
constraints.
    So today, in fact, what we have are we have DDG 51s, for 
example, performing operations and responding to issues and 
concerns that an LCS in theater would be quite suited for if 
not better suited for. So we have a high-end, 300-plus--roughly 
300-man crew on a $1.5 billion warship responding to an issue 
that we would really prefer a $500 million ship with a 75-man 
embarked crew taking care of.
    We can't go all high-end when we look forward in terms of 
the force structure we need across the full range of missions. 
So that is one of the reasons why LCS is firmly placed in terms 
of our long-term shipbuilding plan.
    The concern regarding pushing the difficult decisions 
outside the FYDP, that is--there are some tough decisions that 
we made. We talked about the Virginia; we talked about the 
movement of the destroyer, which stays inside the FYDP but we 
moved it outside of the budget year.
    Two key decisions that I didn't touch on directly but I 
think are on point: One is the decision to delay the 
introduction of the Ohio replacement, which was in 2019; we 
have moved that to 2021. That was a tough decision. There were 
trades that were associated with that.
    In making that decision, what we did was we moved $8.5 
billion of investment beyond this next decade.
    Mr. Wittman. Right.
    Secretary Stackley. That goes towards investment in other 
areas of shipbuilding or other priorities within the Department 
of the Navy. In doing that and in moving that boat 2 years to 
the right we can't simply mark time; we have got to take 
advantage of the additional time to work on technology 
development, design maturity, retiring risk so when the time 
comes we award that boat. We are staring at a much more mature, 
more complete design so we can execute on schedule.
    The downside is, what we just did was we pushed out the 
introduction of the Ohio replacement by 2 years and that 
introduces a degree of operational risk out into the 2030s when 
the Ohio replacement is replacing the Ohio strategic deterrent. 
And so we have got to manage that operationally.
    When we look across the balance and we say to ourselves, we 
have got $8.5 billion worth of asset we can create, we have 2 
years of additional time to manage the risk for the 
introduction of the Ohio replacement, and we have got 
operational risk we have got to manage on the back end in the 
2030s, we concluded that that operational risk was manageable 
and that upfront time and investment opportunity was important 
to take advantage of. And that drove that specific decision.
    Similarly, when you march program by program looking at the 
trades that were being forced by the top line, we did our best 
to strike that balance looking at what is the capability we 
need? What is the capacity we need? How do we stay within 
affordability limits and not create undue risk?
    Mr. Wittman. Okay. Very good.
    Let me ask--go ahead.
    Admiral Blake. If I can just add, sir, as we looked at 
this, I mean, we all knew, if you will, the elephant in the 
room was the 2011 Budget Act. It came in and what it 
essentially did is, for the Department we had to address a bill 
of $58 billion--approximately $58 billion inside the FYDP. And 
as Mr. Stackley already mentioned, 2014 was our hardest year; 
2013 was our next hardest year.
    And then what we had to do is we had to look at, as you 
referred to, the high-end low-end mix, if you will. So when we 
looked at it we said--we went down, if you will, the list, and 
we said, all right, we are going to take out 11 JHSVs [Joint 
High Speed Vessel], we are going to take out one T-AGOS 
[Tactical Auxiliary General Ocean Surveillance], we are going 
to take out one DDG, we are going to take out one SSN, and we 
are going to take out--or we are going to take out, if you 
will, inside the FYDP, two LCSs.
    So as you look at that you can see our focus was the 
recognition that there is a high-end issue that we have to deal 
with, so we, as best we could, had to stay--tried to stay away 
from going against that high-end requirement. However, because 
2014 was our hardest year we looked at it and said, there is no 
other way we can do this and still hit the numbers that we had 
to hit in each of the years, and we had to hit our numbers in 
each year.
    We couldn't have that give and take to give back--you know, 
we couldn't move between years. We had to hit the numbers in 
every one of them. So that drove us to what we did. So our 
approach was to mitigate as much as possible and apply it as 
best we could to the strategy that we were given.
    Mr. Wittman. That is very good.
    Secretary Stackley, and following up on that I want to ask, 
looking back historically, in 1983 and 1988 the Nimitz class 
carriers were purchased in block--two in 1983 in a block buy, 
two in 1988 in a block buy. Understanding that CVN [Ford Class 
Supercarrier] 79 [USS John F. Kennedy] is partially paid for, 
is there the possibility that CVN 79 and CVN 80 could be done 
in a partial block buy? It looks like to me there would be a 
significant amount of savings there, upwards of $500 million.
    With our challenges elsewhere in shipbuilding it seems like 
those resources could go into trying to plug some of these 
gaps, whether it is the SSN build in 2014 or some of the other 
areas where we know we are struggling to try to fix those gaps. 
So I would like to get your perspective on the historical 
elements of block buys and savings that can occur with CVNs.
    Secretary Stackley. Yes, sir. Let me focus on affordability 
of the CVN 78 class. We are right now about 40 percent complete 
construction of the CVN 78 [USS Gerald R. Ford] and we are 
running into some very difficult cost growth issues across the 
full span--design, material procurement, and production--
material procurement on both contractor and government side.
    So our first focus right now is to stabilize the lead ship. 
Let's get cost under control so we can complete this ship as 
close to schedule at the lowest cost possible.
    But in parallel, the Navy is working very closely with the 
shipbuilder to take a step back and say, one, what are all the 
lessons we just learned on CVN 78? Two, CVN 78 is a very 
different ship from the Nimitz; we cannot expect to build the 
78 the way we built the 68 [CVN 68 USS Nimitz] and get to an 
affordable ship construction plan. So we are pressing on the 
way the carrier is built--the build plan for the carrier--to 
arrive at a more affordable CVN 79.
    Now, in the process of doing that we will take a hard look 
at what opportunity there is across 79 and 80, recognizing that 
we are going to be limited, again, by top line. But there are 
going to be some opportunities that jump out at us. We don't 
want to have to re-plan each carrier. We have a vendor base 
that is stretched out with the carrier build cycle that for 
some components that are carrier-unique, that vendor base is 
just struggling to hold on between the 5-year gaps.
    So we have to take a hard look at where does it make sense 
after we have gotten to what I am calling an optimal build plan 
for CVN 79 and then be able to come back and say, okay, here--
on CVN 79 here are some opportunities that if we could, in 
fact, reach out to CVN 80 we can either avoid a gap in a 
production line or avoid unnecessary cost growth on that follow 
ship.
    Mr. Wittman. Thank you, Mr. Chairman. I yield back.
    Ms. Pingree. Thank you, Mr. Chair.
    Secretary Stackley, Vice Admiral Blake, and Lieutenant 
General Mills, thank you very much for being here this morning 
and for your service to our country. I am going to continue on 
a little bit about scheduling and the shipbuilding.
    In highlighting the Navy's shipbuilding plans, particularly 
about the importance of maintaining the stability for the 
future and the Navy's capability and capacity, I really 
appreciate your previous testimony. As you discussed, a budget 
includes a request for two Arleigh Burke destroyers for fiscal 
year 2013 in addition to reauthorizing a 5-year multiyear 
procurement through 2017.
    It is great for us to hear that this 9-year ship 
procurement will help support the need to provide BMD 
[Ballistic Missile Defense] capabilities to the fleet and is 
also projected to save $1.5 billion. That is wonderful.
    However, previous multiyear procurements of DDG 51s have 
occurred at an average rate of three ships a year instead of 
two. Given that the steps need to be taken to mitigate the 
significant projected shortfall in cruisers and destroyers do 
you believe a sustained annual procurement rate of more than 
two DDG 51s annually is required long-term to fully provide for 
our sea-based BMD missions?
    And let me just ask one other part of that question: 
Additionally, the FYDP shifted the second DDG 51 in fiscal year 
2014 to fiscal year 2016. Won't reducing the procurement rate 
by half, from two to one, in fiscal year 2014 disrupt the 
supply chain and potentially increase the cost?
    Admiral Blake. So I think, ma'am, what you are asking about 
is you are looking at the requirements saying, these are the 
requirements. How are you going to address them as you are 
dealing with, if you will, the current fiscal environment we 
are in?
    Ms. Pingree. Yes.
    Admiral Blake. As we look at it, I am required to balance 
across the entire portfolio, and I have to look at the top line 
I am given in each year and then apply those dollars as 
efficiently as possible within it. So if someone were to say to 
me, we want you to buy, say, a third DDG, I understand the 
investment there and taken in isolation I can do that. The 
question becomes, where do you want me to divest, all right? Do 
you want me to build one less submarine? Do you want me to 
build one less amphibious ship? Do you want me to build one 
less aircraft carrier?
    Well, no one ever tells me to build one less of anything, 
and so that is--what I end up having to do, as we work through 
SCN [Ship Construction, Navy] plan I say these are--this is how 
I am going to balance within the top line that I am given and 
these, I think, are the most efficient ways I can get there. 
And it is simple math.
    Ms. Pingree. And I understand. I just want to interject a 
little bit. Since Mr. Courtney is not sitting here I can 
certainly say, well, if you have to build one less submarine 
that is the way things go.
    But also I would say, just sort of the supply chain 
economics, I mean, one of the things that we have consistently 
seen is that the more ships that are being built the more 
consistently we plan. You know, we talk a lot in here about our 
industrial base, of the economies of scale. I understand the 
big numbers and I certainly understand the constraints you are 
under, but looking at it from the other side, those are some of 
the concerns I am looking at.
    Admiral Blake. Let me just focus for a second on the 
industrial base, because that is an excellent question. When we 
are determining what and how we are going to build and where we 
are going to build we have to take a look at the industrial 
base, and one of the concerns we have is if we make a decision 
can that--and it adversely affects a piece of the industrial 
base, does that decision allow us to, if you will, at some 
future date, reconstitute that capability?
    If the answer is yes then we would say, all right, we will 
go down that path. If the answer is no then we have to present 
to our leadership the fact that this may be an irreversible 
decision. You may go down this path and if you do, you may not 
be able to recover in the future.
    And that is the dialogue we have with the leadership when 
we bring those forward and we propose the plan. I can assure 
you, they are lively meetings when we sit in there and we put 
this forward to them because when they realize the--not only 
the effect--the primary effect, but then the second and third 
order ramifications to the industrial base and the fact that we 
may not be able to reconstitute that at some future date then 
the question takes on an even more serious tone.
    Secretary Stackley. I would like to address the question 
regarding the second destroyer in 2014. A couple of important 
facts: First, the--we restarted DDG 51 construction in 2010 and 
we have got four ships under contract, and a result of the four 
ships that we have placed under contract is we have prior year 
savings in this program that are--work in our favor when we 
consider future procurement for the 51s.
    We also have a unique situation where we have got 
competition on this program--two builders building the 51s, and 
the competition has been healthy with both builders. We also 
have a very significant cost associated with government-
furnished equipment, so not only did we restart construction at 
the shipyards; we also restarted manufacturing lines at our 
weapon systems providers.
    So in this process we were able to restart 51s virtually 
without skipping a beat and we are seeing the continued 
learning curve that we left off on back with the 2005 
procurement. So when we march into this third multiyear for the 
51s we are looking to capitalize on the same types of savings 
that we saw prior, and our top line, again, allowed for 9 ships 
to be budgeted, but when we go out with this procurement we are 
going to go out with a procurement that enables the procurement 
of 10 ships, where that 10th ship would be the second--
potentially the second ship in 2014 if we are able to achieve 
the savings that we are targeting across this multiyear between 
the shipbuilders in competition as well as the combat systems 
providers as well as all of the other support and engineering 
associated with this program.
    So we want to leverage the strong learning, we want to 
leverage the strong industrial base, we want to leverage the 
competition to get to what we need in terms of both 
affordability and force structure, and I think we have a pretty 
good shot at it.
    Ms. Pingree. That is good----
    Mr. Akin. Thank you. We are out of time.
    I think if we do it just right we may be able to get all 
the questions in. If you can keep it--if you could keep it 
shorter that is good because we have got votes coming in about 
10 minutes, or so.
    Mr. Palazzo is next.
    Mr. Palazzo. Thank you, Mr. Chairman.
    And I would like to thank our distinguished guests for 
being here and the services that you provide to our country. 
Thank you very much.
    I will keep my questions kind of short. I mean, it is 
always good to talk about, you know, the things, the decades of 
financial mismanagement that have actually led us here today to 
talk about our 30-year shipbuilding plan and that we are 
actually taking ships out of it and we are not going to be able 
to meet our targets, which does--I think is going to impair us 
to be able to meet our emerging threats in the future. So I 
will keep my question kind of short.
    You know, the Navy has made some wonderful progress in 
controlling costs in their shipbuilding programs over the 
years, and it is a shame that we have gotten so far to the edge 
of the financial cliff in this country that those successes 
aren't able to be touted in the increase in our shipbuilding 
targets. And, you know, such things as the use of multiyear 
procurements, keeping the production lines hot, keeping costs 
down while producing a better product for the Navy at a better 
cost to the taxpayer,extremely--two things that are extremely 
important.
    So, Secretary Stackley, my question for you is the next 
amphib, the LHA 8, is scheduled to have a well deck, which is a 
big change from both the LHA 6 and the LHA 7. Obviously a major 
change like this requires a great deal of planning and pre-
engineering.
    Can you give us any insight about the best ways to save 
money on this ship, and especially the savings that could be 
seen if we dedicate funds to begin the engineering process 
ahead of schedule?
    Secretary Stackley. Yes, sir. Let me start with the 
decision to go back to a well deck was made in the course of 
the last 1 to 2 years. But once you have made the decision now 
you have to--what is the best material way to get there, and so 
we conducted what I would call a mini analysis of alternatives, 
looking at different alternatives to not just restore the well 
deck to LHA 8 but then look at all the new capabilities that 
that ship was going to be--basically have to handle with 
regards to introduction on Joint Strike Fighter, the horizontal 
lift capabilities, and do that all within an affordability 
target.
    So the AOA [Analyses of Alternatives] is wrapping up, and 
in this year's budget request we have some funding to start the 
R&D [Research and Development] side of LHA 8 design, and that 
continues through the FYDP. We did move the LHA 9 to the right 
1 year--that ties in with all the previous discussion regarding 
the effects of the Budget Control Act. But that remains a very 
high priority inside of our shipbuilding program, and what is 
critical to ensure that when we go back to a well deck we keep 
a handle on affordability, and that means getting that design 
matured so when we go into procurement we are dealing with a 
very high level of completion of design and not a high level of 
risk in construction.
    Admiral Blake. Sir, if I can just add to that, it was about 
2 years ago when the Commandant and the CNO [Chief of Naval 
Operations] sat down and had a discussion about adding a well 
deck into that particular ship, and then I sat down with 
General Mills' predecessor, General Flynn, and we looked at 
where--how we were going to deal with the issue because we 
needed to consider cost and we also needed to consider 
tradeoffs. So because of the fact that you are going to put a 
well deck back in as well as a reduced island on this ship 
there has to be some level of tradeoff, and that is what we are 
currently looking at right now--where do we make the tradeoffs, 
because the requirement is going to be that the Marine Corps 
needs a well deck?
    And the CNO was attuned to that. He said, I understand; we 
will do it, but we have to also look at the cost and keeping it 
within the constraints we have, so where do we make the 
tradeoffs? And that is what we are dealing with right now.
    Mr. Palazzo. Well, I agree, and that is why I think, you 
know, making those funds available for pre-engineering is 
extremely important because it is going to provide the product 
that the Navy and the Marine Corps wants and needs and it is 
going to be at the best cost to the taxpayer.
    Thank you all for your time.
    Chairman, I yield back.
    Mr. Akin. Thank you. You redeemed a minute-and-a-half. You 
get the prize for the morning.
    Okay. Mrs. Davis.
    Mrs. Davis. Okay, I will try and do the same.
    Admiral Blake, I wanted to ask you about the early 
retirement of ships, because there is some confusion about 
that. I think a statement was made yesterday that in the 30-
year plan that there would be a commitment not to retire them 
early, and yet we know that in the plan now there is a plan to 
do that, and--before their service life is completed.
    So what can you tell us about that? What confidence can you 
give us that when we make that upfront investment in new ships 
that the Navy will continue to maintain them and modernize them 
in order to make their expected----
    Admiral Blake. Ma'am, we would have preferred not to have 
decommissioned any ships at all, but given the current fiscal 
environment we had to make some very hard decisions, and they--
we arrived at those decisions after a number of deliberations. 
So in the case of the cruisers, we had to, if you will, look at 
each one of those and say, where can we recoup the greatest 
savings as we are going forward? So we looked at the seven 
cruisers in particular. One of them has had significant issues 
because of a grounding that occurred earlier in its career.
    And then we looked at the others and we said we have a 
requirement for ballistic missile defense. We have not updated 
these other six units with the ballistic missile defense. We 
have also not given them the significant HM&E [Hull, 
Mechanical, and Electrical] upgrades that are required. And so 
when we chose those seven units we said, this is what we are 
going to have to do in order to be able to get it.
    I will tell you, to give you an idea of the magnitude, just 
for those cruisers alone it would require in excess of $4.1 
billion if we were to put them back in the system, if you will, 
so--and that just is not possible in the current fiscal 
environment. And I think if you decided that--if we were 
directed to put those back in I can only go to so many, if you 
will, pots of money. I would have to go and find something that 
would probably be equally egregious as I went forward in order 
to hit the balanced numbers, or in order to balance my numbers.
    Mrs. Davis. It might be helpful to really be able to look 
at that issue in the whole context. If we can do that, and 
perhaps you have been trying to provide that information, 
because I do think there is a lot of concern about that. I 
mean, we have obviously spent a lot in that development and I 
think--would you suggest that the--on balance--I understand 
what you are saying, but what else could we do? What else would 
