[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]



                         [H.A.S.C. No. 113-64]
 
                  AN INDEPENDENT ASSESSMENT OF THE 
                   NAVY'S 30-YEAR SHIPBUILDING PLAN

                               __________

                                HEARING

                               BEFORE THE

             SUBCOMMITTEE ON SEAPOWER AND PROJECTION FORCES

                                 OF THE

                      COMMITTEE ON ARMED SERVICES

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              HEARING HELD

                            OCTOBER 23, 2013


                                     
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             SUBCOMMITTEE ON SEAPOWER AND PROJECTION FORCES

                  J. RANDY FORBES, Virginia, Chairman

K. MICHAEL CONAWAY, Texas            MIKE McINTYRE, North Carolina
DUNCAN HUNTER, California            JOE COURTNEY, Connecticut
E. SCOTT RIGELL, Virginia            JAMES R. LANGEVIN, Rhode Island
STEVEN M. PALAZZO, Mississippi       RICK LARSEN, Washington
ROBERT J. WITTMAN, Virginia          HENRY C. ``HANK'' JOHNSON, Jr., 
MIKE COFFMAN, Colorado                   Georgia
JON RUNYAN, New Jersey               COLLEEN W. HANABUSA, Hawaii
KRISTI L. NOEM, South Dakota         DEREK KILMER, Washington
PAUL COOK, California                SCOTT H. PETERS, California
               David Sienicki, Professional Staff Member
                Douglas Bush, Professional Staff Member
                         Nicholas Rodman, Clerk


                            C O N T E N T S

                              ----------                              

                     CHRONOLOGICAL LIST OF HEARINGS
                                  2013

                                                                   Page

Hearing:

Wednesday, October 23, 2013, An Independent Assessment of the 
  Navy's 30-Year Shipbuilding Plan...............................     1

Appendix:

Wednesday, October 23, 2013......................................    27
                              ----------                              

                      WEDNESDAY, OCTOBER 23, 2013
   AN INDEPENDENT ASSESSMENT OF THE NAVY'S 30-YEAR SHIPBUILDING PLAN
              STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Forbes, Hon. J. Randy, a Representative from Virginia, Chairman, 
  Subcommittee on Seapower and Projection Forces.................     1
McIntyre, Hon. Mike, a Representative from North Carolina, 
  Ranking Member, Subcommittee on Seapower and Projection Forces.     2

                               WITNESSES

Labs, Dr. Eric J., Senior Analyst for Naval Weapons and Forces, 
  Congressional Budget Office....................................     4
O'Rourke, Ronald, Specialist in Naval Affairs, Congressional 
  Research Service...............................................     5

                                APPENDIX

Prepared Statements:

    Forbes, Hon. J. Randy........................................    31
    Labs, Dr. Eric J.............................................    33
    O'Rourke, Ronald.............................................    69

Documents Submitted for the Record:

    [There were no Documents submitted.]

Witness Responses to Questions Asked During the Hearing:

    Mr. Hunter...................................................    91

Questions Submitted by Members Post Hearing:

    Mr. Forbes...................................................    95
    Mr. Langevin.................................................   102
                AN INDEPENDENT ASSESSMENT OF THE NAVY'S

                       30-YEAR SHIPBUILDING PLAN

                              ----------                              

                  House of Representatives,
                       Committee on Armed Services,
            Subcommittee on Seapower and Projection Forces,
                       Washington, DC, Wednesday, October 23, 2013.
    The subcommittee met, pursuant to call, at 2:30 p.m., in 
room 2212, Rayburn House Office Building, Hon. J. Randy Forbes 
(chairman of the subcommittee) presiding.

  OPENING STATEMENT OF HON. J. RANDY FORBES, A REPRESENTATIVE 
     FROM VIRGINIA, CHAIRMAN, SUBCOMMITTEE ON SEAPOWER AND 
                       PROJECTION FORCES

    Mr. Forbes. I want to welcome our members and our 
distinguished panel of experts to today's hearing that will 
focus on the Navy's 30-year shipbuilding plan. Before we begin 
this hearing today I want to briefly discuss the future of our 
naval forces. There are a multitude of thoughts as to the 
correct size and shape of our United States Navy. The Navy has 
advocated for a force structure plan and has proposed a 306-
ship Navy to meet the national strategy. The 2010 Quadrennial 
Defense Review Independent Panel proposed a Navy of 346 ships 
to meet our Nation's requirements.
    I have no reason to doubt the size offered by our Nation's 
preeminent leaders as to the desired direction of our naval 
forces, but this desired force structure is in sharp contrast 
to our 285-ship Navy of today, and especially at odds to a 
projected force structure posed by the Congressional Budget 
Office of 243 ships.
    I believe that our Nation's military strategy should be 
directly linked to the vitality of our Nation's economy. Our 
forces should be positioned at locations that will best 
maintain a stable global commons. Our naval strategy should be 
prepared to assure our allies and deter potential aggressors.
    As I look forward, I believe that our Nation should 
concentrate our military's efforts on areas deemed important to 
the United States and to the vitality of our Nation's economy. 
The lessons of history teach us that we cannot build a Navy 
that is intended just to protect Norfolk and San Diego. 
Instead, we need a global-postured Navy that can uphold our 
interests across the international maritime highways that 
connect our economy to the world.
    Leading the charge to support the Asia-Pacific rebalance is 
our United States Navy. Unfortunately, institutional inertia 
continues to impede the ability of the Navy to make smart force 
structure decisions to support this vital region. The old adage 
that supports an equal budget share between the Army, Navy, and 
Air Force is quickly becoming a relic, an obstacle to 
effectively shaping our forces. It is time to provide the 
correct force structure to support our economic and security 
interests.
    As to our hearing today I was disheartened to read the 
Congressional Budget Office's assessment of the direction of 
our United States Navy. Using a historic funding model, Dr. 
Labs projected that the Navy will possess 246 ships in 30 
years. Dr. Labs further projected that the Navy will need to 
increase their overall shipbuilding budget by 34 percent to 
meet our national military strategy.
    We are quickly approaching a fork in the road with two 
stark alternatives. Our current path puts us on a direction 
that will increase global instability, encourages our 
adversaries, and increasingly leads to an isolated United 
States. But this is not the only alternative. We can also 
choose to reverse this decline, eliminate defense 
sequestration, and achieve the force structure that will deter 
future aggressors.
    I have no doubt as to my choice, and I hope that our Nation 
will review the facts in our current trend line and with steely 
eyed resolve choose the path that not only maintains our 
national security, but will also seek to enhance the security 
of successor generations. It is simply wrong to fail our 
Nation's greatest generation and drift into global mediocrity.
    It is time that we reverse the devastating defense cuts 
under sequestration and place our national security on a 
positive trend line. It is time that we assess our direction 
and apply our precious treasure toward the services that best 
secure our future. It is time that we properly resource the 
United States Navy and provide them with the direction that 
ensures our collective security.
    Today we are honored to have as our witnesses a senior 
analyst for naval weapons and forces at the Congressional 
Budget Office, Dr. Eric Labs.
    Dr. Labs, thank you for being here with us today.
    And a specialist in national defense at the Congressional 
Research Service, Mr. Ron O'Rourke.
    And Ron, thank for your hard work in preparing for this 
hearing during a difficult time as we were all shut down. We 
know the hard work that you put in. And we thank you both for 
being here.
    And now it is with great pleasure that I recognize my 
friend, the ranking member, Mr. McIntyre from North Carolina, 
for any remarks he may have.
    [The prepared statement of Mr. Forbes can be found in the 
Appendix on page 31.]

 STATEMENT OF HON. MIKE MCINTYRE, A REPRESENTATIVE FROM NORTH 
    CAROLINA, RANKING MEMBER, SUBCOMMITTEE ON SEAPOWER AND 
                       PROJECTION FORCES

    Mr. McIntyre. Thank you. Thank you, Mr. Chairman, thank you 
for holding this hearing.
    And to our witnesses, thank you for being here.
    As you can tell with the room being at capacity, there are 
many, many people interested in what you have to say. This is 
an important hearing because we know the future of American 
naval power is an issue that should concern all Americans. 
Despite the wonders of satellite and other communications 
technology, we realize the world's economy truly does run on 
and arguably also beneath the surface of the oceans. The vast 
majority of trade still moves by ship, and most people in the 
world live within 100 miles of a coastline.
    Since World War II, the U.S. and our allies have guaranteed 
freedom of movement and security in the world's oceans. We know 
that providing this security is expensive, but that the U.S. 
gets back far more through the global economic benefits of 
stable, secure ocean trade routes. And that investment is well 
worth it and multiplied many times over.
    We realize, therefore, we can't take the security of our 
world's oceans for granted. To maintain American dominance of 
the oceans we must invest in a Navy that is of the right size 
and capability, an issue that brings us to the topic of today's 
hearing. The question I believe that is important for today is 
how realistic is the Navy's current shipbuilding plan. We know 
the Navy contends it has a valid plan. We would like to hear 
your testimony as why those assumptions should be carefully 
reviewed.
    For instance, even if the Navy stays on its current path 
with the Virginia-class attack submarine program, it appears 
the Navy will fall short of the number of submarines that it 
says it needs in the 2020s and 2030s.
    Second, even if the Littoral Combat Ship [LCS] stays on 
budget and does deliver on time, we will be replacing far more 
capable cruisers and destroyers with a very small, much less 
capable ship. While a large number of LCS ships may make the 
Navy's overall ship numbers look better, it doesn't mean the 
Navy will retain the combat capability that it has today.
    Third and finally, we want to learn about the health of our 
shipbuilding industry and whether it is capable, indeed, of 
delivering all the ships the Navy needs, even if the funding is 
available. In World War II we had a large amount of excess 
shipbuilding capacity that we could draw on for our wartime 
needs. We know that doesn't exist today. And with budgets 
coming down I am concerned about losing more shipyards. And we 
know if that happens the Navy's current plan will become even 
riskier than it is today.
    Thank you again for your time, and we look forward to, Mr. 
Chairman, hearing the answers to these and other questions that 
our colleagues raise during this panel.
    Mr. Forbes. Thank you, Mike.
    And, Dr. Labs, Mr. O'Rourke, we thank you both again for 
being here. And at the end of this hearing, when everyone has 
asked their questions, I am going to give both of you time to 
wrap up on anything you want to add that we haven't asked or 
you feel that you need to correct that you put in the record. 
And, Dr. Labs, it is my understanding that you are going to be 
leading off, so we once again thank you for being here and look 
forward to your comments.

STATEMENT OF DR. ERIC J. LABS, SENIOR ANALYST FOR NAVAL WEAPONS 
            AND FORCES, CONGRESSIONAL BUDGET OFFICE

    Dr. Labs. Thank you very much, Mr. Chairman. Chairman 
Forbes, Representative McIntyre, members of subcommittee, it is 
a pleasure to be here today to discuss the Navy's 2014----
    Mr. Forbes. Eric, can you pull that microphone up just a 
little bit closer. Sometime it is a little funny.
    Dr. Labs. Yes, sir. Does that work? Good.
    My written testimony focuses on the costs and force 
structure implications of that plan and is based on the 
recently released CBO [Congressional Budget Office] report 
entitled ``An Analysis of the Navy's Fiscal Year 2014 
Shipbuilding Plan,'' which is required under section 1011 of 
the 2012 National Defense Authorization Act. In my prepared 
remarks today I will focus on key points and highlights of that 
report.
    First, if the Navy received the same amount of funding for 
ship construction in the next 30 years that it has over the 
last 30 years, which is about $16 billion for all activities 
related to ship construction, it will not be able to afford all 
266 ships in its plan.
    Second, the Navy estimates that it will cost an average of 
$16.8 billion per year over 30 years to implement its plan. But 
I want to stress that that amount is for new construction only. 
The Navy must fund a number of other activities from its 
shipbuilding accounts. CBO estimates that those other 
activities, such as the refueling of nuclear-powered aircraft 
carriers, outfitting of all new warships, and other smaller 
items, would add an additional $1.9 billion per year to the 
Navy's estimate. Thus, the Navy's estimate is actually closer 
to $19 billion a year or more than 20 percent higher than what 
the service has received historically.
    In contrast, CBO's estimates of the Navy's shipbuilding 
plan are $2.5 billion per year or 13 percent higher than the 
Navy's. Using its own methods and assumptions, CBO estimates 
that it would cost about $19 billion per year for new ship 
construction alone and about $21 billion for everything the 
Navy needs to fund in its ship accounts. That amount is one-
third higher than the historical average.
    Now I would like to discuss some implication of those 
points. The Navy shipbuilding plan is a statement of resources 
required to buy the fleet the Navy says it needs. As a result, 
the Budget Control Act [BCA] of 2011 did not affect the 
composition of the Navy's report. However, if the BCA remains 
in place, funding for ship construction will be well below the 
amounts required for the 2014 plan, unless such funding is 
protected at the expense of our military activities.
    Specifically, if the Navy receives the same percentage of 
the DOD's [Department of Defense] budget during the coming 
decade and devotes the same 10 percent of its budget to 
shipbuilding as it has historically, then the shipbuilding 
accounts will be 30 percent lower than CBO's estimate of the 
plan or about a billion dollars less than the historical 
average.
    The Navy shipbuilding report rightly emphasizes the funding 
challenge the service will face as it replaces the Ohio-class 
ballistic missile submarines in the second decade of its plan. 
The Navy says that the money it will need must increase by 
about 30 percent to pay for the Ohio replacement program. 
However, the Navy's funding challenge is in fact looming much 
sooner than that. In the second half of the first decade the 
average new ship construction budget will need to increase by 
over 40 percent compared to the next 5 years, the period 
covered by the Future Years Defense Program. Thus, in the 
absence of a steady and sustained increase in the Navy's 
shipbuilding budget, the service will inevitably build fewer 
ships than envisioned in its plan.
    Furthermore, CBO estimates that even if an alternative 
means for funding the Ohio replacement program were found, the 
remaining ships in its shipbuilding program will still cost 
about $2 billion per year more or about 13 percent more than 
the historical average.
    In its report CBO included for the first time what the Navy 
might look like if its shipbuilding accounts are limited to the 
historical average of $16 billion per year. If ship 
construction were reduced in rough proportion, such that the 
composition of the fleet at the end of the plan was similar to 
the composition of the fleet in 2043 under the Navy's plan, 
then the Navy would purchase only 193 ships versus 266 and the 
fleet inventory in 2043 would number 243 ships, not 306, or 
about 20 percent less.
    Finally, Mr. Chairman, I would like to highlight one final 
observation from the CBO report. The Navy shipbuilding plan, 
even if implemented in its entirety, projects shortfalls in the 
critical areas of ballistic missile submarines, attack 
submarines, surface combatants, and amphibious ships.
    The issue of the surface combatants is particularly 
notable. The Navy assumes that all DDG-51 Flight IIA, Flight 
III, and next-generation destroyers would serve in the fleet 
for 40 years, a time period considerably longer than previous 
classes of surface combatant have served. If the Navy is unable 
to keep those ships for that long and modernize them 
accordingly, then the shortfall on destroyers will be much 
larger, last longer, and be very expensive to fix down the 
road.
    Thank you, Mr. Chairman. And I will be happy to respond to 
any questions the subcommittee would have.
    [The prepared statement of Dr. Labs can be found in the 
Appendix on page 33.]
    Mr. Forbes. Thank you, Dr. Labs.
    Mr. O'Rourke.

