    [Senate Hearing 112-590, Part 2]
    [From the U.S. Government Publishing Office]

                                                     S. Hrg. 112-590, Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2013 AND THE FUTURE YEARS DEFENSE PROGRAM

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 3254

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2013 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
       MILITARY PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR, AND FOR OTHER
                                    PURPOSES

                                   ----------

                                     PART 2

                                    SEAPOWER

                                   ----------

                             APRIL 19 AND 26, 2012

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             Printed for the use of the Committee on Armed Services

                                                      S. Hrg. 112-590 Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2013 AND THE FUTURE YEARS DEFENSE PROGRAM

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 3254

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2013 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
       MILITARY PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR, AND FOR OTHER
                                    PURPOSES

                                   __________

                                     PART 2

                                    SEAPOWER

                                   __________

                             APRIL 19 AND 26, 2012

                                   __________

             Printed for the use of the Committee on Armed Services

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

            Available via the World Wide Web: http://www.fdsys.gov/
                                    _____

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                          COMMITTEE ON ARMED SERVICES

                         CARL LEVIN, Michigan, Chairman

    JOSEPH I. LIEBERMAN, Connecticut     JOHN McCAIN, Arizona
    JACK REED, Rhode Island              JAMES M. INHOFE, Oklahoma
    DANIEL K. AKAKA, Hawaii              JEFF SESSIONS, Alabama
    E. BENJAMIN NELSON, Nebraska         SAXBY CHAMBLISS, Georgia
    JIM WEBB, Virginia                   ROGER F. WICKER, Mississippi
    CLAIRE McCASKILL, Missouri           SCOTT P. BROWN, Massachusetts
    MARK UDALL, Colorado                 ROB PORTMAN, Ohio
    KAY R. HAGAN, North Carolina         KELLY AYOTTE, New Hampshire
    MARK BEGICH, Alaska                  SUSAN M. COLLINS, Maine
    JOE MANCHIN III, West Virginia       LINDSEY GRAHAM, South Carolina
    JEANNE SHAHEEN, New Hampshire        JOHN CORNYN, Texas
    KIRSTEN E. GILLIBRAND, New York      DAVID VITTER, Louisiana
    RICHARD BLUMENTHAL, Connecticut

                       Richard D. DeBobes, Staff Director

                     Ann E. Sauer, Minority Staff Director

                                     ______

                            Subcommittee on Seapower

                       JACK REED, Rhode Island, Chairman

    DANIEL K. AKAKA, Hawaii              ROGER F. WICKER, Mississippi
    JIM WEBB, Virginia                   JEFF SESSIONS, Alabama
    KAY R. HAGAN, North Carolina         KELLY AYOTTE, New Hampshire
    RICHARD BLUMENTHAL, Connecticut      SUSAN M. COLLINS, Maine

                                      (ii)

                                C O N T E N T S

                                  ----------

                        CHRONOLOGICAL LIST OF WITNESSES
                           Navy Shipbuilding Programs
                                 April 19, 2012

                                                                       Page

    Stackley, Hon. Sean J., Assistant Secretary of the Navy
      (Research, Development, and Acquisition); Accompanied by VADM
      Kevin M. Mccoy, USN, Commander, Naval Sea Systems Command; VADM
      John T. Blake, USN, Deputy Chief of Naval Operations,
      Integration of Capabilities and Resources (N8); VADM William R.
      Burke, USN, Deputy Chief of Naval Operations, Warfare Systems
      (N9); and Lt. Gen. Richard P. Mills, USMC, Deputy Commandant
      for Combat Development and Integration/Commanding General,
      Marine Corps Combat Development Command........................     5

                       Marine Corps Acquisition Programs
                                 april 26, 2012

    Stackley, Hon. Sean J., Assistant Secretary of the Navy
      (Research, Development, and Acquisition).......................    61
    Mills, Lt.Gen. Richard P., USMC, Deputy Commandant for Combat
      Development and Integration/Commanding General, Marine Corps
      Combat Development Command.....................................    68

                                     (iii)

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2013 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                            THURSDAY, APRIL 19, 2012

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

                           NAVY SHIPBUILDING PROGRAMS

        The subcommittee met, pursuant to notice, at 9:30 a.m. in
    room SR-232A, Russell Senate Office Building, Senator Jack Reed
    (chairman of the subcommittee) presiding.
        Committee members present: Senators Reed, Sessions, and
    Wicker.
        Majority staff member present: Creighton Greene,
    professional staff member.
        Minority staff members present: Bryan D. Parker, minority
    investigative counsel; and Christopher J. Paul, professional
    staff member.
        Staff assistant Present: Brian F. Sebold.
        Committee members' assistants present: Carolyn Chuhta,
    assistant to Senator Reed; Gordon Peterson, assistant to
    Senator Webb; Lenwood Landrum, assistant to Senator Sessions;
    and Joseph Lai, assistant to Senator Wicker.

            OPENING STATEMENT OF SENATOR JACK REED, CHAIRMAN

        Senator Reed. Let me call the hearing to order. I want to
    welcome and thank our witnesses who have joined us this
    morning. We're honored to have the Honorable Sean J. Stackley,
    who's the Assistant Secretary of the Navy for Research,
    Development, and Acquisition; Vice Admiral Kevin M. McCoy, USN,
    Commander, Naval Sea Systems Command; Vice Admiral John T.
    Blake, USN, Deputy Chief of Naval Operations (CNO), Integration
    of Capabilities and Resources, N8; Vice Admiral William R.
    Burke, USN, Deputy CNO, Warfare Systems, N9; and Lieutenant
    General Richard P. Mills, USMC, Deputy Commandant for Combat
    Development and Integration/Commanding General, Marine Corps
    Combat Development Command. Thank you, gentlemen, thank you.
        We're obviously grateful not only for your appearance
    today, but for your extraordinary service to the Nation and to
    the extraordinarily courageous and professional men and women
    of the Navy and the Marine Corps that you have the privilege to
    lead, and we thank you and we hope you thank them, too, on our
    behalf.
        The Navy continues to be faced with a number of critical
    issues as it tries to balance its modernization and procurement
    needs against the cost of current operations. The shipbuilding
    budget remains at a level where it will be difficult at best to
    field the Navy we want, and indeed even the Navy that we need.
        With that in mind, we need to ensure that we are getting
    good value for every shipbuilding dollar that we spend. We were
    very pleased to see the Department of Defense's (DOD) original
    decision to budget for two Virginia-class submarines per year,
    but are troubled by the new shipbuilding plan that would delay
    one of the two fiscal year 2014 boats until fiscal 2018. We
    know that the Navy and contractor team are able to drive down
    costs under the two boats per year plan. We will need to hear
    more about why the Navy made this change and what options may
    exist for reinstating the two boats per year plan.
        We support the Navy's continuing efforts to drive costs out
    of the Ohio replacement SSBN program. SSBNs will remain a vital
    leg of the nuclear triad for the foreseeable future.
    Establishing and achieving cost reduction goals in the
    Virginia-class and Ohio replacement programs will yield
    significant stability to our Nation's submarine industrial base
    and provide the Navy with a modern, capable submarine fleet for
    many years to come.
        Last month, the subcommittee held a private briefing on
    issues surrounding the Ohio replacement program. But we should
    get on the record that the Navy continues to try to reduce
    costs on this program to make it more affordable and
    potentially less disruptive to the rest of the shipbuilding
    account.
        Also last month, the full committee heard testimony from
    Secretary Frank Kendall, who agreed that, even with Navy cost
    reduction efforts of the program, DOD may need to step in and
    help the Navy pay for this critical program, the SSBN program
    particularly. We will want to hear from our witnesses about the
    cost reduction efforts and how DOD might step in to help pay
    for this program. I think you understand, I have a certain
    affection and regard for submarines.
        The subcommittee met last year and focused primarily on
    other programs that were experiencing quality control issues or
    other production issues. It is never a pleasant situation where
    major programs are having such problems. In receiving last
    year's testimony from the Navy, it seemed to me that the Navy
    was making good faith efforts to improve the situation through
    changes in staffing, training, and organization.
        We're eager to hear from Secretary Stackley and Vice
    Admiral McCoy this morning on the progress they have made on
    these initiatives since last year.
        In our country's fiscal environment, it's very unlikely it
    will have as much money to spend as the 30-year shipbuilding
    plan assumes. Fundamentally, that is why this hearing is so
    important. We need to focus on managing these important
    programs in ways that are efficient and effective in delivering
    the capability the country needs from its Navy. We need to
    improve quality and efficiency in all of our shipbuilding
    programs, not only because of the direct savings, but also
    because we need to demonstrate to the taxpayers that we are
    using defense dollars wisely.
        We look forward to hearing your testimony this morning on
    these and other issues facing the Navy.
        With that, let me recognize Senator Wicker.
        Thank you.

                  STATEMENT OF SENATOR ROGER F. WICKER

        Senator Wicker. Thank you, Mr. Chairman. I know you have an
    affection for submarines, but you also have an affection for
    defending the country in general, as a whole; and I think in
    that regard we're very well-served by this very distinguished
    panel; we have five men with very difficult tasks and
    responsible jobs. I appreciate them being here at this
    important hearing.
        Vice Admiral Burke is here, I believe, for the first time
    before this panel. Last month, the CNO assigned Admiral Burke
    to the new position of Deputy CNO for Warfare Systems,
    responsible for integration of manpower, training, sustainment,
    modernization, and procurement of ships, submarines, and air
    programs. We look forward to seeing him again before this
    subcommittee.
        Let me take a moment to mention that this is a particularly
    momentous year in our history. It marks the bicentennial of the
    War of 1812 and the writing of our national anthem, the Star
    Spangled Banner. Notably, the War of 1812 was the first
    declared war in our Nation's history. The Battle of Lake Erie,
    which is depicted in William Henry Powell's beautiful and
    profound painting in the east stairwell of the Senate, was
    fought during this conflict and is one of the Navy's greatest
    victories.
        Today, our sailors and marines continue to exemplify the
    benchmarks of leadership, seamanship, and heroism set by their
    predecessors 200 years ago.
        I also want to recognize the outstanding efforts of the
    Navy's expeditionary sailors in places like my State of
    Mississippi. Our Seabees from the Naval Construction Battalion
    Gulfport have facilitated the fastest combat theater expansion
    in U.S. Central Command's (CENTCOM) history. In the past year,
    approximately 2,400 of our Gulfport-based Seabees from two
    naval construction regiments and nine naval mobile construction
    battalions deployed to Afghanistan and Kuwait, Okinawa, Guam,
    Europe, and Africa. Their hard work and dedication reflects the
    very finest traditions of the Navy.
        Mr. Chairman, the Navy's 30-year shipbuilding plan that was
    submitted to Congress last month projects that for the first
    time the fleet would remain below 310 ships during the entire
    30-year period. The plan also foresees critical shortfalls in
    cruisers, destroyers, and amphibious ships.
        I believe these proposed cuts to our naval capabilities
    without a plan to compensate for them will place our strategic
    interests in the Asia-Pacific region and Arabian Sea at greater
    risk. I'd like to hear from our witnesses on what I consider
    five key issues that our subcommittee will review this year.
        First, viability of the industrial base. The viability of
    the 30-year shipbuilding plan is essential to the strength of
    our shipbuilding industrial base. The strength of the skills,
    capabilities, and capacities inherent to new construction,
    shipyards, and weapons system developers reinforce the Navy's
    dominant maritime position. I'd like to hear from our witnesses
    how they carefully weighed the effects on the shipbuilding
    industrial base when they balanced resources and requirements
    in drafting the shipbuilding plan.
        Second, balance of the force. I remain concerned about the
    amount of funding needed for ship construction going forward.
    With more than half the construction and development cost
    dollars allocated to build nuclear submarines, submarine
    construction costs could crowd out funding needed to build
    large surface ships and to modernize the fleet. I hope our
    witnesses can tell us what they're doing to reduce the cost of
    building these submarines and give us their views on the impact
    of submarine construction costs on surface shipbuilding,
    including amphibious ships and destroyers.
        Third, I'm interested in learning the views of our
    witnesses on ways we can ensure the Navy's shipbuilding plan
    meets the demand for amphibious ships from our combatant
    commanders. This demand has increased more than 80 percent over
    the last 5 years. I'm particularly pleased that the Navy and
    Huntington Ingalls signed a Memorandum of Agreement (MOA) last
    month for LHA-7, the second America-class amphibious assault
    ship to be built in my home State of Mississippi.
        As we begin to pivot toward the Asia-Pacific region, the
    Navy and Marine Corps will serve as the linchpin of American
    force projection abroad. Amphibious ships such as LHA-7 will
    help enable our troops to meet any challenges that our country
    may face in the future.
        Fourth, multiyear procurement authority. This subcommittee
    will carefully consider in the coming weeks the Navy's two
    shipbuilding multiyear procurement requests included in its
    budget submission: authority for the Virginia-class submarines
    and the DDG-51 Arleigh Burke-class destroyers. I know members
    of our subcommittee will be interested to learn how these
    multiyear proposals will offer the best value to the warfighter
    and the American taxpayers.
        Finally, sequestration. The Navy faces significant budget
    challenges ahead. The Budget Control Act (BCA) passed by
    Congress and signed by the President last August requires
    sequestration to be implemented across all the departments,
    including DOD. Sequestration is not a hypothetical. It is the
    law of the land, unless changed. On January 3, 2013, a mere 257
    days from today, sequestration will happen unless legislation
    is passed to undo it.
        Mr. Chairman, our national defense is solely a Federal
    responsibility. Defense spending is also a two-fer that
    supports our national security and our high-tech manufacturing
    workforce. As such, I hope our witnesses today will elaborate
    on their assessment of the impact that sequestration will have
    on our sailors, marines, and our industrial base.
        With that in mind, I look forward to the testimony of all
    these fine witnesses. Also, Mr. Chairman, without objection, at
    this point I would like to submit the statement for the record
    of our colleague, Senator Susan Collins, who could not be here
    due to a scheduling conflict. Thank you, sir.
        [The prepared statement of Senator Collins:]
                  Prepared Statement by Senator Susan Collins
        Secretary Stackley, I want to thank you and the other witnesses for
    your public service. The challenges facing our country and our Navy are
    great. The administration and Congress have a responsibility to
    establish budget priorities. The Senate has not passed a budget in 2
    years, and I am troubled by the priorities established in the budget of
    this administration, and previous administrations when I look at the
    historic budget topline for shipbuilding. The annual shipbuilding
    budget has averaged about $14 billion, which is troubling when I
    compare that figure to other Federal spending each year.
        For example, our country pays as much in interest on the national
    debt each month as we do for shipbuilding for an entire year. We spend
    the equivalent of the shipbuilding budget, $15 billion a year, on
    Federal agency travel and conferences. The Army spent more than a
    year's worth of shipbuilding--$19 billion--for research and development
    on the Future Combat System--a program it ultimately cancelled.
        Shipbuilding represents a mere 2.2 percent of the $614 billion
    requested by the Department of Defense (DOD) this year. So, the point I
    simply would like to make is that Navy ships are a great value for our
    country. Ships promote U.S. diplomacy overseas. They deter aggression
    from happening in the first place. They protect the commercial sea
    lanes that underpin our national economy.
        It seems to me that the shipbuilding account punches above its
    weight in comparison to the small portion of the DOD and Federal budget
    it represents.

        Senator Reed. Thank you, Senator Wicker.
        Senator Sessions, do you have any comments?
        Senator Sessions. Thank you, Mr. Chairman, for your
    leadership. I value that so much. You've been a real asset to
    the Senate. Senator Wicker, thank you for those good comments.
        I'm concerned about the sequester. Senator Reed, he is
    exactly correct. That is the law. We need to be taking some
    real action to fix it so we don't end up scrambling at the last
    minute.
        So I thank all of you for your testimony and I look forward
    to participating.
        Senator Reed. Thank you very much.
        I want to commend my colleagues, too, for their great
    service in support in a very collaborative and cooperative
    basis on so many different issues. So thank you, gentlemen.
        Secretary Stackley, I presume you will go first; is that
    correct? Or do you have another preference?

    STATEMENT OF HON. SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE
     NAVY (RESEARCH, DEVELOPMENT, AND ACQUISITION); ACCOMPANIED BY
    VADM KEVIN M. McCOY, USN, COMMANDER, NAVAL SEA SYSTEMS COMMAND;
      VADM JOHN T. BLAKE, USN, DEPUTY CHIEF OF NAVAL OPERATIONS,
    INTEGRATION OF CAPABILITIES AND RESOURCES (N8); VADM WILLIAM R.
     BURKE, USN, DEPUTY CHIEF OF NAVAL OPERATIONS, WARFARE SYSTEMS
     (N9); AND LT. GEN. RICHARD P. MILLS, USMC, DEPUTY COMMANDANT
      FOR COMBAT DEVELOPMENT AND INTEGRATION/COMMANDING GENERAL,
                MARINE CORPS COMBAT DEVELOPMENT COMMAND