be--if people are uncomfortable with that decision?
    Admiral Blake. Well, actually, I would----
    Mrs. Davis. Where do we go from there?
    Admiral Blake [continuing]. I would open the aperture even 
wider because I think it is not only the cruisers; it is the 
amphibs we had to take; it is the fact that we are not going to 
be able to build that SSN in 2014 and the DDG in 2014 that we 
have already put in. And you look, there is little to no wiggle 
room. We are where we are. There is little to no wiggle room at 
this point if you want to hit those--if you are expected to hit 
those numbers. And we were told we would hit those numbers and 
we did.
    Mrs. Davis. Could you address, as well, I know the concerns 
when we spread out the construction we obviously are unable to 
reap some savings that would be done if ships were built closer 
together or in some other fashion, you know, grouping. What 
kind of dollars are we really losing because we are having to 
spread those out? I understand the budgetary constraints, but I 
think just in terms of, again, that larger picture and where 
those costs are going to be lost.
    Admiral Blake. Well, I may be wrong but I think you are 
referring to, like, doing multiyears, for example. That is an 
efficiency.
    Whenever we do a multiyear it is a double-edged sword, and 
by that I mean we do recoup savings but at the same time, 
when--given the current fiscal environment, it limits me in 
what I am able to do because once you put a multiyear in place 
if you want to go back and break that multiyear the penalty is 
going to be so egregious that it is going to be unacceptable.
    So while I do want to achieve multiyears and I want to get 
them there, I also have to look at it and say, okay, because of 
that I then have to go to a limited number of accounts in order 
to come up with those assets to pay a bill.
    Secretary Stackley. Let me join in, if I could. We, in 
fact, have come across with three multiyear requests with this 
budget--the 51s, the Virginias, as well as a multiyear request 
for MV 22s [Osprey Tiltrotor Aircraft], and we place a lot of 
care and consideration into looking at, is it a firm, solid 
requirement? Are there, in fact, substantial savings? Do we 
know we are going to buy this thing?
    Then let's buy it with a multiyear because that is the best 
way to achieve savings and provide stability that the 
industrial base needs. So we do leverage multiyears where we 
can.
    The other side, though, what you are describing is, well, 
how about those programs where, in fact, you have got a 
sawtooth effect, or peaks and valleys, that impacts not just 
the prime contractor but also the vendor base below them? We 
are struggling in a couple of areas, and frankly, none more so 
than the auxiliary shipbuilding sector today.
    And today the last of our auxiliary ships under 
construction, T-AKE, followed by the four-ship MLP [Mobile 
Landing Platform] class, where we have got three authorized and 
appropriated and we are coming forward with a request for the 
fourth. We are fighting that sawtooth effect in the auxiliary 
sector, and that is near the top of our list of concerns 
because of the impact that is associated with the industrial 
base, both at the prime contractor and the sublevel.
    So on PB13 [President's Budget FY 2013] what you are seeing 
is a first line of defense against that. We do not have a long-
term solution in that particular case at this point in time.
    Admiral Blake. Yes, ma'am. The only thing I would add is, 
while we are--we have our eye firmly focused on the 
requirements we also have our focus on that industrial base 
because of the concerns we have that it is fragile and we don't 
want to, if you will, go back to a position that we can't 
recover from.
    Mrs. Davis. No. I agree. I think, obviously, coming from an 
area like San Diego, we know how critical those issues are, and 
so if, as you say, you don't have a solution we--I think we 
would love to work with you to try and find one.
    Secretary Stackley. Well in fact, if we can talk San Diego 
for a second, okay, so the shipbuilder NASSCO has a history of 
commercial and military shipbuilding, and at no point in time 
can we suggest that we are going to be able to carry NASSCO's 
future on the back of Navy ship construction. Their success has 
been the combination of commercial and military.
    So what we have tried to do over the last couple of budget 
subnets is address our requirements for auxiliary shipbuilding, 
keep in mind their requirements to be a viable shipbuilder, and 
try to build a base that allows them to be more competitive for 
commercial shipbuilding as well as fill our need for auxiliary 
shipbuilding on a program-by-program basis. So we can't provide 
the whole solution but we do look to try to provide a base, 
just like we would for our other shipbuilders, but in this case 
so they can also be competitive in commercial.
    Mrs. Davis. Right. Thank you, sir.
    Thank you, Mr. Chairman.
    Mr. Akin. Thank you.
    And, Mr. Platts.
    Mr. Platts. Thank you, Mr. Chairman. I will try to be 
quick.
    Certainly thank each of you for your testimony and most 
importantly for your service. We are grateful for what you have 
done for all of us fellow citizens.
    Mr. Secretary, a really quick follow-up on Mr. Wittman's 
questions about the CVN 79 and the carrier plans: It is my 
understanding that you are extending CVN 79 by a year, what the 
rationale is there, and won't that have a negative impact on 
cost, and what, if any, impact on the vendor and the industrial 
base would you anticipate?
    Secretary Stackley. Yes, sir. First, we held the year 
procurement into 2013, so the 78 was a 2008 ship; the 79--we 
are requesting the 79 to be authorized and appropriated in 
2013. This is in addition to the years of advanced procurement.
    In the case of CVN 79, she is the replacement for the CVN 
68, which does not retire today until--the long-range 
shipbuilding plan describes that CVN 68 goes out of service in 
2023. So what that means is there is an extra 2 years of I will 
call it margin for the build span for CVN 79.
    Now, in regards to what does that mean for cost, discussing 
earlier that first focus on carrier construction is to get CVN 
78 right. We have got to right that ship. And in the course of 
doing so we are working closely with the shipbuilder to come up 
with a better build plan for CVN 79, and in doing that we have 
got to get the front end fixed.
    A lot of the issues that we are dealing with on CVN 78 are 
front end issues associated with design planning and material--
not just the procurement of the material but the arrival of the 
material to support the production and build plan. We have got 
to get that front end fixed, so that is going to be our first 
focus.
    And when we are done that build plan then we get to take a 
look at what is the proper build span for CVN 79 to arrive at 
the best cost? It does not necessarily mean--more time does not 
necessarily mean more cost. If you set out with a build plan 
that is not proper then you are going to end up using that 
additional time just doing more work later when it is more 
costly in the construction process. That is what happened on 
CVN 77; that is what we are fighting against on CVN 78; and 
that is the plan I want to correct for CVN 79.
    When we are done, if that arrives at a different delivery 
date than what is projected today then the Department of the 
Navy will have a discussion about, okay, what is the optimal 
now, in terms of introducing that ship, because there is more 
than just the ship construction costs that are--that come into 
play. We have all the costs associated with the crew, the 
operations, and support costs when the ship enters service. So 
we have to look at total cost, both construction, operating, 
and support; recognizing that we have the added flexibility 
associated with the CVN 68s----
    Mr. Platts. So the year extension, though, is more 
uncertain at this point, until you get 78 right? Am I 
understanding that correctly?
    Secretary Stackley. I would say that the year extension is 
not on the books. In terms of planning, we plan on CVN 79 to 
deliver on time, in time to support CVN 68's decommissioning. I 
am looking to work with the shipbuilder to--let's relieve 
ourselves of a scheduled delivery date. Let's look at how we 
can best build that carrier reliably----
    Mr. Platts. Based on what you are learning from 78 and 
going forward?
    Secretary Stackley. Yes, sir. And that I expect to occur in 
the--we will go through this in the course of the next year and 
then I will be able to bring that information back to POM-14 
[Program Objective Memorandum]. It may or may not affect our 
planning dates today, but at least in making that decision it 
will be better informed than it is today. Because today the 
only information we have to go on is CVN 78 experience and that 
does not drive any decision to deliver 79 earlier.
    Mr. Platts. Thank you, Mr. Secretary.
    Yield back, Mr. Chairman.
    Mr. Akin. Thank you.
    Unfortunately, we have just got 8 minutes left in the vote. 
We have two 15-minute votes. I would assume we could resume 
sort of in the 12 o'clock range, so we are going to call an 
adjournment here for just a moment.
    [Recess.]
    Mr. Akin. I believe Mr. Larsen is going to be next, but I 
am taking the chairman's prerogative in asking one simple 
question, Admiral, and a cup of coffee is riding on the answer 
to your question, okay, so just make sure you answer it the 
right way, okay? I am going to read it just the way the 
question is written.
    Admiral Blake. Is it with cream and sugar, sir, or black?
    Mr. Akin. If I win I will get it the way I want it.
    I don't envy the task you had in trying to balance 
requirements and resources. Knowing it is your job to protect 
the President's Budget, what is the one or two things that you 
would have preferred to see stay in the budget request if you 
had more resources--one or two things?
    Admiral Blake. If I had to choose one or two things I would 
probably choose the DDG and the SSN that we had to give up in 
2014.
    Mr. Akin. Go to the head of the class. I just won my 
coffee. The bet was you wouldn't answer the question, so I came 
out okay.
    I thought you were going to do it. Thanks. I owe you half a 
cup of coffee.
    Mr. Larsen.
    Mr. Larsen. Thank you, Mr. Chairman.
    Based on what the value of the prize was--coffee for 
getting a--I was concerned that you had to answer a question 
and you were going to be the winner. You are very fortunate, 
based on the coffee that we have here, that----
    [Laughter.]
    That you only had to provide an answer but was not--were 
not tied to the prize.
    Question for Mr. Stackley, regarding the SSBNs, and the 
tears slip on this--in your written testimony it is not quite 
clear to me so if you can be more clear in response to this 
question--was--did you make the decision on SSBN 2-year delay 
in conjunction with STRATCOM [U.S. Strategic Command]?
    Secretary Stackley. STRATCOM was fully involved in the 
decision to come forward with the 2-year delay. We all 
recognize the STRATCOM requirements and that by going down from 
today's force structure down to a 10-boat force structure for a 
period of time it places greater stress on meeting their 
requirements, but given that, if you take a look at the 12-boat 
plan for the Ohio replacement, in fact, in the 2050s, when that 
class is going through its extended refit period, we are back 
to 10 boats again.
    We believe that operating--meeting their requirements does 
increase the risk, but at the front end of a new ship class 
unplanned maintenance and overhauls and extended refits that 
aren't a part of that schedule, that it is acceptable risk. So 
they were party to the discussion; they understand the decision 
process that went forward.
    Admiral Blake. Sir, if I can just----
    Mr. Larsen. Yes, sure, Admiral.
    Admiral Blake. So when we looked--when we looked at the 
SSBN(X) [Ohio Replacement Ballistic Missile Submarine] and the 
2-year delay, what we did was we sat down with all the parties 
involved and we went to the 2030 to 2040 timeframe and we--and 
that is the period when you would drop down to 10 boats. But 
one of the ways you are able to mitigate that is because as you 
are bringing those 10 boats online they are all new we don't 
have to start their refit periods until later on in the period, 
around the 2040 timeframe.
    So to answer your question, yes, we think we can take on 
that risk in that timeframe, but we still think, given the 
current state of the criteria for the requirement, that we 
would eventually we would have to go back to the 12 boats, 
because when those 10 boats start going through their refit 
periods that is when we need them to go--the number has to go 
back up to 12 in order to maintain the requirement for the 
continuous number of boats at sea.
    Mr. Larsen. That is fine. I understand that. If that is the 
case then why wasn't this the plan in the first place, if it is 
a risk you can take now? Maybe it is sort of revisiting that 
question.
    Admiral Blake. Well, I think it was based on the economic 
or the fiscal realities that we faced as we had to, if you 
will--we were concerned with how many--what areas were we going 
to be able to take additional risk in and still meet our 
requirements? That is what it came down to. It was just the 
overall fiscal situation that we ended up in.
    Mr. Larsen. All right. I would imagine that--we also have a 
Strategic Forces Subcommittee and this might be a question we 
are going to explore there, as well. Does this have any impact 
on--thanks for starting the clock; I am going to have to speak 
quickly--does this have any impact on the 16-tube versus 20-
tube discussion that we are having on the design?
    Secretary Stackley. We did take a look at--in doing the 
analysis of alternatives for the Ohio replacement we looked at 
24-, 20-, and 16-tube, and STRATCOM was very central to those 
discussions----
    Mr. Larsen. Right.
    Secretary Stackley [continuing]. And that decision, as 
well. And the other alternative that, frankly, we looked at was 
can we afford to go down to a 10-boat class for the long term? 
Concluded that we needed 12 boats for the long term--16 tubes 
with 12 boats meets--meets 85 percent of the New START 
[Strategic Arms Reduction] Treaty warhead allowance.
    Mr. Larsen. Right.
    Secretary Stackley. What we give up in going from 20 down 
to 16 is some flexibility on loadouts. So we give up some 
flexibility, we get the affordability that comes with a 16-tube 
boat, and we maintain the total force structure 12 boats for 
operational availability, and that seems to be the sweet spot 
in terms of balancing----
    Mr. Larsen. But with this period of time where you are at 
10 boats, is that a problem?
    Secretary Stackley. No, sir. No, sir.
    Mr. Larsen. Why not?
    Secretary Stackley. Why not?
    Mr. Larsen. Yes. Because if 12 boats and 16 tubes is, you 
know, great flexibility at some point for a period of time----
    Secretary Stackley. You don't have the missile inventory to 
load out 12 boats, so your missile inventory doesn't go to that 
point.
    Mr. Larsen. Okay.
    Finally, we had some discussion about this question with 
regard to CVNs and trying to find a way to squeeze some costs 
out and one of the ideas was to do some--do block buy of 
certain components of CVN components. And have you considered 
that, and what is your thought on that on block buy on 
components from 79 to 80, or whatever, 79, 79 to 80, and so on?
    Secretary Stackley. Yes, sir. At this point in time the 
Navy and the shipbuilder are sitting side by side putting 
together a build plan for CVN 79. We are 40 percent complete 
construction of the 78; we have got a lot that we have got to, 
I will say, do different on the 79 and follow from the lead 
ship. It is a very different ship class.
    So we are taking a hard look at the build plan. We need to 
get that locked down. And associated with that is the complete 
bill of materials for the Ford class.
    At that point in time we will be able to take a look at----
    On this, call it bill of materials, what does it make 
sense--what makes sense in terms of looking long term, beyond 
the immediate ship?
    Mr. Larsen. Right.
    Secretary Stackley. Are there areas of the industrial base 
that are stressed to the point that it does make sense to look 
at coupling the CVN 79 and CVN 80 buy?
    We are not at that point yet. I described earlier that I 
think after we get through this build plan review then we will 
be able to come back in 2014 and identify potential critical 
items that warrant a block buy approach.
    Mr. Larsen. Yes. Okay. Thank you.
    Thank you, Mr. Chairman.
    Mr. Hunter. [Presiding.] Mr. Coffman.
    Mr. Coffman. Thank you, Mr. Chairman.
    First, thank you all for your service.
    Lieutenant General Mills, would you say that it is--that 
the forced--forcible entry requirement is--to satisfy that 
requirement is two Marine Expeditionary Brigades?
    General Mills. Yes, sir. That is the requirement that we 
are planning to.
    Mr. Coffman. Okay. And then ideally, would you say for that 
requirement that we would have 38 ships out with 4 probably 
down for maintenance, so ideally the requirement would be 42 
amphibs?
    General Mills. Sir, we would assume risk to take 15 
amphibious warships--15 per MEB in the assault echelon, that 
is--for a total of 30 operationally ready ships to deliver 
that--those two MEBs to the right place at the right time. That 
is the number that we are currently--is acceptable to us.
    Regarding the inventory, we--you know, we support the--what 
the Navy is looking at, which is 32 ships under the current 
plan to deliver to us 30 operational ships at the time and 
place in which we need them.
    Mr. Coffman. Now, how much risk would that take? I guess 
you would have noncombatants for--on the follow-on carrying 
equipment, marines?
    General Mills. Yes, sir, that is correct. And, you know, 
the follow-on echelons could--would be made up of the MPS 
[Maritime Prepositioning Ships] ships that we have. We have 14 
ships in those two squadrons that carrying equipment designed 
to support two additional MEBs as they would flow in after the 
assault echelon has made its entry.
    There is risk in what would go out with the initial assault 
force. Again, it is the MAGTF Commander who would have to make 
some decisions as to what he loaded out depending on what the 
mission was, what the threat was. That would be made at the 
time, I think, and place of his assignment.
    Mr. Coffman. Okay. So if now we have revised and revised 
that number down we are accepting greater risk.
    But what is the--Mr. Stackley, what is the date, then, that 
we will be actually at 32 ships?
    Secretary Stackley. Sir, I am not going to do this all from 
memory, but basically, at the end of this decade we basically 
start to build back up. Today we are at 29. We will be 
delivering--we have five LPD 17 class ships that are in some 
stage of construction that we will be delivering serially over 
the course of this decade, as well as the LHA 6. So somewhere 
towards the end of this decade we get up to the 32, 33 ship 
level. And then the long-term plan has us sustaining that level 
with the introduction of the LSD [Landing Ship, Dock] 41 class 
replacement, the LSD(X), and continued construction of the big-
deck amphibs.
    Mr. Coffman. So then out of the 29 ships that are currently 
in service how many of those ships are in service life 
extension programs?
    Secretary Stackley. LSD 41/49 class is the only ongoing 
service life extension program for the amphibs. The LPD 17 
class obviously is a new ship class, and the big decks don't 
have a specific midlife extension but they do go through, in 
their class maintenance plan, continued series of modernization 
as well as maintenance and repair through their overhaul cycle.
    Mr. Coffman. So out of the 29 ships how many of them are 
deployable right now?
    Admiral Blake. Sir, I would have to take that question for 
the record and get back to you. I don't have that number right 
in front of me.
    [The information referred to can be found in the Appendix 
on page 113.]
    Admiral Blake. But I would tell you that as we look at the 
delivery of ships, such as America, we go back and we say, all 
right, if the delivery is delayed then we look at the large-
deck amphibs we have in order to--and extend them beyond what 
we were going to do for their initial decom date and push them 
out. So we recognize that we want to keep that capacity around.
    Mr. Coffman. Okay.
    Thank you, Mr. Chairman. I yield back.
    Mr. Hunter. Does anybody have any secondary questions? If 
you do now is the time.
    Otherwise, thank you all very much for your service and 
time and we are going to change out panels.
    Okay. We are going to restart the hearing here, and some 
other folks are going to come in. I don't have an opening 
statement, so--nor do I have your introductions, I don't think. 
Let's see, biographies. I will tell you what, why don't you 
introduce yourselves in your opening statements?