  STATEMENT OF RONALD O'ROURKE, SPECIALIST IN NAVAL AFFAIRS, 
                 CONGRESSIONAL RESEARCH SERVICE

    Mr. O'Rourke. Chairman Forbes, Ranking Member McIntyre, 
distinguished members of the subcommittee, thank you for the 
opportunity to testify today on the Navy's 30-year shipbuilding 
plan. Chairman Forbes, with your permission I would like to 
submit my statement for the record and summarize it here in a 
few brief remarks.
    Mr. Forbes. Without objection, it will be admitted.
    Mr. O'Rourke. In discussing the 30-year plan it is possible 
to focus on ship numbers and procurement costs so much that one 
can lose track of what is at stake strategically. Strategic 
considerations that helped form the context for the 30-year 
plan include the strategic rebalancing toward the Asia-Pacific, 
China's naval modernization effort, and requests from regional 
combatant commanders for forward-deployed U.S. naval forces 
that would require a Navy of more than 500 ships to fully meet.
    In a situation of reduced levels of defense spending such 
as what would occur if defense spending were to remain 
constrained to the revised cap levels in the Budget Control 
Act, the affordability challenge posed by the 30-year 
shipbuilding plan would be intensified. Even then, however, the 
current 30-year shipbuilding plan would not necessarily become 
unaffordable. The required increase of the shipbuilding account 
equates to 1.5 percent or less of DOD's budget. Some observers, 
noting the strategic rebalancing toward the Asia-Pacific, have 
advocated shifting a greater share of the DOD budget to the 
Navy and the Air Force.
    In discussing this idea, some of these observers refer to 
breaking the so-called one-third, one-third, one-third division 
of resources among the three military departments. In a context 
of breaking one-third, one-third, one-third with an aim of 
better aligning defense spending with strategic rebalancing, 
shifting 1.5 percent or less of DOD's budget into the Navy 
shipbuilding account would appear to be quite feasible.
    More broadly, if defense spending were to remain 
constrained to the revised cap levels in the Budget Control 
Act, then fully funding the Navy's total budget would require 
shifting 4 or 5 percent of the DOD budget to the Department of 
the Navy. While doing that would be more ambitious than 
shifting 1.5 percent of the budget to the Navy shipbuilding 
account, similarly large reallocations have occurred in the 
past.
    The point here is not to argue whether it would be right or 
wrong to shift more of the DOD budget to the Navy shipbuilding 
account or to the Department of the Navy's budget generally. It 
is rather to note that the allocation of DOD resources is not 
written in stone, that aligning DOD spending with U.S. strategy 
in coming years could involve changing the allocation by more 
than a very marginal amount, and that such a changed allocation 
could provide the funding needed to implement the current 30-
year shipbuilding plan.
    The alternative of assuming that there is no potential for 
making anything more than very marginal shifts in the 
allocation of DOD resources could unnecessarily constrain 
options available to policymakers and prevent the allocation of 
DOD resources from being aligned optimally with U.S. strategy.
    In my past work I have suggested options for making Navy 
shipbuilding more affordable, such as adding EOQ [economic 
order quantity] authority to the LCS block buy contracts and 
using a block buy contract to procure CVN-79 and CVN-80. 
Thinking more expansively about block buy contracting, some 
observers have raised the possibility of procuring both 
Virginia-class attack submarines and Ohio replacement ballistic 
missile submarines under a joint block buy contract covering 
both classes of ships. Such a contract might generate savings 
greater than what would be possible under separate multiyear 
contracts for each class.
    Extending this thinking even further, a potential 
additional option in implementing a joint cross-class block buy 
contract would be to modify as needed the current division of 
work for building Virginia-class boats to ensure an optimal 
joint strategy for building both classes. Given the long 
history of the Navy encountering and addressing challenges in 
Navy shipbuilding programs, another option that might be of 
value in implementing the 30-year shipbuilding plan would be to 
establish a Navy shipbuilding lessons-learned center roughly 
analogous to the combat operations lessons-learned centers 
operated by the military services.
    As a final point, the 30-year plan leaves the Navy without 
a clear road map in the cruiser-destroyer force for restoring 
ship growth margin, for introducing integrated electric drive 
technology to a large number of ships, particularly for 
supporting future high-power electrical weapons, and for 
substantially reducing ship lifecycle O&S [operations and 
support] costs by, among other things, reducing crew size. 
Accordingly, a final option for the subcommittee would be to 
ask the Navy for a road map that shows how the Navy plans to 
eventually accomplish these things in the cruiser-destroyer 
force.
    Mr. Chairman, this concludes my statement. Thank you again 
for the opportunity to testify. And I look forward to the 
subcommittee's questions.
    [The prepared statement of Mr. O'Rourke can be found in the 
Appendix on page 69.]
    Mr. Forbes. Thank you, Ron.
    As we go forth, until we get our mikes back on, if our 
reporters need us to speak up, raise your hand. I will defer my 
questions so members can get their questions in.
    But just to start us off, Dr. Labs, if you can help us with 
this. As I understand it, the independent panel that reviewed 
the QDR [Quadrennial Defense Review] basically thought we need 
about 346 ships. In addition to that, we have the Navy saying 
306 ships in their shipbuilding plan. It is my understanding 
that your assessment is, if we keep the funding historically 
the way it has been, that we would be at 243, but that has a 
proportionate reduction across all the lines, and the CNO 
[Chief of Naval Operations] has indicated that he plans to keep 
the Ohio-class replacement going forward.
    If the CNO keeps the Ohio-class replacement as he has 
indicated, what would that do to our total ship count? And then 
also, if you layer sequestration on that, where would that put 
our bottom-line ship count in your best estimate?
    Dr. Labs. Mr. Chairman, the Navy decided and indicated that 
its first priority is going to be the Ohio replacement program. 
So, therefore, if you kept to a historical level of funding of 
$16 billion and you kept all 12 Ohio replacements in the plan, 
that would lead to a reduction in the projected inventory by 
the end of the plan of an additional 10 ships. So, say, about 
233 or so, give or take one or two.
    If you are then talking about a further reduction to the 
sequestration levels--and let's assume for a minute that it 
would maybe just be for the first 10 years of the plan and it 
wouldn't continue throughout the 30-year period unless that is 
what you are preferring to assume--you are talking about 
removing another 9 or so billion dollars from the Navy 
shipbuilding plan, and so that is going to cost you another 5 
or so ships. So you are talking about a 230 or so, late 220s 
size fleet under those two different scenarios, doing a kind of 
a back-of-the-envelope calculation here.
    Mr. Forbes. So basically, as I understand, independent 
panel recommended 346 that they feel we needed for ships, Navy 
shipbuilding plan 306. If we stay on the historical funding the 
way we have been we would be at about 243. If the CNO moved 
forward as he said he would with the Ohio class at the 
historical funding levels, we would be down to about 233. And 
if we had sequestration according to what it is in the law now 
the next 10 years we would be down to 228. Is that a fair 
assessment?
    Dr. Labs. Yes, Mr. Chairman, roughly. If I were sitting at 
my computer with a spreadsheet, it might look a little bit 
different, but it is going to be in those ballparks.
    Mr. Forbes. Congressman McIntyre, I would like to recognize 
you.
    Mr. McIntyre. Just two or three questions, Mr. Chairman.
    Mr. O'Rourke, if the Navy cannot fund all the ships it has 
in the 2014 shipbuilding plan based on our current defense 
strategic guidance, where is the Navy's money best spent? If 
tough choices have to be made, what platforms do you believe 
should be the priorities?
    Mr. O'Rourke. Great question. And I can only kick that 
question back to you. If I were to state a preference it would 
amount to a recommendation. And we do have to avoid making 
recommendations in our work for CRS [Congressional Research 
Service]. So it is going to be a $64,000 question for 
policymakers to decide.
    Mr. McIntyre. Let me ask you about the F-35 program. We 
know the tests have continued. We have now in excess of 10,000 
flight test hours for the F-35. Recent estimates based on 
actual flight hour testing revealed that lifecycle cost 
estimates are 20 percent lower than originally thought. The 
U.S. Marine Corps detailed analysis shows that the cost per 
flying hour of the F-35B model is 16.6 percent lower than 
earlier Pentagon estimates, achieving a savings of $12.3 
billion over the next five decades. Do you believe that we 
indeed are on a path to lowering the long-term cost of 
operating the F-35?
    Mr. O'Rourke. That is a little bit outside my lane. That 
issue is covered by our aviation analysts at CRS. But to give 
you an answer right here, what I do want to tell you is that if 
we are in a scenario of moving to a smaller fleet then the 
question will become, do you want to take down the F-35 numbers 
along with the size of the fleet, which would imply a smaller 
F-35 buy, or conversely do you actually want to enrich the 
proportion of the air wing that is made up by F-35s because you 
are going to have fewer carrier air wings?
    So as a naval analyst who focuses on ships and the 
structure of the fleet, the question that that tends to pose 
for me is, which direction do you then want to take the F-35 
program if the fleet is getting smaller? It is not obvious to 
me that there is only one choice in that matter. I think many 
people who look at a smaller fleet might be inclined to assume 
that you would get fewer F-35s, but it is also possible that 
you might actually enrich the number of F-35s per air wing 
precisely because you are going to have fewer air wings. What 
that would mean in terms of net numbers of F-35s you would then 
have to calculate because there would be fewer air wings.
    But I do think that that is an important consideration for 
this subcommittee and the full committee generally as we move 
forward. The composition of the carrier air wing itself is not 
fixed in a situation of a debate over what the future fleet 
size is and the answers to what that air wing should look like 
are not obvious in one direction or the other.
    Mr. McIntyre. Okay. Thank you.
    Thank you, Mr. Chairman.
    Mr. Forbes. The gentleman from California, Mr. Hunter, is 
recognized for 5 minutes.
    Mr. Hunter. Thank you, Mr. Chairman.
    Okay, so a couple of basic questions then. Why are the 
costs for the ships so much higher than the historical average? 
Is that just the overall cost of commodities and steel and 
labor and everything or is there something else?
    Dr. Labs. Congressman, there are several factors that go 
into that. You are exactly right, the commodities for labor and 
steel are higher than it was, and historically inflation in the 
naval shipbuilding industry has been several points higher than 
inflation in the economy as a whole. And that probably 
represents about half of what you can account for in the 
increase in average Navy ship costs.
    The other half would be the increasing capabilities that 
the Navy has put into its ships over the years, into what they 
design into the ships. So the ships are more capable. The 
things that we buy today by and large are more capable than 
what we bought of the same type historically.
    Mr. O'Rourke. If I could just add very quickly to what Eric 
said. Eric was speaking about the increase in per-ship costs, 
but part of what we are talking about here today is the 
required increase in the size of the shipbuilding budget 
compared to its historical average in past years. And a big 
part of the reason why that number would need to go up in the 
future is simply the number of ships that we would need to 
procure in the future to meet the force level plan. And that is 
something that is revealed in the 30-year shipbuilding plan.
    Mr. Hunter. Let me tie this in then, let me ask you this. 
And use whatever numbers you have because I don't know. If you 
look back 10 or 15 years or 20 years, however you guys look 
back on this, and the amount of money that the Navy had going 
forward to now, can you look back 15 years ago and say they had 
this much money, they said they were going to have a fleet of 
330 ships and they don't, and we lost this many ships due to 
the lack of funding, can you do that? Going back and looking 
until now, does that make sense? Meaning we are talking about 
this now, and so let's say 10 years from now we have a fleet of 
240 and we can look back and say the reason we have a fleet of 
240 is because of what we are talking about in this hearing. 
Can you look back 10 years and say, look, this is where the 
Navy messed up here in what they projected?
    Mr. O'Rourke. I think there is one example of that that is 
fairly clear cut, and that was the near hiatus in attack 
submarine procurement that lasted for much of the 1990s. There 
were plenty of warnings issued at the time by myself and others 
dating back to 1995 that if you spent a lot of that decade not 
getting too many attack submarines that we would eventually be 
in a situation of having to get a lot more just to get back to 
the plan size that we are looking at. And we are now, 18 or 19 
years into my testimony on this point, approaching the time 
when we will live with the consequences of these decisions.
    Mr. Hunter. Of having to buy more submarines and therefore 
having fewer ships.
    Mr. O'Rourke. That is right. I mean, part of the reason you 
need more money in the shipbuilding plan starting 5 years from 
now and extending for the next 15 years after that is the 
reduced rates of shipbuilding that took place from the end of 
the Cold War, from the early 1990s, until really just a few 
years ago. And if you build ships at a rate much lower than the 
steady state replacement rate for that long a period of time, 
then to get back to your required force levels you will have to 
eventually spend other years where you are building ships at 
something higher than the steady state replacement rate. And 
that is the situation that is revealed in the middle years of 
the 30-year shipbuilding plan today.
    Dr. Labs. During the 1990s and most of the 2000s we were 
buying ships at about an average rate of six or so per year. So 
to maintain a fleet of 306 ships or 313 or whatever you need, 
you need numbers that are closer to 9 per year. So if 
historically you have been buying under your steady state 
replacement rate, as Ron indicated, then going forward you are 
going to need to buy above your steady state replacement rate 
and therefore that is going to account for some of the 
increased average annual cost of your shipbuilding budget.
    Mr. Hunter. Two more quick questions. You said they spend 
about 10 percent of their budget on shipbuilding. When you add 
in modernization and repair and everything else that has to do 
with making the current fleet last long enough to make the new 
ships that are coming online add to them, what is that 
percentage?
    Dr. Labs. Sir, I don't know that percentage off the top of 
my head. I can take that for the record if you would like.
    Mr. Hunter. Yeah, please.
    [The information referred to can be found in the Appendix 
on page 91.]
    Mr. Hunter. Ron, do you know, any idea?
    Mr. O'Rourke. I calculated it at the level of the total 
Department of the Navy [DON] budget, and that was the figure I 
gave you in my opening statement, that if you wanted to fully 
fund the DON budget, which includes the Marine Corps as well as 
the Navy, and you wanted to keep that at the level shown in the 
fiscal year 2014 budget submission, then even if the rest of 
