[Senate Hearing 113-108, Part 2]
[From the U.S. Government Publishing Office]


                                                  S. Hrg. 113-108 Pt. 2
 
DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 
               2014 AND THE FUTURE YEARS DEFENSE PROGRAM 

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

                                HEARINGS

                               before the

                      COMMITTEE ON ARMED SERVICES
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   ON

                                S. 1197

     TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2014 FOR MILITARY 
ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND 
   FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE 
   MILITARY PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR, AND FOR OTHER 
                                PURPOSES

                               __________

                                 PART 2

                                SEAPOWER

                               __________

                           MAY 8 AND 14, 2013

                               __________

         Printed for the use of the Committee on Armed Services
        Available via the World Wide Web: http://www.fdsys.gov/

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                      COMMITTEE ON ARMED SERVICES

                     CARL LEVIN, Michigan, Chairman

JACK REED, Rhode Island              JAMES M. INHOFE, Oklahoma
BILL NELSON, Florida                 JOHN McCAIN, Arizona
CLAIRE McCASKILL, Missouri           JEFF SESSIONS, Alabama
MARK UDALL, Colorado                 SAXBY CHAMBLISS, Georgia
KAY R. HAGAN, North Carolina         ROGER F. WICKER, Mississippi
JOE MANCHIN III, West Virginia       KELLY AYOTTE, New Hampshire
JEANNE SHAHEEN, New Hampshire        DEB FISCHER, Nebraska
KIRSTEN E. GILLIBRAND, New York      LINDSEY GRAHAM, South Carolina
RICHARD BLUMENTHAL, Connecticut      DAVID VITTER, Louisiana
JOE DONNELLY, Indiana                ROY BLUNT, Missouri
MAZIE K. HIRONO, Hawaii              MIKE LEE, Utah
TIM KAINE, Virginia                  TED CRUZ, Texas
ANGUS KING, Maine

                    Peter K. Levine, Staff Director

                John A. Bonsell, Minority Staff Director

                                 ______

                        Subcommittee on Seapower

                   JACK REED, Rhode Island, Chairman

BILL NELSON, Florida                 JOHN McCAIN, Arizona
KAY R. HAGAN, North Carolina         JEFF SESSIONS, Alabama
JEANNE SHAHEEN, New Hampshire        ROGER F. WICKER, Mississippi
RICHARD BLUMENTHAL, Connecticut      KELLY AYOTTE, New Hampshire
MAZIE K. HIRONO, Hawaii              LINDSEY GRAHAM, South Carolina
TIM KAINE, Virginia                  DAVID VITTER, Louisiana
ANGUS KING, Maine                    TED CRUZ, Texas

                                  (ii)



                            C O N T E N T S

                              ----------                              

                    CHRONOLOGICAL LIST OF WITNESSES
                       Navy Shipbuilding Programs
                              may 8, 2013

                                                                   Page

Stackley, Hon. Sean J., Assistant Secretary of the Navy for 
  Research, Development, and Acquisition.........................     3
Myers, VADM Allen G., USN, Deputy Chief of Naval Operations, 
  Integration of Capabilities and Resources, N8..................     6
McCoy, VADM Kevin M., USN, Commander, Naval Sea Systems Command..     8

                       Marine Corps Modernization
                              may 14, 2013

Stackley, Hon. Sean J., Assistant Secretary of the Navy for 
  Research, Development, and Acquisition.........................   112
Mills, LtGen Richard P., USMC, Deputy Commander for Combat 
  Development and Integration/Commanding General, Marine Corps 
  Combat Development Command.....................................   118

                                 (iii)


DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 
               2014 AND THE FUTURE YEARS DEFENSE PROGRAM

                              ----------                              


                         WEDNESDAY, MAY 8, 2013

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

                       NAVY SHIPBUILDING PROGRAMS

    The subcommittee met, pursuant to notice, at 9:30 a.m. in 
room SR-232A, Russell Senate Office Building, Senator Jack Reed 
(chairman of the subcommittee) presiding.
    Committee members present: Senators Reed, Shaheen, 
Blumenthal, Kaine, King, McCain, Sessions, Wicker, and Ayotte.
    Majority staff member present: Creighton Greene, 
professional staff member.
    Minority staff members present: Daniel A. Lerner, 
professional staff member; and Lucian L. Niemeyer, professional 
staff member.
    Staff assistants present: Jennifer R. Knowles and John L. 
Principato.
    Committee members' assistants present: Carolyn Chuhta, 
assistant to Senator Reed; Patrick Day, assistant to Senator 
Shaheen; Ethan Saxon, assistant to Senator Blumenthal; Karen 
Courington, assistant to Senator Kaine; Steve Smith, assistant 
to Senator King; T. Finch Fulton and Lenwood Landrum, 
assistants to Senator Sessions; Joseph Lai, assistant to 
Senator Wicker; and Brad Bowman, assistant to Senator Ayotte.

        OPENING STATEMENT OF SENATOR JACK REED, CHAIRMAN

    Senator Reed. Let me call the hearing to order.
    Senator McCain has indicated that he might be delayed and 
asked us to go forward. When he arrives, I will interrupt the 
proceedings and ask him if there are any comments that he would 
make.
    Let me make an opening statement. Then if any of my 
colleagues want to make a brief comment, it would be 
appropriate. But we will get right to the testimony.
    Let me welcome our witnesses: the Honorable Sean J. 
Stackley, Assistant Secretary of Defense for Research, 
Development and Acquisition; Vice Admiral Kevin M. McCoy, USN, 
Commander, Naval Sea Systems Command (NAVSEA); and Vice Admiral 
Allen G. Myers, USN, Deputy Chief of Naval Operations, 
Integration of Capabilities and Resources. Thank you, 
gentlemen, very much.
    We are certainly grateful for your service and also for the 
incredibly professional and courageous service of the men and 
women of the U.S. Navy and the U.S. Marine Corps.
    I especially want to thank Admiral McCoy this morning 
because I believe, sir, this will be your last opportunity--and 
``opportunity'' is used wisely or diplomatically--to appear 
before the subcommittee. Thank you for your service, sir. Thank 
you very much.
    Admiral McCoy. Thank you, sir.
    Senator Reed. I also want to welcome Senator McCain when he 
joins us. He is the new ranking member. There are few people 
with the expertise, the experience, and the insight of Senator 
McCain when it comes to anything to do with the U.S. Navy. So 
he is an extraordinary addition to this subcommittee as the 
ranking member.
    Now, again, I would ask my colleagues to bear in mind that 
the President of South Korea will be attending a joint session. 
So we will want to move forward as expeditiously as possible. 
If someone would like to make a very brief statement, I will 
recognize them at the appropriate time.
    The Navy continues to be faced with a number of critical 
issues as it tries to balance its modernization and procurement 
needs against the costs of current operations. A number of 
ongoing critical issues confront the Department of the Navy, 
but principally complicating the Navy's efforts this year to 
support current operations in U.S. Central Command and 
elsewhere is the specter of sequestration. The shipbuilding 
budget remains at a level where it will be difficult, if not 
impossible, to field the Navy we believe we need. Sequestration 
will only exacerbate that shortfall. We need to understand how 
sequestration may complicate the Navy's job of maintaining 
current readiness while building for the fleet of the future.
    Another topic of concern is the change in fleet size goals 
since last year. The Navy has now defined a new requirement for 
the size of the fleet, changing the goal from 313 ships to 306 
ships. We hope to understand more about this change during the 
hearing this morning.
    With that in mind, a continuing focus of the subcommittee 
has been to see that we improve our acquisition stewardship and 
thereby ensuring that we are getting good value for every 
shipbuilding dollar that we spend.
    We were very pleased to see that the Navy Department has 
been able to use the jump start in advance procurement funds 
Congress provided in fiscal year 2013 to maintain Virginia-
class attack submarine production at a level of two per year. 
We have seen that stability helps drive down costs and improve 
productivity.
    We also support the Navy's continuing efforts to drive 
costs out of the Ohio replacement ballistic missile submarines 
(SSBN) program. SSBNs will remain a vital leg of the nuclear 
triad for the foreseeable future. Establishing and achieving 
cost reduction goals in these Virginia-class and Ohio 
replacement programs will yield significant stability to our 
Nation's submarine industrial base, which provides good paying 
jobs all through the country but particularly in my region and 
will ensure the Navy has a modern, capable submarine fleet for 
many years to come.
    The subcommittee has met the last 2 years and focused 
primarily on other programs that were experiencing quality 
control issues or other production issues. It is never a 
pleasant situation when major programs are having such 
problems. During these hearings, testimony from the Navy made 
it seem to me that the Navy Department and the contractor teams 
were making good faith efforts to improve the situation through 
changes in staffing, training, and organization. We are eager 
to hear an update from Secretary Stackley and Vice Admiral 
McCoy this morning on the progress that they have made on these 
initiatives since last year.
    In our country's current fiscal environment, it is very 
unlikely that we will have as much money to spend as the 30-
year shipbuilding plan assumes. Fundamentally, that is why 
these continuing hearings on efficiency and productivity are so 
important. We need to focus on managing these important 
programs in ways that are efficient and effective in delivering 
the capability the country needs from its Navy. We need to 
improve quality and efficiency in all of our shipbuilding 
programs not only because of the direct savings, but also 
because we need to demonstrate to the taxpayer that we are 
using defense dollars wisely.
    Gentlemen, we look forward to your testimony this morning.
    Senator King, do you have any opening comments, brief 
comments?
    Senator King. No, thank you.
    Senator Reed. Thank you very much.
    Senator Ayotte, if you have a brief comment.
    Senator Ayotte. I do not, Mr. Chairman. Thank you.
    Senator Reed. Thank you.
    This is an extremely cooperative subcommittee. [Laughter.]
    I appreciate your contributions very much.
    Let me now recognize Secretary Stackley. I understand, Mr. 
Secretary, that you will have a statement, as well as Admiral 
McCoy and Admiral Myers.
    Mr. Stackley. That is correct, sir.
    Senator Reed. Please proceed.

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

    Mr. Stackley. Thank you. Chairman Reed, distinguished 
members of the subcommittee, thank you for your leadership on 
the many issues that fall under Congress' broad responsibility 
to provide and maintain a Navy and for your steadfast 
commitment to our sailors and marines around the world today.
    I appreciate the opportunity to appear before you alongside 
Vice Admiral Myers, the Deputy Chief of Naval Operations, and 
Vice Admiral McCoy, the Commander of NAVSEA to address Navy 
shipbuilding. With the permission of the subcommittee, I 
propose to provide a brief statement and submit a separate 
formal statement.
    Senator Reed. All statements will be made part of the 
record in whole, and you may summarize if you wish, Mr. 
Secretary.
    Mr. Stackley. Thank you, sir.
    Today's Navy is 283 ships in number, about half of which on 
any given day are underway performing missions around the 
globe, supporting operations in Afghanistan, providing maritime 
security along the world's vital sea lanes, missile defense in 
the Mediterranean and Sea of Japan, intelligence, surveillance, 
and reconnaissance where needed, as needed, global presence at 
sea and with an embarked marine force ready to move ashore. 
They are conducting anti-piracy patrols, global partnership 
stations, and humanitarian assistance. They are quietly, 
reliably providing strategic deterrence and all the while they 
are training and repairing for the next deployment, the next 
operation.
    Whether measured by the breadth and pace of these 
operations or by the defense strategy's call for increased 
naval presence from the Middle East to the Pacific or by the 
Chief of Naval Operation's (CNO) force structure assessment 
reported to Congress earlier this year, the Navy's objective to 
reach the 300 ship level by the end of this decade is more an 
imperative than a goal if we are to sustain this operational 
tempo (OPTEMPO) that we have all grown to expect of our ships 
and sailors.
    This requires that we build a balanced mix of ships per the 
CNO's requirements at a rate of about 10 ships per year, that 
we not merely control cost but drive down cost in new 
construction, and that we modernize our in-service ships to 
ensure their mission relevance for their full service life.
    With this basic approach since the first quarter of fiscal 
year 2011, we have awarded contracts to procure 43 ships, 
including options, most competitively awarded, all fixed-price 
contracts, and we are on track to increase that number this 
spring with the anticipated award of the DDG-51 multiyear 
procurement.
    Stable production and mature designs represented in these 
fixed-price contracts provide an important degree of 
affordability to our program and certainty to our industrial 
base in an otherwise uncertain period in defense spending. In 
total, today we have 49 ships under construction, under 
contract, where appropriated, and pending the support of 
Congress, with an additional eight ships included in the fiscal 
year 2014 budget request, the Navy is on track to reach the 300 
ship mark later this decade.
    Further capitalizing and support provided by this 
subcommittee in 2013, we are proposing to increase our ship 
procurement this year with the addition of a second Virginia 
submarine in 2014 for a 10-boat multiyear, and similarly, we 
are working to procure the additional 10th DDG-51 authorized by 
Congress in 2013 as part of that program's multiyear.
    Clearly, sequestration puts this plan at risk. Consider 
2013 alone: the Navy proposed and Congress authorized nearly $5 
billion savings associated with the submarine destroyer and MV-
22 aircraft multiyear procurements. Plus, Congress increased 
the Navy's request by nearly $4 billion provided for additional 
ships and for modernization and operations of ships slated for 
early retirement. These gains, however, were more than offset 
at the top line by the $11 billion reduction to the Navy's 
budget resulting from sequestration earlier this year.
    Across the board, we are weighing alternatives to mitigate 
quantity reductions, schedule delays, and cost impacts to each 
of our ship, aircraft, and weapons systems programs that we 
rely upon to meet our future readiness requirements. A case in 
point with specific regard to the DDG-51 multiyear, we will 
need to work with the defense committees to repair the funding 
that was lost to sequestration in order to award the 10th 
destroyer authorized and appropriated in 2013 towards that 
multiyear.
    These singular efforts to repair the impacts of 
sequestration in 2013, however, will be insufficient to stay 
the potentially deeper and longer-term impacts of 
sequestration. The Department of Defense (DOD) leadership is 
separately reviewing alternatives to meet the defense strategy 
under these circumstances at significantly reduced top lines.
    I would like to briefly address specific programs within 
our shipbuilding plan. The eight ships included in this year's 
budget request include two Virginia-class submarines, an Aegis 
destroyer, four littoral combat ships (LCS), and one mobile 
landing platform (MLP). In each case, submarine, destroyer, 
LCS, and MLP, construction performance is strong, and these 
programs' savings have been reinvested to uphold our 
shipbuilding rates despite downward pressure on the budget.
    The request also includes funding for continued 
construction of the Ford class aircraft carriers. In 2010, we 
reported cost growth on the lead ship, CVN-78, stemming from 
development of new systems and delays in design and material, 
all impacting production. Our efforts to improve on this 
performance have stayed cost growth on the lead ship but not 
reversed it. Accordingly, we are requesting an adjustment to 
the cost cap and additional funding to complete CVN-78 in 
accordance with our previously reported estimate.
    We are attacking these issues on the next carrier, CVN-79, 
and are working with the shipbuilder and vendors to improve the 
quality and producibility of this new design, to replan the 
work flow and material ordering in order to drive higher 
completion levels at the earlier, more efficient stages of 
production and to invest in needed facility improvements in 
order to reduce cost for future carriers. We have provided 
these details in a separate report to Congress and look forward 
to working with your staffs on the implementation of these 
critical initiatives.
    Regarding amphibious ship construction, performance is much 
improved. LHA-6 rolling into LHA-7 construction and the 
recently delivered LPD-23 and LPD-24 are entering the fleet at 
high levels of quality and completion, and we look for this 
trend to continue as we complete the remaining ships in this 
class.
    Regarding the Ohio replacement program, requirements are 
stable and development and early design are on schedule to 
support procurement in 2021. Affordability of the Navy's 
shipbuilding program during the period of SSBN construction 
remains a priority, and while design for affordability is a 
central tenet of our Ohio replacement strategy, meeting our 
cost objectives will not alone bring our shipbuilding top line 
within our reach during that period.
    Looking ahead, we are conducting design studies and 
analysis of alternatives (AOA) for future ships, DDG-51 Flight 
III, LHA-8, the future LXR to replace the LSD-41 and -49 class, 
and the future oiler T-AO(X). It is critical that we press 
forward with these ships' design schedules, place a premium on 
affordability, and look for opportunities to pull this work 
forward in keeping with the constraints of the budget and the 
demands of the defense strategy.
    Ultimately, we recognize that as we balance requirements, 
affordability, and industrial base considerations, it is ever 
more important that our shipbuilding plan closely align with 
the priorities outlined in the new defense strategy. In view of 
increasing pressure on our top line, it is equally paramount 
that we, the Navy and industry, continue to improve the 
affordability within our programs in order to build the Navy 
needed by the future force.
    Mr. Chairman, thank you for the opportunity to appear 
before you today. I look forward to answering your questions.
    Senator Reed. Thank you very much, Mr. Secretary.
    Admiral Myers, please.

 STATEMENT OF VADM ALLEN G. MYERS, USN, DEPUTY CHIEF OF NAVAL 
   OPERATIONS, INTEGRATION OF CAPABILITIES AND RESOURCES, N8

    Admiral Myers. Mr. Chairman, distinguished members of the 
committee, it is an honor to appear before you today with Mr. 
Stackley and Vice Admiral McCoy to discuss the Navy's fiscal 
year 2014 national defense authorization budget request.
    Our fiscal year 2014 budget request supports the Defense 
Strategic Guidance and accomplishes our ability to sustain our 
support to the partners in the Middle East, rebalance our 
efforts in the Asia-Pacific, and focus our presence at key 
strategic maritime crossroads, and meet the highest priority 
capability demands of the geographic combatant commanders.
    As the CNO testified before this full committee a couple of 
weeks ago, our final approach to meet our responsibility of 
operating forward where it matters and being ready when it 
matters has not changed. Regardless of the size of our budget 
or our fleet, our CNO's three tenets of warfighting first, 
operate forward, and be ready, guide our decisionmaking in the 
development of our budget request. We made tough, strategy-
based choices to ensure a coherent budget that delivers the 
overseas presence directed by the Secretary of Defense per the 
Global Force Management Allocation Plan (GFMAP) and continues 
essential, near-term investments started in fiscal year 2012 
and 2013 to address challenges in the Middle East and the Asia-
Pacific with improvements in mounting an anti-submarine warfare 
and develops capabilities over the long term to address 
warfighting challenges in these same regions with integrated 
systems such as the Navy integrated fire control, counter-air, 
and platforms like the P-8A Poseidon.
    We also recently completed an update to our force structure 
assessment based on the Defense Strategic Guidance and a 
reexamination of our operational plans and other changes in 
shipbuilding programs, ship employment cycles, and our global 
operating posture. The new requirement was for a battle force 
of 306 ships. This requirement is different from our previous 
requirement of 313 ships because of reduced presence 
requirements resulting from the Defense Strategic Guidance 
priorities, increased forward-basing of ships, and the 
introduction of new payload capacity for attack submarines 
replacing our SSGNs, an increased use of ships manned with 
rotating civilian and military crews which provide greater 
presence for our ships.
    Our shipbuilding investments continue to build towards a 
balanced 306-ship force as outlined by our force structure 
assessment and delivers a fleet of 300 ships by 2019 with 
increased capability and flexibility compared to the fleet 
today.
    Along with our primary joint partner, the U.S. Marine 
Corps, the Navy is uniquely qualified to immediately respond to 
a crisis to assure our allies, build partnerships, and deter 
aggression and to contain conflict. Our fiscal year 2014 budget 
request supports our ability to continue to perform this 
important national security role.
    I want to thank Congress for the National Defense 
Authorization Act (NDAA) for Fiscal Year 2013 and the fiscal 
year 2013 defense appropriations bill. We applied these funds 
in accordance with our strategy and priorities to pay civilian 
personnel and meet must-pay bills to reconcile the fiscal year 
2013 readiness and sustained operation and maintenance (O&M) 
priorities for our forces deploying to meet the current 
approved fiscal year 2013 GFMAP and prepare to meet the fiscal 
year 2014 GFMAP.
    It also restores critical base operations and renovation. 
We are still working through the impacts of sequestration for 
fiscal year 2013, but we know that sequestration will result in 
a fleet and bases that are less ready than planned for and our 
fiscal year 2013 funding for each investment program has been 
reduced by about 8 percent. This will likely result in 
reductions to the number of weapons and aircraft we intend to 
procure, as well as the restructuring of ship construction 
programs very likely resulting in increased cost in future 
years.
    In closing, I ask for the support of the Navy's fiscal year 
2014 budget request, and I thank you for the opportunity to 
testify on behalf of the approximately 613 sailors and 
civilians in our Navy serving worldwide.
    Senator Reed. Thank you very much, Admiral.
    Before I recognize Admiral McCoy, let me call on the 
ranking member, Senator McCain. Senator?

                STATEMENT OF SENATOR JOHN McCAIN

    Senator McCain. Thank you, Mr. Chairman, and thank you for 
holding this first Seapower Subcommittee hearing on the Navy's 
shipbuilding programs in view of the President's 2014 request. 
I look forward to working with you this year to ensure the 
committee and our Nation have a clear understanding of the 
trends for future capabilities of our naval forces.
    I want to thank our witnesses for their public service 
during a time of growing maritime demands on our armed forces.
    I would just mention a couple of things, Mr. Chairman.
    One, the President's budget for fiscal year 2014 on 
shipbuilding is a fantasy. It will continue the Department's 
budget uncertainty, paralyzing any ability to conduct 
deliberate planning or sound management of Navy shipbuilding 
accounts or any other investment program.
    The Department's long-range shipbuilding program, which we 
have yet to receive, will depend on proposed investment levels 
over the next 10 years that will be very difficult to achieve 
as long as sequestration continues.
    Even in the event sequestration is solved, if we accept the 
Department's proposed shipbuilding and retirement plan, by 2015 
we will have the fewest number of naval vessels operating in 
the fleet since 1917.
    The Department's current plan for shipbuilding does not 
achieve the Navy's combatant vessel force structure requirement 
of 306 ships until 2037. The 306-ship requirement was itself 
reduced from 313 ships this past January. For another 23 years, 
we will assume significant risk in the ability of our Navy to 
protect U.S. interests around the world.
    To compound that risk, the Navy plans for the LCS to 
comprise over one-third of the Nation's total surface combatant 
fleet by 2028 and yet the LCS has not yet demonstrated adequate 
performance of assigned missions. We need to fix it or find 
something else rather rapidly
    Finally, the Navy must come up with an affordable way to 
build the Ohio replacement SSBN-X program, which threatens to 
crowd out other investments, and find ways to incentivize the 
lone builder of aircraft carriers to reduce cost. Neither will 
be easy.
    I thank you, Mr. Chairman.
    Senator Reed. Thank you very much, Senator McCain.
    Admiral McCoy?

  STATEMENT OF VADM KEVIN M. McCOY, USN, COMMANDER, NAVAL SEA 
                        SYSTEMS COMMAND

    Admiral McCoy. Chairman Reed, Ranking Member McCain, 
distinguished subcommittee members, thank you very much for the 
opportunity to testify on shipbuilding initiatives and the 
material readiness of our Navy.
    As the Commander of NAVSEA for the past 5 years, I have 
been actively engaged with senior Navy leadership, the 
shipbuilders, and NAVSEA organization to improve the quality of 
ships delivered to the fleet and ensure that our ships retain 
their warfighting effectiveness and achieve their full service 
lives.
    Let me speak upfront specifically about the quality trends 
in our shipbuilding programs. Since the fall of 2008 when the 
problems with initially delivered LPD-17 class ships started to 
materialize in service, NAVSEA and the program executive 
offices have been keenly focused on improving the reliability, 
the in-service performance, and overall quality of delivered 
ships. We have had three particular focus areas.
    First, properly staffing the supervisor of shipbuilding 
offices and training personnel in oversight of industrial 
processes and compliance. Since 2007, we have added 
approximately 200 additional personnel to the Supervisor of 
Shipbuilding, Conversion & Repair (SUPSHIP) staff, an increase 
of over 20 percent.
    Second, we have increased shipyard surveillance inspections 
and metrics-based assessment of the core shipbuilding processes 
by the supervisor of shipbuilding. This includes joint 
collaboration with the shipbuilders on ensuring compliance with 
specifications and spotting negative trends and implementing 
corrective actions. NAVSEA headquarters also performs 
independent assessments of shipbuilder quality performance and 
the performance of SUPSHIP oversight of the shipbuilders.
    Then third, we strengthened the Government's oversight of 
the delivery process to include additional testing prior to 
delivery to ensure reliability during fleet service and to 
drive down the number of significant in-serve trial 
deficiencies prior to delivery.
    An example of additional testing imposed prior to delivery 
includes more robust, at-sea endurance trials for recent LPD-17 
class ships to ensure the reliability of propulsion plant 
diesel engines.
    Our trends, as measured by the Navy's Board of Inspection 
and Survey, have been very positive. Of note, the last three 
LPD-17 class ships delivered, USS San Diego, USS Anchorage, and 
USS Arlington, were all delivered with zero in-service priority 
one start guards. This was a marked improvement from their 
predecessors. All three ships also underwent significant 
additional propulsion trials to ensure reliability before the 
Navy accepted the ships.
    I will also point out that just prior to delivery of USS 
Anchorage, a deficiency with propulsion plant bolts was 
discovered by the shipbuilder. Rather than accept delivery, the 
Navy decided to delay delivery for about 6 weeks until the 
bolts were replaced and additional sea trials performed to 
verify proper operation and to make absolutely sure the ship 
would be reliable in service.
    The last seven T-AKE class ships, for example, were 
delivered with zero shipbuilder responsible in-serve cards. USS 
Fort Worth, LCS-3, was delivered with two shipbuilder start 
cards compared to nine for USS Freedom, the first ship of that 
class. Our trends are all in the right direction across the 
board for remaining ship classes, including Virginia-class 
submarines, Arleigh Burke-class destroyers, and auxiliary 
ships.
    While the examples I gave above are for in-serve priority 
one start cards, our trends are also in the improving direction 
for remaining lower priority deficiencies found prior to 
delivery. While our ultimate goal is zero deficiencies of any 
kind at delivery, we must also balance the cost of keeping the 
ship at the shipyard with a fully manned crew vice completing 
remaining issues during a post-shakedown availability, which is 
normally conducted within a year of delivery. In any case, we 
ensure completion of all shipbuilder deficiencies by the end of 
the post-shakedown availability.
    The NAVSEA and program executive office team fully 
understand our responsibility to work with the shipbuilders to 
ensure that our ships meet the demanding standards required for 
entry into naval service. We will continue to stay focused here 
in order to keep America's Navy number one in the world.
    I will be happy to take any of your questions, sir.
    [The joint prepared statement of Mr. Stackley, Admiral 
Myers, and Admiral McCoy follows:]
Joint Prepared Statement by Hon. Sean J. Stackley, VADM Allen G. Myers, 
                   USN, and VADM Kevin M. McCoy, USN
    Chairman Reed, Senator McCain, and distinguished members of the 
subcommittee, thank you for the opportunity to appear before you today 
to address Department of the Navy shipbuilding programs. The fiscal 
year 2014 President's budget submission implements the Defense 
Strategic Guidance and continues our efforts to build and maintain 
platforms that will evolve and adapt, allowing our war fighters to 
fight and win the Nation's wars, operate forward and sustain readiness. 
As we confront the challenges of budget constraints and the uncertainty 
inherent in our fiscal outlook, we are evaluating priorities in our 
shipbuilding, aviation, and combat vehicle plans to make the hard 
choices necessary to maintain the right measure of balance in 
capability, capacity, affordability, and the industrial base.
    As 2012 began, USS Carl Vinson and Carrier Air Wing 17 provide air 
support over Helmand Province while the USS Abraham Lincoln Carrier 
Strike Group sails west through 7th Fleet toward 5th Fleet.
    USS Makin Island, along with USS Pearl Harbor and USS New Orleans 
and the embarked Marines of the 11th Marine Expeditionary Unit, are on 
point in the Persian Gulf . . . having relieved the BATAAN Ready Group 
and marines of the 22nd MEU, who would, in February, return home after 
nearly 11 months of overseas operations--the longest U.S. Navy 
deployment in 40 years.
    In March, John C. Stennis Carrier Strike Group returned to homeport 
after a 7-month deployment to 5th and 7th Fleets, and 7 days later, USS 
Enterprise departs Norfolk for its final deployment, just 8 months 
after returning from its last cruise. Accompanying are destroyers USS 
Porter, USS Nitze, USS James E. Williams and cruiser USS Vicksburg, all 
headed, as well, to the Middle East.
    Later that same month, Iwo Jima Ready Group and 24th Marine 
Expeditionary Unit deployed . . . the regular drumbeat of rotational 
forces to support maritime security operations, provide crisis response 
capability, and increase theater security cooperation and forward naval 
presence in the 5th and 6th Fleets.
    Already in 7th Fleet, Carrier Strike Group 1 and USS Carl Vinson 
anchor off Chennai, India, in preparation for Exercise Malabar with the 
Indian Navy to foster interoperability.
    In May, the second littoral combat ship, USS Independence, 
completes its maiden voyage to homeport San Diego . . . in time to see 
the hospital ship USNS Mercy depart the following day on a humanitarian 
and civic assistance mission to Indonesia, the Philippines, Vietnam, 
and Cambodia.
    The cycle continues with USS Carl Vinson home again in May with 
cruiser USS Bunker Hill and destroyer USS Halsey, having flown more 
than a thousand Operation Enduring Freedom (OEF) missions . . . 6,600 
flight hours . . . 7,283 pounds of ordnance on target, 1,717 rounds of 
20mm ammunition expended . . . in support of coalition ground forces.
    Days later, USS George Washington, forward-deployed to Japan, 
departs on patrol, its fourth since arrival in the U.S. 7th Fleet Area 
Operations.
    The next month, guided missile destroyer USS Benfold sails west 
from San Diego on an 8-month Ballistic Missile Defense deployment while 
USS Vandegrift, USS Sampson, and national security cutter USCGC Waesche 
arrive in 7th Fleet to begin cooperation afloat readiness and training 
(CARAT), a series of bilateral exercises with Southeast Asian 
countries. The 23rd RIMPAC is underway--the world's largest 
international maritime exercise involves 22 nations this year and more 
than 40 ships and submarines and 200 aircraft, around the Hawaiian 
Islands.
    In the North Arabian Sea, USS Dwight D. Eisenhower begins to fly 
combat sorties over Afghanistan . . . and back at the largest Fleet 
homeport in the world; USS Abraham Lincoln arrives in Norfolk to 
prepare for Refueling and Complex Overhaul. Having left Everett, WA 245 
days before, the ship sailed 72,000 miles, around the world, including 
105 days in the Arabian Sea supporting OEF.
    USS Bonhomme Richard, with elements of the 31st MEU embarked, 
begins its first patrol as the Navy's permanently forward-deployed 
amphibious assault ship from Sasebo, Japan.
    The operational tempo of the Fleet remained high throughout 2012 
and 2013. Guided missile cruiser USS Cape St George returns to San 
Diego after circumnavigating the globe in a 9-month deployment 
supporting 5th, 6th, and 7th Fleets.
    In Bremerton, WA, Defense Secretary Leon Panetta thanks the crew of 
USS John C. Stennis for extraordinary effort to prepare for an 8-month 
deployment: 4 months ahead of schedule; 6 months after returning from a 
7-month deployment.
    Rotations continue . . . Peleliu Ready Group and the 15th MEU 
depart San Diego in September; Guided missile destroyer USS Milius 
returns to San Diego after 8-months while USS Paul Hamilton leaves 
Pearl Harbor for a planned 10-month deployment.
    The third LCS, USS Fort Worth, arrives in homeport San Diego 
following a September commissioning.
    Enterprise Carrier Strike Group returns to Norfolk . . . it is the 
25th and final homecoming in 51 years of distinguished service. The 
inactivation ceremony follows on December 1.
    In mid-December the Dwight D. Eisenhower Strike Group returns to 
Norfolk, early, it seems, after only 6 months gone, but back for a 
brief time to depart again and arrive on station in 5th Fleet barely a 
month ago.
    USS Freedom, the first littoral combat ship, arrives in the U.S. 
7th Fleet area of responsibility on its 8-month deployment to Southeast 
Asia.
    Meanwhile, all the year long, marines keep lit the torch of freedom 
in Afghanistan and the Navy conducts anti-piracy patrols, international 
exercises, global partnership stations, under-ice operations, maritime 
surveillance, strategic deterrence, and missile defense missions.
    No other military, no other nation on earth has the reach, the 
presence, the capability, the training and the resolve to maintain this 
pace and breadth of operations. Global reach, persistent presence, and 
operational flexibility, the inherent characteristics of U.S. seapower 
articulated in the Cooperative Strategy for 21st Century Seapower, are 
demonstrated in all we have done in 2012 and continue to do in 2013. 
These tenets, along with the Defense Strategic Guidance, guide the 
priorities and direction of the Department of the Navy's fiscal year 
2014 President's budget request.
    The Navy and Marine Corps' first responsibility is to ensure the 
ability to deliver the overseas presence and capabilities required by 
the Defense Strategic Guidance (DSG), Sustaining U.S. Global 
Leadership: Priorities for 21st Century Defense. The DSG mandates the 
need to be present overseas where it matters and to be ready when it 
matters, with a smaller, more ready force, with the right capabilities 
postured in each region. The DSG concludes that a prompt, credible 
response by forward U.S. forces can demonstrate American resolve and 
can blunt the initial actions of an aggressor. The Navy and Marine 
Corps are well suited and uniquely positioned to meet this mandate, and 
the Department of the Navy's budget submission for fiscal year 2014 
reflects the capabilities needed to meet the DSG.
    In implementing the DSG, the Navy's fiscal year 2014 budget 
submission sustains our support to partners in the Middle East, 
rebalances our effort toward the Asia-Pacific region, focuses our 
presence at key maritime crossroads, and meets the highest-priority 
capability demands of the geographic Combatant Commanders. We made 
tough strategy-based choices to ensure a coherent budget that delivers 
the overseas presence directed by the Secretary of Defense in support 
of the Global Force Management Allocation Plan (GFMAP); continues our 
essential, near term investments in the Middle East and Asia-Pacific; 
and develops capabilities over the long term to address warfighting 
challenges in these same regions.
    Final passage of the National Defense Authorization Act for Fiscal 
Year 2013 and the fiscal year 2013 Defense Appropriations Bill was 
critical to avert the damaging impacts to our operations, maintenance, 
and investment accounts associated with the potential year-long 
Continuing Resolution. These funds are being applied in accordance with 
our strategy and priorities to pay civilian personnel and ``must pay 
bills,'' reconcile fiscal year 2013 readiness, sustain operation and 
maintenance for priority forces deploying to meet the current approved 
fiscal year 2013 GFMAP, prepare to meet the fiscal year 2014 GFMAP, and 
restore critical base operations and renovation. As well, the 
Department is exercising new start authorities provided by Congress to 
develop and deliver future capabilities required by the force, and 
leveraging multiyear procurement activities for Virginia class 
submarines, Arleigh Burke class destroyers, and Osprey MV-22 aircraft; 
all critical to meeting the force structure requirements in the most 
affordable manner possible.
    Sequestration, however, reduced the fiscal year 2013 funding across 
all accounts by roughly 8 percent, or about $10.7 billion total, thus 
directly impacting current and future readiness. The Navy is still 
reconciling the impact of this reduction; however, due to the mechanics 
of its implementation and the limits on Department-wide transfer 
authority authorized by the fiscal year 2013 Defense Appropriations 
Act, it is likely that the Department will be compelled to reduce our 
near term forward presence, our planned depot maintenance and training 
to support future operational rotations, our procurement of ships, 
aircraft and weapons systems to meet our force structure and inventory 
requirements, and our investment in future capabilities and readiness; 
thus impacting our future readiness. Every major weapon system is 
impacted by sequestration in 2013 with impacts ranging from reducing 
quantities procured, delaying schedules (delivery and initial 
operational capability), deferring costs to future years (particularly 
in the case of executing programs, such as shipbuilding), and absorbing 
cost growth due to all of these impacts.
               the fiscal year 2014 shipbuilding program
    As the Department moves into fiscal year 2014 and beyond, the 
budget submission balances Force structure, Readiness and Capability to 
meet national security commitments; and as the national debate focuses 
increasingly on economic security, it is ever more imperative that the 
Department of the Navy redouble our efforts to being responsible 
stewards of public funds. A brief overview of Shipbuilding programs 
follows.
                              shipbuilding
    The Navy reported to Congress in January 2013 results of the Force 
Structure Assessment (FSA) which determined the capabilities of the 
future force to meet the full range of missions requirements by the 
Department of the Navy in support of the DSG. The FSA analysis resulted 
in a battle force requirement of 306 ships. This requirement is 
different from our previous 313-ship requirement because of: (1) 
reduced presence requirements resulting from the DSG's priorities; (2) 
increased forward basing of ships; (3) introduction of new payload 
capacity for SSNs (replacing the SSGNs) and; (4) the increased use of 
ships manned with rotating civilian and military crews which provide 
more presence per ship. Our shipbuilding investments are not programmed 
to reach the precise number and mix of ships within this Future Years 
Defense Program (FYDP), but do deliver a fleet of 300 ships by 2019 
with increased capability and flexibility compared to the fleet of 
today.
    The Department's Shipbuilding Plan continues to build toward the 
balanced 306-ship force outlined by the FSA. In support of this, the 
fiscal year 2014 President's budget request funds eight ships: two 
Virginia-class attack submarines, one DDG-51 Arleigh Burke class 
destroyer, four Littoral Combat Ships (LCS), and one Mobile Landing 
Platform/Afloat Forward Staging Base (MLP/AFSB) variant. Over the next 
5 years, the Navy will deliver 47 ships. These investments are part of 
our long-term plan designed to deliver the fleet, by ship type, 
required per the FSA over the long term.
    Key to accomplishing the objectives of the shipbuilding plan is 
stability and affordability. Over the past several years, the Navy has 
placed a priority on increasing shipbuilding rates and providing 
stability for the shipbuilding industrial base. Stability translates 
into retention of skilled labor, improved material purchasing and 
workforce planning, strong learning curve performance, and the ability 
for industry to invest in facility improvements; all resulting in more 
efficient ship construction and a more affordable shipbuilding program. 
The past Virginia-class and DDG-51-class MYPs, the DDG-1000 Swap/DDG-51 
Restart Agreement, the LCS dual block buy, the MLP procurement, the 
continuation of CVN-78-class procurements on constant 5-year centers, 
and the heel-to-toe CVN RCOH induction-to-delivery cycle have provided 
critical stable workload for our shipyards and their respective vendor 
base. The approved upcoming Virginia-class and DDG-51-class MYPs will 
help to further stabilize the surface combatant and submarine 
industrial base through this decade. Likewise, the funding requested to 
procure a fourth MLP, and to configure MLP-3 and MLP-4 as AFSBs will 
also provide for much-needed workload within the auxiliary shipbuilding 
sector.
    The strategy going forward must also continue to center upon 
improving affordability. To this end, in addition to the emphasis on 
stability discussed above, the Navy has established affordability 
requirements and invested in Design for Affordability for future ship 
programs; mandating use of open systems design; leveraging competition 
at every opportunity in shipbuilding and weapons systems production; 
employing fixed-price contracts to control cost for ships and weapon 
systems in production; imposing strict criteria limiting disruptive 
change to contracts; investing in industry-wide manufacturing process 
improvements through the National Shipbuilding Research Program; and 
incentivizing capital investment in facilities where warranted.
    The Navy will continue to aggressively pursue the mutual objectives 
of improving the affordability of our shipbuilding program and 
increasing the strength of our shipbuilding industrial base, and is 
committed to working closely with Congress on these efforts.
                           aircraft carriers
    Our aircraft carriers are central to our Nation's Defense Strategy, 
which calls for forward presence, ability to simultaneously deter 
potential adversaries and assure our allies, and capacity to project 
power at sea and ashore. These national assets; however, are equally 
capable of providing our other core capabilities of sea control, 
maritime security, and humanitarian assistance and disaster relief. Our 
carriers provide our Nation the ability to rapidly and decisively 
respond globally to crises with a small footprint that does not impose 
unnecessary political or logistic burdens upon our allies or potential 
partners.
    Gerald R. Ford (CVN-78) is the lead ship of our first new class of 
aircraft carrier in nearly 40 years. Ford-class carriers will replace, 
on a one-for-one basis, Nimitz-class carriers as they reach the end of 
their projected 50-year service lives. Ford-class carriers are expected 
to be the premier forward deployed asset for crisis response and early 
decisive striking power in major combat operations through the 
remainder of this century. While the Gerald R. Ford aircraft carrier 
design uses the Nimitz-class hull form, it is essentially a brand new 
ship, encompassing new technologies and interior arrangements to 
improve warfighting capability, operational availability, and quality 
of life for its sailors, while reducing crew and aviation wing size by 
as many as 1200 personnel and total ownership costs by approximately $5 
billion over the life of each ship. In 2011, the Navy identified 
spiraling cost growth associated with first of class non-recurring 
design, contractor and government furnished equipment, and ship 
production issues on the lead ship. The Navy completed an end-to-end 
review of CVN-78 construction in December 2011 and, with the 
shipbuilder, implemented a series of corrective actions to stem, and to 
the extent possible, reverse these trends. While cost performance has 
stabilized, incurred cost growth is irreversible. Accordingly, the 
fiscal year 2014 President's budget includes funding for the cost 
growth identified in 2011 and requests that the cost cap be 
correspondingly increased to $12.887 billion.
    The President's budget also requests the second year of 
construction funding for John F. Kennedy (CVN-79), the second ship of 
the Ford-class. The planned delivery of CVN-79 aligns with the end of 
service life for USS Nimitz, the ship it will functionally replace to 
maintain a force structure of 11 carriers. As a result of lessons 
learned on CVN-78, the approach to carrier construction has undergone 
an extensive affordability review; and the Navy and the shipbuilder 
have made significant changes on CVN-79 that will reduce the cost to 
build the ship. CVN-79 construction will start with a complete design, 
firm requirements, and material economically procured and on hand in 
support of production need. The ship's build schedule also provides for 
increased completion levels at each stage of construction with 
resulting improved production efficiencies. The associated cost cap for 
CVN-79 is also being updated with this budget request to account for 
economic inflation and non-recurring engineering for incorporation of 
lead ship lessons learned and design changes to improve affordability.
    Inarguably, this new class of aircraft carrier brings forward 
tremendous capability and life-cycle cost advantages compared to the 
Nimitz-class it will replace. However, the design, development and 
construction efforts required to overcome the technical challenges 
inherent to these advanced capabilities have significantly impacted 
cost performance on the lead ship. The Navy continues implementing 
actions from the 2012 detailed review of the FORD-Class build plan to 
control cost and improve performance across lead and follow ship 
contracts. This effort, taken in conjunction with a series of 
corrective actions with the shipbuilder on the lead ship, will not 
recover costs to original targets for Gerald R. Ford, but should 
improve performance on the lead ship while fully benefitting CVN-79 and 
following ships of the class.
    With more than half of the service life of the Nimitz-class still 
remaining, the Refueling and Complex Overhaul (RCOH) continues as a key 
enabler for the enduring presence of the aircraft carrier Fleet. This 
year's budget request includes $1.75 billion for the last year of 
funding for the RCOH of USS Abraham Lincoln and $246 million for 
advance procurement for the RCOH of USS George Washington.
                               submarines
    Submarines have a unique capability for stealth and persistent 
operation in an access-denied environment and to act as a force 
multiplier by providing high-quality Intelligence, Surveillance, and 
Reconnaissance (ISR) as well as indication and warning of potential 
hostile action. In addition, attack submarines are effective in anti-
surface ship warfare and anti-submarine warfare in almost every 
environment, thus eliminating any safe-haven that an adversary might 
pursue with access-denial systems. As such, they represent a 
significant conventional deterrent. While our attack submarine Fleet 
provides considerable strike capacity already, our guided missile 
submarines provide significantly more strike capacity and a robust 
capability to covertly deploy special operations force (SOF) personnel. 
The Navy is mitigating an impending attack submarine force structure 
shortfall in the 2020s through three parallel efforts: reducing the 
construction span of Virginia-class submarines, extending the service 
lives of selected attack submarines, and extending the length of 
selected attack submarine deployments.
    With the support of Congress in fiscal year 2013, the fiscal year 
2014 President's budget requests funding for two Virginia-class 
submarines ($5.3 billion), with one of these two submarines funded 
between fiscal year 2014 and fiscal year 2015 using advance 
appropriations. The request also includes advance procurement and 
economic order quantity funding for the fiscal year 2015 through 2018 
boats. The fiscal year 2014 boats are the first two submarines under 
the Block IV fiscal years 2014 through 2018 multiyear procurement (MYP) 
contract.
    Ballistic missile submarines are the most survivable leg of the 
Nation's strategic arsenal and provide the Nation's only day-to-day 
assured nuclear response capability. They provide survivable nuclear 
strike capabilities to assure allies, deter potential adversaries, and, 
if needed, respond in kind. The Nuclear Posture Review completed in 
April 2010 determined that the United States would retain a nuclear 
triad under New START and that, for the near-term, the Navy would 
retain all 14 Ohio-class SSBNs in the current inventory. To maintain an 
at-sea presence for the long term, the United States must continue 
development of the follow-on to the Ohio-class submarine, the 12-ship 
Ohio Replacement. On December 21, 2012, the Navy awarded the research 
and development contract for Ohio Replacement. This contract focuses on 
meeting the program's stressing performance requirements while reducing 
costs, in not only design and production, but also operation and 
sustainment. To date, the Navy has reduced cost by implementing modular 
construction build practices into the design and re-using previous 
classes' designs and components where feasible.
    The fiscal year 2014 budget requests funding to continue 
development of the Ohio Replacement SSBN and ensures Common Missile 
Compartment (CMC) efforts remain on track to support the United 
Kingdom's Successor Program's schedule. All aspects of the Ohio 
Replacement Program will continue to be thoroughly reviewed and 
aggressively challenged to responsibly drive down engineering, 
construction, and operations and support costs. However, Navy will need 
the means to resource, in particular, construction of the next 
generation nuclear ballistic missile submarine.
    Today the Navy has four guided missile submarines (SSGN). To 
mitigate the loss of strike capacity when SSGNs retire in the next 
decade, the Navy requests fiscal year 2014 Research and Development 
funding to continue the design for a modification to the Virginia-class 
SSN, the Virginia Payload Module. Modified Virginia-class SSNs could be 
procured starting no earlier than fiscal year 2019. Our challenge will 
be executing this option affordably alongside competing priorities 
within the overall shipbuilding program.
    As threats evolve, it is also vital to continue to modernize 
existing submarines with updated capabilities. The submarine 
modernization program includes advances in weapons, integrated combat 
control systems, sensors, open architecture, and necessary hull, 
mechanical and electrical upgrades. These upgrades are necessary to 
retain credible capabilities for the future conflicts and current 
peacetime ISR and Indication and Warning missions and to continue them 
on the path of reaching their full service life.
                        large surface combatants
    Guided missile cruisers (CGs) and guided missile destroyers (DDGs) 
comprise our large surface combatant Fleet. When viewed as a whole, 
these ships fulfill broad mission requirements both independently and 
in conjunction with a strike group. The demands for increased 
capability and capacity in ballistic missile defense (BMD), integrated 
air and missile defense (IAMD) and open ocean anti-submarine warfare 
(ASW) have resulted in a shift of focus on the type and quantity of 
these ships.
    The fiscal year 2014 President's budget requests funding for one 
Flight IIA DDG-51 Arleigh Burke-class destroyer as well as additional 
advance procurement and economic order quantity funds in support of the 
ongoing fiscal year 2013 through fiscal year 2017 MYP for nine ships 
with the option for a 10th ship. The Flight IIA ships will incorporate 
IAMD, providing critical additional BMD capability and capacity to the 
Fleet. The Navy projected in excess of $1.5 billion in savings for the 
ships across the MYP contract and has leveraged these savings in the 
procurement of the ships. The Department's objective is to procure the 
10th DDG-51 in the MYP; however, we will first need to resolve funding 
shortfalls resulting from the fiscal year 2013 sequestration 
reductions.
    The Navy is proceeding with the Air and Missile Defense Radar 
(AMDR) program to meet the growing ballistic missile threat by greatly 
improving radar sensitivity and longer range detection for engagement 
of increasingly complex threats. This scalable radar is on track for 
installation on DDG-51 Flight III ships to support joint battle space 
threat awareness and defense, including BMD, area air defense, and ship 
self defense. The AMDR radar suite will be capable of providing 
simultaneous surveillance and engagement support for long range BMD and 
area air defense. The Navy intends to introduce AMDR on DDG-51 Flight 
III in fiscal year 2016.
    The fiscal year 2014 President's budget request includes funding 
for the modernization of two cruisers and three destroyers. To counter 
emerging threats, this investment is critical to sustain combat 
effectiveness and to achieve the full expected service lives of the 
Aegis Fleet. Destroyer and cruiser modernization programs include Hull, 
Mechanical, and Electrical (HM&E) upgrades, as well as advances in 
warfighting capability and open architecture combat systems to reduce 
total ownership costs and expand mission capability for current and 
future combat capabilities. The current plan combines the HM&E and 
combat system modernization into a single availability which increases 
the operational availability of our most demanded assets.
    The DDG-1000-class guided missile destroyer will be a multi-mission 
surface combatant capable of providing long-range, precision naval 
surface fire support to marines ashore. To accomplish this mission, the 
ship features two 155mm Advanced Gun Systems capable of engaging 
targets with the Long-Range Land Attack Projectiles (LRLAP) at a range 
of over 63 nautical miles. In addition to this critical capability, 
this optimally-crewed ship will provide valuable lessons in advanced 
technology such as signature reduction, active and passive self-defense 
systems, and enhanced survivability features. The fiscal year 2014 
President's budget requests $232 million to continue construction on 
DDG-1000, -1001, and -1002. DDG-1000 is 82 percent complete. The 
deckhouse and hangar have been integrated into the ship, which is 
progressing towards launch and christening later this year. DDG-1001 is 
58 percent complete; and DDG-1002 has started fabrication.
                        small surface combatants
    The Navy's fiscal year 2014 President's budget requests $1.8 
billion to procure four Littoral Combat Ships (LCS) with a total of 
fourteen to be procured across the FYDP. These ships expand the battle 
space by complementing our inherent blue water capability and filling 
warfighting gaps in the littorals and strategic choke points around the 
world. LCS design characteristics (speed, agility, shallow draft, 
payload capacity, reconfigurable mission spaces, air/water craft 
capabilities) combined with its core C4I, sensors, and weapons systems, 
make it an ideal platform for engaging in maritime security operations. 
Each ship brings unique strengths and capabilities to the mission and 
each has been designed in accordance with overarching objectives for 
reducing total ownership cost.
    Affordability remains a key factor in acquiring the needed future 
capacity of these highly flexible and capable ships. The Navy remains 
on course to deliver these ships in the quantities needed through the 
execution of the two competitive block buy contracts (for 10 ships of 
each version) awarded in fiscal year 2010. The average cost of both LCS 
variants--including basic construction, Government Furnished Equipment 
(GFE), and change orders--across the 10-ship procurement over the 5 
year period falls under the congressionally-mandated cost cap of $480 
million per ship (fiscal year 2009 dollars). The dual block buy award 
strategy afforded the Navy an opportunity to award up to 20 ships 
between fiscal year 2010 and 2015 under fixed-price type contracts 
resulting in a savings of $2.9 billion.
    The dual award strategy also stabilized the LCS program and its 
associated industrial base, increased the ship procurement rate to 
support operational requirements, promoted efficiency in the industrial 
base from the vendors to system providers to the shipyards, while 
sustaining competition, and provided potential Foreign Military Sales 
opportunities. The Navy is also aggressively pursuing commonality 
between the two variants, with particular focus on weapon systems, 
sensors, and C4I equipment. There are several on-going studies that 
will identify non-recurring integration costs, insertion points, and 
total ownership costs in order to assess the optimal insertion points.
    LCS capabilities address specific and validated capability gaps in 
Surface Warfare, Mine Countermeasures, and Anti-Submarine Warfare. The 
concept of operations and design specifications for LCS were developed 
to meet these gaps with focused mission packages that deploy manned and 
unmanned vehicles to execute a variety of missions. Two mine-
countermeasure mission modules (MM), four Surface Warfare (SUW) MMs; 
and one anti-submarine warfare MM have been delivered. The surface 
warfare and anti-submarine warfare mission modules remain on schedule 
to reach initial operational capability (IOC) in fiscal year 2014 and 
fiscal year 2016, respectively. Sequestration, combined with recent 
congressional marks and rescissions, will impact the operational test 
schedule for the mine countermeasures MM. The Navy is working to 
minimize this impact and will advise the defense committees of any 
changes to meeting the IOC date for this essential capability. The 
fiscal year 2014 President's budget requests approximately $347 million 
in research and development and other procurement funding for continued 
development of mission modules, procurement of common mission module 
equipment and procurement of four mission packages. The Navy will 
continue to incrementally field additional mission package capabilities 
to the Fleet as they mature. Mission package production will remain in 
phase with ship deliveries to ensure that each LCS is able to execute 
its required missions.
                         expeditionary warfare
    Ensuring the Nation retains its critical amphibious capability 
remains a top Department of the Navy priority. The Marine Corps remains 
first and foremost a naval service, operating in close partnership with 
the U.S. Navy. Together, the two naval services leverage the seas, not 
only to protect the vast global commons, but also to project our 
national power and influence ashore where that is required.
    The future security environment dictates that the Department 
maintains a robust capability to operate from the sea, placing special 
demands on our equipment. A core capability of expeditionary forces is 
the ability to project forces ashore from amphibious platforms and to 
maneuver once ashore.
                            amphibious ships
    Amphibious ships operate forward to support allies, respond to 
crises, deter potential adversaries, and provide the Nation's best 
means of projecting sustainable power ashore; they also provide ideal 
capabilities for providing humanitarian assistance and disaster relief. 
Amphibious forces comprised of sailors, marines, ships, aircraft, and 
surface connectors provide the ability to rapidly and decisively 
respond to global crises without a permanent footprint ashore that 
would place unnecessary political or logistic burdens upon our allies 
or potential partners. There are two main drivers of the amphibious 
ship requirement: maintaining the persistent forward presence, which 
enables both engagement and crisis response, and delivering the assault 
echelons of up to two Marine Expeditionary Brigades (MEB) for joint 
forcible entry operations.
    Based on the footprint of a 2.0 MEB assault echelon force, a 
minimum of 30 operationally available ships are necessary to provide a 
force made up of 10 Amphibious Assault Ships (LHD/LHA), 10 Amphibious 
Transport Docks (LPD) and 10 Dock Landing Ships (LSD). The Chief of 
Naval Operations and Commandant of the Marine Corps have determined 
that an overall force structure of 38 amphibious ships is required to 
ensure this mix of 30 ships is operationally available. Balancing the 
total naval force structure requirements against fiscal projections, 
the Department has concluded that it can accept a measured degree of 
risk by employing planning factors that call for a force of 33 ships to 
achieve this availability.
    Today, the Amphibious Force Structure stands at 30 ships, which 
includes 9 LHD/LHAs, 9 LPDs, and 12 LSDs.
    The Navy is commencing recapitalization of the large deck 
amphibious assault ships with the construction of America (LHA-6). 
America is now more than 80 percent complete and is scheduled for 
delivery in fiscal year 2014. The fiscal year 2014 President's budget 
request includes a funding request to complete construction of America. 
Beginning with LHA-8, which is planned for procurement in fiscal year 
2017, the Navy will reintegrate the well deck into the large deck 
amphibious assault ships to provide necessary surface lift capacity. 
Funding to design this reintegration of the well deck is included in 
the President's Budget.
    The San Antonio-class LPD (LPD-17) provides the Navy and Marine 
Corps team with modern, capable amphibious lift, and has transitioned 
into a mature production program. Eight of the 11 authorized and 
approved ships of this class have been delivered to the Navy. Lessons 
learned from the effort to resolve material reliability concerns 
identified in the early ships of the class are being applied to ships 
currently under construction. Quality continues to improve with each 
ship delivered as the Navy continues to work closely with the 
shipbuilder to address cost, schedule, and performance issues. The 
utility of this class was well demonstrated most recently by USS Mesa 
Verde as she completed 19 months of deployed operation over a 20 5-
month period.
    LX (R) will replace the aging LSD-41/49 Whidbey Island/Harpers 
Ferry-class vessels and will perform an array of amphibious missions. 
An analysis of alternatives (AoA) is being conducted in fiscal year 
2013. The fiscal year 2014 President's budget requests research and 
development funds required for technology development and initial 
design efforts resulting from the AoA. Affordability will be a key 
factor in acquiring the needed future capacity and operational 
capabilities of this highly flexible multifaceted ship.
    A fully funded LSD mid-life program, to include repairs, is 
essential for ensuring the LSD-41/49 ships are able to meet their 
readiness for tasking requirements and their expected service life. 
Seven of the 12 ships in the class have completed their mid-life 
upgrade. Funding for LSD mid-life is included in the fiscal year 2014 
President's budget request, with a total of four mid-life upgrades 
scheduled to be completed or begin in fiscal year 2014.
                            auxiliary ships
    Combat Logistics Support ships fulfill the vital role of providing 
underway replenishment of fuel, food, repair parts, ammunition and 
equipment to forward deployed ships and their embarked aircraft, to 
enable them to operate for extended periods of time at sea. Combat 
Logistic Support Ships consist of T-AOE fast support ships, T-AKE 
auxiliary dry cargo ships, and T-AO Fleet oilers. The T-AO and T-AKE 
ships tend to serve as shuttle ships between resupply ports and their 
customer ships, while the T-AOE tends to serve as a station ship, 
accompanying and staying on-station with a Carrier Strike Group (CSG) 
to provide fuel as required to customer ships. Two T-AKE auxiliary dry 
cargo ships have been allocated to the Maritime Prepositioning 
Squadrons (MPS) to provide sea-based logistic support to Marine Corps 
units afloat and ashore.
    The fiscal year 2014 President's budget requests research and 
development funds to mature the Navy's concept for the replacement T-AO 
Fleet oiler in fiscal year 2016. The analysis of alternatives (AoA) was 
completed in fiscal year 2012. The Navy has recently awarded multiple 
contracts to perform industry studies related to design alternatives 
for the ship. The new oilers will have a double-hull design to ensure 
compliance with the modern commercial environmental protection 
requirement.
    Support vessels provide additional flexibility to the combatant 
commander within the operating area. The Mobile Landing Platform (MLP) 
enables at-sea transfer of vehicles from cargo ships and facilitates 
the delivery of those vehicles, as well as equipment, personnel and 
supplies, between the sea and restricted access locations ashore. The 
Navy has three MLPs under construction and has requested a fourth MLP 
in fiscal year 2014. The Joint High Speed Vessel (JHSV) provides a 
high-speed, shallow-draft alternative for moving personnel and materiel 
within and between the operating areas and in support of security 
cooperation and engagement missions. The final JHSV contract option for 
construction of the 10th ship was exercised in December 2012.
    There remains a valid and enduring requirement for an Afloat 
Forward Staging Base (AFSB) capability with capacity for mine warfare 
and special operations support. Historically, Fleet assets have been 
called upon to address the AFSB demand. The Department converted the 
USS Ponce to alleviate the increased demand on the Fleet and provide an 
interim AFSB capability until fiscal year 2017. To establish a long-
term solution for providing the capabilities specified by the Joint 
Staff, the Navy will sign a detail design and construction contract 
modification for MLP-3 (fiscal year 2012 ship) to become a dedicated 
AFSB asset. Delivery of MLP-3 is planned for fiscal year 2015 to meet 
the projected retirement of USS Ponce. The fiscal year 2014 budget 
includes a similar request for MLP-4, which will result in a class of 
four MLPs--two dedicated to the MPSRONs and two dedicated to the AFSB 
mission.
                 affordability and the industrial base
    Continually improving the affordability of our shipbuilding 
programs is critical to our ability to meet our new construction 
requirements. Stability in our plans is fundamental to any weapon 
system procurement because it allows industry to effectively plan the 
work, train and retain their unique workforce, invest in facility and 
process improvements, and sustain the critical subvendor base. For 
stable programs, the Department has leveraged fixed-price multiyear 
procurements and block buys. These two methods alone are resulting in 
over $11.5 billion of savings in current procurements of major Navy 
weapons systems. Competition is a key element of our programs, and we 
have achieved significant savings from competition which we have 
reinvested in our programs to buy at more economic rates. We have put 
in place the rigor and discipline necessary early in a program's life 
to get the requirements right; we are holding firm to these 
requirements; we're implementing design for affordability as a tenet 
across all of our programs, we are ensuring high levels of completion 
of design before start of production, and mandating use of open system 
designs. As a result of these actions, the Department's procurement 
rates have increased, competition and stable procurements are the norm, 
affordability has improved, and the industrial base on the whole is 
sustainable. We are pointed in the right direction, yet much remains to 
be done. It is critical to sustain this progress particularly as we 
confront the otherwise destabilizing impacts associated with 
sequestration.
                                summary
    The Department's Shipbuilding Plan continues to build toward the 
306-ship force which is outlined by the updated Force Structure 
Assessment. This force possesses the requisite capability and capacity 
to deliver credible deterrence, sea control, and power projection to 
deter or contain conflict and, if called upon, to fight and win our 
Nation's wars. The request for fiscal year 2014 includes two Virginia-
class attack submarines, one DDG-51 Arleigh Burke-class destroyer, four 
LCSs, and one MLP/AFSB variant. These investments are a critical part 
of our long-range plan designed to deliver the fleet necessary to meet 
the Department of the Navy's missions under the Defense Strategic 
Guidance. The Department continues to instill affordability, stability, 
and capacity into the shipbuilding plans and to advance capabilities to 
become a more agile, lethal and flexible force to address the 
challenges and opportunities facing the Nation. Forty seven ships will 
be delivered over the next 5 years.
    Budget uncertainties may slow progress toward our goals, but the 
tenets which guide our decisions remain firm. The Navy and Marine 
Corps, on the high seas and closing foreign shores, stand ready to 
answer the call of the Nation. We thank you for your continued support 
of the Navy and Marine Corps and request your approval of the fiscal 
year 2014 President's budget request.