        Mr. Stackley. Yes, sir, I'm going to propose that we have a
    single statement for the Navy and Marine Corps.
        Senator Reed. That is welcome. Thank you very much,
    Secretary Stackley.
        Mr. Stackley. Yes, sir. Thank you, Mr. Chairman, Senator
    Wicker, Senator Sessions, for the opportunity to appear before
    you today to discuss Navy shipbuilding. As always, thank you
    for your leadership on the many issues that fall under
    Congress' broad responsibility to provide and maintain our Navy
    and, perhaps most importantly, for your steadfast commitment to
    our sailors and marines around the world.
        With the permission of the subcommittee, I have a brief
    opening statement and would propose to submit a more formal
    statement for the record.
        Senator Reed. Without objection.
        Mr. Stackley. Thank you.
        Today we are a force of 282 ships, about half of which on
    any given day are underway, performing missions around the
    globe, supporting operations in Afghanistan, providing maritime
    security along the vital sea lanes, missile defense in the
    Mediterranean and the Sea of Japan, intelligence, surveillance,
    and reconnaissance (ISR), as needed, global presence at sea and
    with an embarked marine force, and readiness to move ashore.
        They're conducting anti-piracy patrols, global partnership
    stations humanitarian assistance, and they are quietly,
    reliably on patrol and providing strategic deterrence. All the
    while they're training for the next deployment, the next
    operation.
        In support of the defense strategic guidance, we're
    building toward a force of about 300 warships, ships that will
    provide the capability and the capacity to maintain our
    maritime superiority today and for the foreseeable future.
        We have reshaped our shipbuilding plan over a year ago to
    reflect the priorities of the new defense strategy and the
    reality of fact-of-life top-line reductions consistent with the
    BCA. This year's shipbuilding plan strikes a balance between
    capacity, capability, affordability, and the industrial base.
        We have important work to do in order to close out-year
    gaps or risks identified by the long-range shipbuilding plan.
    In doing so, we need to drive the equation to deliver the full
    capability and capacity that 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, an LPD-17 amphibious ship, and a T-AKE
    dry cargo-ammunition ship have joined the fleet. The submarine
    Mississippi, the Littoral Combat Ship (LCS) Fort Worth, and the
    Joint High-Speed Vessel (JHSV) Spearhead will deliver this
    spring. Another half a dozen ships have been christened, keels
    have been laid for the lead ship of the DDG-1000-class, the
    mobile landing platform (MLP) class, and the next LCS,
    Virginia, and T-AKE. Construction has begun on another 11
    warships.
        In total, since December 2010, we've awarded contracts to
    procure 38 ships, including options, most competitively
    awarded, all fixed-price contracts, and we're on track to
    increase that number to 40 this spring with the anticipated
    awards of the next amphibious assault ship, the LHA-7, and the
    11th and final ship of the LPD-17 class. These contracts
    provide an important degree of certainty to our industrial base
    in an otherwise uncertain period in defense spending.
        We recognize, however, that it is not possible to simply
    buy our way to recapitalizing our force. We must focus
    relentlessly on improving affordability in our shipbuilding
    programs.
        This year's 2013 budget request includes funding for 10
    ships, including the first year of full funding for the second
    ship of the Gerald R. Ford-class, CVN-79, maintaining aircraft
    carrier construction starts on 5-year intervals. CVN-79 is
    required to deliver in 2022, which aligns with the end of
    service life for Nimitz, the ship CVN-79 will functionally
    replace to maintain an 11-aircraft carrier force structure.
    This provides schedule flexibility, which is important for this
    ship for it enables the Navy and the shipbuilder to develop and
    implement a more affordable build strategy that incorporates
    the findings and recommendations emerging from lessons learned
    in the design and construction of the lead ship CVN-78.
        We continue with Virginia-class fast attack submarine
    procurement at two boats in fiscal year 2013 and are requesting
    authorization of a nine-boat multiyear procurement commencing
    in fiscal year 2014. The Virginia program reliably delivers
    critical undersea capacity affordably and on time, in large
    part due to multiyear savings resulting from economic order
    quantity opportunities, improved workforce planning, and
    workload sequencing, optimized construction scheduling,
    increased opportunities for facilities investment, and reduced
    support and engineering workload.
        Within this request, however, top-line constraints have
    forced the Navy to defer a planned second boat from fiscal year
    2014 to fiscal year 2018.
        We're requesting funding for two Flight 2A DDG-51 Arleigh
    Burke-class destroyers in 2013 in conjunction with the
    multiyear request for nine ships, projected to save $1.5
    billion. This strong-performing, stable program provides much-
    needed ballistic missile defense (BMD) capability and capacity
    to the fleet.
        Key to meeting the growing ballistic missile threat is our
    Air and Missile Defense Radar (AMDR) program, which will
    greatly improve the sensitivity and long-range detection and
    engagement of increasingly complex threats. In the course of
    the AMDR competitive development, we've witnessed impressive
    progress, while assessments of technology maturity steadily
    improve and estimates for cost steadily decline.
        We are continuing to execute the dual-award strategy for
    LCS. In 2013, we're requesting funds for 4 ships and a total of
    16 ships across the Future Years Defense Program (FYDP).
    Program affordability continues to improve as we ramp up
    production. Notably, the fixed-price options for the 10th ship
    of these block buys are about half the cost of their respective
    lead ships. Likewise, the ships' mission packages are moving
    smartly forward in developmental testing in support of initial
    operational capability (IOC) milestones.
        With five LPD-17-class ships in various stages of
    construction and the lead ship of the America-class preparing
    to float off this summer, our shipbuilding program continues to
    build towards the amphibious lift capability required for the
    assault echelon of two Marine Expeditionary Brigades in support
    of joint forcible entry operations. Quality continues to
    improve with each ship delivered on the Gulf Coast and we are
    likewise working closely with the shipbuilder to improve cost
    and schedule on these critical programs.
        While today we are finalizing contract details for LHA-7,
    we are requesting funding in 2013 to begin design for the
    fiscal year 2017 assault ship, LHA-8. Although we have shifted
    our plans to procure the replacement for the LHD-41-class
    amphibious ships beyond the FYDP, we are pressing on with the
    LSDX analysis of alternatives (AOA) this year in advance of
    preliminary design.
        We're continuing to increase our logistics lift capability
    with the 10th JHSV and the first of three MLPs currently under
    contract. As well, to meet CENTCOM's requirement for an afloat
    forward staging base, the Navy has requested funding to modify
    the third MLP and advance procurement toward a fourth fiscal
    year 2014 MLP for this mission. This highly versatile four-ship
    MLP-class will then support the two maritime prepositioning
    squadrons as well as the Afloat Forward Staging Base (AFSB)
    mission.
        In view of fiscal constraints, we are shifting procurement
    for the lead ship of the Ohio replacement program to 2021. This
    2-year shift defers $8.5 billion of cost beyond this decade,
    while providing opportunity to reduce developmental risk by
    increasing the new ballistic missile submarine's level of
    design completion and maturity. Equally important, we'll need
    to employ this time to further our efforts to drive down costs
    in every stage of development, engineering, construction,
    operations, and support on this program.
        However, the delay will result in a temporary reduction to
    10 available SSBNs in the 2030s. With no major SSBN overhauls
    planned during this period, the risk associated with meeting
    at-sea present requirements is assessed to be moderate, but
    manageable.
        The strength of our shipbuilding plan is closely coupled
    with the strength of our shipbuilding industrial base. Over the
    past several years, the Navy has placed a priority in
    increasing shipbuilding rates and providing stability for the
    shipbuilding industrial base, which 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.
        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
    continue to be closely weighed.
        One of the greatest challenges to our future shipbuilding
    program and therefore elements of our industrial base is the
    rapidly increasing cost of our ship programs. To this end, in
    addition to the emphasis on stability, 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 costs
    in production, imposing strict criteria, limiting disruptive
    change 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 aligns with
    the priorities outlined in the new defense strategy. In view of
    increasing pressure on our top line, it's equally paramount
    that we, Navy and industry, continue to improve the
    affordability within our programs in order to build the Navy
    needed by the future force.
        Mr. Chairman, thank you for the opportunity to appear
    before you today and we look forward to answering your
    questions.
        [The joint prepared statement of Mr. Stackley, Vice Admiral
    McCoy, Vice Admiral Blake, Vice Admiral Burke, and Lieutenant
    General Mills follows:]
    Joint Prepared Statement by Hon. Sean J. Stackley; VADM Kevin M. McCoy,
    USN; VADM John Terence Blake, USN; VADM William R. Burke, USN; and Lt.
                          Gen. Richard P. Mills, USMC
        Mr. Chairman, Senator Wicker, and distinguished members of the
    subcommittee, thank you for the opportunity to appear before you today
    to address Department of the Navy (DoN) shipbuilding. The Department is
    committed to build the fleet that best supports the Defense Strategic
    Guidance that emerged from collaborative efforts of the Services,
    combatant commanders, Chairman of the Joint Chiefs of Staff, the
    Secretary of Defense and the President. The fiscal year 2013
    President's budget request for shipbuilding provides for platforms that
    will evolve and adapt, allowing our warfighters to fight and win the
    Nation's wars, remain forward and be ready. While the Budget Control
    Act of 2011 placed new constraints on the DoN budget, which required
    hard choices and prioritization to address, our shipbuilding plan
    attempts to balance capacity, capability and the industrial base.
        Today's Navy is a Battle Force of 282 ships. As described in the
    Long-Range Plan for Construction of Naval Vessels for fiscal year 2013,
    which outlines the DoN's 5-year shipbuilding plan (included in the
    fiscal year 2013 President's budget request) and provides a projection
    for new ship construction and planned ship retirements over the
    following 25-year period, the Navy is building for a 21st century
    battle force of about 300 warships.
        The last year has proven eventful for Navy and Marine Corps
    operations across the entire spectrum of the Maritime Strategy from
    building maritime partnerships to executing our core capabilities of
    forward presence, deterrence, power projection, sea control, maritime
    security, and humanitarian assistance and disaster response.
        As 2011 began, the Enterprise Strike Group sailed east from
    Norfolk, headed out on a penultimate deployment for the carrier. The
    Vinson Strike Group was already operating in 7th Fleet and sailing
    toward the Arabian Sea where it would join the Kearsarge Amphibious
    Ready Group supporting marines of I Marine Expeditionary Force in
    theater. Kearsarge, in its fifth month of deployment, had left Norfolk
    in the summer of 2010 with the 26th Marine Expeditionary Unit (MEU)
    embarked, on a mission to provide disaster relief to the flood stricken
    people of Pakistan. With relief efforts complete, the 26th MEU moved on
    to Operation Enduring Freedom in Afghanistan.
        Shortly after Enterprise deployed, Reagan, Chancellorsville, and
    Preble would get underway from San Diego to conduct multinational
    training in the Western Pacific before relieving the watch in the
    Indian Ocean.
        Then, a month later, a fuse was lit in the Middle East--unleashing
    instability, causing governments to topple, jeopardizing American
    citizens and interests in this strategic region. As the Arab Spring
    emerged, Kearsarge and 26th MEU would sail to the Mediterranean and
    Enterprise would swing west. Amphibious ships Boxer, Green Bay, and
    Comstock and the 13th MEU would get underway from San Diego.
        Then in March of last year, half the world away, unimaginable
    devastation swept away whole villages and towns along the coast of
    Japan, claiming an untold number of lives while leaving the smoldering
    threat of greater destruction and loss. Before the world fully grasped
    the situation, marines, stationed in Okinawa, would airlift to the
    region for disaster response. The Essex Amphibious Group, forward
    deployed to Japan, would get underway and the Reagan Strike Group, now
    in the Western Pacific, would sail north, joining Essex, to provide
    critical supplies, medical services and rescue efforts. Operation
    Tomodachi would eventually employ 22 ships, 140 aircraft and 15,000
    sailors and marines to deliver more than 260 tons of relief supplies to
    earthquake and tsunami survivors.
        Meanwhile, as Muammar Qaddafi launched his army in an assault
    against his own citizens, guided-missile destroyers Stout and Barry and
    attack submarines Providence and Scranton and the guided missile
    submarine Florida, as well as British ships and submarines, launched
    their cruise missiles against Libyan air defense, surface-to-air
    missile sites and communication nodes, demonstrating our extraordinary
    power projection capability. Over the course of the NATO operation,
    Florida would launch more than 90 Tomahawks of the more than 200 total.
        Aircraft of the Enterprise and 26th MEU operating from Kearsarge,
    joined by the first deployed EA-18G Growler squadron, would leave
    Afghanistan and redeploy to the Mediterranean to join coalition forces
    in establishing a no-fly zone to halt the Libyan army and the bloodshed
    it threatened.
        That same week, Bataan, Mesa Verde, Whidbey Island, and the 22nd
    MEU would surge from Norfolk to strengthen the coalition Operation
    ``Odyssey Dawn.''
        Through 2011, carrier air wings embarked aboard Enterprise, Abraham
    Lincoln, Carl Vinson, John C. Stennis, Ronald Reagan, and George H.W.
    Bush, on her first-ever combat deployment, would fly nearly 15,500
    sorties totaling more than 49,000 flight hours in support of coalition
    forces on the ground in Iraq and Afghanistan and Operation New Dawn.
        What is most remarkable about this story of the first 3 months of
    2011 is that it is replayed month after month in Navy and Marine Corps
    operations. On any given day in any given year, nearly half of our
    battle force ships are underway, supporting missions around the globe--
    conducting anti-piracy patrols, global partnership stations, under-ice
    operations, supporting operations ashore, strategic deterrence, missile
    defense missions, amphibious operations or humanitarian assistance
    missions, such as the hospital ship Comfort in Operation Continuing
    Promise. Today, Enterprise, commissioned in 1961, is once again on
    deployment, this time, for the last time.
        No other military and no other nation on earth today, has the
    reach, the presence, the capability, the training and the resolve to
    maintain this pace or breadth of operations. Global reach, persistent
    presence, and operational flexibility, the inherent characteristics of
    U.S. seapower articulated in the Cooperative Strategy for 21st Century
    Seapower, are demonstrated in all we have done in 2011 and continue to
    do in 2012. These tenets, along with the Defense Strategic Guidance,
    guide the priorities and direction of the Department of the Navy's
    fiscal year 2013 President's budget request.
                      the fiscal year 2013 budget request
        The fiscal year 2013 President's budget request funds 10 ships: 1
    Gerald R. Ford-class aircraft carrier, 2 Virginia-class fast attack
    submarines, 2 DDG-51 Arleigh Burke-class destroyers, 4 Littoral Combat
    Ships (LCS), and 1 Navy Joint High Speed Vessel (JHSV). In addition,
    the Department is requesting Multiyear Procurement (MYP) authority for
    the Virginia-class (fiscal year 2014 through fiscal year 2018 ships)
    and the DDG-51 Arleigh Burke-class (fiscal year 2013 through fiscal
    year 2017 ships).
                               aircraft carriers
        Our aircraft carriers are best known for their unmistakable forward
    presence, ability to deter potential adversaries and assure our allies,
    and capacity to project power at sea and ashore; however, they are
    equally capable of providing our other core capabilities of sea
    control, maritime security, and humanitarian assistance and disaster
    relief. Our carriers provide our Nation the ability to rapidly and
    decisively respond globally to crises with a small footprint that does
    not impose unnecessary political or logistic burdens upon our allies or
    potential partners.
        The Gerald R. Ford is the lead ship of our first new class of
    aircraft carrier in nearly 40 years. Gerald R. Ford-class carriers will
    replace aging Nimitz-class carriers and are expected to be the premier
    forward deployed asset for crisis response and early decisive striking
    power in a major combat operation through the remainder of this
    century. While the Gerald R. Ford aircraft carrier design uses the
    Nimitz-class hull form, it is essentially a brand new ship with new
    technologies and interior arrangements that improve warfighting
    capability, operational availability, and quality of life, while
    reducing crew size (approximately 1,200 sailors including air wing
    reductions) and total ownership costs (TOC). TOC reduction by hull is
    expected to result in $5 billion over the 50 year service life of each
    ship of the Gerald R. Ford-class.
        The fiscal year 2013 President's budget requests the first year of
    full funding for the second ship of the Gerald R. Ford-class, CVN-79,
    effectively maintaining aircraft carrier construction starts on 5 year
    intervals. This is an important benchmark for sustaining the large
    vendor base that supports this unique ship class. The build duration
    for CVN-79, though, has been extended by 2 years. This adjusted profile
    provides for delivery no later than 2022, which aligns with the end of
    service life for Nimitz, the ship CVN-79 will functionally replace to
    maintain an 11 carrier force structure. This extended build period will
    also allow for production efficiencies which are discussed in more
    detail below.
        Inarguably, this new class of aircraft carrier brings forward
    tremendous capability and life cycle cost advantages compared to the
    Nimitz-class she will replace. However, the design, development and
    construction efforts required to overcome the technical challenges
    inherent to these advanced capabilities have significantly impacted
    cost performance on the lead ship. In the course of this past year, the
    Navy conducted a detailed review of the Gerald R. Ford-class build plan
    to improve end-to-end aircraft carrier design, material procurement,
    production planning, build and test. This effort, taken in conjunction
    with a series of corrective actions with the shipbuilder on the lead
    ship, will not erase cost growth on Gerald R. Ford, but should improve
    performance on the lead ship while fully benefitting CVN-79 and
    following ships of the class. The added build duration planned for CVN-
    79 allows the Navy and shipbuilder to develop and implement a more
    affordable, optimal build strategy that incorporates the findings of
    the end-to-end review as well as lessons learned from design and
    construction of the lead ship. This year's budget request includes
    prior year completion funding to address increases incurred to date in
    Gerald R. Ford government furnished equipment, non-recurring design,
    and ship construction.
        Among the new technologies being integrated is the Electromagnetic
    Aircraft Launch System (EMALS) which will support Ford's increased
    sortie generation rates. EMALS testing continues and has been
    successful. To date, EMALS has launched more than 1,500 dead loads and
    134 aircraft launches from the full scale EMALS production
    representative unit using 5 different types of test aircraft, including
    an F-35C Joint Strike Fighter. EMALS' production schedule supports the
    planned delivery of Gerald R. Ford in September 2015.
        Advanced Arresting Gear (AAG) is also a new technology planned for
    Gerald R. Ford. This technology will provide the capability to recover
    all existing and future carrier-based fixed wing air vehicles,
    including those too heavy or too light for current systems. Testing of
    a full-scale, land-based installation of AAG is ongoing. It, too,
    supports the planned delivery of Gerald R. Ford.
        Dual Band Radar (DBR) will also be introduced on Gerald R. Ford.
    DBR integrates an X-band Multi-Function Radar with an S-band Volume
    Search Radar to provide a single interface to the ship's combat system.
    Its active planar arrays enable Gerald R. Ford to be designed with an
    island smaller than those on current carriers, which contributes to the
    ship's increased sortie generation rate. With the truncation of the
    DDG-1000 program at three ships and subsequent removal of the S-band
    radar from the DDG-1000 baseline, Gerald R. Ford will be the lead ship
    for DBR developmental testing. DBR production schedule supports the
    planned delivery of Gerald R. Ford.
        Gerald R. Ford's newly designed reactor delivers more core energy
    and nearly three times the electrical output of the current carrier's
    plant, yet will need only half as many sailors to operate and will be
    easier to maintain. Gerald R. Ford also incorporates several
    survivability enhancements to counter current and emerging threats.
        With more than half of the service life of the Nimitz-class still
    remaining, the Refueling Complex Overhaul (RCOH) continues as a key
    enabler for the enduring presence of the aircraft carrier fleet. This
    year's budget request includes prior year completion funding for the
    RCOH of the fourth ship of the Nimitz-class, Theodore Roosevelt, whose
    availability was extended due to unexpected growth work discovered
    during execution. In addition, the budget request includes incremental
    funding to initiate the RCOH of Abraham Lincoln and advance procurement
    funding for the RCOH of George Washington.
                              the submarine fleet
        Submarines have a unique capability for stealth and persistent
    operation in an access-denied environment and to act as a force
    multiplier by providing high-quality Intelligence, Surveillance, and
    Reconnaissance (ISR) as well as indication and warning of potential
    hostile action. In addition, attack submarines are effective in anti-
    surface ship warfare and anti-submarine warfare in almost every
    environment, thus eliminating any safe-haven that an adversary might
    pursue with access-denial systems. As such, they represent a
    significant conventional deterrent. While our attack submarine fleet
    provides considerable strike capacity already, our guided missile
    submarines provide significantly more strike capacity and a robust
    capability to covertly deploy special operations force (SOF) personnel.
    Today the Navy has four guided missile submarines (SSGN). To mitigate
    the loss of strike capacity when SSGNs retire in the next decade, the
    Navy has requested Research and Development funding in fiscal year 2013
    to begin design of a modification to the Virginia-class SSN, the
    Virginia Payload Module. This added capability would contain four SSGN-
    like tubes for strike and future payloads. Pending the future fiscal
    environment, modified Virginia-class SSNs could be procured starting no
    earlier than fiscal year 2019. This would permit Navy to sustain
    undersea strike capacity without requiring the Navy to construct a
    purpose-built ship to replace the SSGN--an option that would be cost
    prohibitive.
        The fiscal year 2013 President's budget requests funding for two
    Virginia-class submarines in fiscal year 2013 as well as advance
    procurement and economic order quantity funding for the fiscal year
    2014 through 2018 boats. The fiscal year 2013 boats are the last two
    submarines under the Block III (fiscal years 2009 through 2013
    Multiyear Procurement (MYP) contract). Now in its 15th year of
    construction, the Virginia program reliably delivers this critical
    undersea capability affordably and on time, in large part due to the
    cost savings and stability provided by the program's multiyear
    procurement strategy. The Department expects continuation of this
    strategy to yield similar benefits, and is including a legislative
    proposal for the authorization of a nine-ship MYP for procurement of
    the next block of Virginia-class submarines (fiscal years 2014 through
    2018) with the fiscal year 2013 President's budget request. The Navy
    estimates 14.4 percent savings on this MYP versus single ship
    procurement, as result of economic order quantity opportunities,
    improved workforce planning and workload sequencing, optimized
    construction scheduling, increased opportunity for facilities
    investment, and reduced support and engineering workload; all made
    possible by leveraging the stability offered by the MYP.
        The Navy is mitigating the impending attack submarine force
    structure gap in the 2020s through three parallel efforts: reducing the
    construction span of Virginia-class submarines, extending the service
    lives of selected attack submarines, and extending the length of
    selected attack submarine deployments.
        Ballistic missile submarines are the most survivable leg of the
    Nation's strategic arsenal and provide the Nation's only day-to-day
    assured nuclear response capability. They provide survivable nuclear
    strike capabilities to assure allies, deter potential adversaries, and,
    if needed, respond in kind. The Ohio Replacement Program inventory is
    assumed to be 12 ships. The Nuclear Posture Review (NPR) completed in
    April 2010 determined that the United States would retain a nuclear
    triad under New START and that, for the near-term, the Navy would
    retain all 14 SSBNs in the current inventory. The NPR stated that,
    depending upon future force structure assessments and how SSBNs age in
    the coming years; the United States will consider reducing from 14 to
    12 Ohio-class submarines in the second half of this decade. To maintain
    an at-sea presence for the long term, the United States must continue
    development of the follow-on to the Ohio-class submarine. Due to budget
    constraints, the Department has shifted procurement of the lead Ohio
    Replacement submarine by 2 years (from fiscal year 2019 to fiscal year
    2021). The delay results in a temporary reduction to 10 available SSBNs
    in the 2030s during the transition period between Ohio and Ohio
    Replacement SSBNs. Because there are no major SSBN overhauls planned
    during this period, an available force of 10 ships will be able to meet
    the current U.S. Strategic Command's at-sea presence requirements,
    albeit with increased operational risk that stems from the reduced
    force levels. The fiscal year 2013 budget requests funding to continue
    development of the Ohio Replacement Program and ensures Common Missile
    Compartment efforts are on track to support the United Kingdom's
    Successor Program's schedule. All aspects of the Ohio Replacement
    Program will continue to be thoroughly reviewed and aggressively
    challenged to drive down engineering, construction, and operations and
    support costs.
        As threats evolve, it is vital to continue to modernize existing
    submarines with updated capabilities. The submarine modernization
    program includes advances in weapons, integrated combat control
    systems, sensors, open architecture, and necessary hull, mechanical and
    electrical upgrades. These upgrades are necessary to retain credible
    capabilities for the future conflicts and current peacetime ISR and
    Indication and Warning missions and to continue them on the path of
    reaching their full service life. Maintaining the stability of the
    modernization program is critical to our future Navy capability and
    capacity.
        Modernization is also critical to sustaining the current combat
    capabilities of the submarine fleet. Through extensive use of
    commercial off-the-shelf (COTS) equipment, modern submarine Control,
    Communications, Computers, and Intelligence (C4I) systems are
    maintained with a minimal industrial logistics tail. Regular
    replacement of electronics through the Tech Insertion process prevents
    part obsolescence and related impacts to operational availability. This
    successful COTS model has sustained the submarine fleet for the past
    decade at a fraction of legacy combat system costs. Maintaining the
    stability of the modernization program is critical to our future Navy
    capability and capacity.
                            large surface combatants
        Guided missile cruisers (CGs) and guided missile destroyers (DDGs)
    comprise our large surface combatant fleet. When viewed as a whole,
    these ships fulfill broad mission requirements both independently and
    in conjunction with a strike group. The demands for increased
    capability and capacity in Ballistic Missile Defense (BMD), Integrated
    Air and Missile Defense (IAMD) and open ocean anti-submarine warfare
    (ASW) have resulted in a shift of focus on the type and quantity of
    these ships. The Navy's ongoing analysis is influenced by the emerging
    shift of focus for large surface combatants; the increased demand for
    capability and capacity in integrated air and missile defense; and open
    ocean anti-submarine warfare resulting from changing global threats.
    BMD forward presence is assumed to be ``in stride'' meaning that a BMD
    capable ship can transition rapidly between BMD and other operations
    historically assigned to these classes of ships.
        The DDG-1000 Zumwalt guided missile destroyer will be an optimally
    crewed, multi-mission surface combatant designed to provide long-range,
    precision naval surface fire support to marines conducting littoral
    maneuver and subsequent operations ashore. The DDG-1000 features two
    155mm Advanced Gun Systems capable of engaging targets with the Long-
    Range Land Attack Projectile at a range of over 63 nautical miles. In
    addition to providing offensive, distributed and precision fires in
    support of marines, it will provide valuable lessons in advanced
    technology such as signature reduction, active and passive self-defense
    systems, and enhanced survivability features. The first DDG-1000 is
    approximately 65 percent complete and is scheduled to deliver in fiscal
    year 2014 with initial operating capability planned in 2016.
        The fiscal year 2013 President's budget requests funding for two
    Flight IIA DDG-51 Arleigh Burke-class destroyers as well as advance
    procurement and economic order quantity funds for the fiscal year 2013
    through fiscal year 2017 Multiyear Procurement (MYP). These two ships
    are planned as part of the fiscal years 2013 through 2017 MYP. The
    Flight IIA ships will incorporate Integrated Air and Missile Defense
    (IAMD), providing much-needed BMD capacity to the Fleet. In evaluating
    the merits of a MYP contract for fiscal years 2013 through 2017 DDG-
    51s, the Navy projected $1.5 billion in savings for nine ships across
    that time period and has leveraged these savings in the procurement of
    the nine ships.
        The Navy is proceeding with the Air and Missile Defense Radar
    (AMDR) program to meet the growing ballistic missile threat by greatly
    improving the sensitivity and longer range detection and engagement of
    increasingly complex threats. This scalable radar is planned for
    installation on the DDG-51 Flight III ships to support joint battle
    space threat awareness and defense, including BMD, area air defense,
    and ship self defense. The AMDR radar suite will be capable of
    providing simultaneous surveillance and engagement support for long
    range BMD and area air defense. Three Fixed Price Incentive Technology
    Development phase contracts were awarded in the fall of 2010. AMDR
    technology development is on track and successfully completed the three
    System Functional Reviews in December 2011. Prototype development to
    demonstrate critical technologies is well underway. The program remains
    on schedule for the Preliminary Design Reviews in the fall of 2012 and
    the Navy plans to award an Engineering and Manufacturing Development
    contract in early fiscal year 2013. Pending the successful
    demonstration of technical maturity and final determination that
    production risks have been suitably mitigated, the Navy intends to
    conduct a separate fixed price competition for installation of the AMDR
    Engineering Change Proposal into DDG-51 ships, commencing in fiscal
    year 2016.
        To counter emerging threats, the Navy continues to make significant
    investments in cruiser and destroyer modernization to sustain combat
    effectiveness and to achieve the 35 year service life of the Aegis
    fleet. Destroyer and cruiser modernization programs include Hull,
    Mechanical, and Electrical (HM&E) upgrades, as well as advances in
    warfighting capability and open architecture to reduce total ownership
    costs and expand mission capability for current and future combat
    capabilities. The fiscal year 2013 President's budget request includes
    funding for the modernization of three cruisers (one Combat Systems and
    two HM&E) and five destroyers (two Combat System and three HM&E).
    Beyond Aegis modernization, the Navy is continuing development of
    Hybrid Electric Drive (HED) at the Land Based Engineering Site to
    mature this promising technology. An initial shipboard demonstration of
    HED is targeted for installation in a DDG-51 ship in early calendar
    year 2013.
        The Aegis Fleet serves as the Surface Navy's sea-based BMD force.
    The Advanced Capability Build 12/Technology Insertion 12 (ACB 12/TI
    12), also known as Baseline 9, constitutes the most significant combat
    system upgrade of the Aegis Fleet. In service DDGs will undergo a
    comprehensive modernization of their combat system, and new
    construction DDGs starting with DDG-113 will be outfitted with ACB 12/
    TI 12. ACB 12/TI 12 brings the Integrated Air and Ballistic Missile
    Defense (IAMD) capability to Surface Combatants. IAMD allows Aegis
    Destroyers to perform the BMD mission without any degradation to their
    ability to conduct Anti Air Warfare (AAW) simultaneously through the
    introduction of the Multi-Mission Signal Processor (MMSP). ACB 12/TI 12
    software development is 97 percent complete and on schedule. John Paul
    Jones's ACB 12/TI 12 modernization will begin in the fall of 2012. John
    Paul Jones will be the first IAMD capable destroyer, paving the way for
    backfit into existing destroyers as well as forward fit on new
    construction ships in the restart of the DDG-51-class. ACB 12/TI 12
    also provides a platform for rapid introduction of additional BMD
    capabilities.
        As in the past, cruisers and destroyers will continue to deploy
    with strike groups to fulfill their traditional roles. Many will be
    required to assume additional roles within the complex BMD arena. Ships
    that provide BMD will sometimes be stationed in remote locations, away
    from strike groups, in a role as theater BMD assets. The net result of
    these changes to meet demands for forward presence, strike group
    operations and BMD places additional pressure on the existing inventory
    of surface combatants. In addition, the constraints of the current
    budget resulted in the Navy having to retire seven CGs (four in fiscal
    year 2013 and three in fiscal year 2014) before the end of their
    service lives. While the specific CGs chosen for decommissioning were
    selected with a view toward minimizing the impact their loss will have
    on BMD capability and capacity, the loss of these ships will
    necessitate other ships fulfilling their roles in non-BMD situations--
    further exacerbating the demands for large surface combatant structure.
    To support the President's Phased Adaptive Approach for defense of
    Europe, Navy plans on placing four BMD capable DDG-51 platforms in a
    Forward Deployed Naval Forces status in Rota, Spain, significantly
    reducing the number of ships required to source this mission. Further,
    the Navy will continue to explore alternatives that will redistribute
    assets currently being employed for missions of lesser priority to meet
    the missions contained in the updated defense strategy.
                            small surface combatants
        The Navy remains committed to an inventory of 55 Littoral Combat
    Ships (LCS). These ships expand the battle space by complementing our
    inherent blue water capability and filling warfighting gaps in the
    littorals and strategic choke points around the world. LCS design
    characteristics (speed, agility, shallow draft, payload capacity,
    reconfigurable mission spaces, air/water craft capabilities) combined
    with its core C4I, sensors, and weapons systems, make it an ideal
    platform for engaging in Maritime Security Operations.
        The Navy's fiscal year 2013 President's budget funds four LCSs in
    fiscal year 2013, with a total of 16 to be procured across the Future
    Years Defense Program (FYDP). Affordability remains the key factor in
    acquiring the needed future capacity of these highly flexible and
    capable ships. The Navy remains on course to deliver these ships in the
    quantities needed through the execution of the two competitive block
    buy contracts (for ten ships of each version) awarded in fiscal year
    2010. Each ship brings unique strengths and capabilities to the mission
    and each has been designed in accordance with overarching objectives
    for reducing total ownership cost.
        LCS capabilities address specific and validated capability gaps in
    Surface Warfare, Mine Countermeasures, and Anti-Submarine Warfare. The
    concept of operations and design specifications for LCS were developed
    to meet these gaps with focused mission packages that deploy manned and
    unmanned vehicles to execute a variety of missions. The first two Mine
    Countermeasure (MCM) Mission Modules (MM), first two Surface Warfare
    (SUW) MMs, and the first Anti-Submarine (ASW) MM have been delivered.
    The fiscal year 2013 President's budget requests approximately $300
    million in Research and Development funding for continued development
    of mission modules, and Procurement funding to buy common mission
    module equipment and three mission packages (one MCM and two SUW).
                                amphibious ships
        Amphibious ships operate forward to support allies, respond to
    crises, deter potential adversaries, and provide the Nation's best
    means of projecting sustainable power ashore; they provide the best
    means for providing humanitarian assistance and disaster relief.
    Amphibious forces comprised of sailors, marines, and ships provide the
    ability to rapidly and decisively respond to global crises without a
    permanent footprint ashore that would place unnecessary political or
    logistic burdens upon our allies or potential partners. There are two
    main drivers of the amphibious ship requirement: maintaining the
    persistent forward presence, which enables both engagement and crisis
    response, and delivering the assault echelons of up to two Marine
    Expeditionary Brigades (MEB) for joint entry operations.
        The Chief of Naval Operations and Commandant of the Marine Corps
    have determined that the optimal force structure for amphibious lift
    requirements is 38 amphibious ships to support the operations of 2.0
    MEBs. Balancing the total naval force structure requirements against
    fiscal projections imposes risk on meeting this requirement. Based on
    the footprint of a 2.0 MEB force, the minimum number of operationally
    available ships necessary to meet the assault echelon requirement is
    30: a force made up of ten Amphibious Assault Ships (LHD/LHA), 10
    Amphibious Transport Docks (LPD) and 10 Dock Landing Ships (LSD). The
    DoN can meet this requirement as long as all 10 of each type is
    operationally available when needed. Historically, the Navy has carried
    more than this minimum number of ships to mitigate the impact that
    long-duration maintenance has on their availability when they are
    tasked to respond during conflict. Planning factors call for a force of
    33 ships to achieve this availability. Today, the Amphibious Force
    Structure stands at 28 ships, which includes 9 LHD/LHAs, 7 LPDs, and 12
    LSDs.
        The Navy is commencing recapitalization of the large deck
    amphibious assault ships with the construction of America (LHA-6).
    America is now more than 60 percent complete and is scheduled for
    delivery in fiscal year 2014. The fiscal year 2013 President's budget
    request includes a funding request to complete construction of America,
    which will cover government liabilities up to the contract ceiling and
    impacts from the Pension Protection Act of 2006. Beginning with LHA 8,
    which is planned for procurement in fiscal year 2017, the Navy will
    reintegrate the well deck into the large deck amphibious assault ships
    to provide necessary surface lift capacity. Funding to design this
    reintegration of the well deck is included in the fiscal year 2013
    President's budget request.
        The San Antonio-class LPD (LPD-17) serves as the replacement for
    four classes of older ships: the LKA, LST, LSD-36, and the LPD-4. Six
    of the 11 authorized and approved ships of this class have been
    delivered to the Navy. Lessons learned from the effort to resolve
    material reliability concerns identified in the early ships of the
    class are being applied to ships currently under construction. Quality
    continues to improve with each ship delivered as the Navy continues to
    work closely with the shipbuilder to address cost, schedule, and
    performance issues. The utility of this class was best demonstrated by
    USS Mesa Verde (LPD-19) as she recently returned after 19 months of
    deployed operation over a 25 month period.
        LSD(X) will replace the aging LSD-41/49 Whidbey Island/Harpers
    Ferry-class vessels and will perform an array of amphibious missions.
    An Analysis of Alternatives (AoA) will be conducted in fiscal year
    2012. The fiscal year 2013 President's budget requests funds for
    Research and Development required for technology development and
    initial design efforts resulting from the AoA. Affordability will be a
    key factor in acquiring the needed future capacity and operational
    capabilities of this highly flexible multifaceted ship.
        A fully funded LSD mid-life program, to include repairs, is
    essential for ensuring the LSD-41/49 ships are able to meet their
    readiness for tasking requirements and meet their expected service
    life. Funding for LSD mid-life is included in the fiscal year 2013
    President's budget request.
                                auxiliary ships
        Combat Logistics Support ships fulfill the vital role of providing
    underway replenishment of fuel, food, repair parts, ammunition and
    equipment to forward deployed ships and their embarked aircraft, to
    enable them to operate for extended periods of time at sea. Combat
    Logistic Support Ships consist of T-AOE fast support ships, T-AKE
    auxiliary dry cargo ships, and T-AO fleet oilers. The T-AO and T-AKE
    ships tend to serve as shuttle ships between resupply ports and their
    customer ships, while the T-AOE tends to serve as a station ship,
    accompanying and staying on-station with a Carrier Strike Group (CSG)
    to provide fuel as required to customer ships.
        Support Vessels such as the Mobile Landing Platform (MLP) and the
    Joint High Speed Vessel (JHSV) provide additional flexibility to the
    combatant commander within the operating area. The MLP enables at sea
    transfer of vehicles from cargo ships and facilitates the delivery of
    these vehicles, equipment, personnel and supplies between the sea and
    restricted access locations ashore. The JHSV provides a high-speed,
    shallow draft alternative to moving personnel and material within and
    between the operating areas, and to support security cooperation and
    engagement missions. Other support vessels, such as salvage ships,
    fleet tug boats, and submarine tenders serve in various supporting
    roles, but are not counted as part of the battle force.
        The fiscal year 2013 President's budget requests Research and
    Development funds to mature the Navy's concept for the replacement T-AO
    fleet oiler in fiscal year 2016. The Analysis of Alternatives (AoA) is
    nearing completion. The new oilers will have a double-hull design to
    ensure compliance with the environmental protection requirement for
    this type of ship.
        In support of the enhanced Maritime Prepositioning Ship Squadron
    (MPSRON) concept of operations, two T-AKE auxiliary dry cargo ships are
    being allocated to the Maritime Prepositioning Squadrons (MPS) to
    provide sea-based logistic support to Marine Corps units afloat and
    ashore. Further, the Navy recognizes the need to provide for at-sea
    transfer of vehicles from a cargo ship and to provide an interface with
    surface connectors. The Mobile Landing Platforms (MLP) (support
    vessels) will provide an enhanced throughput option for the MPS and
    increase capacity to support combatant commander requirements. It will
    facilitate delivery of vehicles, equipment, personnel, and supplies
    between the sea base and restricted access locations ashore. The Navy
    has awarded a contract for three MLPs. As part of the fiscal year 2013
    budget deliberations, the Department will retain two MPSRONs and return
    the third to U.S. Transportation Command for common sealift support.
    The first two MLPs will be built to support the two MPSRONs.
        During the fiscal year 2013 deliberations, U.S. Central Command
    submitted a Request for Forces for Afloat Forward Staging Base (AFSB)
    capability with capacity for Mine Warfare. In the past, the Navy has
    provided fleet assets to address the AFSB demand. In order to avoid
    diverting a fleet asset to fulfill this request, the Department has
    elected to convert Ponce to provide an interim AFSB capability until
    fiscal year 2016. To meet the enduring AFSB mission, Navy plans to
    modify the MLP 3 (fiscal year 2012 ship) to become a dedicated AFSB
    asset and will request an MLP 4 in fiscal year 2014 to provide an
    additional MLP variant for the AFSB mission. This will result in a
    class of four MLPs--two dedicated to the two MPSRONs and two dedicated
    to the AFSB mission. The two dedicated MLP/AFSBs are required to
    provide continuous AFSB support anywhere in the world. Advance
    Procurement funds for the fiscal year 2014 ship as well as Research and
    Development funds for AFSB are included in the fiscal year 2013 budget
    request. MLP 3 is planned for delivery in order to replace Ponce by
    fiscal year 2016.
        The fiscal year 2013 President's budget request includes funding
    for construction of the tenth and final JHSV (support vessel). A
    Memorandum of Agreement with the Army transferred programmatic
    oversight and mission responsibility for the entire JHSV program,
    including operations and maintenance, to the Navy. All delivered JHSV's
    will be operated by the Military Sealift Command and manned by civilian
    or contract mariners.
                         decommissionings/inactivations
        As a result of fiscal constraints, the Navy chose to prioritize
    readiness over capacity. The fiscal year 2013 decision to decommission
    seven Ticonderoga-class guided missile cruisers (CG), four in fiscal
    year 2013 and three in fiscal year 2014, and two LSDs exemplify our
    resolve to provide a more ready and sustainable Fleet within our budget
    constraints. The resources made available by these retirements will
    allow increased funding for training and maintenance. Both the cruisers
    and the LSDs were in need of significant maintenance investment and six
    of the seven cruisers required further investment to install BMD
    capability. Inactivating the CGs resulted in approximately $4.1 billion
    in savings across the FYDP, including manpower and maintenance savings
    and costs avoided by not executing combat system and hull, mechanical,
    and electrical upgrades. These savings were shifted to other portions
    of the Fleet. Inactivation of the two LSDs in fiscal year 2014 saved
    approximately $293 million across the FYDP. These ships will be placed
    in Mobility ``B'' category, allowing for re-activation should
    conditions warrant. The reduction in cruiser and amphibious capacity
    and shift to a more sustainable deployment model will result in some
    reductions to the amount of presence the Navy will provide overseas in
    some select areas, or a change in the nature of that presence to favor
    innovative and lower-cost approaches.
               affordability and the shipbuilding industrial base
        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 past Virginia-class and DDG-51-class MYPs, the DDG-1000 Swap/
    DDG-51 Restart Agreement, the LCS dual block buy, the three ship MLP
    procurement, the continuation of CVN-78-class procurements on constant
    5 year centers, and the heel-to-toe CVN RCOH induction-to-delivery
    cycle have provided critical stable workload for the affected shipyards
    and their respective vendor base. The fiscal year 2013 President's
    budget request for the next Virginia-class and DDG-51-class MYPs will
    help to further stabilize the surface combatant and submarine
    industrial base through this decade. Likewise, the funding requested to
    procure a fourth MLP, and to configure MLP-3 and MLP-4 as AFSBs will
    also provide for added workload within the auxiliary shipbuilding
    sector.
        However, the shipbuilding plan submitted with the fiscal year 2013
    President's budget request also reflects difficult choices guided by
    the strategic priorities and fiscal constraints brought with two
    governing works; the 2011 Budget Control Act and the recently released
    `Sustaining U.S. Global Leadership: Priorities for 21st Century
    Defense.' The decisions to truncate the JHSV program, to delay starting
    the TAO(X), LSD(X), and SSBN(X) programs, and to defer a destroyer, a
    submarine, LHA-8, and two LCS ships to later years in the FYDP (or
    beyond) are decisions which place added stress on the industrial base
    and on the affordability of the respective programs; yet best match our
    resources to our requirements.
        Any strategy which seeks to improve upon these projections by
    relying upon increasing investment above the current plan for
    shipbuilding is, at best, high risk. In fact, the current shipbuilding
    program calls for significant added investment through the FYDP and
    beyond (particularly during the period of SSBN(X) procurement).
    Accordingly, the Navy must continue to explore and implement
    alternatives to improve upon these projections for shipbuilding and the
    industrial base through other means.
        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 systems
    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
    change to contracts; investing in industry-wide manufacturing process
    improvements through the National Shipbuilding Research Program; and
    incentivizing capital investment in facilities where warranted. There
    are additional mechanisms to improve affordability, which have required
    or will require congressional support:

             Strong industry performance in restarting DDG-51
            production has yielded substantial savings for the fiscal year
            2011/2012 ships placed under contract. The Navy is targeting
            additional savings through the competitive fiscal year 2013 to
            fiscal year 2017 MYP.
             Provision of a Shipbuilding Capabilities Preservation
            Agreement (SCPA), to improve a Navy shipbuilder's
            competitiveness for commercial work, is particularly effective
            for auxiliary shipbuilders that possess the skills and
            capabilities common to both Navy and commercial shipbuilding.
            Navy has signed one SCPA agreement in the recent past.

        The Navy will continue to aggressively pursue the mutual objectives
    of improving the affordability of our shipbuilding program and
    increasing the strength of our shipbuilding industrial base, and is
    committed to working closely with Congress on these efforts.
                            shipbuilder performance
        The Navy continues to work with the shipbuilders to improve
    performance on current contracts and to invest in process improvements
    to maximize affordability on current and future contracts. The majority
    of the Navy's shipbuilding contracts are now fixed price type
    contracts, where industry bears a significantly increased
    responsibility for risk. The Navy, in conjunction with the
    shipbuilders, has been and continues to identify specific areas in
    design and build specifications that have the most potential to realize
    savings across multiple platforms. The four highest priority functional
    areas being examined are hull and structure, electrical systems, piping
    systems, and paint and coatings. Some of these will yield near-term
    cost savings while others will yield even more significant cost savings
    over a longer period of time.
        The Navy's Supervisors of Shipbuilding (SUPSHIP) work closely with
    the shipbuilders to address cost, schedule, and performance issues
    while providing on-site oversight of the shipbuilder's quality
    management systems. There are numerous examples where multiple
    initiatives were implemented to address quality issues but some
    specific examples worth highlighting are associated with the
    construction and delivery of the San Antonio-class ships. Welding and
    production processes were significantly revised to improve quality and
    the workforce was retrained and recertified to ensure consistency
    throughout all of the shipbuilder's facilities. More stringent
    procedures were developed and implemented to improve the removal of
    contaminants from the ship's lube oil system. In addition, these
    procedural changes were accompanied by design improvements to the lube
    oil filters and strainers on all San Antonio-class ships. The shipyard
    also took steps to improve cleanliness in the pipe shop which will
    improve quality in the installation of pipe on the ships As a result of
    these and many other initiatives, contractor quality continues to
    improve with each ship delivered to the Navy.
        The Navy is focused on compliance with the fundamental processes of
    structural, electrical, piping, and paint and coating work. Striving to
    better understand quality trends, the Navy is engaging earlier with the
    shipbuilder on potential cost and schedule issues through the use of
    earned value management and other schedule and cost tools.
        Acquisition Workforce
        The Navy has embarked on a deliberate plan to strengthen the
    acquisition workforce over the FYDP. The Navy's position is to continue
    its current plan as stated in the Department of Navy (DoN) Acquisition
    Workforce (AWF) Strategic Plan, to rebuild the DoN civilian acquisition
    workforce. In the past 2 years, the DoN AWF has hired approximately
    4,300 full-time equivalents and has improved its education and training
    programs in shipbuilding program management and contracting.
        The Navy continues to emphasize the need for a professional cadre
    of onsite SUPSHIP personnel co-located with the Nation's shipbuilding
    industrial base in an oversight role. Over the last year, the number of
    onboard SUPSHIP staff reached 1,146. This marks a continued growth
    trend of SUPSHIP staffing from approximately 900 onboard in fiscal year
    2007 and marks another successful year of achieving hiring targets, as
    SUPSHIPs have done every year from fiscal year 2007 to fiscal year
    2011. Preserving these staffing gains made over the past 4 years is
    critically important to ensuring sufficient oversight and management of
    the Navy's shipbuilding programs.
        Summary
        The Navy continues to instill affordability, stability, and
    capacity into the shipbuilding plan and to advance capabilities to
    become a more agile, lethal and flexible force to address the
    challenges and opportunities facing the Nation. The carrier force will
    sustain a 5 year interval for construction starts to better align
    delivery of the Gerald R. Ford-class ships with the ends of service
    life for the Nimitz-class ships while ensuring the Navy maintains an
    eleven carrier fleet. The submarine force will continue to be
    preeminent in the world as the Navy continues to invest in Virginia-
    class submarines via multiyear contracts, submarine modernization, and
    prepare for replacement of the ballistic missile capability. The plan
    also continues DDG-51 construction via a multiyear contract to leverage
    a stable design and mature infrastructure to achieve affordable
    capabilities. LCS will address specific and validated capability gaps
    in Mine Countermeasures, Surface Warfare, and Anti-Submarine Warfare,
    and the selection of both LCS designs leverages the unique capability
    delivered by each platform while providing stability to the
    shipbuilding infrastructure. The Navy's amphibious force will remain
    capable with full funding of LSD mid-life upgrades, replacement of the
    LSD-41/49-class ships with LSD(X), construction of the LHA Replacement
    Class, and successful deliveries of the LPD-17-class ships. Finally,
    the Navy is investing in the auxiliary fleet with the procurement of
    the last JHSV and four MLPs, with variants supporting the MPS and the
    AFSB demands.
        The Navy and Marine Corps, on the high seas and closing foreign
    shores, stand ready to answer the call of the Nation. We thank you for
    your continued support and request your approval of the fiscal year
    2013 President's budget request for shipbuilding.

        Senator Reed. Thank you very much, Mr. Secretary, for an
    excellent statement.
        Mr. Stackley. Thank you.
        Senator Reed. Let me go back to the issues in terms of
    submarines. As you indicated, we had reached some significant
    economies, producing the ships under budget, on time and two
    per year. Now we're in a situation where we're going to skip a
    year. That will have implications on the ability to maintain
    these efficiencies in the shipyards and it also will cause some
    disruption, which usually ends up in paying more ultimately
    than paying less.
        I know you had to make some very difficult decisions, but I
    wonder if there is a way to restore a second boat to fiscal
    year 2014 or to mitigate the effects of the delay. Can you
    describe in more detail, if you feel it necessary, the reasons
    for the delay and what could be done to fix this issue, and is
    legislative authority necessary?
        Mr. Stackley. Yes, sir. Let me just punctuate your
    assessment of the value of two per year and the efforts that
    were taken to get to that rate of production and our intent and
    desire to be able to sustain it. First in terms of force
    structure requirements, our requirements for attack submarines
    is laid out fairly well in the 30-year shipbuilding report and
    states squarely that 48 attack boats is what the Nation needs
    in order to meet our requirements for the near-term and long-
    term.
        Today we have greater than 48 boats in the force. However,
    in order to sustain 48 boats, if you do the math, assuming a
    service life of about 33 years, you need to be building at a
    rate of 1 to 2 per year sustained. We've endured a long period
    of submarine construction when, in fact, we were building at
    one and in certain cases zero submarines. So while today we
    have a force greater than 48 boats, when you look ahead to the
    late 2020s and 2030s our force structure will dip down as a
    result of that past low rate of submarine construction.
        So two per year, not only is it beneficial from an
    industrial base perspective, but it's critical from a force
    structure perspective that we sustain two per year in the near-
    term as best as possible to minimize that longer-term force
    structure gap.
        Now, why are we staring at a one-boat year in 2014? This is
    simply the hard line that came with the new top line. In the
    Navy's budget submit, and frankly with the Office of the
    Secretary of Defense (OSD) throughout the budget process, I
    will state that everything that could be done within the top
    line was done to hold onto that second boat in 2014. But in the
    end we had to compromise on that second boat in order to
    balance, and in doing so we moved it from 2014 to 2018, kept it
    within the multiyear, which mitigates some of the impact. But
    it was perhaps one of the harder decisions that the Navy had to
    deal with.
        Let me address the next part of your question, which is
    what are our alternatives at this point. When we were faced
    with making that move, first as it was important to keep it in
    the multiyear because we want to at least work with industry to
    level load to the extent possible that dip in 2014, but we also
    looked at the funding. In order to fully fund a second boat in
    2014, it would require, first, advanced procurement in 2013,
    plus the balance of full funding required in 2014.
        That total is north of $700 million. It's approximately
    $777 million in 2013 that would be required, as well as a
    balance of greater than $1.2 billion in 2014. We couldn't get
    there within our top line. We couldn't get there.
        When it comes to executing at shipbuilding, the reality is
    that, while we fully fund ships, our outlay rate is drawn out
    over a longer period of time. So for a particular program such
    as aircraft carriers and large-deck amphibs, where there's such
    a significant spike in the budget in the full funding year, the
    Navy, working with OSD, the Office of Management and Budget
    (OMB), and Congress, have adopted an incremental funding
    approach that smoothes out that spike, because what we need to
    do is ensure that our outlays and obligation rates are covered
    by the funding in any particular year. If we go to that
    alternative funding mechanism, then it smoothes out the spike.
        In many respects, we're looking at a similar circumstance
    here with Virginia. That additional boat in 2014 created a
    spike for us in the budget and, absent the ability to other
    than fully fund the boat, we had to push it to the right. So we
    have looked at what it would take to restore the boat within
    the top line, and a couple of things happened.
        First, when you add the boat, in addition to addressing the
    requirement, you generate savings associated with additional
    economic order quantity material, savings associated with
    sustained learning curve performance, as opposed to a potential
    negative learning curve performance, and savings associated
    with improved planning.
        [The information referred to follows:]

        There are two alternative proposals recommended, both using
    incremental funding, to restore the fiscal year 2014-2 ship making the
    Block IV contract a 10 ship MYP. One proposal requires $778 million of
    fiscal year 2013 Advanced Procurement funding and incremental funding
    authority for the fiscal year 2014-fiscal year 2016 ships. The second
    proposal is Total Obligation Authority (TOA) neutral and requires
    incremental funding authority for the fiscal year 2013-fiscal year 2018
    ships. As fiscal year 2013 is the last year of the Block III contract
    and the Navy is currently contractually required to fully fund these
    ships, a contract modification would be required to amend the Block III
    contract. In both options, the addition of a second ship in fiscal year
    2014 to the Block IV contract will result in an incremental cost of
    $1,736.7 million across Block IV, which is funded via incremental
    funding authority and largely TOA neutral. Program of record and both
    options are depicted in the attached chart.

        Mr. Stackley. Every step along the process you generate
    savings by having that second boat in 2014. If you then look at
    the total Virginia program and you look at the bottom line for
    the total Virginia program and you assess, without tripping
    over full funding versus incremental funding discussions, at
    the bottom line what is the net cost impact of adding a second
    boat in 2014, it's near neutral.
        In other words, the net savings associated effectively
    adding the boat by pulling it to the left outweigh the upfront
    costs associated with that. The trouble is that in the budget
    framework requiring full funding we don't have that top line to
    do that.
        So the long-term savings associated with the second boat
    balance out the upfront investment required by the second boat,
    but within the constraints of our budget we were unable to get
    there.
        Senator Reed. You might be able to help us help you get
    there through appropriate legislative language. Is that
    feasible? .
        Mr. Stackley. We could work with your staffs to address the
    total picture and leave that for your action.
        Senator Reed. That is very fair.
        I have many additional questions, but let me recognize
    Senator Wicker so everyone gets a chance to engage, and then
    Senator Sessions, and then I'll pick up with the second round.
        Senator Wicker. To pick up on some of the questions I
    mentioned in my opening statement, the Navy's long-term 30-year
    shipbuilding plan, which indicates we'll build ships at minimum
    sustaining rates--and I realize there are funding constraints
    that we all have to work with. But I'm particularly concerned
    about the proposed construction of new ships that will lead to
    job reductions, that we're going to have to make up for later
    on.
        I think all five of you agree and all three of us up here
    agree, it's irresponsible to think that we can lay off skilled
    workers, engineers for example, and expect them to be available
    when future contracts are awarded. These are the peaks and
    valleys that we've talked about. I know the Navy's concerned
    about employment valleys.
        Admiral McCoy, I may just let you go first on this, and I'm
    sure Secretary Stackley will want to follow up. Is the number
    of ships currently planned enough to keep the Navy's six major
    shipyards in business? If we don't keep them in business, what
    does that do to competition going forward in the medium-term
    and long-term? Does it make us rely long-term on more sole
    source contracts because we don't have enough yards competing?
    What are you gentlemen doing to think of every possible option
    for avoiding these employment valleys that we can't recover
    from in a decade when we need those jobs again?
        Admiral McCoy. Senator, thank you for the question. I think
    if you look out over certainly the next 5 years, I think the
    answer to your question is yes, there's workload out there in
    each one of our big six shipyards, except for the actions that
    Huntington Ingalls is taking relative to their Avondale yard,
    so big five shipyards. There is that work.
        There are peaks and valleys that we do have to manage. I
    will say that three of our yards--Electric Boat, NASSCO, and
    Huntington Ingalls-Newport News--are also in the repair
    business, and we work very closely with those three yards to
    level load the repair business along with the spikes and
    valleys in the new construction business. One, for example, is
    Electric Boat. We are closely coupled on the nuclear submarine
    repair business with the naval shipyards. Today, for example,
    on any given day we may have from 200 to 300 Electric Boat
    employees anywhere around the country in one of our four naval
    shipyards helping us with peaks and valleys, so that we
    minimize overtime in naval shipyards and things like that.
        We are constantly looking across the industrial base at
    those peaks and valleys to see where, between post-shakedown
    availability work, where it makes sense repair work, and those
    kinds of things, Senator.
        Senator Wicker. Let me interject, and I know you haven't
    given a complete answer yet. Is the repair work at all a
    possibility for Pascagoula? Is that something you've discussed
    at all?
        Mr. Stackley. May I?
        Senator Wicker. Please.
        Mr. Stackley. Yes, sir. First, when it comes to repair
    work, there is a homeporting policy that we're not going to
    ship a ship out of its homeport for limited repair
    availabilities. What that means is for Huntington-Ingalls
    Industries (HII) on the Gulf Coast, they would only have the
    opportunity to compete for major repair availabilities that are
    bid coast-wide. Those are limited in number. But when we bid
    coast-wide it is an open competition.
        So it's up to in this case HII to choose to bid. The back
    end of that is would they be competitive in the bid? In other
    words, if you have a ship construction yard that's competing
    against a repair yard and you look at the total associated with
    the competitiveness, the rate structure, the overhead costs
    that you carry with a shipbuilder, they have to assess whether
    or not they're competitive to determine whether they will
    compete for those bids.
        Senator Wicker. So it's not a conversation you've really
    had with Ingalls in Pascagoula?
        Mr. Stackley. Actually, we have talked with regards to
    major modernization for combatants, and particularly the Aegis
    modernization program when it was in its formulation stage,
    whether or not the building yards would have the opportunity to
    bid. There have been alternatives that we looked at and
    continue to look at. But today those availabilities are
    captured within the 6-month timeframe of a homeport policy, and
    so it's been beyond their reach.
        Senator Wicker. Admiral McCoy, I did cut you off in mid-
    statement. So I want to give you an opportunity to complete
    your thought.
        Admiral McCoy. That was basically what I had to say. To sum
    up, I'd say, yes, over the next 5 years we see enough work for
    the yards. There will be peaks and valleys and we are working
    with them all the time to see what legitimate other work we
    have that can help them through that period, where they can be
    competitive as well.
        Senator Wicker. Okay. Let me ask you this, Secretary
    Stackley. Secretary Napolitano was testifying March 8 before
    the Senate Appropriations Committee and she was asked by
    Senator Murkowski about the Coast Guard's future shipbuilding
    plans. Let me just read her response. The Secretary said this:

              ``In light of what DOD is doing with respect to its
            budget reductions under the BCA, we are coordinating
            with naval operations, looking at what the Navy is
            doing with its assets, then really correlating on what
            7 and 8''--meaning National Security Cutters 7 and 8--
            ``would do should they be built. We think that, given
            where we are with the budget and the fiscal
            environment, before moving on numbers 7 and 8 we want
            to make sure we're coordinating with the Navy.''