the defense budget went down to the revised cap level in the 
Budget Control Act and stayed there, you could do that as long 
as you were willing to shift 4 or 5 percentage points of the 
DOD budget into the Department of the Navy budget. That is the 
broadest measure of what it would take to run the Navy, even 
broader than what you indicated in your question, but it is at 
that level that I was able to do the calculation.
    Mr. Hunter. Let me try to get one last question in. What 
did the Navy do wrong in their calculations that made it so 
that their answer is wrong? I mean, there is a big disparity 
between you and they. What did they do wrong in their 
calculations?
    Thank you, Mr. Chairman. And I yield after this.
    Dr. Labs. I wouldn't necessarily say that the Navy has done 
something wrong. We have made some different assumptions than 
what the Navy has made in sort of conducting this analysis. One 
of the assumptions is sort of how you treat long-run historical 
cost growth in the Navy shipbuilding plan. When the Navy does 
its report it assumes that the higher inflation that occurs in 
the shipbuilding industry and when they calculate their 
constant dollar estimates, they wash that back out, all that 
additional growth.
    But what CBO does is that we take an assumption between the 
difference between GDP [Gross Domestic Product] price inflation 
and the Navy shipbuilding inflation and we incorporate that 
into the constant dollar estimates, because that represents a 
real cost that has to be borne by the American taxpayer. If, 
for example, the American taxpayer only wants to give the 
Department of Defense increases each year equivalent to general 
inflation in the economy and ships are costing you more than 
that each and every year, then that is a real cost growth 
factor that you have to factor into the analysis.
    In some other places I have made some different assumptions 
about what ships are going to cost and that is going to drive 
the subsequent costs of an entire class. For example, the Navy 
assumes that its next-generation destroyer, the one beyond the 
Flight III, is going to look not too different from the Flight 
III. But I made the assumption that it was not realistic to use 
the DDG-51 hull form for yet a Flight IV, and I made an 
assumption that they are going to have to design a new 
destroyer by that time, if not sooner, and therefore that is 
going to cost more than what the Navy assumed.
    Mr. Hunter. Thank you.
    Mr. Forbes. And just to clarify, too, Dr. Labs and Mr. 
O'Rourke, I think what Mr. Hunter was asking is, it is not an 
enormous difference between what the Navy is actually 
estimating as cost and what you are estimating. The big gap is 
between what has historically been available to the Navy and 
what it would cost to do their shipbuilding plan, because when 
the Navy actually submits their 30-year shipbuilding plan they 
don't submit the dollars necessary to go along with it. They 
say this is the 30-year shipbuilding plan.
    But even based on the Navy's cost, we would have to find 
where that money is coming from, because it would take a 
substantial amount more than has historically been allocated 
for shipbuilding in order to meet the Navy's figures. Am I 
correct on that?
    Dr. Labs. Yes, sir, Mr. Chairman. I agree with that 
completely.
    Mr. Forbes. The gentleman from Connecticut, Mr. Courtney, 
is recognized for 5 minutes.
    Mr. Courtney. Thank you, Mr. Chairman.
    Ron, your report mentioned the possible benefit of having 
cross-class block contracts as a way of trying to generate more 
savings. Has that ever been done before?
    Mr. O'Rourke. To my knowledge it has not. We would be 
breaking new ground. But one of the points that I wanted to 
make in my testimony, and it is in my prepared statement, is 
that the Navy in effect for years now has been breaking new 
ground in terms of the scope with which it has made use of 
multiyear procurement contracting authority. That authority has 
been on the books for many years, and the Navy through MYP and 
also now through block buy contracting authority, is making a 
lot more use of multiyear contracting than was the case in the 
past. And arguably, as I pointed out in my statement, it 
amounts to a quiet revolution in Navy ship acquisition, one 
that is very significant in my mind looking at it, but perhaps 
unheralded in terms of the amount of attention it has received.
    But if you are breaking new ground doing that, it does 
raise the question of whether you could break further new 
ground in the future moving into a situation where we have to 
be very careful about how we are spending our defense dollars.
    Mr. Courtney. Right. Well, there is clearly going to be 
overlap between the Virginia and the Ohio replacement. So I 
actually think it is an interesting idea.
    Dr. Labs, I mean, your report didn't really I think have 
any kind of assumptions about using that approach, but, I mean, 
if you have any comment, I mean, in terms of whether you think 
it has potential.
    Dr. Labs. Mr. Courtney, I do think that is certainly 
something worth exploring. The Navy should look, frankly, in 
every nook, cranny, and crevice to see what it can do to reduce 
costs in the shipbuilding program.
    The CBO report did not assume cross-class multiyear 
procurement contracts in terms of the cost estimates, and if 
such a thing were feasible, even if they aren't quite as 
efficient as some of the within-class multiyear contracts, it 
is still something that could generate savings.
    The CBO report did, however, include an assumption that in 
the same years that you are buying, which is pretty much every 
year in the plan you are buying an attack submarine and you are 
buying a ballistic missile submarine, you do gain overhead 
efficiencies in the submarine yard. So there are cost savings 
built into the CBO analysis for that aspect of the overlap.
    Mr. Courtney. Right. Again, I think Mr. Forbes' basic point 
is correct, which is that we are sort of paying for the sins of 
the past here in terms of these gaps in the cost of the 
shipbuilding plan to get to an adequate fleet size. But there 
definitely is a delta between what the Navy is projecting for 
the Ohio replacement and what you projected. And I have to say, 
looking at the six sort of changes that were made in the Ohio 
replacement, which you itemize on page 23 of your report, in 
terms of reducing the number of missile tubes, reducing their 
diameter, again, getting the benefit of Virginia class, you 
know, modifications in terms of savings, it doesn't seem like 
you really kind of give them much credit for that. And to me it 
seems awfully substantial in terms of the changes that they 
made.
    Dr. Labs. Actually, Mr. Courtney, we actually have given 
them credit for those changes. If you had looked at the 
estimates that both the Navy and CBO put out, say, 2 or 3 years 
ago, both estimates were considerably higher. When the Navy 
submitted its 2011 shipbuilding plan it had a price estimate 
for the boomers [ballistic missile submarines] around $7 
billion, CBO was like $8 billion, and that was in 2011 dollars, 
2010 dollars, I can't remember precisely.
    Both numbers are come down over time. CBO's do actually 
remain larger, and one of the reasons for that is that when I 
look at the submarine industry historically on a cost-and-
weight relationship there hasn't been a lot of difference 
between attack submarines and ballistic missile submarines. I 
have a chart here I could show you and you could sort of see 
what I am talking about historically.
    So the Navy is assuming, and they may be correct, I mean, 
these are just sort of projections going forward, but the Navy 
is assuming that on a cost-weight relationship basis ballistic 
missile submarines are going to be a lot less expensive than 
attack submarines. And I don't see a lot of historical evidence 
for that, so I am inclined to think that that may be optimistic 
planning at this point. I hope the Navy is correct, I hope all 
of my numbers are wrong and their numbers are correct.
    Mr. Courtney. And, again, I don't think their point of view 
is really pie in the sky. I mean, again, looking at the 
progress that has been made in terms of savings on each 
succeeding Virginia class. And, again, I mean, they are going 
to use a lot of same systems in terms of photonics, you know, 
their modular construction, which has been real, I think, all-
star in term of savings.
    So, again, the thrust of your report I completely agree 
with and the need to look at whether we shift DOD's overall pie 
in terms of orienting it more to shipbuilding, I completely 
agree with it. But I also kind of think they deserve a little 
bit more credit in terms of the fact that they have really 
sharpened the pencil program on the Ohio program over the last 
couple of years and I think have made some real progress.
    Dr. Labs. Mr. Courtney, I completely agree. That is why I 
enumerated actually all the changes the Navy did make to its 
original design of a few years ago in the Ohio replacement and 
that they have driven the cost down. Certainly if you would 
compare year to year what the Navy has estimated for that 
program, the costs have come down on the Navy side and 
correspondingly the CBO costs have also come down as well.
    Mr. Forbes. Thank you, Joe.
    The gentleman from New Jersey, Mr. Runyan, is recognized 
for 5 minutes.
    Mr. Runyan. Thank you, Mr. Chairman.
    The first question is for Mr. O'Rourke. In your sense, is 
the size of the current fleet adequate and do you think the mix 
of ships is adequate?
    Mr. O'Rourke. If you adopt as a metric for measuring 
adequacy a fleet that can meet its commitments in a sustainable 
way without overstressing both the ships and the people, I 
think the Navy would tell you that the levels of presence that 
they are maintaining right now are requiring lengths of 
deployments that are placing a strain on both the ships and to 
some degree the people as well and that in the Navy's view that 
situation, although it is something they can maintain for a 
while, is not sustainable over the long run. And consequently I 
think the Navy would tell you that that size fleet that we have 
today is not enough over the long run to meet the Navy's 
commitments in a sustainable manner.
    Mr. Runyan. What about the mix of the ships?
    Mr. O'Rourke. The mix is a matter of constant study and 
occasional readjustment by the Navy. And they come forward with 
a new force structure mix every few years. They did so about a 
year ago and before that about 5 years before that.
    What is interesting to me observing this as a naval analyst 
is that there is a debate underway right now between people who 
support the current fleet architecture, which is more or less 
the mix that we have today and that we are planning going 
forward, on the one hand, and a different school of thought 
that says we should think about moving toward a more 
distributed, a more highly distributed force structure that had 
fewer larger ships and a greater number of smaller ships.
    I am watching that debate right now. I am struck at how the 
people in those two schools of thought at times almost seem to 
be talking past one another in terms of their assumptions and 
conclusions. I don't know what to make of that debate right 
now, but I am watching it carefully, and I think it is 
something that the subcommittee may also consider tracking 
carefully. Because if the alternative school of thought does 
begin to gain more traction it could increase the possibility 
of larger-scale changes coming forward from the Navy in terms 
of the fleet mix that they are proposing for the future.
    Mr. Runyan. And in your infinite knowledge, if you will, 
has there been any major, major changes? As you say, there are 
a lot of people floating that out there.
    Mr. O'Rourke. The idea for a more highly distributed naval 
force structure has been out there in various specific 
proposals for a number of years now. That debate has continued 
during that time. The Navy, in terms of its proposed force 
structure, has been more or less constant since the end of the 
Cold War. There have been puts and takes in the Navy's proposed 
force structure, but the basic fleet architecture has remained 
more or less the same. The larger-scale changes in that have 
been the appearance and disappearance of the Maritime 
Prepositioning Force of the Future squadron and then the advent 
of the Littoral Combat Ship. I guess those would be the two 
larger-scale changes that have come into the plan over the last 
10 or 15 years.
    Mr. Runyan. Next question is probably for both of you, but 
I will start with Dr. Labs. Now kind of turning to the new 
Ford-class carrier and talking about, are you confident that it 
will stay within the cost projection? And really what is the 
greatest risk to keeping it under and in that budget?
    Dr. Labs. Congressman, right now the CBO does estimate a 
somewhat higher price for the lead ship of the Ford-class 
program as well as the follow-on ships. And right now a lot of 
the potential cost growth that could still occur in that ship 
is if they encounter problems in final stages construction; the 
ship is about 60, 65 percent complete I believe at this stage. 
When they get to sort of the test program, if they uncover a 
serious problem in sort of the testing of the ship that is 
going to be expensive to fix, that is where you would find 
potential cost growth above what the Navy is currently 
projecting. Such problems like that would cause it, I think, to 
exceed its current cost cap that Congress has imposed and would 
bring it even closer to the CBO estimate.
    If there are no problems with the final stages of 
construction and the test programs only reveal some minor 
things--test programs always reveal some problems. The question 
is whether they are expensive, as in one, two, or tens of 
millions or hundreds of millions. If it is on the low end of 
that then the lead ship will come under what the CBO estimate 
will be most likely.
    But then subsequent ships of the class, the Navy has 
currently priced the CVN-79, in my opinion, aggressively. But 
in the Navy's opinion aggressively. They have called it an 
aggressive but achievable target. The CBO estimate is about a 
billion dollars more than what the Navy's is. And I expect to 
see that as that ship gets built it will end up costing more 
than what the Navy projects. But the Navy is well aware of the 
situation and they are keeping a sharp eye on it and they are 
going to work very aggressively to see that that does not 
happen.
    Mr. Runyan. Thank you.
    Chairman, I yield back.
    Mr. Forbes. Thank you. And, Jon, I think your questions 
about the mix, something the subcommittee is going to have to 
look at and continue to get more information on because we are 
going to have to weigh in on that. And on that carrier one of 
the interesting things, regardless of the cost, one of the 
things that is kind of frightening to many of us is the current 
carrier 29 percent of the vendors are sole source, but the next 
carrier are going to be 85 percent of them are going to be sole 
source. It shows what we are doing to our industrial base.
    And Ms. Hanabusa is now recognized for 5 minutes.
    Ms. Hanabusa. Thank you, Mr. Chairman.
    Mr. O'Rourke, the discussion that you were just having 
about basically the architecture of the fleet is probably the 
definitive question, the threshold that we all got to get to, 
but that is going to be determined by what we think the needs 
are going to be. So, for example, if we go to, because of the 
pivot to Asia-Pacific or the rebalance, whatever word you want 
to use, and if you look at the concepts of the A2/AD [anti-
access/area denial] and where we are going to be and under 
basically what circumstances are we going to need, have the 
need, wouldn't that then determine which fleet architecture we 
would look at? And then would that not then determine the cost 
that we are talking about?
    Mr. O'Rourke. I think that is absolutely right, and in fact 
the connection you make between fleet architecture and the 
strategic rebalancing to the Asia-Pacific I think is very much 
on point, because the advocates of the more highly distributed 
fleet architecture are making their arguments in favor of that 
new architecture precisely in connection with countering A2/AD 