  STATEMENT OF PHEBE N. NOVAKOVIC, EXECUTIVE VICE PRESIDENT, 
           MARINE GROUP, GENERAL DYNAMICS CORPORATION

    Ms. Novakovic. --executive V.P. at General Dynamics for 
marine systems--that is all of our shipyards. And I appreciate 
the committee's invitation to testify. In the interest of time 
I have some very short oral remarks. My written statement 
further amplifies these themes.
    First, our shipyards: We have got four shipyards with 
approximately 21,000 employees. Bath Iron Works, in Maine, 
designs and builds destroyers. Electric Boat, in Groton, 
Connecticut, and Quonset Point, Rhode Island, designs, builds 
and repairs nuclear submarines. And NASSCO, in San Diego, 
designs, builds, and repairs Navy auxiliary ships and ships for 
the Jones-Act market. NASSCO also has a repair yard in Norfolk.
    I would like to extend an invitation to each of you to come 
visit our yards and see firsthand the kinds of ships we build 
and the capabilities of our workers, of whom we are very proud.
    You asked for our view of the Navy's long-range 
shipbuilding plan. Let me answer that by focusing on the fiscal 
year 2013 FYDP programs that affect our businesses.
    First, the Navy's destroyer plan: We strongly support the 
Navy's plan to execute a multiyear procurement for nine more 
DDG 51 submarines. We are grateful for the committee's support 
of prior DDG 51 multiyears. Your support on this one will 
ensure that Bath can continue to reduce costs of these ships.
    We also appreciate the increased clarity and stability of 
the Navy's plan. A stable plan provides the predictability 
necessary for us to manage our workforce and make informed 
decisions about future facilities investments.
    That said, as we have talked about this morning at some 
length, the FYDP shifts the second DDG 51 from fiscal year 2014 
to 2016. We intend to work closely with you and the Navy to 
ensure that any risk from this disruption is mitigated.
    While not part of the 2013 plan, I want to thank this 
committee for your support of the DDG 1000. Construction on the 
first ship is 60 percent complete and going very well. 
Construction on the second ship is more than 25 percent 
complete. And Bath begins work on the third and final ship in 
April.
    Next I will address the Virginia class submarine program. 
For years these boats have been under multiyear contracts, 
which allowed Electric Boat to reduce costs and reduce 
production cycle times. These successes would have been 
impossible in the absence of multiyear authority, which 
provides greater predictability and stability, and we thank 
this committee for your constant support.
    The Navy has requested your approval to contract for at 
least nine more submarines in Block IV in a multiyear. We urge 
the committee to continue supporting multiyears for this 
program.
    I am sure that I speak for our teammate, Newport News, when 
I congratulate this committee for accelerating the Virginia 
class procurement from one to two submarines a year. This 
increased rate ensures that we can do our part to build these 
ships faster and at a significantly reduced cost to the Navy.
    As we talked about earlier today, the budget shifts the 
second Virginia class in fiscal year 2014 to fiscal year 2018. 
While we are pleased that the Navy remains committed to Block 
IV, the delay of the second fiscal year 2014 submarine is not 
without consequence. The shift interrupts the two-a-year 
production plan, impacting the costs of Block IV and the 
stability of the supplier base. We will work hard to support 
all efforts to find cost effective solutions to address this 
delay.
    Turning to the Ohio replacement program, over the last two 
decades Electric Boat has made great strides in designing ships 
to optimize construction and reduce costs; and I believe, can 
design, build, and construct the new ballistic missile 
submarines on time and on cost. Imperative to this, however, 
are two factors: first, stability in design and construction 
funding; and second, clear, cost-sensitive requirements that, 
once established, do not change. Regarding the recently revised 
Ohio replacement plan, we ask that the Navy and the Congress 
provide predictable, level loaded R&D funding to support the 
most efficient design profile.
    Finally, I will address the Navy's auxiliary ship program. 
We appreciate the acceleration of the final T-AKEs and mobile 
landing platform ships, enabling NASSCO to provide significant 
cost savings to the Navy. MLP is a capable, flexible platform 
and the President's Budget seeks a fourth MLP ship in fiscal 
year 2014. We would also ask your support for that platform.
    In the interest of time--you had asked about shipyards--
preserving shipyard critical skills--I would refer to you my 
written testimony that has a quite extensive section on that. I 
do, however, want to talk about cost efficiency and risk 
reduction.
    You had asked about initiatives to drive low-cost and 
lower-risk Navy ships. Cost efficiency and risk reduction are 
central to General Dynamics. We have a culture of continuous 
improvement, which means that every process is subject to 
rigorous cost analysis and process improvement.
    In addition, we believe in investing in our proven 
businesses when there is sufficient volume and stability to 
justify the deployment of shareholders' capital. These 
investments help our businesses reduce costs and improve 
quality.
    At E.B. [Electric Boat] we use a disciplined, cost-driven 
approach, called design for affordability, that optimizes the 
Virginia design for production. As a result, we eliminated 3 
million hours of E.B. labor and contributed to a unit cost 
reduction of about $400 million per ship.
    On Ohio replacement, Electric Boat is attacking design, 
construction, and lifecycle costs concurrently in the outset of 
the program. Already our engineers have instituted 510 cost 
reduction initiatives and we are reviewing another 1,200 for 
implementation.
    At Bath we are cutting overhead through initiatives such as 
consolidating leased facilities and dramatically reducing our 
energy and water consumptions. Thousands of lower-level process 
improvements using lean manufacturing principles and Lean Six 
Sigma resulted in $58 million in savings in the last 2 years 
alone.
    At NASSCO the T-AKE, the last of the class, will deliver 
for 38 percent of the hours on the lead ship, and rework is 
less than 1 percent. This was achieved through comprehensive 
process improvements. We modified the design to make it more 
producible, increased throughput, and focused the entire 
organization on changes that improve efficiency.
    In short, the unit cost of all of our platforms that we 
build are lower, not higher, from each unit to the next.
    Finally--and we have talked about it quite a bit this 
morning, but let me address the health of the shipbuilding 
industrial base. As prime contractors each of our shipyards is 
healthy, highly productive, and well facilitized. As primes, 
however, we have a responsibility to our suppliers.
    Our submarine industrial base consists of highly 
specialized suppliers with unique skills and capabilities, 
which, if allowed to atrophy or disappear, cannot be 
reconstituted quickly or affordably. The base is stable but it 
is limited. Multiyear procurements with economic order buys and 
advanced procurement allow suppliers to invest in human capital 
and facilities. However, we have a number of one-of-a-kind 
suppliers who possess designs, facilities, and people not 
replicated elsewhere.
    The recent revisions to the Virginia and Ohio replacement 
programs have troubled the community. Many suppliers had 
accelerated production based on expectations of higher 
workload. They now face a workload valley with the attendant 
loss of learning.
    At BIW [Bath Iron Works] we have roughly 3,000 suppliers in 
47 states, most of whom remain healthy. However, the supply 
chain is increasingly consolidated. Today, roughly 29 percent 
of the value of materials and components is committed to single 
or sole-source suppliers.
    The auxiliary ships delivered by NASSCO are built to 
commercial standards, which allow for a more diverse supplier 
base. That said, the auxiliary ship markets require stability 
to ensure lower cost solutions.
    This concludes my oral remarks, and thank you for the 
opportunity to testify, and I look forward to answering any of 
your questions.
    [The prepared statement of Ms. Novakovic can be found in 
the Appendix on page 65.]
    Mr. Coffman. [Presiding.] Mr. Mulherin.