    Senator Reed. Thank you very much, Admiral McCoy.
    We will have 8-minute rounds. When I conclude, I will 
recognize the ranking member. Then we will go by the early bird 
rule side to side. So thank you very much.
    Again, gentlemen, thank you for your testimony.
    Secretary Stackley, one recurring theme obviously is 
sequestration. You commented upon it in your statement. Could 
you highlight for us again what you believe the critical issues 
are going forward in this budget cycle with respect to 
sequestration and, because of the obvious concern about the 
status of the attack submarine program, any effect it might 
have on that program?
    Mr. Stackley. Yes, sir. Let me start by just describing 
2013 since we are dealing with sequestration in the current 
budget year.
    As I described at the outset, each of the program lines was 
impacted by sequestration. So in 2013, we are working line by 
line to mitigate the impact by either paying for the 
sequestration impact through prior year assets, which we had 
accumulated through the last 4 to 5 years of shipbuilding, or 
trying to defer certain costs that we can defer to a later 
point in the cycle in order to keep the planned procurement on 
track. There are certain cases where we are looking at whether 
we need to descope certain items from the shipbuilding plan, 
but trying to keep the overall force structure number healthy.
    In that approach, in fact the DDG-51 that was added by 
Congress in 2013 is, in fact, held up. Otherwise, the balance 
of the shipbuilding program is going forward admittedly at some 
increased risk in terms of, call it, budget executability.
    So we are trying to do this very mindfully. If we allow 
sequestration to stop us in our tracks, that will simply cause 
our costs and disruption to go through the roof.
    We are going to continue to work that destroyer with 
Congress so that you all understand its specific impact. We are 
going to continue to execute the balance of the shipbuilding 
program in 2013. We have brought forward the budget request in 
2014 which, as you are well aware, does not account for 
sequestration in 2014. In fact in 2014 and out in the more 
strategic review that is being accomplished under the direction 
and guidance of the Secretary of Defense, we are looking at 
shipbuilding amidst all of the capabilities that the Department 
is pursuing in terms of what are the impacts associated with a 
reduction in the top line and then what are the priorities that 
we need to bring forward in terms of funding those 
capabilities. Central to all of that is driving down the cost 
of what we are procuring and driving out the cost of our doing 
business so that more of the dollars available can go towards 
capability.
    Senator Reed. Thank you very much, Mr. Secretary.
    One of the programs that we have been concerned about for 
many years is LPD-17, but we have seen, I think, some progress 
in terms of bringing down costs and increasing quality. You or 
Admiral McCoy might comment upon that but also in the context 
of not just the trials at the end of completion but how we are 
trying to build quality and accountability and budget controls 
in the whole process. So any comments would be appreciated.
    Admiral McCoy. Yes. I will comment, Senator, that the early 
LPDs got away from us and we have had to fix them in-service. I 
will point out that Mesa Verde recently completed 19 of 25 
months on two essentially back to back deployments. So I think 
we have a handle on that.
    We are also taking many actions to drive down the cost and 
improve the competitiveness of maintenance performed on all our 
ships, LPD-17s as well as all of our surface ships.
    So I think we are moving in the right direction, Senator, 
and from all the feedback we have from the Marine Corps, as 
well as the Navy sailors, on board the LPD-17-class ships, they 
love those ships and they are performing well in service.
    Senator Reed. Let me ask you another related question. You 
are responsible for SUPSHIPs which is one of the major 
organizations that are responsible for contract execution, 
negotiation, supervision, et cetera. One of the issues that 
came to the attention of the committee, going back several 
years, is just the lack of qualified personnel on SUPSHIPs. We 
essentially sort of let go our trained workforce. You have been 
trying to reconstitute that capacity, which is critical I 
think, in my view maybe the most critical aspect of maintaining 
cost and control of the contractors. Can you comment upon the 
progress there?
    Admiral McCoy. Yes, sir. We took a hard look around the 
2006-2007 timeframe when we first started having issues with 
the LCS program and realized we were about 20 percent 
understaffed. We had really stopped training the staff we had. 
So for the last 4 or 5 years, we have gotten the staffing up to 
where it needs to be. We have been very rigorous on the 
training. In terms of defining what we expect out of every 
supervisor quality assurance inspector, for example, every day 
in terms of the number of looks we want them doing both 
independent of the shipyard, as well as with the shipyard, and 
collaborating the data, we have been very prescriptive there, 
and it seems to be the right approach, Senator.
    Senator Reed. Thank you very much.
    I know you probably do not have a dollar for dollar sort of 
measure of how much savings or how much better you are, but do 
you have anything like that? I will just ask.
    Admiral McCoy. I can tell you they are probably one of the 
lowest density/highest leveraged workforce that we have in the 
NAVSEA, sir.
    Senator Reed. So they more than make up for their overall 
cost in terms of the benefits and the productivity.
    Admiral McCoy. Yes, sir. We have about 1,200 people in our 
supervisor shipbuilding that do everything from on the ships 
inspections to contract processing and negotiations with the 
shipbuilders, and to do the entire shipbuilding program, it 
could be $30 billion in play at any one time.
    Senator Reed. Senator McCain pointed out, I think, very 
appropriately that we have many challenges. One is to have an 
affordable SSBN replacement for the Ohio-class, and the other 
is to maintain carrier production but at a level that we can 
afford. With respect to the Ohio-class specifically 
replacement, since it is a strategic asset because it is part 
of the triad, are there any attempts to provide supplementary 
funding to the Navy shipbuilding budget because of this 
strategic dimension? Have those talks progressed or have they 
even been undertaken in DOD?
    Mr. Stackley. Sir, all I can answer straightly is those 
talks have not progressed. I should probably leave it at that.
    Senator Reed. Okay. That is an interesting comment. Thank 
you very much.
    Mr. Stackley. Let me go ahead and expand then. [Laughter.]
    The Navy's plan in the Future Years Defense Program 
(FYDP)--we think that the budget that we have assigned to the 
numbers that we plan on procuring in the FYDP is within our 
reach if you park sequestration momentarily. But when you get 
outside of the FYDP, now you are quickly entering into the 
period where the Ohio replacement dominates our shipbuilding 
plan. We have spent a lot of effort over the last couple years 
to go after the requirements, to drive affordability through 
the requirements process and also through the design process. 
So it is something that started at about a $7 billion a unit 
cost for the Ohio replacement. The current estimate is $5.6 
billion. We are working through the design process to get it 
down with an objective of about $5 billion, $4.9 billion. That 
by itself does not bring the shipbuilding plan within the reach 
of affordability.
    So if you look at that period of time and you look at the 
budget forecast for that period of time, you have to go back to 
the period of the 1980s, when we were building up the 600-ship 
Navy, to see those type of shipbuilding budget levels that are 
projected for the force that is laid out in the shipbuilding 
plan. That is beyond our shipbuilding total obligation 
authority by any method of extrapolation.
    Senator Reed. That is assuming that we can stabilize the 
course in the other shipbuilding programs.
    Mr. Stackley. Yes, sir.
    Senator Reed. Thank you very much.
    We will have a second round if time allows.
    Senator McCain, please.
    Senator McCain. Thank you, Mr. Chairman.
    Secretary Stackley, when will the Department deliver the 
final shipbuilding plan to Congress?
    Mr. Stackley. Sir, the shipbuilding plan has been signed 
out of the Navy, gone through review with DOD. I would like to 
hand-carry a copy of that report back over here this week. I 
think it is all complete. It is going through its last routing.
    Senator McCain. According to the draft shipbuilding plan, 
when will the Navy have 306 ships in its fleet?
    Mr. Stackley. The date, year that you identified in your 
opening statement is correct. The draft plan reaches 306 in 
2037.
    Senator McCain. If the Navy builds the Ohio replacement 
submarine within existing funds, will it be able to afford 300 
ships?
    Mr. Stackley. The answer squarely is we will not be able to 
hit the numbers that we outlined in the plan if our top line 
for shipbuilding is brought down to the range in the FYDP. 
During the period of the Ohio replacement, working with the 
Office of the Secretary of Defense, we have allowed for about a 
$2 billion per year increase above current FYDP range. But if 
we have to suppress those numbers down to the FYDP numbers, we 
are going to fall short in terms of total ship count.
    Senator McCain. The numbers I have show that we should be 
about $16.8 billion each year for the next 10 years to meet 
your shipbuilding goals. Is that ball park estimate correct?
    Mr. Stackley. It is ball park correct. We break the 
shipbuilding plan down to three periods, near term, midterm, 
long term. In the near term, about $15.4 billion. Midterm, it 
jumps up to $19.8 billion. Long term, it comes back down again.
    Senator McCain. But the budget request, Admiral Myers, is 
$10.9 billion. Is that correct?
    Admiral Myers. Yes, sir. That is correct, and that is for 
fiscal year 2014. It increases through the FYDP. It reaches $17 
billion at the end of the FYDP and it averages about $15 
billion in our shipbuilding and conversion account for each 
year of the FYDP.
    Senator McCain. So you are counting on a dramatic increase 
in shipbuilding request funding in the coming years?
    Admiral Myers. Yes, sir. The plan that we delivered in 
prospect 2014 reflects that increase in each year of the FYDP.
    Senator McCain. Let us talk for a minute, if we could, 
about the CVN-78. I have here from the Congressional Research 
Service (CRS) some of the estimates for -79 and -80 for CVNs. 
The fiscal year 2008 budget estimated the cost of the Gerald R. 
Ford to be roughly $10.5 billion. That is correct, is it not, 
Admiral? Well, we now know that the estimate is $12.8 billion. 
In rough figures, that is a $2.5 billion cost overrun.
    How do I explain to my constituents in Arizona that wte 
have a $2.5 billion cost overrun on an aircraft carrier? Maybe 
you can help me out, Mr. Secretary.
    Mr. Stackley. Sir, I can go to the details in terms of 
building up how we went from $10.5 billion to $12.8 billion, 
but I do not think that is what you are looking for with your 
question.
    Senator McCain. I apologize for asking you a question that 
I do not expect you to answer, rather that I have to try to 
answer.
    Maybe you can respond to this. The CRS states: costs for 
the CVN-78 will likely exceed the budget for several reasons. 
This is the CRS. First, the Navy's cost estimate, which 
underpins the budget, is optimistic. For example, the Navy 
assumes that the CVN-78 will be built with fewer labor hours 
than were needed for the previous two carriers.
    Second, the Navy's target cost for ship construction may 
not be achievable. The shipbuilder's initial cost estimate for 
construction was 22 percent higher than the Navy's cost target, 
which was based on the budget. The Navy and the shipbuilder are 
working on ways to reduce costs. Actual costs to build the ship 
will likely increase above the Navy's target.
    Third, the Navy's ability to manage issues that affect cost 
suffers from insufficient cost surveillance. Without effective 
cost surveillance, the Navy will not be able to identify early 
signs of cost growth and take necessary action.
    So Newport News is the only game in town. Right? Nobody 
else builds aircraft carriers. What can we do to prevent this 
kind of cost overrun, which I can tell you in my constituents' 
minds is unacceptable when we have a terribly damaged economy 
in my home State of Arizona. I cannot justify it.
    Now, tell me, assure me of the steps we are taking to 
prevent a $2.5 billion cost overrun on one ship, so I can go 
back and tell my constituents.
    Mr. Stackley. Yes, sir. First, the cost growth on the CVN-
78 is unacceptable. The cost growth dates back in time to the 
very basic concepts that went into taking the Nimitz-class and 
doing a total redesign of the Nimitz-class to get to a level of 
capability and to reduce operating support costs for the future 
carrier. Far too much risk was carried into the design of the 
first of the Ford-class.
    Cost growth stems to the design was moving at the time 
production started. The vendor base that was responsible for 
delivering new components and material to support the ship 
production was saddled with new developments in the vendor base 
and production plan did not account for the material ordering 
difficulties, the material delivery difficulties and some of 
the challenges associated with building a whole new design 
compared to the Nimitz.
    Senator McCain. I understand all of that. What are we going 
to do to Newport News to ensure they get a ship built according 
to the cost since there is no competition?
    Mr. Stackley. So for CVN-79, we have held up the 
expenditures on CVN-79 as we go through the details of, one, 
ensuring that the design of the 78 is complete and repeated for 
the 79--so we start with a clean design.
    Two, we are going through the material procurement, and we 
brought a third party in to assess material buying practices at 
Newport News to bring down the cost of material. We are 
metering out the dollars for buying material until it hits the 
objectives that we are setting for CVN-79.
    We are rewriting the build plan on CVN-79. If you take a 
look at how the -78 is being constructed, far too much work is 
being accomplished late in the build cycle. So we are rewriting 
the build plan for CVN-79, do more work in the shops where it 
is more efficient, more work in the buildings where it is more 
efficient, less work in the dry dock, less work on the water. 
Then we are going after the rates, the labor rates, and the 
investments needed by the shipbuilder to achieve these 
efficiencies.
    Senator McCain. Keep us posted.
    Admiral Myers, are you confident about the progress of the 
LCS? I am hearing that there are significant problems.
    Admiral Myers. We are confident at this point in the 
development and implementation of bringing the LCS into the 
fleet. What you are seeing, Senator, is a new platform that we 
are having a proof of concept deployment so that we can 
understand the concept of operations of how we are going to 
rotate the crew, how we are going to sustain it, how we are 
going to maintain it. So these kinds of issues that we see on a 
new platform--and this is a transformational approach to our 
ships. Just like transformational approaches to any platform, 
we are going to find issues and we are going to have discovery 
before it enters the fleet and full operational capability.
    Senator McCain. The only problem here is that under intense 
questioning in past years, I asked whether these problems were 
envisioned, particularly in a new platform, moving in and out 
different modules. I was always told, ``No problem. There is no 
problem. We have that all planned out.'' Obviously, at least 
according to what I am told, ``the Navy's own analysts have 
only about 10 percent confidence in the current estimate of the 
cost to operate and support.'' So I hope that those problems 
that you just outlined, which some of us were concerned about 
at the time, will be resolved without much additional cost to 
the taxpayer.
    I thank you, Mr. Chairman.
    Senator Reed. Thank you, Senator McCain.
    Senator Shaheen?
    Senator Shaheen. Thank you, Mr. Chairman.
    Thank you all for being here, gentlemen, and for your 
service to the country.
    Secretary Stackley, I would like to pursue some of the 
questions that have been presented about how sequestration is 
affecting your ability to operate. One of the things you talked 
about is your efforts to drive down costs. How does 
sequestration affect that ability to drive down costs?
    Mr. Stackley. Senator, across the board, sequestration 
affects everything that we do. First, it has created a great 
deal of uncertainty in terms of our planning and allowing us to 
prioritize within a top line where our investments will go. So 
the uncertainty creates an impact.
    That uncertainty then trickles down into planning and 
procurement in the vendor base, first tier shipyards and then 
down in the vendor base below that. So we are having to keep an 
eye on ensuring the vendor base that we are relying on in the 
longer term to support our shipbuilding requirements does not 
break as a result of delays or uncertainty from sequestration.
    Then the most poignant impact is the dollar impact 
directly. Everything that we have been doing to try to reduce 
the cost of our shipbuilding program, whether it is stabilizing 
requirements, whether it is trying to get stable production 
rates that allow investment by the shipbuilders, trying to wrap 
in a multiyear where we harvest a significant savings, putting 
that inside of a fixed-price contract where we have confidence 
in the savings, sequestration unravels that to an extent.
    So now what we have to do when we look prospectively at 
sequestration in the out-year budgets, we have to fight for the 
priority that shipbuilding demands in order to hit the CNO's 
requirement within the budget so that our efforts to reduce 
cost do not, in fact, go in the reverse direction as a result 
of sequestration and we end up with potential disruption, 
taking low shipbuilding rates that we have today and driving 
them lower and then ultimately driving those costs up. So we 
have to avoid that spiral that could occur if we unravel what 
we have been attempting to do with regard to stabilizing the 
shipbuilding plan over the last several years.
    Senator Shaheen. You indicated that the 2014 budget is 
based on an assumption that sequestration ends at the end of 
this fiscal year. Did I understand that correctly?
    Mr. Stackley. The 2014 budget, as submitted, does not 
account for sequestration in 2014 and beyond.
    Senator Shaheen. I am sure that everyone here would like to 
see us address sequestration before we get into the next fiscal 
year, but given the lack of movement within Congress, I think 
there are real questions about whether that is going to happen. 
So given that, can you talk about what the impact will be if 
you are looking at another $55 billion in cuts over the next 
fiscal year on top of what you have already had?
    Mr. Stackley. Yes, ma'am. Let me first say that Secretary 
Hagel has, in fact, chartered a Strategic Choices Management 
Review to go directly at that question. The Armed Services 
Committee has sent out a letter to the Secretary asking for a 
more discrete response to the potentially $52 billion impact in 
2014, and that response is being addressed in real time.
    Now, let me just talk about shipbuilding and make some 
assumptions. If it is a $52 billion impact, about 10 percent, 
and if that was prorated across all of our lines, then in 
shipbuilding we would be looking at greater than a billion 
dollar reduction to the 2014 request. That is assuming no 
ability to prioritize our investments. That would be applying 
sequestration in 2014 just like it was in 2013 line by line.
    In 2013, shipbuilding took about a $1.7 billion reduction. 
We were able to manage that to a great extent through prior 
year. We had assets that we were building up in the prior year. 
So we were able to pay off about a third to 40 percent of 
sequestration by liquidating those assets. Of the balance, the 
$1 billion to $1.2 billion, some of that we are able to reduce 
our requirements. Some of that we are going to have to work 
within 2013 and some of it effectively bow waves into the out-
years.
    If you then do that again in 2014, effectively we have 
pulled all the margin out of the system in shipbuilding. Where 
we had margin, we have pulled it out. So now if we double down 
sequestration in 2014, the margin is gone and now we are 
looking at direct impacts to our ship procurement rates.
    Senator Shaheen. Thank you.
    Senator King has gone temporarily, I think, but he will be 
back, and I am sure he would be interested, as I am sure 
Senator Ayotte is, in what is happening at the public 
shipyards. We all represent the Portsmouth Naval Shipyard, and 
obviously, our four public shipyards are critical as we look at 
maintenance and what we need to do to keep the fleet operating. 
I wonder if you could talk about the current role that our 
public shipyards are playing and the importance of continuing 
to modernize them so that they can address the needs that we 
have with shipbuilding.
    Admiral McCoy. Yes, Senator. I will go ahead and take that 
one.
    The public shipyards do 95 percent of the submarine and 
aircraft carrier day-to-day maintenance work, as well as 
overhauls. The only big exception would be the refueling 
overhauls of Nimitz-class carriers in the private sector.
    The public shipyards are fully loaded particularly with the 
OPTEMPO that we have had around the world. In fact, I had an 
earlier discussion with Senator King that one of my concerns is 
that we are too loaded. We will have a healthy workload 
certainly through the FYDP, but we are seeing the effects of 
sequestration. We are seeing reduced overtime particularly on 
our aircraft carrier availabilities where we work the critical 
paths 6 days a week, and if we do go into furloughs, we are 
worried about the aircraft carrier schedules, the SSBN 
schedules, and the SNN schedules in the naval shipyards.
    We are also in a hiring freeze which with 30,000 employees 
in the four naval shipyards, we will lose effectively 1,800 
workers or about 150 workers every month that we are in a 
hiring freeze. So we are concerned about that.
    So I would say we have plenty of work in a time of fiscal 
uncertainty, at a time where the workforce is also very 
anxious.
    Jumping to the infrastructure, we have released a report. I 
have been in the naval shipyard business for 30 years. That is 
the most comprehensive, thorough look at the infrastructure of 
our naval shipyards. We have also had probably the most 
significant discussions at the very senior level. I have 
briefed that report at the four-star level several occasions 
personally myself.
    I think the report reflects the Navy's sentiment that we 
would like to close the investment gap we think we need in 
about a 10-year period. We see that the financial uncertainty 
and the budget pressures that we have will only allow us to do 
it about in a 17-year period. We would like to be closer to 10. 
We are committed to looking for opportunities to pull work 
forward. In fact, the plan that we presented starts in 2015, 
but we have already pulled ahead investments into 2013 and 2014 
to get a jump start on that and we will look for ways to 
continue to do that.
    The naval shipyards are a jewel. Our Navy cannot sail 
without them and we understand our stewardship role to keep 
them fully facilitized, ma'am.
    Senator Shaheen. Thank you very much and thank you for the 
report.
    Senator Reed. Thank you, Senator.
    Senator Ayotte.
    Senator Ayotte. Thank you, Mr. Chairman.
    I wanted to follow up, Admiral McCoy, just on what you were 
just talking about with regard to the shipyards. I certainly 
share the concerns that my colleague from New Hampshire does, 
in particular for the Portsmouth Naval Shipyard.
    But you said they are fully loaded in terms of maintenance 
and what is happening. What happens if we implement the 
furloughs in terms of the maintenance schedule? Can you help me 
understand--as I understand it, the Navy has submitted a plan 
to Secretary Hagel that would allow us to avoid the furloughs. 
Can you help me understand if we do implement the furloughs and 
the Secretary decides not to implement the plan that the Navy 
has proposed, what are the additional costs that we incur 
because we have to delay all the maintenance schedules?
    Mr. Stackley. I will start and then allow Admiral McCoy to 
join.
    First, the evaluation of furloughing. It is being done in 
DOD applying to all the Services where everyone is looking at 
how to mitigate the degree to which we would have to furlough, 
and within that larger discussion, we are continuing to look at 
if we do furlough, are there exceptions that we need to apply 
because they are directly impacting readiness or the remedy is 
creating more problems than it is solving. Shipyards are in 
that mix. The potential to furlough public shipyard workers is 
in that mix, and that is all I can offer you right now because 
we are looking at this real hard real-time.
    They are in that mix because of the direct impact on 
readiness that would be caused by a furlough at our shipyards. 
It would be more than a 1-for-1 impact when you impose the 
degree of disruption that occurs to a ship's maintenance or 
modernization schedule at the shipyard if people have to put 
down their tools and then return after a gap to pick them back 
up. So I think everyone understands that shipyards are a 
special case in terms of direct impact on readiness. The math 
states that there is going to be a more than 1-for-1 impact if 
you furlough, and overall DOD is trying to mitigate any 
furlough actions because we recognize the impact on not just 
productivity, not just the impact on readiness, but also the 
impact on the workforce that is trying to execute within the 
sequestration environment.
    Admiral Myers. Senator, just to add before Admiral McCoy 
takes the mike, I think the Navy has been very consistent in 
articulating the readiness impacts of furloughing at our 
depots, both on the shipyards and aviation, the impacts to our 
carriers, the impacts to our submarines, and the impacts to our 
aircraft and engines and engine modules.
    Senator Ayotte. Thank you all. I wanted to follow up on 
what was raised by the chairman as well as Senator McCain, 
which is the Ohio-class replacement, the SSBN. One of the 
things that was recently said I think by Vice Admiral Burke was 
that, yes, if we buy the SSBN within existing funds, we will 
not reach 300 ships. In fact, we will find ourselves closer to 
250. Our global presence will be reduced such that we will only 
be able to visit some areas of the world episodically.
    So I think the issue is this: how to ensure that we build 
the 12 Ohio-class replacement boats, which are such a critical 
part of our triad in the protection of our country, while also 
continuing the shipbuilding plan. What is that going to take? I 
know that Senator McCain touched upon this. What will that take 
because we cannot have one and not the other? Do we need 
something new? I mean, setting aside sequestration, as I 
understand it, if we go forward with sequestration, the fleet 
is going to go down to 235 according to Admiral Greenert. If we 
set aside sequestration for a moment, do we need a new national 
capital ships account in addition to the shipbuilding and 
conversion Navy account? How do we get there?
    Also, could you comment on the collaboration between the 
United Kingdom on the common missile compartment for the Ohio 
replacement? Is that saving money? Are we receiving any 
economies of scale there? What can we do to also bring down 
costs on the Ohio replacement so that we can do both?
    Mr. Stackley. Yes, ma'am. Let me start with the first 
question dealing with the Ohio replacement and the period of 
its production. As discussed earlier, during the period of the 
Ohio replacement ship construction, the average top line for 
shipbuilding that will be required to achieve the shipbuilding 
plan, which as Senator McCain described, does not get to 306 
ships until after the Ohio replacement is complete, is about 
$20 billion. Inside of the FYDP, our average shipbuilding is 
closer to $14 billion to $15 billion with the current budget 
year $11 billion. So you can see the steep rise that would have 
to occur.
    So the first question is could the Navy do this within the 
current budget, call it, rules or allocation. No matter how 
much priority we place on shipbuilding within the Navy's 
allocation, in order to hit $20 billion a year for a 12- to 15-
year period, that would cause breakage to other parts of the 
Navy's budget that we are responsible for.
    So this is a funding requirement that is larger than the 
Navy.
    Senator Ayotte. So how do we get to a realistic--I think it 
is important for all of us to be working toward a realistic 
budget allocation that makes sure that we have a robust Navy. 
As far as I can tell, we have China investing more in their 
navy. The needs right now for a naval presence are very 
rigorous.
    Mr. Stackley. We start with the requirement and the CNO has 
done the force structure assessment to outline the requirement. 
Then we lay in how do we get there from here. So the 
shipbuilding plan lays out a path to get there, recognizing 
that it has a saw tooth effect to it. Then we do everything 
that we can to drive cost out of the equation. We will continue 
to work on that, but we will not be able to drive, say, 25 
percent cost out of the equation.
    So the problem is staring at us. You could argue that the 
problem is inside the FYDP, but it gets pretty extreme right 
outside of the FYDP. So to try to engage in a level of 
discussion and debate that is required to address that beyond 
the FYDP budget issue today while we are just wrestling with 
the uncertainty associated with sequestration by itself, that 
has proven to be too difficult for the system today to clearly 
address that issue that is 5, 10, 15 years beyond today.
    But we have to keep the debate open. We have to keep the 
issues clear in front of us. As it gets inside of the FYDP, I 
think the discussion between Congress and the Department on how 
we are going to be able to afford that shipbuilding plan needs 
to be more heated.
    Senator Ayotte. I worry that we are on a completely 
unrealistic path right now given what the real needs are for 
the Navy on the shipbuilding budget. So I hope that this is an 
issue we will also have more rigorous discussion about.
    So thank you all for being here.
    Senator Reed. Thank you, Senator.
    Senator Kaine, please.
    Senator Kaine. Thank you, Mr. Chair.
    To the witnesses, I am going to start with a comment and a 
couple of questions. The comment is really for both the 
witnesses and my colleagues, and it is kind of a ``new guy'' 
comment.
    Every hearing we have been having of the full committee or 
of the subcommittees has focused on sequester effects. I think 
it was Senator McCain's questioning at a hearing where we had 
both the Secretary and the Chairman of the Joint Chiefs, 
General Dempsey, that inspired the letter from Senators Levin 
and Inhofe to say show us what it would look like if sequester 
is permanent. I really encourage diligence in showing us what 
it will look like if sequester is permanent.
    My observation of my colleagues is that we all think 
across-the-board, non-strategic sequester cuts to defense is a 
really bad idea. Most of us think that across-the-board, non-
strategic cuts to non-defense accounts is also a bad idea. But 
I think we all think that with respect to defense.
    But in February we did have a vote to turn off the 
sequester that got a majority in the Senate, but the invoking 
of the filibuster, the paper filibuster, blocked that.
    In March, we voted on a budget that would have replaced 
sequester. It still would require cuts, but they would have 
been strategic. They would have been smaller and they would 
have been differently arrayed over the 10-year budget cycle 
rather than so much upfront. Unanimous consent rules are being 
utilized in the Senate now to even block that budget from going 
to conference.
    My sense is since we all agree that non-strategic, across-
the-board cuts to defense are a bad idea, if the Senate does 
not fix that, it is not going to get fixed. I think if the 
Armed Services Committee does not reach some accord about it, I 
do not think the Senate is going to fix it. I think this 
committee is the committee that is most willing and most likely 
to try to promote action that would eliminate what we all think 
are stupid across-the-board, non-strategic cuts to defense.
    But I think that July 1 letter inspired by Senator McCain's 
question and the request from the committee chair and ranking 
member is going to be very key to seeing what the next 10 years 
would look like if we do not turn away from the foolish path 
that we are on.
    So I just hope that that is a very specific, detailed 
accounting of what would need to be done because something has 
to convince this body, and this body then has to convince the 
Senate I think to take action. Then the question of whether we 
could convince the House is another matter entirely, but the 
House is not going to do it unless we do it.
    I want to follow up on the questions about the carrier, the 
Ford-class carrier. Secretary Stackley, you talked about 
reasons for the overrun, that the overrun was unacceptable, and 
steps being taken to address it. Educate me a little bit 
about--I imagine there is some analogous history here. The 
building of a first in class creates some issues that hopefully 
the building of the second, third, and fourth in class are 
easier. Is there a history of some challenging cost overruns on 
a first in class and then learning from it and then the per-
unit cost coming down as you get deeper into whether it is 
subs, carriers, surface ships, whatever it is? Just talk to me 
a little bit about that.
    Mr. Stackley. Yes, sir. Absolutely. The history in 
shipbuilding is--since you do not have a prototype for a new 
ship, the first of class, referred to as the lead ship, is your 
prototype. So you carry a lot of risk into the construction of 
that first of class.
    Also, there is a lengthy design, development, and build 
span associated with ships. So there is a certain amount of 
overlap or concurrency that occurs between the development of 
new systems that need to be delivered with the first ship, the 
incorporation of the design of those new systems, and the 
actual construction.
    So to the extent that there is change in a new ship class, 
then that risk goes up accordingly. In the case of the CVN-78, 
the degree of change compared to the Nimitz was fairly 
extraordinary, all for good reasons, good intentions, increased 
capability, increased survivability, significant reduction in 
operating and support costs. So there was a determination that 
we would take not this risk in order to get those benefits. In 
the case of the CVN-78, those risks are driving a lot of the 
cost growth on the lead ship.
    When you think about the follow ships, now you have a 
stable design. Now your vendor base has a production line going 
to support the production. Now you have a build plan and a 
workforce that has climbed up on the learning curve to drive 
costs down. So you can look at virtually every shipbuilding 
program, and you will see a significant drop-off in costs from 
that first of class to the follow ships. Then you look for a 
stable learning curve to take over in the longer-term 
production of a ship class.
    Carriers are unique for a number of reasons, one of which 
we do not have an annual procurement of carriers. They are 
spread out over a 5--and in fact in the case of the 78, as much 
as a 7-year period. So in order to achieve that learning, there 
are additional challenges associated with achieving that 
learning. So we are going at it very deliberately on the CVN-79 
through the build plan with the shipbuilder to hit the line 
that we have to have, the cost reductions that we have to have 
on the follow ships of the class.
    Senator Kaine. You answered a question of Senator McCain's 
about some of the lessons learned from CVN-78 to -79, but I 
think I would like to submit a written question on the record 
as well to try to get a more extended answer that is really 
probably beyond the scope of a hearing like this so that we 
could then just have that and then utilize it as we talk down 
the road about what we are seeing on CVN-79 and CVN-80.
    Mr. Stackley. If I can offer, we have, in fact, submitted a 
fairly detailed report to Congress on the CVN-79 build plan to 
address these issues, and I would start by offering to sit with 
your staff and brief you on those details.
    Senator Kaine. That would be helpful.
    You and I were together recently in Newport News for the 
commissioning of the USS John Warner or I guess the keel 
laying. I am going to be having lunch with him today. So I know 
he is going to be asking me about Virginia-class submarines.
    This is preliminary because we are not at July 1 yet, but 
what would a full sequester likely do to the Virginia-class 
program? This is of deep interest, obviously, not just to 
Virginia but others as well.
    Mr. Stackley. Yes. I am glad you asked that question 
because I wanted to double back to Senator Reed. That was one 
of his opening questions, and I did not get to it in my 
response.
    First, the Virginia-class submarine is a very high priority 
for DOD in terms of procurement. It is a high priority for all 
of the right reasons, extraordinary capability. It plays a 
significant role in every major operation. So regardless of 
sequestration, it will be a priority in our budget. In fact, 
the fact that we came back this year and added Virginia in 2014 
reflects that priority.
    Second, even with that level of priority, within our 
shipbuilding plan and all the assumptions that we have laid in 
that, we still fall below the long-term requirement for attack 
submarines. So the force structure assessment describes we need 
a minimum of 48 attack submarines, and within the shipbuilding 
plan, keeping Virginia as a priority, we still drop down into 
the low 40s and that is without overlaying the risk of 
sequestration or anything beyond that.
    So it is a priority. The budget is at risk in terms of 
sequestration. Not just the Department of the Navy, DOD will 
keep that as a priority as we march forward regardless of 
sequestration.
    Where there is risk are some of the modernization and 
upgrade efforts associated with that class of submarine. We 
will take a hard look, for example, at the Virginia payload 
modules which is under design and development today for the 
2019 boats and beyond. We will have to take a hard look at 
whether or not we can, in fact, afford those upgrades when we 
have better clarity in terms of the long term.
    Senator Kaine. Thank you.
    Thank you, Mr. Chairman.
    Senator McCain. Mr. Chairman, could I ask for unanimous 
consent to submit for the record the cost of CVN-79 has 
increased by--first, CVN-78 cost increase over the original 
estimate is 22.3 percent. CVN-79 is a 23.4 percent increase 
over the estimated original procurement cost, and the CVN-80, 
29.5 percent. So any allegation that somehow costs are under 
control or being reduced are contradicted by the CRS report.
    Senator Reed. Without objection, it will be submitted for 
the record.
    [The information referred to follows:]
      