forces, from China in particular, in the western Pacific. And 
so when you get into the debate between those two camps about 
what the future fleet architecture might be, it is very much in 
connection with what each side thinks will be appropriate in 
that part of the world more than any other, although there is 
also some discussion of structuring the fleet for scenarios in 
the Persian Gulf region as well.
    But I think that is absolutely on target, because very 
frequently the debates over future fleet architecture are 
occasioned or eventually get into a discussion of the western 
Pacific and the situation that we will have there at some point 
in the future.
    Ms. Hanabusa. We have had discussions with, I believe, 
former Secretary of Navy John Lehman was here, as well as 
former Admiral Roughead had testified before this committee, 
and they were, like, I think one ship off, one was 325, 326, 
and the other one was 327 or something around there. And when 
asked to explain the difference, they all said, well, it 
depended on what we needed and where we were going to be.
    So I guess the problem I have always had with the 30-year 
shipbuilding plan is that it is almost like we don't know what 
the demands are going to be 30 years from now and yet we are 
planning what that fleet is going to be. So it is almost like 
to a certain extent we are setting policy by our acquisition 
structure, so that what we decide to acquire in terms of the 
fleet, whether it is distributive or the current fleet 
architecture or distributive architecture, it seems to me we 
are almost deciding where we believe we are going to be and 
what we are going to need versus having where we have to be and 
what we are going to need make the determining factor.
    But given the nature of shipbuilding is that something that 
we can do? Because it seems to me it is just going to be 
continually reactionary for the next 30 years. So why then 
would we have a 30-year shipbuilding plan?
    Mr. O'Rourke. I understand the question. It is a very fair 
question to put out there in connection with reviewing the 30-
year shipbuilding plan.
    I guess what I would say in reaction to that is that if it 
is decided to move to a different architecture and to a 
different mix of ships that you will then begin to reflect that 
in next year's 30-year plan and the 30-year plan after that. So 
there is time for the 30-year plan to accommodate changes in 
the planned fleet mix and the corresponding mix of shipbuilding 
programs that support it.
    For me the greatest value perhaps of the 30-year 
shipbuilding plan is giving policymakers a look ahead to the 
general investment burden that we might face in future years if 
we are to continue with the plan for putting out a certain kind 
of fleet. And it is worth knowing what that investment burden 
might be so that it doesn't take you by surprise when you get 
there and so that you can begin to take actions if you want to 
years ahead of time to head those off, or to mitigate them, or 
to respond to them in some other way.
    And so for me it is not so much the precision of the 
outyears of the 30-year plan or the fine details of it that are 
important, it is the general picture that it paints about the 
future investment burden and what, if anything, we might want 
or need to do about it today to better prepare ourselves for 
that situation 5 and 10 and 20 years from now.
    Dr. Labs. I would actually take that even one step further, 
that if the decision gets made that a different fleet 
architecture is required, then looking at what that investment 
burden is going to be for that alternative fleet architecture 
would be very important to know, because if it is going to be 
considerably more expensive than what the current fleet 
architecture is, policymakers such as Congress need to be 
prepared and be aware of that going forward since appropriation 
decisions are made on an annual basis.
    Ms. Hanabusa. Thank you, Mr. Chair.
    Mr. Forbes. Thank you, Ms. Hanabusa.
    I think one of the things, too, is the 30-year plan gives 
us kind of a projected curve line that we can look at not just 
for us, but also how our peer competitors line up with us. And 
the Navy does need to give us a new one every year, so they can 
modify that any time they want to and change those projected 
curve lines.
    Mr. Wittman is recognized for 5 minutes.
    Mr. Wittman. Thank you, Mr. Chairman.
    Before I begin questioning I would like to take a moment to 
honor the 241 marines, sailors, and soldiers of the 24th Marine 
Amphibious Unit who 30 years ago today were killed in a 
terrorist attack in Beirut, Lebanon. And we should never forget 
their sacrifice or those who have served before and after who 
gave the last full measure of devotion to this country. We are 
blessed today to have great men and women that serve in uniform 
around the world deployed in the most dangerous places 
defending this Nation's freedom, and we are eternally grateful 
for that.
    Gentlemen, thank you so much, too, for your service to our 
Nation.
    I want to dig a little bit deeper into the aspects of the 
architecture of our fleet and talk specifically about our 
amphibious ships and where we are today with amphibious ships, 
especially with the redirection of our strategy to the Asia-
Pacific and what the need is there to make sure that we are 
able to project force and to meet the needs in the Asia-
Pacific.
    I wanted to get your perspective on where you see the gaps 
in our amphibious fleet, both today and where the gaps may be 
with a shipbuilding plan going into the future. And then will 
we have the requisite number of ships to maintain operational 
capability within that theater and in other areas in the world 
based on the current plan and where we may be with the number 
of amphibious ships.
    Mr. O'Rourke. Just very briefly to make three opening 
points on that and then Eric can add further if he likes. We 
are going to have a shortfall on amphibious ships relative to 
the stated goal during the earlier years of the 30-year plan, 
basically now and for the next several years for about the 
first decade of the 30-year period until we get up to that 
number.
    In looking at the shortfall against the 33-ship goal, it is 
important to bear in mind that the 33-ship goal itself 
represents a reduction from a less fiscally constrained number 
of 38, which itself represented a reduction from an 
unconstrained fiscal goal for 2.0 MEB [Marine Expeditionary 
Brigade] lift of about 42 or 43 ships. So the requirement 
itself got knocked down a couple times from 42, 43 to 38. 
Thirty-eight is a number that I think many people on this 
subcommittee have heard, and then that got knocked down to 33.
    So every time you knock it down you are putting a little 
bit more operational risk into your plans, and when you have a 
shortfall against that final number then you add to your 
operational risk. So there is a gap there in terms of sheer 
numbers.
    There are two other things that I wanted to mention. One is 
that we are building a couple of large deck amphibious assault 
ships that because of the nature of our shipbuilding plan 
several years ago will not have a well deck in them. And 
consequently we are looking at the possibility of operating 
amphibious ready groups, ARGs, built around each of those two 
large deck ships, even though those large deck ships don't have 
well decks. And I think the Navy and the Marine Corps face a 
challenge right now in figuring out what the operational 
concept will be for ARGs that are built around large deck 
amphibious ships that themselves do not have well decks in 
them.
    And then the third issue moving forward is the cost and 
capabilities and design of the new LXR amphibious ship, which 
is several years out, but there is already an AOA [analysis of 
alternatives] underway to examine what that ship should be. And 
I think a key potential issue for this subcommittee moving 
forward is to keep track of the Navy's cost goal for that ship 
and how that cost goal relates to the potential capabilities of 
that ship relative to what the Marine Corps might desire to 
have in that ship for operating future ARGs and future 
amphibious forces generally.
    Mr. Wittman. Mr. O'Rourke, let me follow on the question 
that you talked about with the LXR. Are there ways that we can 
decrease costs on that future ship class? In other words, can 
we look at existing hull forms? Are there ways that we can 
actually try to reduce cost there so we can possibly build more 
ships within that class? Do you have any thoughts on that?
    Mr. O'Rourke. Yeah. There are three broad categories of 
cost for the LXR; one is design cost, one is construction, and 
one is lifecycle O&S [operations and oupport]. One way to 
reduce the design cost of the class is to use a common hull, 
such as has been proposed in terms of using a variant of the 
LPD-17 design. That path would definitely reduce your design 
costs. You would then want to examine what implications it 
would have for construction and for lifecycle O&S costs. The 
other way to reduce the cost for the class offhand would be to 
build the ships using a block buy contract for the initial 
ships moving into a multiyear procurement contract in the later 
years of the program.
    Mr. Wittman. Dr. Labs.
    Dr. Labs. I would really quite just agree with everything 
that Ron said there on that front. The only two things I would 
add is that when I look at the shortfalls for amphibious ships, 
those shortfalls are relatively smaller compared to the 
potential shortfalls in attack submarines and large surface 
combatants. Those kinds of shortfalls, particularly when you 
think about the pivot to the East Asia region, the Pacific 
region, give me more of a pause than they do for amphibious 
ships.
    And then what Ron said is very correct about the LXR. Right 
now the Navy has got a cost goal on that ship that is 
potentially quite ambitious for them to be able to put 
everything onto the ship that the Marine Corps said that they 
want to need. So watching that debate evolve, go forward, and 
looking at the AOA carefully and what the options the Navy 
considers, whether it is an existing design, a new design, or a 
foreign design of some sort, I think will be a critical part of 
the oversight process that the subcommittee will need to be 
doing.
    Mr. Wittman. Very good.
    Thank you, Mr. Chairman. I yield back.
    Mr. Forbes. Thank you, Mr. Wittman.
    Mr. Langevin is recognized for 5 minutes.
    Mr. Langevin. Thank you, Mr. Chairman. And I would like to 
thank our witnesses for their very informative testimony here 
today as always.
    As you both have noted in your written testimony, the 
decisions obviously that we make in the near term ripple out 
for the complete lifespan of these systems 30, 40, or even 50 
years, and obviously we have to make sure that we get this 
right. So I would like to briefly touch on Ohio replacement 
funding.
    Mr. O'Rourke, I appreciate your making the point that 
service spending shares and the allocation to shipbuilding 
don't happen in a vacuum, and that funding ships are entirely 
feasible based on past practice. And one idea that has been 
floated in the past, though, is a separate pot of money 
external to the Navy shipbuilding budget that would pay for the 
Ohio replacement boats, since they are national platforms. 
Could you speak about the possible drawbacks or advantages, 
particularly with regard to project oversight and management of 
such a funding arrangement?
    Mr. O'Rourke. The first thing I would want to point out is 
that in a way there are precedents that one might be able to 
cite for having such an arrangement. One would be our treatment 
of spending for missile defense programs, which has been put 
into its own part of the defense budget that is handled through 
the defense-wide part of the budget rather than through the 
service-specific budgets.
    The other precedent would be the National Defense Sealift 
Fund, which was established in the early 1990s, originally for 
the procurement of DOD sealift ships, and which is now also 
used for the procurement of Navy auxiliary ships.
    So there are at least two instances in which separate pots 
of money, if you will, for pursuing specific defense programs 
have been established. So it would not be the first time that 
we would have done something like.
    In terms of advantages and disadvantages, one potential 
advantage would be to insulate that money from the competition 
that would otherwise take place against other Navy shipbuilding 
priorities inside the shipbuilding account. Some people might 
say that is not really an advantage if you take the program out 
of the shipbuilding account but you also move the money along 
with it.
    One thing that the Navy has testified is that wherever the 
ship is funded, whether it is funded inside or outside the Navy 
shipbuilding account, the Navy has expressed a desire to retain 
control over those resources so that they can continue to act 
as the agency in charge of executing the program because they 
know how to build ships. And so there really are two questions 
here. One is where in the DOD budget should that money reside? 
And secondly, regardless of how that question is answered, who 
has control over the resources? And the Navy has expressed a 
view on the second of those questions, which is that even if 
the money is outside the Navy shipbuilding account, they would 
strongly prefer to retain control over it so that they can be 
the people to execute the money in the construction of the 
ships.
    Mr. Langevin. Thank you.
    As was touched on in testimony, there are concerns with 
regard to the growth margin of the DDG-51 Flight III ships, 
similar to the Perry-class frigates and very unlike the 
Spruance-class destroyers. Given that we are now asking these 
ships to last 40 years, and these ships likely would have to be 
able to support next-generation energy-intensive weapons, how 
do we ensure that we are not building ourselves into a corner 
in terms of large service combatant capabilities? And when will 
we have to start looking at a DD(X)-type program in order to 
roll out additional capabilities out to the fleet?
    Mr. O'Rourke. Putting more growth margin back into the 
cruiser-destroyer force is one of the issues that I highlighted 
in my prepared statement and also in my opening remarks for the 
hearing. There are two basic options for doing that. One would 
be a further modification of the DDG-51 hull, and here we would 
be looking quite possibly at the lengthening of the hull so as 
to accommodate more equipment or more growth margin. And the 
other would be to undertake the design of a new-design 
destroyer. And whether you do one option or the other, that is 
something we could initiate at some point. It could perhaps be 
at a point after which we procured some number of DDG Flight 
IIIs. It would be a matter for policymakers to decide whether 
to initiate that project sooner or later.
    Dr. Labs. I would like to add one point on that. All of the 
options that Ron mentioned as being able to put growth margin 
back into the destroyer force are absolutely correct, but all 
of them would likely lead to costs above and beyond what has 
already been projected in either the Navy's or the CBO 
estimates for the 30-year plan. Those are all going to be more 
expensive ships most likely.
    Mr. Langevin. Similar in cost to the 1000s?
    Dr. Labs. Not necessarily that large. They don't 
necessarily have to be that large. But certainly if you put a 
plug in the 51, you are not going to have a $1.5 billion ship 
anymore or $1.7 billion ship, you are going to have something 
above that. If you design an all-new destroyer, that will 
depend very much on what the dimensions and the size and 
displacement of that ship are going to be.
    You could design maybe even a smaller destroyer, maybe it 
wouldn't be as expensive, that within that design has a lot of 
growth margin, but it might not have as much capability because 
it is going to be physically more limited. But it doesn't 
necessarily have to be as expensive as the 1000 currently is.
    Mr. O'Rourke. A new-design ship would also probably give 
you more latitude than the option of a further modification of 
the DDG-51 would for putting features into the ship for 
substantially reducing the ship's lifecycle O&S costs. That 
could include among other things features for substantially 