        The 30-year shipbuilding plan does not mention Coast Guard
    cutters. Can you explain what coordination there is and what
    Secretary Napolitano could have been talking about? Is there
    coordination between the Services, DOD, and the Department of
    Homeland Security on ensuring that the shipbuilding rate is
    meeting our commanders' requirements?
        Mr. Stackley. Yes, sir. There's going to be a two-part
    answer to this. I'm going to answer the first part and ask
    Admiral Blake to answer the second part. The two parts have to
    deal with a MOA between the Navy and the Coast Guard when it
    comes to force responsibilities, that I'll ask Admiral Blake to
    address.
        The other part of the coordination side is on the
    procurement side, and there's a very healthy dialogue in place
    between the Navy and the Coast Guard regarding the national
    security cutter, as well as the other elements of the Coast
    Guard recapitalization program.
        So we have detailed discussions in terms of how we the Navy
    can help the Coast Guard in its procurement efforts while
    separately, at the CNO and Commandant level, there's the larger
    discussion taking place regarding how the Navy and the Coast
    Guard operate together, not just in terms of missions and
    capabilities, but Service to Service.
        Admiral Blake. Sir, the Navy and the Coast Guard, and the
    Navy and all the Services, we have a series of meetings, we
    call them warfighter talks, in which we discuss areas in which
    we can find commonality. One of the challenges we have is the
    different requirements that each of the Services have. Where we
    can find commonality among requirements, then we proceed down
    that path.
        For example, if you look at Coast Guard ships, Coast Guard
    ships have many of the same systems that we have on Navy ships.
    But where we have a tendency to diverge as we're heading down
    that path is because of the differing requirements that each of
    the Services bring to the table. But for both efficiency and
    effectiveness, we attempt to find as many common areas as
    possible and then go down those paths.
        Senator Reed. Thank you, Senator Wicker.
        Senator Sessions.
        Senator Sessions. Thank you.
        Secretary Stackley, the Secretary of the Navy and the CNO
    testified before our full Senate Armed Services Committee and
    the Secretary of the Navy has met with me, describing the
    improvements made with the LCS in its cost and schedule. Recent
    press articles describe problems with the LCS, including
    Defense News on April 5 and the New York Times.
        What is your assessment? It seems to me these articles are
    basing their concerns on older data. Maybe we're not getting
    the word out about the progress that I understand is occurring
    there. The LCS is such a critical part of the Navy's future. It
    has fewer sailors, higher speeds, less fuel cost, and
    remarkable capabilities.
        If you would, tell us where you think we are in that
    system?
        Mr. Stackley. Yes, sir. I'll look to share this response
    with Admiral Blake. But let me start with the platform. The
    history of the startup of this program is well known. I'm not
    going to replow that turf there. However, as I mentioned in my
    opening remarks, we have the first follow ships, one near
    complete. The LCS-3 up north is completing her builder's trials
    and getting ready for acceptance trials to be delivered this
    spring.
        Near textbook. It's going extremely well in terms of
    schedule and being on target, and in terms of quality of
    construction. That's the result of not just plowing in the
    lessons learned from the lead ship, but the significant
    investment that was made by that shipyard to support this
    construction program.
        Separate and very similar on the Gulf Coast. Austal, which
    is 9 to 12 months removed from the construction up north,
    simply by the sequencing of the contracts. Again, plowing the
    lessons learned, investing in the facilities, accomplishing the
    training that needs to be accomplished for the workforce, and
    cleaning up the design. We're seeing the same rate of
    improvement on the Gulf Coast.
        So both construction efforts north and south are quickly
    capturing lessons learned from the lead ship, making the
    investments necessary, and on the production ramp that we need
    to see to support the 55-ship program. That's the construction
    side. We see stability, we see steady improvement, and we see
    good cost returns on the front end of this dual block buy
    strategy.
        Now we have to be talking about mission packages. The
    mission package development efforts, we have today three-plus
    mission packages in development: mine countermeasures (MCM),
    anti-surface warfare, and anti-submarine warfare (ASW). As well
    we have a search and seize, a small module that we've put to
    work. They're conducting development testing to support their
    IOC milestones in the 2014 through 2016 timeframe.
        This spring, for example, we conducted the first shipboard
    demonstration of the MCM mission package on board the
    Independence, working down at the Navy's Warfare Center in
    Panama City. The first time we brought all the elements that
    make up the first increment of the MCM package to the ship, and
    operated with sailors. We learned some things, but we also
    demonstrated the ability to conduct these mission scenarios
    using the unmanned and remote operated vehicles that make up a
    large part of the LCS mission package.
        So the development and testing for the mission packages, in
    that case MCM, separately the anti-surface warfare mission
    package, testing, and in fact we'll be outfitting the LCS-1
    with the first increment of the anti-surface warfare mission
    package when it deploys next year to Singapore, and then
    development of the ASW mission package, all moving forward.
        So that effort lags the construction timeframe by
    deliberation so that the ships and mission packages are all
    IOC-ing in the middle of this decade.
        The third important piece is fleet introduction. So we have
    one lead ship on the West Coast, LCS-1, and LCS-2, right now
    making its way to her homeport in San Diego. We're on the front
    end of fleet introduction at the same time. As with any new
    ship class, we learn a lot. We also train up a sailor force
    that becomes proficient in this ship class.
        We're on the front end of this program. I don't spend too
    much time studying the reports that come from the press other
    than to be aware of what information is out there and try to
    correct any misperceptions. But she's going well. We're
    learning a lot. We look forward to deploying LCS-1 next year,
    and we have a lot of work that we have to do to make sure that
    when she deploys she is well supported and succeeds in all the
    mission areas that we assign to her.
        Senator Sessions. You don't see any cost or technical
    problems of great concern to you at this point?
        Mr. Stackley. I think cost is under control. I think I've
    addressed that fairly well.
        Senator Sessions. I thought I heard you say the 10th ship
    would perhaps be half the cost of the first ship?
        Mr. Stackley. Inside of our block buys, each 10th ship, in
    other words, for each shipbuilder, when you look at the fixed-
    price option, that's a 2015 ship. When you look at a fixed-
    price option for those 10 ships, they're at about half of the
    lead ship's price. You have to take escalation out and put them
    all in the same base year dollars. But it's a very impressive
    learning curve that these shipyards have committed to inside of
    those fixed-price contracts, and that they've put the
    investment behind to ensure that they hit the numbers.
        Senator Sessions. The Navy hasn't changed its view of the
    important role it would play in the future fleet?
        Mr. Stackley. No, sir, and I think I should allow Admiral
    Blake to address that.
        Senator Sessions. Admiral Blake.
        Admiral Blake. Yes, sir. I would tell you the LCSs are
    replacing three classes of ships. They're replacing the PCs,
    they're replacing the MCMs, the minesweepers, and they're
    replacing the FFGs. I think that alone just gives you an idea
    of how critical these are to the future of the Navy. We're
    being able to replace three classes of ships with a single
    class because of the fact that we are going to modularity.
        I'll just anchor for a second on the Avenger-class, the
    minesweeps. They'll be starting to come out of service in
    fiscal year 2019. When those ships start coming out, we'll be
    bringing the LCSs on line. One of the big or key
    transformations in there is that we're going to be able to get
    the man out of the minefield. In the current technology, we
    have to put the man in the minefield in order to be able to
    clear it. When we go to the LCS with its modularity, we will be
    able to take the man out of the minefield. We'll be able to use
    unmanned vehicles. We'll be able to use helicopters, which we
    currently use, but we'll be able to get that individual out of
    there. So we'll be able to keep our sailors out of harm's way,
    or out of harm's way as opposed to where they currently are,
    which is in the field.
        You can look at each of the modules that are coming on
    line, whether it's the surface one or the ASW module, and I
    think you would see that these are absolutely critical, that we
    have to fill in for these as those assets come out of the
    fleet.
        Senator Sessions. How old is the current minesweeper fleet?
        Admiral Blake. I'd have to get you the age. But they're
    coming to the end of their expected service lives, starting
    with the ones in fiscal year 2019. But I'd have to get you the
    exact age on all of them.
        [The information referred to follows:]

        The current minesweeper fleet is between 18 to 25 years old. The
    USS Avenger was the first ship commissioned in 1987, and the USS Chief
    was the last ship commissioned in 1994.

        Senator Sessions. I was on one a number of years ago. It
    was pretty old.
        Admiral Blake. Yes, sir, they are old.
        Senator Sessions. That was a number of years ago.
        Admiral McCoy. Senator, may I jump in on your question
    about technical concerns?
        Senator Sessions. Yes.
        Admiral McCoy. One of the things about LCS was the first
    two ships, in fact, are research and development (R&D)
    platforms. They were bought with R&D funds. Normally on a new
    ship design, we have a fairly robust R&D program ahead of the
    ship. These were our R&D platforms. In fact, if you look at
    LCS-1, we went from concept of the ship to deployment in 7
    years, which is a record for the Navy.
        On every single one of our new classes, even ones that we
    put R&D money in upfront, we learn technical issues on the
    first of the class, that we feed back into the subsequent
    ships. We've learned on LCS as well. But if we take LCS-1, it
    did a Fourth Fleet deployment, then took it out to the Rim of
    the Pacific (RIMPAC) Exercise, took it out to Hawaii, rode it
    very hard for 25 days out there, most of the time at very high
    speed, and brought it back.
        We've had some technical issues, but nothing that would
    tell us that the platform itself is fundamentally unsound or
    will not be a very well performing ship in service. Every time
    we find something, we fold it back into the construction line,
    sir.
        Senator Sessions. Thank you.
        Mr. Chairman, thank you. We are concerned about the size of
    the fleet and that budget-driven fact is a problem and, I
    think, as you answered, Mr. Stackley, and our chairman here
    mentioned, sometimes we just have to find the money, Senator
    Reed, because it costs so much to delay and put off the
    construction. It has so many ramifications not to stay in track
    at an efficient level of production. Mr. Stackley, we value
    your judgment and insight, and I hope you will keep us posted.
        Thank you.
        Senator Reed. Thank you very much, Senator Sessions.
        We'll begin a second round. If necessary, we'll do a third
    round. These are all very good questions.
        I think we're focusing on some critical issues in the
    shipbuilding program. Last year we had a very, very good
    hearing. Admiral McCoy attended and Captain Galinis from the
    Gulf Coast was there. Mr. Secretary, you were there also, among
    others. At that hearing we recognized that there were some
    serious problems with quality and cost, but that you were
    seriously engaged, Admiral McCoy and your colleagues, in
    dealing with the cost issues and dealing with the quality
    issues, too.
        So could you give us an update of the measurable progress
    we've made going forward in these shipyards and assurances that
    we've now reached a point where costs are under control and
    quality is acceptable?
        Admiral McCoy. Yes, sir. Let me start with quality, because
    if you don't get quality right you're cost isn't going to be
    right. We've worked very, very hard with both the shipbuilder
    on the Gulf Coast as well as my Supervisor of Shipbuilding
    Office. Since 2007 or so, I've increased the staff of my team
    down there by about 20 percent. One of the things we've done
    over the last 3 years very hard down there is get the
    Supervisor of Shipbuilding as well as the shipbuilder focused
    on fundamental, everyday deckplate compliance.
        We look at four key areas: piping, electrical, structural,
    and coatings, areas where we had the problems with the LPD-17
    class, for example. In addition, we took the lessons learned
    from the fleet introduction of the LPD-17 class and we made a
    significant number of design changes and we folded those back
    into the line, and some of those we still have to backfit onto
    our ships, principally in the area of how do we keep blue oil
    clean and making smart system design changes there.
        Since those efforts, we delivered LPD-22, the soon to be
    USS San Diego, it will be commissioned in about a month. It was
    delivered in December. That ship went through the most rigorous
    acceptance trials we've had to date. In fact, we added what I
    call an endurance trial, it was actually a third trial after
    the builder's trial and acceptance trial, and then an endurance
    trial, where we ran the ship's main propulsion diesels as well
    as the ship service electrical diesel generators, ran them very
    hard for a period of time, and then we came back in port, we
    rolled out bearings, did inspections, and in fact verified the
    oil was clean, no scoring, that kind of thing.
        San Diego just made the transit from the Gulf Coast and
    reached its port of San Diego about 2 weeks ago. So it was very
    successful. In fact, the remarks from INSURV in terms of the
    number of deficiencies in their report was the best ever LPD-17
    class.
        On top of that, in the last 2 years I've brought an outside
    audit team in three times--they're going back in this fall--of
    outside experts, not only to audit the shipbuilder, but also
    the Supervisor of Shipbuilding.
        So I think I am satisfied that on any given day fundamental
    compliance is happening back down at the yard. We look at those
    metrics every week, I have my folks intently focused on going
    out and doing inspections, as well as the yard, and we compare
    those notes, and I'm satisfied at this point, and we're now in
    a sustainment mode to make sure we don't lose ground.
        I think cost is one area where we still have work to do.
    The cost of compliance of quality in the yard is still high and
    the yard is working on that. We are working with the
    shipbuilder on moving more work to the left in the build cycle,
    more outfitting, to get the cost down. We're working with them
    on the material builds in terms of better pricing and that kind
    of stuff.
        We still have a ways to go with costs and along with that
    schedule. But I'm satisfied right now that quality is where it
    needs to be. We just need to drive the cost of obtaining that
    quality, continue to drive that down, sir.
        Senator Reed. Thank you. Secretary Stackley, who shares
    those costs? This is part of the contractual arrangements going
    forward, but also these were bid, there was the presumption
    that they could deliver quality with the costs that they
    stated. Those costs are still challenging. So how are we not
    only reducing costs in the present time, but as we go forward,
    with our contractual arrangements making sure that we don't
    absorb costs that should be properly done by the contractor?
        Mr. Stackley. Yes, sir. Generally speaking, each
    shipbuilding contract has its own terms and conditions and cost
    structure. So who pays or what the share is for those costs,
    it's a contract-by-contract discussion. However, as I mentioned
    in my opening remarks, the 38 ships that we've put under
    contract since December 2010 are all fixed-price ships. Some of
    those are firm-fixed-price, in which case all of the costs of
    rework or any cost growth is on the shipbuilder's side of the
    ledger.
        Most of those are a fixed-price incentive contract, which
    means that there is a share line associated with cost growth,
    and in almost every case it's a 50-50 share line, which states
    that, regardless of the cause of the cost growth, if the
    shipbuilder's costs increase we share those costs 50-50 up to a
    point of total assumption, in which case it converts basically
    to a firm-fixed-price contract at that point in time.
        We believe that's the right cost structure and it's proven
    very effective over our shipbuilding history to control costs.
        The several steps to this are: before going into the
    contract, make sure your requirements, your design, your specs
    are all nailed down, so there's not unnecessary churn that's
    driving cost growth; and then make sure of processes and
    procedures, the build plan, that contribute to controlling
    quality are in place; and then in the event of additional cost
    growth, it does appear on a 50-50 share line up to the ceiling.
        In the case of the ships that Admiral McCoy discussed on
    the Gulf Coast, those ships are at ceiling, in which case the
    cost growth was the burden of the shipbuilders beyond the
    ceiling.
        Senator Reed. Thank you.
        Let me turn quickly now to the Ohio replacement. As we
    mentioned, Secretary Kendall was here and he conceptually
    agreed that, because of the role of the Ohio-class replacement
    in the strategic triad, that this is not strictly a Navy
    program; this is a DOD program, a national program; and that he
    seemed to be open to efforts to provide support for the Navy.
        It goes back to the question that Senator Wicker posed,
    too. At some point you could have one class of ships that are
    necessary, but crowd out other necessary ships without this
    type of DOD support.
        Are you actively working with DOD to develop financial
    support for the Ohio-class replacement?
        Mr. Stackley. Sir, I'm going to say the answer is yes. You
    have to recognize that actively working with DOD on a
    procurement program that's 8 years away, it's hard to nail
    something down today that when you get out there it will still
    be in effect.
        So for today, we're talking about planning. Inside of the
    30-year shipbuilding plan that we submitted as a report to
    Congress, we lay out today's force structure, the procurement
    plan over the next 30 years, and what it would cost to support
    that procurement plan. In fact, OSD has provided for planning
    purposes some headroom in the years of the Ohio replacement
    construction program to give the Navy the ability to better
    accommodate it. That's not full headroom. That's simply if you
    look at the average shipbuilding investment between now and the
    start of the Ohio replacement program and then you look at the
    period of the Ohio replacement program, there's about a $2
    billion per year hedge that's been allowed for the Navy for
    planning purposes.
        So today, in the long-term planning phases we provide some
    room for working with OSD, provide some room for planning
    purposes. But we have to relentlessly hammer on this issue
    between now and when that becomes real money inside the FYDP,
    or what we'll be looking at is a shipbuilding plan that's not
    executable.
        Senator Reed. Admiral Blake, please.
        Admiral Blake. Sir, when we put the 30-year plan together,
    one of the good-news items that comes out of that is the fact
    that we highlight issues like the fact that when you're in that
    second period of 5-year defense plans from the 2019 period out,
    we highlighted the fact that the Shipbuilding and Conversion,
    Navy plan at that point will go up over $4 billion. It will go
    from a $15.1 billion average, which we're currently in in this
    FYDP and the next, it'll go up in excess of $19 billion.
        So what we end up doing is, as we point that out to DOD,
    they recognize, as you saw in the plan, that there is a
    significant challenge for the Navy because that is such a steep
    curve as we're trying to balance across the entire portfolio,
    and that there will have to be something done in order to be
    able to keep a balanced program.
        Senator Reed. Thank you very much.
        We've been joined by Senator Blumenthal. We recognize
    Senator Blumenthal for his questions and then Senator Wicker. I
    have other questions and I'll finish up. Senator Blumenthal.
        Senator Blumenthal. Thank you. Thank you, Mr. Chairman, and
    thank you all for your great work in DOD on behalf of our
    Nation and the men and women under your command.
        I want to follow up on the questions that have been asked
    about the Ohio-class, in particular whether the 2-year delay
    will achieve substantial R&D progress that will in the long run
    save money as well as advance the superiority of the weapons
    system. Is that your view?
        Mr. Stackley. Yes, sir. If I could simply outline what is
    being done inside the 2-year delay. First, as we look at this
    we have critical path activities that need to support the start
    of construction for the Ohio replacement program. So when we
    lay out the timeframe between now and the 2021 procurement, we
    keep the critical path activities on track.
        In total, between now and that start we have increased R&D
    investments. The R&D budget between now and 2021 is more than a
    billion dollars above what it would have been for a 2019 start.
    So there is R&D wholeness that will contribute to continued
    development, critical path activities, greater design maturity,
    and overall risk retirement going into the start of
    construction of the Ohio replacement program.
        There's also a parallel program with the United Kingdom.
    They're replacing the Vanguard, their strategic deterrent
    submarine, at about the same timeframe. So we have an effort,
    referred to as the Common Missile Compartment, which is common
    to both the United States and the United Kingdom's submarine
    programs. That is staying on track to the United Kingdom's
    schedule.
        What that means is that is slightly ahead of the U.S.
    submarine program now. That means that that entire effort and
    the risk associated with it will be reduced for the United
    States by virtue of the fact that we'll be staying on the
    United Kingdom's schedule. So there's direct improvement to
    risk management associated with the Common Missile Compartment.
    There's direct improvement to retiring risk in developments
    through the total of additional R&D investment during the
    timeframe.
        What's absolutely critical is that we manage the money and
    the time wisely, so that when we get to the start of
    construction for the Ohio replacement program we are at a
    higher level of design completion, a higher level of technology
    maturity, and we've taken advantage of this time and
    opportunity to find those ways to reduce cost in the program.
        Senator Blumenthal. My understanding is that this 2-year
    delay continues our schedule to be in sync with the British; is
    that correct?
        Mr. Stackley. As a result of the 2-year delay, the United
    Kingdom's successor program is ahead of the U.S. Ohio
    replacement program. The parts of the respective programs that
    are common, the Common Missile Compartment, which is a section
    of the ship that includes the strategic weapons system, that is
    staying on schedule to support the U.K.'s successor program.
        Senator Blumenthal. Going to the Virginia-class submarine,
    I have followed a number of the questions and your answers in
    response to Senator Reed's inquiries about it. Number one, I
    just want to second that I hope that perhaps this subcommittee
    and the full committee and Congress can work with the Navy in
    seeking to restore that funding for the boat that was pushed to
    2018 because of the potential savings that you have mentioned
    in connection with building that second submarine in 2014.
        If there is a way to avoid the budget spike in cost that
    right now has caused the delay, if there is some accounting or
    legislative language that could be devised, I'm very eager to
    join with Senator Reed on working on that.
        Mr. Stackley. If I can just state it as squarely as I can,
    today you are working on the 2013 budget. The options before
    you include adding money to the Navy's budget to support the
    advance procurement of a second 2014 budget, and the total
    there is north of $700 million. If you do that, that leaves the
    Navy with about a $1.2 billion bill in 2014, which is the same
    problem that we confronted in building the Program Objective
    Memorandum (POM) for fiscal year 2013, that we don't have the
    headroom for that $1.2 billion.
        That would be a significant reduction in the bill for the
    Navy, but it does still leave us with a problem in 2014 that
    we'd have to address in the POM.
        The other alternative, frankly, is incremental funding,
    which is not in accordance with policy. Policy would dictate
    that we fully fund each boat in the multiyear procurement. I'm
    simply going to state that these are extraordinary times. This
    is an extraordinarily important program and this is a fleeting
    opportunity. If we don't capture that second boat in 2014, the
    opportunity cannot be recovered in terms of force structure, in
    terms of savings potential, and in terms of the industrial
    base.
        Under these extraordinary times, it is perhaps appropriate
    that the Navy and Congress look at whether or not this is the
    right time to provide an exception to full funding. It has its
    drawbacks, going to an incremental funding approach. We explore
    it and we would welcome a discussion with the Hill in that
    regard.
        Senator Blumenthal. I would welcome a discussion as well. I
    very much appreciate your putting it so squarely and, I might
    say, eloquently, and I think that the burden is on us to
    recognize that we are in extraordinary times. We face
    extraordinary challenges, but also extraordinary opportunities
    to make sure that we meet our obligations, take advantage of
    the opportunities to secure our undersea warfare capability at
    the least possible cost in the long term.
        I welcome your responses to Senator Reed and just now to
    myself, and I hope to follow up with you.
        Mr. Stackley. Sir, the only thing I think it's important to
    add is, the Navy's willingness to have this discussion is
    underpinned by the strong performance of the Virginia program.
    Otherwise we wouldn't even consider it. It's the strong
    performance on the Virginia program. It's the fact that we, the
    Navy, DOD, and we look for Congress to follow, are willing to
    make the long-term commitment associated with multiyear
    procurement, that that offsets concerns associated with
    incremental funding during that period.
        Senator Blumenthal. I think you've just stated a very
    critical factor in this discussion, which is that the
    performance under this program ahead of schedule, under budget,
    consistently, and reliably is another extraordinary
    circumstance that has to be part of this discussion to justify
    incremental funding. So I welcome your responses.
        Thank you.
        Senator Reed. Thank you, Senator Blumenthal.
        Senator Wicker.
        Senator Wicker. Thank you.
        Admiral Burke and General Mills, from an operational
    perspective, the Navy budget calls for decreases in large
    amphibious ships, among other categories. In my opening
    statement, I mentioned the requests from combatant commanders
    for amphibious ships has increased over 80 percent in the last
    5 years, a very dramatic number. What is the reason for that
    and what will be the impact if these requests are not met?
        Admiral Burke. Senator, thanks for the question. You're
    right, the combatant command (COCOM) demand signal has gone up
    significantly, to the point where if we were to meet all their
    requirements it would take a Navy of greater than 500 ships. I
    certainly am not here to begrudge the COCOM demand signal
    because they have challenges that they're trying to deal with.
    But we can't meet all their demands.
        There is a process in DOD, run by the Joint Staff, called
    the global force management process, by which they take in the
    COCOM requirements and adjudicate that along with the forces we
    have to come to a reasonable allocation of force. That's a
    process we're dealing with today. We've been using that process
    for a number of years and I would expect we will continue to
    use that process in the future to bridge the gap between supply
    and demand.
        General Mills. Senator, if I could just add to that, I
    would say the increased demand really is testimony to the
    flexibility, the versatility, the value of our forward-deployed
    amphibious forces, and what it gives to those COCOMs out there
    who use those forces across a large range of mission sets. I
    think it's a testimony to how valuable the forces are to our
    people out there who are doing the job.
        As we look at the inventory of ships, I think we look at it
    in three ways. We certainly look at it in the ships it takes to
    maintain that forward presence on a day-to-day basis, and
    provides those tools to the COCOMs for their engagement, for
    their crisis response, et cetera. We look at it for the ability
    to give training opportunities for our homestationed forces who
    need to train with those amphibious ships in order to build
    both our skill sets and our interoperability with the Navy. Of
    course, we have been relatively clear in our requirement in the
    event of a major crisis that we need 30 operationally
    available, ready amphibious ships at the point of action, and
    that we have worked with the Navy closely as they developed
    their shipbuilding plan over the next 30 years to take a look
    at those requirements and plan to meet them.
        Senator Wicker. General, when we drop below 30 to 29
    amphibious ships, what's that going to do to your capability?
        General Mills. Each time we have dropped the number of our
    requirement, I think, it's been an acceptance by us of
    additional risk at each step along the road. I think that we
    worked very closely again with the Navy so they understand what
    the requirement is and that they do their best to meet them.
        I think in the long range we're poised well to meet those
    requirements. In the short range, there is risk. There is risk
    associated.
        Senator Wicker. Can you help us understand that risk? Can
    you be a little more specific?
        General Mills. I think the risk comes in in the event of a
    major crisis it would be incumbent upon the commander who is
    moving forward to work, to decide what he could or could not
    bring along because he didn't have the capability to load it on
    board the ships. He'd have to seek mitigation through other
    processes, either other transportation venues or he would have
    to simply take that risk that he initially on the beach would
    have less than what he had initially anticipated.
        Senator Wicker. I alluded to sequestration, Secretary
    Stackley, so I'm going to let you comment on that. Has OMB
    provided the Navy with specific guidance on sequestration? Will
    you be required to submit a revised plan that takes
    sequestration into account? Have you initiated contingency
    planning for sequestration?
        Mr. Stackley. Yes, sir. I'm going to share this response
    again with Admiral Blake. But let me describe that the first
    guidance has not come down regarding sequestration at this
    point in time. Today, we're literally in the middle of our
    build for POM for fiscal year 2014, so we're going through
    establishing the fiscal years 2014 through 2018 baseline, which
    clearly starts with POM 2013 and makes adjustments and changes
    associated with the top line and associated with the total
    program.
        We're moving forward with the POM for fiscal year 2014
    build, in accordance with a schedule that supports submitting
    the budget to the Hill next February. We'll complete those
    deliberations inside the Navy this summer.
        At that time, we expect OMB, working with Congress, to make
    a determination regarding sequestration planning. I can state
    that, and it's been stated before by the Secretary of Defense
    and the Secretary of the Navy, that if we have to adjust our
    top lines to reflect another potentially half trillion dollar
    reduction to the defense budget over the ensuing decade, we're
    looking at an entirely different force.
        The first half trillion dollars that we reflected in the 5
    years of POM 2013 and then the 5 years beyond, that caused a
    lot of significant change to our program, much of which we've
    just discussed here this morning. The notion of doubling that
    amount of reduction cuts deeply.
        Senator Wicker. That takes the minimal risk that General
    Mills alluded to and just completely blows that up by an order
    of magnitude at least.
        Mr. Stackley. You cannot take the force and the operations
    that we have in place today and are conducting today and try to
    imagine continuing that with another half a trillion dollar
    reduction to our defense program over the next 10 years. It's a
    significant shift and we have not at this point in time put
    contingencies in place, although we are always looking at
    opportunities to be able to reduce our programs' costs, and we
    are also looking at potential builds that will be coming down
    the path, but nothing to the size of what sequestration would
    impose.
        Senator Wicker. You're going to share that answer with
    Admiral Blake, I believe.
        Mr. Stackley. Yes, sir.
        Admiral Blake. Yes, sir. Just to echo what Mr. Stackley has
    said, we have not begun any form of formalized looks at the
    sequestration process. That said, it is always in the back of
    our minds.
        Senator Wicker. I'll bet it is.
        Admiral Blake. Yes, sir.
        But as also Mr. Stackley said, what we are currently doing
    right now is we are working on our POM 2014 proposal as we go
    forward in the fiscal year. I would tell you that if, in fact,
    sequestration were put in place you would have a radically
    different force for the Navy. It would be extremely different
    than what you currently see today.
        When we were putting the current budget together and we
    were coming up with the half a trillion dollar cut in the
    program, we were looking at a couple of fundamentals. We were
    looking at capability versus capacity. We said do we want to
    have this capability and, if so, at what capacity. Then we went
    to the issue of wholeness versus hollowness. We wanted to
    ensure that the force was whole, as opposed to keeping
    additional force structure that would lead us to a hollow
    force.
        If you take what we have already done and then you compound
    it with sequestration, the task ahead of us would be extremely
    difficult and, as I said, you would not end up with the force
    that you currently have today in any way, shape, or form.
        Senator Wicker. Thank you.
        Admiral Burke, go ahead, please.
        Admiral Burke. Just to put the potential cut from
    sequestration in context, it's about the size of the annual
    shipbuilding budget potentially, the full amount. It's almost
    the same amount as our aviation procurement budget, and it's
    about twice the size of the sum of our maintenance and aviation
    maintenance budgets. So it is significant.
        I think were it to come to pass, I believe we'd have to re-
    look at our strategy as well.
        Admiral Blake. Yes, sir. If I can just add to that, we
    essentially have five pots of money. You have your manpower
    piece, you have your infrastructure piece, you have your R&D
    piece, you have your operations and maintenance (O&M) piece,
    and you have your procurement piece. On the Navy's side of the
    equation, procurement is our largest account.
        When you put something in place, as Admiral Burke was just
    saying, to the extent that sequestration would do, you can look
    at those accounts and you would see that it's either in your
    O&M account, or it's in your procurement account. The only
    other big account we have is our manpower account.
    Infrastructure and R&D are relatively small compared to those
    three. Manpower is a must-pay bill. We have to pay the people.
    So that takes that one off the table.
        Then you end up going to the two accounts. It's either your
    O&M account or it's your procurement account to cover something
    like that.
        Senator Wicker. Thank you very much.
        Let me just observe, Mr. Chairman and Senator Blumenthal, I
    voted for the legislation that puts sequestration in place. I
    think, like most of the people who voted yes, I voted for it
    believing in my heart that we would have the leadership in this
    city both in the administration and in Congress to come to
    grips with where the real spending is, to come to grips with
    the fact that we need a different taxation policy that provides
    for greater growth, but also that we have 60 percent of the
    budget plus that's off limits every year. We don't look at it
    every year in the appropriations process. It's on automatic
    pilot.
        I believed that we would be able to come to grips with
    that. To date we've not. We've either not had the leadership or
    the will in this city to come to grips with those issues. While
    sitting here in this room it's unthinkable that we would get to
    actually this brinkmanship of sequestration, I don't know if
    it's any more or less unbelievable than it was last year when I
    actually voted for it, Mr. Chairman.
        I'm not absolutely convinced that we won't face this. I
    certainly hope we don't. I think it would be the disaster that
    you gentlemen have described. But it is indeed disappointing
    that our inability to come to grips with the part of our budget
    that makes up the majority of taxpayer spending is seemingly
    still off limits and we haven't been able to address that. I
    hope we can.
        Thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator Wicker.
        Let me continue with some issues regarding the proposed
    retirement of the Aegis cruisers. Admiral Burke, Admiral Blake,
    and Mr. Secretary, as I understand it, seven cruisers are going
    to be retired, and they have a direct impact on our anti-
    missile capabilities. In fact, there's some suggestion that
    these retirements might reduce our ability to meet the Navy's
    objectives in terms of missile defense platforms and missile
    capabilities.
        Has our missile defense-capable ships requirement changed,
    allowing us to reduce the number of ships that we have? If not,
    what are we doing to mitigate? Then I'll have a follow-on
    question.
        Admiral Burke. Sir, as you've heard today in many of our
    other decisions, the cruiser decommissioning proposal was a
    very difficult choice, and we find ourselves balancing
    procurement, readiness, and people accounts to achieve the
    global force management and avoid the hollow force that Admiral
    Blake talked about.
        No, our missile defense requirement has not abated. It
    continues. The demand continues to grow. But these were not
    missile defense ships. These were not BMD ships. These were
    carrier and strike group defense ships, that would have
    required significant resources. The numbers are roughly just
    short of $2 billion to do the maintenance and repairs to get
    them up to speed. Some of those ships were built with some
    aluminum that has suffered from significant cracking problems
    and it's been quite a challenge for us. There's also some
    maintenance backlog that would need to be addressed there to
    make them viable for the long run.
        In addition, there's the annual O&M dollars that one would
    have to pay to keep them viable, and that's another just over
    $1 billion. Then the helicopters, the communications upgrades,
    and the people is another a little more than $1 billion.
        So overall across the FYDP we're talking about $4.1
    billion. Then to meet the potential BMD requirements we'd have
    to put BMD on those ships as well, which is more than another
    billion dollars. We're talking about a lot of money to keep
    those ships in the fleet.
        Part of the reason we make the decision to do that is
    because they are not BMD ships yet. But I think over the last
    couple of years, we have finally found our way on taking care
    of our surface ships. We need to make sure that we continue
    down that track and take care of the young ships so they don't
    get into the condition that these older ships have gotten into,
    where they have a backlog of maintenance.
        The reason I fully support this decision is because if you
    want to maintain the largest, most sustainable, and most
    capable fleet you can have, you need to do all of the
    maintenance and modernization. We have a bunch of ships and
    we're unable to take care of them all properly, and so we can
    either choose to continue to do that or we can go down a more
    righteous and judicious path in my view, which is to maintain
    the fleet as well as we possibly can, and we'll end up with a
    better, larger fleet as a result.
        Senator Reed. Just to clarify that, the short-run
    operational loss is the protection of the carrier battle groups
    by these Aegis submarines from missile attack, either land-
    based missile attack or any missile attack; is that correct?
        Admiral Burke. Yes. We have 22 cruisers today. We have 11
    carriers, 10 carriers at the moment, but 11 carriers in the
    future. We typically will deploy each carrier strike group with
    one of these cruisers. So it will not have a direct impact on
    the carrier strike group, sir.
        Senator Reed. Then the other issue here, too, is there was
    at least a very theoretical consideration of moving these
    platforms onto BMD capabilities. That's now essentially off the
    table, and it raises the question of--and this is perhaps at
    the Secretary level--has there been discussion within DOD of
    moving resources from land-based systems into more sea-based
    systems, where you would get more bang for your buck
    effectively?
        That's, I'm sure, an object of debate within the building,
    but has that discussion taken place?
        Mr. Stackley. I would say constantly, sir. There's no
    single solution or single element when it comes to missile
    defense. From the Navy's perspective, first we look at force
    structure. We need to defend the battle group. But at the
    larger national level, there is constant discussion about what
    contributions could be made by the sea-based element of missile
    defense.
        There's some tension there in terms of what does that mean
    regarding the dedication of platforms to that mission, what
    does that mean to the overall force structure, and how does
    that affect things? Today we're moving forward with the Phased
    Adaptive Approach with Europe, and, in fact, the land-based
    piece of that effort is taking Aegis ashore.
        Senator Reed. Yes.
        Mr. Stackley. So we're putting the capability on land,
    because it has proven effect. The early increments associated
    with sea-based is bringing Aegis destroyers to the
    Mediterranean, where they provide a capability for that region.
    Then to address the impact on force structure, what that means
    is a part of the solution is forward deploying Aegis
    destroyers, so that the number of ships that are affected is
    limited.
        There's constant discussion. There are capabilities that
    have come forward through the Aegis program that have proven
    extremely effective in the missile defense arena. Throughout
    those discussions, we have to look at our priorities, the
    suitability of the capabilities for the respective missions,
    and then, as Admiral Burke described, managing the total force.
        Admiral Blake. Sir?
        Senator Reed. Go ahead, sir.
        Admiral Blake. If I could just expand on or expound on what
    Admiral Burke was talking about, when we were putting the
    budget together one of the fundamentals we had was the issue of
    hollowness versus wholeness. I don't think anybody in the Navy
    was pleased when we came forward and said that we were going to
    have to take both amphibious ships and cruisers out of service
    earlier than their expected service lives.
        But I would tell you that if someone were to direct that
    those ships be put back in, my real concern would be, all
    right, I still have a bill to pay and I am probably very likely
    going to have to put something else on the table which will be
    considered equally egregious. It was not an easy decision on
    our part, but we were driven by the fundamental approach that
    we wanted to ensure at the end of the day our force was whole
    and that we were not heading down a hollow path.
        Admiral McCoy. Senator, just to complete that thought, both
    Admiral Blake and Admiral Burke talked about the difficult
    decision. But for the first time in fiscal year 2013, we have
    fully funded maintenance, and particularly surface maintenance,
    which has always been short. So with Overseas Contingency
    Operations (OCO) funding we have fully funded in our budget
    surface maintenance, and that goes to that wholeness
    discussion.
        Senator Reed. With OCO funding, which is transitory at
    best.
        Admiral McCoy. About 20 percent of our maintenance budget
    right now is reliant on OCO, yes, sir.
        Senator Reed. Okay. Just for the record, the 313-ship
    target total, is that still under the Secretary's guidance, is
    that still the requirement for the Navy?
        Admiral Blake. What we're doing right now, sir, is, based
    on the new strategy which we have received, we are in the
    process of doing a force structure assessment, and then we will
    then brief that to DOD and we will ascertain the requirement
    for the right size of the fleet.
        Senator Reed. So it's a work in progress?
        Admiral Blake. Yes, sir. That is going on even as we speak.
        Senator Reed. A final question, and then I'll recognize
    Senator Blumenthal.
        We talked about the commitment of both the Navy and the
    contractors to get ships out on time, under budget, et cetera.
    One of the things that complicates that is sometimes the Navy
    changes the plan midway through. There are some examples. I'm
    told that the MLP program, which just signed a contract for a
    third vessel, now intends to build a ship in an AFSB
    configuration, which is new. The Navy wants to sign a multiyear
    for the DDG-51 destroyer, but plans to shift to a new
    configuration, new radar, et cetera.
        To what extent are those changes adding costs and to what
    extent can we avoid those kinds of changes so that we can
    mitigate costs?
        Mr. Stackley. Yes, sir. I'm going to pound the table on
    stability. That has to be one of the cornerstones to our
    program going forward, and that's requirements, design, build
    plan, et cetera. So throughout our process we do everything we
    can to maintain stability.
        In terms of the MLP, we also have to deal with the real
    world. When new requirements emerge, you have to address the
    requirements and you have to look at how can we best meet that
    in terms of cost and schedule so that the warfighter is getting
    what he needs, when he needs it, within the fiscal constraints
    that we have.
        Specifically regarding the MLP and the modification
    associated with the AFSB, we've done a preliminary review in
    terms of what the impact would be to the MLP technical baseline
    and the impact is measured in terms of small impact to the base
    ship, small, single digit percent to the base ship.
    Effectively, what we're doing is we're adding to it, as opposed
    to redesigning the interior.
        The AFSB brings an aviation capability for basically
    vertical lift, as opposed to the baseline MLP, which is more of
    a horizontal lift. So the designs that we're looking at are all
    very much cost conscious to minimize the impact to the base
    ship, but deliver the core capability that's been requested by
    Fifth Fleet.
        We see that as a very controlled and measured approach to
    bring the capability without downstream trying to backfit it or
    holding up the program and introducing cost and delay
    otherwise. We'd be happy to share the details with the staff to
    get a full understanding of what that impact is and what those
    details are, as they mature.
        The other discussion on DDG-51, the fiscal year 2013
    multiyear that we've requested is for a Flight 2A baseline
    multiyear. We're looking at nine Flight 2A ships in the
    multiyear. But what we need to do is introduce the capability
    that I described in my opening remarks regarding the AMDR. In
    parallel with that multiyear, we're completing the development
    of the AMDR, targeting 2016 DDG-51 ships. We are not making
    that a part of the contract baseline, but at the point of
    maturity when we've completed not just the technology
    development phase, but the engineering and manufacturing
    development phase, and we have a firm handle on the details
    associated with the impacts of AMDR to that ship, then we'll
    have a decision point downstream in advance of the 2016 ship
    that tells us, and we share that with Congress, that the
    technology is mature, that we understand the impacts, and that
    we have the design complete sufficient to support introduction
    in the 2016 ships, we understand the costs.
        We will be competing this engineering change proposal
    between the two builders as a fixed price competition to
    incorporate the cost, so that stability, cost control, and
    introduction of this key capability that we need can all come
    together. I believe it's very measured. We are not jumping the
    gun here. We're not slamming that into the multiyear at the
    front end. It is a downstream decision, but we believe it's
    important enough to get that capability introduced to the fleet
    that we want to do it smartly, but timely as well.
        Senator Reed. Thank you.
        Admiral Blake. Sir, just to give you a little more
    background on the AFSB, we are filling an urgent COCOM demand
    signal. In the near term, we are going to take the Ponce, which
    was originally going to be decommissioned this past March, and
    we are now going to do some minor modifications on her, and
    then we will push that ship out to meet the COCOM demand.
    That's the near term.
        Then the far-term solution is to do the modifications, as
    Mr. Stackley described, to the MLP in order to be able to meet
    that COCOM demand signal for the AFSB.
        Senator Reed. Thank you.
        General Mills, I'll see you next Thursday, right? So I'll
    have a chance to just quiz you in depth. I don't know if you
    have a quick comment?
        General Mills. Sir, I look forward to next Thursday.
        Senator Reed. So do I, sir. Thank you. I wasn't ignoring
    you.
        Senator Blumenthal.
        Senator Blumenthal. Thank you, Mr. Chairman.
        I have a question that is a little bit different than most
    that have been asked so far, although I missed some at the
    beginning part of your testimony. I'm very interested in
    renewable energy, particularly the use of fuel cells. I think
    the Navy really has been leading the way in this effort, and I
    want to thank you for what you've been doing.
        But I wonder whether you could comment on whether the
    extraordinary times that we face, to use a euphemism, Secretary
    Stackley, for these extraordinary constraints and challenges,
    are in any way inhibiting the drive toward using more renewable
    energy in the shipbuilding program, whether it is viewed as a
    means of cutting costs in the long-run, as I believe it should
    be viewed? If you could comment generally on that?
        Mr. Stackley. Yes, sir, and I'll probably share this with
    Admiral McCoy. But as you're well aware, alternative energy has
    been a top priority for the Secretary of the Navy, and we have
    been investing across the board--ships, deployed forces, our
    installations and sites--to reduce our energy demands so that
    we're driving up efficiency. So step one is reduce your energy
    demands.
        A very simple example is the development that's going on
    right now for a hybrid electric drive for our surface
    combatants. We're looking at employing technologies that are
    already at sea on other ships and introducing that onto our
    larger ship class, the DDG-51s, to try to reduce their fuel
    bill and to get greater legs for those ships.
        We see an opportunity there to drive our fuel costs down by
    simply 5 percent on each of our destroyers, which when you add
    it up is a fairly significant savings. So we're working that
    technology. We're going to do a demonstration here in the next
    year with one ship in service, with a long-term goal of backfit
    and forward fit that type of technology. That's one simple
    example.
        Separately, I think you're well aware of the efforts that
    the Navy has been working on the R&D for alternative fuels. So
    that's biofuels. We're looking at all of our prime movers, gas
    turbines predominantly, to ensure that they are certified for
    operating with biofuels. There's been much discussion regarding
    the economics of that. The economics are probably a long-term
    issue. But side-by-side with the economics is the operational
    imperative of trying to reduce our reliance on fossil fuels
    from offshore.
        You specifically asked about fuel cells. Fuel cell
    technology has been under development for decades. In fact,
    some other navies are employing fuel cell technology for their
    non-nuclear submarines. It is a good alternative energy source
    for non-nuclear submarines. For the Navy, that would not meet
    our mission requirements. I would say the large-scale
    application of fuel cell technology doesn't in that case meet
    our mission requirements.
        But for commercial and military, fuel cell is a very
    promising technology. We're not going to drive that equation in
    terms of its development, but we are going to look to leverage
    it.
        Admiral McCoy. Senator, I'll just chime in. Most of the
    attention in this area has been on the alternative fuels. On
    the ship side, for example, we've already sailed one of our
    test gas turbine ships off the coast of California and we don't
    see any issue with being able to use that fuel. We're going to
    continue to expand that, including with the RIMPAC exercise
    this summer.
        But an area that really hasn't gotten a lot of air time is
    what I call dozens of initiatives that we've fast-tracked out
    there to reduce the amount of fuel, as Mr. Stackley was saying.
    These are everything from the hybrid motor that Mr. Stackley
    talked about to simple things like hull coatings.
        The good news about the things I'm going to talk about real
    quickly here is we're not on the leading edge of technology.
    We're adapting what's already in industry that can be smartly
    used in Navy ships. Slippery hull coatings that Maersk lines
    and other folks are using, we have them on a number of ships,
    and we are testing those. I really think we're talking about
    really hundreds, if not by the time we're done, initiatives
    that might get us very small, 1 percent, whatever, a half a
    percent, but when you think about the number of steaming hours
    that we have.
        LED lighting, we're putting those on our ships and looking
    for the effect of those. Smart voyage management systems that
    plot the course for the weather to minimize the drag on the
    ship. A hybrid motor, but also efficient motors, compressors,
    and pumps, and we're putting those on our ships and measuring
    the effect of those.
        So we have a very active program that we're funding, that's
    getting this stuff out to sea, taking what makes sense, what
    has a good payback, and going ahead and further deploying it.
        Admiral Blake. Sir, if I can just add, just from a fiscal
    perspective, for every dollar that a barrel of oil goes up we
    end up spending approximately an additional $31 million on the
    Navy side of the equation in order to get that fuel out there.
    So we have to do something. We're currently executing the
    fiscal year 2012 budget and you see the daily fluctuations in
    the fuel prices, we're having to come to grips with that. Every
    time you see that price of a barrel go up a dollar, we have to
    come up with an additional $31 million in order to cover it.
        Admiral Burke. Senator, you've heard a lot about what we're
    doing afloat. We're doing some of the very similar situations
    in the air, looking at coatings, engine development, flight
    profiles, and getting adjustments to air corridors to allow us
    to fly through those to save fuel.
        But also on the shore side, there's a lot of effort going
    into that. As Admiral McCoy said, we are not on the leading
    edge of technology there. But the implementation there has
    wide-ranging impact. For example, we are just beginning to
    meter all the buildings, and particularly base housing is on
    the leading end of this. We meter those houses and evaluate how
    much energy they use relative to other very similar houses, and
    then charge the occupants if they go over the average, or
    refund their money if they save money.
        The holy grail on this on the shore side is to be able to
    do this in all our bases, and we are well into installing those
    monitoring devices, metering, such that we can do that.
        General Mills. Sir, I would offer up from the Marine Corps
    side several things. First, on the individual bases already in
    theater, being used by troops downrange, are battery saving and
    renewables there, along the lines of batteries, green blankets,
    solar panels, those types of things; very, very successful, to
    include troops that are in heavy combat.
        On the shore side, to mirror the Admiral's comments, for
    example, up at Bridgeport, CA, which is our Mountain Warfare
    Training Command, we are soon to be energy neutral because of
    what we're producing through solar and geothermal energy, and,
    in fact, in the very near future we'll actually be able to sell
    some of that electricity to the local power grid because we'll
    be producing more than what we, in fact, need.
        Our warfighting lab down at Quantico is exploring a
    multitude of projects that we can push out to the fleet quickly
    to lighten up the individual marine's load and also to save
    fuel. Fuel efficiency is a major factor in all of our AOA as we
    look at new vehicles and new equipment to put on line.
        It's a multi-fronted effort to really get some fuel savings
    in order to save those O&M dollars.
        Senator Blumenthal. Thank you very much. Thank you for
    those very impressive answers.
        Thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator Blumenthal.
        Gentlemen, thank you for your excellent testimony, and for
    your service to the Navy and the Marine Corps and the Nation.
        We will keep the record open for 1 week. Some of my
    colleagues might have statements they want to submit or
    questions they might direct to you. Please promptly respond to
    the questions.
        With no further ado, this hearing is adjourned.
        [Questions for the record with answers supplied follow:]
                    Questions Submitted by Senator Jack Reed
                       littoral combat ship design issues
        1. Senator Reed. Secretary Stackley, USS Freedom (LCS-1) has
    experienced some issues with cracking. As I understand it, after sea
    trials in February 2011, the Navy found 17 cracks on the ship. I also
    understand that the Littoral Combat Ship (LCS) program manager issued a
    memorandum indicating that the cracks represented a risk in operating
    the LCS-1 at the extreme edges of its safe operating envelope, and
    directed that the maximum speed for the LCS-1 to be capped at 20 knots
    in rough water. Additionally, the Navy found cracks in nearly identical
    locations on opposite sides of the ship. I understand that these cracks
    may be indicative of some systematic design issue with the LCS-1. What
    is your view on the reports of cracking in the hull and the limitations
    it puts on the ship's capabilities?
        Mr. Stackley. The cracks detected on LCS-1 are not indicative of a
    systematic design issue on the Freedom variant of the LCS.
        As was briefed to the Senate and House Armed Services Committees
    (SASC/HASC) in March and April 2011, respectively, there were 17 cracks
    discovered on LCS-1 after 30 months of operation (including post
    delivery test and trials, early deployment, and fleet operations).
    There was a single crack in the hull and 16 minor cracks in the
    superstructure.
        The hull crack was discovered in February 2011 while LCS-1 was
    undergoing heavy weather trials off the coast of Northern California. A
    limitation to the safe operating envelope was implemented until the
    crack was repaired. The hull crack was attributed to a weld defect and
    undersized backing chocks, both of which exposed that area to higher
    than expected stress. The hull crack was repaired during a Continuous
    Maintenance Availability (CMAV) in February/March 2011 and the safe
    operating envelope restriction was lifted, allowing the ship to resume
    all ranges of speeds and operations. During a subsequent post shakedown
    availability, the undersized chocks were replaced. In addition, design
    changes were implemented on LCS-3 to ease accessibility to that area of
    the hull during construction to facilitate welding.
        Regarding the 16 superstructure cracks, the investigation found 11
    of these cracks coincide with high stress areas discovered in
    subsequent detailed structural modeling and analysis and 6 of the
    cracks had some form of workmanship issue during either construction or
    post delivery. All of these cracks have been repaired. Based on
    additional analysis, the LCS-3 design was modified to reduce the
    stresses in the superstructure. Design modifications from LCS-3 have
    been incorporated into LCS-1 and no further design-related
    superstructure cracking risk is anticipated for the LCS-1 design.
        In summary, the cracks are not indicative of a systematic design
    issue on LCS-1. The Navy has been proactive in discovering the root
    cause of the cracks and implementing design and production improvements
    on all of the follow ships of the Freedom variant.