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    Senator Reed. Secretary Stackley?
    Mr. Stackley. If I may make a comment on that. The cost 
figures that were put into the 2006 NDAA associated with CVN-78 
class did not account for escalation. So the dollars in 2006, 
when you escalate those out to the build span for the CVN-79 
and the CVN-80, what you see is an increase associated with 
escalation. For CVN-79, there is also an increase associated 
with nonrecurring engineering to incorporate the design issues 
that we identified on -78 that need to be fixed before 
producibility of -79.
    Senator McCain. I appreciate that, but some of us do expect 
those increases to be anticipated rather than just saying we 
had to add on those costs. Then obviously these cost estimates 
that were submitted in the fiscal year 2008 budget--there are 
increases. That is what was presented to Congress, and that is 
not what happened.
    Mr. Stackley. Sir, for the record, when those numbers were 
presented for the cost cap purposes, it was, call it, in 
constant year dollars in the year of the authorization and the 
allowances made to update those for impacts of escalation.
    Senator McCain. Of 23 and 29.5 percent? I do not think some 
of us would have voted for it if we had known of that kind of 
escalation, Mr. Secretary.
    Senator Reed. I think at this point it is appropriate to 
recognize Senator Sessions. We will have a second round, and we 
will have an opportunity for the Secretary in the course of 
that second round or other comments to further elaborate. 
Senator Sessions?
    Senator Sessions. We have a tight budget situation. I know 
you guys are working hard at it. Thank you for what you do. 
But, Senator McCain raises important questions, and I think it 
is in the national interest that he does so.
    With regard to the fleet and the size, Secretary Stackley 
or Admiral Myers, are you confident that we have the ships that 
we need to do the job that we are challenged to do? Would you 
give us any comments on it? Do you think we have the right mix?
    Admiral Myers. Senator, thanks for the question.
    The force structure assessment that was completed and 
released is very comprehensive. This is a periodic review by 
the Navy to make sure that we understand what force structure 
are we building to. Now, this is an important element of our 
shipbuilding plan. The shipbuilding plan is a combination of 
not just the force structure assessment but also what we think 
we can afford budget-wise, looking at the industrial base, 
understanding our ship construction profiles and a number of 
things. But key to beginning the process of building our annual 
shipbuilding plan is understanding what force structure that we 
are building to.
    So for the force structure assessment, what we did was we 
went to the combatant commanders and talked to them to try to 
understand what mission sets, what capabilities that they need 
in their areas of responsibility (AOR). We also looked at 
deployment schedules in our GFMAP.
    Senator Sessions. Can I interrupt you? When was this done 
and when did it commence?
    Admiral Myers. Last year, and it was completed within the 
last year. So this is current. This is the force structure 
assessment that changed from 313 to 306.
    So in the course of that analysis, what the Navy discovered 
is a couple of things. One is we have new Defense Strategic 
Guidance, and in that guidance it prioritizes presence in 
different AORs.
    Senator Sessions. Who decided the new defense guidance? How 
was that decided?
    Admiral Myers. The Defense Strategic Guidance was released 
by the administration in, I believe it was, January of last 
year.
    So based on the Defense Strategic Guidance, what we did was 
we talked to the combatant commanders, looked at the GFMAP, 
looked at the ships that we have in our inventory, looked at 
the industrial base, and then considered what is it that the 
Navy needs in terms of a requirement for force structure to 
meet the presence and warfighting capabilities overseas.
    The results of that were 306 ships. Now, that is a change 
from 313.
    A couple of things were unique that changed over the last 
year besides the Defense Strategic Guidance shifting some of 
our priorities to the Asia-Pacific. What we also did was the 
Navy has been increasing our emphasis on forward-deployed naval 
ships, and we have four ships that will be permanently 
stationed in Rota as part of the Ballistic Missile Defense 
(BMD) rotation in the Mediterranean. Those four ships keep us 
from having to have more ships sailing from the east coast. So 
we went from 94 surface combatants down to 88. So instead of 
having additional ships to sail back and forth across the 
Atlantic, we were able to keep those BMD ships in Rota and have 
the same kind of force structure we need in terms of presence 
but reduced overall force structure.
    Senator Sessions. When I came on this committee some years 
ago now, that was a serious discussion about the forward 
deployment in ships. So you feel good about that strategy? We 
have been doing more of it. Is it effective in increasing our 
presence and reducing the number of ships that we need in the 
fleet?
    Admiral Myers. Absolutely. We benefit from forward presence 
in Japan and the western pacific routinely, and having 
commanded the USS Kitty Hawk homeported in Yokosuka, I can 
personally attest to the effectiveness and the efficiency of 
having a forward-deployed naval force in the AOR. So what we 
are doing in Rota is we are moving theater BMD destroyers. 
Beginning in fiscal year 2014 will be the first ship and that 
will be a more efficient way to maintaining a presence in the 
Mediterranean for that mission.
    We also within the force structure assessment looked at 
efficiencies of civilian crewed Joint High Speed Vessels for a 
presence where we could have increased presence and then 
prioritizing some of the military manned like our amphib ships 
in different AORs. So we are able to find some efficiencies.
    We are also bringing on board our MLPs in float staging 
bases, and those are also going to be civilian manned and we 
will be able to increase our presence.
    So when you do the math, we come up with 306 ships and we 
think it is the right mix. We think that we have a path ahead 
to account for the SSGN.
    Senator Sessions. My time is about up, but I appreciate 
that. I think we should all recognize that this overall 
assessment strategy is determined by the administration and it, 
therefore, allows you, if your mission is less, to have less 
ships. You are given a mission. You provide the ships that you 
have to have to accomplish that. You constrict the 
requirements. You do not have to have as many ships. So we need 
to be sure, when we analyze all this, in the long run we are 
not making a mistake.
    Secretary Stackley, in your 30-year plan for shipbuilding, 
you do maintain the LCS as a significant role in that. There 
have been questions raised over this ship, but one of the 
reports was over a year old. I know it was recently published. 
Would you give us your assessment of where the LCS is?
    I will have to say I have been impressed with your 
leadership over the years in trying to manage shipbuilding 
programs. I think all of us appreciate your service to the 
country.
    Mr. Stackley. Sir, thanks for the question.
    Let me address LCS in two pieces. One is ship production 
and then the other is mission packages or mission modules.
    First, I think the subcommittee is well aware of the 
history in terms of ship production, and today I can report 
that ship production is stable. Costs are going down. The 
contracts are fixed-price. So there is all goodness there.
    Senator Sessions. Are costs actually at the level you 
expect? How do you compare it to projections?
    Mr. Stackley. When we awarded the dual block buy, we 
projected $2.9 billion in savings across the 20 ships. That was 
assuming not just the fixed prices on the contracts, but we 
also included some margin above those fixed--I am sorry--fixed-
price incentives above the targets on those contracts and we 
are operating well within that budget. So they are performing 
below the budget that we had outlined when we awarded the dual 
block buy, which is a measure that we are achieving the savings 
that we had targeted.
    We are still early in production, but we see the learning 
that we expect to see. We see the investment by the shipyards 
that they needed to make, and we are seeing them leverage the 
block buys with the vendor base in order to get savings in 
material as well. So production is stable.
    Sequestration, frankly, pulled the margins out of those 
budgets. So where we held a margin above the target to account 
for potential risk, sequestration pulled much of that margin 
out. Sequestration pulled out much of the Government's reserve 
for change orders that we include in our budget, but frankly, 
we have locked down requirements to the extent that we are not 
burning dollars on change orders in production.
    So we are on a good path on the ship production side and 
really working out, I will call it, the learning that goes with 
the investments that the shipyards have made and the early 
deliveries.
    On the mission package side, we are in developmental 
testing across the three mission packages. LCS-1 deployed with 
an early increment of surface warfare capability. The mine 
countermeasure mission package, in the first increment of the 
mine countermeasure mission package and surface warfare mission 
package, we are scheduled to initial operational capability 
(IOC) next year.
    In terms of sequestration impacts, the dollars that we have 
lost in research and development (R&D) to support those 
development efforts are likely pushing those IOCs into 2015.
    So if I have a plea for Congress, it is to recognize that 
it is difficult to hold onto developmental schedules when you 
suffer these types of setbacks in your funding, and so I would 
ask that we do not compound that issue in marking the 2014 
budget. But actually let us sit down and take a look at what we 
need in terms of completing that development so we can, in 
fact, IOC those systems that we need desperately today. The 
mine countermeasure package is a priority for the Navy. Our 
capability today with the legacy ships is extremely limited, 
and we have to get increased capability and capacity to deal 
with a potential threat in the mine warfare area.
    Senator Sessions. Thank you.
    Senator Reed. Thank you, Senator Sessions.
    Senator King, please.
    Senator King. Good morning, gentlemen. Thank you for 
joining us.
    Secretary Stackley, first thanks for the notice last week 
on the nine purchase procurement on the DDG-51.
    What is the amount of the current shortfall projected for 
the 10th destroyer in that package?
    Mr. Stackley. Yes, sir. Sequestration pulled about $560 
million out of the DDG-51 program. Congress had rescinded $400 
million of prior year assets for the DDG-51s, included that in 
a $987 million add for the 10th destroyer, and then 
sequestration pulled about $560 million out. Of the $560 
million, almost half of that, about $260 million of it, we were 
able to offset with other assets in the program. So for that 
10th destroyer, we are about $300 million short.
    Senator King. Do you have the necessary authority within 
the current budget request to cover the shortfall? If not, do 
you need something from Congress? I am learning new meaning to 
the phrase--my father used to use it--``it will take an act of 
Congress.''
    Mr. Stackley. Yes, sir. I describe it as we have to work 
real closely with the defense committees because you now have 
the 2014 budget request. So we rely upon your actions in 2014 
in order to be able to award that 10th ship in 2014.
    Senator King. So we need to be in close communication on 
that issue.
    Mr. Stackley. Yes, sir.
    Senator King. If the 10th ship is fully funded in the 2014 
budget, can it be added to the set of nine procurement and 
generate some savings throughout the program?
    Mr. Stackley. Yes, sir. That 10th ship is an option that 
was competed between the two builders. So we have contract 
proposals in hand for the 10th ship. We have all but about $300 
million appropriated that we need to award the 10th ship. So we 
are in the red zone. We got to punch this thing across the goal 
line.
    Senator King. Does it generate savings in the overall 
program?
    Mr. Stackley. I would describe it as the marginal cost for 
that 10th ship. It will be the most affordable destroyer that 
we will be looking at for the foreseeable future.
    Senator King. Thank you.
    As I understand it, under sequestration, the DDG-1000 could 
experience about a $90 million shortfall on the last pieces of 
the third DDG-1000. Does the fiscal year 2014 budget request 
take care of this issue?
    Mr. Stackley. No, sir. This is very similar to the earlier 
discussion on the LCS mission packages where the DDG-1000--
there are a lot of developmental activities that are going 
along side by side with the ship construction. So we are 
impacted in terms of development associated with the lead ship 
and also procurement associated with the lead ship. So we are 
very concerned that we do not have the ability make up that 
reduction. We have limitations in terms of our reprogramming 
authority. We have limited assets under sequestration in order 
to be able to offer up an asset to backfill. So we are stuck in 
2013 with that reduction, and we do not have the ability to fix 
it in 2014 and the budget request in fact did not anticipate 
having to backfill 2013----
    Senator King. So this is another area where we have to work 
together.
    Mr. Stackley. Yes, sir.
    Senator King. There has been a lot of discussion about 
fleet size. The target has moved from 313 to 306, and you 
mentioned that it is going to be 2037 before that occurs. 
Admiral Greenert testified that the fleet, in the meantime, 
could sink as low as 235 ships if we cannot replace 
sequestration. Is that consistent with your thinking? Assume 
for a moment sequestration continues for the next 9 years, 
which is what the law allows.
    Mr. Stackley. First, I guard against putting a specific 
number on what happens under sequestration, and that is not to 
pull back from the CNO's statement. But there are a lot of 
assumptions that you have to get past. The first thing we have 
to sort out is what is the top line for the foreseeable future. 
Second is what flexibility or authority do we have to manage 
our priorities within that top line. Third, what are we going 
to do to offset the reductions to the extent possible by 
improving affordability, driving down the cost of doing 
business, and potentially load-shedding lower priority 
activities or in certain cases curtailing operations, et 
cetera? Then with the balance of top line versus priorities, 
now how does shipbuilding fare?
    Senator King. But is it safe to say that if sequestration 
continues into the indefinite foreseeable future, we will have 
a substantial impact on shipbuilding?
    Mr. Stackley. It will be unavoidable. Yes, sir.
    Senator King. Any thoughts on taking advantage of the 
technical abilities of the DDG-1000, for example, the all-
electric drive and incorporating that into future other ships? 
If we are going to build only three of those ships, we ought to 
at least learn from them and apply some of that technology in 
some of the newer ships.
    Mr. Stackley. Yes, sir. First, we are already doing that. 
So, for example, the DDG-51 Flight III is leveraging some of 
the developments from the DDG-1000-class, and likewise on the 
Ohio replacement program, that will be an all-electric drive, 
an integrated power system for that boat. A lot of the early 
development of the electric drive for DDG-1000 is porting over 
to the Ohio replacement. So the answer is absolutely we need to 
be leveraging those technologies.
    In terms of the capacity that the DDG-1000 brings, the 
power generation capacity that you can now distribute beyond 
just propulsion but now put it on the grid for weapons systems, 
that is an area where, if you take a look at a lot of our early 
development activities in directed energy, for example, those 
technologies need that type of platform, that type of electric 
power capacity to provide the Navy the full potential.
    Senator King. Perhaps this should have been the first 
question, but getting back to this overall question, I was 
frankly surprised that the 306-ship goal would not be reached 
for 24 years. I assume the 306-ship goal is something that the 
Navy feels they need now, and not having it for 24 years 
strikes me as--if I said to somebody I need my roof fixed and 
they said that will be great, we will do it in 24 years, my 
response would be ``huh''?
    Mr. Stackley. The force structure assessment first defined 
the requirements of the post-fiscal year 2020 requirement. Now, 
in terms of the Navy's long-range shipbuilding plan, we can 
certainly come up with a plan that gets us to 306 and holds us 
there, but if we are under criticism today for the realism 
associated with the budget assumptions in that plan, we would 
only be compounding it by stating that during the construction 
of the Ohio replacement submarine, we will be able to hit and 
hold 306 ships. So that is just one of the practical challenges 
that we have.
    The requirement was built. The plan was laid out. A measure 
of constraint was put on the plan in terms of the budget, and 
then within that budget constraint, we worked to keep a 
balanced force. Then you bounce around. You hit a 300 number, 
go through the Ohio replacement. You draw down, come out of the 
Ohio replacement construction and start to build back up. That 
is how you end up with----
    Senator King. But that 306 number in 24 years is based upon 
no sequestration. Is that correct?
    Mr. Stackley. Yes, sir.
    Admiral Myers. Senator, if I could add. The 306--I think it 
is important to note that it is not just 306. It is 306 of the 
right types of ships. It is not just the right types of ships. 
It is when we need those ships. So when we hit 300 in 2019, 
then we essentially maintain 300 through the 2020s, but it is 
the right mix of 300. I think that is critical and that we do 
not look just at the number.
    Senator King. Thank you, Mr. Chairman.
    Senator Reed. Thank you, Senator King.
    Senator Wicker.
    Senator Wicker. I would point out that I think the accurate 
way to say that, Senator King, is that 306 is the minimum 
requirement. That is the way the Navy puts it.
    But let me ask you, Secretary Stackley, about amphibious 
ships. You note that the current inventory of 33 ships allows 
the Navy and Marine Corps to meet combatant commander 
requirements but with risks--that is in your advance 
testimony--and further note that the number of amphibious ships 
you really need is 38. Is that right?
    Mr. Stackley. Yes, sir. The derivation of the 38 
requirement is all about what the Marine Corps--the two Marine 
Expeditionary Brigade (MEB) lift requirement for forcible entry 
operations. 38 assumes that not all will be available for the 
fight. 38 is a notional number. You need the right mix of 30 
amphibs at the fight to provide a full two MEB lift capacity. 
Going to 33 introduces some risk in terms of the elements of 
the MEB that would have to arrive as part of a follow-on 
echelon.
    Senator Wicker. You are pretty high on the San Antonio-
class of LPDs, and I know that you singled out the superb 
performance of the Mesa Verde during 19 months of deployed 
operation over a 24-month period. It sounds to me like the San 
Antonio class has become a proven workhorse in our amphibious 
inventory.
    So, Secretary Stackley, would the addition of a 12th San 
Antonio-class LPD be of value to the fleet, and would continued 
production of a 12th ship in the class have the additional 
benefit of maintaining the fragile shipbuilding industrial base 
which would, in turn, allow you to procure future LXR class of 
amphibious ships at a more affordable price?
    Mr. Stackley. Senator, that is an unconstrained question. 
Would the addition of a 12th LPD----
    Senator Wicker. I hope that is all right.
    Mr. Stackley. Rarely do I have the opportunity to answer a 
question without constraints.
    But would the addition of a 12th LPD-17 be of advantage to 
the fleet? Absolutely. The Navy's requirement, though, 
consistent with the force structure assessment, is 11 LPD-17 
class, and then we move to replace the LSD-41 and -49 class 
with the LXR.
    So the plan of record is a good plan. The challenge before 
us is we do go through a period where we are below the 33 
amphibious force structure inventory requirement, and that same 
period is marked by what I would call a valley in amphibious 
ship construction in our shipyards. So that is the challenge 
before us in this fiscal environment.
    Senator Wicker. We are going to try to get you a 12th LPD, 
and we think that it is going to help you in your future years 
with a more affordable price.
    Let me pivot then to survivability. I am concerned with the 
recent trends toward acquisition of non-military shipping as a 
substitute for combat ready amphibious warships. Commercial 
grade ships have the potential to save costs when used intra-
theater, but a robust anti-access, area of denial (A2-AD) 
capability is being developed by such regional threats as Iran, 
and North Korea indicates that commercial grade ships would not 
survive in the event of conflict. The idea of procuring ships 
built to civilian standards as an augment to military grade 
amphibious warships might sound appealing from a cost 
standpoint, but it is fairly clear that ships built to 
commercial standards would be unable to operate in a robust 
area of defense environments such as Iran and North Korea. 
Conversely, ships built to military standards can operate 
across the spectrum of conflict and add far more value to the 
warfighter.
    To this end, it seems that the U.S. Navy must continue to 
procure combat survivable amphibious shipping. While cost 
savings should be sought certainly in the adoption of 
commercial-grade standards where doing so will not negatively 
affect the safety of the ship and crew, the emphasis must 
remain on ensuring our amphibious ships are built to fight and 
survive.
    So, Secretary Stackley and Admiral Myers, do you agree with 
me regarding the need to continue to build amphibious ships 
that are meant to operate and survive in a multi-threat combat 
environment? Admiral, do you want to go first?
    Admiral Myers. I will take that first, Senator.
    First of all, when we talk about the 33-ship agreed-upon 
number from the Commandant and the Chief of Naval Operations 
back in January 2009, then we are focusing on the amphibious 
ships that you describe. We also have ships that support the 
amphibious MEB as a follow echelon, and we look for 
efficiencies when it comes to how we can support our amphibious 
MEB 2.0 requirement.
    When we looked at the MLP and we look at the float staging 
base, we looked at different ways that we can be the most 
efficient, and it also gives us, with the civilian mariners 
that man our MLPs with our Maritime Prepositioning Ship 
Squadrons (MPSRON)--we think that that is the most efficient 
and effective way to maintain presence, have the capability 
overseas where we need it when we need it and the right kind of 
capability for an affordable price.
    Now, everything that I do I have to look at a strategy-
driven budget, and I cannot look and prioritize just in one 
element at a time. I have to look across the portfolio. I think 
the mix we have with our MPSRONs, our MLPs, and our amphibious 
ships is the right mix for right now and into the future.
    Senator Wicker. I will tell you, let me go to Admiral McCoy 
and then let us see if Secretary Stackley can sum up.
    The CNO in a recent article in Proceedings magazine argued 
that the Navy should reuse proven hull forms and focus its R&D 
investment in warfare systems and not the hull, not the 
mechanical and electrical systems of new vessels. Do you agree 
with Admiral Greenert that the starting point for new warships 
design should be on a proven combat-capable hull form that 
could be modified according to the need and cost constraints?
    Admiral McCoy. Certainly I agree with my CNO, Senator.
    Senator Wicker. I thought you would.
    Admiral McCoy. But let me talk about that. So, for example, 
what is probably on your mind is the LSD-41/49 replacement. So 
when we approach looking at what should the attributes of that 
ship be, we start with a year-long process. For example, it is 
called an analysis of alternatives. The initial starting point 
for that AOA is: What are the existing hot production lines? 
What are the existing light hulls that might meet the 
requirements? Because there is a certain economy from having a 
hot production line or from having gotten over the design 
issues, for example, of a new class--and that is the starting 
point that we always look at.
    Then we look at what are the specific requirements, what is 
the threat that that ship is expected to see over its service 
life. We look at, well, does the entire ship, every system on 
that ship, for example, have to be shot qualified or maybe just 
the propulsion plant and some damage control systems be shot 
qualified and then other portions of the ship can be built to a 
lesser standard and, therefore, a potential for saving money.
    So we look across the board, Senator, starting with an 
existing ship design, how much does it cost to change it to 
meet the requirement of this new ship. We look at other options 
in terms of is there, for example, a commercial ship design in 
some parts of the ship with military specifications in other 
parts of the ship that will get us the survivability that we 
need for the threat environment that we expect the ship to see.
    Then we look at those options. We take them to the table 
and say, okay, so what is the cost of this increase over here? 
What is the cost of this level of survivability? What do we 
expect the Marine Corps, for example, entry to be and 
experience in terms of the threat environment? We lay that out 
and look at what is the best alternative. But typically we look 
at three or four different alternatives starting with a hot 
production line.
    Senator Wicker. Secretary Stackley, we are over my time 
limit, but perhaps you could respond briefly.
    Mr. Stackley. Yes, sir. I am going to actually go back to 
some of the prior discussion on CVN-78. That is an example of 
where we went with an entirely new design to get the added 
capability that we needed and brought with that a high degree 
of risk, and now we are experiencing the cost that came with 
that risk.
    We shift over the DDG Flight III as the other example. With 
DDG Flight III, we are taking a very proven hull form and we 
are bringing it to an increased air missile defense capability 
through a Flight III upgrade. So we are, in fact, using mature 
design and mature technologies to get to the added capability 
and therefore walking away from risk.
    When we look at the LXR, we are accomplishing the AOA that 
Admiral McCoy described, and then there we will place weight on 
the values associated with mature design, mature production, 
and then lower risk that comes with that. Our challenge is to 
get there affordably. But the LPD-17 is more ship than the ship 
that we need to replace with the LXR. So we have to get that 
ship's cost into the box associated with the LXR given all 
these considerations with reusing hull forms and mature 
technology.
    Senator Reed. Thank you very much.
    Senator Blumenthal.
    Senator Blumenthal. Thank you, Mr. Chairman, and thank each 
of you for your service and your excellent work.
    I want to come back, if I may, Mr. Secretary, to the 
Virginia-class submarine. You, I think, characterized in your 
testimony in response to a previous question this program as 
being a priority, notwithstanding sequestration, and that even 
without sequestration, the number of attack submarines under 
the current program would be in the low 40s as compared to the 
projected need for about 48. Is that a fair summary?
    Mr. Stackley. Yes, sir. Today, in fact, we are at 55 attack 
submarines. So what is happening over time is the retirement 
rate of the Los Angeles-class is outstripping the build rate of 
the Virginia-class, and in fact, we went through a period in 
the 1990s where our build rates were down in the zero and one 
range. So we have to get through that transition, and in going 
through that transition, we drop below our 48 requirement.
    Senator Blumenthal. So it is absolutely vital that we 
continue the present pace of building at two submarines a year 
as outlined by the program submitted by the Department of the 
Navy.
    Mr. Stackley. Absolutely for the near term because each 
submarine that we forgo in production deepens the valley when 
we get to it. Ultimately, we will stabilize at about a three 
submarines every 2-year point, which is what you need to build 
to sustain a 48-boat requirement. But we have to get through 
that valley that we are staring at.
    Senator Blumenthal. Which is also the reason why the two 
submarines are projected for 2014 in the current budget.
    Mr. Stackley. From a couple of perspectives, one in terms 
of requirement and the priority associated with the requirement 
and also in terms of the benefit that we gain by adding that 
boat inside of the multiyear that was authorized last year.
    Senator Blumenthal. My understanding is that the current 
program involves building those submarines actually on time or 
even ahead of schedule and on or under budget. Is that correct?
    Mr. Stackley. Yes, sir. In fact, one of the key strategies 
associated with how to increase our operational availability of 
our submarines has everything to do with reducing the build 
span. So not too long ago, the build span was about 66 months. 
The most recently delivered submarine is about 63 to 64 months, 
and as we march into the multiyear, we look at getting it down 
to about a 60-month build span.
    Senator Blumenthal. I am looking at your testimony in 
describing the three parallel efforts to mitigate the impending 
shortfall, which are to reduce the construction span of the 
Virginia-class submarines, extending the service lives of 
selected attack submarines, and extending the length of the 
deployments. I wonder if you could expand on what kind of 
progress we are making in those three parallel efforts. Please 
feel free, either of the two admirals.
    Mr. Stackley. Yes. I am going to share this response with 
Admiral Myers on the deployment schedules.
    I just described the progress that we are making in terms 
of getting the build span down. 4 or 5 years ago, that looked 
like a pretty significant challenge, but the program has been 
steadily making the progress that it needs to hit the schedules 
that we are going forward with in the fiscal year 2014 
multiyear. So we see the build span coming down.
    The other important part of this is we are pulling work 
into the construction span that used to go into a post-
shakedown availability. So in fact the boats will be 
deployment-ready earlier in their life than historically had 
been in the past.
    The deployment schedules. I will leave that to Admiral 
Myers to address.
    Senator Blumenthal. Admiral Myers?
    Admiral Myers. We are anticipating that with the reduced 
number of submarines, it is going to put more stress on the 
force to make the combatant commanders' demand for overseas 
presence. So the three approaches that we are taking are seeing 
what we can do to extend the life of the Los Angeles-class 
submarines, delivering the Virginia-class early, and then 
taking the deployments that are currently scheduled or will be 
scheduled and increasing their length to bridge the gap.
    Senator Blumenthal. Thank you.
    One of the great advantages--obvious advantages--of the 
submarine force is its stealth, and the public, I think, 
appreciates the physical stealth which is apparent to everyone 
who knows that they can go in shallower waters with less 
detection than ever before. But the other part of the stealth 
advantage seems to me perhaps to be in the cyber attack area, 
and I do not know whether that is true. Perhaps you could 
expand on it.
    Mr. Stackley. Senator, I am going to suggest that we take 
that for the record and provide a more comprehensive discussion 
on that in a classified setting.
    Senator Blumenthal. I would appreciate that. I expected it 
that might be the response and I do appreciate it.
    [The information referred to follows:]

    I will have my staff contact the Senate Armed Services Committee 
professional staff and Senator Blumenthal's MLA to schedule a 
classified briefing on this.