reducing the ship's crew size.
    There is a limit to what you can accomplish in that regard 
probably working with the basic DDG-51 hull, but if you were to 
do a clean sheet design for a new ship you might be able to 
accomplish more in that regard, and over the long run if you 
were to then put those ships into service, it would reduce the 
O&S costs of supporting the cruiser-destroyer fleet and free 
money up for other Navy priorities, including, for example, 
building ships.
    Mr. Langevin. Very good. Thank you, gentlemen, for your 
testimony and your service to our Nation.
    And I yield back.
    Mr. Forbes. Thank you, Jim.
    Mr. Conaway is recognized for 5 minutes.
    Mr. Conaway. Thank you, Mr. Chairman.
    Gentlemen, thank you.
    It seems to me inherent in the 30-year projection is 
getting the useful life correct on any one ship and how long 
that lasts across there.
    Dr. Labs, you in your report, I think, indicate that the 
Navy has not been particularly successful in getting the full 
service life out of any one particular vessel. Can you talk to 
us about why that is happening? I have got some thoughts, but 
give us yours.
    Dr. Labs. There are a variety of reasons that come up as to 
why the Navy might not get as much service life out of the 
ships as it originally projected or originally intended. One 
could be that insufficient maintenance was done on the ships 
over the course of their operational life. That usually tends 
to be one of the higher, more important reasons as to why the 
ships don't last as long as the Navy would like.
    A second reason related to that one would be that if the 
Navy does not invest the necessary resources to modernize the 
combat capabilities of a ship, at a certain point in time, 
historically at least, the Navy has made the determination, 
well, a given ship is no longer relevant for the potential 
threat environment it might face, therefore they don't want to 
continue operating it, they don't want to take the risk to the 
crew, they don't want to take the risk to the ship, and they 
don't want to pay the expense for continuing to operate the 
ship.
    So maintenance and modernization are usually the two 
reasons why ships don't last as long as the Navy would like 
them to last.
    Mr. Conaway. Yeah. Well, you mentioned, though, that 
assumes that the first number is correct. So it would seem to 
me that that first number as to what the expected useful life 
is going to be would take into account that, given our history 
of deferred maintenance on every ship we have got, and the fact 
that over a 50-year lifespan or a 40-year lifespan the 
obsolescence issue, which is what the second issue you are 
talking about, the boat becomes obsolete and you can't retrofit 
it or it no longer makes sense to do that. Are those issues 
already factored into the front end as to what they think the 
boat or each ship, how long it will last?
    Dr. Labs. Well, sir, I am not a ship architect, but my 
understanding of sort of the way ship design works is that when 
the designer comes up with a particular expected service life 
for a ship, they factor in the fact that they assume that 
maintenance is done correctly and properly and that a certain 
amount of modernization does take place over the course of the 
life of ship. So if that fails to happen, then clearly it would 
not meet the initial design expectations.
    But that doesn't necessarily mean that even if that happens 
the threat might far exceed what the initial design or 
modernization expectations would be. So, I mean, there is 
certainly a possibility that could occur above and beyond.
    Mr. Conaway. Those kind of things I think are just risks of 
building a long-life asset.
    You mentioned earlier when you talked to Mr. Runyan about 
the cost of the Ford-class carrier and you said if some of the 
component pieces don't come in on budget then that could push 
it past the expected number. I read recently an article about 
the catapult system for the ship and that it is new design and 
the folks that were in charge had some very seeming to be rosy 
pictures as to fixing all of the issues that might be 
associated with it. Can you talk to us about that detail at 
this stage?
    Dr. Labs. I can't talk to you in detail about that. I would 
say that that is the type of issue that is going to come up 
when the Ford itself is fairly complete and they have to go 
through the test program. How well the integration of the 
catapult system went into the ship and how well that it 
operates after the fact is going to be one of the potential 
cost risks that are still outstanding for that particular ship 
program.
    Maybe Mr. O'Rourke might have more details on it at his 
fingertips than I do.
    Mr. O'Rourke. The EMALS system that you are referring to, 
the Electromagnetic Aircraft Launch System, has been a subject 
of oversight for a few years now in part because of the risk it 
could pose to the ship's construction schedule. My impression 
is that the period of maximum concern and risk in connection 
with EMALS was 2 or 3 years ago, and that while we are not out 
of the forest yet, we appear to be in a better situation today 
than we were 2 or 3 years ago when the Navy had to focus a lot 
of time and attention on making sure that they were getting 
that effort stabilized. The advanced arresting gear is another 
issue and GAO [Government Accountability Office] has 
highlighted the dual-band radar as a third. So there are 
technical issues out there that remain on the ship.
    Mr. Conaway. You mentioned that that always happens with a 
new ship. You put those into the relatively--I mean, still big 
numbers. Are we at the point where we are now talking tens of 
millions and it can still work, or you are beyond the point 
that it would be a catastrophic wreck if it didn't work?
    Mr. O'Rourke. I think Eric is the best person for that.
    Dr. Labs. I do think we are, certainly in the case of the 
EMALS and the arresting gear, that we are past the point where 
it is going to be a catastrophic wreck. I do not believe that 
you are going to end up with a very large helicopter carrier. 
But at the same time that doesn't mean that there aren't going 
to be risks associated with the final installation, 
integration, and testing of the catapult system, and any 
potential problems that may erupt from that could range 
anywhere from just a few million dollars to fix to maybe 
something substantially more than that, into, you know, $100 
million or something like that. But I don't consider it a 
catastrophic potential risk at this point.
    Mr. Conaway. Thank you, gentlemen.
    Mr. Chairman, thank you.
    Mr. Forbes. Thank you, Mr. Conaway.
    Just two last questions for you and then any comments that 
you might have. It is my understanding as we started out, and 
Mr. Hunter basically began this line of questioning, but if we 
assume that we are going to have a similar funding stream for 
ship construction as to what we have had for the last 30 years, 
if we assume that the CNO means what he says about how he plans 
to fund the Ohio class, and if we assume that sequestration, 
which is currently the law, remains the law, then, Dr. Labs, it 
is your projection that we will be in 30 years at approximately 
228 ships in the United States Navy. Is that a fair assessment?
    Dr. Labs. Approximately, yes, Mr. Chairman.
    Mr. Forbes. Approximately.
    The second question, we had testimony by at least one of 
our admirals that talked about some of our peer competitors, 
particularly the Russians, that when they set out a projected 
number of submarines, for example, that they are going to 
produce, you can pretty much set your watch based on the fact 
that they are going to be produced in that number. We have a 
little bit of a difficult time in our projections on our 30-
year shipbuilding plan.
    If we have a stable funding stream, can both of you share 
with us what is the greatest source of risk associated with 
projecting the Navy's force structure under our 30-year 
shipbuilding plan?
    Dr. Labs. When you say a stable funding stream, that is at 
the historical level, or a stable funding stream that is 
somewhere closer to what the Navy estimates or what CBO 
estimates needs for the 30-year plan?
    Mr. Forbes. You can pick at either one, because if you have 
the stable funding source you are still going to at least know 
what amount of money you have. But still whatever projections 
you make there are other factors that can play other than just 
the dollars that you have that could impact on the number of 
ships we ultimately produce. What would you say the major other 
risk would be?
    Dr. Labs. I would say that in my view there would be two 
other potential risks to the shipbuilding plan or the potential 
cost growth that could occur as a result of it. One would be 
that even with a stable funding source you are still going to 
want to have a stable plan to sort of minimize cost growth, to 
the extent that you can for at least 4- or 5-year periods that 
the number of ships of particular types and particular 
quantities does not radically shift around a lot, give the 
industry an opportunity to plan, to optimize their workforce, 
optimize their shipbuilding processes.
    The other potential risk that would be out there would be 
some sort of change in the threat environment such that some 
components of the plan, more than one perhaps, are no longer 
considered to be as viable to deal with the threat, an emerging 
threat, as the Navy had thought, and therefore a substantial 
change is required, a change that could lead to design of 
different types of ships, purchases of particular kinds, more 
of one kind over another. All of that would definitely then 
cause perturbations inside a stable funding stream.
    Mr. Forbes. Both of those coming back of course to what 
Mrs. Hanabusa raised in terms of the fluid nature really of 
that 30-year shipbuilding plan.
    Dr. Labs. Yes, sir.
    Mr. Forbes. Mr. O'Rourke, any comment on that?
    Mr. O'Rourke. My answer was going to be the same as the 
final part of Eric's. I think the largest risk would be a shift 
in the international security environment that might require a 
larger scale change in the plan, one that would take years to 
implement, and we might be in a situation of trying to catch up 
for a while before we were back on an even keel.
    Mr. Forbes. We thank you both for being here. I want to end 
up with the promise that I made at the beginning. Do either of 
you have any wrap-up comments that you want to get on the 
record, things that we did not ask that you think were 
important that we should have had on the record in looking and 
assessing this 30-year plan?
    And, Dr. Labs, I would like to start with you with any 
final wrap-up comments you might have.
    Dr. Labs. Well, Mr. Chairman, I don't believe I really have 
too many in terms of the final comments. I guess the one 
clarification I would like to make is that on the potential for 
a 228-ship plan there, you said assuming that sequestration 
remains in place. I would interpret that to be quite literally 
that sequestration would actually be having that effect. 
Because clearly under the BCA policymakers could choose to fund 
different parts of the Department of Defense differently, so 
they could fully fund the shipbuilding program at the expense 
of other programs. So it would simply assume that proportionate 
reduction that I was referring to early on.
    But beyond that, I would say that one of the things that 
concerns me the most, and it is not that I haven't stated it, I 
would just like to emphasize it, is the assumptions that go 
into service lives of these ships. The 40-year assumptions for 
cruisers and destroyers when we are already looking at a 
shortfall is something that needs to keep an eye on very 
closely, that the Navy is properly funding, modernizing, and 
operating and maintaining those ships so that they can last 
even what the designers have suggested that they would last. 
Because if you end up getting where the ships aren't going to 
last as long as the Navy had expected you are just going to be 
increasing your shortfall substantially or you are going to 
require substantially additional resources in a relatively 
short period of time to be able to compensate for that 
potential.
    Mr. Forbes. Which is what Mr. Conaway was addressing in his 
questions, I believe.
    Mr. O'Rourke.
    Mr. O'Rourke. Three points. I want to return to the point I 
spoke about earlier about air wing composition in connection 
with Ranking Member McIntyre's question. If we go to a smaller 
fleet that has fewer carriers, there are in broad form three 
options for what you might want to do concerning the richness 
or the composition of the mix of that air wing.
    One would be to say that if you are in an environment where 
you are cutting costs you might also want to think about 
reducing proportionately the cost of each air wing, and that 
might involve under some people's calculations an air wing that 
would have a greater number of Super Hornets and fewer F-35s.
    A second way of responding to that situation is to say 
that, although you are going to have a fewer number of air 
wings to correspond to your smaller number of carriers, you 
keep the air wing composition the same as currently planned.
    And the third option is the one that I spoke about at the 
beginning, which is to say that, well, if we are going to have 
a fewer number of air wings we might want to have each air wing 
be enriched in terms of its use of the newest technologies, 
which might argue in favor of having each air wing have a 
greater number of F-35s and perhaps a smaller number of Super 
Hornets than currently planned.
    So there are three broad options out there for how you 
might want to respond to a situation of reduced spending for 
the Navy as a whole and therefore a smaller number of carriers 
and carrier air wings.
    The second point I want to make is to emphasize what Eric 
has said about the risk of service lives, and I think there is 
a considerable risk in that regard right now with the DDG-51 
fleet. They are being used quite intensively, and it is not 
clear to me that the Navy's maintenance of these ships is what 
the Navy would prefer it to be for a ship that actually is 
intended to remain in service for 35 years.
    We might already be behind the curve in terms of the amount 
of maintenance we have put into those ships already, and we 
might already be in a situation of having to play catchup to 
make sure that those ships can last to 35 years, or even to 30 
years in the view of some observers. So I think the service 
life of the DDG-51 fleet and the maintenance we are putting 
into that fleet and the intensity with which we are using it 
today bears watching.
    And the third final comment I wanted to make is something I 
didn't have a chance to mention in my opening remarks, and that 
is how we look at technology in this overall situation. One of 
the points I make in my prepared statement is that the 
discussion of technology in defense acquisition in recent years 
in my view has become very heavily weighted toward looking at 
technology as a source of program risk for schedule and 
technical and cost risk. And it seems to me that what is in 
danger of being lost by focusing so much on technology as a 
source of risk is the idea that technology also represents an 
opportunity for reducing costs, for reducing both procurement 
costs and lifecycle O&S costs.
    And my hope is that as we go ahead in the evaluation of 
technology, that we continue to look at it not only in terms of 
its implications for program risk, but also in terms of 
opportunity for reducing costs and therefore improving the 
affordability situation regarding the 30-year shipbuilding 
plan. If we don't, we could begin to drift toward a situation 
where we take programs in a direction that might be 
technologically safer, but in the end, even though they might 
be safer and less controversial, they might wind up being more 
expensive than necessary, in which case we have made the 
situation of the affordability of the 30-year shipbuilding plan 
more challenging than it needed to be.
    Mr. Forbes. Gentlemen, thank you both for your service to 
our country, to Congress, and thanks for sharing your research 
with us today. And with that, we are adjourned.
    [Whereupon, at 3:45 p.m., the subcommittee was adjourned.]