        2. Senator Reed. Secretary Stackley, are cracks in nearly identical
    locations on opposite sides of the ship, as apparently were identified
    in the LCS-1, indicative of a systematic flaw in the design of the LCS-
    1, and if so, how will the Navy address this issue?
        Mr. Stackley. The cracks detected on LCS-1 are not indicative of a
    systematic design issue on the Freedom variant of the LCS.
        As Navy briefed to the SASC/HASC in March and April 2011,
    respectively, there were 17 cracks discovered on LCS-1 after 30 months
    of operation (including post delivery test and trials, early
    deployment, and fleet operations). There was a single crack in the hull
    and 16 minor cracks in the superstructure. The small subset of the 16
    superstructure cracks that were mirrored on the opposite side of the
    ship was also detailed in the congressional briefs.
        The hull crack was discovered in February 2011 while LCS-1 was
    undergoing heavy weather trials off the coast of Northern California. A
    limitation to the safe operating envelope was implemented until the
    crack was repaired. The hull crack was attributed to a weld defect and
    undersized backing chocks, both of which exposed that area to higher
    than expected stress. The hull crack was repaired during a CMAV in
    February/March 2011 and the safe operating envelope restriction was
    lifted, allowing the ship to resume all ranges of speeds and
    operations. During a subsequent post shakedown availability, the
    undersized chocks were replaced. In addition, design changes were
    implemented on LCS-3 to ease accessibility to that area of the hull
    during construction to facilitate welding.
        Regarding the 16 superstructure cracks, the investigation found 11
    of these cracks coincide with high stress areas discovered in
    subsequent detailed structural modeling and analysis and 6 of the
    cracks had some form of workmanship issue during either construction or
    post delivery. All of these cracks have been repaired. Based on
    additional analysis, the LCS-3 design was modified to reduce the
    stresses in the superstructure. Design modifications from LCS-3 have
    been incorporated into LCS-1 and no further design related
    superstructure cracking risk is anticipated for the LCS-1 design.
        In summary, the cracks are not indicative of a systematic design
    issue on LCS-1. The Navy has been proactive in discovering the root
    cause of the cracks, and implementing design and production
    improvements on all of the follow ships of the Freedom variant.

        3. Senator Reed. Secretary Stackley and Admiral Blake, I also
    understand that during transit from Mayport, FL, to its homeport in San
    Diego, CA, the LCS-1 experienced a number of equipment failures,
    perhaps as many as 80 such failures, and at least once the ship lost
    all electricity, temporarily leaving her adrift at sea. Nevertheless,
    the committee has received favorable testimony on the LCS, including
    testimony from Secretary Mabus, who praised the performance of the
    ship, testifying that: ``LCS-1, the Freedom, demonstrated some of the
    things we can expect during her maiden deployment earlier this year,''
    and then-Chief of Naval Operations (CNO), Admiral Gary Roughead,
    stating: ``I deployed the LCS earlier than any other ship class to
    assure we were on the right path operationally. It is clear to me that
    we are.'' Are these two testimonies inconsistent with the LCS-1
    performance during that transit?
        Mr. Stackley and Admiral Blake. No, these two testimonies are not
    inconsistent. Throughout its deployment, USS Freedom (LCS-1) safely
    operated and conducted its mission. Few of the 80 equipment failures
    cited above were mission critical. The ship did experience a brief loss
    of power; however, it should be noted that many commercial and U.S.
    Navy vessels have periods of power loss due to plant set-up and
    operator control. In the event of power loss, there are specific Navy
    procedures documented in the Engineering Operational Sequencing System
    (EOSS) to quickly restore power throughout the ship. To address
    concerns documented with electric power generation, the LCS Program
    executed Electric Plant Reliability Improvement Programs on both ship
    designs to increase reliability of ship service diesel generators and
    the performance and management of the shipboard electrical systems.
    This has resulted in changes that have been implemented through post
    delivery availabilities on LCS-1 and LCS-2 as well as captured for LCS-
    3 and follow ships. Additionally, sensors were installed to monitor
    performance trends.
        LCS-1 arrived in San Diego on April 23, 2010, successfully
    completing her maiden deployment having traveled 6,500 miles, including
    transiting the Panama Canal. Highlights of operations in 3rd and 4th
    Fleet Areas of Responsibility include theater security cooperation port
    visits in Colombia, Panama, and Mexico, successful performance of
    strike group operations with the USS Carl Vinson Carrier Strike Group,
    joint maneuvers with the Mexican Navy, and counter-illicit trafficking
    patrols which resulted in four interdictions yielding over five tons of
    cocaine, two seized vessels, and nine suspected smugglers taken into
    custody. The second phase of the early deployment included LCS-1
    participating in the bi-annual Rim of the Pacific (RIMPAC) exercise
    with 14 other nations, 34 ships, 5 submarines, 100 aircraft, and over
    20,000 personnel. The early deployment included the development of a
    coordinated logistics support plan. The lessons learned from the LCS-1
    deployment have provided critical data to inform the permanent support
    plan for the 55 ships of the LCS class, as well as valuable information
    used in the construction of both LCS-3 and the block buy ships.

        4. Senator Reed. Secretary Stackley, does the experience with the
    cracks and other equipment failures call into question the
    survivability of the LCS-1 in a hostile combat environment?
        Mr. Stackley. The cracks and other equipment failures experienced
    by LCS-1 do not call into question the survivability. These types of
    issues are not uncommon to first of class ships and the Navy has
    corrected the underlying technical issues.
        LCS ships are built to meet JROC-approved survivability
    requirements and include OPNAVINST 9070.1 Level 1 Survivability
    standards. The LCS design specifically includes Level 1 plus additional
    tailored survivability enhancements (``Level 1+''). LCS survivability
    depends on a combination of ship design, ship numbers, and ship CONOPS
    which says LCS will:

             Operate as part of a networked battle force

                     Independent operations in low- to medium-
                    threat scenarios
                     Part of a networked battle force ops in high
                    threat environments

             Create Battle Space/Avoid being hit

                     Reliance on networked battle force for threat
                    attrition
                     Reliance on offboard systems

             Fight and survive if hit

                     Ship design: Accept ship mission kill; keep
                    ship afloat and protect crew after hit
                     Battle force design: Maintain battle force
                    fight-through capability through LCS numbers and
                    mission flexibility

             Withdraw/reposition if hit-LCS is designed to maintain
            essential mobility after a hit allowing the ship to exit the
            battle area under its own power. The LCS systems allow ship's
            crew to navigate and communicate while repositioning after a
            hit all the while utilizing numbers (of LCSs), and CONOPS as
            force multipliers. LCS incorporates survivability systems to
            perform required missions in the littoral with an emphasis on
            crew survival.

        5. Senator Reed. Secretary Stackley, can the Navy ensure that these
    issues with the LCS program will be addressed before follow-on ships
    are delivered?
        Mr. Stackley. Yes. The LCS program incorporates lessons learned
    during construction of the lead ship of both LCS variants. For example,
    the Navy has implemented design modifications and production process
    improvements on LCS-3 and follow-on hulls to correct the superstructure
    cracking experienced. The LCS program has collected data on the lead
    ships, executed design reviews/design updates, and continues to
    implement those findings into the follow-on ships as required. In
    addition, those findings have led to upgrades and changes on LCS-1 and
    LCS-2 to ensure that these research and development (R&D) hulls are
    fully operational fleet assets.

        6. Senator Reed. Secretary Stackley, if you are unable to fix these
    issues, would that result in a need to discontinue the Navy's dual-
    source acquisition strategy?
        Mr. Stackley. As a result the of lessons learned from LCS-1 and
    LCS-2, the risk of discontinuing the dual-source block buy continues to
    decrease as the program matures. The Navy has implemented design
    modifications and production process improvements on LCS-3 and follow-
    on hulls to correct the superstructure cracking experienced on LCS-1.
    In addition, the lessons-learned have led to upgrades and changes on
    LCS-1 and LCS-2 to ensure that these R&D hulls are fully operational
    fleet assets.

        7. Senator Reed. Secretary Stackley, I also understand that the
    Director of Operational Test and Evaluation (DOT&E) may not have
    released any formal developmental test and evaluation (T&E) reports.
    Does this lack of releasing reports in any way reflect the fact that
    the Navy and the DOT&E are not cooperating effectively on the LCS
    program?
        Mr. Stackley. No. The LCS Program Office has been working in close
    coordination with the DOT&E community since the early days of the
    program. DOT&E has been an active member of the T&E Working-level
    Integrated Program Teams (WIPT) since 2004 and most recently at the OSD
    level in the Milestone-related Integrating IPTs (IIPT) and Overarching
    IPTs (OIPT) that occurred in 2011. The Navy is actively developing the
    required reports documenting the results of all the developmental
    testing that has occurred on LCS-1. Once completed, these reports will
    be delivered to DOT&E.

        8. Senator Reed. Secretary Stackley, how will you ensure that the
    Navy works more closely with the DOT&E on the LCS program and better
    informs the DOT&E and Congress of vulnerabilities with the LCS during
    the T&E process?
        Mr. Stackley. The LCS Program Office has been working in close
    coordination with the DOT&E community since the early days of the
    program. DOT&E has been an active member of the T&E WIPTs since 2004
    and most recently at the OSD level in the IIPTs and OIPTs that occurred
    in 2011. The Navy provided Draft Detail Design Integrated Survivability
    Assessment Reports (DDISAR) to DOT&E in the second quarter of fiscal
    year 2012, in advance of completion of modeling results and shot line
    selections. DOT&E and the Program Office now are working jointly to
    complete the DDISARs before planning and conduct of the Total Ship
    Survivability Trials (TSST) to assess seaframe survivability in fiscal
    year 2014. Additionally, the LCS Program Office provided a draft of the
    57mm Live Fire T&E Management Plan to OSD/DOT&E on March 29, 2012, and
    received comments on April 3, 2012. Comment resolution is in process.
                                     ______

                  Questions Submitted by Senator Kay R. Hagan
                                amphibious ships
        9. Senator Hagan. General Mills, in 2009, the Navy identified the
    requirement for 38 amphibious ships, but accepted the risk of 33 ships
    due to fiscal constraints. This risk was deemed acceptable based on an
    assumed fleet readiness rate of 90 percent, which would have 30
    operational ships at any given time. The current shipbuilding plan
    shows an average inventory of 29 ships across the Future Years Defense
    Program (FYDP) and historical trends demonstrate amphibious ship
    readiness well below the assumed rate of 90 percent, closer to 80
    percent. The shipbuilding plan doesn't get us to the required number of
    32 or 33 amphibious ships, depending on the year of the report, until
    2022. What impact, if any, has amphibious ship availability had on
    readiness?
        General Mills. One Marine Expeditionary Brigade (MEB) assault
    echelon requires 17 operationally available amphibious warships and we
    require a minimum of two MEBs to meet combatant commander requirements.
    These ships, along with the requisite number of ship-to-shore
    connectors, represent the minimum number of ships needed to provide the
    Nation with a sea-based power projection capability for full spectrum
    amphibious operations. Fiscal constraints reducing this operational
    availability down to 30 ships have already required us to assume risk,
    not only in quantities, but also the speed with which we can respond.
    As of May 2012, there are 28 ships in the Navy's amphibious fleet, with
    3 scheduled for decommissioning and 4 new ships under construction in
    the yards. Within the coming FYDP, the inventory will decline in fiscal
    year 2014 before rising to an average of 30 amphibious warships over
    the next 30 years. The key to meeting amphibious lift requirements with
    acceptable risk is maintaining a fleet which provides 30 operationally
    available ships.
        Shortfall in amphibious lift remains a concern as we work with the
    CNO and his staff to mitigate risk in meeting the amphibious lift
    requirement. We are aggressively reviewing our amphibious concepts,
    doctrine, and plans and have recently developed an Ellis Group
    specifically charged with developing innovative solutions to overcome
    these obstacles and look for new methods given these amphibious ship
    shortfalls.

        10. Senator Hagan. General Mills, what level of risk is being
    assumed across the FYDP?
        General Mills. The combatant commanders' cumulative operational
    demand for amphibious ships falls into three basic categories: forward
    presence and engagement; crisis response; and operations plans. While
    operations plans amphibious warship requirements have remained
    consistent, the demand for the first two categories has dramatically
    increased in the post-Cold War era. In the past 20 years, U.S.
    amphibious forces have responded to crises and contingencies well over
    100 times, a response rate that approximately doubles that of the Cold
    War. Furthermore, during the same period, forward-postured amphibious
    forces have continually conducted sea-based security cooperation with
    international partners--reflecting the philosophy espoused in the
    Maritime Strategy that preventing war is as important as winning wars.
        An inventory of 33 ships allows the Navy/Marine Corps team to: meet
    desired presence goals; fully supports our ability to build
    partnerships through engagement; and respond to crisis. Optimally,
    deploying 3 forward ARG/MEUs and 2 enhanced MPSRONs--each with an MLP
    and T-AKE integrated into the squadron--provides the Nation the ability
    to respond to small to large scale crisis within 7-10 days. These
    ships, equipment, marines, and sailors are the same capability used to
    strengthen our relationships worldwide and provide a strategic
    ``buffer'' protecting our interests and a global economy and stability.
    Rotational Amphibious Ready Groups and Marine Expeditionary Units form
    together to provide forward deployed naval forces in four Geographic
    Combatant Command areas of responsibility.
        In addition to forward presence and episodic crises response, we
    maintain the requirement for an amphibious warship fleet for
    contingencies requiring our role in joint operational access. One MEB
    assault echelon requires 17 operationally available amphibious warships
    and we require a minimum of 2 MEBs to meet combatant commander
    requirements. These ships, along with the requisite number of ship-to-
    shore connectors, represent the minimum number of ships needed to
    provide the Nation with a sea-based power projection capability for
    full spectrum amphibious operations. As of May 2012, there are 28 ships
    in the Navy's amphibious fleet, with 3 scheduled for decommissioning
    and 4 new ships under construction in the yards. Within the coming
    FYDP, the inventory will decline in fiscal year 2014 before rising to
    an average of 30 amphibious warships over the next 30 years. Fiscal
    constraints reduce operational availability down to 30 ships, based on
    an inventory of 33 ships, which requires us to assume risk, not only in
    quantities, but also the speed with which we can respond. The key to
    meeting amphibious lift requirements with acceptable risk is
    maintaining a fleet which provides 30 operationally available ships for
    the 3 categories described.

        11. Senator Hagan. General Mills, how important are amphibious
    ships and other amphibious capabilities to your plans to distribute
    forces throughout the Pacific?
        General Mills. The geographic realities of the Pacific theater
    demand naval responsiveness. The genesis of the amphibious and power
    projection capabilities of the Navy and Marine Corps traces back more
    than 70 years to operations in the Pacific--where today key terrain and
    strategic chokepoints are separated by large expanses of ocean. The
    Pacific theater is where 30 percent of the world's population and the
    same percentage of our primary trading partners reside; where five
    major defense treaties are focused; where 50 percent of the world's
    megacities are situated; and where natural disasters over the past
    decade have required the greatest attention from the international
    community. The geography of the Pacific has not changed, though our
    tactics and operations continually evolve with the changing character
    and lethality of modern warfare. Approximately 24,000 marines already
    in the Pacific conduct an ambitious, annual training cycle of more than
    80 exercises, engagements, and initiatives, in addition to the crises
    we respond to such as Operation Tomodachi in Japan last year.
        Forward presence involves a combination of land- and sea-based
    naval forces. Our enduring bases and presence have served U.S. National
    Security interests well for decades. Our rotational presence in
    locations such as Japan, Korea, Australia, the Philippines, Thailand,
    and Singapore reassures our allies and partners. Sea-basing, the act of
    using amphibious warships with support from maritime prepositioned
    ships with various types of connectors is uniquely suited to provide
    the geographic combatant commander with the flexibility to deploy
    forces anywhere in the Pacific region without having to rely on
    multiple bases ashore or imposing our presence on a sovereign nation.
    Sea-basing enables forward deployed presence at an affordable cost.
    Forward-deployed naval forces serve as a deterrent and provide a
    flexible, agile response capability for crises or contingencies.
    Maritime prepositioning offers the ability to rapidly support and
    sustain Marine Corps forces in the Pacific during training, exercises,
    or emerging crises, and delivers the full range of logistical support
    those forces require.

        12. Senator Hagan. General Mills, what is the current amphibious
    ship requirement?
        General Mills. One MEB assault echelon requires 17 operationally
    available amphibious warships and we require a minimum of 2 MEBs to
    meet combatant commander requirements. These ships, along with the
    requisite number of ship-to-shore connectors, represent the minimum
    number of ships needed to provide the Nation with a sea-based power
    projection capability for full spectrum amphibious operations. Fiscal
    constraints reducing this operational availability down to 30 ships
    have already required us to assume risk, not only in quantities, but
    also the speed with which we can respond. As of May 2012, there are 28
    ships in the Navy's amphibious fleet, with 3 scheduled for
    decommissioning and 4 new ships under construction in the yards. Within
    the coming FYDP, the inventory will decline in fiscal year 2014 before
    rising to an average of 30 amphibious warships over the next 30 years.
    The key to meeting amphibious lift requirements with acceptable risk is
    maintaining a fleet which provides 30 operationally available ships.

        13. Senator Hagan. Admiral McCoy, why don't we have these ships now
    or expect to have them anytime soon for that matter?
        Admiral McCoy. The Navy remains committed to providing 30
    operationally available amphibious ships to meet naval amphibious lift
    demand. Although budgetary pressures have led us to shift priorities
    elsewhere in the short-term and the future fiscal environment is
    unclear, the Navy can achieve this goal by sustaining an inventory of
    about 32 amphibious ships in the mid- to long-term.
        The 32-ship amphibious force we are procuring to support this need
    will optimally be comprised of 11 LHA/D, 11 LPD-17, and 10 LSD. Our
    proposed delivery/decommissioning profile will meet historical sourcing
    for Amphibious Ready Groups.
        The 30-year shipbuilding plan procures the first LHA(R) Flight 1
    amphibious assault ship in fiscal year 2017, 1 year later than
    originally expected. Current plans call for this ship to include a well
    deck and a reduced island to improve its surface and aerial assault
    capabilities. Additionally, the plan delays decommissioning of an
    amphibious assault ship (LHA-5) from fiscal year 2014 to fiscal year
    2015 to maintain large deck amphibious ships in the inventory pending
    LHA-6 delivery to the fleet. The Navy will continue to procure Flight I
    LHA(R) amphibious assault ships in the mid-term period. Three of these
    large, multi-purpose warships will be built every 4 years, starting in
    fiscal year 2024.
        The 30-year shipbuilding plan procures the first LSD(X), the
    replacement for LSD-41 and -49 dock landing ships, in fiscal year 2018.
    Three of the 10 planned LSD(X)s are to be procured in the near-term
    planning period with the remaining 7 ships procured during the mid-term
    planning period; the last coming in fiscal year 2032. As the first of
    these legacy ships will not retire until fiscal year 2026, this
    procurement action is ahead of need; it is being taken primarily to
    preserve the shipbuilding industrial base and to maintain a long-term
    total amphibious inventory at or slightly above 32 ships. The
    additional ships in the inventory will help reduce the risk associated
    with generating the 30 operationally available amphibious ships needed
    to meet amphibious lift demand.

        14. Senator Hagan. Admiral McCoy, why, with fewer ships this year
    than last, are we looking to decommission two more amphibious ships?
        Admiral McCoy. The decision to inactivate certain fleet assets was
    made to maintain the proper mix of capability in the battle force and
    provide a fiscal pathway to sustain, modernize, and update the existing
    and future fleet while maintaining an industrial base.

             The Navy plans to transfer 2 of 12 LSDs to the
            inactive fleet and delay procurement of LSD(X). This will
            maintain an adaptable amphibious landing force of approximately
            30 ships.

        In the short-term, we are accepting risk to aviation and vehicle
    lift. We may be able to reduce the risk by relying more heavily on
    carrier tactical aviation for close air support and by delivering
    additional support vehicles via Mobile Landing Platform (MLP) and/or
    Joint High Speed Vessel (JHSV) to support ground maneuver. This
    decision reflects the judicious use of limited resources while
    balancing operational risk.
                                     ______

                 Questions Submitted by Senator Roger F. Wicker
                       cvn-78 ford-class aircraft carrier
        15. Senator Wicker. Secretary Stackley and Admiral McCoy, it is
    likely that the cost to complete construction of the USS Gerald R. Ford
    aircraft carrier will overrun significantly. What new approaches will
    the Navy take to ensure that the Ford-class carrier's costs get under
    control?
        Mr. Stackley and Admiral McCoy. The Navy's ongoing efforts to
    control cost in the CVN-78 class are detailed in the March 26, 2012
    letter from the Secretary of the Navy to Senators Levin and McCain.
    Strategies to incorporate lessons learned from CVN-78 and apply them to
    CVN-79 are described below.
    Improving Cost Performance on CVN-78
        Cost growth to date is attributable to increases in design,
    contractor furnished material, government furnished material (notably,
    the Electromagnetic Aircraft Launching System (EMALS) and the Dual Band
    Radar (DBR)), and production labor performance. To achieve the best
    case outcome, the program must execute with zero additional cost growth
    in design and material procurement, and must improve production
    performance. The Navy and the shipbuilder have implemented a series of
    actions and initiatives in the management and oversight of CVN-78 that
    cross the full span of contracting, design, material procurement,
    government furnished equipment, production planning, production,
    management, and oversight.
        CVN-78 is being procured within a framework of cost plus contracts.
    Within this framework, however, the recent series of action taken by
    the Navy to improve contract effectiveness are achieving the desired
    effect of incentivizing improved cost performance and reducing
    government exposure to further cost growth.

             CVN-78 design has been converted from a level of
            effort, fixed fee contract to a completion contract with a firm
            target and incentive fee. Shipbuilder cost performance has been
            on target or better since this contract was changed.
             CVN-78 construction fee has been retracted, consistent
            with contract performance. However, the shipbuilder is
            incentivized by the contract shareline to improve upon current
            performance to meet agreed-to cost goals.
             Contract design changes are under strict control;
            authorized only for safety, damage control, mission-degrading
            deficiencies, or similar. Adjudicated changes have been
            contained to less than 1 percent of contract target price.
             The Navy converted the EMALS and AAG production
            contract to a firm, fixed-price contract, capping cost growth
            to that system and imposing penalties for late delivery.
             Naval Sea Systems Command is performing a review of
            carrier specifications with the shipbuilder, removing or
            improving upon overly burdensome or unneeded specifications
            that impose unnecessary cost on the program.

        The largest impact to cost performance to date has been contractor
    and government material cost overruns. These issues trace to lead ship
    complexity and CVN-78 concurrency, but they also point to inadequate
    accountability for carrier material procurement, primarily during the
    ship's advance procurement period (2002-2008). These effects cannot be
    reversed on CVN-78, but it is essential to improve upon material
    delivery to the shipyard to mitigate the significant impact of material
    delays on production performance. Equally important, the systemic
    material procurement deficiencies must be corrected for CVN-79. To this
    end, the Navy and shipbuilder have taken the following actions.

             The Navy has employed outside supply chain management
            experts to develop optimal material procurement strategies. The
            Navy and the shipbuilder are reviewing remaining material
            requirements to employ these best practices (structuring
            procurements to achieve quantity discounts, dual-sourcing to
            improve schedule performance and leverage competitive
            opportunities, etc.).
             The shipbuilder has assigned engineering and material
            sourcing personnel to each of their key vendors to expedite
            component qualifications and delivery to the shipyard.
             The shipbuilder is inventorying all excess material
            procured on CVN-78 for transfer to CVN-79 (cost reduction to
            CVN-78), as applicable.
             The Program Executive Officer (Carriers) is conducting
            quarterly flag-level government furnished equipment summits to
            drive cost reduction opportunities and ensure on-time delivery
            of required equipment and design information to the
            shipbuilder.

        The most important finding regarding CVN-78 remaining cost is that
    the CVN-78 build plan, consistent with the Nimitz class, focuses
    foremost on completion of structural and critical path work to support
    launching the ship on schedule. This emphasis on structure comes at the
    expense of completing ship systems, outfitting, and furnishing early in
    the build process and results in costly, labor-intensive system
    completion activity during later, more costly stages of production.
    Achieving the program's cost improvement targets will require that CVN-
    78 increase its level of completion at launch, from current estimate of
    60 percent to no less than 65 percent. To achieve this goal and drive
    greater focus on system completion:

             The Navy fostered a collaborative build process review
            by the shipbuilder with other tier-1 private shipyards in order
            to benchmark its performance and identify fundamental changes
            that would yield marked improvement;
             The shipbuilder has established specific launch
            metrics by system (foundations, machinery, piping, power
            panels, vent duct, lighting, etc.) and increased staffing for
            waterfront engineering and material expediters to support
            meeting these metrics;
             The shipbuilder has linked all of these processes
            within a detailed integrated master schedule, providing greater
            visibility to current performance and greater ability to
            control future cost and schedule performance across the
            shipbuilding disciplines;
             The Navy and shipbuilder are conducting Unit Readiness
            Reviews of CVN-78 erection units to ensure that the outfitted
            condition of each hull unit being lifted into the dry-dock
            contains the proper level of outfitting.