    Senator Blumenthal. Shifting now to the payload module, I 
understood either from your testimony or from other briefings 
that there was an effort underway to extend the size of the 
payload module and that that issue was going to be under study, 
but that the funds for that work have been reduced somewhat. 
Could you explain, number one, the reasons to extend the 
payload module and, number two, the reasons to reduce the 
funding going into that study?
    Mr. Stackley. Yes. I am not sure about the context of 
extending.
    What we are looking at within the Virginia payload module 
concept is adding 4 modules to the current capacity on the 
Virginia which would add an additional 28 missiles per boat.
    Senator Blumenthal. I should have used the word ``expand'' 
probably instead of ``extend.''
    Mr. Stackley. Okay.
    So if you add 4 modules per boat, in order to recover the 
capacity that we lose with the retirement of the SSGNs in the 
late 2020s, we will need about 20 Virginias modified with 
Virginia payload modules. We are currently targeting or looking 
at the 2019 block 5 Virginia procurement as the initiation of 
Virginia payload modules. But first, we have to go through the 
design phase and we also have to take a hard look at the cost 
per boat. There will be a significant review between now and 
then to assess whether that investment is appropriate for that 
capability and capacity.
    The funding that we have laid out in the FYDP, about $800 
million in the FYDP and a trace outside the FYDP, adding up to 
about $924 million nonrecurring engineering, is necessary to 
address the changes that would be required. I would say we are 
held up at the outset due to the continuing resolutions since 
this is a new start, and then we were stunned by sequestration 
in terms of reducing the funding in 2013. So we are delayed on 
that start, but we still see a 2019 incorporation as quite 
feasible. But when you look at the long-range shipbuilding 
plan, that is not included in the cost per boat in 2019 and 
out. So those decisions have not been made.
    The current estimate is in then-year dollars, inflation 
accounted for, we are looking at as much as a $500 million per 
boat increase for that added capacity, and we are going to do 
some significant review of that cost and see what we can do to 
drive that cost down and go through those deliberations with 
all the uncertainty that we are staring at in the budget at 
least in the near term.
    Admiral Myers. Senator, if I could add.
    Senator Blumenthal. Yes, Admiral Myers.
    Admiral Myers. The Virginia payload module incorporation of 
the Virginia-class submarines is an assumption that went into 
the force structure assessment, and when we lose the SSGNs from 
the 2026 to 2028 timeframe, then that is a loss of four 
vessels, four boats. That was another reason, a compounding 
reason, that the numbers changed from 313 to 306.
    Senator Blumenthal. $500 million as an additional cost is a 
fairly significant increment of the total cost. Is it not? It 
is a fairly significant percentage.
    Mr. Stackley. The two boat per year rate right now is about 
2.7 to 2.8 per boat. So you are looking at a 15 to 20 percent 
increase in the unit cost of the submarines. We have work to do 
to try to improve upon that. Actually let me back up here.
    There is $500 million in then-year. So that is out in the 
2019 timeframe. The 2.7/2.8 is in current year. So in current 
year, the Virginia payload module is closer to a $360 to $380 
million estimate.
    Senator Blumenthal. My time has expired, but I want to 
thank each of you for your excellent testimony today. Thank you 
very much.
    Senator Reed. Thank you, Senator Blumenthal.
    We will begin a second round of 5 minutes to give our 
witnesses an opportunity to at least relax a bit.
    But I want to thank the witnesses and also my colleagues. 
This has been a very thoughtful and constructive hearing. 
Again, Secretary Stackley, let me join my colleagues in 
saluting your service over many years. You have done an 
extraordinarily effective job, along with Admiral McCoy and 
Admiral Myers.
    But a lot of our hearing has been, I think, engaged in the 
perennial issue: does the budget drive strategy or strategy 
drive budgets? It is a little of both probably. But one of the 
things that we are reminded by with some of Admiral Myers' 
comments that you have to look at, in terms of strategy, is the 
threat environment. Senator Blumenthal alluded to this.
    We have two not new but increasingly more problematic 
issues. One is cyber in which some of our systems, both 
offensive and defensive, might be compromised either with our 
knowledge or without our knowledge, and second, long-range 
precision weapons that can essentially reach out hundreds of 
miles, if not further.
    Again, this might be more appropriate for a closed session 
but, Mr. Secretary and Admiral Myers, how are you factoring in 
these not new developments but increasingly more critical 
developments in terms of, as you point out, the ship size, the 
size of the fleet, and the mix of ships? Let us begin with 
Admiral Myers.
    Admiral Myers. Mr. Chairman, I think that the place to 
start, when we look at the construction of our annual 
shipbuilding plan, is the force structure assessment and do we 
have that right or are we focused and targeted on the right 
quantity and the right kinds of ships.
    Our current force structure assessment takes into account 
the requirements for our operational plans by the combatant 
commanders, our presence requirements overseas, what we have in 
the force structure, what we think we can build to the 
industrial base, and also looks at it with an eye on the fiscal 
constraint. So when you put it all together, we have what we 
think is the right force to have the right capability in the 
right place at the right time.
    Now, when it comes to the Asia-Pacific AOR, it is important 
that we have the right modernization and capabilities so that 
we can pace the changing environment. When you look at the A2-
AD environment, our submarines having undersea dominance is a 
top priority for the Navy. We have investments in the right 
kinds of ship modernization and protection measures that we 
think are appropriate at this point. We are vigilant. We are 
watching. We are monitoring, but we are also not sitting around 
waiting. We are actively developing and fielding the 
capabilities that we need to assure our access in that kind of 
environment.
    When it comes to the cyber portion, that is very 
complementary to A2-AD, and the Navy has a couple of 
approaches. We are investing in increasing our manpower 
contribution to our cyber force working with the cyber force 
commander, but also all the way down to the ship level with 
Consolidated Attack Network Enterprises (CANEs) and the 
incorporation within our ships to make sure that we have the 
right kind of firewalls, the right kind of thresholds to try to 
mitigate from any kind of cyber intrusion.
    With that, I will turn it over to Secretary Stackley.
    Senator Reed. Thank you, Admiral.
    Mr. Secretary, any further comments?
    Mr. Stackley. Yes, sir. Let me just kind of go down a short 
list here.
    First, a lot of this hearing was focused on platforms, but 
it is really about capability. So if I use the DDG Flight III 
as an example, the reason we are able to evolve that ship class 
to provide for increased air missile defense is because we are 
going to look to leverage other sensors and integrate the other 
sensors into the battle problem to increase the effectiveness 
of the shooter so we do not have to load all the radar 
capability onto one platform. We believe that is extremely 
feasible and it is the right way to go. So we have to continue 
to develop not just the platform, not just the radar for the 
platform, but the integration of the sensors across the force 
to amass the effects.
    Second is R&D. A lot of the discussion about 
sequestration--one of the things we have to keep a close eye on 
is in a sequestration environment, if we are looking at as much 
as a $50 billion a year reduction over the next decade, we have 
to keep our investments going forward in R&D. A decision was 
made back in post-World War II that the United States of 
America is going to remain dominant on the battlefield because 
of capability not just numbers. That comes through the R&D 
stream. So we have to keep our eye focused on developing those 
technologies and capabilities that we need for dominance not 
just winning the numbers battle.
    There is a modernization piece to it. Admiral Myers 
described CANEs as an example. CANEs is an upgrade to our, call 
it, communications backbone on our ships that we need to get to 
because a lot of the legacy capability is vulnerable. We have 
to get there quickly, though. So the investment in CANEs, left 
to its own devices, becomes a 10- to 20-year modernization 
plan. We might not have 10 to 20 years to get there. So we have 
to continually look at how to drive those necessary upgrades 
earlier to the fleet, which means wholeness in terms of our 
modernization accounts as well.
    Then the last piece is--I am just going to put the plug in 
for open architecture. 5-6 years ago, it was a concept. Today 
everyone recognizes that we have to employ open architecture in 
the design of our systems so that we can, in fact, upgrade them 
to keep pace with the threat and not bring our major platforms 
down for lengthy periods of time when we have to do massive 
rip-out and upgrades.
    Senator Reed. Thank you, Mr. Secretary.
    Senator King, any questions?
    Senator King. No additional questions, Mr. Chairman. I just 
want to again thank the witnesses. Mr. Secretary, thank you for 
the superb work that you do and have done.
    Admiral, I understand you are retiring soon, and I want to 
thank you for your long service and wish you a happy 
retirement. I know you will miss coming before this committee. 
[Laughter.]
    Senator Reed. He will miss coming before Senator King.
    Senator Kaine.
    Senator Kaine. Just briefly to all three of you, again 
thanks. This has been helpful. We have talked a lot about 
platforms and then, Secretary Stackley, you talked about 
capability.
    Let us talk about people for a minute. Just over the course 
of the testimony this morning, we have heard about the question 
about furloughs. We have heard questions about the hiring 
freeze and its effect upon the shipbuilding mission, and we 
have also talked about potential cuts to contracting, which 
obviously has an effect on the industrial base. I would love it 
if each of you could just sort of offer your own perspectives 
about the people side of this, this budgetary uncertainty.
    The chairman indicated does budget drive defense strategy 
or does defense strategy drive budget. I am worried that we are 
letting budgetary indecision drive defense strategy, which is a 
horrible thing to do, but that indecision affects people's 
choices about their careers, about where they will work, about 
whether a welder would go to work in the shipyard or choose to 
go to work for the many other companies that want to hire good 
welders.
    Mr. Stackley. Yes, sir. I think you are going to get three 
different perspectives, but we are all going to land at pretty 
much the same spot here.
    Let me first describe that DOD and Congress, and industry 
all recognized that over the period of drawdown of the 1990s 
that we drew down our acquisition workforce far too fast, far 
too deep, and we lost a lot of the capabilities, the talent, 
the skills that we need to have inside the Government in order 
to be able to manage these large, complex programs.
    So we went on the path of rebuilding the acquisition 
workforce. We leveraged the fund that was set up by Congress to 
bring in talent. It is not a numbers count. It is talent. It is 
youth and it is also experience, the right skill sets, the 
right locations. We have done pretty well there. We probably 
hit 70-75 percent of our target before we intersected things 
like hiring freezes and some of these other budget issues. So 
step one is we want to hold onto the skilled workforce that we 
have.
    Sequestration and all the churn that comes with that--that 
is a demoralizer for folks inside of the Government, but I will 
tell you you have a professional workforce out there and we are 
delivering what we need to deliver because the sailors and the 
marines at the far end need our best.
    But it is also a distracter or detractor for folks that are 
in industry that are considering entering Government service. 
That causes me equal concern because we need that talent. We 
need that experience. It still takes 20 years to get 20 years' 
experience, and if we lose the ability to tap into industry for 
that, then we have a long growth path ahead of us.
    So from an acquisition workforce perspective, this period 
that we are going through, uncertainty, the churn, it is almost 
a de-valuing of the Government workforce. That is pretty 
significant. Congress' understanding of that helps. Now what we 
all need to do is work together to try to resolve some of the 
issues before us. In the end, the budget reductions directly 
impact people whether they are inside the Government or service 
industries supporting the Government or our defense 
contractors.
    Admiral McCoy. Senator, thank you very much for asking that 
question. I have a little over 57,000 civilian employees in the 
NAVSEA, and I get many emails every week from what I call the 
``man on the street'' talking to me and asking me questions 
about the furlough and the uncertainty ahead. I had a recent 
one from a worker out of Puget Sound Naval Shipyard who said I 
am getting ready to close on a $73,000 mobile home for my wife, 
myself, and my daughter. I cannot afford it if I am furloughed. 
Do you think I should close on the mobile home? All I could say 
was I can tell you what I know and I can tell you what I do not 
know.
    What I worry about particularly in an industrial 
environment is the focus, and the people are incredibly 
patriotic. On the Friday night before a 3-day weekend, if I 
told a worker in any shipyard, hey, you are flying to Guam 
tomorrow to fix a submarine or fix a ship, even though they had 
plans, they would be the first ones. Their bags would be packed 
and they would be on the airplane. That is the caliber of 
people we have. They put their lives on hold at a moment's 
notice to do the Nation's work.
    What I worry about is the churn out there and the potential 
impacts of the lack of focus either on personnel safety or ship 
safety.
    Senator Kaine. Admiral Myers?
    Admiral Myers. Again, I appreciate the opportunity to 
respond to that question. I think that I have the unique 
perspective of recently as 6 months ago coming from the fleet, 
being the commander of naval aviation and currently being the 
chief financial officer for the Navy.
    So when I look at what is happening, first you have to 
think about what is the role of the Navy. The role of the Navy 
is to operate forward and be ready with a capable force, a 
trained and capable force. That is our job. But to do that, we 
have to plan. We have to plan a budget. We have to plan a 
shipbuilding plan. We have to plan how we are going to operate, 
train to make sure that we are ready to operate overseas, 
maintain our aircraft, our ships and our weapons systems so 
that they can be ready when we need them. We have to have the 
sailors that are trained and ready to man those ships and 
aircraft.
    The sequestration and the budget uncertainty is disruptive. 
It is immensely disruptive. It disrupts our ability to sort out 
the budget. It disrupts the shipbuilding plan. It disrupts our 
ability to plan for the future. It disrupts our ability to 
operate, and we saw that just this last spring and will 
continue to see that with the impacts of the fiscal year 2013 
sequester. It disrupts the way we train because if our 
operating schedule is changing and we do not have the funding 
in our operating accounts to train the way we want to, then we 
have to reduce the training. It impacts the way we maintain, 
and if you impact the way you train and maintain, now you are 
impacting the way you are going to operate the next fiscal 
year. Most significantly, it is very disruptive to the sailors 
and their families because of all the uncertainty that is 
introduced.
    So anything that we can do together to put certainty back 
into our budget process to de-trigger the sequester, to support 
PB-14, would be not only appreciated but embraced by the 
613,000 civilians and sailors operating around the globe for 
the U.S. Navy.
    Senator Kaine. Thank you very much.
    Thank you, Mr. Chair.
    Senator Reed. Thank you, Senator Kaine.
    Senator Blumenthal.
    Senator Blumenthal. Thank you, Mr. Chairman.
    Just briefly to pursue the excellent question asked by 
Senator Kaine, in terms of the impact of sequester, I think we 
on this panel, maybe every Member of the U.S. Senate at this 
point, could do the denunciation of sequester in our sleep. We 
have done it so often and we are so deeply believing in the 
harmful, even disastrous effects of sequester on morale, on 
procurement, and so forth. At least members of this committee, 
I think almost to a person feel that strongly about it. So I 
appreciate the very passionate and committed remarks that you 
just made.
    But looking at the personnel issue from a different 
standpoint, the weapons systems that we have been discussing 
here are so advanced and sophisticated that they really require 
extraordinarily talented and trained, dedicated individuals to 
operate. Obviously, we deeply appreciate the extraordinary 
ability that you bring and the service and sacrifice that you 
have made as individuals, but that same kind of sacrifice, it 
seems to me, needs to be made by those individuals who actually 
drive those ships and operate the weapons systems as they 
become more advanced and more demanding.
    I guess the question I am asking is, are you satisfied that 
the Navy, whether it is because of sequester or any of the 
other disadvantages relative to the private sector, can 
continue to attract the exceptionally devoted and able people 
that it has in past so as to be able to operate the submarines 
and the ships and the aircraft that we are endeavoring to fund 
now?
    Admiral Myers. That is a great question, Senator, and 
something that we are actively looking at very closely. I think 
it is going to be increasingly difficult and challenging for 
the military to attract the right people at the right level if 
we do not put some certainty back into our process. I cannot 
overemphasize the disruption from this budget uncertainty and 
what it is doing out in the fleet, what it is doing to not just 
our investment accounts and our training, but just down to the 
deck plates.
    If we can put certainty back into the process, then I think 
that it would make it easier to communicate not just within the 
Navy but outside the Navy what we are going to be doing for the 
next few years. We absolutely understand what our 
responsibilities are. We understand that this is something that 
we need to work through together, but outside the Navy, those 
that are not part of the process have a hard time understanding 
what is happening and why. So being able to assure them that 
they are coming to an organization that is going to have not 
just potential for their personal development but also has the 
kind of purpose that our military offers in terms of embracing 
our national security and doing something worthwhile with your 
life, wearing the cloth of your Nation is something that we are 
going to have to continue to emphasize. But having any kind of 
budget certainty back into the process would enable us to 
communicate that a little more clearly.
    Senator Blumenthal. Thank you, and I appreciate that very 
candid answer.
    At the same time, if it is any reassurance, as the father 
of a son who was commissioned as a Navy officer in March and 
who is very enthusiastic, to put it mildly, about his service, 
I want to thank you for the model of service you have provided, 
``you'' meaning the men and women of our U.S. Navy, because in 
spite of the uncertainty, in spite of the challenges, we have 
some of the best and brightest of his generation wanting to 
follow that model that you have so ably established. So I know 
that may not be a lot of reassurance, and I share your doubts 
and determination to avoid the effects of sequester. But again, 
I thank you for your service. Thank you.
    Senator Reed. Senator King, please.
    Senator King. I was struck by the sentence you just 
uttered, Admiral Myers. I just want to speak for one U.S. 
Senator. I am having a hard time understanding what is 
happening and why. What is going on in this institution with 
regard to the fiscal situation is inexcusable, and to me it is 
a fundamental issue of competence. We are not doing our job. I 
say ``we'' collectively. I know there are plenty of people who 
are trying very hard to do their job. But it is not just you. 
It is the American people. But there are also people in this 
institution who have a hard time understanding what is going on 
and why. I think that is the key question that I have heard 
today, and we are going to be discussing this. But I appreciate 
your candor, and I know that what you have said is true because 
I am hearing it from people in Maine every time I talk to them 
on the street.
    Thank you very much, gentlemen.
    Senator Reed. Thank you, Senator King.
    For the record, we will keep it open until May 15, next 
Wednesday. My colleagues might have statements they want to 
submit, additional questions. I would ask you, gentlemen, to 
respond as quickly as possible to these questions.
    Thank you, not only for today's hearing, but for your 
service to the Navy and the Nation.
    With that, this hearing is adjourned.
    [Questions for the record with answers supplied follow:]
                Questions Submitted by Senator Jack Reed
                 313 to 306 ships--goal for fleet size
    1. Senator Reed. Admiral Myers, for a number of years now, the Navy 
has stated that the long-term goal for fleet size is 313 ships. That 
goal included a number of assumptions about which ships were included 
in the 313-ship fleet, where they would be based, how they would be 
manned, et cetera. This year, the Navy has changed the goal to 306 
ships. The reason identified in the report related to a change in 
demand for ships in U.S. Africa Command (AFRICOM). With the situation 
in AFRICOM we see today, why should we believe that there should be a 
reduction in overall fleet size based on reduced demand for naval 
forces in AFRICOM?
    Admiral Myers. The reduction in overall fleet size contained in 
Navy's most recent Force Structure Assessment was primarily driven by 
increased global posture forward and modified employment cycles. In 
comparison, the reduction to the AFRICOM presence requirement, in 
alignment with the 2012 Defense Strategic Guidance (DSG), had minimal 
impact on Navy force structure requirements. The revised AFRICOM 
presence requirement is still more than what is currently being 
provided.

                          littoral combat ship
    2. Senator Reed. Secretary Stackley, one of the lessons the Navy 
has had to periodically relearn is that we shouldn't be making changes 
in the middle of a shipbuilding acquisition contract. We certainly most 
recently saw the problems this creates on the Littoral Combat Ship 
(LCS) program where the Navy changed requirements shortly after signing 
the contract. However, after many original problems, the LCS program 
seemed to be improving in its execution. Recently, some concerns have 
been raised about two major issues: what warranted the establishment of 
an LCS Council and are we spending several billion dollars on the LCS 
program to produce a ship that will not meet requirements? Can you 
discuss why the Navy felt the need to create an LCS Council and what 
problems is the Council trying to solve?
    Mr. Stackley. In August 2012, the Navy (CNO/ASN(RD&A)) established 
the LCS Council with three-star flag officer membership from 
requirements, acquisition, and Fleet stakeholders with the objective of 
driving actions and coordinating all administrative control 
responsibilities for the LCS class to ensure LCS is ready to meet its 
assigned missions. Fundamentally, the Council was constituted and 
empowered to bridge ``gaps and seams'' that may exist or arise between 
various stakeholders, warfare and mission communities and, supporting 
activities across the requirements, acquisition, and Fleet enterprise 
to ensure the successful procurement, development, manning, training, 
sustainment and operational employment of the LCS class ships, their 
associated Mission Packages, and shore infrastructure.
    LCS will meet all expected Capability Development Document Key 
Performance Parameters including speed, mission package payload, range, 
navigational draft, core crew manning (addition of 10 crew members 
remains within the threshold), interoperability and the various detect 
to engage scenarios for (ASW, MIW, and SUW). LCS was conceived as an 
integral part of a battle force architecture based on an essential need 
for a new generation of multi-role, ``focused mission'' surface 
combatants optimized for battle network operations in the near-land 
battlespace dominance arena. This capability is precisely what the 
Department of the Navy has received with LCS.
    LCS's concept of operations calls for LCS to penetrate contested 
littorals in the face of three major anti-access threats which are 
clearly documented as joint capability gaps: swarming fast attack 
craft/fast inshore attack craft/ (FAC/FIAC), diesel submarines (SSK/
SMM) and maritime mines. LCS' design characteristics of high speed, 
maneuverability, shallow draft, networked sensors, and readily-
exchangeable focused mission packages were specifically intended to 
allow LCS to dominate these threats and assure access to the littorals.

    3. Senator Reed. Admiral Myers, why do you believe that Vice 
Admiral Tom Copeman, USN, Commander of Naval Surface Forces in the U.S. 
Pacific Fleet, has been quoted as calling for the truncation of the LCS 
program if it will meet Navy requirements?
    Admiral Myers. In 2012, Chief of Naval Operations Admiral Jonathan 
Greenert requested a memo from Vice Admiral Tom Copeman, Commander of 
U.S. Surface Forces, to provoke open and honest discussion to senior 
Navy leadership with regard to force requirements. Vice Admiral 
Copeman's document was entitled ``Vision for the 2025 Surface Fleet.'' 
The comments on the LCS are three paragraphs in a 10-page document on 
the future of Navy's surface fleet. The vision memo does not yet 
represent any program changes or decisions, although it does put these 
issues into the official ring of discussion.
    As the Type Commander for all U.S. Navy Surface Forces, Vice 
Admiral Copeman is specifically responsible for manning, training, and 
equipping Navy's surface forces, including LCS, to meet operational 
commander requirements, and his recommendations and thoughts on the 
Fleet of the future are invaluable in Navy's decisionmaking process. 
Chief of Naval Operations Admiral Greenert stated that ``he appreciated 
the thoughtful look he [Vice Admiral Copeman] gave into the future,'' 
and considered Vice Admiral Copeman's vision to be ``interesting and 
useful.''

               cost and schedule performance of all ships
    4. Senator Reed. Secretary Stackley, could you please give me an 
overview of how the other shipbuilding programs, like aircraft 
carriers, destroyers, LCS, other amphibious ships, and auxiliaries, are 
performing? Please provide detailed metrics on cost and schedule 
performance of these programs.
    Mr. Stackley. Below is a summary of the cost and schedule 
performance for surface Navy ships under construction. The contracts 
for CVN-78 and DDG-1000 are cost plus. All other current contracts are 
fixed price. The Navy continues to assess the impact of fiscal year 
2013 sequestration reductions on shipbuilding programs.
CVN-78:
    The ship is above target cost and will deliver beyond the 
contractual delivery date. The launch date for Gerald R. Ford, the 
first CVN-78 class ship, was revised from July 2013 to November 2013 
with a corresponding delay in delivery until the second quarter of 
fiscal year 2016. Delay of launch and associated delivery will allow 
for increased outfitting to more economically complete the ship. With 
the ship at 70 percent complete at launch, CVN-78 will be well prepared 
for subsequent shipboard testing. The comprehensive effort to reverse 
the trend in cost growth has stabilized program cost performance, and 
the Program Manager's Estimate at Completion, has remained steady at 
$12.887 billion for the past 2 years. However, there are still risks 
associated with full-system testing and first-time integration of 
developmental systems on this first-of-class. Additional funding as 
cost to complete, along with the legislative proposal to adjust the 
cost cap to the program's estimate at completion, is included in the 
fiscal year 2014 President's budget (PB) request.
DDG-1000:
    Some of the DDG-1000 program contracts have experienced cost 
increases typical with first of class ships. Cost increases on the 
first ship are primarily attributed to contracts for the construction 
of the lead ship at Bath Iron Works (BIW), and completion of the lead 
ship hangar, deckhouse and aft peripheral vertical launching system at 
Huntington Ingalls Industries (HII). Many factors contribute to any 
cost increase, including contractor performance, contract change, 
government furnished equipment (GFE), inflation, and labor rates. The 
cost increases at BIW are typical for learning associated with 
construction of a lead ship. The Navy is currently assessing cost 
performance on the program, as well as the impact of sequestration 
reductions, and will address cost increases in the fiscal year 2015 
President's budget. The acquisition procurement unit cost (APUC) in the 
most recent Selected Acquisition Report (SAR) is below the current 
acquisition program baseline (APB) unit price. The program remains on 
track for launch and christening of DDG-1000 in the fall of 2013 and to 
achieve initial operational capability (IOC) in fiscal year 2016.
DDG-51:
    There are currently 13 ships under contract from fiscal year 2010 
to fiscal year 2017. DDG-113 to DDG-116 were awarded in fiscal year 
2010-fiscal year 2012 timeframe while the remaining nine ships were 
awarded as part of the fiscal year 2013-fiscal year 2017 multiyear 
procurement (MYP). While it is still early in the construction process 
for DDG-113 to DDG-116, and the MYP ships are in the pre-construction 
phase, the ships are currently on or projected to be on cost and 
schedule. Sequestration in fiscal year 2013 results in a shortfall to 
the program and requires $304.2 million in Completion of Prior Year 
Shipbuilding Programs.
LCS:
    The Lockheed Martin and Austal USA shipbuilding teams revised their 
schedules based on refined build strategies and have done so to 
maintain solid cost performance (not chasing schedule at the expense of 
cost performance). The shipbuilding teams have paced production work to 
the availability of complete design products, the ability to use new 
facilities efficiently, and the availability of skilled workforce in 
Marinette, WI and Mobile, AL. The shift in the delivery dates for the 
first ships of the Block Buy contracts has resulted in a serial 
production schedule that has an LCS being delivered from each 
shipbuilder every 6 months in the most cost effective method possible. 
LCS seaframe construction continues to be within the allotted 
congressional-mandated budget.
LHA-6:
    LHA-6's Builder's Trials are scheduled to occur this Fall and 
anticipated delivery is March 2014. The ship will deliver beyond the 
contractual delivery date and is projected to be near the cost ceiling. 
Additional funding to complete was provided in the fiscal year 2013 
President's budget. The fiscal year 2014 President's budget request 
includes additional cost to complete for economic price adjustment.
LPD:
    LPD-25 will deliver in the fall 2013 and will be the last ship 
delivered at the Avondale shipyard in Louisiana. LPD-26 and -27, under 
construction at HII's Pascagoula shipyard, are planned for delivery in 
2016 and 2017 respectively. LPD-25 contract is at ceiling. LPD-26 is 
currently above target cost and behind schedule due to initial 
resource/facility challenges at the Pascagoula shipyard. It is very 
early in LPD-27 construction process; the initial baseline review is 
scheduled for summer 2013.
MLP:
    MLP-1 delivered in May 2013, on-cost and on-schedule, which is a 
major accomplishment for the lead ship of a class. MLP-2 will deliver 
in 2014 and is on-cost and on-schedule. It is very early in MLP-3 
construction process (start of construction occurred in February 2013); 
therefore, the current estimate at completion for MLP-3 is the contract 
target cost.
JHSV:
    JHSV-3 to -5 are under construction. Ship deliveries are set 6 
months after the delivery of the previous hull and in the near term, 
are on schedule. Shipbuilder is addressing cost performance with 
capital and process improvement investments. JHSV-3, -4, and -5 are 
projected to complete above target cost, although cost improvement is 
being seen from one ship to the next. Additional funds will be required 
to complete these ships. The HAC-D mark up of the fiscal year 2014 
President's budget request has proposed an additional $7.6 million for 
JHSV-4 overrun. The Navy is addressing overruns for JHSV-3 and -5, 
which were originally funded with Other Procurement, Army.

    effect of retiring an aircraft carrier before a replacement is 
                               available
    5. Senator Reed. Secretary Stackley, having stretched out carrier 
funding in the long-term shipbuilding plan to a rate of buying an 
aircraft carrier every 6 years, we will likely be faced with having to 
retire an aircraft carrier before its replacement has been built. We 
saw this situation with the inactivation of the USS Enterprise before 
the USS George H.W. Bush had been delivered. This resulted in 
temporarily dropping the carrier force level from 11 to 10 for a 2- to 
3-year period. I suspect that the gap period has led to pressure to 
maintain the construction schedule at the expense of efficiency and 
total costs. As we get further into the plan to buy one carrier every 6 
years, I suspect that this pressure will only increase. Will the Navy 
have the resilience to avoid letting the shipyard make very 
inefficient, expensive production decisions to try to deliver carriers 
on schedule or even earlier in order to try to minimize carrier force 
structure gaps occasioned by retiring older carriers?
    Mr. Stackley. Aircraft carriers are procured on 5-year centers. 
CVN-78 was awarded in 2008; CVN-79 and CVN-80 have planned awards in 
2013 and 2018, respectively. As noted in the 30-year shipbuilding plan, 
this pace supports the required carrier force structure of 11 through 
2039. The force structure gap created between the inactivation of CVN-
65 and the commissioning on CVN-78 was the direct result of previous 
DOD and Navy decisions to defer the construction start for CVN-78.
    The Navy and shipbuilder are committed to the most cost efficient 
construction and testing process for aircraft carriers, and will not 
let schedule pressures drive cost inefficiencies into the program. The 
recent decision to delay launch of CVN-78 from July to November 2013 
reflects this commitment; allowing the shipbuilder to complete more 
outfitting and best prepare the ship for the post-launch test program, 
steps that will ultimately lower the production costs to build the 
ship.
    The follow-on ships of the class, CVN-79 and CVN-80 will 
incorporate repeatable, sustainable build, and test processes, built on 
lessons learned from CVN-78 that will substantially lower the costs of 
these follow-on ships.

    6. Senator Reed. Secretary Stackley, will the Navy be able to 
maintain self-discipline in this situation?
    Mr. Stackley. Yes, the Navy remains committed to the most cost 
effective delivery schedule regardless of the pressure to the schedule. 
The recent decision to delay launch of CVN-78 from July to November 
2013 reflects this commitment; allowing the shipbuilder to complete 
more outfitting and best prepare the ship for the post-launch test 
program, steps that will ultimately lower the production costs to build 
the ship.
                                 ______
                                 
               Questions Submitted by Senator Bill Nelson
                    mayport and strategic dispersal
    7. Senator Nelson. Admiral McCoy, dispersing our capital ships is 
in our best national security interest and specifically, dispersing the 
East Coast carrier fleet is a national security priority. The 2010 
Quadrennial Defense Review clearly states, ``To mitigate the risk of a 
terrorist attack, accident, or natural disaster, the Navy will homeport 
an East Coast carrier in Mayport, Florida.'' The Navy has stated 
military construction (MILCON) costs to prepare Mayport to homeport a 
carrier, which includes nuclear maintenance facilities, would be 
approximately $500 million, while the Government Accountability Office 
(GAO) estimates the number to be $250 to $300 million. The next phase 
of the effort is a Controlled Industrial facility (CIF) for nuclear 
maintenance. Navy estimates it will cost $150 million. GAO states the 
range as $35 to $94 million. However, the Navy recently completed a CIF 
at the Naval Shipyard in Portsmouth, VA, for $33 million. I know that 
the Navy is always interested in ensuring that we have adequate 
capacity and a suitably diverse footprint for our surface ship nuclear 
maintenance facilities. Do you have any reason to believe that the Navy 
is backing off from this position?
    Admiral McCoy. The Navy is committed to strategic dispersal of its 
forces. The east coast carriers are not currently dispersed. All east 
coast carriers and support infrastructure are consolidated within a 15 
nautical mile radius in the Hampton Roads area. Two Atlantic Fleet CVN 
homeports reduce risk and provide strategic flexibility/options in the 
event of natural disaster, manmade calamity, or attack by foreign 
nation or terrorists, and are consistent with homeporting strategies in 
place on the west coast (i.e., Bremerton, Everett, & San Diego). Due to 
fiscal constraints, the decision has been made to defer the investment 
required to homeport a CVN in Mayport at this time. The Navy remains 
committed to strategic dispersal of east coast carriers and intends to 
homeport a CVN in Mayport in the future.

    8. Senator Nelson. Admiral McCoy, can you discuss how the Navy can 
provide such a drastically different quote for a similar facility?
    Admiral McCoy. The CIF at Norfolk is currently under construction 
and therefore the $26 million cost represents an actual winning bid in 
the current economic climate; whereas the $150 million estimate for the 
CIF at Mayport is based on a very preliminary design. Additionally, the 
Mayport CIF design is more robust to accommodate the increased 
potential for higher storm surges due to its location adjacent to the 
coast of Florida. Furthermore, the Mayport CIF will also include some 
nuclear facilities (such as a long-term mixed waste storage facility, 
container storage, additional crane capacity, and additional 
radiological work enclosures) that the Norfolk CIF does not require 
because those facilities already exist at Norfolk.

                              counterdrug
    9. Senator Nelson. Admiral Myers, due to the sequestration, Navy 
ship deployments to U.S. Southern Command (SOUTHCOM) have been 
cancelled. Additionally, the President's fiscal year 2014 budget 
request saw a drastic 38 percent reduction from the President's 2013 
budget for drug interdiction efforts. Historically, SOUTHCOM drug 
interdiction results in the annual removal of 200 tons of cocaine from 
the U.S. supply--10 times that which is removed by U.S. law enforcement 
along the Southwest border. I realize that we have the unfortunate 
effects of sequestration, ongoing commitments in U.S. Central Command 
(CENTCOM), as well as the pivot to Asia influencing the number of Navy 
ships available to the SOUTHCOM commander. No Navy ships for the 
counterdrug effort in the Caribbean for the remainder of the fiscal 
year, however, is a very negative development, indeed. Now that you 
have sent the new LCS on its maiden deployment in the Western Pacific, 
will you commit to examining SOUTHCOM as the next developmental 
deployment for LCS?
    Admiral Myers. In accordance with the DSG, the initial LCS 
deliveries and deployments are focused in the Pacific. Navy has a 
variety of platforms that can support SOUTHCOM's counter illicit 
trafficking line of operations and we continuously review support to 
SOUTHCOM as part of our defense strategy. However, we cannot commit to 
making SOUTHCOM the next deployment for LCS without a stable defense 
budget. Navy is currently assessing the impacts of sequestration as 
part of the Strategic Choices Management Review (SCMR), which is 
designed to factor in defense-wide budget cuts and their impacts to the 
DSG.
                                 ______
                                 
             Questions Submitted by Senator Jeanne Shaheen
                               submarines
    10. Senator Shaheen. Secretary Stackley and Admiral McCoy, the 
Defense Advanced Research Projects Agency (DARPA) is developing an 
unmanned anti-submarine system called the anti-submarine warfare 
continuous trail unmanned vessel (ACTUV). Could you please provide the 
Navy's assessment of the program's potential capabilities and current 
state of development?
    Mr. Stackley and Admiral McCoy. The Navy is watching ACTUV with 
interest. The program will advance the state-of-the-art for Unmanned 
Surface Vehicle (USV) autonomy which will be useful for many other 
programs. It will provide insight into the flexibility of a surface 
craft to engage a submarine in an environment short of hostility. The 
program will also advance the state-of-the-art of various ASW sensors 
which have been under development by the Office of Naval Research, 
notably Non-Acoustic sensors. The ACTUV concept of operation is focused 
on ``hold-at-risk'' after first being cued by ASW surveillance systems 
to search an area of uncertainty. This concept of operation depends on 
initial detection and classification of a threat target within a large 
area by a surveillance system, the hardest task in ASW. The success of 
long term track depends to some extent on benign behavior of the threat 
country's maritime assets.
    The ACTUV program has selected a USV design and has completed 
scale-model testing to validate speed/power relationships. Collision 
avoidance autonomy has been bench-marked in simulations. The algorithms 
were tested against the International Collision Regulations (COLREGS). 
The reacquired and continued track of a simulated submarine after 
executing COLREGS maneuvers 95 percent of the time. The Navy will 
continue to stay engaged with DARPA on this technology development.

             ohio-class guided missile submarine retirement
    11. Senator Shaheen. Admiral McCoy, U.S. Special Operations Command 
(SOCOM) has indicated that the Ohio-class guided missile submarines 
(SSGN) are the only host platform capable of deploying with dual dry 
deck shelters (DDS), which allow Special Operators much greater 
flexibility during undersea campaigns. How will that requirement be met 
as the SSGNs retire?
    Admiral McCoy. The Navy and SOCOM are currently conducting an 
Analysis of Alternatives (AoA) to evaluate options to address the gap 
in undersea clandestine insertion of Special Operations Forces when the 
four Ohio-class SSGNs retire. The AoA is expected to be completed in 
2013.

    12. Senator Shaheen. Admiral McCoy, would the Virginia Payload 
Module (VPM) accommodate the DDSs?
    Admiral McCoy. Virginia-class (SSN-774) submarines with VPM will 
still be required to accommodate the DDS.

    13. Senator Shaheen. Admiral McCoy, what capabilities will be lost 
from a special operations perspective in the transition from SSGNs to 
Virginia-class boats both with the VPM?
    Admiral McCoy. Ohio-class SSGNs are much larger submarines than 
Virginia-class attack submarines (SSN), with or without VPM. This size, 
and the modifications made to the SSGNs during conversion to support 
special operations, allows them to carry large complements of Special 
Operations Forces (SOF) and their support teams, ammunition and 
equipment and two dry deck shelters (DDS) to support long duration, 
sustained, undersea special operations campaigns.
    Virginia-class SSNs were also extensively designed to support 
special operations forces, on a smaller level. Current Virginia-class 
SSNs can accommodate approximately half the personnel, only one DDS, 
and much less equipment because of their size, but have much better 
maneuverability and access to shallow, littoral waters, optimizing them 
for focused missions vice long term campaigns.
    VPM, because of its added compartment size and accessible large 
diameter payload tubes, would provide the opportunity to host more SOF 
personnel and their equipment for longer durations than current 
Virginia-class SSNs, though not to the degree of the SSGNs. The 
suitability of Virginia-class SSNs with and without VPM is being 
considered as a potential material solution in the ongoing Navy and 
SOCOM AoA. This analysis will identify options and address the gap in 
undersea clandestine insertion of special operations forces when the 
four Ohio-class SSGNs retire.

    14. Senator Shaheen. Admiral McCoy, what capabilities will be lost 
from a special operations perspective in the transition from SSGNs to 
Virginia-class boats both without the VPM?
    Admiral McCoy. Ohio Class SSGNs are much larger submarines than 
Virginia-class attack submarines (SSN), with or without VPM. This size, 
and the modifications made to the SSGNs during conversion to support 
special operations, allows them to carry large complements of Special 
Operations Forces (SOF) and their support teams, ammunition, equipment 
and two DDSs to support long duration, sustained, undersea special 
operations campaigns. Virginia-class SSNs were also extensively 
designed to support SOF, but on a smaller scale. Current Virginia-class 
SSNs can accommodate approximately half the personnel, only one DDS, 
and much less equipment because of their size. The smaller SOF payload 
is balanced against better maneuverability and access to shallow, 
littoral waters, optimizing Virginia-class for focused missions vice 
long-term campaigns. U.S. Special Operations Command requirements 
currently are fulfilled by maintaining both an SSGN and SSN operational 
capability. VPM, because of its added size and accessible large 
diameter payload tubes, would provide the opportunity to host more SOF 
personnel and their equipment for longer durations than current 
Virginia-class SSNs, though not to the degree of the SSGNs. The 
suitability of Virginia-class SSNs with and without VPM is being 
considered as a potential material solution in the ongoing Navy and 
SOCOM AoA. This analysis will identify options and address the gap in 
undersea clandestine insertion of Special Operations Forces when the 
four Ohio-class SSGNs retire.

                           dry deck shelters
    15. Senator Shaheen. Secretary Stackley, the first DDSs will reach 
the end of their service life in 2022. In order to optimize design, 
ensure a smooth transition, and minimize cost the Navy should consider 
the next generation DDS as soon as possible. What is the Navy's current 
plan to replace the DDS platform?
    Mr. Stackley. In January of this year, an engineering evaluation of 
the current DDSs was completed, resulting in their service life being 
extended an additional 20 years. As a result, the first DDS will not 
reach its end of service life until 2042. U.S. Special Operations 
Command (SOCOM) is the resource sponsor for the DDSs, as ``special 
operations forces peculiar equipment,'' and is responsible for their 
operation, modification and eventual replacement. An ongoing AoA is 
evaluating various options to modify or replace the current DDSs, along 
with the Navy's options for associated host submarines, to best support 
SOCOM and the regional combatant commanders' warfighting requirements. 
The AoA is expected to be complete in 2013.
                                 ______
                                 
            Question Submitted by Senator Richard Blumenthal
                        virginia payload module
    16. Senator Blumenthal. Secretary Stackley, I appreciate your 
statement that, to make up for the loss of the strike capacity of the 
retiring SSGNs, the Navy requested funding of approximately $121 
million in fiscal year 2014 to continue the design for the VPM that can 
launch more cruise missiles. I understand the Navy plans to procure the 
modified Virginia-class SSNs starting in fiscal year 2019. Given that 
plan, I would appreciate if you could please provide information as to 
why the request for new design SSN for fiscal year 2014 was reduced by 
approximately $146 million from the $268 million projected for fiscal 
year 2014 last year, to what we saw submitted in the President's budget 
this year. The Navy budget justification documents say only that $55 
million reduction was for program adjustments and $91 million was a 
miscellaneous adjustment. I would like to have more fidelity as to the 
nature of these reductions and whether they will impact your target 
date of 2019 for this capability.
    Mr. Stackley. The Navy is proceeding with development and design of 
the Virginia Payload Module (VPM) with the intent of pursuing the 
option to include this capability in the 2019 Virginia-class 
procurement. The ultimate decision regarding procuring VPM in 2019 will 
be made in conjunction with budgeting decisions for the fiscal year 
2019 President's budget. The VPM effort (RDT&E Project 4500) was 
reduced $91 million in fiscal year 2014 to align with a rephased 
funding profile, which supports starting major design activities in 
fiscal year 2014, vice fiscal year 2013 as was projected in last year's 
budget.
    Funding for the reduced total ownership cost (RTOC) initiative, 
under RDT&E Project 1947, was reduced by $47 million. The RTOC work 
performed to date had determined that the full amount originally 
programmed was not required to reach the core objective of increasing 
Virginia-class SSN operational availability by reducing depot-level 
maintenance, starting in Block IV.
    The remaining balance of the adjustment was related to efficiencies 
in doing business or was used for other Department priorities and 
rephased to future years.
    These adjustments do not impact on the ability to incorporate VPM 
in Block V Virginia-class SSNs starting in fiscal year 2019.
                                 ______
                                 
               Questions Submitted by Senator John McCain
                        impact of sequestration
    17. Senator McCain. Secretary Stackley, last year you testified 
that the Navy cannot ``imagine continuing [the current defense program] 
with another half a trillion dollar reduction over the next 10 years. 
It's a significant shift and we have not put contingencies in place.'' 
It's a year later and sequestration has occurred. Has the Navy budget 
accounted for sequestration in the budget request for fiscal year 2014?
    Mr. Stackley. The fiscal year 2014 President's budget submission 
did not account for sequestration in fiscal year 2014. Navy is working 
with the Office of the Secretary of Defense in the Strategic Choices 
and Management Review (SCMR) to inform the major decision that must be 
made in the decade ahead to preserve and adapt our defense strategy, 
our force, and our institutions under a range of future budgetary 
scenarios. In the event sequestration is allowed to occur in 2014, we 
will work with the Department to make the necessary adjustments to 
continue to provide Combatant Commanders with ready and capable Naval 
forces while, to the extent practicable, protecting our research base 
and ensuring that our people are properly resourced.

    18. Senator McCain. Secretary Stackley, you state in your testimony 
that, ``Every major weapon system is impacted by sequestration in 
2013.'' Which specific acquisition programs are experiencing reduced 
quantities, delayed schedules, and potential cost growth as a result of 
sequestration?
    Mr. Stackley. The Navy is still reconciling the impact of 
sequestration in fiscal year 2013 to each specific acquisition program. 
Sequestration law implemented automatic cuts that impacted each 
separate program line in the entire budget. We are working to mitigate 
the impacts, but in some cases we had to de-scope certain items in the 
shipbuilding plan, while maintaining overall force structure capacity 
and capability. For example, Navy was unable to award the 10th DDG-51 
in the multiyear authorized and appropriated in 2013 due to funding 
lost by sequestration. We are continuing to work with Congress to 
examine this impact. Additionally, we estimate that there will be a 
reduction of up to 12 aircraft procurements across our aviation 
programs and approximately 291 weapons of various types not procured.
    In other cases, we may have to delay delivery or initial 
operational capability (IOC). For example, due to the funding lost in 
research and development, sequestration will likely cause a delay in 
the IOC dates for the LCS mission packages, systems and capabilities 
that we need desperately today. Similarly, sequestration also reduced 
the development and procurement associated with the lead ship in the 
DDG-1000 program, which potentially will delay lead ship delivery.
    Delays in schedules, uncertainty in planning, and deferral of costs 
to future years inevitably lead to future cost growth and affordability 
challenges. Our ship construction programs will need to restructure 
schedules and shift some costs to future years due to sequestration. 
This will pass on ``costs to complete'' that will need to be reconciled 
in future years. These costs will not be an insignificant challenge as 
they may compel Navy to cancel the procurement of future ships to 
complete ships that are nearing delivery.
    Navy is able to mitigate some of the impacts of sequestration in 
fiscal year 2013 by liquidating all the assets we were building through 
cost reduction efforts in the prior years of our major procurement 
programs. If sequestration continues into fiscal year 2014, that margin 
is gone and there will be direct impacts to our acquisition programs 
with significant reductions in shipbuilding, aviation, and weapons 
system programs.

    19. Senator McCain. Secretary Stackley, your testimony states that 
the Navy will need an average annual level of shipbuilding investment 
of $16.8 billion over the next 10 years, and the 10 years after that 
about $20 billion annually to meet goals outlined in the 30-year 
shipbuilding report. Given the current fiscal crisis facing the 
Department of Defense (DOD), do you realistically expect to even get 
$14 billion or $15 billion over the next 3 years?
    Mr. Stackley. As the Secretary of Defense certified with the 
shipbuilding plan, the budget for fiscal year 2014 and the Future Years 
Defense Program (FYDP) for fiscal years 2014-2018 provide a sufficient 
level of funding to procure the naval vessels specified by the plan. 
DON has historically been able to resource between $12 billion and $14 
billion in annual new-ship procurement funding. During the fiscal year 
2014-2018 FYDP, average annual new-ship procurement funding is about 
$14 billion. This level of investment is based on the need to balance 
our resources between manning, maintenance, sustainment, modernization 
and recapitalization of our ships, aircraft and weapons. The plan is 
affordable within the FYDP, but does not account for the effects of the 
Budget Control Act of 2011.
    There will be resourcing challenges outside the FYDP, largely due 
to the investment requirements associated with the Ohio-class 
replacement (OR) SSBN. The cost of the OR SSBN is significant relative 
to the resources available to DoN in any given year. At the same time, 
the Department will have to address the block retirement of ships 
procured in large numbers during the 1980s which are reaching the end 
of their service lives. The confluence on these events prevents DoN 
from being able to shift resources within the shipbuilding account to 
accommodate the cost of the OR SSBN.
    If DoN funds the OR SSBN from within its own resources, OR SSBN 
construction will compete for the resources available for construction 
of other ships in the battle force such as attack submarines, 
destroyers, aircraft carriers and amphibious warfare ships. The 
resulting battle force will not meet the requirements of the Force 
Structure Assessment (FSA) and will therefore not be sufficient to 
implement the DSG. In addition, there will be significant negative 
impact to the shipbuilding industrial base since, for the decade the 
SSBNs are being built, there will only be sufficient resources 
(assuming historical funding levels) to procure one or two additional 
multi-mission ships each year during that period.

    20. Senator McCain. Secretary Stackley, please provide a revised 
30-year shipbuilding plan that takes into account, to the best of your 
ability, the sequestration of defense accounts over the next 9 years.
    Mr. Stackley. Accordingly, a shipbuilding plan that takes into 
account a decade of sequestration cannot be constructed in isolation, 
but must rather be constructed with the formation of the overall 
budget. As Secretary Hagel stated in his letter of May 10, 2013 to the 
Defense Authorization and Appropriations committees, forwarding the 
Report to Congress on the Annual Long-Range Plan for the Construction 
of Naval Vessels for fiscal year 2014, the plan will be updated and 
submitted with the President's budget submission for fiscal year 2015 
when the Strategic Choices and Management Review is completed and the 
Department's Appropriations Bill for fiscal year 2014 is enacted.

                      ford-class aircraft carrier
    21. Senator McCain. Secretary Stackley, the President's budget 
request for 2014 includes a legislative proposal to raise the cost cap 
for the first Ford-class aircraft carrier (CVN-78) from $11.8 billion 
to $12.9 billion. Why do you need the cap this year when the carrier is 
only 58 percent complete--6.5 percent behind schedule--and not 
scheduled for delivery until 2016?
    Mr. Stackley. The Navy requires an increase to the CVN-78 cost cap 
in fiscal year 2014 because, based on the expected spend rates, the 
program will exceed the current cap of $11.8 billion during fiscal year 
2014. The fiscal year 2014 President's budget adds $588 million to the 
CVN-78 program in fiscal year 2014. When added to the appropriated 
funding of $11,512 million, the total program funding through fiscal 
year 2014 is $12,100 million.