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                            A P P E N D I X

                            October 23, 2013

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              PREPARED STATEMENTS SUBMITTED FOR THE RECORD

                            October 23, 2013

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    [GRAPHIC] [TIFF OMITTED] =======================================================================


              WITNESS RESPONSES TO QUESTIONS ASKED DURING

                              THE HEARING

                            October 23, 2013

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              RESPONSE TO QUESTION SUBMITTED BY MR. HUNTER

    Dr. Labs. Mr. Hunter asked what percentage of the Navy's budget is 
spent on shipbuilding, modernization, repair, and everything else that 
is needed to ensure that the current fleet lasts long enough to meet 
the Navy's service life goals.
    Unfortunately, CBO does not have sufficient resources to analyze 
the Navy's budget line by line to determine all of the funding that 
provides for ship construction, modernization, and repair. [See page 
10.]
?


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


              QUESTIONS SUBMITTED BY MEMBERS POST HEARING

                            October 23, 2013

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

      
                   QUESTIONS SUBMITTED BY MR. FORBES

    Mr. Forbes. Using an historical average as a method to project the 
30-year shipbuilding plan forward, can you provide an assessment as to 
your projection of number of ships that we should anticipate at the end 
of the 30-year shipbuilding plan?
    Dr. Labs. If, over the next 30 years, the Navy receives the same 
amount of funding in its shipbuilding accounts that it received over 
the last 30 years after adjusting for inflation--which is about $16 
billion per year in 2013 dollars--then the service would end up with a 
fleet in 2043 of 243 ships. That number assumes that the Navy would buy 
the same types of ships that it plans to buy in its 2014 shipbuilding 
plan but would buy proportionately fewer numbers of each type, and it 
incorporates CBO's estimates of the cost of building each type of ship. 
For the next 30 years as a whole, that amount of funding would be $160 
billion less than CBO's estimate of the cost of the Navy's shipbuilding 
plan.
    Mr. Forbes. Assuming a full sequester and your budget projections, 
how will the overall Navy force structure and 30-year shipbuilding plan 
be impacted?
    Dr. Labs. Senior Navy officials have stated that sequestration of 
the Navy's shipbuilding accounts in fiscal year 2014 would result in 
the Navy's not buying an attack submarine, a littoral combat ship, and 
an afloat forward staging base. In addition, sequestration in 2014 
would likely make it impossible for the Navy to complete the purchase 
of a third DDG-51 destroyer authorized by Congress in 2013.
    Beyond 2014, the effect of the Budget Control Act of 2011 on the 
Navy's shipbuilding depends on choices made by lawmakers. During the 
past 15 years, the Department of the Navy has received about 30 percent 
of the Department of Defense's base budget and has devoted about 10 
percent of its funding to shipbuilding. Going forward, if lawmakers 
chose to protect shipbuilding and ship maintenance at the expense of 
other defense programs, then any further effect on the Navy's force 
structure would be minimal. Alternatively, if lawmakers provided the 
Navy with the same percentage of DOD's budget during the coming decade 
as it has received in the past 15 years and the same percentage of the 
Navy's overall budget was devoted to ship construction as has been the 
case in the past 15 years, then the shipbuilding budget would be a 
little less than $13 billion per year from 2014 through 2021. That 
amount would be about $5 billion per year--or roughly 30 percent--below 
CBO's estimate of the amount required to carry out the Navy's latest 
shipbuilding plan. (According to CBO's estimates, the Navy's 2014 
shipbuilding plan would cost about $140 billion between 2014 and 2021, 
while complying with the BCA's lower caps on defense funding with the 
historical allocation of funding would give the Navy about $102 billion 
for ship construction.) With that funding, if the Navy bought the same 
types of ships that it plans to buy in its 2014 shipbuilding plan but 
bought proportionately fewer numbers of each type, the Navy would buy 
44 ships between 2014 and 2021, rather than 61 ships under the Navy's 
plan.
    Mr. Forbes. In your report, you indicated that the Navy has 
traditionally been unsuccessful in obtaining the full service life of 
the surface combatants. How will the 30-year shipbuilding plan be 
impacted if the Navy cannot obtain the full service life of its ships? 
In your estimation, what is the greatest threat to the Navy that will 
impede the Navy from obtaining the full service life?
    Dr. Labs. The Navy's 2014 shipbuilding plan, consistent with the 
plans the Navy has submitted to Congress over the last few years, 
assumes a 50-year service life for carriers; a 40-year service life for 
most surface combatants, amphibious ships, and logistics ships; a 42-
year service life for ballistic missile submarines, a 33-year service 
life for attack submarines, and a 25-year service life for littoral 
combat ships. If the Navy cannot meet those goals for service life for 
large numbers of ships, then the result will either be a smaller fleet 
than the Navy is planning or a greater need for funding to buy more 
ships sooner than expected. The greatest risk to the intended service 
lives is probably with large surface combatants. The Navy has 
demonstrated, through the long service of the USS Enterprise, that it 
can operate nuclear-powered aircraft carriers for more than 50 years. 
Similarly, the Navy has successfully operated and retired a few 
amphibious ships at 40 years and Los Angeles class attack submarines at 
33 years. However, the Navy is inexperienced at operating surface 
combatants for more than 30 years. The most likely reason why the Navy 
might not achieve its service life goal for surface combatants would be 
insufficient investment in maintaining and modernizing those ships. The 
history of ship operations in the U.S. Navy and in other navies 
suggests that surface ships can operate for decades and their combat 
systems can be continually upgraded to respond to changes in the threat 
environment--if policymakers choose to do so and allocate the resources 
to do so.
    Mr. Forbes. Given a stable funding stream, what is the greatest 
source of risk associated with projecting the Navy's force structure 
and 30-year shipbuilding plan?
    Dr. Labs. 1If the Navy's funding stream for shipbuilding was 
relatively stable over time, there are still at least four significant 
risks involved in projecting the Navy's force structure and 30-year 
shipbuilding plan--and it is unclear which risk is the greatest.
      First, the Navy might make significant changes in the 
number or types of ships that it plans to buy. Such instability in the 
Navy's shipbuilding, particularly in the near term, would also make it 
difficult for the shipbuilding industry to optimize their workforce and 
their shipbuilding processes to build ships in the most efficient and 
cost-effective manner.
      Second, and related to the first risk, unexpected cost 
growth for ships could result in fewer ships being purchased than what 
the Navy proposes in its shipbuilding plan.
      Third, a change in the projected future threat 
environment such that major components of the Navy's shipbuilding plan 
would no longer be considered viable would make it difficult to project 
the Navy's future force structure. Such a change in the security 
environment could lead to decisions to design and purchase different 
types of ships in different quantities than what the Navy has 
previously expected.
      Fourth, the Navy's 30-year shipbuilding plan is not just 
a shipbuilding plan but also a ship retirement plan. If the Navy does 
not invest sufficiently in the existing fleet so that ships are not 
maintained properly and modernized as needed, then ships may be retired 
sooner than the Navy planned.
    Mr. Forbes. The Navy has proposed retiring the four SSGN boats and 
replacing their strike capability with the Virginia Payload Module. The 
Navy has also forecast a reduced cost associated with this capability. 
In your estimate, what capability is provided by the Virginia Payload 
Module and what is the program and cost risk associated with developing 
this capability?
    Dr. Labs. The Virginia Payload Module (VPM) provides a substantial 
increase in the capability of Virginia class attack submarines to 
conduct strike and special operations missions. The VPM inserts a new 
section in the Virginia class submarines that is composed of four 
multiple all-up round canisters (MACs), each of which can carry seven 
missiles, such as Tomahawk land-attack weapons. Alternatively, the 
canisters could carry other payloads associated with special operations 
or reconnaissance if the Navy chose to configure them for those 
missions. The 28 additional missiles provided by a VPM increases the 
number of weapons positions (missiles and torpedoes) on a Virginia 
class submarine from 39 to 67.
    In light of the Navy's experience with modifying submarines to 
perform different missions than originally intended (such as changing 
the USS Jimmy Carter from an ordinary Seawolf attack submarine to one 
specialized for special operations, and converting ballistic missile 
submarines into cruise missile-carrying submarines), the technical 
challenges of designing VPM into the Virginia class seem relatively 
limited. CBO has not produced an independent cost estimate of VPM-
modified submarines because the Navy has not incorporated that change 
in the class into its 30-year shipbuilding plan. However, the Navy has 
stated in briefings to CBO and the Congressional Research Service that 
designing the VPM into the Virginia class would increase the unit cost 
of those ships by 13 to 15 percent.
    Mr. Forbes. How confident are you in the cost projection associated 
with the Ford class aircraft carrier that Navy has proposed? What 
elements cause the greatest risk to obtaining a Ford class aircraft 
carrier within the proposed budget?
    Dr. Labs. The Navy currently estimates that the CVN-78 will cost 
$12.8 billion in nominal dollars, whereas CBO estimates that it will 
cost $13.5 billion in nominal dollars. The Navy's current estimate is 
22 percent higher, after adjusting for inflation, than the service's 
estimate first published as part of the 2008 budget submission. The 
additional cost that CBO has built into its own estimate could come 
from at least three sources: contractor performance, the integration of 
major component systems as the ship enters the final 30 percent of 
construction, and problems that arise from the testing regime that will 
occur once the ship is completed. If contractor performance does not 
deteriorate from where it is today, if integration of the major systems 
on the ship runs smoothly, and if the test program reveals only minor 
problems, then the final cost of the CVN-78 will likely be less than 
CBO's estimate (but not less than the Navy's current estimate). 
Conversely, if any one of those issues proves problematic in the final 
two years of construction, then the final cost of the CVN-78 will 
likely be higher than the Navy's estimate and higher than the 
Congressional cost cap for the ship of $12.9 billion in nominal 
dollars.
    The next carrier to be built, the CVN-79, which was ordered in 
2013, may also experience cost growth. The Navy estimates the cost of 
that ship at $11.3 billion in nominal dollars, and CBO estimates the 
cost at $12.0 billion. The Navy itself describes its estimate as an 
``aggressive but achievable target.'' Both the Navy and CBO assume that 
the contractor will improve its performance on the second ship of the 
class, as customarily occurs in ship construction program. But CBO does 
not expect that construction performance will improve as much as the 
Navy is expecting.
    Mr. Forbes. During recent testimony, the Chief of Naval Operations 
indicated his intent to maintain the Ohio class replacement program as 
a priority acquisition. Navy projects that this program is expected to 
cost more than $80 billion. Considering your projections associated 
with 30-year shipbuilding plan and assuming an historical funding 
model, how will the overall fleet size be impacted if the Navy retains 
the current program of record associated with the Ohio class 
replacement?
    Dr. Labs. During the past 30 years, the Department of the Navy has 
received about $16 billion, after adjusting for inflation, to fund all 
of the activities in its shipbuilding accounts. If lawmakers provided 
the Navy with those same (inflation-adjusted) resources in the future, 
and if the Navy bought the same types of ships that it plans to buy in 
its 2014 shipbuilding plan but bought proportionately fewer numbers of 
each type, the Navy would purchase 193 ships during the next 30 years 
and would finish that period with an inventory of 243 ships. (For 
comparison, the Navy's 30-year shipbuilding plan calls for the purchase 
of 266 ships and an inventory in 30-years' time of 306 ships. Under 
that scenario, nine ballistic missile submarines would be part of the 
243-ship fleet. If, however, the Navy purchased the 12 ballistic 
missile submarines that are included in its latest plan and made 
further proportional reductions in its purchases of other ships, then 
it would purchase seven fewer ships of other types and have a fleet in 
30 years that numbered 235 ships.
    Mr. Forbes. Assuming a full sequester and your budget projections, 
how will the overall Navy force structure and 30-year shipbuilding plan 
be impacted?
    Mr. O'Rourke. Overall Navy force structure and the 30-year 
shipbuilding plan will be affected in coming years not only by the 
future DOD budget top line as influenced by the Budget Control Act or 
other legislation, but also by additional factors, such as the 
allocation of the DOD budget top line among the military departments 
and by the portion of the DOD budget top line that is used for other 
expenses, including military pay and benefits and DOD's so-called 
overhead and back-office costs. Presentations from the Navy, CBO, GAO, 
or other sources on future Navy force structure and the 30-year 
shipbuilding plan sometimes appear to assume little or no change in 
these additional factors, perhaps because there is no specific basis 
that can be cited for assuming a particular change. The fact that other 
organizations choose to assume little or no change in these additional 
factors does not prevent Congress from considering such possibilities. 
The alternative of assuming at the outset that there is no potential 
for making anything more than very marginal changes in these additional 
factors could unnecessarily constrain options available to policymakers 
and prevent the allocation of DOD resources from being aligned 
optimally with U.S. strategy.
    In a situation of reduced levels of defense spending, such as what 
would occur if defense spending were to remain constrained to the 
revised cap levels in the Budget Control Act, the affordability 
challenge posed by the 30-year shipbuilding plan would be intensified. 
Even then, however, the current 30-year shipbuilding plan would not 
necessarily become unaffordable.
    The Navy estimates that, in constant FY2013 dollars, fully 
implementing the current 30-year shipbuilding plan would require an 
average of $16.8 billion in annual funding for new-construction ships, 
compared to an historic average of $12 billion to $14 billion provided 
for this purpose.\1\ The required increase in average annual funding of 
$2.8 billion to $4.8 billion per year equates to less than 1% of DOD's 
annual budget under the revised caps of the Budget Control Act. The 
Congressional Budget Office estimates that, in constant FY2013 dollars, 
fully implementing the current 30-year shipbuilding plan would require 
an average of $19.3 billion in annual funding for new-construction 
ships, or $2.5 billion per year more than the Navy estimates.\2\ This 
would make the required increase in average annual funding $5.3 billion 
to $7.3 billion per year, which equates to roughly 1.1% to 1.5% of 
DOD's annual budget under the revised caps of the Budget Control Act.
---------------------------------------------------------------------------
    \1\ See Report to Congress on the Annual Long-Range Plan for 
Construction of Naval Vessels for FY2014, May 2013, p. 18.
    \2\ Congressional Budget Office, An Analysis of the Navy's Fiscal 
Year 2014 Shipbuilding Plan, October 2013, Table 3 (page 13).
---------------------------------------------------------------------------
    Some observers, noting the U.S. strategic rebalancing toward the 
Asia-Pacific region, have advocated shifting a greater share of the DOD 
budget to the Navy and Air Force, on the grounds that the Asia-Pacific 
region is primarily a maritime and aerospace theater for DOD. In 
discussing the idea of shifting a greater share of the DOD budget to 
the Navy and Air Force, some of these observers refer to breaking the 
so-called ``one-third, one-third, one-third'' division of resources 
among the three military departments--a shorthand term sometimes used 
to refer to the more-or-less stable division of resources between the 
three military departments that existed for the three decades between 
the end of U.S. participation in the Vietnam War in 1973 and the start 
of the Iraq War in 2003.\3\ In a context of breaking the ``one-third, 
one-third, one-third'' allocation with an aim of better aligning 
defense spending with the strategic rebalancing, shifting 1.5% or less 
of DOD's budget into the Navy's shipbuilding account would appear to be 
quite feasible.
---------------------------------------------------------------------------
    \3\ The ``one-third, one-third, one-third'' terminology, though 
convenient, is not entirely accurate--the military departments' shares 
of the DOD budget, while more or less stable during this period, were 
not exactly one-third each: the average share for the Department of the 
Army was about 26%, the average share for the Department of the Navy 
(which includes both the Navy and Marine Corps) was about 32%, the 
average share for the Department of the Air Force was about 30%, and 
the average share for Defense-Wide (the fourth major category of DOD 
spending) was about 12%. Excluding the Defense-Wide category, which has 
grown over time, the shares for the three military departments of the 
remainder of DOD's budget during this period become about 29% for the 
Department of the Army, about 37% for the Department of the Navy, and 
about 34% for the Department of the Air Force.
---------------------------------------------------------------------------
    More broadly, if defense spending were to remain constrained to the 
revised cap levels in the Budget Control Act, then fully funding the 
Department of the Navy's total budget at the levels shown in the 
current Future Years Defense Plan (FYDP) would require increasing the 
Department of the Navy's share of the non-Defense-Wide part of the DOD 
budget to about 41%, compared to about 36% in the FY2014 budget and an 
average of about 37% for the three-decade period between the Vietnam 
and Iraq wars.\4\ While shifting 4% or 5% of DOD's budget to the 
Department of the Navy would be a more ambitious reallocation than 
shifting 1.5% or less of the DOD budget to the Navy's shipbuilding 