        These initiatives, which summarize a more detailed list of actions
    being implemented and tracked as result of the end-to-end review, are
    accompanied by important management changes.

             The shipbuilder has assigned a new Vice President in
            charge of CVN-78, a new Vice President in charge of material
            management and purchasing, and a number of new general shop
            foremen to strengthen CVN-78 performance.
             The Navy has assigned a second tour flag officer with
            considerable carrier operations, construction, and program
            management experience as the new Program Executive Officer
            (PEO).
             The PEO and shipyard president conduct bi-weekly
            launch readiness reviews focusing on cost performance, critical
            path issues, and accomplishment of the target for launch
            completion.
             The Assistant Secretary of the Navy (Research,
            Development, and Acquisition) conducts a monthly review of
            program progress and performance with the PEO and shipbuilder,
            bringing to bear the full weight of the Department, as needed,
            to ensure that all that can be done to improve on cost
            performance is being done.

        Early production performance improvements can be traced directly to
    these actions, however, significant further improvement is required. To
    this end, the Navy is conducting a line-by-line review of all cost-to-
    go on CVN-78 to identify further opportunity to reduce cost and to
    mitigate risk.
    Improving Cost Performance on CVN-79
        CVN-79 advance procurement commenced in 2007 with advance
    construction activities following in 2011. Authorization for CVN-79
    procurement is requested in the fiscal year 2013 President's budget
    request with the first year of incremental funding. Two years have been
    added to the CVN-79 production schedule in this budget request,
    afforded by the fact that CVN-79 will replace CVN-68 when she
    inactivates. To improve affordability for CVN-79, the Navy plans to
    leverage this added time by introducing a fundamental change to the
    carrier procurement approach and a corresponding shift to the carrier
    build plan, while incorporating CVN-78 lessons learned.
        The two principal documents which the Navy and shipbuilder must
    ensure are correct and complete at the outset of CVN-79 procurement are
    the design and the build plan.
        Design is governed by rules in place that no changes will be
    considered for the follow ship except changes necessary to correct
    design deficiencies on the lead ship, fact-of-life changes to correct
    obsolescence issues, or changes that will result in reduced cost for
    the follow ship. Exceptions to these rules must be approved by the JROC
    or designee. Accordingly, the Navy is requesting procurement authority
    for CVN-79 with the Design Product Model complete and construction
    drawings approximately 95 percent complete (compared to approximately
    30 percent complete at time of lead ship authorization).
        As well, first article testing and certification will be complete
    for virtually all major new equipments introduced in the Ford-class. At
    this point in time, the shipbuilder has developed a complete bill of
    material for CVN-79. The Navy is working with the shipbuilder to ensure
    that the contractor's material estimates are in-line with Navy should
    cost estimates; eliminating non-recurring costs embedded in lead ship
    material, validating quantities, validating escalation indices,
    incorporating lead ship lessons learned. The Navy has increased its
    oversight of contractor furnished material procurement, ensuring that
    material procurement is competed (where competition is available); that
    it is fixed priced; that commodities are bundled to leverage economic
    order quantity opportunities; and that the vendor base capacity and
    schedule for receipt supports the optimal build plan being developed
    for production.
        In total, the high level of design maturity and material
    certification provides a stable technical baseline for material
    procurement cost and schedule performance, which are critical to
    developing and executing an improved, reliable build plan.
        In order to significantly improve production labor performance,
    based on timely receipt of design and material, the Navy and
    shipbuilder are reviewing and implementing changes to the CVN-79 build
    plan and affected facilities. The guiding principles are:

             Maximize planned work in the shops and early stages of
            construction,
             Revise sequence of structural unit construction to
            maximize learning curve performance through families of units
            and work cells,
             Incorporate design changes to improve Ford-class
            producibility,
             Increase the size of erection units to eliminate
            disruptive unit breaks and improve unit alignment and fairness,
             Increase outfitting levels for assembled units prior
            to erection in the dry-dock,
             Increase overall ship completion levels at each key
            event.

        The shipbuilder is working on detailed plans for facility
    improvements that will improve productivity, and the Navy will consider
    incentives for capital improvements that would provide targeted return
    on investment, such as:

             Increasing the amount of temporary and permanent
            covered work areas,
             Adding ramps and service towers for improved access to
            work sites and the dry-dock,
             Increasing lift capacity to enable construction of
            larger, more fully outfitted super-lifts.

        An incremental improvement to carrier construction cost will fall
    short of the improvement necessary to ensure affordability for CVN-79
    and follow ships. Accordingly, the shipbuilder has established
    aggressive targets for CVN-79 to drive the game-changing improvements
    needed for carrier construction. These targets include:

             75 percent complete at launch (15 percent > Ford);
             85-90 of cable pulled prior to Launch (25-30 percent >
            Ford);
             30 percent increase in front-end shop work (piping
            details, foundations, etc);
             All structural unit hot work complete prior to blast
            and paint;
             25 percent increase to work package throughput;
             100 percent of material available for all work
            packages in accordance with the integrated master schedule;
             Zero delinquent engineering and planning products;
             Resolution of engineering problems in < 8 hours.

        In parallel with efforts to improve shipbuilder costs, the PEO is
    establishing equally aggressive targets to reduce the cost of
    government furnished equipment for CVN-79; working equipment item by
    equipment item with an objective to reduce overall GFE costs by $500
    million. Likewise, the Naval Sea Systems Command is committed to
    continuing its ongoing effort to identify specification changes that
    could significantly reduce cost without compromising safety and
    technical rigor.
        The output of these efforts comprises the optimal build plan for
    CVN-79 and follow, and will be incorporated in the detail design and
    construction baseline for CVN-79. CVN-79 will be procured using a fixed
    price incentive contract.

        16. Senator Wicker. Secretary Stackley and Admiral McCoy, one of
    the many new technologies on the Ford-class aircraft carrier is the
    Electromagnetic Aircraft Launch System (EMALS) and the Advanced
    Arresting Gear. Please describe how these key programs are doing.
        Mr. Stackley and Admiral McCoy. The EMALS is designed for the CVN-
    78-class aircraft carrier. EMALS System Development and Demonstration
    (SDD) program is 87.4 percent complete and currently in the T&E phase.
    T&E status is as follows:

             Highly Accelerated Life Testing (HALT) of trough
            components completed 13,144 cycles of 18,000 planned cycles.
             High Cycle Testing (HCT) of power equipment completed
            32,217 cycles of 40,000 planned cycles.
             Full Scale Catapult System Functional Demonstration
            (SFD) completed:

                     5,648 maneuvers, including 1,622 no-load and
                    2,014 deadload launches
                     Four F/A-18E risk reduction launches in
                    December 2010
                     One F-35C risk reduction launch in November
                    2011
                     Test site is undergoing reconfiguration until
                    July 2012

             Aircraft Compatibility Testing (ACT) Phase I is
            complete;

                     129 aircraft launches including F/A-18E (with
                    and without stores), C-2A, T-45C and E-2D

             Electromagnetic Interference (EMI) tests completed:

                     Weapons (HERO): Electronic Explosive Device
                    response tests
                     Aircraft systems: F/A-18E, T-45C and C-2A
                    tested to EMALS emissions levels in the Patuxent River
                    anechoic chamber. F/A-18E, T-45C, C-2A, E-2D, and F-35C
                    tested at the SFD site against actual EMALS emissions
                     Personnel (HERP): Component testing complete

        The EMALS firm-fixed-price production contract was definitized in
    June 2010 and production is complete or underway on all major
    subsystems. EMALS component deliveries to the shipyard commenced in May
    2011, and the last component will deliver in April 2014. EMALS
    component deliveries to date have met CVN-78 Required In-Yard Dates
    (RIYDs) or have delivered in time to avoid major construction delays.
    EMALS is on track to meet all future CVN-78 RIYDs.
        The Advanced Arresting Gear (AAG) is designed for forward fit in
    CVN-78-class carriers as well as back fit in Nimitz-class carriers. The
    SDD Program is 80 percent complete and in the T&E phase. Test status is
    as follows:

             Extended Reliability Testing (ERT) of components has
            completed 5,610 cycles
             Jet Car Track Site (JCTS) testing has completed:

                     Hardware Commissioning including 13 deadloads
                     Deadload Commissioning including:

                             80 percent of full operating envelope
                            available for test
                             125 deadloads representative of F/A-
                            18E/F, EA-18G, F/A-18C/D, E-2C, C-2A, and T-45
                            recoveries

                     Testing is on hold while system water twisters
                    undergo structural redesign to prevent internal
                    structural failure
                     Estimated return to commissioning is June 2012
                    with commencement of JCTS performance testing in fiscal
                    year 2013

        The AAG firm-fixed-price production effort was definitized in June
    2010 as part of a combined contract with EMALS. Production is underway
    on most major subsystems. The first AAG component deliveries to the
    shipyard occurred in March 2012. Delivery of most major AAG hardware
    will be complete by fall of 2012. Final delivery of the production
    water twisters is under evaluation.

        17. Senator Wicker. Secretary Stackley and Admiral McCoy, will
    these systems meet the required in-yard date for delivery and
    installation on the Ford?
        Mr. Stackley and Admiral McCoy. To date, EMALS has delivered 259
    hardware end items for CVN-78, including 12 schedule-critical energy
    storage subsystem (ESS) motor/generators and 70.5 miles of cable to the
    shipyard. EMALS component deliveries to date have met CVN-78 RIYDs or
    have delivered in time to avoid major construction delays.
        AAG production for CVN-78 is underway on all major subsystems. The
    first AAG component deliveries to the shipyard began in March 2012. To
    date, 142 hardware end items have been delivered to the shipyard
    including 4 of the 8 required electric motors needed to meet 2012 RIYDs
    and 12.6 miles of cable. The Navy and the shipbuilder are coordinating
    revision to the delivery dates for AAG water twisters and purchase
    cable drum assemblies to address component design modifications while
    ensuring minimal impact to ship's build schedule. The remaining 62
    hardware items have either been completed or are in manufacture to meet
    RIYDs later in 2012 and 2013. Installation of AAG hardware is planned
    to begin in late summer of 2012.

          proposed early retirements of cruisers and amphibious ships
        18. Senator Wicker. Admiral Blake, why did the Navy cut seven
    Ticonderoga Aegis-class cruisers early and put two landing ship dock
    (LSD) amphibious ships in reduced operating status?
        Admiral Blake. As a result of fiscal constraints, the Navy chose to
    prioritize readiness over capacity. The fiscal year 2013 decision to
    decommission the cruisers (CG) and LSDs exemplify our resolve to
    provide a more ready and sustainable fleet within our budget
    constraints. The resources made available by these retirements will
    allow increased funding for training and maintenance. Both the cruisers
    and the LSDs were in need of significant maintenance investment and six
    of the seven cruisers required further investment to install BMD
    capability. Inactivating the CGs resulted in approximately $4.1 billion
    in savings across the FYDP, including manpower, helicopters, and
    maintenance savings and costs avoided by not executing combat system
    and hull, mechanical, and electrical upgrades. These savings were
    shifted to other portions of the fleet. Inactivation of the two LSDs in
    fiscal year 2014 saved approximately $293 million each across the FYDP.
    These ships will be placed in Mobilization Category B allowing for
    reactivation should conditions warrant. The reduction in cruiser and
    amphibious capacity and shift to a more sustainable deployment model
    will result in some reductions to the amount of presence the Navy will
    provide overseas in some select areas, or a change in the nature of
    that presence to favor innovative and lower-cost approaches. This
    decision supports wholeness of the force by not having more force
    structure than we can afford to maintain, equip, and man.

        19. Senator Wicker. Admiral Burke, how does retiring seven
    Ticonderoga Aegis-class cruisers early and putting two LSD amphibious
    ships in reduced operating status square away with the Secretary of
    Defense's new strategic guidance, which puts renewed emphasis on the
    Asia-Pacific region?
        Admiral Blake. The Navy can meet the Defense Strategic Guidance
    with the current and projected force structure provided in Navy's
    President's budget for 2013 submission. Keeping these ships that are
    increasingly expensive to maintain and operate, in service, would
    divert funding from other programs vital to the Navy's mission,
    including the modernization and procurement of ships critical to fleet
    needs, and compete for scarce operations and maintenance dollars to
    sustain fleet readiness.
        Consistent with the Defense Strategic Guidance, the Navy will
    posture continuous, credible combat power in the Western Pacific and
    the Arabian Gulf/Indian Ocean to protect our vital interests, assure
    friends and allies, and deter potential adversaries. Naval forces
    remain flexible and agile, able to swing rapidly in response to
    emergent high priority requirements in other theaters, as well as to
    surge from U.S. homeports in the event of crises. The Navy can meet
    these challenges under our current operational tempo and deployment
    lengths.
        As reported in the Annual Report to Congress on Long-Range Plan for
    Construction of Naval Vessels for Fiscal Year 2013, all nine ships
    being retired will be placed in Out of Commission in Reserve Status
    (OCIR) and not in Reduced Operating Status (ROS).

        20. Senator Wicker. Admiral Burke, what is the Navy doing to enable
    it to reactivate at a later date the seven cruisers it plans to retire
    early?
        Admiral Blake. The Addendum to the Report to Congress on the Long-
    Range Plan for the Construction of Naval Vessels in Fiscal Year 2013
    indicates the seven cruisers will be designated to be retained in an
    OCIR status. The seven cruisers will undergo a standard inactivation
    program and be placed in a Mobilization Category B status, which
    includes dehumidification and cathodic protection to prepare them for
    long-term storage and potential future reactivation. In the future, if
    a decision to return any/all of the cruisers to service is made, the
    Navy will have to determine the cost and duration of the activation
    availability needed to recommission these ships in a meaningful combat
    status after assessing individual ship material readiness and
    determining the required warfighting capability upgrades necessary to
    return the ship(s) to operation.

        21. Senator Wicker. Admiral Burke, what are the potential
    operational implications of these early retirements?
        Admiral Blake. The primary operational impact will be fewer assets
    to address geographic combatant commanders' demand. To mitigate the
    impact of early ship retirements, other employment models have been
    adopted. For example, relocating Ballistic Missile Defense (BMD)
    destroyers to Rota, Spain, is one approach to source geographic
    combatant commanders' demand. Innovative amphibious shipbasing concepts
    are more challenging since true capability must include Marine Corps
    resources, training, and embark factors. Nevertheless, Navy will
    continue to explore new employment models to place more capacity
    forward in order to maximize responsiveness and readiness of our force.
        Overall, the current and planned Navy battle force provides a fleet
    capable of sourcing combatant commanders' demands with manageable risk.
    Going forward, our current shipbuilding plan balances the anticipated
    future demand for naval forces with expected resources.

        22. Senator Wicker. Admiral Blake, what would be the cost to keep
    these ships without retiring them?
        Admiral Blake. As a result of fiscal constraints, the Navy chose to
    prioritize readiness over capacity. The fiscal year 2013 decision to
    decommission the CGs and LSDs exemplify our resolve to provide a more
    ready and sustainable fleet within our budget constraints. The
    resources made available by these retirements will allow increased
    funding for training and maintenance. The reduction in cruiser and
    amphibious capacity and shift to a more sustainable deployment model
    will result in some reductions to the amount of presence the Navy will
    provide overseas in some select areas, or a change in the nature of
    that presence to favor innovative and lower-cost approaches. This
    decision supports wholeness of the force by not having more force
    structure than we can afford to man, train, and equip.
        Based on additional analysis, the cost to retain and fully
    modernize the following three CGs scheduled for decommissioning in
    fiscal year 2013 (USS Cowpens (CG-63), USS Anzio (CG-68), and USS
    Vicksburg (CG-69)), including BMD upgrade and MH-60R helicopter
    procurement, is:

             Fiscal Year 2013: $640 million
             Fiscal Year 2014: $590 million
             FYDP: $2.7 billion

        The cost to retain and fully modernize the remaining cruisers is
    dependent upon the decisions to be made in fiscal year 2013.
        The Navy estimates overall cost to retain and modernize, maintain,
    man, and equip the two LSDs proposed for decommission is:

             Fiscal Year 2013: $63 million
             Fiscal Year 2014: $105 million
             FYDP: $512 million

        23. Senator Wicker. Admiral Blake, the Department of Defense has
    cited reversibility in connection with its new strategic guidance. What
    is the Navy doing to enable it to reactivate the seven cruisers at a
    later date after the ships are retired early?
        Admiral Blake. The Addendum to the Report to Congress on the Long-
    Range Plan for the Construction of Naval Vessels in Fiscal Year 2013
    indicates the seven cruisers will be designated to be retained in an
    OCIR status. The seven cruisers will undergo a standard inactivation
    program and be placed in a Mobilization Category B status, which
    includes dehumidification and cathodic protection to prepare them for
    long-term storage and potential future reactivation. In the future, if
    a decision to return any/all of the cruisers to service is made, the
    Navy will have to determine the cost and duration of the activation
    availability needed to recommission these ships in a meaningful combat
    status after assessing individual ship material readiness and
    determining the required warfighting capability upgrades necessary to
    return the ship(s) to operation.
                                     ______

                Questions Submitted by Senator Susan M. Collins
                         multiyear procurement savings
        24. Senator Collins. Secretary Stackley, at a recent House Armed
    Services Committee hearing regarding Navy ship acquisition, industry
    officials testified that multiyear procurements (MYP) are incredibly
    important in terms of stability for the workforce, achieving efficient
    ship construction compared to annual procurements and reducing overall
    costs. Please discuss the affordability and possible savings achieved
    by an MYP for the DDG-51 destroyer program.
        Mr. Stackley. A MYP achieves affordability for the Navy by enabling
    industry to maintain a stable workforce which in turn facilitates
    efficiencies in the shipbuilding process including planning,
    scheduling, and material purchasing efforts. The MYP also enables the
    contractor to buy materials in economic order quantities providing for
    additional savings during construction. In addition, MYP contracts
    drive a more stable design configuration reducing the amount and cost
    of engineering changes over the course of the construction cycle. For
    the DDG-51 fiscal years 2013-2017 MYP, the Navy estimates a cost
    savings of $1.5 billion during the next 5 years, a net savings of 8.7
    percent, in comparison to single year procurements over the same
    timeframe. A detailed breakdown of the savings is provided below:

                     importance to the fleet of the ddg-51
        25. Senator Collins. Admiral Blake, at a recent House Armed
    Services Committee hearing regarding Navy ship acquisition, you were
    asked: ``what would the Navy have preferred to see stay in the budget
    if you had more resources?'' Your response was, ``the DDG and the SSN
    that we had to give up in 2014.'' Please elaborate on this answer.
        Admiral Blake. The projected Navy 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. In the current budget
    environment, the Navy must carefully prioritize its commitments in the
    various areas of responsibility. Removing the DDG and SSN from the
    budget was purely a financial decision as, over the next decade, the
    Navy will see a decline in its DDG and SSN inventory resulting from the
    large number of Aegis CGs and Los Angeles-class SSNs reaching the end
    of their service lives. Buying additional DDGs and SSNs in the near
    term, provided they are affordable and do not disrupt other priorities,
    would help address this growing gap between the supply of these multi-
    purpose warships and the combatant commanders' demands for more assets.

        26. Senator Collins. Admiral Blake, please describe the importance
    and flexible capabilities of these additional platforms in the context
    of the new defense strategy.
        Admiral Blake. The DDG-51 destroyer operates independently or as
    part of a carrier strike group (CSG), surface action group, or in
    support of Marine amphibious task force in environments that include
    air, surface, and subsurface threats. Fiscal year 2010 and follow on
    DDG-51s also provide BMD. These ships respond to low intensity
    conflict, coastal, and littoral offshore warfare scenarios as well as
    open ocean conflict by providing power projection and forward presence
    and conducting escort operations at sea.
        The Virginia-class nuclear-powered attack submarine's high
    endurance and covert nature make it an ideal platform for anti-access/
    area denial environments. The complement of sensors, torpedoes, and
    Tomahawk missiles enable the Virginia-class submarine to execute
    missions including anti-submarine warfare, anti-surface warfare, strike
    warfare, intelligence surveillance and reconnaissance, and special
    warfare.
        These two multi-mission warships would provide additional capacity
    and enhance the Navy's ability to accomplish the primary missions set
    out in the new Defense Strategic Guidance, including deter and defeat
    aggression, project power despite anti-access/area denial challenges,
    and stabilizing global presence.

                        force structure and requirements
        27. Senator Collins. Admiral Blake, in recent years, I have
    repeatedly cited the analyses of the 2010 Quadrennial Defense Review
    Independent Panel and the Center for New American Security that have
    called for a fleet of 328 ships or more, even as each CNO since 2005
    has said that 313 ships is the minimum number required. You testified
    last month that the unconstrained combatant command is probably about
    500 ships. That is 100 ships more than Admiral Greenert testified
    before Congress last year when he was still at Fleet Forces Command,
    and 215 ships more than we will have in our fleet now or we will have
    in 5 years. This week at the Sea-Air-Space Symposium, the CNO indicated
    the Navy cannot run at its current pace for much longer, that the pace
    of operations is unsustainable. In your view, how do we address this
    problem?
        Admiral Blake. The Navy is addressing the current unsustainable
    pace of operations through our fiscal year 2013 budget submission. The
    Navy plans to prioritize improving readiness over capacity and shift to
    a more sustainable deployment model by:

             Fully funding ship maintenance and midlife
            modernization periods, and continuing a series of actions to
            address surface ship material condition
             Increasing investment in training and adjusting the
            FRTP to be more sustainable and provide units adequate time to
            train, maintain, and achieve the needed fit and fill in their
            manning between deployments
             Forward basing and forward deploying ships to reduce
            transit time, so that the Navy-Marine Corps team can continue
            delivering the rapid response our Nation requires of us
             Employing rotating crews on mine countermeasures,
            patrol coastal class ships, and soon LCSs as the force grows,
            and further studying the benefits and costs of expanding and
            using rotational crewing

        The Navy is in the process of conducting a Force Structure
    Assessment (FSA) based on the new Defense Strategic Guidance (DSG). The
    FSA will evaluate the capabilities needed to execute the DSG, the ships
    and aircraft needed to deliver these capabilities, and the resulting
    inventory requirements. Overall, the proper mix of critical
    capabilities necessary to support the DSG will prove more significant
    than the exact number of ships in the fleet.

                   surface combatant service life assumptions
        28. Senator Collins. Admiral Blake, the Navy has proposed to retire
    six non-BMD-capable cruisers, at an average service life of 21 years,
    because it was cheaper to retire them and buy new than it was to
    upgrade and modernize them to perform BMD. I understand that the
    projected service life for these ships was 30 years. I'm concerned that
    this one case is actually the tip of the iceberg of a significant issue
    the Navy and Congress must face together, even if we are capable of
    maintaining ships for more than 3 decades, the prohibitive cost to
    perform the necessary maintenance may lead us to question whether the
    maintenance investment is worth the benefit. The shipbuilding plan
    makes considerably optimistic assumptions that all destroyers will at
    least reach 35 years of service life and the newer versions will reach
    40-year service lives. The actual retirement data for these ships
    suggests that a more realistic assumption for the service life of these
    ships is much less than that. Are the Navy's assumptions for estimated
    service life based upon the Navy's actual experience with those classes
    of ships or is it based upon a different model the Navy has developed?
        Admiral Blake. Expected Service Life (ESL) is based in part on
    previous ship-type platform experience, design, and materials, but is
    also tied to force capability, ship maintenance funding, ship manning,
    and recapitalization requirements. An ESL is planning guidance, not a
    technical limitation. The Navy uses the ESL of ships as an estimate on
    which to base long-range ship planning, budget development, and force
    structure for procurement or recapitalization.
        Actual service life depends on maintenance, modernization, and
    operational employment. Additionally, other factors such as design
    changes or modifications made to the ship, or a design that is not
    amenable to a subsequent operational system upgrade, may make it
    infeasible to continue its service. Without ongoing ship maintenance
    and modernization, ships will not achieve their expected service lives.
        For destroyers specifically, 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. The Navy
    will endeavor to operate every ship procured to the very end of its
    ESL.
        The shipbuilding plan takes into account the expected retirement of
    ships during the 30-year period. By using open, flexible payload bays
    and open architecture combat systems, the Navy is designing ships that
    can accommodate capability upgrades throughout their service lives in
    order to remain operationally and tactically relevant. The Navy policy
    is to ensure all ships reach their ESL. ESL extensions could, in a span
    of years, reduce the numbers of ships that must be recapitalized;
    however, any deferral of shipbuilding costs would be offset by the
    additional cost of maintenance, system upgrades, and modernization
    required to keep the ships operational and tactically relevant in their
    latter years.

        [Whereupon, at 11:20 a.m., the subcommittee adjourned.]

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2013 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                            THURSDAY, APRIL 26, 2012

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

                       MARINE CORPS ACQUISITION PROGRAMS

        The subcommittee met, pursuant to notice, at 10:05 a.m. in
    room SR-222, Russell Senate Office Building, Senator Jack Reed
    (chairman of the subcommittee) presiding.
        Committee members present: Senators Reed, Blumenthal,
    Wicker, and Ayotte.
        Majority staff member present: Creighton Greene,
    professional staff member; and Thomas K. McConnell,
    professional staff member.
        Minority staff member present: Bryan D. Parker, minority
    investigative counsel.
        Staff assistant present: Brian F. Sebold.
        Committee members' assistants present: Carolyn Chuhta,
    assistant to Senator Reed; Ethan Saxon, assistant to Senator
    Blumenthal; Joseph Lai, assistant to Senator Wicker; and Brad
    Bowman, assistant to Senator Ayotte.

            OPENING STATEMENT OF SENATOR JACK REED, CHAIRMAN

        Senator Reed. The subcommittee will come to order. I thank
    our ranking member, Senator Wicker, and my colleagues. We
    particularly thank Sean J. Stackley, the Assistant Secretary of
    the Navy for Research, Development, and Acquisition; and
    Lieutenant General Richard P. Mills, USMC, the Deputy
    Commandant for Combat Development and Integration and
    Commanding General for Marine Corps Combat Development Command,
    for joining us here today. We are grateful for your dedicated
    service to the Nation, the Marine Corps, and the marines and
    families who represent us so well and so bravely every day. So
    thank you, gentlemen, for what you do.
        A year ago at our last hearing on this topic, Marine Corps
    ground force acquisition programs were in turmoil following the
    termination of the Expeditionary Fighting Vehicle (EFV), amidst
    the realization that the Marine Corps could not afford either
    the cost to procure or to subsequently operate and maintain the
    portfolio of ground vehicles it had on the books.
        In the last year, the Marine Corps leadership has taken
    action to address this impending bow wave. The target price for
    the replacement of the terminated EFV, called the Amphibious
    Combat Vehicle (ACV), is about one-third less than the EFV.
    This cost reduction is to be achieved mainly by greatly
    reducing water speed and the complexity associated with
    transforming a tracked combat vehicle into a speedboat. This
    procurement cost reduction should directly translate into
    operations and maintenance (O&M) savings as well.
        The Army and the Marine Corps also have dramatically
    reduced the costs of the Joint Light Tactical Vehicle (JLTV)
    and the Marine Corps has pared their projected inventories of
    trucks and other wheeled tactical vehicles by 25 percent.
        In the National Defense Authorization Act (NDAA) for Fiscal
    Year 2012, the committee enacted a requirement for the Marine
    Corps to conduct a comprehensive vehicle portfolio life cycle
    affordability study before proceeding further with its
    modernization plans. That study should be completed soon and we
    hope that it will show whether the actions that the Marine
    Corps has taken thus far are sufficient.
        For the remainder of my opening statement, I want to focus
    on what I see as the central planning issue facing the Marine
    Corps at this time. Since the end of the Cold War and Operation
    Desert Storm, the size of the assault echelons of the largest
    amphibious operation that the Navy and Marine Corps could
    conduct has dwindled from four Marine expeditionary brigades
    (MEB) to two. The entry assault portion of that force consists
    of six battalions. The Marine Corps currently has enough
    Amphibious Assault Vehicle (AAV)-7 Amphibious Assault Tractors
    to self-deploy all of those battalions ashore plus many more.
    The supporting tanks, heavy artillery, light armored vehicles,
    and trucks would be brought ashore with ship-to-shore
    connectors once the assault infantry has established a secure
    beachhead.
        When the cost of the EFV ballooned in the middle of the
    last decade, the Marine Corps took two related steps. It cut
    the number of EFVs it planned to produce almost in half,
    reducing the number of infantry battalions that could be self-
    deployed in amphibious assault craft from 12 to 8; and it
    initiated plans to procure a non-amphibious wheeled armored
    personnel carrier to lift 4 infantry battalions.
        This would appear to represent an erosion of the Nation's
    amphibious assault capability. Marine Personnel Carriers (MPC),
    at least as currently envisioned, would require the use of
    ship-to-shore connectors to enter the battle and cannot conduct
    an assault against a defended shoreline. These connectors, the
    Landing Craft Air Cushions (LCAC) and Landing Craft Utility
    (LCU), are large, expensive, and few in number. To the extent
    they are used to transport infantry assault forces, they cannot
    be used to move tanks, artillery, and other critical supporting
    elements. The rate at which combat power could be built up on
    shore would be substantially decreased and there would be
    increased risk to the infantry assault forces themselves.
        In addition, whereas one amphibious tractor can lift a
    rifle squad, it would take two MPCs to do so, which will
    consume significantly more volume and weight on already
    stressed amphibious shipping.
        When the Marine Corps terminated the EFV and decided to
    acquire a substantially cheaper substitute, the committee
    assumed that the Marine Corps would want to return to a
    strategy of acquiring enough self-deploying amphibious tractors
    to equip 12 infantry assault battalions. This assumption was
    buttressed by the likelihood that a slower speed assault
    vehicle would have the weight margin to support armor
    protection equal to a prospective armored personnel carrier.
        However, the Marine Corps may be headed in the opposite
    direction, towards a further reduction in the acquisition
    objective for the ACV. The subcommittee is informed that the
    Marine Corps is seriously considering an option to limit ACV
    procurement to four infantry assault battalions and making up
    the difference with MPCs and other vehicles such as mine-
    resistant ambush protected (MRAP) vehicles.
        Marine Corps staff have stated that there is an independent
    requirement for a wheeled armored personnel carrier apart from
    any consideration of ACV cost, mobility, or armored protection,
    and rather than sustaining the time-honored doctrine that
    splitting rifle squads in two, necessitated by the small
    internal volume of wheeled armored personnel carriers, would
    seriously degrade combat capability, this is being
    characterized as a potentially positive method of coping with
    distributed land warfare environments.
        We are concerned that substituting wheeled armored
    personnel carriers for amphibious tractors could erode the
    Marine Corps' amphibious assault capability, the capability
    that separates the Marine Corps from the Army in one dimension
    at least. The Marine Corps is now conducting a so-called fleet
    mix study to help it decide how many of what vehicle types it
    should buy in the future.
        The Marine Corps also points out that it is possible to
    postpone a decision on how many ACVs to procure until full-
    scale development is underway. I look forward to a dialogue
    about this issue today with our witnesses.
        Before I turn it over to Senator Wicker, we are at a
    critical moment. The Marine Corps has performed magnificently
    for the last 10 years in a non-amphibious role. In fact,
    amphibious operations have essentially taken a back seat to the
    extraordinary and courageous actions in Iraq and Afghanistan,
    dealing in a counterinsurgency environment, using equipment
    that's designed for urban warfare, not beach assaults. We're at
    the point now where doctrinally, operationally, and in terms of
    acquisition, we have to make a decision, are we getting back
    into the amphibious business with both feet or are we putting
    one foot in and still looking back at potential operations that
    require skill, courage, but they're not amphibious operations.
        That's why I think this hearing and the timing of this
    hearing and your deliberations are so important and I wanted to
    go at length at some of the concerns that we have. These are
    concerns I think we all share.
        With that, let me recognize the ranking member and
    apologize for the length of my statement.

                  STATEMENT OF SENATOR ROGER F. WICKER

        Senator Wicker. Thank you, Mr. Chairman, for holding this
    important hearing, and thanks to our witnesses, very talented
    public servants, for your participation and continued service
    to our Nation.
        Since our last hearing on the Marine Corps acquisition
    programs, we've witnessed some significant developments. In
    August, Congress passed and the President signed the Budget
    Control Act (BCA), which threatens further, deeper cuts to our
    military. Meanwhile, the United States is rebalancing its
    national security strategy and realigning its forces with
    greater focus on the Asia-Pacific region. However, the
    President's proposed budget seeks to reduce Marine Corps end
    strength by 20,000 marines and delay or defer certain weapons
    system purchases.
        I would like our witnesses to elaborate on the Marine
    Corps' strategy for modernizing its ground combat and tactical
    vehicle fleet, including the ACV, the JLTV, and the MPC. I'm
    particularly interested to learn how the Marine Corps plans to
    meet its ground vehicle requirements within current and
    projected budget constraints, yet still maintain high
    operational capability and readiness.
        Our Nation's increased emphasis on the Asia-Pacific region
    underscores the importance of the core competency that
    distinguishes the Marine Corps from other ground forces, its
    ability to conduct amphibious assaults against a defended
    shoreline. However, in today's threat environment the Marine
    Corps cannot continue to rely on the Vietnam era AAV.
        Many supporters of the Marine Corps, including this
    Senator, were disappointed by the cancellation of the EFV, but
    we also understood that it was not a financially viable
    solution. I hope our witnesses can explain how the current
    program will benefit from the more than $3 billion spent on
    this EFV. The American taxpayers need to be assured that this
    program was not a complete loss. As such, I look forward to
    hearing from our witnesses the specific steps the Marine Corps
    is taking on the ACV program to ensure the delivery of a
    vehicle that: one, meets Marine Corps requirements; two, is
    cost effective; and three, is delivered as quickly as possible.
        On the issue of the JLTV, I'm encouraged by the progress
    that the Marine Corps and the Army have made on this multi-
    service program. The JLTV Program Office will award prototype
    development contracts in June. I trust our witnesses will
    reassure this subcommittee that the Marine Corps JLTV
    requirements are stable to ensure that the Marine Corps can
    afford to field this important replacement for our HMMWVs as
    soon as possible.
        With regard to both the ACV and the JLTV, I'm told that the
    Marine Corps is relying on competition to gauge early on what
    is technologically feasible and to reduce cost. Secretary
    Stackley, I commend you and your team for your efforts to
    pursue competitive acquisition programs for the Navy and Marine
    Corps. However, competition requires viable competitors, which
    we do not always have. So I'd like our witnesses' best
    assessment of the state of the U.S. industrial base for ground
    combat and tactical vehicles and what can be done to sustain
    the vitality of our manufacturing base at the contractor and
    supply chain levels.
        Finally, the Marine Corps faces significant budget
    challenges ahead. As I have mentioned repeatedly, the BCA
    passed by Congress and signed by the President last August
    requires sequestration to be implemented across all
    departments, including the Department of Defense (DOD).
    Sequestration is not a hypothetical. It is the law of the land.
    On January 3rd of next year, 250 days from today, sequestration
    will take place unless legislation is passed to undo it and
    signed by the President.
        Our national defense is solely a Federal responsibility.
    Defense spending is also a two-fer, as we all know. It supports
    our national security and our high technology manufacturing
    workforce.
        The Marine Corps budget accounts for approximately 8
    percent of the DOD total budget. I'm gravely concerned that
    sequestration could disproportionately impact the Marine Corps
    on everything from modernization to readiness. As such, I hope
    our witnesses today will elaborate on their assessment of the
    impact that sequestration will have on our expeditionary Marine
    Corps and our industrial base.
        Thank you very much, Mr. Chairman.
        Senator Reed. Thank you very much, Senator Wicker.
        We'll recognize Secretary Stackley and then General Mills,
    if he has comments. Mr. Secretary, please.