   STATEMENT OF MATTHEW J. MULHERIN, PRESIDENT, NEWPORT NEWS 
SHIPBUILDING, AND CORPORATE VICE PRESIDENT, HUNTINGTON INGALLS 
                           INDUSTRIES

    Mr. Mulherin. My name is Matt Mulherin. I am corporate vice 
president of Huntington Ingalls Industries and the President of 
Newport News Shipbuilding.
    Distinguished members of the Seapower and Projection Forces 
Subcommittee, thank you for this opportunity to share what we 
at Huntington Ingalls Industries believes are the issues facing 
our U.S. military shipbuilding. I want to limit my oral remarks 
to a brief summary of my written testimony, which I 
respectfully request be submitted for the record.
    Today I would like to discuss the health of the industry, 
the cost of ships, and what we believe are obstacles to more 
affordable ships. I would characterize shipbuilding and its 
associated industrial base as healthy but fragile, and one 
critical to our Nation and economic security.
    We live in an era where freedom of global commerce on the 
seas is taken for--as a given. We have been and still remain a 
maritime nation and the sea is our conduit to the rest of the 
world.
    Our Navy is the only force capable of maintaining that 
conduit. Clearly, then, it is essential for the Nation to 
maintain a healthy shipbuilding and industrial base.
    At Huntington Ingalls Industries we defined a healthy 
industry as one that attracts talent, capital, and the 
technologies necessary to meet its commitments to maintain and 
grow the business. We compete with other industries for 
critical skills and we must make a career in shipbuilding 
attractive to the next-generation workforce.
    We must also have the access to capital by demonstrating 
the viability and return on investments while offering an 
acceptable balance of both risk and reward. But building 
America's most complex ships reaches far beyond our shipyard's 
gates. We have a highly skilled industrial base made up of 
4,000 suppliers across all 50 states.
    Some of our suppliers have chosen to leave shipbuilding to 
focus on more steady business. As they leave we lose critical 
manufacturing skills across our Nation.
    A stable shipbuilding plan is crucial. We are sizing 
ourselves today to support the Navy's plan, but the potential 
for sequestration could have a devastating impact to our 
healthy but fragile industrial base.
    Much has been said and published concerning the rising cost 
of military ships. The reasons for these increases are quite 
complex with many variables, and I will try to discuss 
specifically how the estimating and budgeting process impacts 
cost.
    The current methods do not factor in the increased 
complexity of warships or how new technologies have altered the 
way we build them. For example, new ship designs incorporate 
many more miles of cable to monitor ship conditions and to 
operate systems.
    From an operational standpoint, these innovations provide 
great benefit and cost savings over the life of the ship. From 
a design and construction standpoint, it makes today's ships 
vastly more complex to construct, integrate, test, and deliver.
    The current estimating and budgeting processes do not 
reflect these factors. Until they do we will significantly 
underestimate and incorrectly budget for today's complex ships.
    I would also like to mention ``should cost'' analysis. 
These estimates differ from traditional evaluation methods 
because they do not assume that a contractor's historical cost 
reflects efficient and economical operation.
    ``Should cost'' estimates do provide value and may identify 
areas for improvements that can yield real savings. The 
difficulty of such analysis is that it may also quantify a 
theoretically possible yet realistically improbably outcome, 
potentially resulting in unrealistic estimates, budgets, and 
ultimately, unachievable targets.
    There are two other significant factors that affect cost 
and I would like to discuss each briefly. They are changes to 
the current ship programs, and procurement strategies.
    Currently we are facing a build-rate reduction on Virginia 
class submarines and DDG 51 class destroyers in fiscal year 
2014. While delaying construction starts or changing the 
quantity of vessels in a class may result in decreased funding 
demands for any given fiscal year, overall they will have 
detrimental impacts to a shipbuilder and the industrial base. 
The realities of budgeting and funding to an optimal plan may 
not always be achievable, but the effects of stretching or 
gapping programs are also realities that cannot be ignored in 
assessing cost growth.
    Regarding procurement strategies, in recent years we have 
seen greater use of multiyear procurements for submarines and 
destroyers, and most recently, the block buy contracts for the 
Littoral Combat Ship. These types of contracts enable greater 
economic efficiency to provide the shipbuilder and industrial 
base with a stable, relatively long-term business base that 
helps us justify process investment and infrastructure 
improvements. We encourage the Congress to make broadest use of 
multiyear contracts and block buy contracts, and we believe 
they result in overall lower cost to the taxpayer.
    In closing, I would like to report that today American 
manufacturing is alive and well in our shipyards and in our 
supplier companies across the Nation. Together we are building 
the finest ships the Navy has every sailed.
    Thank you, and I look forward to answering any questions 
you may have.
    [The prepared statement of Mr. Mulherin can be found in the 
Appendix on page 91.]
    Mr. Coffman. Let me ask a couple.
    First of all, I think to both of you, as you look to the 
future, what is your biggest concern for the shipbuilding 
industrial base, if you were to identify one as being your top 
concern?
    Ms. Novakovic. For us it is stability and predictability of 
funding. We can adjust to lower volumes of new ship 
constructions--construction, to a point. I mean, there becomes 
a critical mass that you need. But the single largest thing 
that we have to have is consistency and stability, because that 
allows us, then, to work with the industrial base and our 
suppliers to craft their support of us and our--and frankly, 
our entire build strategy and our entire shipyard, to meet the 
requirements of the Navy.
    So right now would we all wish that we had more volume? 
Sure. But within today's volume I think it is manageable as 
long as these plans stay in place and they get funding that we 
can rely on.
    There is nothing that perturbs the work plan of a shipyard 
more than changes in a longstanding program. It is costly and 
ultimately ends up costing--we have learning issues, but 
ultimately it ends up costing the Navy a considerable amount of 
money.
    Mr. Coffman. Mr. Mulherin.
    Mr. Mulherin. I would have to agree that says that 
stability is a very big issue. Big issues facing Huntington 
Ingalls Industries have to do with amphibious ships, both the 
timing of LHD 8 and the timing of LSD(X) that drives workload 
valleys at Ingalls Shipbuild, and that we--that would be--that 
drive costs in the programs.
    Mr. Coffman. Let me just ask you one--given this 
shipbuilding plan that is being presented by the 
Administration, by the Department of Defense, is it such that 
it is inefficient to keep--is it enough to sustain the number 
of shipbuilding yards that we have in the United States today, 
or do we--given the workflow from--the reduced workflow from 
this plan, what is the net effect in terms of being able to 
keep alive the number of shipbuilding yards that we have?
    Mr. Mulherin. As you may be aware, at--within H.--
Huntington Ingalls Industries we are right-sizing our footprint 
in the shipbuilding business, so we are in the process of 
winding down military ship construction at Avondale Industries, 
in New Orleans, and that shipyard will cease being part of that 
military shipbuilding industrial base after delivery of the 
second LPD that we are building there. So I think at least 
within our realm that that will size the industry will have 
about the right footprint.
    Ms. Novakovic. I think that, again, thinking about our 
three major shipyards, the FYDP adequately supports the capital 
footprint that we have got at each of those shipyards. I think 
it is contractors' responsibilities to size their business to 
meet the demand. So when the demand slows we have got to take 
costs out of our business and out of programs in order to 
effectively and efficiently meet those lower volumes.
    That said, the movement of the--and the delay on Virginia 
in 2014 and of the DDG 51 is troubling, not so much for the 
footprint of the--or the capital structure of the shipyards, 
but because of the efficiency of which we can build these 
ships. It is just going to cost more.
    Mr. Coffman. Mr. Larsen.
    Mr. Larsen. Mr. Chairman, I will yield my time to Mr. 
Courtney.
    Mr. Coffman. Okay.
    Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman.
    You know, obviously you have out very well sort of a 
challenge we have got in terms of maintaining the momentum in 
your programs that you have been working on. And again, looking 
back, when we--when this subcommittee actually sort of put a 
bet down in 2007 that advanced procurement above what the 
administration gave was hopefully going to pan out in terms of, 
you know, getting all that momentum in terms of a more 
efficient, cost effective program.
    I mean, clearly the numbers speak for themselves. I mean, 
that was a bet that did pay off. A fixed-price approach also 
sort of challenged both yards to sort of hit, again, budget 
constraints from the government.
    So in terms of trying to look at what we can do as a 
subcommittee to try and avoid the damage that you have laid out 
here--again, there are other ideas that are floating around 
about possibly using some form of flexibility in the 
contracting process to, again, avoid the problems that you have 
described. And I guess the question is, you know, are we at a 
point in both programs--the DDG and the Virginia class--where 
we should feel confidence that if that opportunity was given 
that it is something that, you know, within even the budget 
constraints that we are all dealing with would really work? And 
I just wonder if you could comment on that.
    Ms. Novakovic. As a predicate to what I am going to say, I 
wanted to share with the committee that I used to run the 
national security division at OMB [Office of Management and 
Budget] so I understand the catechism around the bad words of 
incremental funding. But that said, it is, in my view, 
appropriate with long-term national security programs that have 
been performing well. We are well into 15 years of excellent 
performance on Virginia class. If there was a program that met 
the test of incremental funding I think this is it.
    And frankly, we have crossed that Rubicon already, and 
while precedence isn't in some people's mind as positive, it is 
in mine. It is a way--it is, frankly, the only way to get the 
velocity into that--those shipyards, because you are putting 
more work on a yearly basis just funded in a more rational 
profile.
    We haven't talked about it, but I suspect that if the 
sequencing of the money is right this can be a very effective 
tool to buy more submarines for the amount of appropriated 
dollars that we have over that period. So that is on the 
Virginia class.
    With respect to the 51s, I think Sean mentioned that we are 
looking to work with the Navy and then we will ultimately need 
this committee's help. Because of the savings that were accrued 
to the Navy--to the Navy's benefit from the competition that 
Ingalls and Bath participated in, those funds may be available 
to again resequence the available monies and appropriated 
dollars over the period that we--and perhaps even throw in 
another ship.
    So I think we are premature in that. I have yet--and I 
don't know if you all have, but I have yet to see what that 
sequencing would look like, what funds are available. I think 
the Navy is beginning to look at that but that is something 
that--be all back up here once we have got some clarity to talk 
to you about.
    Mr. Mulherin. I would agree. I think split funding that 
kind of aligns how the Navy outlays funds with what my 
obligations are in any year does make sense.
    Obviously you have to look at it and make sure that it 
doesn't impede the program as you go through the years of that 
construction. So as long as it doesn't, I think it makes sense.
    Mr. Courtney. Well, it sure seems like we are--again, we 
are not talking about programs that are in their infancy. We 
are talking about mature programs that are well along, again, 
and that have really, I think, should give the Government a lot 
more confidence that, you know, stepping outside the catechism 
may be, you know really justified, because clearly with the 
Budget Control Act caps minus sequestration, I mean, we are all 
going to have to put our thinking caps on to come up with 
creative ways to stretch the dollars out farther, and really 
under almost any scenario.
    So we look forward to working with you if, again, there are 
some ideas in terms of accomplishing that goal.
    The other sort of question--quick question I just wanted to 
ask was that, you know, you sort of talked a little bit about 
sort of the carryover from Virginia to the Ohio replacement 
program. I mean, that is sort of another dividend to sort of, 
you know, getting--keeping that momentum going, because clearly 
there are going to be lessons learned as far as getting the 
cost of the Ohio replacement down from what you have done in 
the Virginia class. And just thought maybe you could just sort 
of underline that point.
    Ms. Novakovic. Yes, in two respects. We are using the 
lessons learned in the design of Virginia on--in the design of 
Ohio. And we have a new tool in place, so between our lessons 
learned and the design tool that we are very, very familiar 
with, we are getting some astounding efficiencies on the design 
side.
    We also, though, to test the design and our ability to 
accurately use all of the tools and the lessons learned we have 
built some prototypes. And they have been perfect.
    So this early into a program we are retiring construction 
risk years before construction starts. I consider that a major 
accomplishment. And we will continue to do that iteration 
throughout the design and engineering of the Ohio, but it is 
why we appeal for--we need that funding level loaded. It is 
pushing that ship out 2 years, if we don't get that design done 
and all the risks retired in the design and all--and do 
considerably more of this kind of prototyping we are talking 
about--all bets can be off on the construction.
    Mr. Coffman. Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman.
    Mr. Mulherin, Ms. Novakovic, thank you so much for joining 
us today.
    Mr. Mulherin, I want to begin with you and follow up on a 
question that I asked with our previous panel, and that is with 
the current state of CVN--we heard Secretary Stackley talk 
about the cost with 78--I would like to ask you your thoughts 
about the idea of a block buy. We have seen historically where 
block buys create some certainty, they create some cost 
assurance, they also create some significant cost savings, 
which these days we are all looking at ways to attain.
    Give me your thoughts on a block buy scenario for the 
remaining portion of purchase on CVN 79 and CVN 80 and then 
subsequent scenarios for block buys.
    Mr. Mulherin. Yes, sir. You know, historically you go back, 
you were exactly right, if you look at the contracts that 
bought the CVN 72 and 73 there was huge savings that flowed to 
the second ship, both in the ability to go buy materials, a 
block buy and get discounts there, but also that you did the 
engineering up front the first time for both hulls so the 
second ship you really just had the answer, problem, paper and 
some of those kind of things the--kind of the normal course of 
business to support the waterfront.
    So I wouldn't see any different. I think if we were able to 
do it both for material, for the engineering to be able to go 
pump out drawings that had two-ship applicability--plus, I 
think it brings the--CVN--if we were to do a two-ship buy for 
79 and 80 it would ensure CVN 80 was a copy of CVN 79, no 
change into the contract or very minimal, you are not having 
a--on the material side you get economic order savings, you 
don't have to deal with obsolescence.
    So absolutely. I think there is huge opportunity to go do 
that. You know, you talk to the vendor base. They would love to 
see it. It gives them the ability to go look at what 
investments they need, what work is out in front of them, and 
go invest in training and tools to be able to go support that.
    Mr. Wittman. Well, thank you. I know as I have heard from 
suppliers, their big concern is in the 79 and 80 build 
structure to look at spreading those build cycles out, 
spreading those centers out. For them, many times spreading 
that out takes them out of the availability of being able to 
survive those longer periods of time as suppliers, and we all 
know that our supplier base is absolutely critical.
    I want to ask both of you a question about DDG 51. As you 
know, the--I want to ask this: Do we know the estimated cost 
per unit on the DDG 51 Flight IIIs? And I understand that there 
are going to be 33 ships in this class as they are being 
developed, and I understand, too, as we are making decisions 
about how to, again, block buy those ships there is also the 
air missile defense radar upgrades there.
    We are looking at, you know, what the cost structure are 
associated with them. And how much will that cost be integrated 
into this future cost structure for the Flight III DDG 51? And 
how will efficiencies in Flight IIA be utilized to streamline 
construction on Flight III?
    And do you see this--as we get into Flight III do you see 
this developing into an entirely new class of ship? Because as 
you know, we are doing the three DDG 1000s. The decision has 
been made to stick with it, at least for the time being, and at 
least with the next bid for the next nine ships to be DDG 51.
    But the question is, with Flight III, you know, where are 
we going with modernized systems, with the hull type itself? Is 
all of that going to integrate as the years go down the road?
    So I would like to hear both of your comments about that.
    Ms. Novakovic. We are approaching this multiyear, should we 
get that authority, and certainly this block of ships in the 
same way that we have approached each competition that we are 
in. I don't see any particular additional uncertainty as we 
think about these ships.
    We do not understand that radar. We are going to have to 
understand it better and its interfaces with the ship. We have 
got a long way to go until we are at that point where we need 
to go bid and size. That we work with the Navy customer and, 
frankly, the other industry partners who have been very, very 
helpful.
    I will give you an example. We are doing the combat systems 
integration with Raytheon. We have a tiger team with Raytheon 
because we are not electronics guys, right? So the extent--they 
have been very useful in teaching us a lot about how their 
systems work so we could optimize the integration of that 
system into the ship hull.
    It is that kind of process that we will apply to a--
whatever the changes are in the--and even if they are 
substantial changes--in the configuration of the 51s. So we can 
bid as long as we understand we can--and understand that--the 
risk areas and that you are properly protected around those 
risk areas, and everybody is reasonable about understanding 
what they are I think is----
    Mr. Coffman. Thank you, Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman.
    Mr. Coffman. Ms. Pingree.
    Ms. Pingree. Thank you very much.
    Thank you two for both--for testifying today and really for 
doing a good job of talking about the efficiencies that both 
yards are working on and the importance of a healthy 
shipbuilding base. I know my colleagues are going to want to go 
vote so I will try to be brief here.
    I am very fortunate to represent the 1st Congressional 
District of Maine, which has Bath Iron Works, and the 5,500 
wonderful workers and the great shipbuilders at that yard and 
the long tradition of producing incredible ships under budget 
and on time.
    And I appreciate your testimony, Ms. Novakovic. It is great 
to hear you talk more about the efficiencies that have been 
achieved and how the multiyear funding really can be helpful, 
and I know my colleagues are thinking a lot about that.
    But I just wanted to give you an opportunity to talk for a 
minute or two about the DDG 1000. It is nice to know that it is 
60 percent complete, and I know we have two more along the way, 
and if you want to just talk a little bit about the progress of 
them and how----
    Ms. Novakovic. Yes. For those of you who haven't visited 
the shipyard I would recommend it, and in particular, Bath, 
because while we all can intellectually understand the 
constructs of these--and sizing of this ship it is really quite 
remarkable when you see it. It is a large ship with enormous 
capacity to carry very sophisticated equipment. This is going 
to be quite a warfighting ship. I am outside my lane to talk 
about, you know, what the Navy is going to love and not love, 
but I have a feeling, in fact, betting a cup of coffee, that 
this is going to be a game-changer for the Navy once we get it 
delivered to them.
    So we are 60 percent complete. The deckhouse that Ingalls 
is building, is on track. We have got the--BAE is providing the 
magazines; we have installed several of those. We have yet to 
hit any design-construction discontinuity.
    And we have these fully outfitted, as well. When we say 
complete they are complete with full outfitting.
    So we are very pleased with where we are at this juncture. 
Now, the risk in shipbuilding, and as we--those of us who have 
lived and watched this--tends to be at the back end of the 
ships, and we are very mindful of that. So we have risk 
mitigation plans A through Z to address whichever one of these 
variables can affect us.
    The work on the second DDG 1000 is progressing extremely 
well and I believe it is, I think, next week that we start on 
the third. So they are on schedule. We are on cost.
    The first ship, by the way, is a cost-plus; the second two 
are fixed-price. I personally am an advocate of fixed price, 
assuming that you can get the risk properly identified and 
fenced off and understood.
    So I think that there is a real possibility that these 
ships are going to be done exactly the way the Navy wants them 
in a very affordable price. So we are actually excited about 
this program. Thank you.
    Ms. Pingree. Well, thank you very much for your testimony.
    I wanted to just thank Mr. Wittman for coming to visit the 
yard, and I know he was impressed, as everyone is, to see the 
incredible systems that have been developed for shipbuilding 
today. It is really a phenomenal use of technology and great 
workers' skills. So thank you very much.
    Mr. Coffman. Thank you.
    With that, the committee hearing is--oh, I am sorry.
    Mr. Palazzo? Mr. Palazzo.
    Mr. Palazzo. Sorry about that. Thank you, Mr. Chairman.
    And thank our guests for being here today. It is great to 
actually get an industry perspective. I was particularly 
impressed with Mr. Mulherin's, you know, comments about the 
efficiencies of multiship buys.
    Is there anything else you or Ms. Novakovic would like to 
add to help us do our job--help us understand what you, the 
industry, is doing to provide the customer and the taxpayer 
with the best ships and the best possible price for America?
    Mr. Mulherin. I guess I will just go real quick. I want to 
tell you, in building ships it is a full-contact sport. There 
is no stone not turned over looking for ways to take out cost. 
The Navy has stood up a--under Admiral Eccles' review team that 
looks at ship specifications for how can we change those ship 
specifications to make them more producible and still maintain 
the warfighting capabilities of the ship? That has been 
helpful.
    Our supply base leans into it. You know, we have just spent 
yesterday and today with our aircraft carrier industrial base 
council, and part of that was a panel to ask suppliers for 
their ideas on how we can take out costs. So we are trying to 
lean on everybody and we have got a great bunch of shipbuilders 
who spend every day trying to figure out how do they go, you 
know, work safer, work with higher quality, take out costs, and 
meet schedule.
    So I think we are doing all that we can and I think--but 
again, we need to do more. So I have nothing more to add.
    Ms. Novakovic. I just quickly, to your point about 
multiyears, two subset examples: At the shipyard it allows us 
to level load the workforce, and that preserves--improves their 
efficiency and preserves their skill sets. So that is critical 
for us, and then we have some predictability that we can man at 
that level, and that is the best way to build ships 
efficiently.
    Looking from the--at the supplier base, the block material 
buys that can be done in sufficient economic order quantities 
give you an enormous leverage in driving down the price of your 
suppliers. You cannot do that on one-off ships; you can do it 
in block buys of many ships--classes of material.
    It just is the basic law of economics. Volume reduces their 
cost, just as it does in our--for us. So that is really the 
beauty of--those are two--if I think about it, those are the 
two simplest metrics.
    Mr. Palazzo. Well, thank you all both so much, again, for 
what you all are bringing, helping the Navy and helping the 
taxpayers understand that you are out there trying to control 
costs. And congratulations. I think you all are participants in 
the last great American industry in our country and we need to 
do everything we can to preserve it, promote it, and protect 
it.
    Thank you.
    Mr. Coffman. Thank you.
    [Whereupon, at 1:03 p.m., the subcommittee was adjourned.]
      