    22. Senator McCain. Secretary Stackley, the majority of the 
shipboard test programs for CVN-78 will not commence until after the 
launch in November 2013. What is the risk that the operational testing 
for CVN will result in expenses that exceed the proposed cost cap?
    Mr. Stackley. The significant new developmental technologies, 
Electromagnetic Aircraft Launch System (EMALS), Advanced Arresting Gear 
(AAG), and Dual Band Radar (DBR) are executing land based programs to 
mitigate shipboard testing risk. In addition, all shipboard systems are 
undergoing a methodical test progression that will ensure testing is 
conducted as a totally integrated test program vice a federation of 
individual tests. All of these steps will minimize the risk associated 
with follow-on testing. However, there are always unknowns associated 
with first time operation of new systems that could produce cost risk 
during the shipboard test program. The Navy is taking all available 
steps to minimize that risk but it cannot be fully eliminated and 
cannot be precisely quantified at this time.

    23. Senator McCain. Secretary Stackley, in December the Director of 
Operational Test and Evaluation noted that the current test plan for 
CVN-78 does not adequately address ``platform-level developmental 
testing.'' What are you doing to address this concern?
    Mr. Stackley. The Program's Test and Evaluation Master Plan (TEMP 
1610) is currently being revised, and will be submitted for approval as 
part of the upcoming Defense Acquisition Board. The revisions have been 
made to address the concerns noted by DOT&E and organized the planned 
testing into five distinct Developmental Test phases to include 
platform-level developmental testing. This approach was established 
based on recommendation received from, and in collaboration with 
COMOPTEVFOR, DASD (DT&E), and DOT&E.

    24. Senator McCain. Secretary Stackley, do you have concerns that 
the concurrent development, testing, and installation of an electronic 
aircraft launch system designed to replace legacy catapult systems will 
affect either cost or schedule for CVN-78?
    Mr. Stackley. The Navy has taken specific steps to mitigate both 
the cost and schedule risks associated with the concurrent development, 
testing and installation of Electromagnetic Aircraft Launch System 
(EMALS).
    EMALS hardware is being procured on a Firm-Fixed-Price contract. 
Hardware deliveries to the shipbuilder have been ongoing since May 
2011, and most equipment interior to the ship is already installed. 
Flight deck equipment will be installed this year using lessons learned 
from the full scale single launcher installation at the land-based test 
site. Further cost risk from development and shipboard installation of 
EMALS is projected to be low.
    EMALS is 92 percent complete on an extensive System Development and 
Demonstration land-based test program, having successfully launched 134 
aircraft and more than 2,600 deadloads. This testing and the identified 
design issues have been resolved, greatly mitigating risk to the 
shipboard test program. Additionally, following installation, a 
methodical step-by-step shipboard testing sequence has been developed 
to further reduce risk of significant test problems that could affect 
cost or schedule. Testing of the integrated EMALS system (four 
launchers and three energy storage groups) will be completed shipboard. 
This process, together with laboratory testing of the shipboard four 
launcher control system and the land-based testing already completed, 
lowers cost risk due to shipboard testing. However, because there are 
always unknowns associated with first time shipboard operations of new 
systems, some cost and schedule risk remains as part of this effort. In 
particular, EMALS installation and testing will be on the critical path 
for CVN-78 Delivery and will require a heightened degree of 
coordination and performance by the shipbuilder in order to capitalize 
on the extensive risk mitigation efforts employed throughout EMALS 
development; else cost and schedule will be significantly impacted.

    25. Senator McCain. Secretary Stackley, how confident are you that 
the final cost for CVN-78 will not exceed the proposed statutory cap?
    Mr. Stackley. The cost estimate that forms the basis for the 
proposed cost cap was first established and reported to Congress 
approximately 2 years ago. The estimate accounts for all elements of 
cost (design, contractor furnished material, government furnished 
material, shipbuilding labor, fees, change orders, and government 
support cost) factoring in performance-to-date, estimated work-to-go, 
risks and opportunities to future performance. In the course of these 
past 2 years, design, material (contractor and government), labor 
rates, change orders and government support costs have performed within 
range of the estimate and confidence is high that these elements of 
cost will not exceed their allocation within the proposed cap. There 
remains, however, substantial risks associated with full system testing 
and first time integration on this first-of-class. System testing and 
land-based testing to date have increased confidence that the test 
program has mitigated the impact of major changes to the ship's 
platform. Yet, the extent and complexity of these new systems preclude 
fully retiring this risk in advance of shipboard testing. Accordingly, 
in view of remaining risk associated with completing the first-of-class 
test and trials program, the Navy has requested authority for the 
Secretary of the Navy to be able to adjust the cost cap in the event 
test-related cost growth jeopardizes completion of CVN-78 within the 
proposed cost cap.

    26. Senator McCain. Secretary Stackley, the launch for CVN-78 has 
been delayed from July 2013 to November 2013 and even then will only be 
70 percent construction complete. How do schedule slips affect the 
costs to the Navy?
    Mr. Stackley. The delay in launch reflects the Navy's commitment to 
follow the most cost-effective path to CVN-78 delivery. Rather than 
inefficiently pursuing scheduled milestone dates, the Navy has opted to 
delay launch. Doing so allows time for the most cost-effective 
completion of critical path work and also enables the ship to reach the 
70 percent complete mark at launch--10 percent above the previous 
program goal. This advanced state of completion serves to lower cost 
risk associated with the follow-on shipboard testing schedule.

    27. Senator McCain. Secretary Stackley, what concerns do you have 
that CVN-78 will be delivered by early 2016?
    Mr. Stackley. The shipbuilder has developed a cost-effective plan 
to complete construction and test of CVN-78 in early 2016 with minimal 
schedule risk considering technical risks identified to date. However, 
as has been seen in other first-of-class ships, unknown risks 
associated with first time shipboard testing of new systems could, 
depending on the magnitude of the issue, impact scheduled delivery. The 
Navy has taken several steps to minimize these risks, including 
extensive land-based testing and well-designed shipboard testing plans.

    28. Senator McCain. Secretary Stackley, the next carrier, CVN-79, 
is now estimated to cost the Navy $11.3 billion and the Secretary of 
the Navy has used an authority provided by law to adjust the cost cap 
for total construction to $11.5 billion. The shipyard at Newport News, 
which will construct CVN-79, is operated by Huntington Ingalls 
Industries, the Nation's sole industrial designer, builder, and 
refueler of nuclear-powered aircraft carriers. How can the Navy use 
competitive practices to control costs for CVN-79?
    Mr. Stackley. The Navy is taking several steps to introduce as much 
competition as possible into the construction process for its carriers. 
These include working directly with the shipbuilder to ensure 
competitive practices are employed where feasible within the material 
procurement process. New suppliers have also been developed and 
qualified to increase the number of competitive opportunities. In 
addition, while outside contractors have not been employed in past CVN 
construction, the Navy is pursuing the use of Alteration Installation 
Teams, who routinely install modernization items at a lower cost on 
other Navy ships, to accomplish the installation of select systems on 
CVN-78 and CVN-79 as another competitive practice. Finally, we are 
examining the effectiveness of competing select portions of the ship 
itself, similar to the deckhouse on DDG1000. We will work diligently to 
expand each of these opportunities for CVN-80 and subsequent ships of 
the class.

    29. Senator McCain. Secretary Stackley, the Navy recently submitted 
a report to Congress regarding the costs for CVN-79 that detailed a 
series of actions expected to reduce the material cost of CVN-79 by 10 
to 20 percent in real terms from CVN-78, to reduce the number of man-
hours required to build the CVN-79 by 15 to 25 percent from CVN-78, and 
to reduce the cost of government furnished systems by 5 to 10 percent 
in real terms from CVN-78. Can you please provide what the current 
actual baselines in real terms for CVN-78 are for each goal that you're 
going to measure savings against for CVN-79?
    Mr. Stackley. The cost savings expected to be realized in the 
construction of CVN-79 and identified in the May 6, 2013 Report to 
Congress are measured against the corresponding elements (hours to 
build the ship, material cost, and government furnished systems cost) 
of the CVN-78 Program Manager's estimate at completion (EAC) as 
identified in the 2011 SAR as measured in TY$13. The details of this 
baseline are considered sensitive and were provided to the subcommittee 
professional staff members on June 8, 2013.

    30. Senator McCain. Secretary Stackley, given the sole source 
nature of the negotiations, how realistic is the projection of savings 
for CVN-79?
    Mr. Stackley. As detailed in its May 6, 2013 Report to Congress, 
the Navy's approach to carrier construction has undergone an extensive 
affordability review. Changes made by the Navy and the shipbuilder will 
significantly reduce the cost to build CVN-79. These changes include 
starting construction on CVN-79 with:

         A complete design and bill of materials
         A firm set of stable requirements
         Development completed on a host of new technologies 
        inserted on CVN-78
         An optimal build plan that emphasizes the completion 
        of work and ship outfitting to optimize cost and ultimately 
        schedule performance

    Additionally, the Navy and the shipbuilder continue to discuss a 
series of additional changes that could positively impact construction 
costs. The Navy has also imposed cost targets and is aggressively 
pursuing cost reduction initiatives in its government furnished 
systems. The projection of savings on CVN-79 is consistent with both 
the actions we are taking to change the way we are building CVN-79, and 
reductions achieved between the first and second ships of other ship 
classes.

    31. Senator McCain. Secretary Stackley, in your opinion, what is 
the incentive for the contractor to negotiate price reductions with the 
Navy in good faith?
    Mr. Stackley. The incentive for the contractor to negotiate price 
reductions with the Navy in good faith is the direct linkage between 
shipbuilding cost reduction and a stable and predictable workload into 
the future. The Navy has communicated its expectations to the 
shipbuilder that performance on CVN construction must improve. The 
shipbuilder's actions, including visiting other construction yards to 
view best practices and the changes they have already made to the CVN-
79 construction process, indicate that they have heard that message and 
are changing how CVNs are constructed to reduce the cost. While they 
are the sole provider capable of building CVNs, we have made it clear 
that failure to reduce costs will come at the expense of future 
workload stability for Huntington Ingalls Industries-Newport News 
Shipbuilding.

    32. Senator McCain. Secretary Stackley, the Secretary of the Navy's 
recent report on costs for CVN-79 mentions a series of lessons learned 
that should significantly control the cost of construction, starting 
with a firm set of stable requirements, a complete design and a 
complete bill of material, and ensuring an optimal build plan that 
emphasizes the completion of work and ship outfitting as early as 
possible in the construction process to optimize cost and ultimately 
schedule performance. How are you applying these lessons to the 
development and construction of other ship classes? Please provide 
specific examples.
    Mr. Stackley. The Aircraft Carrier Construction Report to Congress 
dated May 2013, provided a comprehensive report detailing the actions 
being taken to reduce the cost to build CVN-79. Lessons learned from 
CVN-78, which were driven by material availability and first-of-class 
design/construction issues, have resulted in changes to the build 
strategy, design changes for greater producibility, facility upgrades, 
and improved supply chain management, that are being or will be 
incorporated on CVN-79 and follow ships.
    Certain lessons learned, such as shipbuilding and manufacturing 
best practices, can be implemented to various degrees across all 
shipyards. Within the Navy's shipbuilding portfolio, the Navy has 
instituted priorities that center upon improving affordability and 
wholeness, which include, but are not limited to, employing fixed-price 
type contracts to control cost for ships in production, and utilizing 
long-term contracts such as multiyear procurements (MYP) and block 
buys; maturing design plans prior to the start of construction; and 
continuing emphasis on cost performance, production stability, and 
improving quality.
    Examples of these priorities and the resulting benefits are 
outlined below:
Employing Fixed-Price Type Contracts and Utilizing MYP and Block Buys:
    For stable programs, the Navy has leveraged fixed-price MYP and 
block buys. These two methods alone are resulting in over $11.5B of 
savings in current procurements of major Navy weapons systems. Within 
the surface and submarine shipbuilding portfolio, the Navy has utilized 
fixed-price type contracts in the DDG-51, LPD-17, LCS, LHA (R), JHSV, 
MLP, and Virginia-class programs.
    The recent DDG-51 fiscal year 2013-2017 MYP yielded savings of more 
than $1.5 billion. MYP contracts achieve savings through economic order 
quantity (EOQ), reduced hardware and engineering costs, and improved 
planning and production efforts possible with increased stability in 
the industrial base.
    The dual block buy award strategy employed on the LCS program 
afforded the Navy an opportunity to award up to 20 ships between fiscal 
year 2010-2015 with fixed-price type contracts resulting in a savings 
of approximately $2.9 billion. This strategy stabilized both the LCS 
program and the industrial base. It increased the ship procurement rate 
to support urgent operational requirements, promoted efficiency across 
the entire spectrum of the industrial base while sustaining 
competition, and enhanced Foreign Military Sales opportunities. The 
fixed-price type contract also limits the government's liability and 
incentivizes both the government and the shipbuilder to aggressively 
pursue further efficiencies.
    Two shipbuilders, Electric Boat and Newport News Shipbuilding, are 
currently building Virginia-class submarines under a teaming agreement 
originally legislated by Congress. The Virginia-class submarines have 
been awarded as MYP blocks with each block incorporating minimal 
changes designed to reduce cost and improve performance. Block III was 
awarded as a fixed-price incentive (FPI) contract for eight ships in 
December 2008. Construction of the first Block III ship started in 
March 2009; and the construction of the eighth ship is planned to start 
in September 2013. Award of the Block IV MYP FPI contract for 10 ships 
is expected in early fiscal year 2014. As a result of these actions, 
procurement rates are increasing, competition and stable procurements 
are fostered, and affordability has improved.
Mature Design Plans Prior to the Start of Construction:
    In Production Readiness Reviews, the Navy ensures that design 
maturity is at least 85 percent prior to start of construction because 
a shipyard's efficiency and learning curve is heavily impacted by 
having a completed design using 3D modeling. In the case of the MLP, 
the design was 100 percent complete before starting construction. Using 
the 3D modeling and collaborative government-industry teams, the 
shipbuilder was able to identify interferences early and plan the block 
design more efficiently. During construction, minimal change orders 
were executed--the change order budget for MLP was less than 1 percent, 
safety was maintained and rework was kept to a low of 2.4 percent. With 
a completed design, the shipbuilder was able to outfit construction 
blocks prior to launching the ship. By performing the outfitting on the 
ground, access is easier and productivity is improved which reduces 
both cost and schedule performance. MLP-1 was more than 90 percent 
complete at launch.
    This principle was further exemplified by the decision to leverage 
the stable DDG-51 design and production baseline for the introduction 
of integrated air and missile defense capability. The fiscal year 2010 
and follow DDG-51's required a significant design update to accommodate 
the addition of the integrated air and missile defense capability in 
AEGIS Baseline 9. The design update was fully complete and design 
products fully developed before either Bath or Ingalls began 
construction on DDG 113 and follow. This prevented delays and cost 
increases due to design concurrency. Requirement stability is also key, 
and the DDG-51 program, like others in the Navy's shipbuilding 
portfolio, have used annual Configuration Steering Boards to vet all 
proposed additional requirements and control the inclusion of new 
requirements to only those judged essential by Navy leadership.
Material/Supply Chain Process:
    Material cost has become the largest area of the shipbuilder's 
overall cost for a ship; and there is great opportunity to reduce those 
costs by the shipbuilders, particularly in a sole source contractor 
environment. The standardization of material specifications has created 
opportunities to bundle material orders and achieve economic order 
quantity pricing for Virginia-class submarines and Nimitz-class 
refueling complex overhaul. Conversion of contractor furnished 
equipment (CFE) to GFE, as was done for the last two ships of the LPD-
17 class, has resulted in significant savings by eliminating pass-
through costs and fees associated with material subcontracts. The 
utilization of expert material consultants and establishment of 
material should-cost estimates have driven costs downward by creating 
opportunities for competition and promoting aggressive pricing.
    The Navy has been working to minimize ship equipment and parts 
variants within ship classes, and from ship class to ship class, to 
create greater commonality across the Fleet, while also looking at 
smart ways to reduce the number of ship specifications and procedures. 
From these efforts, the Navy believes that additional cost savings can 
be achieved through application of the block buy approach across a 
subset of shipbuilding material, common equipment, parts, and 
commodities. The Navy is currently evaluating this alternate 
acquisition concept and ways to implement it within the confines of the 
current authorization and appropriation process. Once the concept is 
developed further, additional flexibility may be desired with respect 
to authorization, appropriation, and bundling of advanced procurement 
material across appropriations (SCN, OPN, and NDSF), and possibly 
fiscal years, to best implement this alternative acquisition concept.
Continued Emphasis on Cost and Execution Performance, Production, and 
        Quality:
    Commonality of shipboard systems across ship classes not only 
presents opportunities for EOQ buys, but it also allows lessons learned 
from installation of those shipboard systems on earlier ships to be 
leveraged on future ships--resulting in favorable impacts to production 
costs and schedules. The Navy has worked with the Virginia-class 
shipbuilder to reduce the submarine construction span through the use 
of multiyear procurements, fixed price contracts, and EOQ buys. Design 
changes focused on improved performance and reduction in costs have 
been incorporated on follow ships; and the use of outside supply chain 
experts has increased material availability while driving down material 
costs. Ten Virginia-class submarines have been delivered to date. The 
last eight have been delivered on budget and on or ahead of schedule 
with the most recent submarines (SSN-782 and -783) being delivered an 
average of 11 months ahead of contract delivery date.
    Marinette Marine and Austal, USA, the two LCS shipyards and their 
parent companies, have invested considerable capital resources to 
improve shipyard quality, capacity, and efficiency. Substantial 
production efficiencies are being realized by both shipbuilders on LCS 
as a result of those capital investments, which were not in place for 
the lead ships.
    The T-AKE-1 Class (Dry Cargo/Ammunition ship) program is another 
example of successful leveraging of continuous process improvements, 
best practices, and learning across a relatively large production run. 
The T-AKE-class sustained an exceptional 79 percent production learning 
curve across the class, with the seventh ship being produced for less 
than 50 percent of the man-hours of the lead ship, and demonstrated a 
corresponding reduction in production and delivery cycle times. Stable 
requirements and a mature design were the primary drivers behind a less 
than 2 percent configuration change rate and less than 3.9 percent 
rework across the class resulting in an overall average of greater than 
85 percent completion at launch. Proper sequencing and allocation of 
work packages, stable funding, and long lead material procurements 
enabled efficient production, reduced cycle times and overhead, and 
created material purchasing economies. Capital improvements led to 
increased throughput and lower overhead; the implementation of hundreds 
of ``lean design'' producibility improvements reduced the cost of 
follow ships by an average of $10 million (2 percent savings) per hull.
    The LPD-17-class shipbuilder, Huntington Ingalls Industries, 
developed a new class build plan which was implemented on LPD-22 and 
follow ships. The plan aligned work packages in a more logical sequence 
and focused on accomplishing an increased portion of construction on 
land, which is the most efficient approach. As a result, pre-outfitting 
and completion levels at launch have increased with each successive 
LPD-17-class ship.
    The Virginia-class design was tailored to optimize the construction 
process, facilitate the integration of supplier equipment, and 
incorporate Navy operational and maintenance experience. The best 
strategy is to maximize work in the shop environment and minimize work 
within the hull, which means increasing the size, weight, and state of 
completion of modules prior to inserting them into hull sections. The 
shipbuilder, Electric Boat, began to develop build plan improvements in 
the Virginia-class when hull sections and module weights were no longer 
limited by the capacity of the Groton Land Level Ship Construction 
Facility transportation system. Increasing the transportable module 
weight opened up virtually unlimited possibilities for construction 
planners; and the build plan could be based on an approach that made 
the most sense from an efficiency standpoint--maximizing module 
manufacturing at module outfitting facilities and doing final assembly 
at the delivery yards. The improvements to the module transportation 
system are expected to save more than 1.2 million construction hours on 
a 30-ship Virginia-class reducing the number of module end loads 
performed by the final assembly yard from four to one, reducing the 
number of critical installs from eight to one, and reducing the number 
of hull butt welds from five to three.
    The Capital Expenditures (CAPEX) program is a unique investment 
opportunity for the shipyards wherein the Navy funds selected process 
and infrastructure improvements. The projects are designed to reduce 
overall construction costs. Under the program, the shipyard presents a 
proposal and business case to the Navy outlining improvements to its 
processes or facilities. If the plan and business case are deemed 
worthy, the Navy funds 50 percent of the cost of the improvement 
upfront. Once complete, the Navy then pays for the remainder of the 
project; however, the Navy can recoup up to 100 percent of the funds 
provided for the project if it fails to meet the projected savings. 
Several shipbuilders have taken advantage of this opportunity over the 
past few years to upgrade their facilities resulting in increased 
through-put and productivity, improved efficiencies and quality, and 
reduced costs and schedule durations.
    BIW recently completed one of those CAPEX improvements, the Ultra 
Hall facility, which incorporated early release of retentions, special 
contract incentive fees, and share-line adjustments resulting in 
maximized pre-outfitting levels, man-hour reductions, and savings for 
the DDG-51 and DDG-1000 programs. The Ultra Hall facility allows for 
increased work in climate-controlled conditions which optimizes 
outfitting levels early in construction. The resultant improved quality 
in the blast and paint process and the elimination of the requirement 
for custom-built staging has also reduced schedule durations. Electric 
Boat's Quonset Point Coating Facility is another example of a CAPEX 
success. The facility reduces cost by applying hull coatings prior to 
the submarine's delivery as opposed to the legacy approach which 
involved applying the coating in a dry-dock during the submarine's post 
shakedown availability (PSA). In addition to the cost reduction, the 
PSA schedule was able to be shortened allowing submarines to be 
delivered 6 to 9 months sooner.
    The Navy is also driving increased quality in shipbuilding. The 
LPD-17 class has seen significant improvement in ship quality at 
delivery; most recently, LPD 24 had zero starred cards open at 
delivery. Another test of total ship quality is how the ship performs 
at Acceptance Trials; and that is evidenced by the reduced number of 
``starred cards'' being issued by the Navy's Board of Inspection and 
Survey (INSURV). During acceptance trials for MLP-1, there were 0 
starred cards--this was a first for any new ship class. Across the 
other ship classes, the Navy is closing out most, if not all, starred 
cards prior to ship delivery.

                          littoral combat ship
    33. Senator McCain. Secretary Stackley, the Navy originally 
intended the LCS to replace a total of 56 frigates, minesweepers, and 
patrol boats. The current plan calls for the purchase of 52 LCS, which 
will eventually comprise one-third of the Navy's surface combatant 
fleet. Recent critical reviews about the LCS's capabilities and 
performance have surfaced with specific concerns about survivability, 
adequate manning, endurance, and the ship's ability to meet warfighter 
requirements. As a result of internal reviews, are you currently 
considering terminating the program at the 24 ships in operation, under 
construction, or on order?
    Mr. Stackley. Navy is not considering terminating the program at 24 
ships. With regard to LCS performance characteristics, LCS meets its 
warfighter requirements; including survivability and endurance. Navy's 
2012 Force Structure Assessment calls for 52 LCSs to meet global fleet 
requirements, and Navy leadership is committed to LCS as an integral 
component of the future fleet.

    34. Senator McCain. Secretary Stackley, does the Navy intend to 
down select to a single LCS design in fiscal year 2016? If not, why 
not?
    Mr. Stackley. The Navy is evaluating its follow-on acquisition 
strategy and has not made a decision about down-selecting to a single 
LCS design. Both LCS variants provide the operational capability 
required by the Navy and continued competition promises continued 
affordability for the program.

    35. Senator McCain. Secretary Stackley, why is LCS-4 delayed in its 
delivery date? Will this affect -5 through -8?
    Mr. Stackley. The delay in LCS-4's delivery date is attributed to 
several factors: an aggressive initial schedule, transition from stick-
built to modular construction, delay in production manning ramp-up 
early in the construction process, incorporation of design lessons 
learned from LCS-2, and a consistent focus on cost performance.
    Austal USA has paced production work to the availability of 
complete design products, the ability to use new facilities 
efficiently, and the availability of skilled workforce in the Mobile, 
AL, region. The shipyard has revised its schedule based on a refined 
build strategy and has done so to maintain solid cost performance (not 
chasing schedule at the expense of cost performance). The shift in the 
delivery dates for the first ships of the Block Buy contract has 
resulted in a serial production schedule that has an LCS being 
delivered every 6 months and in the most cost effective method 
possible.
    The delivery schedules for all of the Austal USA Block Buy ships 
are delayed an average 5 months, with the most significant delivery 
delays being on LCS 6 and 8, where the contract delivery dates were 
modified 6 and 8 months, respectively. Navy believes the initial 
schedule for the Austal ships was somewhat aggressive, and the schedule 
adjustment proposed by the shipbuilder, represents a more realistic 
delivery schedule, balancing shipyard workload between LCS and Joint 
High Speed Vessel (JHSV).
    LCS-4 through LCS-8 are contracted under fixed-price incentive type 
contracts with established target costs and associated under and over 
share lines and ceiling prices. The current planned delivery dates are 
consistent with the fiscal year 2014 President's budget SCN exhibits. 
There are no changes to target prices of the ships as a result of 
changes in the ship delivery dates.
    LCS-5 and -7 are being built by Marinette Marine Corporation (MMC) 
in Wisconsin and therefore are not impacted by the schedule shifts at 
Austal USA.

    36. Senator McCain. Secretary Stackley, would it be economical to 
maintain production of both LCS designs at a combined production rate 
of two per year? If not, can you provide a detailed estimate of the 
additional costs that the Navy would incur?
    Mr. Stackley. Reducing procurement to one ship per year at each 
shipyard instead of two ships would permit the contractors to 
renegotiate the prices for the remaining ships of the Block Buy in 
fiscal year 2014 and the last year of the block buy in fiscal year 
2015. Navy would expect the shipbuilders to renegotiate the ship prices 
at a higher cost since there would be no guarantee of future work. 
Further, shipbuilder costs will increase because their ability to buy 
components in quantity would be reduced.
    If only two ships instead of four were authorized in fiscal year 
2014, the increased cost estimate for the contracted LCSs (fiscal year 
2010-fiscal year 2013 ships) is estimated to be $302 million. This cost 
estimate includes schedule slips and labor inefficiencies resulting in 
the fiscal year 2011, fiscal year 2012 and fiscal year 2013 ships going 
from target to ceiling cost.
    If Navy is unable to come to an agreement on the cost of the two 
fiscal year 2014 ships and ships in later years (fiscal year 2015 and 
later), the cost for all the ships already under contract will be 
increased due to impact of lost workload, inefficiencies, and breakage 
to vendor base. The Navy's liability in this case extends to the 
contract ceiling for LCS-5 to LCS-16 (up to $462 million).
    Additionally, in the event of lost workload at Austal USA in 
Mobile, AL, JHSV program cost would also increase.

    37. Senator McCain. Admiral Myers, a recently leaked draft GAO 
report notes that the the Navy's own analysts have only about 10 
percent confidence in the current estimate that it will cost $50.4 
billion to operate and support a total of 52 LCSs over their 25-year 
service lives. While such long-term life cycle costs are notoriously 
hard to estimate accurately decades out, a normal program would have at 
least 50 percent confidence in its figures at this stage. Does the Navy 
have confidence that the estimate of $50.4 billion for the long-term 
costs to operate and support the fleet of LCSs is accurate?
    Admiral Myers. The Navy is confident in its operating and support 
estimate based on current parameters and assumptions. The draft GAO 
report references an estimated life cycle cost and risk analysis based 
on the program requirements set during the Milestone B decision in 
April 2011 for the LCS program. At that time, the operating and 
sustainment cost estimate of range $50.4 billion (Calendar Year 2010$) 
to $86.8 billion (calendar year 2010$) represented a total of 55 LCSs, 
each with a 25-year service life. For Milestone B, Navy conducted a 
risk analysis on the total program life cycle cost estimate where the 
point estimate was at a 10 percent confidence level. However, the 10 
percent assessment reflects the risks inherent in operating and 
sustainment estimates that are typical for any ship class--principally 
uncertainties in future inflation, the price of crude oil, and realized 
ship operating tempo (OPTEMPO) for a period of 48 years (the life of 
the class). As additional hulls are delivered and become operational, 
the long-term cost estimate to operate and support the fleet of LCSs 
will be further refined and will be reflected annually in the program's 
SAR.

    38. Senator McCain. Admiral Myers, is the LCS built to military 
standards?
    Admiral Myers. The LCSs were designed and built to the standards of 
the American Bureau of Shipping (ABS) High Speed Naval Craft and Naval 
Vessel Rules (NVR) with additional military requirements stipulated in 
the class-specific contractual Build Specifications. The NVR was 
developed jointly between ABS and the Navy and it integrates industry 
and military standards. This design specification meets all the JROC 
approved requirements, including survivability.

    39. Senator McCain. Admiral Myers, how is the Navy addressing 
concerns with the LCS's survivability?
    Admiral Myers. Navy has designed and built the LCS to meet its JROC 
approved survivability requirements. LCS is designed and built to ABS 
NVR, which require higher performance and survivability features for a 
naval combatant and allow the ship to fight and operate in high-threat 
environments as part of a networked battle force which includes higher-
end surface combatants. LCS can operate independently in low- to 
medium-threat environments.
    LCS ships are built to meet JROC-approved survivability 
requirements and include OPNAVINST 9070.1 Level 1 Survivability 
standards. The LCS design specifically includes Level 1 plus additional 
tailored survivability enhancements (``Level 1+''). LCS' Level 1+ 
survivability standard is greater than the Level I standard to which 
Navy patrol craft and mine warfare ships were designed, but less than 
the Level II standard to which the Oliver Hazard Perry (FFG-7)-class 
frigates were designed. LCS survivability depends on a combination of 
ship design, ship numbers, and ship CONOPS which says LCS will;

         Operate as part of a networked battle force

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

         Create Battle Space/Avoid being hit

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

         Fight and survive if hit

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

         Withdraw/reposition if hit

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

    40. Senator McCain. Admiral Myers, in your opinion, does the LCS 
have the capability to adequately meet all expected warfighters' 
requirements?
    Admiral Myers. The LCS will meet all expected warfighting 
requirements. LCS was conceived as an integral part of a battle force 
architecture based on an essential need for a new generation of multi-
role, ``focused mission'' surface combatants optimized for battle 
network operations in the near-land battlespace dominance arena. This 
capability is precisely what the Department of the Navy has received 
with LCS.
    LCS's concept of operations calls for LCS to penetrate contested 
littorals in the face of three major anti-access threats which are 
clearly documented as joint capability gaps: swarming fast attack 
craft/fast inshore attack craft/(FAC/FIAC), diesel submarines (SSK/SMM) 
and maritime mines. LCS' design characteristics of high speed, 
maneuverability, shallow draft, networked sensors, and readily-
exchangeable focused mission packages were specifically intended to 
allow LCS to dominate these threats and assure access to the littorals.

    41. Senator McCain. Admiral Myers, based on the current performance 
of the ship and modules, are you comfortable with the LCS comprising 
one-third of the Navy's surface combatant fleet by 2027?
    Admiral Myers. I am completely comfortable relying on the LCS for a 
third of the Navy's surface combatant fleet. LCS fills current 
capability gaps for the Joint Force in the littorals. LCS is a 
component of a balanced force, structured to defeat adversaries in 
times of war and maintain a sizeable, continuous naval presence across 
the globe. Much of what the Navy does in peacetime, and a sizable 
portion of what we need to do in any conflict, are within the 
capability of these ships.
    While expensive, multi-mission ships, like cruisers and destroyers, 
could do what the LCS does, we would have far fewer of them and this is 
a classic case of quantity having a quality of its own. By having this 
mix of multi-mission ships and LCSes, the Navy is able to be in more 
places at the same time--with combat credible ships. This ``phase 
zero'' presence is what deters conflict from happening in the first 
place and aides in establishing the conditions for success in conflicts 
when deterrence fails.
    Their rotational crewing construct enables LCS to spend more than 
twice the percentage of their service life deployed overseas when 
compared to U.S.-based cruisers and destroyers, and does so at a 
quarter of the procurement cost by operating from a more forward 
presence. LCS will provide significantly greater forward presence than 
a like number of cruisers and destroyers, and will relieve those more 
expensive surface combatants to focus on their primary missions.

    42. Senator McCain. Admiral Myers, in January, the Navy revised the 
number of naval combatant vessels required to meet a revised strategic 
defense guidance issued last year by the President. Despite rebalancing 
U.S. military forces to the Asia-Pacific region and the recent 
testimony by Navy leaders that a fleet of more than 500 ships would be 
required to meet the demands of combatant commanders, the Navy 
concluded that a fleet of 306 ships would be adequate to meet the range 
of worldwide requirements, down from 313 ships it established in 2010. 
In your testimony, you state that this reduction was attributed to four 
factors:

    A.  Reduced presence requirements resulting from the 2012 Strategic 
Guidance;
    B.  Increased forward basing of ships;
    C.  Introduction of new payload capacity for cruise-missile 
submarines; and
    D.  Increased use of rotational manning on ships--keeping the ships 
at sea longer.

    Can you describe which priorities for reduced presence in the DSG 
specifically resulted in a decrease in the number of ships required to 
meet the strategy?
    Admiral Myers. The DSG states that in a period of declining 
resources, U.S. forces will require ``innovative and creative solutions 
to maintain our support'' for allies and partners. Further, 
``thoughtful choices will need to be made regarding the location and 
frequency'' of operations that provide a stabilizing presence.
    The DSG, warfighting requirements, and an analysis of platforms to 
capabilities were all used to derive the Force Structure Assessment 
(FSA). A number of factors, including the rebalance toward the Asia-
Pacific region, modifications to employment cycles and increases to 
Navy's global posture forward, led to a smaller number of ships 
required to execute DSG guidance.
    The reduction in overall fleet size contained in Navy's most recent 
Force Structure Assessment was primarily driven by increased global 
posture forward and modified employment cycles. In comparison, the 
reduction to the AFRICOM presence requirement, in alignment with the 
2012 DSG, had minimal impact on Navy force structure requirements, only 
impacting the number of LCSs and Combat Logistics Force (CLF) ships. 
The revised AFRICOM presence requirement is still more than what is 
currently being provided.

    43. Senator McCain. Admiral Myers, how exactly does increased 
forward basing of ships equate to a rationale to decrease the total 
size of the fleet?
    Admiral Myers. One of our CNO's tenets, operate forward, compels us 
to look for new ways to increase the amount of presence we can deliver 
at the right places--and to do so more efficiently. Each of these ways 
places ships overseas where they deliver continuous (``non-
rotational'') presence, instead of having to deploy from the 
continental United States (CONUS) to provide ``rotational'' presence. 
One ship operating from an overseas port in this manner provides the 
same presence as about four ships operating from homeports in the 
United States.
    The Navy operates forward to make the most effective and efficient 
use of what we own. There are two basic ways in which we can sustain 
ships overseas:

         Ships can be homeported overseas as part of the 
        Forward Deployed Naval Force (FDNF) with their sailors and 
        their families as we do in Japan and will soon do in Rota, 
        Spain. This provides continuous presence, immediate response to 
        crisis, and the means to build a strong relationship with the 
        host nation.
         For example, we continued preparations for the planned move of 
        four destroyers to Rota, Spain, which highlights the benefit of 
        FDNF ships. Conducting the European ballistic missile defense 
        (BMD) mission today takes 10 ships deploying from CONUS. This 
        same mission can be done with four destroyers based forward, 
        freeing up six rotationally-deployed destroyers to deploy to 
        other regions such as the Asia-Pacific.
         Ships can also Forward Station overseas and be manned 
        by civilian or military crews that rotate out to the ship. 
        Rotating civilian crews man our Mobile Landing Platform (MLP), 
        JHSV, Afloat Forward Staging Base (AFSB) and Combat Logistics 
        Force (CLF) ships. Rotating military crews man our LCS and 
        nuclear guided missile submarines (SSGN).

    44. Senator McCain. Admiral Myers, if ships have a certain service 
life that requires so many days per year at the pier for maintenance, 
how would rotating crews provide more presence per ship?
    Admiral Myers. The LCS will operate differently than most legacy 
surface platforms by using a rotational crewing concept and conducting 
maintenance while operating forward. The ships will deploy from 
continental United States (CONUS) homeports for 16 months and crews 
will be swapped during the deployment at 4-month intervals. Rotating 
crews provide more presence per ship since it will enable LCS ships to 
remain forward without lengthy transits to and from CONUS homeports in 
support of a standard 6- to 7-month deployment.
    Combatant commanders will benefit from increased Operational 
Availability (Ao) from LCS due to its ability to consistently remain in 
theatre. The ships will return to homeport every 16 months for a CNO 
maintenance period, during which time the ship will undergo depot 
maintenance as well as support crew training and CONUS-based tasking. 
While deployed overseas, LCS will be able to operate approximately 25 
days per month with 5 days per month dedicated to inport maintenance 
periods. There will also be a dedicated maintenance period every 4 
months during which the ship remains available for surge operations.

    45. Senator McCain. Admiral Myers, DOD seems to be revising fleet 
size requirements to respond to diminishing defense budgets. How do we 
know that 306 is the right number?
    Admiral Myers. The Navy conducted a comprehensive and rigorous 
analytical Force Structure Assessment (FSA) in 2012, consistent with 
the DSG, that identified a 306 ship combatant force as that required to 
deter and respond to crises and war, and protect the interconnected 
systems of trade, information, and security that underpin American 
prosperity. The 306 ship combatant force possesses the capability and 
capacity to deliver credible deterrence, sea control, and power 
projection to deter or contain conflict and, if called upon, to fight 
and win our Nation's wars. These critical missions have been, remain, 
and will continue to be the Navy's core responsibilities.
    The new battle force requirement is different from the 2010 FSA 
results (313-ship requirement) because of: (1) adjusted global presence 
requirements aligned with DSG's priorities; (2) increased forward 
basing/stationing of ships (and systems); (3) new payload (strike) 
capacity for attack submarines (replacing nuclear guided missile 
submarines); and (4) increased use of rotating civilian and military 
crews, providing more forward presence per ship.
    The FSA provides a comprehensive description of and justification 
for the 306 ship combatant force. We would be happy to provide a 
classified brief on the FSA if additional information is requested.

                           early retirements
    46. Senator McCain. Secretary Stackley, this year's shipbuilding 
plan submitted by the Secretary of Defense included this caveat: ``All 
battle force ships serve to the end of their planned or extended 
service lives.'' Last year's plan included the additional note that: 
``In this fiscal environment, the Navy can ill-afford to inflate future 
shipbuilding requirements by retiring ships earlier than planned.'' 
However, the Navy is still planning to retire 20 ships in fiscal year 
2015, and 42 over the Future Years Defense Plan, 12 of which are being 
proposed for retirement prior to the end of their expected service 
life: 7 guided missile cruisers; 2 dock landing ships; 1 mine 
countermeasure; and 2 T-AOE fast support ships. When was the last time 
the Navy retired so many ships in such a short time?
    Mr. Stackley. In the past, particularly during the 1990's draw 
down, the Navy retired a significant number of ships in single fiscal 
years. For example, in 1998, 29 ships were retired and in 1999, 21 
ships. In a more recent period, in the timeframe of fiscal year 2004 to 
fiscal year 2008, the Navy retired 45 ships.
    The budget decisions that drove the retirements in the fiscal year 
2014 President's budget plan were based on the Navy's determination to 
reshape force structure to reflect the priorities of the DSG and the 
reality of top line reductions consistent with the Budget Control Act.

    47. Senator McCain. Secretary Stackley, given uncertain future 
shipbuilding budgets, why is the Navy taking this risk?
    Mr. Stackley. As part of the difficult choices required by the 
Budget Control Act (BCA) of 2011, the fiscal year 2014 President's 
budget request proposed the decommissioning of seven guided missile 
cruisers (CGs) and two dock landing ships (LSDs) in fiscal year 2015. 
This is before the end of their expected service life. Navy decided to 
retire these ships to provide a ready and sustainable Fleet within 
budget constraints. The Navy reshaped force structure to reflect the 
priorities of the DSG and the reality of top line reductions consistent 
with the BCA.
    The DSG is designed to ensure U.S. Armed Forces can meet the 
demands of the National Security Strategy at acceptable risk. To 
support the DSG under fiscal constraints, Navy force structure struck a 
balance between capacity, capability, affordability, and preserving the 
industrial base, while ensuring our warfighters have the necessary 
tools to protect our vital interests around the world. These ships are 
in need of significant maintenance investment, and the decision to 
retire these ships allows increased funding for training and 
maintenance for the balance of the fleet. This decision is driven by 
the need to provide wholeness of the force, averting more force 
structure than we can afford to man, train, and equip.

    48. Senator McCain. Secretary Stackley, what is the current 
estimate of savings the Navy will achieve for these retirements?
    Mr. Stackley. The Navy reported an estimated $4.8 billion in 
savings associated with early retirement of the seven CGs and two LSDs 
with submission of the fiscal year 2013 President's budget. Congress 
subsequently fully funded the cost for continued operation and 
sustainment of these ships through the end of fiscal year 2014 with the 
Ship Modernization, Operation, and Sustainment Fund (SMOSF). Insofar as 
the unused balance of SMOSF funds expire at the end of fiscal year 2014 
and no further sustainment funding is programmed for fiscal year 2015 
and beyond, the estimated cost to retain these ships across the fiscal 
year 2015 Future Years Defense Plan--with the same set of assumptions 
regarding operations and modernization of these ships in fiscal year 
2015-fiscal year 2019, would be on the order of $4.8 billion. (This 
number would need to be updated--likely reduced--pending decisions 
regarding ship modernization, since the fleet modernization plan has 
been directly affected by the revised scheduling resulting from the 
decision to retire these ships.) Since these costs are not programmed, 
retiring these ships in early fiscal year 2015 equates to cost 
avoidance rather than savings relative to the budget.

    49. Senator McCain. Secretary Stackley, Congress rejected the 
Navy's proposal last year to early retire seven cruisers. Congress also 
provided the Navy an additional $2.4 billion to cover the costs for 2 
years of ship modernization, operations, and sustainment. Yet, in the 
draft shipbuilding plan for fiscal year 2014, the Navy again proposes 
to retire the same ships in 2015. What is the Navy's expense plan for 
the $2.4 billion?
    Mr. Stackley. The current Navy plan only includes the expense of 
basic operation and sustainment (O&S) costs for fiscal year 2013 ($280 
million) and fiscal year 2014 ($550.3 million). The CGs and LSDs 
covered by Ship Modernization, Operation and Sustainment Fund (SMOSF) 
will be maintained until the currently planned retirement in fiscal 
year 2015. However, due to the expiring nature of the SMOSF funds and 
the longer term budget uncertainty that contributed to the Navy's 
submission of the fiscal year 2013 budget proposing to retire these 
ships early, there is no viable plan to expend SMOSF funds to modernize 
these ships. Specifically, the SMOSF funding expires at the end of 
fiscal year 2014, and no funding is currently available in the Navy's 
budget beyond fiscal year 2014 for the required manpower and operating 
costs. Full combat system and HM&E modernizations require 2 years for 
procuring material, and for planning and executing the modernization 
availabilities.