    STATEMENT OF HON. SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE
             NAVY (RESEARCH, DEVELOPMENT, AND ACQUISITION)

        Mr. Stackley. Yes, sir. Chairman Reed, Senator Wicker,
    thank you for the opportunity to appear before you today to
    address Marine Corps modernization. I will be testifying
    alongside Lieutenant General Mills and if it's acceptable to
    the subcommittee, I propose to keep opening remarks brief and
    submit a formal statement for the record.
        Senator Reed. Without objection and with great enthusiasm.
    [Laughter.]
        Mr. Stackley. Sir, your Marine Corps serves as America's
    expeditionary force in readiness, a balanced air-ground-naval
    force, forward deployed and forward engaged. Today, over 30,000
    marines are deployed around the world, on the ground in
    Afghanistan in support of Operation Enduring Freedom (OEF), and
    at sea deployed aboard amphibious ships operating off coasts
    from Northern Africa to Japan, conducting air operations and
    ship-to-shore operations, building partnerships, deterring
    enemies, and responding to crises and contingencies.
        Unequivocally, our top priority is to support these
    marines, who by their service and sacrifice have placed in the
    hands of our Nation's leaders the tools and options that they
    need to respond to today's world events and shape future
    events, all the while defending those freedoms we hold most
    dear.
        Over the past year, the Navy and Marine Corps have
    responded to a rapid succession of unpredicted political
    upheavals, natural disasters, social unrest, piracy, and
    emerging threats in various unstable areas of the world's
    littoral regions. Marines were first on the scene to provide
    humanitarian assistance and disaster relief in Japan in the
    wake of that nation's devastating tsunami; the first to fly air
    strikes over Libya in Operation Odyssey Dawn. They were on
    scene to evacuate noncombatants from Tunisia and reinforced our
    embassies in Egypt, Yemen, and Bahrain. Of course, all of these
    and similar global response operations were conducted against
    the backdrop of sustained combat and counterinsurgency
    operations in Afghanistan.
        To say that your Navy-Marine Corps team is the best at what
    they do does not do justice, for among the world's fighting
    forces, none other can do what they do. Accordingly, we will
    develop for the current and future force those capabilities
    that give our marines the ability to respond rapidly and to
    shape, deter, defeat, and deny our enemies sanctuary.
        In readying for its role as the post-OEF expeditionary
    force in readiness, the Marine Corps will accept risk in
    extended ground operations while reshaping the force for
    scaleable crisis response missions such as countermeasures,
    counterproliferation, disaster relief, protection of U.S.
    citizens overseas, security cooperation, and support of our
    allies. We'll rebalance our force posture back to the Pacific,
    remain postured to the Middle East, yet remain globally
    responsive, ever mindful of the world's choke points and
    prepared to respond where needed, as needed, as directed by the
    President.
        The seamless maneuver of marines from the sea to conduct
    operations ashore, whether for training, humanitarian
    assistance, or combat operations, remains a key priority as the
    Marine Corps shapes its future force. To this end, the Marine
    Corps modernization strategy includes sustainment of amphibious
    lift capabilities as outlined in the Navy's 30-year
    shipbuilding plan. Landing craft, air cushion and utility, will
    be replaced with more capable, more reliable connectors.
    Recapitalization of critical aviation capabilities, from the
    short takeoff vertical landing (STOVL) version of the Joint
    Strike Fighter (JSF) to modernized attack and utility H-1
    helicopters to the development of the heavy lift H-53K
    helicopter.
        Modernization of the Marine Corps' expeditionary combat
    command, control, and communication capabilities with the
    development of the Ground-Air Task-Oriented Radar, the Common
    Aviation Command and Control System, and the Global Combat
    Support System; and modernization of the Marine Corps' ground
    combat vehicles.
        The Navy has developed and is implementing a four-phase
    strategy, the Ground Combat Tactical Vehicle Strategy, to guide
    the planning, programming, and investment required to provide
    balanced maneuver and mobility capabilities to the force. The
    strategy is focused on achieving the mix of wheeled and tracked
    vehicles that best balances performance, payload,
    survivability, fuel efficiency, transportability, and cost.
        It is within this construct that the Navy will determine
    the future capabilities and numbers of the ACV, the JLTV, and
    the MPC. Within the ground vehicle portfolio, our top priority
    is the ACV. In the highly complex and uncertain future security
    environment, the execution of amphibious operations will
    require a self-deploying amphibious vehicle. This vehicle is
    essential to our ability to conduct surface littoral maneuver
    and seamlessly project ready-to-fight marines ashore from sea
    to land in permissive, uncertain, and hostile environments.
        It allows us to maximize available amphibious lift and
    increase the rate at which we build power ashore. This
    capability is key to overcoming access challenges posed by the
    lack of improved infrastructure or the threat of an adversary.
        Throughout 2011, we conducted a comprehensive systems
    engineering review of amphibious vehicle operational
    requirements. The review evaluated the requirements for water
    mobility, land mobility, lethality, and force protection for
    the future combat environment. It provided well-informed
    preliminary cost estimates for development, production, and
    sustainment for the range of capabilities suited for these
    requirements. The systematic review ultimately provided well-
    informed analytical data to support the currently ongoing ACV
    analysis of alternatives (AOA).
        Alongside the ACV program, the JLTV addresses shortfalls
    for select light combat vehicles which perform our most
    demanding missions. These two critical programs are being
    developed in concert with the overall integrated vehicle
    strategy, which includes select upgrade and sustainment of the
    HMMWV fleet, upgrade of the legacy AAV as a bridge to the ACV,
    continued research and development (R&D) for the MPC in support
    of vehicle fleet mix alternatives, and management of the
    overall vehicle fleet, reduced by greater than 20 percent as a
    result of the most recent force structure review.
        For our entire portfolio and particularly the ACV and JLTV,
    the Marine Corps has taken a textbook approach to developing
    these critical combat vehicles, placing priority on getting the
    requirements right at the front end, employing mature
    technology where possible to reduce cost and risk in
    development, establishing affordability as a requirement,
    conducting comprehensive systems engineering and cost analysis,
    streamlining the acquisition process where feasible, leveraging
    competition, and, perhaps most importantly, integrating the
    requirements and acquisition team to enable effective cost
    performance trades throughout the requirements definition and
    systems development process.
        Mr. Chairman, thank you for the opportunity to appear
    before you today. We look forward to answering your questions.
        [The jont prepared statement of Mr. Stackley and General
    Mills follows:]
             Joint Prepared Statement by Hon. Sean J. Stackley and
                         Lt.Gen. Richard P. Mills, USMC
                                  introduction
        Chairman Reed, Senator Wicker, and distinguished members of this
    subcommittee, we are honored to appear here today. We want to thank you
    for your continued support to our sailors, marines, and their families,
    and we appreciate the opportunity to address Marine Corps acquisition
    programs.
        As America's Expeditionary Force in Readiness, the Marine Corps'
    ground modernization investments support our Nation's ability to be
    prepared for all manner of crises and contingencies. As a
    ``middleweight force,'' marines do not seek to supplant any Service or
    ``own'' any domain. Rather, Marine forces transit in a ``lane'' that
    passes through all domains--land, sea, air, space and cyber--operating
    capably and freely throughout the spectrum of threats, whether they be
    conventional, irregular or the uncertain hybrid areas where they
    overlap. Key is the ability to deploy and employ from the sea in
    austere environments at a time and place of our choosing--a significant
    asymmetric, strategic and operational advantage that has been used more
    than 130 times in the past 2 decades.
        Our ground investments allow us to develop and sustain a ready,
    middleweight force that is easily deployable, energy efficient, and
    highly expeditionary. Complementary to our ground investment, we are
    making parallel investments in amphibious ships, amphibious combat
    vehicles, connectors such as the landing craft air cushion (LCAC) and
    landing craft utility (LCU), naval surface fire support assets, mine
    counter measures, radars, command and control, vertical lift, and
    fixed-wing, short takeoff and vertical landing (STOVL) aircraft, and
    many other programs critical to maintaining tactical and operational
    readiness. These investments are designed to provide a full range of
    complementary capabilities for our Nation's Expeditionary Force in
    Readiness.
        The Department of the Navy and its Marine Corps are fully aware of
    the fiscal challenges facing our Nation and have critically examined
    and streamlined our capabilities for the future. We have accepted our
    share of the additional risk associated with reduced resources;
    however, we have also sought innovative and practical means to mitigate
    that risk. We leverage programs, technologies, technical skills and
    competencies of other Services to ensure we deliver the most effective
    and affordable combat capability to our marines. We also seek to
    capitalize on our industrial base to identify and pursue innovative and
    ground-breaking solutions to meeting the warfighter's needs and to
    reduce acquisition and sustainment costs of our systems.
                             operating environment
        During the past year, the Navy and Marine Corps have responded to a
    rapid succession of unpredicted political upheavals, natural disasters,
    social unrest, piracy and emerging threats in various unstable areas of
    the world's littoral regions. Marines were first on the scene to
    provide humanitarian assistance and disaster relief in Japan in the
    wake of a monumental tsunami; were the first to fly air strikes over
    Libya; evacuated noncombatants from Tunisia; and reinforced our
    embassies in Egypt, Yemen, and Bahrain. While accomplishing all of
    that, marines continued sustained combat and counterinsurgency
    operations in Afghanistan.
        History has shown that crises usually come with little or no
    warning; stemming from the same conditions of uncertainty, complexity
    and chaos continue as risks across the world today. Regardless of the
    financial pressures placed on governments and markets today, crises
    requiring military intervention undoubtedly will continue tomorrow. In
    this environment, physical presence and readiness matter significantly.
    As a maritime nation, dependant on the sea for the free exchange of
    ideas and trade, America requires security both at home and abroad.
    Since the 1990s, America has been reducing its foreign basing and
    presence, bringing forces back home. This trend is not likely to change
    in the face of the strategic and budget realities we currently face.
    There remains an enduring requirement to balance presence with cost. In
    the past, the Nation has chosen to depend on the Navy and Marine Corps
    to provide a lean and economical force of an expeditionary nature,
    operating forward and in close proximity to potential trouble spots.
    Investing in naval forces that can respond to a wide range of crisis
    situations creates options and decision space for our Nation's leaders.
                            role of the marine corps
        New strategic guidance issued by the President and the Secretary of
    Defense provides the framework by which the Marine Corps will balance
    the demands of the future security environment with the realities of
    our current budget. The guidance calls for a future force that will
    ``remain capable across the spectrum of missions, fully prepared to
    deter and defeat aggression and to defend the homeland and our allies
    in a complex security environment.'' As America's force in readiness,
    the Marine Corps provides efficient and effective insurance against the
    unexpected with an adaptive, multi-capable force that has the reach to
    defend American citizens, commerce and our vital national interests.
        Bridging a seam in our Nation's defense between heavy conventional
    and Special Operations Forces (SOF), the U.S. Marine Corps is light
    enough to arrive rapidly at the scene of a crisis, but heavy enough to
    carry the day and sustain itself upon arrival. Operating in a state of
    persistent forward presence aboard amphibious warships, your Marine
    Corps remains the most economical, agile and ready force immediately
    available to deter aggression and respond to crises. This flexible and
    multi-capable force maintains high readiness levels and can mitigate
    risk; satisfy the standing strategic need for crisis response; and,
    when necessary, spearhead entry and access for the Joint Force. Given
    likely future operations set forth in the new guidance--ranging from
    defeating rogue actors to responding to natural disasters--the Nation
    should invest in the small premium it pays for high readiness levels
    within its naval amphibious forces. Because our Nation cannot afford to
    hold the entire Joint Force at such high rates of readiness, it has
    historically ensured that marines remain ready, and has repeatedly
    relied on marines to fill gaps, buy time for decision makers, ensure
    access, or respond when and where needed.
        As a ``middleweight force,'' the Marine Corps is optimized for
    rapid deployment, versatile employment, and self-sustainment via Marine
    Air-Ground Task Forces (MAGTF), which are balanced, combined-arms
    formations under a single commander. All MAGTFs consist of four core
    elements: a Command Element, Ground Combat Element, Aviation Combat
    Element, and Logistics Combat Element. MAGTFs are scalable in size and
    capability.
        Both the Secretary of Defense and the Secretary of the Navy have
    reaffirmed the necessity of the Marine Corps' amphibious assault
    mission. Accordingly, we must develop an affordable and capable
    amphibious combat vehicle to project marines from sea to land in
    permissive, uncertain, and hostile environments. We ask for your
    continued support to reach this goal.
        In order to adapt to the future operating environment and address
    access challenges, the Navy and Marine Corps are pursuing a number of
    other programs that leverage operational lessons learned and adopt
    acquisition best practices.
                                     reset
        Reset is a subset of reconstitution and comprises the actions taken
    to restore units to a desired level of combat capability commensurate
    with the units' future missions; and after more than a decade of
    combat, this will require an unprecedented level of effort.\1\ The
    Marine Corps is resetting its forces ``in stride'' with fighting the
    war in Afghanistan and transitioning to the new Defense Strategic
    Guidance. Unlike previous post-conflict periods, such as after
    Operation Desert Storm, we do not anticipate taking an ``operational
    pause'' to reset as we transition from Operation Enduring Freedom
    (OEF).
    ---------------------------------------------------------------------------
        \1\ Reconstitution refers to actions beyond reset, taken during or
    after operational employment, to restore and/or upgrade combat
    capability to full-spectrum operational readiness. Reconstitution
    includes personnel, equipment, and training. Force reconstitution
    includes activities from normal sustainment (rearm, refuel, recover
    (dwell), repair, and replace), through reorganization and regeneration
    of units to redeployment. As to equipment, our reconstitution efforts
    include reset, replenishing tables of equipment, and modernization.
    ---------------------------------------------------------------------------
        The Marine Corps' Operation Enduring Freedom Ground Equipment Reset
    Strategy, which was released in January 2012, helps to identify the
    equipment we will reset or divest. We currently estimate, subject to
    change, that the ground equipment reset liability is in excess of $3
    billion.\2\ This forecast is primarily based on the replacement of
    combat losses, the repair of items to serviceable condition, and the
    extension in service life of selected items. The Strategy prioritizes
    reset requirements along with investment and modernization decisions to
    develop our middleweight force, per the Defense Strategic Guidance.
    ---------------------------------------------------------------------------
        \2\ This $3 billion liability is our ``strategic'' reset--which is
    the cost to reset our Afghanistan equipment to a zero-hours/zero-miles
    condition. In addition to strategic reset, we have a $1.3 billion OCO
    request in fiscal year 2013--primarily to cover cost of war issues; but
    some of which is slated for strategic maintenance for reset. The
    precise amount of the $1.3 billion to be used for reset depends on the
    quantity of equipment that flows out of Afghanistan and our depot
    capacity.
    ---------------------------------------------------------------------------
        Our reset effort is already underway and it maximizes the Marine
    Corps' depot capacity, where we expect the bulk of reset execution to
    occur for 2 to 3 years after our equipment's return to the depot. The
    continued availability of our total ground equipment depot capacity at
    both Barstow, CA, and Albany, GA, is essential for timely reset, our
    ability to generate readiness, and to surge in response to wartime
    demand. Continued congressional support to our long-term reset
    challenge is critical to reset the Marine Corps' equipment.
        We are examining future equipment requirements with an ongoing
    comprehensive review of the Marine Corps' equipment inventories. This
    effort will validate reset strategies, future acquisition plans, depot
    maintenance programming, and required modernization initiatives. This
    review will incorporate the lessons we learned from over a decade of
    combat to upgrade our tables of equipment to reflect the way we fight
    today and our warfighting requirements of tomorrow.
                                 modernization
        In conjunction with reset efforts, the Marine Corps is undertaking
    several initiatives to conduct only essential modernization of the
    Marine Corps Total Force. This will place the Corps on a sustainable
    course to achieve institutional balance. We are doing so by judiciously
    developing and procuring the right equipment needed for success in the
    conflicts of tomorrow, especially in those areas that underpin our core
    competencies. As such, we ask for continued Congressional support to
    modernize equipment and maintain a high state of readiness that will
    place us on solid footing in a post-Afghanistan security environment.
    While budgetary pressures will likely constrain modernization
    initiatives, we will mitigate pressure by continuing to prioritize and
    sequence both our modernization and sustainment programs to ensure that
    our equipment is always ready and that we are proceeding in a fiscally
    responsible manner. Modernization programs that require significant
    additional funding above current levels will be evaluated for continued
    operational requirement and capability/capacity modification.
        Our force structure, and associated vehicles, are highly leveraged
    investments. They optimize strategic lift capability and provide
    aggregate utility across the range of military operations. Our ground
    modernization strategy is to sequentially modernize priority
    capabilities, reduce equipment requirements wherever possible, and
    judiciously sustain remaining equipment. The current baseline budget
    allows for equipment modernization on a reasonable timeline. Possible
    future reductions in the baseline budget will result in delay,
    modification or elimination of key modernization programs.
    Modernization in the following areas is critical to maintaining
    operational capabilities and readiness:

             Ground Combat and Tactical Vehicles;
             Aviation;
             Preparing for Future Battlefields;
             Amphibious and Pre-positioning Ships;
             Expeditionary Energy; and
             Intelligence, Surveillance and Reconnaissance.
                  ground combat and tactical vehicle strategy
        The programmatic priority for our ground forces is the seamless
    maneuver of marines from the sea to conduct operations ashore whether
    for training, humanitarian assistance or combat. The Marine Corps'
    Ground Combat and Tactical Vehicle Strategy (GCTVS) is the basis for
    planning, programming and budgeting to provide balanced maneuver and
    mobility capabilities to operating forces. The GCTVS is focused on
    achieving the right mix of assets, while balancing performance,
    payload, survivability, fuel efficiency, transportability and cost.
    Vehicles comprising the GCTVS include the entire inventory of wheeled
    and tracked vehicles, and planned future capabilities, including the
    Amphibious Combat Vehicle (ACV), Joint Light Tactical Vehicle (JLTV),
    and the Marine Personnel Carrier (MPC).
        The current priorities within the GCTVS include the following:

             Develop a modern ACV;
             Develop and procure JLTV;
             Sustain a portion of the High Mobility Multipurpose
            Wheeled Vehicles (HMMWVs) through 2030;
             Initiate a legacy Assault Amphibious Vehicle upgrade
            as a bridge to ACV;
             Continue research and development in MPC through
            fiscal year 2014 to identify the most effective portfolio mix
            of vehicles; and
             Limit procurement of vehicles to reduced Approved
            Acquisition Objective estimates as identified.

        Our top ground modernization priority is the ACV. Based on our 10-
    year investment plan, we intend to address our light combat vehicle
    shortfalls both before and after development of the ACV. Our JLTV
    strategy depends on procuring those vehicles with the most demanding
    mission profiles before we turn our focus to ACV. The biggest risk to
    sequential modernization is schedule--not program schedules but rather
    decision schedules. If JLTV is delayed, we lose an opportunity that we
    cannot readdress until after ACV procurement in the late 2020s.
        Throughout 2011 and informed by cost, we conducted a comprehensive
    systems engineering review of amphibious vehicle operational
    requirements. The review evaluated the requirements for water mobility,
    land mobility, lethality and force protection of the future
    environment. The identification of essential requirements helped to
    drive down both the production and the sustainment costs for future
    amphibious vehicles.
        We are conducting an Analysis of Alternatives (AoA) to review six
    ACV options. The results of the AoA are expected to be complete in June
    of this year, and the results will inform the direction and scope of
    the ACV program. The MPC program is maturing as a wheeled armored
    personnel carrier that is complementary to the ACV as a solution to the
    general support lift requirements of Marine Forces operating in the
    littorals.
        We are firmly partnered with the U.S. Army in fielding a Joint
    Light Tactical Vehicle to replace a portion of our legacy light lift
    utility vehicles. Our long-term participation in this program remains
    predicated on development of a cost-effective vehicle, whose payload
    integrates seamlessly with our expeditionary operations and likely
    amphibious and strategic lift profiles. The Joint Requirements
    Oversight Council approved the JLTV Capability Development Document,
    and the Department of the Navy is working with the Army to establish a
    program of record at Milestone B in the third quarter of fiscal year
    2012. Our approach to JLTV is as an incremental acquisition, and our
    objective for Increment I currently stands at 5,500 vehicles.
        We are focused on developing and procuring Multiple Mission Role
    Variants of the JLTV family of light vehicles to modernize for the most
    demanding missions, providing increased payload, energy efficiency,
    performance and protection. The JLTV will replace 30 percent of the
    High Mobility Multipurpose Wheeled Vehicle (HMMWV) family. At this
    time, JLTV is on schedule, affordable, and performing to meet essential
    validated Marine Corps light combat capability gaps.
        Last fall, the Marine Corps conducted an affordability review of
    the portfolio--which included the process of using Knowledge Points to
    tailor JLTV cost versus capability decisions. Our end-state is to
    develop a more relevant and affordable portfolio of combat and tactical
    vehicles. Through procurement and service-life extension, we will
    provide the capacity for Marine forces to respond to crises with up to
    a Marine Expeditionary Force-sized forcible entry operation, address
    irregular threats, and conduct sustained operations ashore when
    necessary.
                            additional modernization
        To complement future ground and amphibious vehicles, the Marine
    Corps is investing in other key support areas. For example, the Corps
    is leading the way to build a next generation medium-range radar system
    called the Ground/Air Task-Oriented Radar. This system will replace
    five radars, and will be significantly more advanced in its
    capabilities. It will improve threat detection and be more deployable,
    able to be set up in a fraction of the time compared with current
    systems. In addition, the Corps is investing in the Common Aviation
    Command and Control System, which will help better network our
    communications, radars, intelligence, and ultimately our forces. To
    better protect the marine on patrol, we are also planning to replace
    electronic jamming equipment with the next-generation, open
    architecture JCREW 3.3 system. This system will ensure sailors and
    marines are better able to counter future improvised explosive device
    (IED) threats. We are also investing in the Ground Renewable
    Expeditionary Energy System and Solar Portable Alternative
    communications Energy System. These systems will provide portable
    power, increasing self sufficiency, and reduce requirements for fuel
    resupply for small units operating at the forward edge.
        Over the last 10 years of near continuous combat operations, the
    need for fuel and batteries on the battlefield has grown exponentially.
    Since 2001, the Corps has increased the number of radios infantry
    battalions use by 250 percent and the number of computers/information
    technology equipment by 300 percent. The number of vehicles has risen
    by 200 percent, with their associated weight increasing more than 75
    percent as a result of force protection requirements. In the end, the
    force today is more lethal, but we have become critically dependent on
    fuel and batteries, which has increased the risk to our logistics
    trains. Moreover, a 2010 study found that one marine is wounded for
    every 50 fuel and water convoys.
        To reduce risk and increase combat effectiveness, in March 2011,
    the Commandant issued the ``Marine Corps Expeditionary Energy Strategy
    and Implementation Plan'' to change the way the Corps thinks about and
    values energy. This is a ``bases-to-battlefield'' strategy, which means
    all marines will be trained to understand the relationship between
    resource efficiency and combat effectiveness. Throughout the Navy and
    the Marine Corps, we will consider energy performance in all our
    requirements and acquisitions decisions.
                        fiscal year 2013 budget request
        The Navy and Marine Corps team is fully aware of the fiscal
    challenges facing our Nation and has critically examined and
    streamlined our force needs for the future. We continually strive to be
    good stewards of the public trust by maintaining the very best
    financial management practices. The Marines are proud of the reputation
    for frugality and remain one of the best values for the defense dollar.
    As a force-in-readiness, the Marine Corps must judiciously preserve
    readiness, manning and modernization with only 8.2 percent \3\ of DOD's
    budget--this amount includes all Marine and associated Navy accounts
    including amphibious ship construction and operation. Our ground forces
    modernization comprises only 9 percent of our total budget; and is only
    about $2 billion a year.\4\
    ---------------------------------------------------------------------------
        \3\ This percentage is based on the fiscal year 12 Defense budget
    authorization and is slightly larger than the 7.8 percent sum cited in
    the past. The percentage includes $3 billion in fiscal year 2012
    funding for amphibious warship new construction as well as Navy funding
    for chaplains, medical personnel, amphibious warships (operations and
    maintenance) and Marine Corps aircraft.
        \4\ The 9 percent figure in this sentence is based on the fiscal
    year 2012 Defense budget authorization. The percentage includes
    procurement Marine Corps and RDT&E, and totals $2.3 billion.
    ---------------------------------------------------------------------------
                                   conclusion
        Through the support of Congress, our marines and sailors responding
    to crisis and in the fight have received everything necessary to ensure
    success over the past decade of near constant combat operations. As we
    begin to transition to the challenges and opportunities of the post-OEF
    world and reorient to the Pacific under our new Defense Strategic
    Guidance, the Marine Corps must begin to rebalance and modernize for
    the future. We must also keep faith with and provide the right
    resources for those who have served and sacrificed so selflessly in our
    All-Volunteer Force since September 11. With the continued support of
    Congress and the American people, we will ensure amphibious forces are
    well prepared to secure our national interests in an uncertain future.
    Thank you for the opportunity to be here today and we look forward to
    answering your questions.

        Senator Reed. Thank you very much, Mr. Secretary.
        General Mills, do you have a comment?

    STATEMENT OF LT.GEN. RICHARD P. MILLS, USMC, DEPUTY COMMANDANT
      FOR COMBAT DEVELOPMENT AND INTEGRATION/COMMANDING GENERAL,
                MARINE CORPS COMBAT DEVELOPMENT COMMAND

        General Mills. Sir, I'll just add my personal thanks to
    both of you for your continued support to our marines, the
    sailors who support us, and of course our families. Without
    your support we simply could not do our mission. Thank you.
        Senator Reed. Thank you very much, gentlemen.
        I propose an 8-minute first round, and then we have a long
    list of questions, so we'll go back and forth after that. I
    want to ask a few questions and then recognize my ranking
    member.
        General Mills, we've talked about the recent exercise that
    you conducted, a major amphibious exercise. When we were
    younger, this used to be an annual operation under various code
    names. I remember Solid Shield. We got out of that business for
    about 10 years, frankly, because of the requirements in
    Afghanistan and Iraq.
        Could you give us some details on what you learned, both
    strengths and the deficiencies of the Marine Corps, from that
    amphibious operation? One point you mentioned was inserting a
    Marine Corps unit 150 miles downrange, which raises questions
    of how to provide support. I'd appreciate any comments on that.
        General Mills. Yes, sir, I appreciate the opportunity to
    discuss that. That's Exercise Bold Alligator, which was our
    largest amphibious exercise in the past 10 years. Obviously,
    over the past 10 years we have been primarily focused on
    providing well-trained forces to Iraq and Afghanistan and
    therefore we haven't attempted an exercise of this scale in a
    while. It's going to be both an experiment and interesting for
    us to see how we do it.
        Let me preface this by saying, however, there's a myth that
    we have been ignoring amphibious operations over the past 10
    years, and that's really not true. In the past 10 years, we
    have not missed a Marine Expeditionary Unit (MEU) deployment.
    We've had three MEUs on the water deployed at all times,
    working with our Navy counterparts. So we have retained that
    amphibious capability over the years in which our main focus,
    of course, has been the war in Afghanistan. But again, I just
    remind everyone that we have not lost that experience level nor
    that capability.
        For Bold Alligator, it was a very, very aggressive schedule
    of events. We wanted to see whether we could composite two MEUs
    into a MEB afloat, work with our Navy counterparts then to plan
    an amphibious operation ashore in support both of Special
    Operations Forces (SOF) already operating within the AOA and in
    order to resolve a series of tactical scenarios which we would
    face.
        The highlight, I think, was our emphasis on distributed
    operations, realizing that we are going to have to attack
    through different means to avoid hard spaces and avoid enemy
    defenses and move and looking for gaps and openings, which
    requires the force to be spread out further than perhaps when
    you and I did operations when we were younger. We felt that was
    very successful. We were able to insert the reinforced company,
    really a battalion minus, several hundred miles inland and we
    were able to sustain them over a period of time as they linked
    up with friendly forces ashore and conducted a series of
    tactical evolutions.
        We were expressly interested in communications and our
    ability to command and control at those kinds of distances. So,
    taking some experimental projects that we're working on down at
    the Marine Corps Laboratory in Quantico, we were able to do
    that. At the same time, we were able to lighten the load of the
    force going in and of the individual marines and sailors
    ashore. Some of the experimental communications equipment that
    we have takes one radar and replaces three that would normally
    be carried at the squad, platoon, and company level.
        Other areas in which we found some success were in
    logistically being able to self-sustain them through energy
    conservation methods, bringing in things like solar blankets
    and our greens experiments so we wouldn't have to carry as many
    batteries nor as much fuel to sustain forces at that level. We
    found that to be very, very successful.
        Logistically, we looked at things like being able to purify
    our own water once ashore, once again to alleviate that
    logistics burden that's placed on units that are that deep into
    enemy territory.
        We had lessons learned, of course, but we found that staff
    interaction at sea was very successful. We worked very well
    with the Navy counterparts at the flag officer level and the
    staffs that were fully integrated. Our ship to shore movement
    was done well and was done successfully, and again reinforced
    many of the things that we've been working at over the past 10
    years.
        So all in all, a very good exercise, but one in which we
    didn't simply want to replicate things we had done 10 years
    ago, but one in which we wanted to stretch the boundaries and
    take a look at how we conduct amphibious operations in the
    future. I think at that level we were successful.
        Senator Reed. Do you plan to have a similar operation this
    year and following years? Has this become the new routine?
        General Mills. We do intend to. We're going to have a
    regular series of exercises, both on the east coast and on the
    west coast and afloat in the Western Pacific, again to
    revalidate some of our concepts, to test some of our new
    concepts out, and as our new equipment comes on line to ensure
    that that's fully integrated in the amphibious capability.
        Senator Reed. As I mentioned in my opening comments, we're
    at a critical juncture here where we're moving from a major
    focus on ground operations in Afghanistan and counterinsurgency
    into more of a focus on the Pacific, inherently amphibious
    maritime operations. Can you, General Mills and Mr. Stackley,
    but General Mills first, give us a notion of the alternatives
    or the strategies and doctrines that you're looking at going
    forward, and also based, of course, on the threats that you
    perceive? I know this could fill 15 volumes of single-spaced
    pages, but in as succinct as possible a way, what is the
    threat-driven doctrine that you're trying to rebuild the Marine
    Corps to face?
        General Mills. We believe that under the current threat if
    you look at the high end threat in the Pacific area, that
    that's going to force us to have, initially at least, more
    standoff distance of our amphibious forces and more pre-assault
    operations as you move forward towards the objective area.
    Those shaping operations that would take place on the ground at
    the target area would involve such things as long-range air,
    involve SOFs, and other, more highly classified systems that
    you could bring to bear on that area in which you were going to
    attempt to land.
        We also believe that distributed operations, both at sea
    and once we arrive on the ground, will alleviate some of that
    threat. Working with our Navy partners, we take a look at what
    the ranges are, what the capability of the enemy threat would
    be, and once we arrive in the area again to bypass those
    defended beaches that we spoke about a little bit earlier and
    by using concepts such as ship-to-objective maneuver to bypass
    the hard surfaces and move to areas in which we can accomplish
    our mission without doing an old-fashioned amphibious assault.
        It's a combination of new equipment, new tactics,
    techniques, and procedures, and some new strategy that will
    allow us to remain relevant. We certainly believe that forward-
    deployed amphibious forces is a requirement and a price that
    the United States has to bear in order to be a world power. We
    provide you with a flexible force, forward deployed, ready to
    respond to crisis, and ready to give our decisionmakers here in
    Washington time to make key decisions. We believe that
    interacting with our allies, especially in the Pacific,
    reinforcing our old ties with the Australians, looking back at
    some of our other old allies and again reinforcing them through
    our training, through our presence, and through our engagement
    will pay large benefits in the long run.
        Senator Reed. Let me follow up with one very quick
    question, then recognize Senator Wicker. Your first exposure to
    the Marine Corps as a child in the 1950s was watching a landing
    craft go to the beach. Do you have in your doctrine a ratio
    between sealift and airlift for getting marines to the shore?
    Is that a number that's situationally determined or is it
    doctrinally we want to have two-thirds landing craft a third
    lift, or vice versa?
        General Mills. Yes, sir. Doctrinally, the rule of thumb
    would be two-thirds of the force would land by surface, one-
    third would go in by air. Of course, there's a lot of other
    factors that play into that, weather, sea conditions, things
    like that. But essentially that allows you to get your combat
    power quickly ashore and then allows you to build up that
    beachhead, bringing in your logistics trains, bringing in your
    supporting arms, expanding that beachhead, and then conducting
    your subsequent operations ashore.
        As we look at the portfolio of vehicles, for instance, and
    decide what mix we're going to have between tracked amphibians
    and wheeled MPCs, much of that depends on our analysis of what
    do we need to bring in initially across that beach. But then 90
    percent of that time is going to be spent expanding that
    beachhead, so what's the capability you're going to need for
    subsequent operations ashore.
        Those are the kinds of factors that we're looking at as we
    balance what that ultimate portfolio mix will be between our
    tracked amphibians, our MPCs, and our JLTVs.
        Senator Reed. Thank you, sir.
        Senator Wicker.
        Senator Wicker. Thank you very much.
        General Mills, the Marine Corps and Army were able to
    reduce the JLTV vehicle cost from a projected $634,000 to
    $266,000 per vehicle. I understand you're trying to reduce that
    vehicle cost even further. How did you do this? Describe
    briefly to our subcommittee the requirements that were
    eliminated. Were they key requirements, and how will they
    affect the vehicle performance?
        General Mills. Sir, we believe probably the biggest driving
    factor in cost reduction will be competition in order to
    provide that. For instance, currently we have six major
    organizations that are interested in providing that vehicle to
    us. So we believe competition within the acquisition process
    will naturally drive the price down as those companies compete
    for the business.
        Second of all, working with the Army, and the Army has been
    extraordinarily cooperative and it's been a great team effort
    to take a look at the vehicle and pare down not what we want,
    but what we need on board a vehicle. Both of us were very
    concerned about protection levels and we arrived at a solution
    set that allowed us to take the protection level that we
    needed, yet keep the weight down, so that we were able to both
    transport it on our amphibious ships and--or sling it beneath
    our heavy lift helicopters and get it ashore quickly.
        We also looked at perhaps, rather than buy everything we
    wanted at one time, have a vehicle that would give us some
    capability for growth, that would allow us later on to perhaps
    upgrade the weapons system that might be on board it, take a
    look at weight growth that could be allowed if we wanted to add
    armor, and then take a look at kits, if you will, that would
    allow us to increase the levels of armor based on threat that
    we would see ashore.
        I think it's been a real teamwork effort between the Army
    and the Marine Corps to lay our requirements on the table and
    then look for ways in which we could compromise and yet ensure
    that we were providing our soldiers and our marines with the
    right level of protection, with the right speed and mobility on
    the ground, and with equipment that we know would be reliable
    and available to them for years to come.
        Senator Wicker. So we reduce protection levels, weight, and
    cut back on weapons systems and levels of armor; is that a fair
    summary?
        General Mills. What I would really say, sir, is we scrubbed
    our requirements extraordinarily hard. We didn't surrender any
    of our requirements, but we really studied them and said, what
    is it that we absolutely needed, what level of protection was
    needed by our forces on the ground, what weapons system best
    serves our purpose, and all of which could fold into an
    affordability matrix.
        Mr. Stackley. If I can add to that, one of the challenges
    that the JLTV has had in its history has been taking this joint
    requirement between the Army and the Marine Corps and arriving
    at a single family of vehicles. There is a divergence when it
    comes to mobility, the impact of weight, transportability of
    the JLTV when you look at what the Marine Corps needs to load
    these vehicles onto amphibious ships, get them to shore, and to
    have the maneuverability that it needs ashore, versus some of
    the requirements on the Army side that drives greater reliance
    on armor and that drives up weight.
        One of the keys to arriving at a more affordable program
    was to tailor JLTV so that the armor solution could be
    scaleable, it could be provided by kits, so that the Marine
    Corps could get the vehicles of the size and weight that it
    needs for its mobility purposes, and if the situation warrants
    or dictates an upgrade, the additional armor kits.
        That helps tremendously in terms of affordability,
    transportability, and the mobility requirements for the Marine
    Corps while also serving the Army. That solution was one of the
    keys to really getting to a more affordable vehicle, really
    just hammering out the requirements on the front end between
    the two Services to stay with the family of vehicles that gives
    you the benefit of large-volume procurement, not just through
    competition, but just the large volume helps to drive down the
    cost.
        Senator Wicker. Mr. Secretary, you mentioned in your
    statement getting the requirements right at the front end. Is
    it accurate to say that now the requirements of the JLTV are
    stable?
        Mr. Stackley. Yes, sir. We went through what's referred to
    as a Defense Acquisition Board with the joint program, Army,
    Marine Corps, and Acquisition, Technology, and Logistics, to
    review the acquisition plan, and with the Joint Staff present
    and subsequently through the requirements definition process
    with the Joint Staff; and a lot of good discussion and debate
    over how much capability was required for the JLTV, and the
    Joint Staff helped shape some of those requirements to scale
    back some of those requirements to drive affordability of the
    program.
        Senator Wicker. General Mills mentioned that competition
    was a key factor. I think I told you in my opening statement
    that I'd like some assurances that we're going to continue to
    have viable competitors. What reassuring words can you give the
    subcommittee about what you've done to sustain the viability of
    these competitors in the manufacturing base?
        Mr. Stackley. Yes, sir. First, General Mills referred to
    about a half a dozen interested industry members. In fact, what
    we expect to see is teaming in industry for competition on the
    program.
        One of the keys to keep the industrial base primed in this
    particular case is time. If this were going to be a long,
    drawn-out development program, in fact the industrial base
    would be marching through a valley waiting for JLTV to emerge
    in production. So again going back to looking at the sweet spot
    between capability and affordability, the industrial base
    piece, if you can leverage mature technologies and make this
    more of an integration effort as opposed to a development
    effort, you can cut down significantly on the timeline to get
    to production.
        In fact, for the JLTV program we're doing that. We're
    driving integration of existing capabilities as opposed to a
    significant development effort, so we can get through the
    design, into the limited rate initial production phase, more
    quickly. That helps in terms of meeting the capability gap, it
    helps in terms of the industrial base, it helps in terms of
    cost.
        We think we have that about right. We've managed the risk
    in the definition of the requirements and balanced that against
    the affordability of the program. The Marine Corps and the Army
    have worked very closely in terms of when the Marine Corps buys
    its vehicles, when the Army buys its vehicles, looking at
    respective gaps and also looking at respective budgets in terms
    of what they can afford, and then adding them together so that
    the industrial base ramp is nice and stable.
        We're working that with industry. There has been very open
    dialogue with industry in every regard in terms of through the
    development of the requirements and looking at the ramp in
    numbers.
        Senator Wicker. You two can decide who will take this
    question. Assuming we prevent sequestration, give us your best
    guess on the schedule for the Marine Corps to procure JLTV?
    When will the Marine Corps receive its first delivery of
    operationally capable vehicles and how many do you expect in
    that first delivery lot?
        Mr. Stackley. Yes, sir. The first Marine Corps buy for
    production units is about 2015. Right now the plan is 2015 and
    we're on the front end of that procurement process. It goes up
    in a ramp. So in the Future Years Defense Program (FYDP),
    through the end of the FYDP, the Marine Corps procures about
    400 JLTVs on a ramp between 2015 and 2017, and the delivery
    timeframe is about a 2-year lag. So until industry gets up into
    a steady state in terms of production, you'll see a solid 2-
    year lag between when we procure and when those vehicles are
    delivered.
        Senator Wicker. I wonder if I could squeeze in one more
    question. General, what did we get out of our $3 billion on the
    EFV?
        General Mills. Yes, sir. We're taking the lessons learned
    from that across the board and applying them to our ACV. We
    still have several of those at Camp Pendleton that we can
    operate and learn from. But we're looking at things like the
    stability in the water, habitability, because the marines are
    going to be in the new ACVs for longer periods of time. So
    there were lessons learned that we can apply directly to our
    AOA as we look at that coming down.
        Some of our power train and power requirement lessons
    learned from the previous vehicle could be applied to the new
    one as we look at the AOA and decide which vehicle we want to
    proceed with.
        Senator Wicker. What have you learned about habitability?
    How long can a marine stay in one of those vehicles?
        General Mills. We've done some experiments on the west
    coast with marines in vehicles, in both the old EFV and our
    AAVs, and we have found that the rule of thumb is less than an
    hour. We actually can put marines in them and it can last
    longer. It depends obviously on a number of things: sea state,
    for instance; the number of marines you put in the back of
    these kinds of vehicles.
        We just recently completed an experiment off Camp
    Pendleton, where we put some of our old AAVs in the water at 12
    miles, floated them in. Some of those vehicles were in the
    water for up to 3 hours. Now, they did not have marines in the
    back. They had crews on board. But the crews landed and were
    surprisingly fit. We are doing some studies to see what is the
    time that we could put marines in the back of them, how far can
    we move them in the water, and what can we expect of them once
    they land. That's still in the study process.
        Senator Wicker. Thank you.
        Senator Reed. Thank you.
        Senator Blumenthal.
        Senator Blumenthal. Thank you, Mr. Chairman.
        Let me pursue that line of questioning for just a couple of
    moments, if I may. I understand the lessons learned from the
    EFV in terms of its capabilities. How about in terms of cost
    control, General Mills or Secretary Stackley?
        Mr. Stackley. Let me start. The lessons learned in terms of
    cost control were extraordinarily fundamental. In fact, they're
    similar to lessons learned we have picked up in other programs
    that broke along the way. I stated at the opening, getting the
    requirements right at the front end. That is so critical. The
    EFV concept was developed greater than 20 years ago now, and
    the requirements at the front end were very far-reaching. It
    was orders of magnitude beyond the fleet's experience and also
    beyond industry's ability at the time, without an understanding
    of cost.
        One of the things that we have done through the EFV is
    we've done a complete teardown of cost in terms of development
    and, equally or more importantly, procurement, and then through
    that you extrapolate to operating and support cost. One of the
    things that broke the EFV was operating and support costs.
        We've done that teardown, so we have a fairly strong
    understanding of a cost basis for the alternatives that are
    being evaluated today through the ACV AOA, a fairly good cost
    breakdown that we're putting side-by-side during the
    requirements definition process, so that requirements aren't
    being written unconstrained or uninformed by costs.
        Then that effort is being done jointly between the
    requirements and the acquisition offices. So they're locked
    together debating, assessing, and ultimately arriving at a set
    of requirements for the ACV with a good understanding of what
    it will cost to procure and to support, and then that is being
    overlaid by what the projections are for Marine Corps
    procurement and budgets, so that you have a good balance
    between requirements and capability, cost, and then
    affordability as defined by the budget.
        This work has been going on since the decision to cancel
    the EFV program and it is, frankly, moving pretty smartly
    forward. I think when we come out of the AOA we'll have a half
    a dozen alternatives that we'll be well-postured for and be
    able to make decisions that 3, 4, or 5 years from now the basis
    of those decisions will still ring true.
        Senator Blumenthal. It sounds to me like those are very
    profound lessons that could be useful not only in the ACV
    context, but really for many other procurement programs across
    the Services.
        Mr. Stackley. Yes, sir. We're struggling to get to a point
    where we can make affordability a requirement. So while we have
    key performance parameters that go into our requirements
    document, that document does not capture what those systems
    will cost. So in our overall acquisition process we want to be
    able to tag affordability against those requirements, so we
    don't end up out of bounds when we're halfway through
    development or at the front end of production.
        Senator Blumenthal. Thank you.
        General Mills, I had occasion yesterday to speak with Major
    General Toolan about the progress and the outstanding
    performance of our marines in Afghanistan. I know you're very
    familiar with it. He emphasized the gains that we've made, but
    the continuing dangers to our troops. We all know that one of
    the greatest sources of those dangers is the improvised
    explosive device (IED), the roadside bombs that continue to
    maim and kill our brave marines there.
        I wonder if you could update the subcommittee on the
    ability of the Marine Corps to equip our troops with the
    protective gear, pelvic protective gear and biker shorts and so
    forth, but also what perhaps in the way of new programs might
    be in the works, because this kind of warfare will no doubt
    continue in the future. It's asymmetric, extraordinarily
    damaging, but cost effective for our enemies to use. So any
    comments you would have, I would appreciate.
        General Mills. Sir, I would thank the Senate and Congress
    for their support on being able to provide very quickly needed
    countermeasures to IEDs to the marines in the field. Our urgent
    needs process, in which we respond very quickly to commanders'
    absolutely urgent warfighting requirements, has been very
    successful for us across the board, I think everything from the
    MRAP program, which was done extraordinarily rapidly, as
    efficiently, I think, as possible, but bottom line was it saved
    countless lives on the battlefield, is a great example of that.
    Everything from that large project down to protective devices
    that marines now wear across their hips in order to protect
    vital organs, which was responded to very, very quickly.
        Everything in between, when a commander on the ground sees
    a need and there is either a commercially available solution or
    a process to rapidly develop to fill that need, it's done
    extraordinarily quickly and given to those marines. I saw in my
    time in Afghanistan and in talking to General Toolan during his
    time, whenever they came up with a new idea that was useful,
    whether it be the low metal detectors that were in response to
    the insurgent capability to fashion these IEDs out of wood and
    plastic, whether it be the mine clearing equipment that went
    forward that was needed, everything from boat hook type things
    to very sophisticated explosive ordnance disposal (EOD) robots,
    again very, very quickly.
        I think the process worked. I think that there was a point
    there where cost or competition perhaps was not the driving
    factor, but it was what does that marine need on the ground to
    save his life, and that was met very, very well.
        In the lessons learned, we certainly agree with you that
    this is a threat that will carry on. It's cheap, it's easy to
    do, and it has a significant asymmetric effect on the
    battlefield. We've taken that into consideration. I point to
    probably the JLTV as a great example. If you look at the HMMWV,
    which the JLTV will replace, the HMMWV was an unarmored
    vehicle, it was a Jeep, soft-skinned, and proved itself
    extraordinarily vulnerable to IEDs and small arms. HMMWVs don't
    go outside the wire in Afghanistan any more. They're all inside
    the wire. Only armored protection goes outside the wire.
        When the JLTV requirements were put together, armored
    protection was a significant requirement. Probably 10 years
    ago, 15 years ago, it wouldn't have been. We would have
    produced another soft-skinned vehicle.
        If you look at our MPC, protection underneath from the IED
    threat becomes a critical requirement that we have to look at
    as we go forward. I think the lessons learned both from the
    self-protection equipment that a marine wears into combat to
    the vehicle suite that he's going to have access to, all are
    going to show lessons learned from the war and have IED
    protection, explosive protection, and mine protection built
    into it. The ACV is another example of that.
        Senator Blumenthal. Thank you very much, General Mills.
    Thank you both for your excellent testimony this morning.
        Thank you.
        Senator Reed. Thank you, Senator Blumenthal.
        We'll initiate a second round, presumably 8 minutes. If my
    colleagues want to come back and ask questions, I certainly
    want to give them that opportunity.
        General Mills, one of the urgent procurement initiatives
    because of Afghanistan and Iraq was the MRAP, and the MRAP All-
    Terrain Vehicles. They don't seem to fit into the amphibious
    strategy that we're talking about. So it begs the simple
    question: What are you going to do with these vehicles? Will
    you park them someplace, or will a portion of them be used? Can
    you give us some ideas?
        General Mills. Sir, we have a little over 4,000 of them in
    the inventory right now as we come out of Afghanistan. We're
    going to do several things with them. Our plan, we're going to
    keep about 2,500 of them on inactive service. They will be used
    in countermine operations with our EOD folks, with our combat
    engineers, with our route clearance units. That is a
    requirement developed directly out of the war and they'll play
    an important role in there.
        We'll have some available to the operating forces, whether
    they're pre-staged forward at a location or here in the United
    States. We'll have some available for training at our various
    training locations and some available for training for our
    maintainers and our operators.
        The remainder--we'll work through Marine Corps Systems
    Command to rid ourselves of. We don't want to maintain an
    excessive number of those due to costs. So it'll be a split
    strategy of divesting ourselves of what we don't need for the
    future, but also keeping that capability and being able to
    deploy it.
        The deployment piece will be an issue we have to work our
    way through. As you stated, they're heavy. They're big. They do
    take up an awful lot of footprint if you put them on your
    forward-deployed ships. However, I will keep them accessible to
    our forward-deployed forces, able to come forward through a
    transportation method when needed and when called for by the
    commander on the ground.
        Senator Reed. One aspect of both the Navy and the Marine
    Corps budget which, I think, has huge implications is the F-
    35B, with the sheer size of the procurement dollars required
    for that activity. General Mills and Secretary Stackley, your
    view is that this is critical to your doctrinal approach to the
    future in terms of amphibious operations, and if you have to
    pay some of the costs indirectly you're prepared to do that, I
    presume?
        General Mills. Sir, I believe the F-35 is an absolutely
    critical requirement for the Marine Corps. The ability to
    forward deploy with our large-deck amphibs and bring fixed wing
    aviation, with all the benefits that has attached to it, is
    critical to the Marine Corps air-ground task force concept in
    which we fight now and will fight in the future.
        Certainly one of the things you want when you're conducting
    amphibious operations is the ability to put supporting arms
    ashore to support your landing force in the initial hours of
    any operation. With the decline in naval gunfire surface
    support that we've seen, I think the use of Marine Corps
    aviation becomes even more critical, that you can impact
    targets well inland. We talk about a threat that has been
    developed against the amphibious forces which can be launched
    from well beyond the beachhead. That capability to do that is
    absolutely critical.
        Our Harriers have done a great job for us. They're
    beginning to run out of life, as we know. General Roebling has
    done some excellent programs to extend that as far as possible,
    but they will run out of life in the early 2020s and the F-35,
    the STOVL capability, is critical to Marine Corps' capabilities
    going forward into this century.
        Senator Reed. Secretary Stackley, the cost factor is
    significant and, despite the best planning, it's going to
    impact probably every system in the Marine Corps and the Navy.
    From both perspectives, how do you soften the blow, if you
    will, in terms of not only what the Marine Corps has to
    acquire, but what the Navy has to acquire to support the Marine
    Corps, to complement the emerging doctrine?
        Mr. Stackley. Yes, sir. With particular regard to the JSF,
    as you're well aware, two factors come to play inside of this
    FYDP. First is the program schedule, and the schedule has moved
    to the right, which has resulted in the product ramp being
    brought down while we complete the developmental testing and
    get to a more mature point in the program where we can ramp up
    to steady production.
        The unit cost on the aircraft has increased as well, and
    we're battling that through the design and development phase,
    and also through the way we buy the aircraft. But it does put
    significant pressure on the overall tactical air (TACAIR)
    portfolio for the Navy and the Marine Corps.
        So we don't try to solve the JSF cost in isolation. The
    requirement is unchanged, for the Navy 680 JSFs split between a
    carrier version and a STOVL version. What we are managing in
    the near- to mid-term is the total TACAIR portfolio, where
    we're at risk of a TACAIR shortfall. That's more than just the
    effects of the JSF. We do have the aging Harriers and the F/A-
    18A through D versions that need to go through a service life
    extension program (SLEP), as well as completing the production
    and procurement of the E&F aircraft.
        So between those three, we're balancing within the budget
    to determine how many A through Ds can we afford to SLEP, and
    what's the right production ramp for JSF that we can sustain
    within our budget. We count on the E&F in terms of its service
    life. It's a healthy aircraft for the near- to mid-term. What
    that leaves us with is managing the amount of risk inside the
    TACAIR portfolio.
        We've briefed the committee over the last several years as
    that picture has unfolded. This past year we've revised our
    estimates in terms of the TACAIR shortfall, which peaks in
    about 6 or 7 years from now. The revision was, frankly, a
    downward revision, despite the upward pressure on costs on the
    JSF program, primarily as a result of the revised estimates of
    fly rates as we have gotten out of Iraq and we look forward to
    getting out of Afghanistan.
        Frankly, it's one of the two things that keeps me up at
    night. But we're managing it closely. We have to continue to
    manage the execution of the SLEP. We have to make sure that the
    F-18 aircraft that go through the SLEP get the upgrades they
    need to be combat-capable, while we continue to work the
    introduction of the JSF.
        It's a complex problem with many variables. JSF has added
    some pressure in terms of cost, but what we're managing is
    total portfolio.
        Senator Reed. Thank you.
        We have a chart. I think you're familiar with it. This is
    the chart we used last year.
        [The chart referred to follows:]