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                            A P P E N D I X

                             March 29, 2012

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

              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                             March 29, 2012

=======================================================================
      
                     Statement of Hon. W. Todd Akin

     Chairman, House Subcommittee on Seapower and Projection Forces

                               Hearing on

        Oversight of U.S. Naval Vessel Acquisition Programs and

          Force Structure of the Department of the Navy in the

            Fiscal Year 2013 National Defense Authorization

                             Budget Request

                             March 29, 2012

    This morning the Seapower and Projection Forces 
Subcommittee meets to discuss naval shipbuilding as presented 
in the fiscal year 2013 budget request and the force structure 
it supports. The Constitution states that Congress shall 
``maintain a Navy.'' To do this we must ensure the Navy has the 
resources required to build ships that will sail in harm's way, 
operated by America's sons and daughters. Today's Navy is by 
far the most capable in the world. Our job is to make sure it 
stays that way.
    There are some worrisome indicators in the fiscal year 2013 
budget request delivered to Congress last month. There are 
significant changes in this request from that anticipated for 
the same period just last year. The Shipbuilding and Conversion 
Account is 20% lower, at $13.7 billion, with the procurement of 
10 ships instead of 13. The account is 8% lower in the next 5 
years than it was in the last 5 years, with 16 fewer ships, 
going from 57 to 41. In many ways, it makes little sense to be 
shrinking our Navy just months after the announcement of a 
strategy that would shift emphasis to Asia, the Pacific, and 
the Mideast--areas where a strong naval presence is an 
imperative.
    To address these and other issues we have two panels. I 
want to thank all of our witnesses today for taking valuable 
time out of their schedules to be here with us. The first panel 
represents the acquisition and requirements leadership in the 
Department of the Navy, and for the second panel we have two 
executives from some of our largest shipyards to discuss 
impacts of the budget on their industrial base, and 
particularly on their talented and unique workforce. They are:

    Panel 1

         LHon. Sean Stackley, Assistant Secretary of 
        the Navy for Research, Development and Acquisition;

         LVice Admiral Terry Blake, USN, Deputy Chief 
        of Naval Operations for Integration of Capabilities and 
        Resources (N-8); and

         LLieutenant General Richard Mills, USMC, 
        Deputy Commandant for Combat Development and 
        Integration and Commanding General, Marine Corps Combat 
        Development Command.

    Panel 2

         LMs. Phebe Novakovic, Executive Vice 
        President, Marine Group, General Dynamics Corporation, 
        and

         LMr. Matt Mulherin, President, Newport News 
        Shipbuilding, and Corporate Vice President, Huntington 
        Ingalls Industries.

    Thank you again and we look forward to your testimony.

                    Statement of Hon. Susan A. Davis

          House Subcommittee on Seapower and Projection Forces

                               Hearing on

        Oversight of U.S. Naval Vessel Acquisition Programs and

          Force Structure of the Department of the Navy in the

            Fiscal Year 2013 National Defense Authorization

                             Budget Request

                             March 29, 2012

    I would like to thank all of the witnesses for appearing 
here today and for their service to the country.
    Both the Department of the Navy's FY13 budget and the 
recently received 30-year shipbuilding plan highlight the 
challenges the Navy and Marine Corps team are currently facing 
and will continue to face long-term.
    The short-term implications of the budget constraints 
imposed by the Budget Control Act, forced the Navy to make 
difficult choices such as moving a Virginia class submarine 
from FY14 to FY18. This single move only further exacerbates 
the capability gap the Navy will be facing beginning in the 
mid-2020's with regard to fast attack submarines. Other 
difficult choices included the early retirement of cruisers and 
amphibious ships and the move of one DDG-51 from FY14 to FY16. 
I look forward to hearing from the witnesses about any 
potential ways we as Congress can help mitigate any shortfalls 
those moves have caused.
    I am concerned about the cost growth with regard to the USS 
Gerald R. Ford (CVN 78). I understand that this is the lead 
ship in a new class of aircraft carriers and several systems 
that had been planned to be incrementally fielded were pulled 
forward causing additional challenges. I would appreciate 
hearing from our witnesses about what lessons learned we have 
gained from CVN 78 and how they can be applied to the follow-on 
CVN 79.
    As I review the 30-year shipbuilding plan, I see that the 
challenges continue as we move into the out-years. Today, the 
FY13 new ship construction budget stands at $13.7 billion. The 
30-year plan clearly points out that the budget required to 
meet future demands is simply not attainable under current 
budget levels. The plan states that the required average annual 
spending on new ship construction in the near-term planning 
period will be $15.1 billion per year and during the mid-term 
planning period between FY2023 and FY2032, average yearly 
spending will climb to $19.5 billion per year. This growth is 
due in large part to the recapitalization of its Fleet 
Ballistic Missile Submarine (SSBN) force. In order to meet this 
plan, added resources in the Navy shipbuilding account will be 
necessary. I hope the Department of the Navy will continue to 
work with Congress and try to find a solution given the tight 
budget environments we are facing.
    Recent world events have further proven why it is necessary 
to have a Navy and Marine Corps that is capable of quickly 
responding when needed. Whether that means reacting to flashes 
of unpredicted violence, as we saw in Libya, or responding to a 
natural disaster and the subsequent humanitarian crisis like 
the situation that occurred in Japan after the earthquake.
    This subcommittee remains committed to ensuring our Navy 
and Marine Corps are prepared to meet the challenges of today 
and the future. I want to thank the witnesses again for being 
here today and their service to our country.
    I also want to thank the industrial base panel witnesses 
for being here today. I look forward to hearing your estimates 
on how the FY13 budget and future budgets will impact not only 
your industrial base but the second- and third-tier suppliers 
you depend on. 