    50. Senator McCain. Secretary Stackley, how will maintaining these 
ships in the fleet beyond 2014 affect the Navy's shipbuilding plan? 
Please provide specific changes.
    Mr. Stackley. There would be more ships in the Naval Battle Force 
Inventory if the ships scheduled for early retirement were maintained 
beyond 2014. Specifically, the year-to-year battle force inventory 
would be nine ships higher than projected in the 2014 Shipbuilding Plan 
until fiscal year 2024. In fiscal year 2025, these ships would begin to 
reach their expected service lives until all nine ships were retired by 
fiscal year 2029.
    The budget decisions that drove the retirements in the fiscal year 
2014 President's budget plan were based on the Navy's determination to 
provide a ready and sustainable Fleet within budget constraints, and 
reshape force structure to reflect the priorities of the DSG and the 
reality of top line reductions consistent with the Budget Control Act. 
Navy made the difficult decision to retire these ships to allow 
increased funding for training and maintenance through the balance of 
the fleet, and balance between capacity, capability, affordability, and 
preserving the industrial base, while ensuring our warfighters have the 
necessary tools to protect our vital interests around the world.

                        virginia payload module
    51. Senator McCain. Secretary Stackley, according to the witnesses' 
prepared testimony, the introduction of new payload capacity for SSNs 
is one of four cited rationales used to justify a decrease in the 
battle force requirement reduction from 313 to 306 ships. What is the 
current design maturity of the VPM?
    Mr. Stackley. The Virginia Payload Module (VPM) is currently in 
concept development. The Department of Defense added RDT&E and non-
recurring engineering funding in the fiscal years 2013-2018 Future 
Years Defense Program for VPM, which will incorporate four large 
diameter payload tubes in a new hull section that could be inserted aft 
of the sail on future Virginia-class SSNs. This advance engineering 
work will enable the Department to consider incorporating VPMs in the 
fiscal year 2019 Block V Virginia-class buy as an alternative to 
recapitalizing the Ohio-class guided missile submarines (SSGNs).
    The Navy has just started the design effort this fiscal year and 
will initially focus on requirements definition and concept design. The 
Navy will make the final decision whether or not to incorporate VPM in 
ship procurement in the fiscal year 2017 President's budget request to 
support the first year of Advanced Procurement SCN required for the 
submarines starting construction in fiscal year 2019. The design 
efforts for VPM will leverage existing technologies proven in Virginia 
Payload Tubes, SSGNs and with the construction of USS Jimmy Carter 
(SSN-23). There is no developmental technology required for VPM.

    52. Senator McCain. Admiral Myers, with additional payload 
capacity, will the future fleet be able to satisfy combatant command 
demand or will you still have a shortfall in overall the overall 
submarine fleet size?
    Admiral Myers. SSN force structure will drop below the requirement 
of 48 SSNs in 2025 and remain below 48 for 10 years. Though increased 
payload capacity would improve the capability of individual SSNs, the 
overall force size will still be unable to satisfy forward presence 
demands.
    Undersea strike volume will decrease by approximately 63 percent in 
the 2030 timeframe due to SSGN retirement and SSN force structure 
reductions. The additional payload capacity provided by Virginia 
Payload Module (VPM) will allow the Navy to satisfy the regional 
combatant commanders' demand for major contingency operations where the 
unique value of undersea strike is most important. Including VPM on 
future Virginia-class submarines in the Navy's long range shipbuilding 
strategy would allow the Navy to eventually restore approximately 94 
percent of our current undersea strike volume.
    The Navy is considering measures to mitigate the impact of the SSN 
force structure trough--including reductions in SSN construction time 
and overhaul length and increases in deployment length--and has 
developed an Integrated Undersea Future Strategy to balance 
considerations of force structure and payload capacity.
    While VPM represents a significant improvement in strike capacity, 
it comes at a cost. Given the increased costs VPM would introduce in 
the Virginia-class concurrent with our efforts to field the SSBN(X) 
replacement, it may render VPM unaffordable as we assess the future 
fiscal impact of sequestration.

    53. Senator McCain. Secretary Stackley, how would a delay in the 
design of the VPM impact the Navy's ability to move forward with 
production on block V in fiscal year 2019?
    Mr. Stackley. Department of Defense requested RDT&E and 
nonrecurring engineering funding in the fiscal year 2013-2018 Future 
Years Defense Program for VPM, which will incorporate four large 
diameter payload tubes in a new hull section that could be inserted aft 
of the sail on future Virginia-class SSNs. This advance engineering 
work will enable the Navy to consider incorporating VPMs in the fiscal 
year 2019 Block V Virginia-class buy.
    The Navy will make the final decision whether or not to incorporate 
VPM in ship procurement in the fiscal year 2017 President's budget 
request to support the first year of advanced procurement SCN required 
for the submarines starting construction in fiscal year 2019. A design 
delay will influence which hull ultimately receives the VPM. Navy will 
not proceed unless design maturity is achieved.

                      2-year delay of the ssbn(x)
    54. Senator McCain. Admiral Myers, the fiscal year 2014 budget 
fully funded the SSBN(X) development effort. It does not repair the 2-
year delay initiated in last year's budget. In prior years, the Navy 
claimed that the schedule for procuring 12 follow-on ballistic missile 
submarines is inextricably linked to legacy submarine retirements and 
that there is no leeway in this plan to allow a start or any delay in 
the procurement plan. Does the delay the Navy proposed last year risk 
your ability to maintain the same at-sea availability rates required 
under current nuclear force posture?
    Admiral Myers. Long term, the Navy needs a minimum of twelve SSBNs 
to provide a survivable force and meet STRATCOM strategic targeting 
objectives. This force structure is necessary to provide 10 
operationally available SSBNs during the middle-of-life overhaul period 
(beginning in the mid-2050s). The key to ensuring we meet strategic 
requirements is to start construction of the lead Ohio Replacement SSBN 
in fiscal year 2021.
    The 2-year delay introduced a second period where the Navy will be 
at the absolute minimum requirement of 10 operational SSBNs during the 
2030s as the Ohio Replacement comes into service. Since no legacy Ohio-
class SSBNs will be in overhaul during this period. We will be able to 
satisfy STRATCOM requirements with moderate risk.
    Any further delay to the Ohio Replacement program will reduce the 
total SSBN force structure below that required to provide 10 
operational SSBNs during the transition period from the Ohio-class to 
the Ohio Replacement, which would prevent us from meeting STRATCOM at-
sea requirements.

    55. Senator McCain. Admiral Myers, does the current strategy 
include any margin for design or development challenges?
    Admiral Myers. To meet U.S. Strategic Command operational 
requirements, the first Ohio Replacement SSBN must be ready for 
strategic deterrent patrol by 2031. The Ohio Replacement SSBN program 
leverages the highly successful Virginia-class design-build 
methodology. The program schedule was developed using lessons learned 
from previous submarine classes (i.e., Ohio-class, Seawolf-class, and 
Virginia-class) enabling the Ohio Replacement SSBN to obtain a high 
design maturity at construction start ensuring minimal changes during 
construction and provide a predictable delivery cost and schedule. As 
with many shipbuilding programs employing new technologies to meet 
operational requirements, a risk assessment is performed to identify 
potential technical, cost, and schedule issues that could occur during 
development and ensure that plans properly account for those potential 
issues. Even with this approach, unforeseen issues with new technology 
development can occur and impact plans.
    Given the strength of our submarine industrial base--as witnessed 
in the success of fielding the Virginia-class--our Ohio Replacement 
design-build-sustain strategy timeline is sound.

    56. Senator McCain. Admiral Myers, did this delay in any way infuse 
additional risk in our national ability to meet our current strategic 
requirements in the future?
    Admiral Myers. As detailed question 54, the 2-year delay introduced 
a period where the Navy will be at the absolute minimum requirement of 
10 operational SSBNs during the 2030s as the Ohio Replacement comes 
into service. This adds moderate risk to the period of transition 
between Ohio and Ohio Replacement. However, since no legacy Ohio-class 
SSBNs will be in overhaul during this period, we will be able to 
satisfy STRATCOM requirements with moderate risk.

                 virginia-class advance appropriations
    57. Senator McCain. Admiral Myers, instead of the traditional 
funding approach utilizing incremental funding, the fiscal year 2014 
budget proposes to fund the Virginia-class using advanced 
appropriations, legislatively locking in the fiscal year 2015 funding 
increment. According to the Congressional Research Service (CRS), while 
the Navy has expressed interest in advanced appropriations in the past, 
there is little precedent in recent years for funding Navy ships with 
advance appropriations. Why did you propose to use advanced 
appropriations?
    Admiral Myers. When assessing the path ahead on the procurement of 
the 10th Block IV or second Virginia-class SSN in fiscal year 2014, the 
Department looked at a range of funding options. During final budget 
deliberations, the Department decided that advance appropriations was 
the best way to fund the second Virginia-class submarine in fiscal year 
2014. This would mitigate the budget spike of the balance of the second 
submarine in fiscal year 2014 minimizing the impact to other Navy 
shipbuilding programs, but allow Congress to make a single procurement 
decision vice incrementally funding.
    The use of advance appropriations for the 10th Block IV multiyear 
procurement Virginia SSN will also greatly reduce significant 
programmatic and budgetary uncertainties. Moreover, advance 
appropriations will help ensure transparency of total ship procurement 
costs.

    58. Senator McCain. Admiral Myers, given the budget does not 
account for sequestration, how might advance appropriations impact Navy 
flexibility if sequestration were not averted in fiscal year 2014?
    Admiral Myers. The Department is currently assessing the impact of 
sequestration on its shipbuilding goals as part of the SCMR, which is 
designed to factor in defense-wide budget cuts and its impact on the 
DSG. Upon completion of the review, we will balance the level of risk 
across warfighting and support capabilities for the full range of 
potential military operations and prioritize procurements to meet the 
capabilities and capacities to achieve this balance. Changes to ship 
force structure numbers and types of ships will be evaluated based on 
the results of this review.

                      amphibious ship construction
    59. Senator McCain. Secretary Stackley, today, the Amphibious Force 
Structure stands at 30 amphibious ships, which includes 9 LHD/LHAs, 9 
LPDs, and 12 LSDs. Of this amount, only 22 to 23 are currently 
operationally available. The Navy determined last year that an overall 
force structure of 38 amphibious ships is required to ensure that 30 
ships are operationally available as required to support the Marine 
Corps. But the Navy concluded that it can accept a measured degree of 
risk by employing planning factors that call for a force of 33 ships, 
even though the DSG in 2012 calls for dispersing the Marine Corps 
around the Pacific theater, thereby increasing the reliance on 
amphibious ships. Based on the projected 2014 shipbuilding plan, when 
will the fleet have the right mix of 33 amphibious ships?
    Mr. Stackley. The fiscal year 2014 Long-Range Shipbuilding Report 
to Congress provides the plan to meet the 33 ship amphibious force mix 
with eleven LHD/LHAs, eleven LPDs, and eleven LSDs upon delivery of the 
first LX(R) in fiscal year 2025.

    60. Senator McCain. Secretary Stackley, is the Navy currently 
assessing any plan to accelerate the construction of additional 
amphibious ships?
    Mr. Stackley. Not at this time. However, as the AoA for LX(R) 
concludes this year, the Department will assess the timing of 
acquisition of this amphibious ship class.

    61. Senator McCain. Secretary Stackley, what is the Navy's position 
on a proposal to authorize and appropriate an additional $825 million 
in fiscal year 2014 and authorize 2-year incremental funding for a 12th 
LPD-17-class vessel?
    Mr. Stackley. Balancing requirements, affordability and industrial 
base considerations, the Navy's shipbuilding plan builds toward a 33 
ship amphibious force comprising 11 LHD/LHAs, 11 LPD and 11 LSD 
amphibious ships. The fiscal year 2013 Continuing and Furthering 
Appropriations Bill (P.L. 113-6) added $263 million of Advanced 
Procurement (AP) funding for a 12th LPD-17 amphibious transport dock 
ship. With the sequestration mark of $20 million, the net AP 
appropriated for a 12th ship is $243 million. Assuming the $243 million 
of AP in fiscal year 2013 was leveraged, the end cost of a 12th ship in 
fiscal year 2014 is estimated at $2.13 billion, leaving a balance of 
approximately $1.9 billion of full funding required in fiscal year 
2014.
    Accordingly, the Department has concluded that procurement of a 
12th LPD is not an affordable alternative to meeting the 33 ship 
amphibious force requirement. However, within the context of the LX(R) 
AoA, the Navy is assessing the feasibility of significantly reducing 
the cost of the LPD hull form through design for affordability 
initiatives and capability trades. Insofar as procurement funding for 
the LX(R) is not required until fiscal year 2018, the Navy is currently 
holding the AP funds pending determination of LX(R) design/development 
funding needs.

    62. Senator McCain. Secretary Stackley, Congress provided $263 
million for advanced procurement in fiscal year 2013 appropriations for 
a 12th LPD. What is the plan for the use of those funds?
    Mr. Stackley. The administration opposed the addition of $263 
million for advanced procurement in fiscal year 2013 appropriations for 
a 12th LPD as excess to requirement. The Navy is currently holding the 
AP funds pending determination of LX(R) design/development funding 
needs and will provide recommendations on the use of these funds at 
that time.

    63. Senator McCain. Secretary Stackley, what additional funding 
would be required by the Navy to construct a 12th LPD?
    Mr. Stackley. The fiscal year 2013 Continuing and Furthering 
Appropriations Bill (P.L. 113-6) added $263 million of advanced 
procurement (AP) funding for a 12th LPD-17 amphibious transport dock 
ship. With the sequestration mark of $20 million, the net AP 
appropriated for a 12th ship is $243 million. Assuming the $243 million 
of AP in fiscal year 2013 was leveraged, the end cost of a 12th ship in 
fiscal year 2014 is $2.13 billion, leaving a balance of approximately 
$1.9 billion of full funding required in fiscal year 2014.
                                 ______
                                 
             Questions Submitted by Senator Roger F. Wicker
              stabilizing the shipbuilding industrial base
    64. Senator Wicker. Secretary Stackley and Admiral Myers, in your 
advance testimony, you discuss at length the need to maintain a robust 
and healthy shipbuilding industrial base. In my discussions with 
industry leaders, they expressed to me their concerns with the unsteady 
nature of the contract work they perform for the Navy and the 
difficulties that stem from the shipbuilding acquisition program. 
Because of the feast or famine nature of the Navy's shipbuilding 
process, companies are challenged to find steady work for their highly-
skilled employees to ensure they do not lose them to other industries. 
Once these employees leave an industry or region, they are unlikely to 
return. Such losses have the potential to cripple a fragile 
shipbuilding industrial base. Additionally, the lack of consistency 
that characterizes the acquisition system currently in place has a 
ripple effect on second- and third-tier suppliers. While major 
companies can generally survive short periods in which they are not 
building a ship, smaller companies that produce components or provide 
materials are often forced out of business. This uncertainty increases 
costs to the Navy and the taxpayers in the near-term, and contributes 
to the gradual erosion of the industrial base in the long-term. Do you 
agree that it is in the best interest of the Navy and the shipbuilding 
industry to establish a more consistent, predictable method of 
contracting and paying for ship construction?
    Mr. Stackley and Admiral Myers. The Navy agrees that stability and 
affordability are key to obtaining the objectives of the shipbuilding 
plan and improving the health of the industrial base. Over the past 
several years, the Navy has placed a priority on increasing 
shipbuilding rates and providing stability for the shipbuilding 
industrial base. Stability translates into retention of skilled labor, 
improved material purchasing, improved workforce and financial 
planning, strong learning curve performance, and the ability for 
industry to invest in facility improvements; all resulting in more 
efficient ship construction and a more affordable shipbuilding program. 
The past Virginia-class and DDG-51 class multiyear procurements (MYPs), 
the DDG-1000 Swap/DDG-51 Restart Agreement, the LCS dual block buy, the 
MLP procurement, the continuation of CVN-78-class procurements on 
constant 5-year centers, and the heel-to-toe CVN RCOH induction-to-
delivery cycle have provided critical stable workload for our shipyards 
and their respective vendor bases. The approved upcoming Virginia-class 
MYP and just awarded DDG-51-class MYP will help to further stabilize 
the submarine and surface combatant industrial base through this 
decade. Likewise, the funding requested to procure a fourth MLP, and to 
configure MLP-3 and MLP-4 as AFSBs will also provide for much-needed 
workload within the auxiliary shipbuilding sector.
    The strategy going forward continues to center upon improving 
affordability. To this end, in addition to the emphasis on stability 
discussed above, the Navy has established affordability requirements 
and invested in design for affordability for future ship programs; 
mandating use of open systems design; leveraging competition at every 
opportunity in shipbuilding and weapons systems production; employing 
fixed-price contracts to control cost for ships and weapon systems in 
production; imposing strict criteria limiting disruptive change to 
contracts; investing in industry-wide manufacturing process 
improvements through the National Shipbuilding Research Program; and 
incentivizing capital investment in facilities where warranted.
    The fiscal year 2014 President's budget request for fiscal years 
2014-2018 requests 41 ships. Of these 41 ships, 25 ships are part of 
stable DDG-51 or SSN-774 MYPs or the LCS block buy contracts, and 11 
ships are part of ongoing shipbuilding construction programs.
    The Navy believes continued use of multiyear and block buy 
procurements provide the best means of ensuring stability and 
predictability within the industry with respect to workload and 
financial planning. The greatest risk to the industrial base is 
associated with budget uncertainty, particularly the disruption and 
inefficiency caused by sequestration, delayed authorization and 
appropriations, and the looming budgetary challenges. The Navy will 
continue to aggressively pursue the mutual objectives of improving the 
affordability of our shipbuilding program and increasing the strength 
of our shipbuilding industrial base, and is committed to working 
closely with Congress on these efforts.

    65. Senator Wicker. Secretary Stackley and Admiral Myers, if you 
had the option, would you agree to funding contracts on a multiyear 
basis, rather than year by year?
    Mr. Stackley and Admiral Myers. New ship construction is typically 
procured using Shipbuilding and Conversion, Navy (SCN) appropriation 
funding which provides multiple year budget authority that is available 
for obligation for 5 years. With few exceptions, the Navy typically 
requests to fully fund an entire ship in the year of authorization/
appropriation. In cases where there is a requirement for advance 
procurement (AP) funds, which typically is associated with the need to 
order long lead time material or to achieve economic order quantity 
discounts, the Navy will request AP funds in the year(s) preceding a 
ship's full funding request. With respect to aircraft carriers and 
large deck amphibious ships, in addition to AP funds, the Navy will 
request to incrementally or ``split'' fund the balance of the ship, in 
order to avoid large spikes in the budget request for the years that 
these platforms are authorized and appropriated.
    In instances where the ship class design is mature and production 
is proven and stable, the Navy believes continued use of multiyear and 
block buy procurements provide the best means of ensuring stability and 
predictability within the industry with respect to workload and 
financial planning. The fiscal year 2014 President's budget request for 
fiscal years 2014-2018 requests 41 ships. Of these 41 ships, 25 ships 
are part of stable DDG-51 or SSN-774 multiyear procurements or the LCS 
block buy contracts. The greatest risk to the industrial base is 
associated with budget uncertainty, particularly the disruption, 
inefficiency and irrational acts necessitated by sequestration, delayed 
authorization and appropriations, and the looming budgetary challenges. 
The Navy will continue to aggressively pursue the mutual objectives of 
improving the affordability of our shipbuilding program and increasing 
the strength of our shipbuilding industrial base, and is committed to 
working closely with Congress on these efforts

    66. Senator Wicker. Secretary Stackley, if given the opportunity to 
restructure the way the Navy pays for ship acquisition, from design to 
construction to final acceptance by the Navy, what changes would you 
make?
    Mr. Stackley. Today one of the greatest risks facing Navy 
shipbuilding is associated with budget uncertainty. To mitigate budget 
uncertainty, the Navy believes the continued use of multiyear and block 
buy procurements provide the best means of ensuring stability and 
predictability within the industry in instances where the ship design 
is complete and the production is proven and stable. Consideration 
should be given to expanding the period over which these types of 
procurements can be used to 6 or 7 years, in order to leverage economic 
order quantity purchases and to increase stability. As well, as we 
approach a period of ship construction that will be dominated by the 
capital demands for replacing the Ohio-class strategic deterrent 
submarine, we need to investigate financing methods that enable 
continued steady investment across the balance of our shipbuilding 
programs commensurate with the Ohio Replacement procurement. This 
should include limited exceptions to the full funding policy for 
shipbuilding.
    The Navy has been working to minimize ship equipment and parts 
variants within ship classes and from ship class to ship class, to 
create greater commonality across the Fleet, while also looking at 
smart ways to reduce the number of ship specifications and procedures. 
From these efforts, the Navy believes that additional cost savings can 
be achieved through application of the block buy approach across a 
subset of shipbuilding material, common equipment, parts and 
commodities. The Navy is currently evaluating this alternate 
acquisition concept and ways to implement it, within the confines of 
the current authorization and appropriation process. Once the concept 
is developed further, additional flexibility may be desired with 
respect to authorization, appropriation, and bundling of advanced 
procurement material across appropriations (SCN, OPN, and NDSF) and 
possibly fiscal years, to best implement this alternative acquisition 
concept.
    Another potential area of consideration regards restrictions and 
scoring rules associated with long term lease-purchase agreements. A 
long-term ``Charter-Build'' construct may be a prudent way to build, 
lease, and possibly procure some auxiliary ships such as T-AO(X) and T-
ATS(X). In this construct, the Navy would enter into a long-term 
agreement with a private sector contractor to design, build, and then 
lease a number of ships to the Navy. The Navy would pay for the use of 
the vessels over the length of the lease, rather than upfront, and 
would secure the private sector contractor's loan from the Federal 
Financing Bank, pay financing charges, and would have the option to buy 
the vessel at a later date.
                                 ______
                                 
              Questions Submitted by Senator Kelly Ayotte
                      shipbuilding industrial base
    67. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, in your joint prepared statement, you highlight the importance 
of providing ``stability for the shipbuilding industrial base.'' Due to 
the inability to pass budgets and appropriations bills on time and find 
alternative spending reductions to replace defense sequestration, 
Congress has not provided the Navy the stability and predictability it 
needs. You also underscore the need to increase the ``strength of our 
shipbuilding industrial base.'' I would be interested to hear from each 
of you . . . how healthy is our Nation's shipbuilding industrial base, 
and what vulnerabilities or weaknesses do you see in our shipbuilding 
industrial base?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. At present, the 
First Tier Shipbuilding Industrial Base is relatively stable, although 
the Navy remains concerned with the Amphibious and Auxiliary 
shipbuilding sector. The current shipbuilding plan of one Aircraft 
Carrier Refueling and Complex Overhaul (RCOH) approximately every 3 
years, and one new carrier procurement every 5 years, maintains 
sufficiently stable production at Huntington Ingalls Industries Newport 
News Shipbuilding (HII-NNS) to sustain a level workload and a highly 
skilled workforce that supports complex aircraft carrier work. 
Submarine design and construction workload is at its highest level in 
over 2 decades at General Dynamics (GD)-Electric Boat and HII-NNS. 
Congress' approval in fiscal year 2013 of the Navy's request for 
multiyear procurement for the Virginia-class Block IV fiscal year 2014-
2018 contract for up to 10 submarines should further stabilize the 
submarine industrial base. With the early June 2013 award of the fiscal 
year 2013-2017 multiyear procurement contract, surface combatant 
backlog provides workload stability at both GD BIW and HII-Ingalls 
shipyards. The Amphibious and Auxiliary Ship sector, consisting of HII-
Ingalls and GD-NASSCO faces the greatest challenges with respect to 
sustaining a stable design and construction workload. HII has announced 
plans to close its Avondale, LA, shipyard and consolidate its naval 
shipbuilding at its HII-Ingalls facility in Pascagoula, MS. With both 
the LPD-17 class and MLP-1 class program delivering their last ships in 
fiscal year 2017, bridging the gap in procurement of amphibious and 
auxiliary ships will be challenging, as the next auxiliary program (T-
AO(X)) is not planned until fiscal year 2016, the next amphibious ship 
award (LHA-8) is not until fiscal year 2017, and the next amphibious 
program (LX(R)) is not planned to be procured until fiscal year 2019 
with advanced procurement funding in fiscal year 2018.
    The second-tier shipbuilding industrial base consisting of 
Marinette Marine, Austal USA, VT Halter Marine, Dakota Creek 
Industries, Textron and others, is considered healthy. Second-tier 
shipyards are building the LCS, JHSV, Oceanographic Survey Research 
Ship (T-AGS-66), Oceanographic Research Ship (Ocean AGOR) and the Ship-
to-Shore Connector (SSC).
    The Navy continues to assess the industrial base for risk as it 
executes this shipbuilding plan and will address industrial base 
matters with industry and Congress in the course of programming future 
years' shipbuilding budgets, formulating industrial base policies and 
agreements, and implementing acquisition strategies.

    68. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, what damage has sequestration and the lack of budget 
predictability and stability caused?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. Both sequestration 
and delayed appropriations have resulted in inefficiencies, short term 
reactions at the expense of long term goals, added risk, and damage at 
various extents and at various levels throughout the Navy enterprise. 
While the Navy made every attempt to minimize the damage when 
administering sequestration, some impacts were unavoidable given the 
size and timing of the reduction. The Navy has cancelled the unbudgeted 
deployment of a second carrier to CENTCOM in February and has cancelled 
other deployments to EUCOM, PACOM and SOUTHCOM. We have also forgone 
training and reduced our parts purchases, lowering our ability to surge 
forces and maintain our readiness levels while deployed. We have 
reduced the scope and efforts associated with development and 
acquisition, and are preparing to furlough our civilian workforce for 
up to 11 days beginning in July.
    Many of our decisions in the area of procurement have been focused 
on making immediate reductions, although temporary de-scopes and 
deferrals were necessary, programs will require a ``pay-back'' in the 
future. This creates a continued rightward push of projects and 
requirements for what amounts to a one-time, non repeatable savings. As 
such, future budgets will have much less trade space available to 
respond, and ultimately our readiness and ability to surge will 
continue to be diminished. In fact, should sequestration continue with 
the Department placed on a lower funding path, the readiness impacts 
will increase disproportionately. As funding declines, our shore 
infrastructure will degrade and our shipbuilding, weapons system and 
supplier base will decline. Some contractors may choose not to do 
business with the Department or cease to exist entirely.
    While some efficiency can still be obtained, reduction of the 
Navy's top-line budget will ultimately require a more balanced 
strategic approach, which the Department is currently assessing.

    69. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, what can we do to address those weaknesses?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. Budget uncertainty 
and instability are immensely disruptive to our ability to execute the 
current year budget and our ability to plan for the future.
    We have limited options to restore funding lost to fiscal year 2013 
sequestration that is required to complete fiscal year 2013 and prior 
year ships. A portion of fiscal year 2015 through fiscal year 2018 
budget authority will be diverted from budget year requirements to fund 
prior year program completion efforts.
    Reducing uncertainty in the budget process through passage of 
appropriation acts (or allowing anomalies during extended periods of 
Continuing Resolution Authority which are extremely disruptive for 
shipbuilding programs) and acting to avoid sequestration would help to 
address disruptions in programs. The Department is limited in terms of 
its reprogramming authority. Increasing the General Transfer Authority 
and the scope and purpose of Special Transfer Authority associated with 
new construction shipbuilding would provide additional flexibility to 
enable the Department leadership to review alternatives and take 
actions to meet the defense strategy.

    70. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, to what degree is the Navy reliant on sole source suppliers? Has 
the reliance increased or decreased in recent years?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. The Navy's 
shipbuilding industrial base is relatively stable. At the prime level, 
we have sole source contracts for our aircraft carriers and currently 
with our large deck amphibious ships. Most of the other shipbuilding 
contracts are procured using limited competition. These shipbuilders 
have established supplier relationships, in some cases with a single 
domestic source supplying critical equipment or components for one or 
more shipbuilders, or in some cases Services.
    Where demand and funding are stable and/or the supplier is not 
solely reliant on one customer or product, sole source or single source 
arrangements can and do exist, typically without issue. Of course, 
relying on a single supplier introduces risk, as it creates a single 
point of failure, possibly from natural disasters, labor unrest, surge 
limitations, or financial distress. The Department recognizes that only 
a small fraction of our enormous industrial base capabilities are truly 
at risk (fragile) and therefore in danger of disappearing without 
dedicated efforts to sustain them. As such we will continue to identify 
those firms which may warrant action if appropriate.

 importance of virginia payload module to u.s. undersea strike capacity
    71. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, based on the planned drop to 42 attack submarines in 2029, what 
will be the specific impact on the Navy's undersea strike capacity?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. Undersea strike 
volume will decrease by approximately 63 percent in the 2030 timeframe 
due to two factors: SSN force structure reductions and SSGN retirement. 
The retirement of SSGNs accounts for a loss of 616 launchers and the 
reduction in SSN force structure for a loss of 72 launchers.
    DOD added RDT&E and non-recurring engineering funding for a 
Virginia Payload Module (VPM) that could be inserted into future 
Virginia-class SSNs that would restore approximately 94 percent of our 
current undersea strike volume. This advance engineering work will 
enable the DoN to consider incorporating VPMs in the fiscal year 2019 
Block V Virginia-class buy as an alternative to recapitalizing the 
SSGNs.

    72. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, how important is it that Congress fully fund the research and 
development funding for the VPM to mitigate the loss of undersea strike 
capacity?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. Undersea strike is 
a critical element of the ability to counter adversary anti-access and 
area denial capabilities, and to assure access for the Joint Force.
    The Virginia Payload Module (VPM) is a potential option to more 
than triple the vertical launch capacity in current Virginia-class 
ships. VPM would provide an additional four large diameter payload 
tubes, each capable of carrying seven Tomahawk cruise missiles, 
increasing vertical launch cruise missile capacity from 12 to 40 per 
ship. Twenty Virginia-class SSNs with VPM could replace the undersea 
strike volume gap created by the inactivation of the SSGNs. The current 
advanced engineering design work on VPM will enable the Department of 
the Navy to consider incorporating VPM in the fiscal year 2019 Block V 
Virginia-class buy.
    While the VPM represents a significant improvement in strike 
capacity that may be made available to us if we could incorporate this 
change into the Virginia-class design, it comes at a cost. In 
isolation, these costs would not be insurmountable but including them 
in the Virginia-class costs concurrent with our efforts to field the 
Ohio Replacement SSBN may prove to make these changes unaffordable 
regardless of the contribution they might represent.

                         ohio-class replacement
    73. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, I note that Vice Admiral William Burke, the Deputy Chief of 
Naval Operations Warfare Systems, recently said that, ``if we buy the 
SSBN within existing funds, we will not reach 300 ships. In fact, we'll 
find ourselves closer to 250 . . . our global presence will be reduced 
such that we will only be able to visit some areas of the world 
episodically.'' Our national security requires not only the Ohio-class 
replacement, but also a fleet of 306 ships. Under the current plan, not 
even accounting for sequestration, we are not going to have a 306-ship 
Navy until 2037. How can we ensure our Nation builds the 12 Ohio-class 
replacement boats we need with the common missile component for the 
U.K. Vanguard program, while protecting our shipbuilding plan that will 
allow the Navy to reach and sustain approximately a 300-ship fleet 
through much of the 2020s?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. The Department of 
the Navy will require ship construction funds identified in the 30-year 
shipbuilding plan to execute the plan and meet the requirements of the 
Force Structure Assessment (FSA). The funding cost estimates presented 
in the 30-year shipbuilding plan will build to and maintain a battle 
force inventory of approximately 300 ships during the time of Ohio-
class recapitalization and ultimately achieve the Navy's FSA post-
fiscal year 2020 objective of 306 battle force ships. The battle force 
represents an integrated and balanced fleet that executes the DSG. The 
challenge before us all is ensuring that shipbuilding receives the 
level of funding necessary to meet these force structure requirements.

    74. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, do we need a new national capital ships account in addition to 
the SCN account?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. Budgeting for Ohio 
Replacement (OR) in a separate national capital ships account will not 
affect the cost of the program or the resources required to meet the 
30-year shipbuilding plan. The challenge before the Department is the 
episodic nature of SSBN recapitalization. SSBNs are not built in a 
level loaded schedule approach as are virtually other Navy platforms 
and instead, are built in tight class groupings every 30 to 40 years. 
The ``historical average'' shipbuilding plan over the last 20 years 
does not include SSBNs, so it is not surprising that a shipbuilding 
plan which includes SSBNs will exceed the historical average.
    Accordingly, the Department with Congress will need to increase 
shipbuilding funds to account for the OR SSBN. Otherwise, with the OR 
estimated to require about one third of the historical average 
shipbuilding budget; existing, stable, lean shipbuilding plans 
implemented to provide optimal cost-efficiency (and the associated 
workforce stability) would be disrupted for 15 years in a manner 
inconsistent with cost control. Fewer ships would be built, and those 
built would be less cost efficient.

    75. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, is the collaboration with the United Kingdom on the Common 
Missile Compartment (CMC) for the Ohio-class replacement saving the 
U.S. money due to economies of scale?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. The U.S. and U.K. 
Governments both share in the U.S.-designed CMC. The U.K. provides 
funding for the non-recurring engineering (NRE) costs of designing the 
CMC; under the joint agreement the U.K. will pay a 12.5 percent cost 
share of all CMC design NRE. To date, the U.K. has invested 
approximately $400 million.
    The U.S. and U.K. Governments anticipate both CFE and GFE material 
savings benefits associated with combined purchases from the recently 
reconstituted missile tube and launch tube industrial bases for 
construction of both the Ohio Replacement and U.K. Successor 
submarines.
    In addition to missile and launch tube savings, the U.S. and U.K. 
Governments anticipate cost savings from joint manufacturing fixture 
procurements by sharing non-recurring engineering and design costs, 
leveraging suppliers' economic order quantities, including procurement 
and quality management labor hour reductions, and securing learning 
curve improvements during the assembly and testing of fixtures. The 
program expects to realize a cost savings of approximately 5 to 10 
percent of the overall contract values for each manufacturing fixture 
based on the combined buy. At this time, actions for the fixtures are 
in various stages of competitive process. The Navy plans to award a 
fixture contract in 2013 and both nations will benefit from these 
savings.

    76. Senator Ayotte. Secretary Stackley, Admiral McCoy, and Admiral 
Myers, are there other areas of shipbuilding where we could seek to 
establish similar international partnerships that could save money?
    Mr. Stackley, Admiral McCoy, and Admiral Myers. There are numerous 
international partnerships that provide technology and tools that aid 
Navy shipbuilding. Actual shipbuilding cooperation is limited by 
legislation; therefore, most of these projects focus on cooperation in 
the research and development phases. Some examples are:

         Advanced steel technology with Japan (completed--
        results used in submarine and ship construction).
         Trimaran with the U.K. (completed--design technology 
        for trimaran hulls like that used in LCS 2 Variant).
         Tip vortex cavitation with the Netherlands 
        (completed--results used in the design of the propeller for 
        DDG-51).
         Dynamic system mechanics advanced simulation (DYSMAS) 
        with Germany--(completed--provided modeling code for undersea 
        explosion effect and ship design that mitigate such effects).
         Submarine composite structures with the U.K. (signed 
        and underway--developing and testing composites for submarine 
        structures).
         Advanced material propeller with Australia (recently 
        signed--will design and test future designs for submarine 
        propulsors).
         High speed multi-hull vessel with Japan (in 
        negotiation--will develop tools to support future designs).
         Large diameter unmanned undersea vessels with South 
        Korea (in negotiation--will provide an additional prototype 
        platform for Unmanned Undersea Vessels).
         Hydrodynamics with the U.K. (active Project 
        arrangement--collaboratively designed and evaluated different 
        stern designs for use on Ohio Replacement and Successor 
        programs).

    The Navy meets regularly with several countries to assess any 
future efforts and conducts numerous active information exchanges with 
allies.

    [Whereupon, at 11:46 a.m., the subcommittee adjourned.]


DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR 
               2014 AND THE FUTURE YEARS DEFENSE PROGRAM

                              ----------                              


                         TUESDAY, MAY 14, 2013

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

                       MARINE CORPS MODERNIZATION

    The subcommittee met, pursuant to notice, at 9:33 a.m. in 
room SR-222, Russell Senate Office Building, Senator Jack Reed 
(chairman of the subcommittee) presiding.
    Committee members present: Senators Reed, Kaine, King, 
McCain, and Ayotte.
    Committee staff member present: Leah Brewer, nominations 
and hearings clerk.
    Majority staff members present: Creighton Greene, 
professional staff member; and William K. Sutey, professional 
staff member.
    Minority staff members present: Ambrose R. Hock, 
professional staff member; and Daniel A. Lerner, professional 
staff member.
    Staff assistants present: Lauren M. Gillis and John 
Principato.
    Committee members' assistants present: Carolyn Chuhta, 
assistant to Senator Reed; Karen Courington, assistant to 
Senator Kaine; Stephen Smith, assistant to Senator King; Paul 
C. Hutton IV, assistant to Senator McCain; Bradley Bowman, 
assistant to Senator Ayotte; and Joshua Hodges, assistant to 
Senator Vitter.

        OPENING STATEMENT OF SENATOR JACK REED, CHAIRMAN

    Senator Reed. Let me call the hearing to order.
    I want to, obviously, thank and welcome back Sean Stackley, 
the Assistant Secretary of the Navy for Research, Development, 
and Acquisition; and Lieutenant General Richard Mills, the 
Deputy Commander for Combat Development and Integration, and 
the Commanding General of the Marine Corps Combat Development 
Command. We are certainly grateful for your service to the 
Nation and the Marine Corps, both of you. Thank you very much 
for that and also to the men and women of the Marine Corps who 
every day distinguish themselves and honor the country. So 
thank you, gentlemen.
    Today our witnesses will update us on their efforts to 
build a force of amphibious, combat, and tactical ground 
vehicles that meets the Nation's requirements for maneuver from 
the sea that is technologically achievable and affordable. 
Since the cancelation of the Expeditionary Fighting Vehicle 
(EFV) in 2011, the Marine Corps has taken advantage of the 
opportunity to reassess its amphibious vehicle concepts and 
requirements.
    Last year, we questioned the affordability of the Marine 
Corps combat and tactical vehicle programs given an out-years' 
procurement bow wave that far exceeded projected available 
funding levels. We hope that the Marine Corps ground systems 
budget request for fiscal year 2014 reflects the applications 
of the lessons of the recent past and adaptation to the 
realities of today and tomorrow's operational and fiscal 
environments.
    We look forward to our witnesses describing for us how the 
Marine Corps has reassessed its priorities relative to its 
missions and requirements under the current defense strategy 
and how it proposes to sequence its vehicle development and 
acquisition efforts to better control overall affordability, 
specifically the appropriate size and structure of the 
amphibious assault capability and the mix of armored combat and 
tactic vehicles and ship-to-shore connectors.
    Coming off the cancelation of the EFV, and the 
affordability tradeoffs made with respect to the cost of the 
system and the numbers of amphibious vehicles during the 
program development, several questions were raised about the 
tactical implications of the scope and pace of the buildup of 
combat power ashore and risk to mission success.
    I understand that the Marine Corps is nearing the 
completion of its fleet mix study to inform its decisions with 
respect to how many of what type vehicles it should buy in the 
future. I look forward to an update on the fleet mix study, its 
preliminary findings, if any, and continuing our discussion of 
this issue.
    We must note, unfortunately, that all of this is at risk if 
sequestration is triggered for fiscal year 2014. No doubt, 
sequestration next year would compound the challenges to all 
Marine Corps programs. We would like our witnesses to address 
the impacts and risks of another year of sequestration, 
including any extraordinary budget pressures associated with 
continuing operations in Afghanistan.
    Finally, and related to our interest in the challenges of 
modern operations from the sea, I note that next month the 
Marine Corps will conduct a major amphibious exercise that 
will, so to speak, stretch some tactical muscles that have not 
enjoyed robust testing in many years. We would welcome your 
views on this coming exercise and other completed exercises and 
what the Marine Corps has learned or hopes to learn about joint 
and combined amphibious operations and their concepts, 
equipment, and readiness. We are particularly interested in any 
insights regarding the performance of the Marine Corps current 
fleet of amphibious, combat, and tactical vehicles.
    Gentlemen, we look forward to your testimony.
    Now, let me now recognize Senator McCain.

                STATEMENT OF SENATOR JOHN McCAIN

    Senator McCain. Thank you, Mr. Chairman. I join you in 
welcome our witnesses, Secretary Stackley and Lieutenant 
General Mills, and thank them for their many years of service.
    As we all know, it is the responsibility of Congress to 
provide the resources to enable a ready expeditionary force 
capable of acting when called upon and defending our security 
interests when threatened. Unfortunately, the budget request 
before us today falls short of that goal as it continues to 
finance near-term readiness at the expense of modernization and 
infrastructure. Marine Corps modernization funding represents 
less than 10 percent of the Marine Corps budget request for 
2014. We must ensure the Marine Corps makes good use of these 
scarce resources.
    The current fiscal situation has caused the Department of 
the Navy to assume significant risk in shipbuilding programs 
needed by the Marine Corps to accomplish their missions. For 
example, the Navy has identified a requirement for 38 
amphibious ships to support the Marine Corps mission, but the 
shipbuilding plan calls for only 33 ships. That number of ships 
will not be achieved until 2025 and assumes a huge increase in 
the annual shipbuilding budget.
    The Navy is also taking on readiness risk with the current 
amphibious fleet, with only 22 ships available or fully mission 
capable last year. This is on top of the Navy's decision last 
year in response to declining budgets to eliminate a squadron 
of maritime prepositioning ships for the Marine Corps which are 
used to rapidly deploy combat equipment around the world. In 
all, reduced investments have Marine Corps capabilities and 
readiness headed in the wrong direction.
    Over the last few years, the Marine Corps has identified 
areas in which new technology is needed to improve capabilities 
or respond to changing threats. The fiscal year 2014 budget 
request includes funding for the procurement of the Joint Light 
Tactical Vehicle (JLTV), and development of the Amphibious 
Combat Vehicle (ACV), which replaces the failed EFV program. 
Additionally, the Marine Corps will recapitalize a portion of 
their legacy vehicles, including the High Mobility Multipurpose 
Wheeled Vehicle (HMMWV) fleet. This subcommittee would be 
interested in hearing how the Marine Corps is managing these 
programs so that they are affordable in the current and future 
fiscal environment.
    After spending nearly $3 billion on it, the Marine Corps 
canceled the EFV program in 2011 due to poor reliability and 
excessive cost growth. One of the factors contributing to cost 
growth was the requirement that the armored troop carrier be 
able to achieve high speeds in open water. After recently 
completing the ACV analysis of alternatives, I understand the 
Marine Corps is reopening the high water-speed can of worms. We 
will be interested in hearing how the Marine Corps plans to 
field this capability without incurring the cost growth that 
led to the EFV's cancelation.
    Let me close by expressing my concern for Marine Corps 
readiness. Similar to the other Services, the Marine Corps has 
prioritized deployed and next-to-deploy marines in their 
operations and maintenance accounts at the expense of 
nondeployed units. This has resulted in the degradation of 
Marine Corps readiness. According to the Commandant of the 
Marine Corps, by the beginning of calendar year 2014, 
approximately 50 percent of Marine Corps ground and aviation 
units will be below acceptable readiness levels. This places 
the Marine Corps at serious risk in their ability to respond to 
near-term contingency operations.
    I look forward to the testimony of the witnesses.
    Senator Reed. Thank you very much, Senator McCain.
    Secretary Stackley.