account, similarly large reallocations have occurred in the past:
---------------------------------------------------------------------------
    \4\ Since the Defense-Wide portion of the budget has grown from 
just a few percent in the 1950s and 1960s to about 15% in more recent 
years, including the Defense-Wide category of spending in the 
calculation can lead to military department shares of the budget in the 
1950s and 1960s that are somewhat more elevated compared to those in 
more recent years, making it more complex to compare the military 
departments' shares across the entire period of time since the end of 
the World War II. For this reason, military department shares of the 
DOD budget cited in this statement are calculated after excluding the 
Defense-Wide category. The points made in this statement, however, can 
still made on the basis of a calculation that includes the Defense-Wide 
category.
---------------------------------------------------------------------------
      From the mid-1950s to the mid-1960s, reflecting a U.S. 
defense strategy at the time that placed a strong reliance on the 
deterrent value of nuclear weapons, the Department of the Air Force's 
share of the non-Defense-Wide DOD budget increased by several 
percentage points. The Department of the Air Force's share averaged 
about 45% for the 10-year period FY1956-FY1965, and peaked at more than 
47% in FY1957-FY1959.
      For the 11-year period FY2003-FY2013, as a consequence of 
combat operations in Iraq and Afghanistan, the Department of the Army's 
share of the non-Defense-Wide DOD budget increased by roughly ten 
percentage points. The Department of the Army's share during this 
period averaged about 39%, and peaked at more than 43% in FY2008. U.S. 
combat operations in Iraq and Afghanistan during this period reflected 
the implementation of U.S. national strategy as interpreted by 
policymakers during those years.
    The point here is not to argue whether it would be right or wrong 
to shift more of the DOD budget to the Navy's shipbuilding account or 
to the Department of the Navy's budget generally. Doing that would 
require reducing funding for other DOD programs, and policymakers would 
need to weigh the resulting net impact on overall DOD capabilities. The 
point, rather, is to note that the allocation of DOD resources is not 
written in stone, that aligning DOD spending with U.S. strategy in 
coming years could involve changing the allocation by more than a very 
marginal amount, and that such a changed allocation could provide the 
funding needed to implement the current 30-year shipbuilding plan.
    As an alternative or supplement to the option of altering the 
allocation of DOD resources among the military departments, the 30-year 
shipbuilding plan could also become more affordable by taking actions 
beyond those now being implemented by DOD to control military personnel 
pay and benefits and reduce what some observers refer to as DOD's 
overhead or back-office costs. Multiple organizations have made 
recommendations for such actions in recent years. The Defense Business 
Board, for example, estimated that at least $200 billion of DOD's 
enacted budget for FY2010 constituted overhead costs. The board stated 
that ``There has been an explosion of overhead work because the 
Department has failed to establish adequate controls to keep it in line 
relative to the size of the warfight,'' and that ``In order to 
accomplish that work, the Department has applied ever more personnel to 
those tasks which has added immensely to costs.'' The board stated 
further that ``Whether it's improving the tooth-to-tail ratio; 
increasing the `bang for the buck', or converting overhead to combat, 
Congress and DOD must significantly change their approach,'' and that 
DOD ``Must use the numerous world-class business practices and proven 
business operations that are applicable to DOD's overhead.''\5\
---------------------------------------------------------------------------
    \5\ Defense Business Board briefing, ``Reducing Overhead and 
Improving Business Operations, Initial Observations,'' July 22, 2010, 
slides 15, 5, and 6, posted online at: http://www.
govexec.com/pdfs/072210rb1.pdf. See also Defense Business Board, 
Modernizing the Military Retirement System, Report to the Secretary of 
Defense, Report FY11-05, posted online at:
http://dbb.defense.gov/Portals/35/Documents/Reports/2011/FY11-
5_Modernizing_The_Military_
Retirement_System_2011-7.pdf; and Defense Business Board, Corporate 
Downsizing Applications for DOD, Report to the Secretary of Defense, 
Report FY11-08, posted online at: http://dbb.defense.gov/Portals/35/
Documents/Reports/2011/FY11-8_Corporate_Downsizing_Applications
_for_DoD_2011-7.pdf.
---------------------------------------------------------------------------
    One potential way to interpret the affordability challenge posed by 
the Navy's 30-year shipbuilding plan is to view it as an invitation by 
the Navy for policymakers to consider matters such as the alignment 
between U.S. strategy and the division of DOD resources among the 
military departments, and the potential for taking actions beyond those 
now being implemented by DOD to control military personnel pay and 
benefits and reduce DOD overhead and back-office costs. The Navy's 
prepared statement for the September 18 hearing before the full 
committee on planning for sequestration in FY2014 and the perspectives 
of the military services on the Strategic Choices and Management Review 
(SCMR) provides a number of details about reductions in Navy force 
structure and acquisition programs that could result from constraining 
DOD's budget to the revised cap levels in the Budget Control Act.\6\ 
These potential reductions do not appear to reflect any substantial 
shift in the allocation of DOD resources among the military 
departments, or the taking of actions beyond those already being 
implemented by DOD to control DOD personnel pay and benefits and reduce 
DOD overhead and back-office costs.
---------------------------------------------------------------------------
    \6\ Statement of Admiral Jonathan Greenert, U.S. Navy, Chief of 
Naval Operations, Before the House Armed Services Committee on Planning 
for Sequestration in FY 2014 and Perspectives of the Military Services 
on the Strategic Choices and Management Review, September 18, 2013, pp. 
6-10.
---------------------------------------------------------------------------
    Mr. Forbes. What is your sense as to the adequacy of the size of 
the current Navy fleet? Do you think the current ``mix'' of ships is 
correct?
    Mr. O'Rourke. The adequacy of the size of the Navy is best judged 
against U.S. strategic goals and the Navy's consequent assigned 
missions, including missions that the Navy performs on a day-to-day 
basis with forward-deployed Navy ships. Some press reports suggest that 
the extended forward deployments now being made by certain Navy ships 
may be taking a toll on Navy personnel and ships, and may not be 
sustainable over the long run.\7\ If that is the case, the situation 
could be addressed by doing one or more of the following: reducing the 
Navy's assigned missions, making greater use of measures for maximizing 
forward-deployed presence (such as forward homeporting, forward 
stationing with crew rotation, and multiple crewing), and increasing 
fleet size.
---------------------------------------------------------------------------
    \7\ See, for example, Dan Taylor, ``Blake: Long Ship Deployments 
`Unsustainable,' Prioritization Necessary,'' Inside the Navy, December 
3, 2012; Sam Fellman, ``CNO: High Op Tempo Straining Fleet,'' Navy 
Times, October 8, 2012: 19; Sam Fellman, ``Pushing The Fleet Too Far?'' 
Navy Times, March 12, 2012: 18; Mike McCarthy, ``Admiral Warns Of 
`Burning' Out Ships, Aircraft,'' Defense Daily, March 1, 2012: 4; 
William H. McMichael, ``The New Norm: Longer Tours,'' Navy Times, 
December 5, 2011: 22-24; Sam Fellman and Joshua Stewart, ``Torrid 
Operational Pace Taxes U.S. Navy,'' Defense News, April 11, 2011: 23.
---------------------------------------------------------------------------
    Regarding the Navy's mix of ships, there is a debate currently 
underway within the broader U.S. community of those who study naval 
forces about whether the U.S. Navy should shift from its current fleet 
architecture to a more-distributed architecture that would include 
fewer large ships (such as aircraft carriers and large surface 
combatants) and greater numbers of smaller ships (such as smaller 
aircraft carriers and small surface combatants). Advocates of a more-
distributed fleet architecture--who appear to include, among others, 
analysts working at the Naval Postgraduate School--argue that a more-
distributed architecture would offer benefits in terms of fleet 
affordability and effectiveness in countering adversaries who field 
capable maritime anti-access/area-denial (A2/AD) systems.\8\ The Navy 
and other supporters of the Navy's current fleet architecture disagree 
on both of these points.
---------------------------------------------------------------------------
    \8\ See, for example, Wayne P. Hughes, Jr., The New Navy Fighting 
Machine: A Study of the Connections Between Contemporary Policy, 
Strategy, Sea Power, Naval Operations, and the Composition of the 
United States Fleet, Monterey (CA), Naval Postgraduate School, August 
2009, 68 pp.; Timothy C. Hanifen, ``At the Point of Inflection,'' U.S. 
Naval Institute Proceedings, December 2011: 24-31; David C. Gompert, 
Sea Power and American Interests in the Western Pacific, RAND, Santa 
Monica (CA), 2013, 193 pp. (RR-151-OSD); and John Harvey Jr., Wayne 
Hughes Jr., Jeffrey Kline, and Zachary Schwartz, ``Sustaining American 
Maritime Influence,'' U.S. Naval Institute Proceedings, September 13, 
2013: 46-51.
---------------------------------------------------------------------------
    Participants on the two sides of this debate appear to proceed from 
differing or even contradictory views on underlying factors such as the 
likely effectiveness of adversary A2/AD weapons, the likely 
effectiveness of U.S. Navy systems for countering them, the resulting 
likely survivability of Navy surface ships to attack from such weapons, 
and how the survivability of a ship changes as a function of ship size. 
Due to differences on matters such as these, it can sometimes appear as 
if the two groups are almost talking past one another.
    One option for the subcommittee would be to attempt to understand 
why the two groups have come to such differing views on these 
underlying issues. More generally, the subcommittee may wish to monitor 
(and perhaps participate in) this debate, because its outcome could 
have significant implications for Navy proposals to Congress regarding 
the planned size and structure of the fleet, and for the types and 
numbers of ships included in the 30-year shipbuilding plan.
    Mr. Forbes. The Navy has proposed retiring the four SSGN boats and 
replacing their strike capability with the Virginia Payload Module. The 
Navy has also forecast a reduced cost associated with this capability. 
In your estimate, what capability is provided by the Virginia Payload 
Module and what is the program and cost risk associated with developing 
this capability?
    Mr. O'Rourke. Although the Navy often characterizes the Virginia 
Payload Module (VPM) in terms of the additional capacity it would 
provide for Tomahawk cruise missiles, the large-diameter launch tubes 
in the VPM could also be used for other payloads, including other types 
of missiles or large-diameter unmanned underwater vehicles (UUVs). The 
VPM would enhance the mission capability and capacity of the Virginia-
class design by adding substantial payload volume and four flexible, 
large-diameter ocean interfaces.
    Altering the Virginia-class design to accommodate the VPM would add 
technical and cost risk to the Virginia-class program. The Navy has 
already changed the Virginia-class design in various ways, perhaps most 
significantly in the bow area, where the design was changed to replace 
twelve smaller-diameter vertical launch tubes with two large-diameter 
vertical launch tubes. The Navy executed this and other design changes 
as part of a strategy for reducing the time and cost of building 
Virginia-class boats. The idea of lengthening the Virginia-class design 
to accommodate the VPM is broadly comparable to the Navy's earlier 
project to lengthen the Jimmy Carter (SSN-23), the third and final 
Seawolf (SSN-21) class submarine, to accommodate an additional section 
roughly 100 feet in length that provides that ship with additional 
mission capability. A review of the SSN-23 project might provide some 
perspective on the Navy's ability to manage the lengthening of the 
Virginia-class design to accommodate the VPM. The Navy reportedly 
examined several design concepts for the VPM and selected a concept 
that the Navy believes represents the lowest-cost approach.\9\ The Navy 
states that among the concepts studied, the selected concept would 
require the ``least amount of baseline ship disruption.''\10\
---------------------------------------------------------------------------
    \9\ ``Navy Selects Virginia Payload Module Design Concept,'' USNI 
News (http://news.usni.org), November 4, 2013.
    \10\ Briefing to Naval Submarine League Symposium, Rear Admiral 
David Johnson, Program Executive Officer, Submarines, 24 October 24, 
2013, slide 6, entitled ``VIRGINIA Payload Modules Under Review.''
---------------------------------------------------------------------------
    Mr. Forbes. How confident are you in the cost projection associated 
with the Ford class aircraft carrier that Navy has proposed? What 
elements cause the greatest risk to obtaining a Ford class aircraft 
carrier within the proposed budget?
    Mr. O'Rourke. The Navy indicated in a briefing on the CVN-78 class 
program to CRS and CBO in May that there is a risk of further cost 
growth on the CVN-78 related to schedule and ``unknowns'' associated 
with the ship's shipboard test program. Potential sources of cost risk 
for CVN-79 include the impact of any changes that are incorporated into 
the ship's design; the ability to achieve the efficiencies targeted in 
the CVN-79 build plan, including efficiencies associated with improved 
material purchasing and for achieving learning-curve effects ``inside 
the ship'' (i.e., learning that can occur in heel-to-toe production of 
CVN-79 modules that are similar to one another); material costs; and 
shipyard productivity. If the general pattern of past Navy shipbuilding 
programs holds in the CVN-78 class program, there may be less overall 
cost risk for CVN-79 than for CVN-78. The procurement cost of CVN-79 
could be reduced by incorporating it into a block buy contract with 
either CVN-78 or CVN-80.
    Mr. Forbes. The original capability development document (CDD), 
which defines requirements for the Littoral Combat Ship, states that 
LCS would be developed primarily for employment in major combat 
operations. It would address vital warfighting gaps, replacing the 
capabilities of decommissioning Frigates, Mine-Warfare ships, and 
Patrol Class ships. As stated in the original LCS Required Operational 
Capability/Projected Operational Environment (ROC/POE), ``the LCS's 
mission is to operate offensively in a high density, multi-threat 
littoral environment independently or as an integral member of a 
Carrier-Strike Group, Expeditionary Strike Group, or Surface Action 
Group. However, at a National Press Club breakfast on April 12, 2013, 
Navy officials stated that ``these are not large surface combatants 
that are going to sail into the South China Sea and challenge the 
Chinese military; that's not what they're made for'' and that ``I don't 
worry per se about its survivability where I would intend to send it, 
[because] you won't send it into an anti-access area.'' Will LCS ever 
be able to meet its original combat requirements of being able to 
operate offensively in a high-density, multi-threat littoral 
environment independently?
    Mr. O'Rourke. As a matter of parsing the ROC/POE language, it can 
be observed that ``a high density, multi-threat littoral environment'' 
might not necessarily be the same as a high-threat environment. High 
density can mean that the environment includes many other contacts, 
including civilian craft that may pose no threat to the ship. Multi-
threat means more than one threat, or perhaps more than one type of 
threat. Those two factors can add up to a complex operating 
environment, but they need not necessarily add up to a high-threat 
environment. If the authors of ROC/POE had meant a high-threat 
environment, they might have simply used that term, rather than the 
more complex term ``high density, multi-threat littoral environment.''
    The LCS program was initiated to address identified gaps in the 
Navy's littoral warfighting capabilities for countering mines, small 
boats, and diesel submarines. Accordingly, the three core missions of 
the LCS are to counter mines, small boats, and diesel submarines, 
particularly in littoral waters. In performing these three core 
missions, the LCS can contribute to the Navy's overall ability for 
countering littoral anti-access/area denial (A2/AD) capabilities of 
various kinds that have been fielded by countries such as Iran. The LCS 
was not designed to act as a primary platform for the Navy for 
performing other kinds of warfighting missions in littoral waters, such 
as area anti-air warfare (AAW), ballistic missile defense, or naval 
surface fire support. Missions such as these are to be performed in 
littoral waters primarily by other Navy platforms. If the operating 
environment does not pose threats other than the three kinds of threats 
the LCS is designed to counter, then the LCS might be able to operate 
independently. If the operating environment poses threats other than 
the three kinds of threats that the LCS is designed to counter, then 
the LCS would need to operate in conjunction with other Navy platforms. 
For example, in an environment where there is a significant threat 
posed by anti-ship cruise missiles, the LCS might operate in 
conjunction with Aegis cruisers or destroyers, which have an area AAW 
capability. Other types of Navy combatants, such as aircraft carriers, 
cruisers/destroyers, and frigates, might also need to operate in 
conjunction with other Navy platforms in certain operating 
environments.
    If the Navy can successfully address LCS sea frame design issues 
and bring the LCS's mine countermeasures (MCM), surface warfare (SUW), 
and antisubmarine warfare (ASW) mission packages to IOC, the LCS would 
be in a position to perform its three core missions. In assessing the 
cost effectiveness of the LCS program and how many LCS sea frames and 
mission packages to procure, central questions include the following:
      Are the LCS's three core missions of countering mines, 
small boats, and diesel submarines, particularly in littoral waters, 
still valid?
      If the LCS's three core missions are still valid, does 
the LCS represent the most cost effective way for performing these 
three missions? (And if not, what other way would be more cost 
effective?)
      If the LCS represents the most cost effective way to 
perform these three missions, how many LCSs and LCS mission packages 
are needed to provide a sufficient capacity for performing them?
      In a situation of constrained defense resources, where 
does having capability and capacity for performing the LCS's three core 
missions stand in comparison to other defense spending priorities?
                                 ______
                                 