        Senator Reed. I think it's useful because it's the O&M cost
    of the vehicles. The bottom orange line is the EFV. That's
    gone, so you just pull that out. But still the rest of the
    colored areas representing individual vehicles go above that
    dark line, which is the steady state without a significant
    combat operation, and even above the dotted line, which is
    steady state with combat operations.
        If you can give us a notion of, one, how well you're doing
    to bring those lines underneath your expected budget; and then,
    two, when you would think because of the wear and tear on
    vehicles, et cetera, that the cost of O&M would go up. Mr.
    Secretary, please comment generally on what we're doing.
        The final point I'll make is this chart was available last
    year for the testimony and what I think repeatedly we heard was
    the way we're going to deal with this is reducing the overall
    number of vehicles. Is that still the bottom line, what we have
    to do? So if you can elaborate?
        Mr. Stackley. Yes, sir. I'll start and then let General
    Mills finish.
        Senator Reed. Yes.
        Mr. Stackley. First, the approach we took on looking at the
    affordability of ground combat tactical vehicles for the Marine
    Corps, we're adopting this same approach across the board
    program-by-program, because we can't afford to look at the
    individual program. We have to look at its affordability inside
    of a total portfolio. Then quite often when we do that, we
    realize in the out-years we're overprogrammed.
        I will give the Marine Corps credit for doing a tremendous
    job of taking a look at the problem--this goes back 2 years
    ago--and realizing we can't get there from here. We are
    overprogrammed. The first decision that came out of that was we
    have to do a scrub of the fleet mix of vehicles, and in that
    was the decision to terminate the EFV program.
        But by itself--and we were very clear--that's not enough to
    solve this problem. A part of the ground combat tactical
    vehicle strategy was taking a look at the total fleet size and
    mix and determining what can we do to get from what has built
    up over the years down to what we absolutely need going
    forward.
        The first cut coming out of that strategy was a readiness
    of about 10,000 vehicles planned for the portfolio for the
    foreseeable future, greater than 20 percent. That has a direct
    impact on the O&M projections going forward.
        The other half of the equation was looking at what we buy
    and when we buy it. So while this is O&M, there's a similar
    picture that reflects the procurement side at the same
    timeframe. So the vehicle strategy has placed a sequence of
    what we buy and also has driven affordability into what we buy.
    As far forward as we can look and project today, our vehicle
    procurement strategy aligns with our budget projections.
        The other aspect that's built into this chart, not
    immediately apparent, is the front end of that chart, the left-
    hand side, is augmented by Overseas Contingency Operations
    (OCO) funding. One of the challenges that remains before us is
    a post-OCO environment, what does that mean for sustaining our
    vehicle fleet? We're continuing to work that. We have a near-
    term reset that we have budgeted, but there is a longer-term
    strategic buildout there that we've identified to everyone. But
    that's very much contingent upon when we get out of
    Afghanistan.
        Your specific question regarding why does that tail down. I
    can't reconstruct the last couple of years of that chart, but
    I'm going to tell you that that's probably more than anything
    else a budget peculiarity in terms of how far forward we
    project certain programs, and since we don't have other
    programs identified yet, the budget numbers probably took over
    the chart at that point in time.
        Senator Reed. Realistically, the chart is accurate, but
    with the right assumptions the lines would continue to go up,
    or be level at least?
        Mr. Stackley. Yes, sir.
        Senator Reed. Thank you.
        I have additional questions, so we'll have another round.
        General Mills. Senator, if I could just add.
        Senator Reed. Excuse me, General.
        General Mills. He covered very clearly what our procurement
    piece was. Regarding O&M costs, other things which we're doing
    to take a look to try to control some of those costs, because
    we realize that will be pressurized under the new budget system
    when you look at the budget amounts that are available to us,
    regarding our older vehicles we do have a plan to do a
    sustainment package on 81 percent of the vehicles that we're
    going to retain in the fleet, both our HMMWVs, our ACVs, and
    our other vehicles. So as they come out of theater, we have a
    very thorough sustainment package we put them through that will
    restore them to we think a good, reliable level.
        For our newer vehicles, of course, we're looking at raising
    reliability standards, challenging the builders to give us
    vehicles that are more reliable the longer time between major
    breakdowns. Also fuel efficiency. Fuel is a big piece of O&M
    costs and we're looking at vehicles that are more fuel
    efficient, and that becomes a factor that we're going to
    consider heavily, where in the past perhaps we didn't give it
    as much set. That's the reset that Mr. Stackley talked about.
    We want to bring those vehicles that are coming out of theater,
    that have been used and have been ridden hard, and bring them
    back to as good a state as we can so they are reliable in the
    future, driving down future maintenance costs.
        We have a pretty comprehensive effort to keep those costs
    as low as possible, understanding also that O&M costs drive
    training, and you have to be able to make sure that you keep
    levels there that you're able to use vehicles, train on them,
    and keep them in the field for preparation.
        Senator Reed. Thank you, sir.
        With that, Senator Ayotte.
        Senator Ayotte. Thank you, Mr. Chairman.
        I want to thank both of our distinguished witnesses for
    being here and for their service to our country.
        Secretary Stackley, I want to follow up on your testimony
    from last week's shipbuilding hearing and particularly ask you
    about the Virginia-class submarine. First of all, is the
    Virginia-class submarine performing well?
        Mr. Stackley. Yes, ma'am, absolutely. It's performing well
    in terms of production, but more importantly performing well in
    terms of the fleet. If you had one of the fleet sailors on
    board here talking about when they compare a Virginia to even
    Los Angeles-class, it's a leap forward in terms of combat
    capability. They're very excited about it.
        Senator Ayotte. Terrific.
        As you're probably aware, the Chief of Naval Operations has
    testified that the Navy is only able to meet 61 percent of the
    combatant commander requirements and requests for attack
    submarines. Are you familiar with that number?
        Mr. Stackley. Yes.
        Senator Ayotte. Yet, for budget reasons, the Navy has
    recommended, because of the numbers that were given in the BCA,
    that we postpone the procurement of one Virginia-class
    submarine from 2014 to 2018. I wanted to ask you about some of
    your testimony at the shipbuilding hearing about this issue,
    particularly the issue of if we were able to move to say that
    if we were to lower the cost by doing it, the cost to purchase
    on an incremental basis. I believe that you testified last week
    about the fact that if you assess the bottom line or the net
    cost impact of adding a second Virginia-class, in other words
    bringing it back up to 2014, that it's near neutral. In other
    words, the net savings associated with pulling the boat to the
    left if we did it on an incremental basis would effectively,
    adding the boat by pulling it to the left, outweigh the upfront
    cost if we had to purchase the entire submarine up front.
        As I understand it, the House Armed Services Committee
    (HASC) Seapower Subcommittee did just that and recommended that
    we actually push back the purchase, but do it on an incremental
    basis.
        Can you help me? Can you comment on this and also explain
    that if we were to purchase the Virginia-class in the
    incremental way that you described in the shipbuilding hearing,
    what impact that would have?
        Mr. Stackley. Yes, ma'am. First, the way the cost analysis
    works out is we assess the Virginia-class program as opposed to
    individual boats, what the program cost would be, not simply
    moving a boat from 2018 back to 2014, but literally moving a
    boat from the end of the program to 2014, because we want to
    sustain two per year.
        Senator Ayotte. Right.
        Mr. Stackley. Then when you look at the total program cost
    for those two different procurement profiles, the upfront cost
    for that second boat in 2014 is offset by savings across the
    program in the later years.
        Senator Ayotte. By moving it up, right.
        Mr. Stackley. Yes, ma'am. So at the bottom line, for the
    Virginia multi-year, 9 versus 10 boats, it is near neutral
    adding that second boat in 2014. That's independent of how you
    fund it.
        The discussion regarding incremental funding simply
    reflects the constraints that we have for our top line in 2014.
    We did not have sufficient head room to fully fund the second
    boat in 2014. So there is an exception to the full funding
    policy that's been put in place for carriers and large-deck
    amphibs that allows you to spread those costs over a number of
    years to eliminate the spike that it causes in the budget.
        In this particular case, that would enable us to fund a
    second boat in 2014 without giving up the second boat in 2018
    and stay near neutral at the bottom line.
        Senator Ayotte. The only reason that you weren't able to
    recommend that to us is because you didn't have that capacity
    for the submarine fleet, is that right, in terms of how you
    could budget?
        Mr. Stackley. You say ``capacity''?
        Senator Ayotte. I mean you didn't have the authority, is
    what I meant to say.
        Mr. Stackley. Yes, ma'am. The policy is that we fully fund
    our capital investments in the year in which we procure them.
    There are exceptions to that, but we do not have an exception
    in this case for Virginia. So while it works out analytically,
    policywise we don't have the authority to incrementally fund
    it.
        Senator Ayotte. Wouldn't it make sense to have an exception
    for Virginia, the way you just described it in terms of how we
    look at this?
        Mr. Stackley. When you simply look at the fact that we have
    this demand for submarine service that exceeds our capacity,
    and in fact longer-term our number of attack boats in the fleet
    goes down until we hit a valley in the 2030s.
        Senator Ayotte. Right, the nine-sub valley is by 2030?
        Mr. Stackley. Our requirement is 48 boats.
        Senator Ayotte. Right.
        Mr. Stackley. Our force structure out in the 2030s
    timeframe drops well below 48 boats. So to affect that, to try
    to improve upon that, you really have to sustain two boats per
    year as long as you can, until you get to the point where you
    have some flexibility in the buy rate. We're not at that point
    yet.
        So it's a budget constraint that drove us to make this
    reduction in 2014, but the requirement would insist otherwise,
    that we get back up to two boats and sustain it as best we can.
        Senator Ayotte. This would be something that perhaps would
    be a very important authority that we could give you with
    respect to our attack submarine fleet and also making sure if
    we did what the HASC Seapower Subcommittee just did we could
    ensure that the two remained constant in a way that would be
    much better in terms of trying to meet our combatant
    commanders' requirement for the attack submarines; isn't that
    true?
        Mr. Stackley. Let me describe that the President's budget
    didn't request it, but I think it's important that we discuss
    and provide the information regarding this alternative to full
    funding, so that everyone can assess the value to the force,
    the value to the industrial base, and then the affordability
    that adding that second boat provides, and weigh that against
    the importance of the full funding policy.
        Senator Ayotte. Right. But as we're talking about it in the
    testimony before the subcommittee today, this is a very
    sensible move, as well as making sure that we meet the requests
    of our combatant commanders, and we already are not meeting
    them. We're only meeting 61 percent of those requests now.
        Mr. Stackley. Getting that second boat in 2014 is the most
    affordable way to buy another submarine.
        Senator Ayotte. I very much appreciate your providing that
    insight to us. I want you to know that this is something that I
    am going to be proposing and pushing with the rest of the
    members of the Senate Armed Services Committee, and I think it
    only makes sense in terms of not only the cost, but also making
    sure that we maintain our attack submarine fleet and given the
    needs of our combatant commanders, and particularly if we look
    at our shift in strategy as a focus on the Asia-Pacific region,
    obviously our naval fleet and the importance of it, that's
    very, very important that we have a robust attack submarine
    fleet, and the Virginia class is very important to that. I
    appreciate your testimony today.
        Thank you very much. Thank you for being here.
        Senator Reed. As long as you want to speak about
    submarines, Senator, you may continue. [Laughter.]
        Senator Blumenthal. I'm prepared to speak about submarines.
        Senator Reed. In that case, we'll recognize Senator
    Blumenthal.
        Senator Blumenthal. Thank you.
        I want to thank Senator Ayotte for that line of
    questioning, which you and I really engaged in at the last
    hearing. I think Secretary Stackley put it extraordinarily in
    that hearing, and I don't want to put words in your mouth, but
    effectively you suggested that the committee should adopt this
    incremental funding approach, which you said is an
    extraordinary method of funding, but we live, as you put it, in
    extraordinary times, and we are facing extraordinary
    challenges. I agree with you completely.
        Senator Ayotte, I'm glad you followed up with those
    questions, because I've already written to the chairman, and I
    know others have as well, endorsing the idea of moving that
    submarine forward without necessarily funding it up front and
    doing the incremental funding. I'm glad to see that the HASC
    has adopted that approach, which perhaps we can follow here.
        I want to thank you for the testimony this morning in
    effect endorsing--that may be too strong a word--but at least
    suggesting favorable consideration on the part of our
    committee.
        Senator Ayotte. We may be able to have bipartisan agreement
    on this. I like that.
        Senator Blumenthal. I think we will, and I'm sure that
    Senator Reed may have favorable things to say about it as well.
        Senator Reed. I have made a note to myself.
        Senator Blumenthal. I would like to just move to another
    topic if I may, Mr. Chairman. It was really suggested by the
    testimony making reference to the Commandant's energy
    efficiency statement. I know there was a more high-falutin term
    for it, but I want to commend and thank the Marine Corps for
    focusing on this issue. Secretary Stackley, you and I discussed
    it a little bit in the last hearing.
        But I'm wondering, in light of this chart and other
    analyses that show, as you put so well, General Mills, the
    costs of simply running these vehicles using our present source
    of energy; and certainly I think one of the lessons in
    Afghanistan has to be the tremendous cost of providing fuel,
    which when you think about it is really staggering, not only
    the cost in dollars, but the vulnerability in terms of the
    Pakistan route that it creates and the cost in human lives in
    the convoys that is required.
        I'm wondering whether there is thought to alternative means
    of running these machines, so to speak. I don't know whether I
    can put it in a more sophisticated way, but just alternative
    sources of energy that can be used in these vehicles.
        Mr. Stackley. The chart that was displayed regarding the
    O&M costs for the vehicle fleet, General Mills hit the issue
    when he described the majority of those vehicles, they are
    aging; they are going to go through a sustainment program.
    They'll get modernized. They'll go through improvements so they
    can serve well beyond their service life.
        Regarding your specific question, the point there is that
    the majority of those vehicles, those drive trains are what
    they are. If there's an opportunity to improve upon the drive
    train as we go through the modernization, we're going to
    explore that and do that to the extent it improves the
    operation of the vehicle and drives down its operation and
    support cost.
        But there's little opportunity to introduce new
    technologies for drive trains beyond the programs that we're
    introducing today. So the JLTV program, in particular, we've
    discussed whether or not there's an opportunity to look at a
    more fuel efficient system. In fact, energy is one of the
    requirements that's being drafted up for that vehicle. But it
    doesn't drive you to a leap-ahead technology in a drive train
    when it comes to military vehicles, not yet.
        It is something that we have to continue to look at. So
    while we do development in parallel on the components and the
    subsystems, at some point downstream we have to explore how do
    we introduce these more efficient drive trains to the fleet of
    vehicles. It will be a slow, slow transition because of the
    large numbers of legacy vehicles that we start with.
        General Mills. Sir, I would just add two things that we're
    looking at from the Marine Corps perspective. One, of course,
    is life in the barracks when you're back, not in the field, not
    at war, not training, looking at various energy supplements
    there that we can use. Solar is the one that we're most active
    in, and we're having success at many of our bases in replacing
    fossil-driven fuels with our solar capabilities. Our Mountain
    Warfare Training Command up in Bridgeport, CA, is soon to be a
    negative energy user. They're going to provide everything they
    need through solar and through thermo, which they have access
    to, and may, in fact, be able to sell some of that energy out
    in town to the local power grid.
        We're looking at ways back in the barracks in which we can
    ensure those barracks are green, for want of a better term, and
    which we can save power.
        Out in the field, in the vehicles, we're looking at
    ensuring our new vehicles have alternate power units attached
    to them, so that you don't have to run a 10K generator that
    uses an awful lot of fuel when you simply want to keep some
    lights on in the Combat Operations Center (COC). You can use a
    more efficient method of providing that electricity, looking
    for more efficiency. Lighting in our COCs and places like that,
    those aren't huge savings, but they chip away at the
    requirements.
        I found that when I was in Afghanistan, surprisingly, the
    troops were extraordinarily receptive to energy-saving devices,
    because they knew what that meant to them as far as the
    logistics trail they had to drag along and the risks they had
    to take in moving large quantities of fuel around the country
    in which fuel trucks were lucrative targets, both for the enemy
    and for corruption.
        We're looking for ways big and small to save power, save
    energy, reduce that logistics trail, and also to reduce costs,
    as pointed out by that graph.
        Senator Blumenthal. I thank you for those answers. Also,
    the March 2011 Marine Corps Expeditionary Strategy and
    Implementation Plan was the report that I was referring to
    before. I think it's a great step in the basis to battlefield
    strategy and I hope that it will be updated because technology
    is moving so quickly that there's a lot of opportunity.
        General Mills. Sir, if I can just add, twice a year we
    sponsor what we call an expeditionary forward operating base,
    one at Camp Pendleton and one at Camp Lejeune. The one at Camp
    Lejeune goes next week and we're going to have a group of
    staffers accompany us down there. The intent of that is to look
    at expeditionary ways to save fuel, both through solar and
    other experimental methods. It will expose us to them, it will
    allow us to identify some projects worthwhile to take forward
    to us on our deployments, try them out in the field under real
    conditions, and then report back as to whether there are things
    that we want to exploit. It's an ongoing project for us.
        Senator Blumenthal. Thank you very much.
        Senator Reed. Thank you, Senator Blumenthal.
        Let me ask some additional questions. General Mills, I want
    to get a feel for the procurement strategy. We started off with
    the notion of buying about 1,000 EFVs to replace roughly 1,000
    AAV-7s, which you have in your inventory now. The EFV is out
    and now we're looking at basically dividing your resources
    between the ACV, which would be the assault craft, and the
    wheeled armored personnel carrier.
        The wheeled armored personnel carrier doesn't swim. It
    carries only half a squad, so it has some tactical
    consequences. It's about as heavy to lift as the ACVs, which
    raises the question, particularly if we're still doctrinally
    looking at roughly two-thirds of our assault forces going
    ashore by amphibious vehicle, what is the ratio of investment
    in the ACV versus the personnel carrier, and why are we buying
    personnel carriers? Can you comment?
        General Mills. Sir, we feel the portfolio approach is the
    best one, that both from an affordability perspective, but more
    importantly for the flexibility it gives the commander on the
    ground. We don't believe that every marine has to swim ashore
    in a self-propelled amphibious vehicle, that the forces flown
    ashore off of the ships will go ashore through a series of
    means. A third of the force will go in by aviation, for
    instance, and land and link up with heavy equipment later on
    ashore. Initial assault waves will go in in our ACVs because of
    the uncertainty of what they're going to meet once they reach
    that beachhead.
        Once that beachhead is established, however, we can begin
    to run connectors in there, which are our LCAC and our LCU,
    bringing in the remainder of our vehicles. They can bring in
    the MPCs that you spoke of.
        Then, once ashore, those vehicles give us great
    flexibility, give us better speed than the tracked vehicles do
    in the field, give us efficiencies in fuel, and provide us
    with, I think, better combat power for that commander as he
    pushes the beachhead in and proceeds on to exploit the
    opportunities on the ground.
        We currently have a mixture of vehicles. We have a
    portfolio. It works. It fits into our concept of operations
    very, very well. We're still doing the study as to what that
    breakdown should be. We think that the total requirement is the
    ability to have 12 battalions with some armored protection
    mobility. Whether we break down to all of them being on ACVs,
    probably an unaffordable strategy, or what the exact breakdown
    will be, is an ongoing study and will be a decision that we're
    going to push down the road a little bit for the Commandant to
    make. But once the AOA on the ACV is complete, once we have a
    better feel for the MPC characteristics and costs, we think we
    will give him an opportunity to make his decision as to how he
    sees the fleet motored up, if you will.
        Senator Reed. So you're teeing this up for a decision on
    numbers based on what you think is the optimal configuration
    for your doctrine, your tactical operations?
        General Mills. Exactly, sir. Of course, cost has to be a
    factor.
        Senator Reed. Let me go back to the point that you have a
    vehicle that takes half a squad, which complicates command and
    control. That is a factor which I assume you're going to also
    consider. My sense, over the last several decades the thrust of
    buying military equipment for land forces was to at least have
    a squad size as the minimum organization point carrier, both
    lift as well as the personnel carriers. This seems to be a
    diversion from that.
        General Mills. Sir, it is different. But we think that it
    does also mitigate some risk. It does disperse that unit, so
    should you lose one of the vehicles, you haven't lost an entire
    squad. Some of our experience in Iraq, for instance, where we
    lost some AAVs that had full squads on board, and then you lost
    an entire fighting unit, so there is some advantage to
    splitting that squad into units.
        There are challenges with command and control as you
    pointed out. It also gives us some advantage in distributed
    operations as we begin to spread these units out, fight at
    greater distances and fight in smaller units. There is some
    capability there. But we do feel that the MPC will give us some
    flexibility, some efficiencies, some reliability that a tracked
    vehicle, which is more complicated and complex, doesn't give
    us.
        Mr. Stackley. If I could just add?
        Senator Reed. Yes, Mr. Secretary.
        Mr. Stackley. First, sir, you're asking exactly the right
    questions, and they're the same questions that we're asking
    ourselves internally. Those are all built into the AOA that's
    being accomplished for the ACV.
        But also, as we look at that portfolio mix, the fleet mix
    of vehicles, it's very similar to the discussion we had earlier
    when you laid out the total O&M costs for the fleet of
    vehicles. It's the same portfolio approach that we're taking
    when we look ahead through the ground combat tactical vehicle
    strategy.
        Senator Reed. Let me raise a question with you, Mr.
    Secretary, on that. We have communicated back and forth about
    habitability issues with respect to the assault ships coming
    ashore. From General Mills' initial comment about the new
    threat, the new doctrine, that you're going to have to swim a
    long way to the beach, longer than we thought before, there's
    been some testing and you responded to the committee that it
    does not appear that the multi-hour water movements have
    degraded the capability of the marines coming ashore.
        We understand that this test was done under mild weather
    conditions, et cetera. I raise the issue because I would
    presume this is again something that you're going to test again
    and again and again under a whole series of conditions, because
    you have to get to the beach, but if you get off the amphibious
    vehicle in a degraded state, that's not doing your marines any
    favors. I know you don't want that to happen.
        Mr. Stackley. Yes, sir. Inconclusive is a good word for
    this case. We did about a 1-week habitability assessment test
    and submitted the report to Congress. We did not get the
    challenging sea conditions that would have provided more
    meaningful results. But what we did gain from that is we did
    not find anything in that early testing that said it can't be
    done. The assessment and the testing of the marines that
    participated concluded that, at least for these sea conditions
    and under the 1-, 2-, and 3-hour scenarios, when they got to
    the beach they were operationally effective.
        The report describes that when it comes to cognitive skills
    and things, there was some marginal degradation, but when it
    came to marines being able to perform a combat mission, for
    those conditions everything looked okay. We have to go beyond,
    though. We have to do further testing. This is important, not
    just to development of the ACV, but it's important to how we
    operate going forward for amphibious operations.
        Senator Reed. Do you have a comment, General?
        General Mills. Sir, I would just add one comment to that.
    We know what the optimum conditions are now. We've been doing
    it for years; 4,000 yards off the beach and sea state one. You
    get ashore quickly and you barely know you're in the water.
        Our challenge, as we plan to use the exercises that I
    talked to you about earlier to push those limits, is to find
    what's the worst case. We know what the best case is, 4,000
    yards and sea state one. Now what's the worst case? How many
    miles off the beach could you be? What kind of sea states could
    you operate in, and what decisions will that Marine Air-Ground
    Task Force commander have to make when he looks at amphibious
    operations in the future?
        So we're going to do that. We're going to do it
    incrementally, we're going to do it safely, because we
    certainly don't want to put loaded vehicles well out at sea
    with marines in the back and have a problem. So we're going to
    do it incrementally, we're going to do it safely, and we're
    going to use what we've learned to help guide our decisions
    when we see those results of the AOA.
        It is very concerning to us and we are working it.
        Senator Reed. I have just a few additional questions, but
    Senator Ayotte, if you would like to do an additional round, go
    ahead.
        Senator Ayotte. Thank you, Mr. Chairman. I really
    appreciate it. I just have two areas of questioning. I
    appreciate it.
        General Mills, I wanted to thank you for coming to my
    office recently to talk about the Navy's proposal to eliminate
    one of the three maritime prepositioning squadrons and to
    reduce the number of maritime prepositioning ships in the
    fiscal year 2013 proposal. We just recently received the report
    that I had asked for in the 2012 NDAA about this topic and also
    the risks associated in terms of our readiness with reducing
    the prepositioned squadrons.
        Obviously, this is something that we're looking at. We're
    reducing status, but in the fiscal year 2013 budget we're
    eliminating one because of the fiscal pressures that we face.
    In the report, General Amos consulted with the U.S. European
    Command and U.S. Africa Command (AFRICOM) commanders. They
    certified that the risk was acceptable, but still acknowledged
    that it's going to create capability gaps and influence force
    closure and crisis response times in terms of some of the gaps
    we might have.
        But the mitigating factor, as you and I also talked about
    in my office, was the prepositioning program in Norway. In
    terms of the equipment in Norway, that equipment is not on
    ships, is that right?
        General Mills. That's correct. It's in caves that are
    maintained by the Norwegians under an agreement.
        Senator Ayotte. We would probably need to get it on a ship.
    That's one of the capacities we may need, unless we need it
    right there. But most likely we'd need to get it on a ship,
    correct?
        General Mills. Yes, ma'am.
        Senator Ayotte. So that's one additional step we would have
    to take, as opposed to already having the ship right there, the
    squad, and what we're eliminating in capacity now; is that
    right?
        General Mills. That's correct.
        Senator Ayotte. How long will it take to get the equipment
    on the ships?
        General Mills. That's a difficult question to answer
    because of the many factors that would play into that.
    Depending on how much equipment you needed, what that slice
    was, weather conditions, that kind of thing, a MEU loads out in
    about a week from Camp Lejeune to Moorehead City and gets on
    board ships and moves out. I'd have to get back to you with
    exact planning figures to get out of the caves and get to
    commercially available shipping. But I think it's a reasonable
    amount that we could respond to large-scale contingencies.
        Senator Ayotte. If you're able to answer me more
    specifically as a follow-up, I'd appreciate it.
        General Mills. Yes, ma'am.
        [The information referred to follows:]

        Surge sealift ships can be activated and sail to Norway in about 2
    weeks. An additional option is to call upon U.S.-flagged ships from the
    Maritime Security Program (MSP). Some of these MSP ships conduct trade
    in northern Europe, thus can likely respond in days.
        It will take 7 to 10 days to load the equipment in Norway onto
    ships once they arrive. However, Marine Corps Prepositioning Program-
    Norway (MCPP-N) is versatile, and ground, rail, and air are all
    possible modes of transportation. Strategic air was used for MCPP-N
    support of the Russian wildfires in 2011 and humanitarian assistance to
    Turkey following the earthquakes in 2011, allowing equipment and
    supplies to be delivered very quickly.
        Current MCPP-N on hand, ground and aviation equipment will require
    two ships, and a fully-attained prepositioning objective will require
    three ships. It takes 5 days to load each ship, and ships can be loaded
    concurrently if berths and required personnel are available.
        Current MCPP-N munitions on hand, and a fully attained
    prepositioning objective, will require one ship. It will take 5 days to
    load the current on hand munitions and 9 days to load a fully attained
    prepositioning objective. Munitions conduct load out from a different
    port than ground and aviation equipment.