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
      
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              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                             March 29, 2012

=======================================================================
      
             RESPONSE TO QUESTION SUBMITTED BY MR. COFFMAN

    Admiral Blake. Of the 29 amphibious ships, 19 are deployable right 
now. Of the ten ships that are non-deployable, two are finishing their 
year-long LSD Mid-Life availabilities, seven are in scheduled 
maintenance availabilities, and one LPD has been redesignated to an 
AFSB (I). [See page 26.]
                                 ______
                                 
             RESPONSE TO QUESTION SUBMITTED BY MR. COURTNEY
    Secretary Stackley. The Navy briefed Professional Staff Members Mr. 
Tom MacKenzie and Mr. Phil MacNaughton of the House Armed Services 
Committee on April 5, 2012, concerning the VIRGINIA Class multiyear 
procurement, specifically, the nine-boat verses ten-boat, and the 
challenges the Navy faced with the budget.
    The FY 2013 President's Budget Submarine Force Structure is 
attached on page 114. [See page 7.]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

      
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              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                             March 29, 2012

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                  QUESTIONS SUBMITTED BY MR. LANGEVIN

    Mr. Langevin. Could you both please comment on the impact of the 
potential Virginia class boat shift from FY14 to FY18 on the 
efficiencies that we have gained by shifting to a two-per-year 
procurement rate?
    Ms. Novakovic. A critical component to achieving the $2B (FY05$) 
unit cost goal for the Virginia class submarine involved increasing the 
production rate to two ships per year and maintaining that rate. Navy 
studies completed in the 2005-2006 timeframe concluded the combination 
of maintaining the two-ships-per-year production rate along with 
multiyear procurement provided a unit cost reduction to subsequent 
procurements of about $200M per ship (FY05$). This increased production 
rate provides increased efficiencies by allowing fixed cost to be 
spread over a greater volume of work and enables a more stable and 
efficient drumbeat for manufacturing, assembly and delivery of ships 
from each builder. Removing the second ship in FY14 and adding it to 
FY18 interrupts the cadence of the production plan and program learning 
curve and decreases the efficiencies gained through the greater 
production volume. Continued stable and predictable two-ships-per-year 
procurement is the most efficient way to improve production and 
manufacturing efficiencies at the shipyards and across the industrial 
base.
    Mr. Langevin. What effect might such a move have on both your 
workforces and your supplier base, particularly lower-tier suppliers? 
Conversely, could you describe for this subcommittee why such great 
efficiencies are gained from a steady two-per-year procurement rate?
    Ms. Novakovic. Moving the second FY14 ship to FY18 impacts the 
workforces at the shipyards and in the industrial base as follows:

         -- Reduces staffing levels at shipbuilders in Connecticut, 
        Rhode Island and Virginia over the period 2014 to 2018 by 800 
        to 1,000 jobs. This work would be accomplished later in Block 
        IV (i.e., 2018-2022).
         -- In a similar fashion, it reduces staffing levels at other 
        major suppliers in Virginia, Ohio, Indiana, New York and Rhode 
        Island by approximately 350 jobs. This work would be 
        accomplished later in the block as well.
         -- In addition, highly skilled manufacturing jobs from the 
        direct suppliers to the prime contractors, as well as their 
        suppliers (i.e., sub-tier suppliers), and the associated 
        economic impact to local economies where material is bought, 
        will be moved out by 5 years. Virginia class submarine material 
        is bought from suppliers in all 50 states, therefore the 
        economic impact is felt across the entire country to varying 
        degrees.

    Efficiencies are generated from a steady state two-ships-per-year 
procurement rate in four key areas:

         -- Production efficiency
         -- Cost efficiency
         -- Supplier efficiency
         -- Critical skills retention

    Production efficiency

    A steady state procurement rate of two ships per year continues, in 
an uninterrupted fashion, the series production plan that has been 
optimized for efficient production (i.e., shortened cycle time and 
build plan). Steady production rates provide the steady demand that 
allows the shipyards and industrial base to better plan and execute the 
work and to match the work to the required resources (skilled 
workforce, shipyard facilities and industrial base capacity). The 
ability to maintain a steady plan avoids costly peaks and valleys 
associated with the cycles in workload levels. Learning curve 
efficiencies are also realized as production units are built in a 
repeatable fashion on subsequent units and budgets and cost targets are 
more easily understood and flowed down to the shop floor. It is 
estimated that removing a ship from FY14 will insert a 6-month 
production gap into the series production plan which will incur a 
penalty of more than one million labor hours on Block IV submarines due 
to interrupted learning and lost efficiencies.

    Cost efficiency

    Continued efficient multiyear procurement of Virginia class 
submarines provides economic order quantity savings and improved 
material availability that support more efficient production plans and 
reduced construction spans. Efficiencies are derived though volume and 
earlier procurement of material avoiding escalation costs that would 
result from the later procurement of hardware. The volume afforded by 
the two-ships-per-year production rate allows the shipyard and 
suppliers to spread fixed costs more efficiently over a larger business 
base providing further economic benefit. The shipbuilders are able to 
achieve labor savings due to the ability to execute the build plan as 
conceived and to drive down labor hours on subsequent units.

    Supplier efficiency

    The production and cost efficiencies discussed above for the 
shipyards are also realized by the suppliers for the equipment they 
directly provide. Continued two-ships-per-year procurement encourages 
suppliers' sub-tier supply chains and local economies to grow by 
providing a stable and predictable workload to meet increased 
production demands. This stability bolsters the supply chain with 
steady production, to keep suppliers competitive and reduce costs, and 
provides the supplier base with the confidence it needs to make capital 
investments in equipment and their workforce.

    Critical skill retention

    The ability of the United States to efficiently manufacture and 
deliver nuclear submarines is directly related to our ability to retain 
the people who possess the experience and unique skills that are 
exercised only during the submarine building process. In order to 
retain the current competency, as well as advance the production 
process, it is imperative that we keep submarine production at a stable 
and efficient rate. This stability allows the shipbuilders to execute 
viable workload plans, provide long-term employment opportunities, and 
preserve the critical skills needed for production. The production 
break caused by the shifting of the second FY14 ship to FY18 adds risk 
to the Nation's ability to efficiently and effectively manage the 
submarine production workforce that possesses these critical skills.
    Mr. Langevin. How does the 2-year push of the Ohio Replacement 
program affect your engineering and design workforce?
    Ms. Novakovic. In February 2012, PEO Submarines (PMS397) informed 
Electric Boat that the start of construction on the lead ship in the 
Ohio Replacement Program would slip 2 years, to FY21. This delay will 
extend the design effort by 2 years, adding roughly one million labor 
hours to the overall design effort. The design reschedule will assure 
that the Missile Compartment effort supports the needs of the United 
Kingdom, while attempting to maintain concurrency of the design 
evolution with the rest of the Ohio Replacement design effort. This 
shift poses risk to the resource and infrastructure planning within the 
industrial base that supports technology and new component development 
during the design phase. The acquisition cost will also escalate due to 
the 2-year delay across the 12-ship construction plan. As a result of 
this stretch in the design effort, Electric Boat employment increases 
planned in FY13 through FY14 will be delayed. Engineering and Design 
employment on Ohio Replacement will remain essentially constant in FY13 
and FY14. While the Ohio Replacement represents a significant portion 
of the engineering and design work across the company, the introduction 
of new work on Virginia class and other projects mitigates the impact 
of the Ohio Replacement program delay such that the overall engineering 
and design workforce remains stable through FY13 and future years.

    Mr. Langevin. Could you both please comment on the impact of the 
potential Virginia class boat shift from FY14 to FY18 on the 
efficiencies that we have gained by shifting to a two-per-year 
procurement rate?
    Mr. Mulherin. Maintaining a stable and predictable two-per-year 
procurement and subsequent production rate is the most efficient way to 
gain production and manufacturing efficiencies at the shipyards and 
across the industrial base. Increasing the procurement rate to two 
ships per year, and maintaining that rate, was a critical component to 
achieving the two for $4 billion (FY05$) cost goal for the Virginia 
class submarines. Newport News Shipbuilding and Electric Boat began 
two-per-year production in FY11, with the volume of work peaking in 
2015. This rate provides efficiencies in both workforce and facilities 
utilization for both companies and allows fixed costs to be spread over 
a greater volume of work. Repetitive work teams can move from one 
module or unit to the next ship's module/unit on 6-month intervals 
verses 12 months at the one-per-year rate. This allows for continuous 
learning and improved skill retention during the manufacturing, 
outfitting and delivery phases of construction. Shifting the second 
ship from FY14 to FY18 will reduce these efficiencies, increase non-
value-added costs such as escalation, and significantly increase 
overall program cost by as much as $600 million based on joint NNS/EB 
estimates. The shift of the FY14-2 boat to FY18 will also result in a 
submarine workforce reduction. This reduction follows significant 
investment we have already made in our workforce as we ramp up to the 
two-per-year production rate, and will require us to rehire, retrain 
and reinvest in a new workforce as production returns to the two-per-
year rate.
    Mr. Langevin. What effect might such a move have on both your 
workforces and your supplier base, particularly lower-tier suppliers? 
Conversely, could you describe for this subcommittee why such great 
efficiencies are gained from a steady two-per-year procurement rate?
    Mr. Mulherin. A break in the Virginia class submarine series 
production plan results in an estimated loss of 800-1,000 jobs at the 
shipyards and 350 jobs at our prime suppliers during FY14 through FY18. 
This immediately follows the completion of the manning ramp-up to 
support earlier two-per-year construction. At NNS, an average of 500 
submarine construction jobs will move from FY14 through FY18 to FY19 
through FY23, creating a workforce gap that will be difficult to 
recover in certain critical skills. An estimated average of 350 prime 
contractor jobs that supply equipment for the Government (VA, OH, IN, 
NY, RI) will also move from FY14 through FY18 to FY19 through FY23. 
Although an exact number cannot be determined, based on previous 
industrial base studies, the impact to all Virginia class suppliers is 
expected to be at least within the same order of magnitude as the 
impact to the shipyards, with the potential to be even 3 to 5 times 
higher given that material is bought from thousands of suppliers in 46 
states. Reconstitution following job losses at the shipyards and 
supplier companies will be problematic, adding risk and cost associated 
with rehiring and retraining personnel.
    Two-per-year production provides benefits in efficiencies and 
economies of scale, including opportunities to lock-in lower material 
costs for multiple ships. It also provides opportunities to move work 
teams from one module or ship to the next on 6-month intervals verses 
12 months at the one-per-year rate. A steady two-per-year procurement 
rate provides gains in production and cost efficiency for the 
shipbuilders and suppliers (both Contractor Furnished Equipment and 
Government Furnished Equipment) as well as improved retention of 
critically-skilled workers. The following provides a brief description 
of the efficiencies associated with steady two-per-year procurement.

    Production efficiency

    A steady state procurement rate of two-per-year, in an 
uninterrupted fashion, supports the series production plan in place 
today, which has been optimized for efficient production (i.e., 
shortened cycle time and build plan). The ability to maintain a steady 
plan avoids costly peaks and valleys associated with the cycles in 
workload levels. Learning curve efficiencies are also realized as 
production units are built in a repeatable fashion on subsequent units.

    Cost efficiency

    Continued multiyear procurement of Virginia class submarines 
provides economic order quantity savings and improved material 
availability. Both of which support more efficient production plans and 
reduced construction spans. Efficiencies are derived through volume and 
earlier procurement of material, avoiding escalation costs that would 
result from the later procurement of hardware. The volume afforded by 
the two-per-year production rate allows the shipyard and suppliers to 
spread fixed costs more efficiently over a larger business base 
providing further economic benefit.

    Supplier efficiency

    The production and cost efficiencies discussed above for the 
shipyards are also realized by the suppliers for the equipment they 
directly provide. Continued two-per-year procurement encourages our 
suppliers' sub-tier supply chains to grow by providing a stable and 
predictable workload to meet increased production demands. This 
stability bolsters the supply chain with steady production to keep 
suppliers competitive and reduce costs. It also provides the supplier 
base with the confidence it needs to make capital investments in 
equipment and in their workforce.