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

    Mr. Stackley. Yes, sir. Chairman Reed, Senator McCain, 
distinguished members of the subcommittee, thank you for the 
opportunity to appear before you today to address Marine Corps 
modernization. I will be testifying alongside the Deputy 
Commandant for Combat Development and Integration, Lieutenant 
General Mills, and with the permission of the subcommittee, I 
propose to keep opening remarks brief and submit a formal 
statement for the record.
    Senator Reed. All of your statements will be included. You 
may summarize.
    Mr. Stackley. Thank you, sir.
    Your Marine Corps serves as America's expeditionary force 
in readiness, a balanced air/ground naval force, forward-
deployed and forward-engaged. Today, over 17,000 marines are 
deployed around the world, on the ground in Afghanistan in 
support of Operation Enduring Freedom and at sea deployed 
aboard amphibious ships operating off coasts from Africa to 
Japan, conducting air operations, ship-to-shore operations, 
building partnerships, deterring enemies, and responding to 
crises and contingencies. They place in the hands of our 
Nation's leaders tools and options to respond to today's world 
events and shape future events, and it is our responsibility to 
place in the hands of our marines the best weapons this Nation 
can produce to shape, deter, defeat, and deny our enemies 
sanctuary.
    The seamless maneuver of marines from sea to conduct 
operations ashore, whether for training, humanitarian 
assistance, or combat, remains a key priority as the Marine 
Corps shapes its future force. To this end, the Marine Corps 
modernization strategy includes sustainment of amphibious lift 
capabilities, as outlined in the Department's 30-year 
shipbuilding plan, replacement of the landing craft air cushion 
(LCAC), ship-to-shore connectors, recapitalization of critical 
aviation capabilities from the Short Takeoff Vertical Landing 
(STOVL) version of the Joint Strike Fighter (JSF) to modernized 
attack and utility H-1 helicopters to the development of the 
heavy lift H-53K helicopter, modernization of the Corps' 
expeditionary command, control, and communications capabilities 
with the development of the Ground/Air Task-Oriented Radar (G/
ATOR), the common aviation command and control system, and the 
global communications support system Marine Corps and 
modernization of the Marine Corps' ground combat vehicles.
    The Marine Corps combat vehicles are at the front end of 
much needed recapitalization. We have briefed this subcommittee 
on the Corps' ground combat tactical vehicle strategy which 
includes developing and procuring the JLTV; developing a modern 
ACV; sustaining a portion of the HMMWV fleet through 2030; 
initiating an upgrade program for the legacy amphibious assault 
vehicle (AAV) as a bridge to the ACV; and managing procurement 
of vehicles to reduce acquisition objectives, a net reduction 
of about 20 percent based on the more recent force structure 
reviews.
    The JLTV program remains on track with the 2014 budget 
request continuing development in support of procurement 
commencing in 2015. We are continuing to review with the Army 
the impacts of sequestration on the schedule and will advise on 
the results of this review when complete.
    The ACV is, as the Commandant stated in testimony earlier 
this year, a top Marine Corps priority. The simple fact is that 
execution of amphibious operations requires a self-deploying 
amphibious vehicle to seamlessly project ready-to-fight marine 
units from sea to land in permissive, uncertain, and hostile 
environments. This capability enables the Corps to maximize 
available amphibious lift and accelerate the buildup of power 
ashore, which is key to overcoming access challenges posed by 
either the lack of improved infrastructure or the threat of an 
adversary.
    In order to ensure we get the ACV program right, we are 
conducting a combined requirements definition feasibility study 
assembling the best of government and industry requirements, 
systems engineering design, and cost experts. Our intent is to 
bring the best talent and best information together to build on 
the tremendous body of knowledge we possess across all our 
vehicle programs and determine how to deliver the capability 
needed by the Marine Corps with high confidence in the 
affordability of the defined requirements.
    We have engaged your staff at the front end of this process 
and will remain engaged as we progress towards future milestone 
decisions. In fact, for our entire portfolio and particularly 
the ACV and JLTV, the Marine Corps has taken a textbook 
approach to developing these critical combat vehicles, placing 
priority on getting the requirements right at the front end, 
employing mature technology where possible to reduce cost and 
risk in development, establishing affordability as a 
requirement, conducting comprehensive systems engineering and 
cost analysis, streamlining the acquisition process where 
sensible, leveraging competition and, perhaps most importantly, 
integrating the requirements and acquisition team to enable 
effective, cost performance trades throughout the requirements 
definition and system development process.
    Mr. Chairman, thank you for the opportunity to appear 
before you today. We look forward to answering your questions.
    [The joint prepared statement of Mr. Stackley and General 
Mills follows:]
Joint Prepared Statement by Hon. Sean J. Stackley and LtGen Richard P. 
                              Mills, USMC
                              introduction
    Chairman Reed, Senator McCain, and distinguished members of this 
subcommittee, we appreciate the opportunity to appear here today and 
discuss Marine Corps modernization. As always, we thank you for your 
continued support to our sailors, marines, and their families.
    As America's Expeditionary Force in Readiness, the Marine Corps' 
ground modernization investments support our Nation's ability to be 
prepared for all manner of crises and contingencies. As a 
``middleweight force,'' Marines do not seek to supplant any Service or 
``own'' any domain. Rather, Marine forces transit in a ``lane'' that 
passes through all domains--land, sea, air, space and cyber-operating 
capably and freely throughout the spectrum of threats, whether they be 
conventional, irregular or the uncertain hybrid areas where they 
overlap. Key is the ability to deploy and employ from the sea in 
austere environments at a time and place of our choosing -a significant 
asymmetric, strategic and operational advantage that has been used more 
than 130 times in the past 2 decades.
    Our ground investments allow us to develop and sustain a ready, 
middleweight force that is easily deployable, energy efficient, and 
highly expeditionary. As the Department of the Navy and your Marine 
Corps confront the challenges of budget constraints and the uncertainty 
inherent in our fiscal outlook, we are evaluating priorities and making 
hard choices that are necessary to maintain the right balance in 
capacity, capability and industrial base sustainment. We have accepted 
our share of the additional risk associated with reduced resources; 
however, we have also sought innovative and practical means to mitigate 
that risk. We leverage programs, technologies, technical skills and 
competencies of other Services to ensure we deliver the most effective 
and affordable combat capability to your marines. We also seek to 
capitalize on our industrial base to identify and pursue innovative and 
ground-breaking solutions to meeting the warfighter's needs and to 
reduce acquisition and sustainment costs of our systems.
                         operating environment
    Over the past year alone, Marines have actively engaged in every 
corner of the global security environment. The Marine Corps continued 
to meet operational commitments in Afghanistan while simultaneously 
working with more than 90 allies and partners to train, learn, and 
build effective security institutions. In addition to forces committed 
to Operation Enduring Freedom (OEF), our Marine Expeditionary Units 
(MEUs), in partnership with Navy's Amphibious Ready Groups (ARGs), 
continued to patrol regions of likely crisis. Other task-organized 
Marine Air Ground Task Forces (MAGTFs), operating from expeditionary 
locations, supported U.S. national security objectives through forward 
presence, deterrence, multinational theater security cooperation 
exercises, and building partner capacity. Marines have been active in 
every geographical combatant command, serving as a key component of the 
joint force. Even under fiscal restraint, we continue to support these 
strategically important activities to the greatest extent possible.
    The need for this highly capable and ready force is more pressing 
now than ever. Today, we see a world marked by conflict, instability 
and humanitarian disaster. We see the disruptive changes that accompany 
a rapidly modernizing world--a world in which tyranny is rewarded, 
power is diffused, and extremism finds fertile ground in the 
disenfranchised. In what has been described as a 'new normal,' 
extremism, economic disruption, identity politics and social change 
generate new potential security threats at an accelerating pace. While 
we desire peace as a nation, threats to our citizens, allies and 
national interests compel our response when crisis occurs.
    Regardless of the financial pressures placed on governments and 
markets today, crises requiring military intervention undoubtedly will 
continue into the foreseeable future. In this environment, physical 
presence and readiness matter more than ever. As a maritime nation, 
dependent on the sea for the free exchange of ideas and trade, America 
requires security both at home and abroad. Since the 1990s, the United 
States has been reducing its presence on foreign bases. This trend will 
likely continue in the face of the strategic and budget realities we 
currently face. There remains an enduring requirement to balance 
presence with cost. In the past, the Nation has chosen to depend on the 
Navy and Marine Corps to provide a lean and economical force of an 
expeditionary nature, operating forward and in close proximity to 
potential trouble spots. Investing in naval forces that can respond to 
a wide range of crisis situations creates options and decision space 
for our Nation's leaders.
                        role of the marine corps
    The Marine Corps remains first and foremost a naval service, 
operating in partnership with the U.S. Navy. We share with them a 
storied heritage that predates the signing of our Constitution. 
Together, we in the naval service use the seas, not only to protect the 
vast global commons, but also to project our national power and 
influence ashore where that is required. The world's coastal regions 
are the home to an increasing majority of the human population, and are 
thus the scene of frequent conflict and natural disaster. These 
littoral regions comprise the connective tissues that join oceanic 
trade routes with the activities of populations ashore. In an era of 
heightened sensitivities over sovereignty, and where large foreign 
military footprints are unwelcome, the seas provide maritime forces 
with a means of less obtrusive presence and unfettered access. Maritime 
expeditionary forces can be located close enough to act when crisis 
threatens and hours matter, without imposing a burden on host nations. 
Expeditionary maritime forces can operate in the air, at sea, and on 
land, without the necessity of infrastructure ashore. They can loiter 
unseen over the horizon, and can move swiftly from one crisis region to 
another. Importantly, maritime forces also have the ability to rapidly 
return to the sea when their mission is complete.
    This flexibility and strategic agility make Marine forces a key 
tool for the Joint force in major contingencies. Operating in 
partnership with the Navy, the Marine Air-Ground-Logistics Task Force 
creates the strategic asymmetries that make the joint force so 
effective on the modem battlefield. Amphibious and expeditionary 
capabilities contribute to each of the ten mission areas of the joint 
force, and are directly responsive to the security demands articulated 
in the President's Defense Strategic Guidance for the 21st Century. By 
design, marines smoothly integrate with the other elements of the joint 
force, enable our interagency partners, and provide a naturally 
complementary team when working with Special Operations Forces.
    Virtual presence, the ability to strike with precision weapons or 
to attack an adversaries' networks do not have the same impact of 
knowing the force is over the horizon can be at your front door 
tonight. The tragic events in Boston highlight the value of a ready 
police force that can respond to today's crisis with today's force. Law 
enforcement personnel (local, State, and Federal) are backed up by 
sophisticated technology but the officer walking the street--going door 
to door -was crucial to re-establishing calm and finding the 
perpetrators. With the right ships, equipment, personnel and training, 
marines are your international crisis response force--as part of a 
larger joint and multi-national effort--we will be there first with the 
ability to respond to today's crisis with today's force, today.
    As the Nation prepares for an uncertain future, its expeditionary 
Marine forces provide a highly-utilitarian capability, effective in a 
wide range of scenarios. Marines remain a cost-effective hedge against 
the unexpected, providing a national ``insurance policy'' against 
strategic surprise. The Marine Corps will continue to meet the 
requirements of strategic guidance while resetting and reconstituting 
the force in-stride.
                                 reset
    Reset is a subset of reconstitution and comprises the actions taken 
to restore units to a desired level of combat capability commensurate 
with the units' future missions. After more than a decade of combat, 
this will require an unprecedented level of effort. The Marine Corps is 
resetting its forces ``in stride'' with fighting the war in Afghanistan 
and transitioning in line with the Defense Strategic Guidance. Unlike 
previous post-conflict periods, such as after Operation Desert Storm, 
we do not anticipate taking an ``operational pause'' to reset as we 
transition from OEF.
    The Marine Corps' Operation Enduring Freedom Ground Equipment Reset 
Strategy, released in January 2012, identifies the equipment we will 
reset or divest. The reset strategy prioritizes investment and 
modernization decisions to develop our middleweight force. Last year 
our reset liability was approximately $3.2 billion. We currently 
estimate it will be something less; however; we are unsure exactly what 
that number will be until we can get a better picture on both the 
totality of the costs associated with returning our equipment from 
Afghanistan and the detailed costs associated with resetting our gear 
after 10 years of combat. This revised forecast is primarily based on 
the replacement of combat losses, the restoration of items to 
serviceable condition, and the extension in service life of selected 
items. The liability accounts for execution of reset dollars provided 
in fiscal year 2012 and the first quarter of fiscal year 2013 to 
include maintaining the Marine Corps' enduring requirement of 1,231 
Mine Resistant Ambush Protected (MRAP) vehicles.
    The Marine Corps' MRAP reset requirement strikes the right balance 
between capabilities immediately available to the operating forces, 
those geographically positioned for crisis response, and MRAPs placed 
in a cost-effective long-term storage for potential enduring conflict. 
The 455 MRAPs maintained in our strategic prepositioning stocks afloat, 
in Norway, and in Kuwait will be kept at a heightened state of 
readiness--available in crisis response with little notice; 618 MRAPs 
will move into long term storage at our organic depot facility in 
Barstow, CA; and the remaining 158 MRAPs will be used in our operating 
forces for training and immediate response.
    The Retrograde and Redeployment in support of Reset and 
Reconstitution Operational Group (R40G) is a vital element to the 
Marine Corps' responsible drawdown from Afghanistan and the successful 
execution of the Ground Equipment Reset Strategy. The R40G which began 
in May 2012 is the Marine Corps' component to the U.S. Central Command 
Materiel Recovery Element and is tasked with preserving the operational 
capacity of combat units shouldering the load of clearing the battle 
space of equipment, supplies and sustainment stocks. The R40G is 
focused on accountability and efficiency in the redeployment and 
retrograde process. This process includes retrograding more than $324 
million of equipment, repairing more than 1,200 shipping containers, 
and processing more than 230,000 pounds (net explosive weight) of 
ammunition, and has overseen the retrograde of more than 4.5 million 
square feet of aviation AM2 matting and more than 5,700 equipment 
items. The Marine Corps has retrograded 60 percent of its equipment 
items; 70 percent of the supplies, repair parts, and ammunition; and 85 
percent of its AM2 matting in Afghanistan. Additionally, the R40G 
brings discipline to the retrograde process ensuring Marine Corps 
combat units can withdraw from Afghanistan and redeploy.
    Our reset effort is already underway and it maximizes the Marine 
Corps' depot capacity, where we expect the bulk of reset to occur for 2 
to 3 years after our equipment is returned. The continued availability 
of our ground equipment depot capacity at both Barstow, CA, and Albany, 
GA, is essential for timely reset, our ability to generate readiness, 
and to surge in response to wartime demand. With the funding provided 
by Congress in Public Law 113-6 we will be able to remain on schedule 
with our reset plan in fiscal year 2013; however, the long term impacts 
of sequestration on reset may result in cuts to depot maintenance and 
procurement accounts, which may hinder the Marine Corps' ability to 
reconstitute in stride by fiscal year 2017.
    We are examining future equipment requirements with an on-going 
comprehensive review of the Marine Corps' equipment inventories. This 
effort will validate reset strategies, future acquisition plans, depot 
maintenance programming, and required modernization initiatives. This 
review will incorporate the lessons we learned from over a decade of 
combat to upgrade our tables of equipment to reflect the way we fight 
today and our warfighting requirements of tomorrow.
                             modernization
    With the smallest modernization budget in the Department of 
Defense, the Marine Corps continually seeks to leverage the investments 
of other Services, carefully meting-out our modernization resources to 
those investment areas which are the most fiscally prudent and those 
which promise the most operationally effective payoffs.
    Innovative warfighting approaches and can-do leadership are 
hallmarks of the Corps, but these cannot overcome the vulnerabilities 
created by our rapidly aging fleet of vehicles, systems and aircraft. 
Long-term shortfalls in modernization would have an immediate impact on 
readiness and would ultimately cost lives during crises. At some point, 
sustaining fleets of severely worn vehicles becomes inefficient and no 
longer cost-effective. This inefficiency reduces available 
modernization resources from an already small account, degrading our 
ability to effectively operate in today's complex security environment. 
Our modernization investment requires a balanced approach across the 
Air-Ground-Logistics Team.
Ground Vehicle Modernization and Sustainment
    Selective modernization and effective sustainment of our combat and 
tactical vehicles is the basis for planning, programming and budgeting 
to provide balanced maneuver and mobility capabilities to our Operating 
Forces. Our force structure and associated vehicles are highly 
leveraged investments. They optimize strategic lift capability and 
provide aggregate utility across the range of military operations. Our 
ground vehicle modernization strategy is to sequentially modernize 
priority capabilities, reduce equipment inventory requirements wherever 
possible, and judiciously sustain remaining equipment. Our plans focus 
on achieving the right mix of assets, while balancing performance, 
payload, survivability, fuel efficiency, transportability and cost.
    Our two signature modernization initiatives are the Amphibious 
Combat Vehicle (ACV) and the Joint Light Tactical Vehicle (JLTV). These 
vehicle modernization programs coupled with the upgrade of our Assault 
Amphibious Vehicles (AAV) and our family of Light Armored Vehicles 
(LAV), the refurbishment of a portion of our legacy High Mobility 
Multi-Purpose Wheeled Vehicle (HMMWV) fleet, and improvements in 
advanced simulations systems, are critical to sustaining our combat 
readiness and enabling our core warfighting capabilities. The Marine 
Corps has deferred acquisition of the Marine Personnel Carrier with the 
future capability requirement to be assessed after the more pressing 
ACY and JLTV requirements have been addressed.
    The Marine Corps is committed to developing and fielding an ACY 
that supports and enables our Service-defining capability of enabling 
operational access and forcible entry from the sea. The ACY is the 
Marine Corps' top ground modernization priority and the fiscal year 
2014 President's budget request includes $137 million for support of 
this effort. Based on the Department's 10-year investment plan, the 
intent is to address modernization shortfalls sequentially-both before 
and after development of the ACY. The Department's JLTV strategy 
depends on procuring those vehicles with the most demanding mission 
profiles. The Marine Corps' fiscal year 2014 request includes $50 
million to continue Engineering Manufacturing and Development efforts 
and reach Milestone C before the Marine Corps procurement focus is 
turned towards the ACY.
    During the interval in which the ACY is designed, built and 
fielded, the Department must also ensure the continued safety, 
reliability, and operational capability of the legacy AAV. The current 
AAV platform faces significant maintenance challenges and obsolescence 
issues. Accordingly, the Marine Corps is investing $70 million in AAV 
sustainment efforts, to include the AAV upgrade program. Both of these 
efforts remain a top Marine Corps recapitalization effort priority 
until fielding of the ACY. The Marine Corps plans to upgrade between 
350 to 400 existing AAVs to ensure they are survivable on the modern 
battlefield.
    While the AAV upgrades will provide a bridge of sorts, the ACY is 
needed to replace this aging fleet. The ACY Analysis of Alternatives 
was completed in July 2012 and the results of follow-on analysis into 
the cost of a high water-speed capability are expected in October 2013 
at which time a decision will be made whether to pursue a high water-
speed vehicle. The current baseline budget allows for equipment 
modernization on a reasonable timeline. Possible future reductions in 
the baseline budget and the impact of sequestration would result in 
delay, modification or elimination of key modernization programs.
Additional Modernization
    To complement future ground and amphibious vehicles, the Marine 
Corps is investing in key support areas such as the Ground/Air Task-
Oriented Radarm. Fiscal year 2014 President's budget request includes 
$192 million to complete Engineering and Manufacturing Development and 
enter Low Rate Initial Production in fiscal year 2014. This system will 
replace five legacy radar systems, and will be significantly more 
advanced in its capabilities. It will improve threat detection and be 
more deployable, able to be set up in a fraction of the time compared 
with current systems.
    Over the last 10 years of near continuous combat operations, the 
need for fuel and batteries on the battlefield has grown exponentially. 
Since 2001, the Corps has increased the number of radios infantry 
battalions use by 250 percent and the number of information technology 
equipment by 300 percent. The number of vehicles has risen by 200 
percent, with their associated weight increasing more than 75 percent 
as a result of force protection requirements. In the end, the force 
today is more lethal, but we have become critically dependent on fuel 
and batteries, which has increased the risk to our logistics trains. 
Moreover, a 2010 study found that one marine is wounded for every 50 
fuel and water convoys. To reduce risk and increase combat 
effectiveness, in March 2011, the Commandant issued the ``Marine Corps 
Expeditionary Energy Strategy and Implementation Plan'' to change the 
way the Corps thinks about and values energy. As part of this strategy, 
we are also investing in the Ground Renewable Expeditionary Energy 
System and Solar Portable Alternative communications Energy System. 
These systems will provide portable power, increasing self-sufficiency, 
and reduce requirements for fuel resupply for small units operating at 
the forward edge. This ``bases-to-battlefield' strategy includes 
training all marines to understand the relationship between resource 
efficiency and combat effectiveness. Throughout the Navy and the Marine 
Corps, we will consider energy performance in all our requirements and 
acquisitions decisions.
                               conclusion
    The Navy and Marine Corps team is fully aware of the fiscal 
challenges facing our Nation and has critically examined and 
streamlined our force needs for the future. We are proud of our 
reputation for frugality, and will continue to remain good stewards of 
every defense dollar we receive. In a period of budget austerity, we 
offer a strategically mobile force optimized for forward presence and 
rapid crisis response for a notably small portion of the Department of 
Defense budget. The Marine Corps will remain ready to fulfill its role 
as the crisis response force of choice for our Nation's leaders.
    Through the support of Congress, our marines and sailors responding 
to crisis and in the fight have received everything necessary to ensure 
success over the past decade of sustained combat operations. As we 
transition to the challenges and opportunities of the post-OEF world 
and continue to reorient to the Pacific, the Marine Corps is 
rebalancing and modernizing for the future. We must also keep faith 
with and provide the right resources for those who have served and 
sacrificed so selflessly in our All-Volunteer Force. With the continued 
support of Congress and the American people, we will ensure amphibious 
forces are well prepared to secure our national interests in an 
uncertain future.

    Senator Reed. Thank you, Mr. Secretary.
    General Mills, please.

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

    General Mills. Thank you, sir. Chairman Reed, Senator 
McCain, distinguished members of the subcommittee, it is good 
to be here to discuss Marine Corps modernization programs. As 
always, we thank you for your continued support to our sailors, 
our marines, and their families.
    As America's expeditionary force readiness, the Marine 
Corps' ground modernization investments support our Nation's 
ability to be prepared for all matters of crises and 
contingencies. Our ground investments allow us to develop and 
sustain a ready, middle-weight force easily deployable, energy 
efficient, and highly expeditionary.
    As the Department of the Navy and your Marine Corps 
confront the challenges of budget constraints in sequestration, 
we are evaluating priorities, we are making hard choices, 
choices that are necessary to maintain the right balance and 
capacity, capability, and industrial base sustainment.
    The programmatic priority for our ground forces is the 
seamless maneuver of marines from sea in order to conduct 
operations ashore whether for training, for humanitarian 
assistance, or for combat. The Marine Corps modernization and 
sustainment strategy is the basis for planning, programming, 
and budgeting in order to provide balanced maneuver and 
mobility capabilities for our operating forces. This strategy 
is focused on achieving the right mix of assets while balancing 
performance, payload, survivability, fuel efficiency, 
transportability, and of course, affordability.
    With the smallest modernization budget in the Department of 
Defense (DOD), the Marine Corps continually seeks to leverage 
the investments of our other Services. We carefully allocate 
our modernization resources in those investment areas which are 
most fiscally prudent and those which promise the most 
operational return.
    Our two signature modernization initiatives this year are 
the ACV and the JLTV. These vehicle modernization programs, 
coupled with an upgrade to our AAVs and also upgrades to our 
family of light armored vehicles, the refurbishment of a 
portion of our legacy HMMWV and improvements in advance 
simulation systems, are critical to sustaining our combat 
readiness and enabling our core warfighting capabilities.
    As discussed, the ACV AOA was completed in July 2012. While 
it did not directly address high water-speed, it did validate 
the requirement for an ACV capable of self-deploying from over-
the-horizon at long distances. High water-speed, however, is 
still a valuable attribute, but we understand it must be 
weighed against all other requirements. Mr. Stackley, as he 
said, brought industry together with a team of our own experts 
at Quantico to determine if an affordable, survivable, high 
water-speed vehicle is in fact obtainable. We expect the 
results of this incursion in October of this year and expect a 
decision shortly after that time.
    Clearly, there are challenges in meeting operational 
requirements in today's highly dynamic security environment, as 
well as the constrained and uncertain budget environment we are 
operating in. However, in partnership with the Navy, the Marine 
Corps looks forward to working with you to address these issues 
so that we are best postured to continue serving as the 
Nation's expeditionary force in readiness.
    Again, thank you for the opportunity to be here. I look 
forward to your questions.
    Senator Reed. Thank you very much, General Mills.
    Let me ask a question which I think will be asked by all my 
colleagues in one form or another. That is, how would you 
characterize the impact or potential impact of the Continuing 
Resolution (CR), the sequestration, and reprogramming on the 
Marine Corps modernization budget this year and going forward, 
all of this under the Budget Control Act and other 
congressional actions? Mr. Secretary, you might begin.
    Mr. Stackley. Yes, sir. First, you start with the CR. The 
CR slowed our execution in 2013, but I think we are overcoming 
any lasting effects that it has had and getting up on the 
governor in terms of executing smartly our programs. The 
sequestration impact clearly is more significant for the two 
reasons that are described. First, is the dollar amount itself, 
and second, is the across-the-board method of applying the 
reductions due to sequestration.
    For Marine Corps modernization, for example, the total 
impact is north of $300 million across their programs in 
procurement and then a smaller but significant amount in 
research and development (R&D). So we are having to go line by 
line through the Marine Corps programs to mitigate the effects 
in 2013, recognizing that some of those effects bow wave into 
the out-years. So there may be some necessary backfilling 
associated with sequestration.
    We can handle that on a 1-year basis, but clearly when you 
start to compound that with 2014 and out, it will have a 
significant reshaping of our Marine Corps modernization, at 
least in terms of the schedule for the programs that we are 
delaying in the out-years.
    Senator Reed. General Mills, do you have any comments?
    General Mills. Sir, I would add that our program and our 
plan for modernizing especially the JLTV and the ACV area 
require a plan for us to buy them sequentially. Any delay to 
either of those programs could affect our ability to do that. 
So it is one that we are very concerned about and one that we 
are watching very carefully. Again, affordability is a major 
factor in both of those programs. The sequential buy and the 
interaction between those two programs is critical to our 
strategy, and so the impact could be substantial.
    Senator Reed. Let me ask you a question, General Mills. I 
understand currently the Marine Corps has about 1,000 AAVs, 
which is the workhorse that gets marines from ship to shore. 
When you were doing the EFV, because of costs and other 
factors, I think you were down to a number of about 360. That 
was the planned buy. That would equip about four infantry 
battalions, not presumably 10 or so battalions you could equip 
now with the AAV.
    As you go forward with the new vehicle, the ACV, what is 
your target in terms of how many vehicles you want to procure? 
Then how does it relate to some of the other purchases? For 
example, you also have on the boards a Marine Personnel Carrier 
(MPC), which is a wheeled vehicle. You are sharing costs with 
the Army with the JLTV. Is there a priority? I say this in the 
context of, when you look out at the money situation, even in 
the best of circumstances, it is not going to be as robust as 
we might have thought 4 or 5 years ago. Do you have to make a 
tough decision and say, ``well, we only can afford the 
appropriate number of ACVs and then the others will be 
slipped.'' How are you going to deal with this whole vehicle 
mix?
    General Mills. Sir, the ACV is the Commandant's number one 
priority for ground modernization, and so that is the crown 
jewel in our program. Of course, it does impact our other lift 
requirements, and we have looked at those very carefully and 
studied them very carefully. The MPC is probably an excellent 
example of that. Although that is something we would like to 
have, we feel at this point in time we just simply cannot 
afford it. So we have pushed that requirement further out into 
the out-years to be perhaps resurrected at a later date.
    We have taken a look at the number of ACVs that we would 
need, what our lift strategy would be to move forces from ship 
to shore. We have looked at the mix between aircraft lift and 
surface lift. We have looked at alternate means of moving 
forces once they get ashore. We feel we have arrived at a 
requirement to lift about six battalions of forces by ACV, and 
that is the number that we are looking at.
    We have also, of course, developed a bridging strategy 
until that vehicle is able to be fielded, and that is to 
selectively sustain a number of our AAVs, our amphibious 
tracked vehicles, which are in the fleet right now. Between 350 
and 400 of those vehicles will undergo some sustainment work. 
They will become more survivable by increasing the protection 
on the floor, by putting in new blast seats that make it more 
survivable for the marines who ride inside of it, and some work 
on the power trains to be able to lift that extra weight and 
move it.
    So we see that as a bridging strategy until our new ACVs 
are able to be fielded some years from now, but we think that 
we have a plan, again, to maintain that core capability of 
moving marines in a self-deployer from ship to shore, move 
seamlessly beyond the high-water mark, continue on to the 
objective, and provide the marines inside with an acceptable 
level of protection.
    Senator Reed. Let me ask you another related question. The 
present AAV is designed to carry at least a squad of marines to 
the beach. When you look forward to the new ACV, is that going 
to maintain that same unit integrity of a squad or are you 
building a smaller vessel, or what are your plans?
    General Mills. Sir, what we anticipate is sometime in the 
October timeframe getting back the additional study from 
industry which will tell us the trade space that we have. We 
understand there will be some trades between affordability, 
number of marines you may have to lift inside of it, high speed 
in the water or not high speed. So the number of marines that 
will be lifted ashore is one of those areas in which we look at 
possible trade space. Unit integrity is critical to us, 
obviously. Lift capability to bring the right supplies ashore 
and be able to sustain those forces once they are on the beach. 
All those are factors that we will have to look at when we 
decide what it is that vehicle will finally be able to do.
    Senator Reed. Thank you.
    For the members' information, we are doing 7-minute rounds 
and we will entertain a second round.
    I hope, General Mills, I asked hard questions because as 
General Flynn pointed out at his retirement, I asked too easy 
questions and he was hoping that the Commandant would be here 
rather than you so I can ask harder questions. So I hope I have 
not disappointed General Flynn.
    General Mills. Sir, I failed to thank General Flynn for 
making that comment.
    Senator Reed. You should thank General Flynn.
    Senator McCain.
    Senator McCain. Thank you, Mr. Chairman.
    It is nice to see you again, General. You mentioned the 
last time we were together was in March--we had a delightful 
meal of unknown ingredients at the Governor's residence, and 
how you survived all those meals is a testimony to your iron 
constitution, I must say. [Laughter.]
    Secretary Stackley, we are still budgeting on the proviso 
that sequestration will be repealed. Is that correct?
    Mr. Stackley. Yes, sir. The 2014 budget request did not 
include an impact associated with sequestration.
    Senator McCain. Do you think at some point, as the weeks go 
on, that maybe we should prepare for that contingency?
    Mr. Stackley. Yes, sir.
    Senator McCain. I would imagine that decision is somewhat 
above your level, but would you not think logically we should 
start at least preparing a budget which would take into 
consideration the lack of repeal of sequestration? I say this 
because I think it might motivate Members of Congress and the 
American people to understand how devastating the effects would 
be.
    Mr. Stackley. Yes, sir. Secretary Hagel, back around the 
March timeframe, launched what he referred to as a Strategic 
Choices and Management Review (SCMR) to do exactly that, to 
take a look at the longer-term impacts associated with 
sequestration commencing in 2014 and beyond.
    Senator McCain. But there has been no formal notification 
or inclusion of Congress in those deliberations. Again, I hope 
that we would make the American people aware of the effects of 
another, I believe, $52 billion reduction in defense spending. 
Is that correct?
    Mr. Stackley. Yes, sir.
    Senator McCain. So we have already, in the short-term, 
curtailed training for nondeploying forces, General Mills, and 
obviously it takes time to recover from the impacts of 
training. How concerned are you, and who would bear the brunt 
of this additional risk in your view?
    General Mills. Sir, the Commandant is very concerned about 
the readiness, of course--number one--of our deploying forces, 
but equally with all marine forces. As we are a crisis response 
force, we have to have forces ready to deploy immediately, not 
necessarily being able to plan that ahead of time. I think that 
you can see that somewhat in the deployment of our special 
purpose Marine Air-Ground Task Force that recently deployed to 
Europe in order to cover any contingencies that arise on the 
northern rim of Africa, again an unplanned deployment, but one 
in which the Marine Corps had to be ready to do and which, I 
think, we did in a very timely and very efficient, professional 
manner. Those forces today, I believe, are on alert for 
possible use somewhere in that area. So we are very concerned.
    I think the first impact you probably would see in 
readiness would be in our aviation communities. Those are 
skill-sets that deteriorate very rapidly which require constant 
refresher training. I think the ground forces perhaps might 
have a little more lag time to maintain their high state of 
readiness. As you begin to see parts, as you begin to see 
maintenance pieces fall out of the budgets, I think that that 
would have a direct impact on our ability to deploy forces. So 
it is a concern.
    Senator McCain. As far as the ACV, for which the budget 
requests $137 million and follows the failed EFV, what are we 
doing different this time, General?
    General Mills. Sir, I believe what we are doing different 
this time--first of all, we are drawing from the lessons 
learned from that previous program, which are substantial.
    Senator McCain. A $3 billion lesson.
    General Mills. I think those lessons have been applied 
directly to the partnership that you see today between industry 
and the developers down at Quantico who are looking now at a 
series of capabilities, and those capabilities, I think, 
include high water-speed will be weighed carefully for 
affordability and for trade space so that we understand what we 
are giving up if, in fact, we want to achieve the high water-
speed. So I think certainly the number one lesson I can say we 
drew from there is that we have to balance high water-speed 
against the other capabilities we want out of that vehicle and 
ultimately against the affordability of the individual vehicle 
but also of the entire program itself.
    Senator McCain. When you look at the costs of the high 
speed in the water issue, in retrospect, it is just nonsense. 
Who was the contractor on that system, do you know?
    Mr. Stackley. The prime contractor for the EFV program was 
General Dynamics, one of two defense contractors that have the 
ability to manufacture track vehicles.
    Senator McCain. That is one of the problems.
    Secretary Stackley, today I understand that Secretary Hagel 
plans to announce this afternoon that DOD will furlough about 
800,000 civilian employees to pay for the budget cuts under 
sequestration for 11 days. Assuming that is going to happen, 
which is what reports are, what will be the impact of 
furloughing the civilian employees on Marine Corps and Navy 
depot operations, and how does that--maybe General Mills can 
weigh in on this--impact fiscal year 2014 readiness? How long 
would it take the Navy and Marine Corps to recover from this 
decision?
    Mr. Stackley. Yes, sir. Let me start by discussing what the 
impact of the furlough would be on the depots. Notionally, the 
furlough would be a day-per-week furlough for the period of 
time that the Secretary would be announcing. If it applies to 
the depots--and I do not know that at this time--then 1 day a 
week the depots would be shutting down or curtailing their 
operation, and there would also be an impact in terms of their 
ability to work overtime. So there is the direct impact of a 
day-for-day loss of work plus the impact of lost overtime 
opportunity for dealing with throughput at the depots.
    Today at the depots, we are dealing with the workload 
associated with planned maintenance and also the workload 
associated with reset as hardware comes back from the theater. 
So we are rising in terms of the workload at the depots, 
reaching towards a peak in the 2014 to 2015 timeframe, and this 
would stall that ramp-up.
    Senator McCain. General Mills, do you have a comment?
    General Mills. Sir, I have to concur with what Secretary 
Stackley said. It would have a ripple effect. Right now, the 
Marine Corps plan is to reset the force in stride by fiscal 
year 2017, and that depends on our depots being able to provide 
that very vital maintenance work and that refit work. So it 
would have a definite impact on our ability to reset the force 
and, again, would have a ripple effect, I believe, on readiness 
in the out-years.
    Senator McCain. Just as a comment, Mr. Chairman, is it not 
true that with all this equipment coming back from Afghanistan, 
the load on these depots is dramatically increased? Is that not 
true, Mr. Secretary?
    Mr. Stackley. Yes, sir.
    Senator McCain. Thank you, Mr. Chairman.
    Senator Reed. Thank you, Senator McCain.
    Senator Kaine.
    Senator Kaine. Thank you, Mr. Chairman.
    To the witnesses, welcome.
    You might have mentioned this, but I just want to pin it 
down. I think we are expecting a report from Secretary Hagel in 
early July, around the 1st of July, to the committee on 
sequester effects compared to the fiscal year 2014 request. But 
if the annual is about $52 billion in terms of reduced defense 
expenditure, what are you expecting that to be in terms of an 
allocation to the Marine Corps?
    Mr. Stackley. Senator, that is exactly the type of review 
that is going on right now inside of the SCMR. We are trying to 
not have a strict Service-by-Service allocation but really take 
a step back and take a look at the capabilities, the 
operations, and the priorities across DOD, with input from the 
combatant commanders in terms of how to best deal with 
reductions to the budget.
    If you just assumed an across-the-board cut the way 
sequestration was applied in 2013, then in terms of Marine 
Corps procurement, for example, you would be looking at about a 
$200 million to $250 million reduction, and when you overlay on 
top of that the impact to R&D, now you are north of $300 
million. If you look at what we refer to as blue-in-support-of-
green, which are Navy dollars that go towards Marine Corps 
programs such as aviation and amphibious shipbuilding, then you 
quickly go north into the billions.
    Senator Kaine. So just on the procurement account--and 
straight line is not likely what you are going to recommend, 
but if it was about $200 million to $250 million, that is out 
of a $1.3 billion request in the fiscal year 2014 budget. 
Potentially 25 percent of the procurement request could be 
reduced if we were to apply the sequester on a straight-line 
basis.
    Mr. Stackley. For planning purposes, we are taking a 
nominal 10 percent number and then looking at iterations off of 
that up and down.
    Senator Kaine. Just a decisionmaking thing that you have 
had to recently go through was a decision that you would not 
retrograde a lot of the Mine Resistant Ambush Protected (MRAP) 
vehicles back from Afghanistan. Could you just share the 
decisionmaking on that and how that is a mixture of either 
modernization and analyzing what capacity you need versus the 
budgetary realities of the cost of retrograding and how the 
Marine Corps reached that decision?
    General Mills. Sir, regarding the MRAP, we procured a 
little over 4,000 of them. We did an extensive study to decide 
how many we wanted to retain as a capability because it is a 
rather unique vehicle and it does have some limitations on it. 
That study was completed this summer. We decided that we were 
going to retain about 1,200 of them. Those would be refitted 
and they would be spread-loaded at various places both in our 
preposition stocks, both ashore and afloat, also out to our 
operating forces for missions such as route clearance and 
explosive ordinance disposal work. Some would be retained at 
our various training locations in order to ensure that our 
mechanics and drivers were able to train on the actual vehicle 
itself. So a very rigorous study was applied, in which we 
decided that a little over 1,200 was probably the number that 
we could afford and we wanted to retain.
    Senator Kaine. The plan would be to leave the remainder in 
Afghanistan and try to allocate them to our partners there as 
best as we can?
    Mr. Stackley. Sir, the MRAP retrograde is much larger than 
the Marine Corps, obviously. So across DOD, with the Army being 
the heavyweight in terms of numbers, we are still working 
through the details of how to best retire the vehicles that are 
not going to be put back into service. There is an in-theater 
piece to it, but then the large numbers--we are still going to 
have to be bringing these back to the States.
    Senator Kaine. We had some testimony recently about the 
size of the retrograde budget, and I think General Amos or 
General Paxton said that the Marine Corps will need about $3.2 
billion in Overseas Contingency Operation funding to retrograde 
the equipment that it wants back. How would the sequester 
likely affect that effort?
    Mr. Stackley. One of the issues that we are dealing with 
right now in 2013, dealing with impacts associated with 
sequestration, is retrograde and its effect on--again, it is 
not a Service-unique issue. It is a force-wide issue--our 
ability to retrograde from Afghanistan. So it is having a very 
direct, very real impact, and Congress will be seeing some of 
those effects when we talk about reprogramming later in fiscal 
year 2013.
    Senator Kaine. Senator McCain asked a question that was 
about the effect of sequester on readiness, and, I think, 
General Mills, you indicated that you might see it sooner on 
the aviation side than on the ground side. Or maybe it was 
Secretary Stackley. How about in terms of the procurement side? 
What is likely to feel the most direct effects? Or I guess the 
reverse way to ask it is what priority on the procurement side 
will you protect against sequester, and then what is most 
vulnerable to sequester on the procurement side. Is it aviation 
or other assets?
    Mr. Stackley. It is not going to be aviation versus ground 
vehicles versus shipbuilding. We have to look at the balanced 
force capability. I will tell you that shipbuilding is a 
priority for the Secretary of the Navy, and so we are going to 
be protecting that in the budget process. General Mills 
described that the ACV is a priority for the Commandant. So 
when we look at the mix of vehicles between the JLTV, the 
improved AAV, and the development of the ACV, we are going to 
keep the ACV on track to the extent possible even within a 
sequestered environment.
    Then the other top priority for the Marine Corps is the 
STOVL version of the JSF. That is going to have to--not simply 
earn its way--hold its place in the budget as it continues its 
development. So it is keeping the development on track, and 
that is a priority inside of the JSF program is keeping the 
funding for the development, but then performance inside of 
that development and test regime of the JSF STOVL version will 
be the other priority for the Marine Corps.
    Senator Kaine. One last question moving away from the 
budget is in the discussion about the pivot to Asia. As you 
look at modernization programs, how does a more primary focus 
on Asia affect the strategic decisions about what kinds of 
platforms to procure on the procurement side?
    General Mills. Sir, again, the pivot to Asia, when you look 
at the Pacific, you are struck by the vastness of the maritime 
and the ability of our forces to operate from ship to shore. So 
we are very carefully looking at, as we modernize, to ensure 
that everything that we get is able to fit very nicely with our 
Navy counterparts' plans as they look at shipbuilding, look at 
what the new ships are going to look like, their capabilities, 
capacities, and again to ensure that the Marine Corps remains 
the expeditionary crisis response force able to respond 
anywhere when the country needs it. So we are looking very hard 
at those kinds of things. So if you look at vehicles like the 
MRAP, which are not very expeditionary, and, of course, look at 
the JLTV and the ACV, which are critical to our expeditionary 
capabilities, those again are the programs that we want to 
protect, programs we want to continue, and the ones that are 
very important to us as a Corps and as an institution.
    Senator Kaine. Thank you, Mr. Chairman.
    Senator Reed. Thank you.
    Senator Ayotte.
    Senator Ayotte. Thank you, Mr. Chairman.
    I wanted to follow up with last May 10, 2012, before the 
implementation of sequestration, there were many of us asking 
questions as to what to anticipate on the impact. General 
Dunford testified before the Senate Armed Services Committee, I 
believe on the subcommittee, that if you look at the personnel 
end--now, I understand that is exempt right now in terms of 
Active Duty--that if we were to cut 10 percent from the Marine 
Corps, it would end up being an 18,000 troop cut and that, in 
his view, it would not allow us to meet a single major 
contingency operation. That really stuck with me because the 
notion that we would have--if we just took it from the troop 
side, that we would have a Marine Corps that could not respond 
to a single major contingency operation.
    Can you help me understand that testimony in light of--we 
are all sitting here today on sequestration, but this thing 
continues for 10 years. Is there an assumption that in those 10 
years we will continue to exempt the troops from that in terms 
of force structure and end strength? If that assumption does 
continue, if you think it will continue, if sequestration is 
the new norm, then what will that mean? I am assuming if we do 
not take it from the troop end, General, that if we send the 
troops in there, it has to be taken from somewhere, and then 
they do not have the equipment and/or the training.
    So I wanted to bring that statement to your attention again 
and get a reaction to it because to me, it was quite striking 
at the time.
    General Mills. Thank you, Senator.
    Of course, the Marine Corps has been looking for the past 
several years at what size will we be following the wars in 
Afghanistan and Iraq, and we have put substantial effort into 
several studies designed to balance the requirements that the 
Marine Corps faces, along with what can we actually afford to--
how big can we afford to be and what can we afford to have 
those marines equipped with.
    Currently, we are looking at a force of 182,100. That meets 
the requirements, we feel, with some risk across the board. 
Everything from, of course, the entire range of military 
operations. Everything from humanitarian assistance to a major 
contingency operation somewhere in the world. We continue to 
look at those numbers. Personnel is our largest expense. It is 
expensive. But we need to have marines, obviously, and we need 
to have the units manned to proper strengths. The Commandant 
has been very adamant that he does not want to build a hollow 
force, hollow either in the number of marines who are manning 
the fighting holes or the equipment that those marines have 
with which to operate.
    So it is going to be a balance, no question about it. The 
challenge will be to make those balances between equipping the 
force, training the force, and manning the force, and one which 
we will put an awful lot of effort into.
    Senator Ayotte. General, I appreciate that.
    I think what we need to understand here is--and if you 
cannot answer this today, I would like us to take it for the 
record. If last year, when General Dunford said that the impact 
of sequestration would be that the Marine Corps could not 
respond to one single major contingency, that is the kind of 
thing that keeps me up at night. So if that is where we are, 
meaning if we continue on this path, whether it is because we 
have to reduce end strength and/or because we have to diminish 
the training and the equipment that our men and women in the 
Marine Corps need, I would like to know what your view is of 
that statement now, if it has changed and/or what the 
implications are going forward.
    I just think that it is really important because there is 
an operating assumption around here that, sure, maybe it is all 
okay, and I think it is important to understand what that does 
to the investment in our Marine Corps going forward. We ask you 
to go in first, and if we do not have a robust, prepared Marine 
Corps, then that is a big problem for our country.
    So if that is something you want to take for the record, 
that is fine, or if you can answer it now, I would appreciate 
it.
    Mr. Stackley. Senator, the only thing I can add at this 
point is I come back to the SCMR. That is the task before this 
group which looks across the Services, across the strategic 
defense guidance, overlays what does a $52 billion hit look 
like in terms of, first, what can we get out of, call it the 
cost of our doing business, call it efficiency, what have you. 
Then for the balance of that reduction, what are the impacts to 
keeping things balanced, the size and shape of our force, and 
the readiness of that force in terms of their training, their 
maintenance, the wholeness of their equipment, and then the 
operations that can be conducted and then prioritize. So, 
frankly, it is a somewhat daunting task that we are trying to 
complete in the course of the balance of this spring before we 
can come forward to Congress with some findings.
    Senator Ayotte. So just as a follow-up for both of you, we 
will give you General Dunford's statement and you can let me 
know whether that statement still stands because this is a 
shocking statement and it is really important that we 
understand that.
    [The information referred to follows:]

    Additional information regarding this request was provided to 
Senator Ayotte.