                  QUESTIONS SUBMITTED BY MR. LANGEVIN
    Mr. Langevin. The DDG-1000 class includes a number of key enabling 
technologies, such as advanced propulsion and power generation and 
distribution, increased ship automation, changes in shipbuilding 
processes, and large ship margins. These are very capable ships, and 
the Navy and the shipbuilders have invested a lot of time and resources 
into researching and developing the technologies they carry. What are 
the prospects for harvesting these investments across programs beyond 
the existing 3-ship buy?
    Dr. Labs. Prior to the Navy's decision in 2010 to restart the DDG-
51 program, the Navy had a clear plan to incorporate the new 
technologies of the DDG-1000 program into its surface combatant force. 
The Navy had planned to purchase 7 or more DDG-1000s, and then the main 
systems and hull form of that ship were intended to be the foundation 
on which the Navy would develop a new cruiser, designated at the time 
as the CG(X), that would ultimately replace the Ticonderoga class 
ships. With the restart of the DDG-51 program and the plan to develop 
an upgraded version of that ship, designated the DDG-51 Flight III, the 
Navy has not articulated a path for incorporating key technologies from 
the DDG-1000 program into the Navy's future surface combatant force. 
The new Flight III will have new, much more powerful radar and combat 
system as well as improved systems to support them, but the ship will 
not have an integrated power system and electric drive, an advanced gun 
system, or other new systems, nor will it incorporate technologies to 
reduce ship manning and operating costs. In addition, the Navy's 30-
year shipbuilding plan describes the follow-on surface combatant to the 
Flight III as a DDG-51 Flight IV, with only a modest increase in the 
average cost per ship over the DDG-51 Flight III. That suggests that 
the Navy is not planning major changes to the follow-on design that 
would allow for incorporating the DDG-1000's technologies. However, 
this does not mean that the Navy could not develop a new design for a 
surface combatant that would include technologies from the DDG-1000 
program. Alterations of this sort in the Navy's 30-year shipbuilding 
plans have occurred numerous times in the past.
    Mr. Langevin. Mr. Labs, you mention the Virginia Payload Module 
effort and that it will require additional as-yet-unbudgeted resources 
in order to offset the capability gap brought on by SSGN retirement. I 
and many of my colleagues believe that this investment is absolutely 
key in terms of enabling our Navy in future years--not just through 
land-attack capability, but also through the flexibility those tubes 
offer in terms of mission space. If those capabilities are not provided 
by VPM in the Block 5 and beyond Virginias, where else could that 
capability come from and what might the costs be?
    Dr. Labs. The only alternative to incorporating the Virginia 
Payload Module (VPM) into the Virginia class submarine that would gain 
the capability provided by the Navy's existing SSGNs would be to 
develop an SSGN replacement. CBO expects that the most cost-effective 
way to develop such a replacement would be to modify the Ohio 
Replacement class submarines to have VPM-like capabilities. To acquire 
the equivalent capability of the four in-service SSGNs or 20 Virginia 
class attack submarines with VPMs would require six modified Ohio 
Replacement class submarines. (Six new SSGNs would be required to 
replace the four existing SSGNs because the Ohio Replacement class 
submarines are expected to carry 16 launch tubes, whereas the existing 
Ohio class submarines carry 24 launch tubes.) The cost of designing and 
building those submarines would likely range from $30 billion to $35 
billion in fiscal year 2013 dollars, based on CBO's latest estimate of 
the cost of building new SSBNs.
    Mr. Langevin. The DDG-1000 class includes a number of key enabling 
technologies, such as advanced propulsion and power generation and 
distribution, increased ship automation, changes in shipbuilding 
processes, and large ship margins. These are very capable ships, and 
the Navy and the shipbuilders have invested a lot of time and resources 
into researching and developing the technologies they carry. What are 
the prospects for harvesting these investments across programs beyond 
the existing 3-ship buy?
    Mr. O'Rourke. Prospects for implementing such technologies in the 
cruiser-destroyer force beyond the three DDG-1000 class ships are 
currently uncertain. The replacement of the CG(X) and DDG-100 programs 
with resumed DDG-51 procurement leaves the Navy without a clear roadmap 
in the 30-year shipbuilding plan for accomplishing certain things for 
the cruiser-destroyer force that were to have been accomplished by the 
CG(X) and DDG-1000 programs, including but not limited to the 
following:
      restoring ship growth margin for accommodating future 
capabilities;
      introducing integrated electric drive technology into a 
large number of ships, particularly for supporting future high-power 
electrical weapons such as high-power lasers; and
      substantially reducing ship life-cycle O&S costs by, 
among other things, reducing crew size.
    Accomplishing the above three items will depend to a large degree 
on when procurement of large surface combatants shifts from Flight III 
DDG-51s to some follow-on design, and on the features of that followon 
design. Options for the next large surface combatant after the Flight 
III DDG-51 include a further modification of the DDG-51 design (i.e., a 
Flight IV design, which might include a lengthening of the hull to 
accommodate new systems and restore growth margin), the current DDG-
1000 design or a modified version of the DDG-1000 design, and a clean-
sheet design that might be intermediate in size between the DDG-51 and 
DDG-1000 designs.

                                  