    Critical skill retention

    The ability of the United States to manufacture and deliver nuclear 
submarines is directly related to the shipbuilders' ability to retain a 
few thousand people who possess the experience and unique skills that 
are exercised only during the submarine building process. In order to 
retain the current competency, as well as advance the production 
process, it is imperative that we keep submarine production at a stable 
and efficient rate. This stability allows the shipbuilders to execute 
viable workload plans, provide long-term employment opportunities, and 
preserve the critical skills needed for production. The production 
break caused by shifting the FY14-2 ship adds risk to the Nation's 
ability to efficiently and effectively manage the submarine production 
workforce who possesses these critical skills.
    Mr. Langevin. How does the 2-year push of the Ohio Replacement 
program affect your engineering and design workforce?
    Mr. Mulherin. Current projections are that our existing Ohio 
Replacement Program (ORP) engineering and design workforce is expected 
to remain essentially flat through FY13, as opposed to a slight 
increase in demand during this period. However, the ORP subcontracted 
effort represents less than 10 percent of the overall design and 
engineering workforce at our shipyard. From a volume perspective, we do 
not expect any adverse effect to our engineering and design workforce 
as a result of the two-year shift. From a critical skills perspective, 
the shift does place additional pressure on retention of a number of 
critical engineering and design capabilities that will require 
mitigating actions to avoid.
                                 ______
                                 
                   QUESTIONS SUBMITTED BY MR. WITTMAN
    Mr. Wittman. Mr. Stackley, I would like to focus on the near-term 
planning period of the Long-Range Naval Vessel Construction Plan and 
the Naval Battle Force Inventory. In the next 5 years we are 
decommissioning 22 Oliver Hazard Perry class frigates, essentially 
ending that class's active service to the Navy. During this same time 
period the Navy is procuring 16 LCS. My question is how many LCS will 
be delivered to the Navy and be fully mission capable and deployable 
between FY13-FY17?
    Secretary Stackley. The Navy will take delivery of 17 Littoral 
Combat Ships (LCS) and 21 Mission Packages by the end of Fiscal Year 
(FY) 2017. The Navy currently has two LCS available for Fleet tasking. 
USS FREEDOM (LCS 1) is scheduled to deploy for a second time in 2013, 
this time to Singapore, and USS INDEPENDENCE (LCS 2) is currently 
sailing to her homeport of San Diego, Calif. FORT WORTH (LCS 3) will 
deliver to the Navy in June 2012. CORONADO (LCS 4) will deliver to the 
Navy in FY 2013. The ships of the block buy contracts will begin to 
deliver in FY 2014 starting with MILWAUKEE (LCS 5) and JACKSON (LCS 6). 
Deliveries then ramp up with DETROIT (LCS 7), MONTGOMERY (LCS 8), and 
LITTLE ROCK (LCS 9) in FY 2015 and GABRIELLE GIFFORDS (LCS 10), SIOUX 
CITY (LCS 11), OMAHA (LCS 12) and LCS 13 in FY 2016. LCS 14, LCS 15, 
LCS 16 and LCS 17 are scheduled to deliver in FY 2017. Currently, the 
Navy plans for each ship to undergo approximately 12 months of post 
delivery tests and trials.
    The LCS Mission Package program is on track to deliver a mix of 
Mine Countermeasures (MCM), Surface Warfare (SUW) and Anti-Submarine 
Warfare (ASW) Mission Packages to support the Fleet's warfighting 
missions for the Littoral Combat Ship. LCS employment will be in 
response to the global demand signals of the combatant commanders to 
support timely joint force access to critical littoral regions. LCS 
will be configured with the mission package required by the operational 
commander. LCS also has inherent characteristics and capabilities to 
enable missions such as Maritime Law Enforcement operations, Maritime 
Anti-Terrorism/Force Protection, Search and Rescue, and Freedom of 
Navigation (FON) operations. The table below shows the cumulative 
number of LCS and Mission Packages that are planned to deliver to the 
Navy by the end of FY 2017.
    Mr. Wittman. Mr. Stackley and VADM Blake, in reviewing the Long 
Range Plan for Construction for Naval Vessels for FY2013, it seems to 
me that we continue to push hard decisions outside the Future Years 
Defense Program (FYDP).
    a. Within this FYDP, from 2013 to 2017, we are planning to 
construct 41 ships, 16 of which (39%) are the relatively inexpensive 
LCS small combatants. Additionally, the LCS cost from shipbuilding 
budget does not even include the LCS Mission Modules, which are 
required for these ships to be viable warships.
    b. In the following 5 years, 2018 to 2022, we are building 52 
ships, 15 of which (29%) are LCSs. Additionally, the 52 ships include a 
first in class Ohio Replacement, a total of 12 Virginia class SSNs vice 
the 9 Virginia class SSNs within the current FYDP, and some large deck 
amphibs. Obviously, these will be relatively expensive ships to 
construct; especially relative to the LCS.
    c. From 2013 to 2017, we buy 11 fewer warships than from 2018 to 
2022; and we also buy a higher percentage of less expensive ships in 
the FYDP than the next 5 years.
    d. I understand this makes the math look better, but is this right 
for the National Security of this country, is this right for the Navy, 
is this right for the Industrial Base? Is it realistic to believe that 
we will have the required funding from 2018 to 2022 to support this 
dramatic ramp-up in shipbuilding?
    Secretary Stackley. The Department of the Navy shipbuilding plans 
are based on three central principles: (1) maintain required battle 
force capability to meet the national defense strategy; (2) balance 
needs against expected resources; and (3) maintain an adequate 
shipbuilding industrial base.
    After accounting for the funding limits of the 2011 Budget Control 
Act (BCA) and the specific resourcing decisions made in the recently 
completed strategic review, and considering the full range of 
supporting capabilities, capacities, and enablers found in the combined 
Navy-Marine Corps Team, going forward the 21st Century Battle Force 
will have about 300 warships. This battle force is fully capable of 
meeting the strategic guidance found in Sustaining U.S. Global 
Leadership: Priorities for 21st Century Defense, and as importantly, 
the construction plan that builds it sustains the national shipbuilding 
design and industrial base. The Navy's Long Range Plan for Construction 
of Naval Vessels carefully balances construction of all classes of 
ships including small surface combatants such as Littoral Combat Ships.
    The FY2013 President's Budget and the Future Years Defense Plan 
fully funds the construction of naval vessels in the plan through 
FY2017. Beyond the FYDP, however, the need to recapitalize our Fleet 
Ballistic Missile Submarine force will put pressure on the Navy's 
overall shipbuilding plan. Annual spending on Navy shipbuilding must 
increase during this 10-year period, before returning to historical 
averages in the last decade.
    To procure the needed ships during the middle decade, yearly 
shipbuilding expenditures will need to average about $19.5B/year. This 
is greater than $4B more per year than in the first decade, and nearly 
$3B more per year than the steady-state, 30-year average requirement of 
$16.8B/year. The Department is taking strong measures to try to reduce 
projected yearly shipbuilding costs during this period, such as trying 
to reduce the recurring and non-recurring costs for OHIO Replacement 
and other ship programs.
    If the DON is unable to sustain average annual shipbuilding budgets 
of $19.5B during the second decade, plans to recapitalize the Nation's 
secure second-strike nuclear deterrent and the Navy's conventional 
battle force will have to be re-examined. The overall size of the 
battle force will drop below the levels needed to meet all naval 
presence and warfighting requirements.
    The Department recognizes that its 30-year shipbuilding plan 
represents a significant demand on fiscal resources, and is committed 
to maintaining stability in planned requirements, funding and 
shipbuilding profiles in order to tightly control the demands on these 
precious resources.
    Mr. Wittman. Mr. Stackley, the industrial base has routinely and 
consistently stressed the importance to maintain a steady ship 
construction rate vice ebbs and flows in construction to help to drive 
down unit costs. The current plan does not appear to stress this 
consistently. Does this plan, in an effort to make the FYDP look good, 
actually open up taxpayers to paying more in the long run for the same 
number of ships?
    a. A specific example of this is the shifting of one Virginia class 
submarine from FY 2014 to FY 2018. This move effectively increases the 
total cost to the American taxpayer for 10 Block IV Virginia class 
submarines by approximately $600 million. Why would we pay an 
additional $600 million dollars to have the same number of submarines 
delivered?
    Secretary Stackley. The Navy recognizes that shifting one ship from 
FY2014 to FY2018 is not the most cost efficient way of procuring the 9 
Block IV VIRGINIA class submarines; however, this is one of many 
difficult choices that the Navy had to make in developing the PB13 
budget in order to reduce spending in FY2013 and FY2014 in compliance 
with the Budget Control Act. However, with an eye on providing much-
needed stability to the shipbuilding industrial base, the Navy has 
maintained the total number of submarines planned for the Block IV 
multi-year (nine) and plans to leverage advance procurement and 
economic order quantity buys to mitigate the impact of this shift.
    Mr. Wittman. Mr. Stackley and VADM Blake, in 1983 and 1988 the U.S. 
Navy entered into block buys for Nimitz class carriers, buying 2 in '83 
and 2 in '88. Understanding that some of CVN 79 has already been paid 
for, are there benefits to the taxpayer to enter into a partial block 
buy for CVN 79 and CVN 80? It is my understanding that some experts 
estimate this could save the Navy and the taxpayer close to $500 
million? That is a decent amount of money to put towards an SSN, DDG, 
Amphib, or LCS.
    Secretary Stackley. The Department recognizes that building the 
required force structure depends on controlling shipbuilding costs. In 
the case of aircraft carriers, the Navy is focused on stabilizing the 
lead ship (CVN 78), getting cost under control and completing the ship 
as close to schedule at the lowest cost possible. The Navy is 
experiencing cost growth in the design, material procurement, and 
production associated with CVN 78.
    CVN 78 is a very different ship from the Nimitz-class and the Navy 
cannot expect to build the CVN 78 the way it built the CVN 68 and get 
to an affordable ship construction plan. The Navy is working closely 
with the shipbuilder to incorporate lessons learned from CVN 78 
construction which will result in a more affordable build plan for CVN 
79.
    It is too late to implement a complete block buy on CVN 79 and CVN 
80, as some of CVN 79, particularly its propulsion plant, has already 
been purchased. Pending results of the ongoing Navy-Industry `optimal 
build plan' review, the Navy would have an option to implement a 
partial block buy for CVN 79 and CVN 80 to the extent substantial 
savings are generated.
    Mr. Wittman. Mr. Stackley, do we know the estimated per-unit cost 
of the DDG-51 Flight III? I understand from the plan that there will be 
33 of these ships and they will replace the capabilities and mission 
set of the CG-47 cruisers and improve integrated air and missile 
defense for the battle forces. Do we know the estimated cost of the Air 
and Missile Defense Radar (AMDR) and how much the integration on to a 
DDG-51 hull will cost? What efficiencies from DDG-51 Flight IIA will be 
utilized to streamline this construction? Do you see this developing in 
to a completely new class of ship?
    Secretary Stackley. The unit cost for DDG 51 FLT III ships as 
submitted in PB13 is approximately $2,151M (TY$). This represents the 
first three FLT III ships (one ship in FY 2016 and two ships in FY 
2017) and includes installation/integration of AMDR onto the DDG 51 
hull, associated ship changes, and non-recurring design costs. This 
estimate will continue to be refined as the AMDR technology matures and 
the AMDR down select occurs. AMDR is currently in a competitive 
Technology Demonstration phase. A draft Engineering Manufacturing 
Development Request for Proposal was recently released for industry 
comment. The Navy's estimate for the AMDR is included in the total ship 
price presented above. Releasing the estimate for the radar alone at 
this time would adversely impact the ongoing competition. The estimate 
for all 33 ships has not yet been finalized.
    The Navy intends to compete the FY 2013 through FY 2017 DDG 51 MYP 
using Profit Related to Offer, similar to previous DDG 51 competitions. 
As with previous DDG 51 MYPs, these contracts will be fixed price 
incentive contracts. The shipbuilders will compete to the stable DDG 51 
Flight IIA baseline (nominal configuration of the DDG 113-116 restart 
ships) for all nine ships planned for procurement between FYs 2013-
2017. In addition, the Navy will use MYP authority to contract for the 
Vertical Launch Systems, AEGIS Weapon Systems, and Commercial Broadband 
Satellite Systems to support these ships.
    Independent of the MYP contract action, the Navy's Air and Missile 
Defense Radar (AMDR) program is in development to address gaps in 
Ballistic Missile Defense. Currently, this S-band radar program has 
demonstrated prototype technology in a relevant environment. As noted 
above, the Navy's current plan calls for the final three ships of the 
DDG 51 MYP to be modified via an Engineering Change Proposal (ECP) to 
the Flight III configuration which incorporates the AMDR-S band radar 
in place of SPY-1D(V). This ECP approach provides the Navy the ability 
to field a critical advancement in Ballistic Missile Defense, the AMDR-
S radar, at the earliest opportunity, while preserving the increased 
savings that a 5 year DDG 51 MYP provides to the Navy's shipbuilding 
program. But the proposed MYP contracting strategy provides the 
flexibility to continue to procure Flight IIA DDGs if the technology 
critical to Flight III does not mature on schedule. It should be noted 
that the Navy has successfully used ECPs to enhance DDG 51's during 
previous MYPs. Examples of technology incorporated during MYPs via ECPs 
include: SPY-1D(V); NULKA; CIWS Block 1B; Cooperative Engagement 
Capability (CEC); and enhanced 3000kW (vice 2500kW) Gas Turbine 
Generators.
    Mr. Wittman. Mr. Stackley, per this plan it seems that the Navy is 
being realistic in understanding that we have some pretty expensive 
ships being procured, especially once we get in to FY18-FY32. My 
question is with 33 DDG Flt IIIs planned, 24 SSNs that cost around 
$2.6B a copy, 12 SSBNs that will cost $5-6B a copy, and multiple 
amphibious ships in the ``out-years.'' I would argue that it is safe to 
say that we need to see a robust SCN account that should hover around 
$20B a year sooner, rather than later. The luxury we have here is that 
it is highly unlikely that any of us in this room will be authorizing, 
appropriating, or executing this plan in 2032. My argument is why wait, 
there is nothing like building ships for a fleet that needs them to 
ignite the industrial base and the creative spirit of our engineers and 
shipbuilders.
    Secretary Stackley. The FY2013-FY2017 Future Years Defense Program 
(FYDP) reflects the budgetary constraints associated with the 2011 
Budget Control Act (BCA). The Plan's long-range projections focus first 
on battle force inventory requirements, and then outline the resources 
necessary to build to and maintain those requirements. Your assessment 
of the SCN investment required to support the long-range shipbuilding 
plan is exactly correct.
    Over the next 30 years, the DON plans to procure a total of 268 
ships of all types, for an average of about nine ships per year. 
However, executing even this relatively modest build plan within 
expected future resource limitations will present a stiff planning and 
resource challenge.
    The Department recognizes that its 30-year shipbuilding plan 
represents an enormous demand on national resources. Our ability to 
maintain stability in planned requirements, funding and shipbuilding 
profiles is critical in order to control the demands on these 
resources. The Department will work closely with Congress and the 
shipbuilding and combat systems industries with each successive year of 
implementation as we move forward with the plan and proceed from 
projected funding to programmed funding.
    With specific regards to increasing the funding `sooner, rather 
than later', two principles are in action; (i) we must preserve 
wholeness of the current force, i.e., we need to first fully fund our 
readiness accounts to ensure the force `in being' readiness is not 
diminished as a result of the reduced topline, and (ii) we must drive 
affordability into our programs to the extent possible within our SCN 
budget to ensure we are acquiring these new construction ships at the 
best possible price to the taxpayer. To this end, our efforts to 
procure an additional DDG 51 and an additional VIRGINIA SSN within the 
requested multi-year procurements are solid examples reflecting the 
right balance between requirements, budget, affordability, and the 
industrial base.
    We will continue to work with Congress and industry to pursue these 
and further initiatives to address the Navy's critical shipbuilding 
needs.
    Mr. Wittman. Mr. Stackley, is it no longer the goal of the U.S. 
Navy to attain a 313-ship Navy?
    Secretary Stackley. After accounting for the funding limits of the 
2011 Budget Control Act (BCA) and the specific resourcing decisions 
made in the recently completed strategic review, and considering the 
full range of supporting capabilities, capacities, and enablers found 
in the combined Navy-Marine Corps Team, the Department of the Navy's 
most current shipbuilding plan assumes the 21st Century Battle Force 
will have about 300 warships.
    This battle force is fully capable of meeting the strategic 
guidance found in Sustaining U.S. Global Leadership: Priorities for 
21st Century Defense, and as importantly, the construction plan that 
builds it sustains the national shipbuilding design and industrial 
base.
    This projection will be informed by the completion of a formal 
Force Structure Assessment (FSA) and the ongoing Department of Defense 
review of its operational plans for potential regional contingencies.