        Senator Ayotte. Then also, how is the equipment in Norway
    in the caves different than the equipment that's in a maritime
    prepositioning squadron? Is it a different type of equipment or
    is it the same?
        General Mills. It's basically the same. It's a cross-
    section of Marine Corps equipment. The plan to reload the
    caves, because we're going to reload them, is to organize them
    around MEU- or MEB-sized units, which are probably the
    appropriate size unit you'd want to have respond to something
    that was going to happen either in Africa or in the Levant.
        Senator Ayotte. Are we going to have to do some
    modernization and update on the equipment in Norway?
        General Mills. We would have to as we restock it. We have a
    plan with all of our prepositioning, whether afloat or ashore,
    to modernize it on schedule at the times it needs to be done.
    But those caves are going to be restocked. They're low in our
    priorities, in all honesty, but they are on our priorities to
    restock them and have them prepared and ready to go.
        Senator Ayotte. One of the factors we're dealing with in
    terms of just thinking about a difference in capability between
    the squadron and the caves is not only loading the ships, but
    also the equipment there isn't as modern as what's in the
    squadron right now, is it?
        General Mills. I'd say it's comparable. I would say it's
    comparable.
        Senator Ayotte. It's comparable?
        General Mills. I can get you some information on that, but
    I would say it's comparable.
        Senator Ayotte. Okay. I would appreciate if you have any
    additional information on that as well. Thank you very much.
        [The information referred to follows:]

        The equipment sets within the Maritime Prepositioning Force (MPF)
    program and the Marine Corps Prepositioning Program-Norway (MCPP-N) are
    comparable in terms of modernization and maintenance readiness;
    however, the MPF equipment set includes larger quantities and a wider
    array of equipment than MCPP-N. The MCPP-N equipment set does not
    currently have all of the communications and weapons systems
    prepositioned in the MPF.
        The Marine Corps is currently conducting an assessment of MCPP-N to
    ensure future operational relevance from a capability and capacity
    standpoint. The Marine Corps is in the process of modifying the
    composition of prepositioning stocks within MCPP-N as part of an
    ongoing transformation effort. MCPP-N formerly supported an air-landed
    Marine Expeditionary Brigade (MEB) with engineering, transportation,
    aviation support equipment, and various classes of supply. This
    existing equipment set is being reshaped, with the addition of
    communications and additional ordnance assets, to support a Marine Air-
    Ground Task Force built around an infantry battalion task force and
    composite aviation squadron. MCPP-N will retain its primary role of
    augmenting up to a MEB-sized force to support the reinforcement of
    Norway and U.S. Marine Corps expeditionary operations.
        Over the course of the next several years, and to the maximum
    extent possible, MCPP-N will be restocked with equipment that becomes
    available as a result of the decommissioning of Maritime Prepositioning
    Ship Squadron-1 (MPSRON-1) and drawdown from combat operations in
    support of Operation Enduring Freedom. This is essential to increasing
    attainment levels in Norway and mitigating risk to U.S. European
    Command and U.S. Africa Command associated with the loss of MPSRON-1.
    Though MCPP-N will mitigate this risk to some extent, it is not a
    substitute for the afloat prepositioned capability within MPSRON-1.

        Senator Ayotte. This has just been something I've been very
    interested in, in terms of our capacity and our ability of
    eliminating one of these squadrons in terms of response times.
    So I do appreciate your follow-up on it. We certainly are
    taking on additional risk by doing this. I think you'd agree
    with me on that.
        General Mills. Yes, ma'am, there is additional risk. As we
    discussed earlier, the squadrons that we're going to have are
    enhanced. They are better than the squadrons that we had. They
    have newer ships, they have more capacity, and so the
    individual squadron gives us a better capability.
        Senator Ayotte. But also, location is helpful, too.
        General Mills. Location is very helpful.
        Senator Ayotte. Especially with AFRICOM, yes.
        General Mills. Although those ships will be focused to the
    Pacific, the advantage they give you is the flexibility of
    being able to move them should a crisis arise someplace in the
    European or African theaters. You always have the flexibility
    with forward-deployed amphibious capability to move it to the
    point of crisis.
        Senator Ayotte. Thank you, General Mills. I look forward to
    also continuing to talk with you about this issue.
        Secretary Stackley, if we undertake what I think would be
    foolish, to allow sequestration to go into place, on an annual
    basis that's about $15 billion to the Navy, which as I
    understand it would be the equivalent of our entire
    shipbuilding budget in 1 year or the equivalent of 2 years of
    maintaining our fleet, or would be the entire naval air fleet
    procurement in 1 year. Is that true?
        Mr. Stackley. In terms of numbers, that's about right, yes,
    ma'am. The impact of the first $487 billion over the decade to
    the Navy was about $50 billion over the FYDP, and so the first
    thing when you talk about sequestration is you have to
    recognize that we've already carved out $50 billion and the
    budget that you're looking at reflects those actions.
        To consider sequestration and its impact, the next thing
    you have to recognize is a lot of the budget can't be adjusted.
    There's some core of O&M that you have to have. So that $10 to
    $15 billion of additional impact per year really lays on top of
    a relatively small portion of the overall budget. So its impact
    will just be devastating.
        We don't today plan for sequestration. The first step of
    planning sequestration would probably have to be arriving at a
    new defense strategy because the defense strategy that's in
    place could not be supported if sequestration hit.
        Senator Ayotte. General, I assume that if sequestration
    goes forward it would be devastating to the Marine Corps as
    well?
        General Mills. Yes, ma'am, across the board; acquisition,
    the O&M part of it, and the training piece of it. Assuming the
    personnel section was excused from it, it would have a
    devastating effect on our acquisition, our training, and our
    readiness.
        Senator Ayotte. It is my hope that we will take this issue
    up very quickly around here, so you don't have to undertake any
    type of planning for things that would be devastating to our
    military, as well as for our industrial base, that has to look
    ahead in terms of planning and the capacity. I think about our
    shipbuilding capacity. This is a very, very important issue. So
    I appreciate both of your being here today.
        Thank you.
        Senator Reed. Thank you, Senator Ayotte.
        I have two concluding questions. We've talked about the
    Littoral Combat Ship (LCS), a program that gets a lot of
    attention. The Marine Corps has expressed some interest in
    developing and fielding some modules for the LCS that would
    support Marine Corps warfare missions. Can you discuss, General
    Mills, what these modules might be and how it would complement
    everything we've talked about this morning?
        General Mills. Certainly. We have a planning team right
    now, as a matter of fact, that's out visiting the ships and
    working with the Navy to take a look at ways in which the
    Marine Corps could complement the capability of the LCSs. I
    think one that leaps immediately to mind is there's an
    overriding requirement out in the combatant commands for
    amphibious ships. A lot of that requirement is relatively low-
    level engagement opportunities. I think that, given the fact
    that we can get some helicopters on board one of the LCSs, we
    could put a module on board in which marines could live and do
    some training and get ashore. I think that would be ideal for
    those kinds of low-level operations.
        Second, I think when you look at operations in littorals,
    in the shallow waters and perhaps the bays and rivers, those
    ships give you some capability in those areas, small-scale
    Marine Corps units, that you want to send forward.
        I think there's lots of opportunity there. We're going to
    take a hard look at it. We're going to work with the Navy fleet
    command to find opportunities to experiment with it. I think
    that we'll find some use.
        Senator Reed. Mr. Secretary, the program of record for LCS
    doesn't have an expeditionary module or a Marine Corps
    component. How are you beginning to plan for this, or is this
    in such an early stage that it hasn't reached your attention?
        Mr. Stackley. No, sir, the program of record has the three
    mission modules: anti-submarine warfare, mine countermeasures,
    and anti-surface warfare. But we recognize that that's a
    starting point. What the LCS brings is flexibility. It's a
    modular concept, so it brings space, volume, displacement, and
    margin. It provides power and links. It provides aviation
    capability and also provides boat-handling capability.
        We're looking at missions that that capacity that the LCS
    brings can neatly support. General Mills just talked about the
    Marine Corps. We are also in discussions with SOF. We look at
    some specialty niches associated with humanitarian assistance,
    as well as search and seizure.
        Admiral Harvey has been pounding the table on this: hey, we
    need to look beyond the first three mission packages. We need
    to be looking at where else can we employ LCS and get started
    now on developing the concepts so we can have that capability
    in hand sooner.
        Senator Reed. Thank you.
        General Mills and Secretary Stackley, you're probably aware
    that the Chinese have an amphibious vehicle. One version is a
    tank in which a 105-millimeter gun appears. The other is an
    infantry fighting vehicle with a 30-millimeter cannon. They're
    both high speed planing vehicles. They look a lot or something
    like the EFV might have looked like. They're also building
    their first set of large amphibious ships that compare to,
    roughly, the LPD-17 class.
        Can you give us an assessment of your view or your take, or
    is this something that you're still considering?
        General Mills. I think it reflects the interest that China
    has in overseas areas in which they're very interested in
    looking for natural resources and things like that, and they
    begin to have the capability to project power. I think that any
    country, any world power, has to have that capability, the
    ability to project power, and I think that amphibious forces
    are the natural growth from making that assumption. So I think
    that it's their beginning steps on a way to being able to
    project power to areas that they're interested in.
        Senator Reed. Mr. Secretary?
        Mr. Stackley. I would say that China's not alone. There are
    several nations around the world that are expanding their
    amphibious warfare capabilities. I think statistically there's
    a 200 percent increase when you look globally at investment in
    amphibious capabilities beyond the United States. More
    recently, it's been well-advertised that the Russian navy is
    acquiring a French-designed and built amphibious ship, the
    Mistral-class.
        So, as General Mills described, it is a method of power
    projection, increasing attention in the littorals; I think that
    simply reflects that.
        Senator Reed. Thank you very much, gentlemen, not only for
    your testimony today, but for your service to the Navy and the
    Marine Corps and to the Nation. Obviously, as always, please
    commend those that you lead for their extraordinary efforts.
        We'll keep the record open for a week, and there may be
    additional statements or questions submitted by colleagues. We
    would ask you to respond as quickly as you could to any written
    questions.
        With no further business, this hearing is adjourned.
        [Questions for the record with answers supplied follow:]
                  Questions Submitted by Senator Kay R. Hagan
                      modernized expanded capacity vehicle
        1. Senator Hagan. Lieutenant General Mills, until recently, there
    were plans to modify and upgrade High Mobility Multipurpose Wheeled
    Vehicle (HMMWV), through the Modernized Expanded Capacity Vehicle
    (MECV) program, to provide a light tactical vehicle that could be
    useful in an environment where improvised explosive devices (IED) are
    prevalent. Now, all efforts are focused towards the Joint Light
    Tactical Vehicle (JLTV). The decision to move away from the MECV
    program has impacted the defense industrial base. Industry moved to
    address HMMWV survivability and crew protection concerns and now they
    are told the program is terminated. Meanwhile, the JLTV is still in the
    research, development, test, and evaluation (RDT&E) phase. What is the
    Marine Corps' plan should the JLTV program's timeline slide?
        General Mills. The HMMWV Survivability Improvement Initiative
    (HSII) was developed in early 2011 as a complementary effort to JLTV,
    recapitalizing a portion of our light tactical vehicles and extending
    their service life. The Army and Marine Corps collaboratively developed
    JLTV and HMMWV recapitalization requirements and programs (called MECV
    in the Army) throughout this period. The Marine Corps evaluated,
    through experimentation, testing, and analysis, a recapitalization
    approach, HSII, but decided against it. Given the added weight
    necessary to improve protection, HMMWV-based platforms will not meet
    Marine Corps requirements in terms of reliability, payload, service
    life, mobility, ability to fit on Maritime Prepositioning Force (MPF)
    shipping. The Army does not intend to invest to meet these
    requirements. Therefore, the Marine Corps will reduce the scope of our
    2011 HMMWV competitive survivability initiative and establish a HMMWV
    sustainment program. The purpose of that effort, through modification
    to existing platforms, is to extend HMMWV service life out to 2030.
    Marine Corps collaboration with the Army MECV program will continue to
    identify successful component designs that may be applied in our HMMWV
    sustainment program.

        2. Senator Hagan. Lieutenant General Mills, do you see any value in
    continuing to explore options with the MECV testing, for which
    approximately $20 million had been budgeted for fiscal year 2012?
        General Mills. No. HMMWV recap does not meet the Marine Corps
    requirements for light vehicles meeting the full desired mission
    profile, while remaining transportable and possessing the desired
    characteristics of our sustainment effort, returning reliability,
    payload, and mobility.

        3. Senator Hagan. Lieutenant General Mills, what factors were
    behind the decision to cancel the MECV program and focus on the JLTV?
        General Mills. Last year, we determined that with the added weight
    necessary to improve protection, HMMWV-based platforms will not meet
    Marine Corps requirements in terms of reliability, payload, service
    life, mobility, or ability to fit on amphibious and MPF shipping.
    Therefore, we reduced the scope of our HMMWV competitive survivability
    initiative to a HMMWV sustainment program. The purpose of that effort
    is to extend the service life of our roughly 14,500 light tactical
    vehicle fleet out to 2030, as a portion is replaced by the JLTV. The
    focus of the HMMWV sustainment effort will be toward safety and
    engineering enhancements, a return of mobility and payload, increased
    reliability, and reduced operating costs for those vehicles for the
    operating forces.
                                     ______

                 Questions Submitted by Senator Roger F. Wicker
                         expeditionary fighting vehicle
        4. Senator Wicker. Secretary Stackley, the Expeditionary Fighting
    Vehicle (EFV) program went through a Nunn-McCurdy breach and
    recertification in 2007 during which the Department of Defense (DOD)
    certified to Congress that requirements for an amphibious assault
    capability were still operationally necessary and that the most cost-
    effective means to achieve that capability was the EFV. Not much has
    changed in terms of the need for the Marine Corps to have the
    capability to carry out an amphibious assault. If anything, the area
    denial capabilities of our adversaries that would oppose Navy-Marine
    Corps amphibious operations have increased. What leads DOD and the Navy
    to believe that lesser requirements for a vehicle like the EFV are
    adequate to accomplish the amphibious assault mission?
        Mr. Stackley. The Navy and Marine Corps have conducted/supported
    campaign analysis and a wargame examining scenarios requiring power
    projection from the sea using the EFV as well as the legacy Amphibious
    Assault Vehicle (AAV) and our current and projected suite of air
    assault connectors. The analysis used official threat assessments and
    modeled battlespace preparation in order to define threats to landings.
    Using fielded and planned capabilities to conduct pre-assault
    battlespace preparation, the Navy assessed that U.S. weapons and
    sensors will allow amphibious ships to operate at 12 nautical miles
    from the coast with acceptable risk against any residual threats. This
    analysis suggests a 25 nautical miles assault range of the EFV may not
    be required.
        For the past 2 decades, both the threats in the littorals and U.S.
    area and self-defense capabilities against those threats have evolved,
    enabling discharge of amphibious vehicles at approximately 12 nautical
    miles from shore. While the tactical advantages of at-sea speed
    capability provided by the EFV are not dismissed, the principal driving
    factor leading to the EFV's water speed requirement was the assumption
    that marines would not be combat-ready after spending more than an hour
    in the vehicle at sea--a legacy of the current AAV. Initial
    developmental testing indicated that improvements in habitability (air
    conditioning and improved vehicle exhaust) permitted marines to ride in
    the vehicle longer without suffering ill effects associated with the
    legacy AAV. At-sea speed requirements were a significant system
    complexity and cost-driver that did not significantly contribute to the
    operational effectiveness of the vehicle.

        5. Senator Wicker. Secretary Stackley, do the Navy and the Marine
    Corps stand behind the requirement to conduct amphibious operations
    against a defended shoreline, or can requirements and costs be reduced
    to support landings in only uncontested areas--in other words, is the
    amphibious assault mission still relevant for the future?
        Mr. Stackley. There is absolutely an enduring requirement for the
    capability to conduct opposed amphibious operations; in simple terms,
    this gives the United States an assured access capability under any
    circumstances. America remains a maritime nation with global
    responsibilities. The majority of the world's population lives within
    200 miles of the sea. The Marine Corps-Navy team provides the Nation's
    only assured access force that can come from the sea to project and
    sustain power ashore in this environment. Amphibious forces provide a
    maritime power such as the U.S. significant advantages including the
    ability to overcome the tyranny of distance and project power where we
    have no basing or infrastructure. The amphibious capability inherent in
    the Marine Corps also provides a powerful deterrent that is central to
    our National Security Strategy.
        Forward deployed amphibious forces are capable of conducting
    security cooperation, building partnership capacity, responding to
    crises by providing humanitarian assistance and disaster response (HA/
    DR) or conducting non-combatant evacuation operations, serving as a
    deterrent to hostility, and conducting forcible entry as either a
    single force or facilitating the forward movement of a larger force. In
    all cases, the global presence and rapid response of amphibious forces
    provide critical options to the Joint Force Commanders, Geographic
    Combatant Commanders, and the National Command Authority.
        Conversely, the risks associated with a lost or diminished
    amphibious capability present serious threats to our national security
    from lost influence with our global partners, an inability to develop
    new partnerships, an inability to counter growing threats from
    terrorism, an inability to protect our interests in the global commons
    from piracy threats, and unchecked competition from peer nations. It is
    imperative that the Navy-Marine Corps team maintains its amphibious
    capabilities forward deployed and globally postured so that it remains
    the ``most ready'' when the Nation is ``least ready.''

        6. Senator Wicker. Secretary Stackley, fundamentally, what has
    changed since the Nunn-McCurdy certification in 2007 that favored
    continuing the EFV as the most cost-effective way to meet the
    amphibious assault requirement?
        Mr. Stackley. The decision to cancel EFV procurement was not made
    lightly, as we recognized the importance of the Marine Corps' ability
    to respond to crisis around the globe as vital to our Nation's
    security. Two factors were at the core of the decision to cancel the
    EFV: affordability, both in procurement and sustainment; and the impact
    of that cost on our ability to reset or modernize other warfighting
    capabilities after 10 years of combat. Projected costs of EFV grew
    substantially over the course of the program, and it simply became
    unaffordable to procure and sustain over time, especially in light of
    this Nation's emerging fiscal environment and other critical capability
    needs of the Marine Corps.

        7. Senator Wicker. Secretary Stackley and Lieutenant General Mills,
    when the Marine Corps provided information to Congress in January
    supporting the decision to end the EFV program, the case for
    termination was made by citing the affordability of the EFV, not
    whether the EFV would be reliable and capable of meeting mission
    requirements. The Marine Corps said that continuing with the EFV would:
    consume about half the Marine Corps total procurement budget for 2018
    to 2025; consume all of the budget that was projected to be available
    for procurement of ground combat vehicles over that period; and consume
    about 90 percent of the operation and maintenance (O&M) budget for
    Marine Corps ground vehicles when the EFV was fully fielded. These cost
    projections were made against historical cost averages. The
    affordability concerns raised by the Marine Corps are significant, but
    should we allow comparisons to historical costs to drive an assessment
    of what is required to do the mission?
        Mr. Stackley and General Mills. One element used to evaluate the
    affordability of the EFV and all other ground vehicle modernization and
    sustainment efforts was the 30-year average of vehicle procurement as
    it related to the Marine Corps warfighting investment account. The last
    30 years contained periods of significant investment in ground
    equipment modernization (LAV, M1A1, MTVR, LVSR, HMMWV, and HIMARS).
    During that period, vehicle investment averaged 33 percent of total
    procurement except during modernization peaks, when it approached or
    slightly exceeded 50 percent of total procurement. A principal
    consideration of EFV affordability was the measure of cost versus
    capability delivered. The EFV represented a major expense in combat
    vehicle modernization, with a great deal of the cost being driven by a
    high water speed requirement where water mobility constituted only 20
    percent of the vehicle's operational mission profile. During the EFV's
    development, landward threats grew exponentially as evidenced by enemy
    employment of IEDs in Iraq and Afghanistan but the constraints imposed
    by the EFV's water mobility requirements did not allow for growth to
    accommodate armor and other protective systems to make the vehicle more
    operationally effective in its landward mission. We believe future
    vehicle modernization should focus investments in more operationally
    relevant capabilities, procured faster, and--where operational or
    threat complexity exceed a single vehicle type's capacity--a portfolio
    approach to modernization mitigates the weakness imposed by
    overinvesting in specialized mission vehicles.

        8. Senator Wicker. Secretary Stackley and Lieutenant General Mills,
    since almost all new procurement programs are more technically
    sophisticated than the equipment they replace, is the historical cost
    of legacy programs relevant to the requirements needed to execute the
    mission today?
        Mr. Stackley and General Mills. To the extent that historical data
    provides a benchmark from which to begin planning, historical data
    regarding the cost data of legacy programs is relevant to the
    requirements needed to execute the mission today.
        As to the EFV, the Marine Corps assessed the affordability of EFV
    along with other key elements of our ground combat and tactical
    vehicles against several affordability metrics, one of which was based
    on historical vehicle investments projected into the future. EFV was
    unaffordable by every metric; however, it is just as important to note
    that even without EFV, the potential required investment in vehicle
    modernization and sustainment is also potentially unaffordable when
    measured against the same metrics. This means that our fiscal trade-
    space within the vehicle portfolio is very limited, even for a
    capability as important as that provided by an amphibious combat
    vehicle (ACV).

        9. Senator Wicker. Secretary Stackley and Lieutenant General Mills,
    the Average Procurement Unit Cost--the cost of the vehicle not
    including research and development (R&D) and program-unique military
    construction costs--of the EFV was estimated to be $16.8 million in
    fiscal year 2007 dollars while some projections have the cost reaching
    more than $23 million per vehicle. The cost of the legacy AAV is about
    $4 million per vehicle. What sort of methodology or analysis of the
    operational requirements went into making the decision to end the EFV
    other than concern about its cost?
        Mr. Stackley. The Navy and Marine Corps conducted campaign analysis
    and wargames examining scenarios requiring power projection from the
    sea using the EFV as well as the legacy AAV and our current and
    projected suite of air assault connectors. The analysis used official
    threat assessments and modeled battlespace preparation in order to
    define threats to landings. Using fielded and planned capabilities to
    conduct pre-assault battlespace preparation, the Navy assessed that
    U.S. weapons and sensors will allow amphibious ships to operate at 12
    nautical miles from the coast with acceptable risk against any residual
    threats. The closure timeframe for ship to shore movement no longer
    requires a high speed vessel to ensure combat build-up ashore.
        General Mills. The decision to cancel EFV procurement was not made
    lightly, as we recognized the importance of the Marine Corps' ability
    to respond to crisis around the globe as vital to the Nation's
    security. Three factors were at the core of the decision to cancel the
    EFV: affordability, both in procurement and sustainment; the impact of
    that cost on our ability to reset or modernize other warfighting
    capabilities after 10 years of combat; and cost of the EFV in relation
    to its overall operational suitability across the range of military
    operations. Projected costs of EFV grew substantially over the course
    of the program, and it simply became unaffordable to procure and
    sustain over time, especially in light of the Nation's emerging fiscal
    environment and other critical capability needs of the Marine Corps.
        The following is a summary of the key operation and sustainment
    (O&S) ground rules and assumptions in the EFV O&S estimate:

             Total Life Cycle Systems Management Program (Program
            Manager has cradle-to-grave responsibility for O&S)
             Contractor Logistics Support (Procurement, Marine
            Corps (PMC) and Operation and Maintenance, Marine Corps (OMMC))

                     PMC will cover these costs until a determined
                    Depot Support Date at which time these costs will be
                    split 50/50 for 1 year; OMMC funding will be used
                    thereafter

             Three Levels of Maintenance (organizational,
            intermediate, depot)
             Peacetime Operation--437 hrs/yr

                     Engine: 150 hrs/vehicle/yr
                     APU: 287 hrs/vehicle/yr

             Mature System Reliability--21.9 hrs mean time between
            failure
             Tech Insertion Costs (PMC) are excluded
             Any applicable O&S-related surcharges are not included
            at this time

        Procurement of the EFV was simply no longer affordable; and the
    projected operation and support costs became too onerous.

        10. Senator Wicker. Lieutenant General Mills, the concept of ship-
    to-shore maneuver supporting the EFV considered anti-ship threats from
    land-based mobile cruise missiles, air-to-surface weapons, and mines
    sufficiently serious that amphibious assaults were planned to be
    launched from over-the-horizon to minimize the chances of loss or
    damage to Navy ships. In the years since the EFV program was started in
    1996, anti-ship ballistic missile capabilities have been added as a
    potential threat to large Navy ships, including the large-deck
    amphibious ships, and the sophistication of the other threats has
    increased. What has changed about the Navy-Marine Corps concept of
    ship-to-shore maneuver that makes the Navy more willing to bring
    marines closer to shore to launch the assault phase?
        General Mills. 25 nautical miles was based on keeping the
    amphibious force beyond the enemy's radar horizon, thereby making it
    more difficult for the enemy to monitor amphibious force activity and
    target amphibious warships. The proliferation of anti-ship cruise
    missiles already allowed most of our adversaries to engage well beyond
    25 nautical miles, but the distance made their targeting solution more
    complicated. The triad of EFV, Landing Craft Air Cushion (LCAC), and
    MV-22 allowed amphibious warships to project forces ashore and remain
    beyond the 25 nautical miles.
        However, the capabilities of our Aegis capable combatants have
    always allowed our Navy systems to engage incoming anti-ship cruise
    missile/airborne threats at distances less than 25 nautical miles, and
    our analysis continually indicates that these tactics are successful
    with very few leakers. Ships could go into as close as 10 nautical
    miles and still be protected from these leakers with organic maritime
    defense systems. 12 nautical miles was selected as the distance for our
    revised concept for amphibious operations because it also keeps ships
    out of range of coastal gun systems.
        With the cancellation of EFV, ships of the amphibious force will
    now have to come in closer than 25 nautical miles to deploy the ACV.
        The LCAC and MV-22 still allow most of the amphibious warships to
    stay outside 25 nautical miles. Only those ships deploying the ACVs
    need to come into 12 nautical miles and then they only need to remain
    as long as needed to launch the initial ACV assault force. Once
    complete, these ships could go back outside 25 nautical miles, and the
    LCAC with the MV-22 (in concert with other surface and vertical
    connectors) remain sufficient to sustain the force.

        11. Senator Wicker. Lieutenant General Mills, if a 25-knot water
    speed is no longer required to launch from about 25 miles from the
    shore, what range of speed and distance from shore are being considered
    for the EFV's replacement?
        General Mills. The launch distance is not a static position; it's
    going to be dependent on a number of factors: our tactics, techniques,
    and procedures of using the sea as maneuver space. Also, there have
    been significant improvements in the Navy's ability to deal with the
    threat.
        For the past 2 decades, both the threats in the littorals and U.S.
    area and self-defense capabilities against those threats have evolved,
    enabling discharge of ACVs at distances beyond the visual horizon
    (approximately 12 nautical miles from shore). While the tactical
    advantages of at-sea speed capability provided by the EFV are not
    dismissed, the principal driving factor leading to the EFV's water
    speed requirement was the assumption that marines would not be combat-
    ready after spending more than an hour in the vehicle at sea--a legacy
    of the current AAV. Initial developmental testing indicated that
    improvements in habitability (air conditioning and improved vehicle
    exhaust) more than high speed or longer duration permitted marines to
    ride in the vehicle longer without suffering ill effects associated
    with the legacy AAV. At-sea speed requirements were a significant
    system complexity and cost-driver that did not significantly contribute
    to the operational effectiveness of the vehicle.

        12. Senator Wicker. Lieutenant General Mills, what drives the speed
    and distance requirement in terms of how long marines can stay in an
    amphibious vehicle and be effective when they reach shore?
        General Mills. For the past 2 decades, both the threats in the
    littorals and U.S. area and self-defense capabilities against those
    threats have evolved, enabling discharge of amphibious vehicles at
    approximately 12 nautical miles from shore. While the tactical
    advantages of at-sea speed capability provided by the EFV are not
    dismissed, the principal driving factor leading to the EFV's water
    speed requirement was the assumption that marines would not be combat-
    ready after spending more than an hour in the vehicle at sea--a legacy
    of the current AAV. Initial developmental testing indicated that
    improvements in habitability (air handling and improved vehicle
    exhaust) more than high speed or longer duration permitted marines to
    ride in the vehicle longer without suffering ill effects associated
    with the legacy AAV. At-sea speed requirements were a significant
    system complexity and cost-driver that did not significantly contribute
    to the operational effectiveness of the vehicle.

        13. Senator Wicker. Lieutenant General Mills, can this be improved?
        General Mills. Yes. Improved habitability is a key system attribute
    defining the ACV. There are various mature, low-risk technologies that
    can be incorporated that will improve both sea and landward ride
    quality.

        14. Senator Wicker. Lieutenant General Mills, the Marine Corps
    proposes responding to the EFV termination through a three-phased
    acquisition policy: upgrade a portion of the legacy AAV inventory
    through a Service Life Extension Program (SLEP) that will extend their
    life and add capability; accelerate the Marine Personnel Carrier (MPC)
    program designed to complement the EFV, AAV, or the replacement for the
    EFV known as ACV; and develop the new ACV building on the lessons
    learned from the EFV. The wind-up of the EFV is focused on harvesting
    relevant technology from the EFV program to transfer to the new ACV.
    The MPC would not be designed to swim ashore, but would be a fighting
    vehicle on land. Design requirements are being developed. How many of
    the legacy AAVs now in service will undergo a SLEP?
        General Mills. The SLEP is now referred to as a survivability
    upgrade which is intended to address the greatest limitation of the
    current AAV--survivability and force protection against underbelly
    mines and IEDs. The upgrade will improve overall vehicle survivability
    for 392 AAVP7A1s by adding underbelly blast protection, interior spall
    mitigation, and blast attenuating seating. Anticipating resulting
    weight growth, the program will also restore vehicle land and water
    mobility to previously achieved performance levels with power train,
    track, and suspension upgrades. These vehicles will be phased out of
    the inventory as the ACV reaches full operational capability.

        15. Senator Wicker. Lieutenant General Mills, what capabilities
    will be added to the AAV?
        General Mills. The survivability upgrade is intended to address the
    greatest limitation of the current AAV--survivability and force
    protection against underbelly mines and IEDs. The upgrade will improve
    overall vehicle survivability for 392 AAVP7A1s by adding underbelly
    blast protection, interior spall mitigation, and blast attenuating
    seating. Anticipating resulting weight growth, the program will also
    restore vehicle land and water mobility to previously achieved
    performance levels with power train, track, and suspension upgrades.
    These vehicles will be phased out of the inventory as the ACV reaches
    full operational capability.

        16. Senator Wicker. Lieutenant General Mills, how old are the AAVs
    and how much additional life will the SLEP provide?
        General Mills. Today's AAV are built upon the LVT-7 family of
    vehicles which began fielding in 1971. Over the past 40 years these
    systems have been service life extended, product improved, rebuilt to
    standard, upgraded, and continuously maintained at all echelons. Our
    current survivability upgrade is intended to address the greatest
    limitation of the current AAV--survivability and force protection
    against underbelly mines and IEDs. The upgrade will improve overall
    vehicle survivability for 392 AAVP7A1s by adding underbelly blast
    protection, interior spall mitigation, and blast attenuating seating.
    Anticipating resulting weight growth, the program will also restore
    vehicle land and water mobility to previously achieved performance
    levels with power train, track, and suspension upgrades. These vehicles
    will be phased out of the inventory as the ACV reaches full operational
    capability by 2030.

        17. Senator Wicker. Lieutenant General Mills, how much funding does
    the Marine Corps estimate will be required--or how much is available--
    for a SLEP?
        General Mills. The 2013 President's budget supports the initiation
    of the AAV survivability upgrade program. The total cost estimate is
    based on an Average Production Unit Cost of $1.65 million for 392
    vehicles.

        18. Senator Wicker. Lieutenant General Mills, given budget
    constraints, how confident is the Marine Corps that improvement of the
    amphibious assault capability may not be limited to a SLEP of the AAV?
        General Mills. Under any future budgetary constraint, the
    survivability upgrade of the AAV is essential to maintaining an
    operationally relevant ACV capability until a modern ACV is developed
    and fielded. We have planned a prioritized, sequenced, and balanced
    combat vehicle modernization program that is achievable, with moderate
    risk to other ground combat modernization and within the President's
    budget fiscal year 2013 levels of investment extended through fiscal
    year 2030. ACV modernization is our top ground combat investment
    priority but future budgetary pressures could severely limit our
    ability to achieve this capability.

        19. Senator Wicker. Lieutenant General Mills, in terms of the MPC,
    how expensive is this vehicle estimated to be in comparison to the EFV
    or its proposed replacement, the ACV?
        General Mills. In order to better distribute combat power for
    sustained operations ashore, two MPCs are required to lift the same
    reinforced rifle squad that is concentrated in a single ACV. Based on
    responses we have received from industry and our own estimates, the
    cost to procure an equivalent number of MPC is approximately a quarter
    of the cost of EFV. Based on a range of cost estimates and
    affordability predictions, dependent on capability, quantity, and
    production schedules, MPCs are estimated to cost half or less than that
    to procure ACV. In terms of total life cycle costs, equivalent numbers
    of MPC will cost about one-third of EFV and one-half of ACV.

        20. Senator Wicker. Lieutenant General Mills, how much money will
    actually be saved by cancellation of the EFV if the Marine Corps must
    extend the life of the AAV and design and build two new vehicles, the
    ACV and the MPC?
        General Mills. The decision to procure MPC and to upgrade AAV was
    independent of the decision to cancel EFV. The AAV upgrade was
    necessary to bridge to EFV and will be necessary to bridge to ACV; and
    MPC was a complementary capability to EFV to address overall tactical
    lift capacity. Both initiatives pre-dated the cancellation of the EFV
    program. The principal cost avoidance will be attained by developing an
    ACV that costs substantially less to procure than the EFV would have.
    We have done extensive systems engineering cost-to-capability analysis
    in support of the ACV program in order to prioritize capabilities,
    ensure a lower risk engineering, manufacturing, and development
    program, and to control cost from the outset of requirements
    development.

        21. Senator Wicker. Lieutenant General Mills, what is the timeline
    for designing and building the MPC?
        General Mills. We are working to fully develop an integrated
    acquisition plan in support of ACV, MPC, and AAV survivability upgrade.
    Over the last several years, we have conducted extensive market
    research and technology development in support of the MPC program which
    we believe will lead to the potential for a lower risk, more rapid
    acquisition. Still, our acquisition plans are sequenced and are shaped
    by cost and affordability projections over time and by the necessity to
    consider other required modernization and sustainment efforts across
    our warfighting portfolio. Based on these estimates, we will have an
    initial operational capability in fiscal year 2022.

        22. Senator Wicker. Lieutenant General Mills, won't an improved AAV
    that will be in service for a long time together with the new ACV leave
    the Marine Corps with two different sets of amphibious vehicles and the
    associated higher costs of a mixed inventory?
        General Mills. Improvements to the AAV are intended to enable the
    Marine Corps to sustain its amphibious capability until the ACV is
    fielded. As with other equipment replacement programs, the transition
    period between the initial fielding of a new capability and attainment
    of full operational capability will result in a mixed fleet of
    vehicles. During this transition period, the AAV inventory will be
    disposed as the ACV inventory increases.

        23. Senator Wicker. Lieutenant General Mills, how will the MPC get
    ashore if it doesn't swim as the EFV and the ACV would?
        General Mills. Introduction of the MPC into theater is planned as
    part of a Maritime Prepositioning Force deployment. MPC is a
    reinforcing capability relative to the self-deploying ACV. MPC will
    transit to the beach or port via connectors such as the LCAC,
    conventional landing craft, or via pier-side offload. The ACV will be
    optimized to support ship-to-objective water and land mobility as the
    main effort of an amphibious assault, while the MPC is optimized to
    provide a combat vehicle capable of protected land mobility in support
    of sustained operations ashore.

        24. Senator Wicker. Lieutenant General Mills, does this mean that
    the Marine Corps will be operating two different combat vehicles during
    the land phase of an amphibious assault, the ACV and the MPC?
        General Mills. The Marine Corps operates multiple combat and
    tactical vehicles including AAVs, Light Armored Reconnaissance
    Vehicles, tanks, and several tactical vehicles. The role of providing
    tactical mobility in armored personnel carriers would have been
    fulfilled by a combination of the EFV and the MPC. The ACV will fulfill
    the role intended for the EFV and it will be complemented by the MPC to
    achieve our required mobility capacity across the range of military
    operations.

        25. Senator Wicker. Lieutenant General Mills, won't protection from
    IEDs and other threats necessarily be different in the two vehicles?
        General Mills. Yes. Each system will need to be designed to counter
    and mitigate the effects of the IED threat. The ACV design will be
    driven, in part, by its strenuous amphibious requirements which will
    likely mean a different survivability and force protection approach
    than for the MPC which will be designed for superior land mobility.
    However, common materials and approaches will be evaluated in order to
    reduce life cycle costs. ACV protection methodologies, performance, and
    payload protection trade-space assessments and capability level
    estimates will be a critical part of early technology demonstration and
    development efforts just as they were for the MPC.

        [Whereupon, at 11:48 a.m., the subcommittee adjourned.]