    Mr. Wittman. VADM Blake, Arleigh Burke class destroyers will start 
decommissioning in the mid-late 2020s. In the plan it states that 
Flight IIA DDG 51s (starting with DDG 79) service lives will be 
extended to 40 years in an effort to reduce the impact of the DDG 51 
retirement schedule on overall LSC force structure. We have a 
documented history of retiring surface combatants early.
      In the last 14 years we have seen an entire destroyer 
class, 31 ships, decommissioned in the Spruance class.
      Their average service life was 23.5 years (per the Naval 
Vessel Register website http://www.nvr.navy.mil/nvrships/S_TYPE.HTM).
      The Spruance, DD 963 served the longest at 29.5 years.
      We decommissioned 7 of these ships prior to their 20 
years of service point.
      In the last 8 years we have already decommissioned 5 CG-
47 class ships well before their end of service life instead of 
upgrading them and modernizing them.
      Of the prior DDG class ships, the Farragut class had an 
average service of roughly 30 years, with the USS Mahan (DDG 42) 
serving the longest at 32.8 years.
      The USS Arleigh Burke (DDG 51) is now almost 21 years 
old.
      The USS Oscar Austin (DDG 79) the first of the Flt IIA 
DDGs is now 12 years old and per this plan she will serve until 2040?
    Admiral, you are a career surface warfare officer, you have served 
on multiple large surface combatants. My question is when you factor in 
operation and maintenance shortfalls and the fact that over the last 10 
years we have punted on numerous routine maintenance issues. Coupled 
with the fact these ships are the workhorses of the surface fleet and 
they have conducted cyclic deployments since 9/11, along with the fact 
that these ships will be on a rotation to deploy for 7 months and be 
home for 14 months; can we logically assume that 32 Flight IIA DDGs 
will be serving for 40 years?
    Admiral Blake. The 30-year shipbuilding plan is based on several 
key assumptions including: All battle force ships--particularly Large 
Surface Combatants--will serve to the end of their planned or extended 
service lives. The total FY 2013 President's Budget request for Ship 
Maintenance fully funds the FY2013 ship maintenance requirement for our 
remaining ships and submarines to reach their expected service life. On 
average, ships and submarines are reaching their expected service life, 
and the Navy is working to reverse the negative trend in Surface Ship 
readiness by investing in mid-life availabilities to work off the 
identified surface ship maintenance backlog.
    The Navy has implemented a DDG Modernization Program to upgrade 
each ship's systems and extend service life to 40 years. The Navy will 
closely monitor the material condition of these ships during the 
various maintenance and modernization periods as they progress through 
their service lives to enable them to reach a 40 year ESL. The Navy 
will also utilize spiral upgrades to existing ships to maximize ship 
operational availability, enable learning curve efficiencies, and 
perform continuous and emergent maintenance. Lessons learned from the 
other ship classes have already been incorporated into ship design, 
such as using all-steel construction vice aluminum. The Navy will 
endeavor to operate every ship procured to the very end of its expected 
service life.
    All of these measures will help maintain the size of the battle 
force inventory during the heavy ship retirement period expected in the 
2020s and 2030s. However, even after all of these measures are taken, 
executing even the relatively modest build plan within expected future 
resource limitations will present a significant planning and resource 
challenge.
    Mr. Wittman. Mr. Stackley and VADM Blake, in 1983 and 1988 the U.S. 
Navy entered into block buys for Nimitz class carriers, buying 2 in '83 
and 2 in '88. Understanding that some of CVN 79 has already been paid 
for, are there benefits to the taxpayer to enter into a partial block 
buy for CVN 79 and CVN 80? It is my understanding that some experts 
estimate this could save the Navy and the taxpayer close to $500 
million? That is a decent amount of money to put towards an SSN, DDG, 
Amphib, or LCS.
    Admiral Blake. The Department recognizes that building the required 
force structure depends on controlling shipbuilding costs. In the case 
of aircraft carriers, the Navy is focused on stabilizing the lead ship 
(CVN 78), getting cost under control and completing the ship as close 
to schedule at the lowest cost possible. The Navy is experiencing cost 
growth in the design, material procurement, and production associated 
with CVN 78.
    CVN 78 is a very different ship from the Nimitz-class and the Navy 
cannot expect to build the CVN 78 the way it built the CVN 68 and get 
to an affordable ship construction plan. The Navy is working closely 
with the shipbuilder to incorporate lessons learned from CVN 78 
construction which will result in a more affordable build plan for CVN 
79.
    It is too late to implement a complete block buy on CVN 79 and CVN 
80, as some of CVN 79, particularly its propulsion plant, has already 
been purchased. Pending results of the ongoing Navy-Industry `optimal 
build plan' review, the Navy would have an option to implement a 
partial block buy for CVN 79 and CVN 80 to the extent substantial 
savings are generated.
    Mr. Wittman. Admiral Blake, over the FYDP we are decommissioning 
five amphibious ships, and I am including the reclassified USS Ponce, 
because for all intents and purposes, that is still an L-class ship. We 
are procuring 1 amphibious ship in the FYDP and only 3 between FY18-
FY22. What is the service life plan for LSD 41 and LSD 49 class? I have 
been told the ballpark figure per-unit cost of the LPD-17 is $2B . . . 
What do you expect LSD(X) to cost and when do you see this ship being 
delivered? Is there a plan in place to utilize the hull design of the 
LPD to make this a more efficient and affordable design and procurement 
process?
    Admiral Blake. The estimated service life (ESL) for the LSD 41/49 
class is 40 years.
    The cost of the LSD 41/49 replacement will be informed during the 
Analysis of Alternatives (AoA) phase that will complete in late fiscal 
year 2013. Cost will be an important consideration in the construction 
of this ship class. The Navy plans for the lead ship delivery in FY 
2026, in time to support the end of service life decommissioning of LSD 
42.
    Use of the LPD 17 design will be studied as part of the AoA.
    Mr. Wittman. Admiral Blake, you're one of the most experienced 
surface warfare officers in the Navy, if not the most experienced. You 
have served and commanded at every level at sea . . . In your 37 years 
of service have you ever seen more capable and combat ready surface 
combatants that we have in the fleet today? Some up here like to argue 
that we have the smallest Navy since WWI. In reality we now have highly 
trained, all-volunteer crews that operate the most technologically 
advanced ships in the world . . . multi-mission capable platforms that 
can operate in a variety of environments. Can we get your professional 
opinion on this? You served and sailed through the Cold War, the 600-
ship Navy plan, the Gulf War, and the combat operations since 9/11. You 
have seen every threat out there for the past 37 years. Based on the 
threat and the risks at sea and our desire to project power and answer 
the call to execute the core missions of the Navy, is this the fleet 
that we want, the fleet that we need, or the fleet we can afford? What 
risks are we assuming by not having a larger fleet that multiplies 
capabilities that we have now? Is this the most capable fleet we could 
have at this point in time?
    Admiral Blake. The Navy would need in excess of 500 ships to meet 
all validated Combatant Commander (COCOM) requirements. Although the 
near-term force structure does not fulfill all those demands, it is 
sufficient to meet warfighting needs--including Major Combat Operations 
and execution of COCOM's Theater Campaign Plans--while still meeting 
high-priority presence and partnership requirements, with some level of 
acceptable risk. Today's battle force numbers 282 warships of all 
types. After accounting for the funding limits of the 2011 Budget 
Control Act (BCA) and the specific resourcing decisions made in the 
recently completed strategic review, and considering the full range of 
supporting capabilities, capacities, and enablers found in the combined 
Navy-Marine Corps Team, going forward the 21st Century Battle Force 
will have about 300 warships.
    This battle force is fully capable of meeting the strategic 
guidance found in Sustaining U.S. Global Leadership: Priorities for 
21st Century Defense, and as importantly, the construction plan that 
builds it sustains the national shipbuilding design and industrial 
base.
    Since every naval force or platform should be able to draw from the 
combined capabilities, capacities, and enablers found in the wider 
Navy-Marine Corps Team, counting platforms and forces gives only a 
partial picture of the aggregate combat power of the combined Team. 
Indeed, a more thoroughly inter-connected Navy and Marine Corps allows 
a smaller naval force to achieve greater awareness in all operating 
domains--space, air, sea, undersea, land, and cyberspace--and to 
effectively and efficiently execute integrated, coordinated actions 
even when the force is conducting widely distributed naval maneuver 
within and across theaters, or when in disaggregated, geographically 
fixed sea, air, and land control missions.
    The current shipbuilding program builds and maintains a battle 
force inventory of approximately 300 ships, which will be refined with 
the completion of an ongoing Force Structure Assessment. This battle 
force is part of a broader Navy-Marine Corps Team that is built and 
ready for war, and operated forward to preserve the peace. The battle 
force represents an integrated and balanced fleet with the necessary 
capabilities and capacities to meet anticipated future demands for 
forward presence, deterrence, and war-fighting missions.
    The major risk beyond the Fiscal Year Defense Plan (FYDP) is the 
need to recapitalize our Fleet Ballistic Missile Submarine force which 
will cause noteworthy risks to the Navy's overall shipbuilding plan. If 
the DON is unable to sustain average annual shipbuilding budgets of 
$19.5B over the course of the mid-term planning period, plans to 
recapitalize the Nation's secure second-strike nuclear deterrent and 
the Navy's conventional battle force will have to be dramatically 
changed, and the overall size of the battle force could drop below the 
levels needed to meet all naval presence and warfighting requirements.

    Mr. Wittman. General Mills, how does decommissioning 5 L-class 
ships over the FYDP while only procuring 1 affect the USMC's ability to 
man, train, and equip the 2 MEB requirement?
    General Mills. One Marine Expeditionary Brigade (MEB) assault 
echelon requires 17 operationally available amphibious warships. In 
working with the Navy to balance operational risk with fiscal 
challenges we have agreed to a minimum of 15 ships to support a MEB/
Amphibious Task Force. Combatant commanders require a minimum of two 
MEBs to meet Operation Plan requirements. Amphibious warships, along 
with the requisite number of ship-to-shore connectors, represent an 
operational capability with the minimum number of vessels required to 
provide the Nation with a flexible, persistent, sea-based, power 
projection capability that is capable of full spectrum amphibious 
operations in an anti access area denial environment. Fiscal 
constraints have reduced operational availability below 30 ships, 
requiring the assumption of additional risk, not only in terms of 
capacity and operational capabilities, but also the speed with which we 
can respond. More importantly, it is becoming more common for forces to 
deploy without the benefit of training as a complete Amphibious Ready 
Group with a Marine Expeditionary Unit. As of May 2012, there were 28 
ships in the Navy's amphibious fleet, with three scheduled for 
decommissioning in FY14 and one ship decommissioning in FY15. Four new 
ships are under construction in the yards and scheduled for delivery 
between FY14 and 15. Within the coming FYDP, the inventory will decline 
in FY14 before rising to an average of 31.9 amphibious warships over 
the next 30 years. The key to meeting amphibious operational 
requirements with acceptable risk is maintaining a fleet which provides 
30 operationally available warships.
    An amphibious warship inventory that does not maintain 30 
operationally available ships adversely affects our ability to conduct 
day-to-day deployments, meet necessary training standards and surge 
forward in response to crises with a balanced combat capability. 
Shortfalls in amphibious lift remain a concern as we work with the 
Chief of Naval Operations and his staff to mitigate risk in meeting the 
amphibious lift requirement. We are aggressively reviewing our 
amphibious concepts, doctrine, and plans; and recently stood up the 
Ellis Group, which is partnered with the Navy to develop innovative 
solutions to overcome these challenges and look for new methods to 
operate given amphibious ship shortfalls.

                                  
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