    Senator Ayotte. I do not have a lot more time, but I want 
to ask you about this G/ATOR program. I want to ask you about 
the trailer-mounted radar system. Having read the Government 
Acountability Office (GAO) report from March 2013, my jaw 
dropped really when I looked and I saw a 145 percent increase 
in R&D, an 87 percent increase in procurement costs, a 101 
percent increase in total program costs, a 126 percent increase 
in unit costs, and a 100 percent increase in acquisition time. 
So can you help us? When we are talking about sequestration, 
this to me seems like a 126 percent increase in unit costs--how 
can we justify that to people back home? Can you tell me what 
is happening with this particular procurement program, the G/
ATOR?
    Mr. Stackley. Let me first describe that the numbers that 
you are quoting from GAO--I am looking at the baseline for G/
ATOR, and I do not arrive at those types of numbers. I am 
looking at a 13 percent increase in the current costs over the 
original baseline, and I can provide you the backup data that 
goes with that.
    G/ATOR has been an extremely strongly performing program 
over the course of about the last 3 years as we have been 
completing its development, and today we are taking production 
representative units out in the field and demonstrating its 
performance. So it is meeting its performance targets.
    It is about 13 percent over the original baseline, but to 
the current baseline, it has been 5 percent or less above that 
developmental baseline. The efforts to reduce its procurement 
costs--we were able to go to a new technology, referred to as 
gallium nitride, for the system, and by combining that shift in 
G/ATOR, along with other radar programs that are all moving to 
gallium nitride, we are able to bring down its unit cost in 
production in the out-years as well.
    Senator Ayotte. I see my time has passed, but I am holding 
the GAO report right here. I took these percentages right from 
it. So I certainly would like to have a follow-up.
    Mr. Stackley. Yes, ma'am.
    Senator Ayotte. If we can get it today, I will submit a 
written question to get a follow-up answer on this because it 
does not make sense to me with what I read in the GAO report.
    Thank you.
    Mr. Stackley. Yes, ma'am.
    [The information referred to follows:]
      
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    Senator Reed. Thank you, Senator Ayotte.
    Senator King.
    Senator King. General, I want to step away a minute from 
procurement and talk about strategy. We are talking about the 
Pacific. We are talking about amphibious. The Benghazi 
situation taught us that timeliness of response is important. 
During that week that that event occurred, there were 31 
different demonstrations around the Muslim world, 5 different 
attacks. This is going to be a part of the future, I am afraid. 
Do you have a strategy or think about rapid deployment of small 
numbers of people as opposed to taking a beach in a more 
concentrated kind of way?
    General Mills. The Marine Corps has always been and 
continues to be the crisis response force, and one of the 
pillars of that strategy or ability to do that is our ability 
to be forward-deployed and therefore being able to be 
repositioned close to areas of crisis as they develop and, 
furthermore, being able to linger in those areas for a 
substantial period of time and to be able to provide the 
decisionmakers back here in Washington time to decide what it 
is they want to do about that particular crisis. So that is why 
we stress the importance of the Marine Corps being 
expeditionary, being forward deployed, being aboard ship, 
having the means to move ship to shore, to put only the force 
necessary on site and be able to sustain them if they need to 
stay there, and to provide the forces that are afloat with a 
wide range of capabilities so they are able to operate across 
the entire realm, or whether that crisis happens to be 
something like Benghazi or whether that crisis is a hurricane 
or a tornado that has struck a particular area, or a 
humanitarian disaster, any sort of crisis we might want to be 
able to use our forces to respond to.
    We believe the value of our amphibious forces is that you 
can reposition. You can get it to the crisis location. It is 
not locked down to one particular location and, therefore, too 
far away or too many hours away to be able to respond credibly. 
We think that that just shows the value of the Marine Corps to 
the country.
    Senator King. Do you think we are adequately forward-
deployed now? If so, why could we not get people to Benghazi?
    General Mills. The Marine Corps maintains three forward 
deployed amphibious forces at any one time. One comes off the 
east coast of the United States, and one comes off the west 
coast of the United States, and one is based in Japan. 
Currently, all of them are busy within the U.S. Central Command 
(CENTCOM) area of operations.
    Senator King. I would point out none of those geographic 
areas are anywhere near where all of these demonstrations took 
place.
    General Mills. True. I had the privilege of being able to 
command the 24th Marine Expeditionary Unit out of Camp Lejeune, 
NC, back in the late 1990s and early 2000s. Then our routine 
stops were all in the Mediterranean. We made a round robin, if 
you will, of the Mediterranean, operated there nearly 
exclusively. However, a good example again of the value of 
those kinds of forces is that in 2003, when the fight in Iraq 
started, we moved through the canal, went down to the Red Sea, 
and we actually landed and participated in the operation 
ashore.
    So a long answer to a short question. The fact is, that the 
value of those amphibious forces, had they been moved, they 
could have been positioned in the Mediterranean perhaps if that 
is where the decision was made where they were needed most. At 
this time they are in the CENTCOM area of operations conducting 
operations.
    Senator King. Changing the subject, on the ACV, I think the 
chairman testified that there were $3 billion spent before that 
program was terminated. That is an awful lot of money. Should 
we not have a trigger that tells us before we get to $3 billion 
that it ain't gonna work?
    Mr. Stackley. Yes, sir. The program that was terminated was 
the EFV. A long history to that program. The demonstrator for 
the EFV dates back to the late 1980s/early 1990s, followed on 
by a down-select to a sole source development effort that 
proceeded through the 1990s and into the 2000s to develop the 
technologies that would go with the complex task of a high 
water-speed armored vehicle.
    The program did incur what is referred to as a Nunn-McCurdy 
breach where it exceeded its original baseline cost by greater 
than 25 percent. That was in the 2006 timeframe. At that point 
in time, the program was restructured. The cost estimates were 
stabilized, and the program went into what is referred to as a 
reliability growth effort to get the reliability numbers up 
where they needed to be.
    The decision to terminate the program in 2011 was driven by 
two parts. One was the unit cost had grown, at that point in 
time, to a $16 million to $17 million vehicle, which was beyond 
the reach of procurement in the Marine Corps. It would have 
pushed too many other programs out. The other aspect was the 
operating and support costs. The complexity of the vehicle 
brought with it a tail----
    Senator King. Excuse me. I am not questioning that the 
decision was made. I am sure it was made on good grounds. My 
question is, why did it take $3 billion to get to the point 
where that decision became obvious?
    Mr. Stackley. Frankly, at the point in time the decision 
was made, it was competing with other priorities in the budget, 
and the decision was that the price tag for that vehicle, 
including the operating and support costs, was going to push 
out too many other priorities and that we needed to go back and 
revisit the EFV.
    Senator King. What is the difference between the AAV and 
the proposed ACV?
    General Mills. The program that was canceled? Is that the 
comparison?
    Senator King. No. The vehicle you have now, the AAV, versus 
the ACV. What is the difference? What are we gaining in the new 
proposed vehicle that we do not have in the current vehicle?
    General Mills. A number of things. First of all, the AAV is 
aging out. It is coming to the end of its life, so we are going 
to have to look at either replacing it or putting some 
extensive modernization into it.
    Senator King. Its physical life?
    General Mills. Its physical life, that is correct, just 
strictly the frame and those types of things.
    The difference is going to be mainly in protection. It will 
be one that jumps right out at you, is the fact that the AAV--
it is very susceptible to the improvised explosive device (IED) 
threat. It is also susceptible to small arms fire. We are going 
to put more protection on the ACV, as it comes online. We hope, 
again, as we have said before, to achieve better water speed, 
higher speed in the water, therefore less time that the marines 
have to spend in it afloat.
    Senator King. What are we talking about when we talk about 
water speed? What does the AAV have versus this high speed? Are 
we talking about 50 knots or 30 knots?
    General Mills. No, no. The AAV right now in the water is 
probably about 7 knots. The hopefully high water-speed would be 
in excess of 15 knots.
    What does that give you? It gives you several things, less 
time in the water, as I said, quicker ability to move from ship 
to shore, your ability to offset the ships to avoid the threat 
ashore, so you can go further out in the sea because you can 
move those forces quickly to the beach. Also, it gives you 
range and ability to bypass perhaps enemy defenses and enemy 
beaches where you do not want to land, but you have to go other 
places. So it gives you a fair amount of improvement over the 
current capability.
    Mr. Stackley. If I could just add. General Mills described 
in excess of 15 knots. In fact, for the EFV, we demonstrated 
the ability to go greater than 25 knots by pushing the vehicle 
up onto a plane. That becomes critical in terms of the time/
distance equation for buildup ashore and also the range at 
which you would deploy the marines from the amphibious ships.
    Senator King. But that was one of the things that pushed 
the price up, I understand.
    Mr. Stackley. Yes, sir.
    Senator King. Thank you, Mr. Chairman.
    Senator Reed. Thank you, Senator King.
    Related questions, I hope, General Mills, you are going to 
have to take another amphibious operation, training operation, 
at which you are going to try to establish, I think, where you 
are, the baseline and what you need, and it goes to the bigger 
question. I cannot think of a more complicated military 
operation than amphibious assault. You need to clear the beach 
with naval gunfire, aviation. Usually you have to bring your 
own aviation. You have to get our amphibious ships up close but 
not too close. You have to have assault ships to take the 
marines to the beach, and you have to have LCACs to bring 
supplies ashore. Then, of course, you have to have marines 
ready, able, and well-trained to do that very complicated 
operation. Another dimension, which has increased, is the 
precision weapons that a likely opponent might have to engage 
even a fairly fast moving assault vessel.
    So given all those issues and given this budget problem, 
how do you keep everything synchronized in the sense of you 
have all those pieces? Because I think one of the concerns we 
have that has been reflected in a lot of the questioning is 
something is going to give. You are either not going to get 
your new assault vessel or you are not going to get the 
amphibious ships or the amphibious ships will not be the level 
of readiness that you need. You have training issues we have 
all talked about. Then you have this new environment where it 
is going to be awfully difficult to get close to a beach and it 
is going to be really hard to get on the beach given the 
weapons systems that even some of the second-tier powers might 
have.
    In the context of this training exercise you are doing, I 
would just like your comments on that very broad question. 
Again, thank General Flynn.
    General Mills. Senator, we do several large exercises. We 
do a number of large exercises every year. Usually in alternate 
years they are live. In other years, they are virtual, both one 
on the east coast and one on the west coast so we involve the 
entire operational Marine Corps in these exercises. I believe 
the one that you are interested in particularly is Exercise 
Dawn Blitz, which goes on on the west coast.
    All of these exercises, we try to put in both real 
operational experience but also experiments in how we plan to 
do things in the future and try things out. They are not just 
simply dog and pony shows in which we all land in a perfect 
line from 1,000 yards off the beach. Instead, we use those 
exercises because they are expensive and they are difficult to 
set up. We use them to experiment so we can try out new 
tactics, techniques, and procedures, and new operational 
concepts and apply those.
    For instance, distributed operations is one in which we are 
putting a lot of effort into in doing our exercises. Those are 
long inserts usually by air and supported by aviation and using 
experimental ways to supply those forces once ashore so we can 
maintain more of our big footprint out at sea where it is 
safer. We are also pushing the amphibious forces further out to 
sea, only sending those ships close to the beach that have to 
go there in order to carry out a particular mission, with the 
support further out outside threat envelopes. We are looking at 
energy experiments, for instance, in the way of solar and 
things like that so we have less of a logistics footprint to 
take ashore, which saves us in amphibious lift, which saves us 
in surface transport.
    So we use these exercises to take a look realistically at 
how we would conduct a whole range of operations from low 
intensity to high intensity against a threat that is real and 
that is based on good intelligence of what we might see in 
various places in which we go.
    Senator Reed. So your operation force would be, presumably, 
equipped with some of the sophisticated weapons that are 
available now, and your operation force command structure would 
operate independently of the blue force, if you will, so that 
they could react not by script but by the skill of the 
operation force commander. Is that a fair summary of the 
concept?
    General Mills. That is an extraordinarily good summary, 
sir. We want that operation force commander to react in what we 
call force-on-force, in which he is free to react as an 
operation force commander might. We want him to do the 
unexpected, and we want him to thoroughly test if what we are 
doing is the way it should be done. Sometimes failure can be as 
valuable as success. That shows you that an idea you have may 
or may not work out. Better try that out now in peacetime and 
obviously in a training operation than to find it out on a 
beach somewhere in the future.
    Senator Reed. Could I ask you when you conclude and have 
your results thoroughly vetted--would you be available either 
in an open or a closed session to come back and let us know 
about the lessons you have learned, particularly the lessons 
learned based on trial and error.
    General Mills. Absolutely. That would be great. We would 
relish that opportunity, sir.
    Senator Reed. Thank you very much.
    Mr. Secretary, let me ask you a variation of the same 
question, which is how do you keep all these different 
components at the relatively same level, readiness of forces, 
amphibious ships, et cetera, particularly given the sheer cost 
of the F-35B. How do you keep all those things moving forward 
in this very difficult budget? At what point--I presume it is 
after you have talked to the Commandant, General Mills--do you 
decide that we have to step back on this one. We can afford the 
risk. Can you comment on that briefly?
    Mr. Stackley. Yes, sir. First, the going in philosophy when 
we are dealing with this sequestration issue is the last thing 
we give up as we bring the budget down is the capability that 
we need. So let us work the entire budget and identify what we 
can do to reduce our costs before we give up the capability. 
Then when you get down to the things that add up to force 
structure is taking a look at the priorities within the program 
and looking for are there opportunities where things could 
either be delayed, deferred, descoped without compromising the 
force's ability to do its mission and then balancing. In the 
end, you have to keep things in balance.
    So you have to do a portfolio management of the program, as 
opposed to a line-by-line management of the program, to ensure 
that as you bring things down, you do not untowardly break a 
part of the kill chain. It is really looking at the kill chain 
to keep it intact and then understand what does that leave you 
in terms of your overall ability to perform the missions. So it 
is really taking a portfolio approach, starting with the rest 
of the costs, try to bring the cost of doing business down, and 
then within the portfolio, prioritizing and then making sure 
you keep it balanced.
    Senator Reed. Thank you very much, Mr. Secretary.
    Senator Kaine.
    Senator Kaine. This is a topic that I think may be a little 
bit beyond the modernization topic, but it has come up. It is 
the end strength, and then Senator King's questions about 
Benghazi have reminded me about something. General, you toured 
me at Quantico a couple months back, and one of the things I 
did was visit the marine security guard program on base, which 
is very exemplary.
    So the Accountability Review Board (ARB) in the aftermath 
of Benghazi suggested that one of the things that we needed to 
do was to bulk up that marine security guard program, I 
believe, by about 1,000 marines. That was the recommendation. 
Am I correct about that?
    General Mills. That is correct.
    Senator Kaine. Now, I believe that there is a bit of gray 
area about how that affects the end force, the 182,100 number. 
Would it be fair to say that the Marine Corps is considering 
the additional 1,000 marine security guards as additional to 
the 182,100?
    General Mills. The assumption was that the extra 1,000 
marines would not be counted against that 182,100 end strength. 
Yes, sir.
    Senator Kaine. So the current marine security guard program 
recruits enlisteds into that elite program and trains them, but 
the working assumption today is that the additional 1,000 would 
be on top of the 182,100 end force.
    General Mills. That is correct.
    Senator Kaine. The training budget for the current marine 
security guard program I understand is protected from 
sequester, but I do not believe the Marine Corps' budget 
request includes funding for an additional 1,000 to come into 
the marine security guard program. Correct?
    General Mills. That is correct.
    Senator Kaine. So even before we get to the question of 
whether sequester would affect the marine security guard 
program, even the Marine Corps budget, as requested, does not 
include funding for the recommendation that we add 1,000 to the 
marine security guard program.
    General Mills. I believe that is correct. I know there was 
a question about where that funding would come from.
    Senator Kaine. Mr. Chairman, this might be something that 
might be more for the Personnel Subcommittee, but I am 
concerned about this. One of my worries about Benghazi and the 
discussion about Benghazi is that we will spend a lot of time 
talking about things other than the recommendations that have 
been made for how we fix the problems that we spent a lot of 
time trying to dig through and discover. If the ARB 
recommendations make this, I think, worthy recommendation, a 
very worthy one, that part of the response should be bulking up 
the marine security guard program, and yet that is not part of 
even the budget request right now, it could easily get lost in 
the shuffle as we talk about other aspects of Benghazi.
    I hope that as we move into the full committee markup, that 
might be something that we dialogue with the Marine Corps about 
because if they are believing from a Corps perspective that the 
1,000 security guards are extra but we on the staff or the 
Senate side are believing, no, you can find that 1,000 within 
the 182,100, then we have a serious challenge. We ought to be 
trying to reach some kind of an accord and be on the same page 
about it because following the ARB's recommendations, I think 
is the least that we ought to be able to do to protect against 
the likelihood of a similar incident in the future.
    Senator Reed. I think the Senator has made some excellent 
comments. First, the issue here of whether that increase would 
come out of the top line of the Marine Corps so it would be a 
cost to maneuver units and other units of the Marine Corps, I 
think that has to be seriously addressed.
    Second, the primary mission, prior to Benghazi, of the 
marine security unit was basically to destroy the sensitive 
information and protect that information. In fact, we lost a 
marine in Islamabad doing that in the 1980s. That raises the 
question of do we want a different mission also for the marine 
security forces.
    So I think your point is well-taken and we will pursue it.
    Senator Kaine. Thank you. Thank you, Mr. Chairman.
    Senator Reed. Thank you.
    Senator King, do you have a question?
    Senator King. A comment about sequestration. I can remember 
being asked last year this time or perhaps in the summer about 
sequestration and saying, ``oh, do not worry. It will never 
happen. Congress would never do such a foolish thing.'' I have 
a feeling now that we are having a somewhat similar experience 
of it will never happen again. It is just more of a comment 
than a question, and I am glad to hear the Secretary is 
preparing a contingency plan for what happens if.
    I would urge you to get that contingency plan or list of 
what it would mean to us because it will help those of us who 
want to try to unwind sequestration to have the information of 
what it will actually mean. One of the problems with the 
discussion that took place around here in February and March 
was it was all abstract and nobody really knew what it was 
going to entail.
    Following on that point, it strikes me that the overall 
impression from this hearing is that we are really in a 
situation, particularly with sequestration, where readiness and 
modernization are in competition with each other, and that we 
are slighting both is what it amounts to. I believe the 
chairman's comment was we are 50 percent below readiness levels 
generally across the Marine Corps, and we are also talking 
about putting aside and slowing down some of these 
modernization projects. Modernization is particularly 
important, it seems to me, as we are coming out of Afghanistan 
and we have an aged force of equipment. We have learned a lot 
of lessons, and the question is, are we going to have the 
wherewithal to modernize and upgrade that equipment?
    This was a long statement. Now my short question. Am I 
correct that we are really talking about a competition or a 
tension between readiness and modernization?
    Mr. Stackley. Sir, I would say it is clearly a tension. I 
would not use the word ``competition'' because we all lose if 
you have to compete current and future readiness.
    The Marine Corps modernization strategy has been very well 
thought out over the last several years, going from amphibious 
ships, aviation, and then ground vehicles. So it is a well-
constructed plan to hold onto that capability that was defined 
in terms of two marine expeditionary brigades capability for 
joint forcible entry operations. Senator Reed's question gets 
at that capability that is central to the Marine Corps' 
operations.
    So we are very careful in all these deliberations to hold 
onto that capability which we think the Nation needs as a 
priority. The deliberations will carry on and the outcome will 
start to set a path for perhaps there are trades that get made 
between current and future readiness to hold onto current force 
structure at some expense of future capability. But we are not 
there yet. We are not there yet. We are holding onto what we 
believe are the core capabilities required by the Marine Corps 
to perform that mission.
    Senator King. General?
    General Mills. Sir, I would agree. There is always a 
certain tension, I think, in any budget process. I think the 
Commandant, however, understands the value of the Marine Corps. 
We are most ready when the Nation is least ready. He has 
directed the Corps to be ready and we will be ready. If that 
requires some tradeoffs in modernization, some delays in some 
programs or perhaps restructuring a few programs, then that is 
what we will do. But I can assure you the marines who go 
forward will be ready to go there and to accomplish their 
mission, properly equipped, properly trained, and fully manned 
to do that.
    We have already begun to make a few of these adjustments. 
JLTV, for instance. We maintain that program. However, we are 
also going to care for our HMMWVs and we are going to put them 
through a sustainment and a reset process that they will be 
also able to serve out in the fleet. The MPC, which was the 
third triad of our ground mobility--we have decided to delay 
that a number of years, again in order to ensure that we can 
afford those critical pieces of equipment that we need to do 
our core missions.
    We think that the ACV is our number one priority that we 
have to have. That is what the Marine Corps does. We move from 
forward-deployed ships. We move ashore. We move seamlessly 
beyond the high water mark to the objective to conduct 
operations. To do that, we need that ACV, and so we are going 
to protect that program.
    The JLTV, we think we need that program. The HMMWV showed 
itself in Iraq and Afghanistan to be very susceptible to the 
IED threat and the mine threat. The JLTV will have a level of 
protection substantially better than the HMMWV and will protect 
those marines and sailors who have to go forward to do the 
Nation's business.
    So although that tension exists, I think we are studying it 
very hard and willing to accept some risk in some areas, but 
again, our readiness, our ability to go forward, our ability to 
do the Nation's business when called upon, will remain 
sacrosanct.
    Senator King. Again, I would emphasize that we need to hear 
about the effects particularly of the sequestration because it 
will not do to have a crisis that we are unable to respond to 
adequately and then look back and say, ``well, we just could 
not do that because of the lack of funds.'' You need to tell us 
now so we can prevent that eventuality.
    Thank you, Mr. Chairman.
    Senator Reed. Thank you, Senator King.
    Mr. Secretary, General Mills, thank you for your testimony, 
and obviously your continued service to the Nation and the 
Marine Corps and the Navy.
    We will keep the record open until next Tuesday, May 21. 
You may get questions from my colleagues or additional 
statements could be included. We would ask you to respond to 
those questions as promptly as you can.
    If there are no further questions, the hearing is 
adjourned.
    [Questions for the record with answers supplied follow:]
              Questions Submitted by Senator Kelly Ayotte
              reduced capacity for contingency operations
    1. Senator Ayotte. Secretary Stackley and General Mills, on May 10, 
2012, General Dunford testified that ``If we were to cut another 18,000 
we would not have adequate capabilities and capacities to meet a single 
major contingency operation.'' Is that still true?
    Mr. Stackley and General Mills. At the time General Dunford was 
asked the question, leaders were deciding how sequestration would be 
implemented at the Service level. Studies were attempting to determine 
if cuts should be applied to capacity, capability, readiness, et 
cetera. Applying a 10 percent personnel cut from 182,000 would reduce 
the Marine Corps to approximately 164,000--which is a significant 
reduction. Based on analysis from the Force Structure Review Group and 
the Force Optimization Review Group, the Marine Corps could respond to 
a major contingency operation, but at 164,000, it would be an all-in 
force. This force would include all Active Duty components supplemented 
by the Reserve Force. It is important to note that the Marine Corps 
would not have the force structure to provide additional crisis 
response or forward presence (e.g., Marine Expeditionary Units) during 
this evolution. Additionally, when the question was posed to General 
Dunford, personnel were exempt from sequestration and were therefore 
removed from the sequestration equation.

                     ground/air task-oriented radar
    2. Senator Ayotte. Secretary Stackley and General Mills, in your 
joint prepared statement, you discuss the Ground/Air Task-Oriented 
Radar (G/ATOR). You state that this multi-role radar will improve 
threat detection, be more deployable, and is intended to replace five 
legacy radar systems. However, I am concerned about the program's past 
cost growth and schedule delays. According to a March 2013 Government 
Accountability Office (GAO) report, between August 2005 and June 2012, 
the program saw a 145 percent increase in research and development cost 
($364 million to $893 million); 87 percent increase in procurement cost 
($1.1 billion to $2.1 billion); 101 percent increase in total program 
cost ($1.5 billion to $3.0 billion); 126 percent increase in unit cost 
($24 million each to $53 million each); and a 100 percent increase in 
acquisition time (66 months to 132 months). Why has the program 
experienced a 126 percent increase in unit cost?
    Mr. Stackley and General Mills. Provided by the Assistant Secretary 
of the Navy (ASN) for Research, Development, and Acquisition (RDA) in 
his letter to Senator Ayotte dated May 22, 2013, excerpted below:
    During my testimony before the Seapower Subcommittee of the Senate 
Armed Services Committee on May 14, 2013, you raised a concern 
regarding a recent GAO report outlining cost growth exceeding 100 
percent in the AN/TPS-80 G/ATOR Program.
    In my response, I cited much better performance and indicated an 
inconsistency in our respective data. In fact, I was incorrectly 
referring to the program baseline at the time it was designated as a 
Major Defense Acquisition Program as the ``original baseline.'' Your 
concern for G/ATOR cost growth is wholly warranted as it relates to 
peformance prior to the program being restructured in 2009.
    In order to correctly address your question, I believe it is 
important to review the  G/ATOR  program  performance  history.  
Subsequent  to  program  initiation  in  2005, G/ATOR performance 
requirements were revised to provide better force protection for the 
host vehicle which resulted in the necessity to redesign the system. 
Cost growth associated with this decision had become irreversible in 
the 2009 timeframe at which point the program was restructured. At that 
time, a revised program baseline was established and one of the 
Department's finest program managers was hand-selected to take over 
leadership of G/ATOR's further development. Since then (March 2010), 
the program has performed exceptionally well and is currently 
experiencing an overall 15 percent cost reduction to that baseline.

                                            [In millions of dollars]
----------------------------------------------------------------------------------------------------------------
                                                                             Percent                   Percent
                                     As of 08/    As of 03/    As of 06/   Change from   Today  05/  Change from
         Fiscal Year 2013               2005         2010         2012      08/2005 to      2013      03/2010 to
                                                                             06/2012                 Present Day
----------------------------------------------------------------------------------------------------------------
Research and development cost.....       $364.3     $1,016.0       $893.0        145.1       $907.0           -3
Procurement cost..................      1,141.1      2,423.0       2135.0         86.6       1620.0          -34
Total Program cost................      1,508.1      3,439.0       3034.0        101.2      2,911.0          -15
Program unit cost.................         23.6         49.8         53.2        125.9         47.5           -4
Total quantities..................           64           69           57        -10.9           57          -16
Acquisition cycle time (months)...           66          132          132          100          132            0
----------------------------------------------------------------------------------------------------------------

    It is worth noting that during this timeframe, the Department of 
the Navy recognized that we had encountered an unacceptable rate of 
program cost breaches which were attributable to requirements or design 
change, and we implemented improved governance through a ``Gate Review 
Process'' designed to preclude inadvertent cost growth of this nature.
    Thank  you  for  the  opportunity  to  clarify  the  performance  
of  this  important  program.  The  program's  early  performance  
history  was  unacceptable.  Currently,  G/ATOR is on sound 
programmatic footing, has solid requirements and continues to show 
improvement in technical maturity. Upon a successful Operational 
Assessment this fall, I will be reviewing the program for entrance into 
Low Rate Initial Production. Cost will be a major aspect of my 
assessment and decision to move forward.

    3. Senator Ayotte. Secretary Stackley and General Mills, I note 
that the Marine Corps began development of the G/ATOR in August 2005, 
and as I understand it, we don't expect initial capability until August 
2016. Why is it going to take 11 years for the Marine Corps to reach 
initial capability for a trailer-mounted radar system?
    Mr. Stackley and General Mills. The contract was originally awarded 
in 2005. However, the program was delayed 2 years due to a protest from 
industry and didn't commence development until 2007. Subsequently, G/
ATOR was redesigned to support the improved force protection for the 
host vehicle (High Mobility Multipurpose Wheeled Vehicle (HMMWV)) thus 
increasing program cost and schedule. As such, the program was 
restructured in 2009 and has since maintained all schedule thresholds 
and is scheduled for a Milestone C this fall with an Initial 
Operational Capability of 2016. This timeframe is entirely consistent 
with complex radar development timelines.

    4. Senator Ayotte. Secretary Stackley and General Mills, why has 
the acquisition time doubled?
    Mr. Stackley and General Mills. The contract was originally awarded 
in 2005. However, the program was delayed 2 years due to a protest from 
industry and didn't commence development until 2007. Subsequently, G/
ATOR was redesigned to support the improved force protection for the 
host vehicle (HMMWV) thus increasing program cost and schedule 
increase. As such, the program was restructured in 2009 and has since 
maintained all schedule thresholds and is scheduled for a Milestone C 
this fall with an Initial Operational Capability of 2016. This 
timeframe is entirely consistent with complex radar development 
timelines.

    5. Senator Ayotte. Secretary Stackley and General Mills, I 
understand that initial plans to integrate the G/ATOR onto a High 
Mobility Multipurpose Wheeled Vehicle (HMMWV) were abandoned when the 
weight exceeded the chassis and drive train limits. Reportedly, the G/
ATOR will be towed by a Medium Tactical Vehicle Replacement (MTVR) 
truck--which cannot be moved by helicopter. This will limit the 
expeditionary capability of the system--which is, of course, a key 
comparative advantage of the Marine Corps. Can you discuss these design 
changes and how they will impact the expeditionary capabilities of this 
system?
    Mr. Stackley and General Mills. To ensure clarity, the problem was 
not with G/ATOR's weight, rather the increase in curb weight the HMMWV 
experienced due to the vehicle being up-armored in response to the 
improvised explosive device threat our warfighters were experiencing in 
theater. This additional weight diminished the towing ability of the 
HMMWV required to support G/ATOR. The MTVR is an interim solution until 
the Joint Light Tactical Vehicle (JLTV) comes onboard. The radar 
continues to meet the Marine Corps expeditionary needs, as all prime 
mission equipment can be transported to/around the battlefield by two 
vehicles, rotary-wing aircraft, MV-22, and fixed-wing support aircraft. 
Once the JLTV is introduced into the inventory, it will replace the 
MTVR as the prime mover.

                     expeditionary fighting vehicle
    6. Senator Ayotte. Secretary Stackley and General Mills, in 2011, 
after spending approximately $3 billion in developmental funding, the 
Marine Corps cancelled the Expeditionary Fighting Vehicle (EFV) program 
due to poor performance and excessive cost growth. With the budget 
challenges our Nation and the Department of Defense (DOD) are 
confronting, we cannot afford more acquisition failures like we saw on 
the EFV. What are the key lessons you have learned from the EFV 
cancelation and how are those lessons informing your work on the 
Amphibious Combat Vehicle (ACV)?
    Mr. Stackley and General Mills. The key lessons are, first, getting 
the requirements right. The ACV requirements must be established with 
an understanding of the associated cost and maturity of the technology 
required to meet them with sufficient available trade space to manage 
the uncertainty in both.
    The second lesson is a realistic assessment of affordability. ACV 
affordability targets must be established with an understanding of both 
the opportunity costs and service impacts associated with the trades 
necessary to hold that target in a dynamic fiscal environment. The 
Department's ``Better Buying Power 2.0'' places emphasis on 
affordability as a requirement and we will approach this acquisition 
with full consideration of affordability.
    The third lesson is early industry involvement to inform the above. 
This entails a need for greater industry involvement in the early 
phases of requirements development and material assessment.
    While determining affordability will continue to be a challenge in 
an uncertain fiscal environment, we believe we have developed a more 
rigorous means of establishing and understanding requirements, 
particularly the correlation between capability, cost, and technical 
risks. These relationships serve to drive trade-offs in capabilities 
necessary to establish achievable affordability targets and manageable 
program risks while still providing relevant operational value to 
marine warfighters.
    Beginning with the cancellation of the EFV program, we stood up a 
Systems Engineering War Room that first decomposed, to the component 
level, the cost of the EFV in order to help us fully understand the 
cost drivers of that program. We then defined several ACV concepts, 
with cost information down to the component level, some of which were 
evaluated in an analysis of alternatives (AOA). The results of the AOA 
provided insight into potential future capabilities and the cost of 
those capabilities. It confirmed that mission requirements dictate that 
the ACV must be a self-deploying amphibious tractor capable of over-
the-horizon deployment but it did not specifically address the tactical 
value of a vehicle capable of moving at high water-speed.

    7. Senator Ayotte. Secretary Stackley and General Mills, does the 
Marine Corps have preliminary program cost estimates for the ACV?
    Mr. Stackley and General Mills. The Marine Corps and the ASN(RDA) 
established an ACV team which reports directly to General Paxton and 
Mr. Stackley and is chartered to determine the capability trades, cost, 
and technical risks associated with the development of an affordable, 
survivable, high water-speed vehicle. This team, composed of leading 
technical experts from across the Marine Corps/Navy enterprise, is 
working in close collaboration with industry to understand the design 
and cost implications of prospective requirements. This team is also 
engaging with the operating forces and Marine Corps leadership to 
establish Service priorities across the spectrum of requirements. The 
results of these efforts will be used to inform decisions and 
investments with respect to future ACV capabilities and acquisition 
plans, the goal of which is to provide the operational capability at 
the best price possible.
    Specific to your question, the Marine Corps is still conducting a 
material solution analysis to determine the most suitable alternative 
for this program and the associated cost. We expect to complete this 
phase of the program in fiscal year 2014 at which time we will be able 
to provide specific program costs.

    8. Senator Ayotte. Secretary Stackley and General Mills, has the 
Marine Corps provided those cost estimates to this committee, and if 
not, when can this committee expect to receive those cost estimates?
    Mr. Stackley and General Mills. We have not yet provided cost 
estimates to the committee but will do so as soon as we have completed 
our material solution analysis and developed our cost estimate for this 
program. In the interim, we offer your staff full insights to the 
process and progress of this important program by way of a full program 
brief at the ACV war room.

                      joint light tactical vehicle
    9. Senator Ayotte. Secretary Stackley and General Mills, according 
to recent news reports, Army officials have said the across-the-board 
sequestration cuts and potential furloughs threaten to delay the JLTV 
program by an estimated 3 to 4 months. From a Marine Corps perspective, 
do you also see sequestration and furloughs causing delays in the JLTV 
program?
    Mr. Stackley and General Mills. Yes. JLTV is a joint program, and 
budget decrements and delays imposed upon the program from any source 
affect both participating Services. The Joint Program Office is already 
experiencing schedule delays to ongoing ballistic hull and rolling 
chassis blast testing, due to sequestration and furlough-related 
restrictions on workhours directed by the Army Test and Evaluation 
Command approximately 2 months ago. While current schedule delays will 
not impact the timely delivery of the Engineering and Manufacturing 
Development (EMD) phase of the JLTV prototypes in late August, 
sequestration decrements and furloughs will cause a delay in the start 
and execution of the program's (Office of the Secretary of Defense/
Department of Operational Test and Evaluation) approved Test and 
Evaluation Master Plan (TEMP), resulting in an estimated schedule slip 
of 3 to 4 months, and placing the program at a higher risk of a 
schedule breach. Subsequent sequestration decrements in future fiscal 
years will have potentially compounding schedule and associated cost 
implications.

    10. Senator Ayotte. Secretary Stackley and General Mills, how will 
the delay impact program costs?
    Mr. Stackley and General Mills. The Joint Program Office (JPO) is 
working contingency plans to mitigate schedule delays caused by fiscal 
year 2013 sequestration cuts and furloughs. If these measures prove 
unsuccessful, or if additional cuts are levied on the program, the JPO 
estimates each month of delay increases EMD phase contract costs by 
roughly $3 million. In addition, lengthening the EMD phase 14-month 
test period for the 66 full-up prototypes will also increase the costs 
of supporting all aspects of the required performance, reliability/
availability/maintainability (RAM), and live-fire testing, to include 
onsite JPO test representatives, test site personnel and equipment, and 
administrative costs.

            army and marine corps acquisition collaboration
    11. Senator Ayotte. Secretary Stackley and General Mills, how has 
the Marine Corps' collaboration with the Army on the JLTV benefited the 
Marine Corps?
    Mr. Stackley and General Mills. From a business perspective, 
collaboration has enabled the Marine Corps to leverage significant Army 
fiscal, manpower, and test resources in the refinement of operational 
capabilities requirements and the research, development, and 
acquisition of technical solutions to meet those requirements. Long-
term benefits for both the Marine Corps and the Army will be realized 
during the production phase, in that both Services will incur lower 
average unit costs due to the economies of scale afforded by the 
combined quantities in the JLTV production rates of Service-common 
baseline vehicles. These same benefits extend likewise well into the 
program's sustainment phase as the Marine Corps will be able to 
leverage the benefits of commonality with the Army.

    12. Senator Ayotte. Secretary Stackley and General Mills, are there 
any other current or planned acquisition programs where we could 
achieve economies of scale and save money by developing and fielding 
the acquisition program jointly?
    Mr. Stackley and General Mills. When it comes to requirements, the 
Marine Corps and the Army collaborate whenever mission profiles 
converge. We have many joint programs--JLTV being the most notable. A 
few other joint programs include the Joint Battle Command-Platform, RQ-
11B Raven UAS, Tactical Robotic Controller, and Enhanced Combat Helmet 
(ECH). The Joint Battle Command-Platform is the follow-on the Force XXI 
Battle Command Brigade and Below (FBCB2). The Marine Corps is an active 
participant in this Army program. Both Services have converged to a 
single, common hardware and software solution that provides command and 
control/situational awareness to the platform and dismounted user. With 
the ECH, the two Services will develop a helmet with greater protection 
against ballistic and blunt trauma at equal or lesser weight to the 
currently issued helmets (Light Weight Helmet (LWH) for the Marine 
Corps, Advanced Combat Helmet (ACH) for the Army).
    In addition to the many joint programs with the Army, the Marine 
Corps collaborates with the Army on a myriad of capabilities--from C2, 
cyber, and force protection, to the HMMWV sustainment program. For 
example, the Marine Corps has collaborated with the Army on the M16A4 
and the M4 Carbine. We have participated with the Army since 2008 in 
developing the improved carbine requirements and will remain engaged 
with the source selection process to identify potential candidates to 
replace the M16A4 and the M4 Carbine Modular Weapon System (MWS). 
Although the Marine Corps will monitor individual carbine progress, the 
Service has neither validated a requirement to replace the MWS nor 
funded a potential replacement. Current Marine Corps efforts and 
funding are focused on MWS precision, accuracy, and human factors 
upgrades. The Marine Corps is actively pursuing emerging technologies, 
such as lightweight materials and ammunition, improved fire control 
systems, and an integrated approach to the next generation of small 
arms weapons, optics, enablers, and ammunition.

               marine corps prepositioning program-norway
    13. Senator Ayotte. General Mills, in last year's hearing, you and 
I discussed the Marine Corps Prepositioning Program-Norway (MCPP-N). We 
talked about the need to ensure that the equipment there is fully 
reconstituted and modernized, as well  as  properly  maintained.  Would 
 you  please  provide  an  update  on  the  MCPP-N?
    General Mills. MCPP-N equipment and supplies are stored in stable 
temperature and humidity-controlled facilities and undergo scheduled 
inspections and maintenance services. All equipment and supplies are 
stored at the proper level of preservation to ensure operational 
readiness and serviceability. Normal modifications, technical 
instructions, and retrofits are applied during scheduled maintenance 
services. Corrective maintenance is performed by the Norwegian Defense 
Logistics Organization on an as-required basis, generally after 
equipment has been returned from an exercise. In this regard, MCPP-N 
benefits from an experienced, highly trained workforce and near optimal 
storage conditions directly attributable to our 50/50 burdensharing 
agreement with our Norwegian partners. Marine Corps Logistics Command 
is responsible for overall equipment management for the program which 
includes, but is not limited to: rotation planning of weapons systems 
and equipment; conducting quality assurance inspections; readiness 
reporting; meeting accountability requirements; and support of 
exercises or crisis response, when required.
    The Marine Corps is currently executing a transformation effort 
designed to enhance relevance of the MCPP-N to geographic combatant 
commanders, in particular, U.S. European Command (EUCOM) and U.S. 
Africa Command (AFRICOM). This effort includes development of a new 
force list and corresponding equipment sets to support that force. This 
initiative includes addition of communications and ordnance items not 
previously prepositioned in Norway. Quantities of equipment and 
supplies currently stored in Norway will also be adjusted to provide a 
balanced equipment set appropriate to support a Marine Air Ground Task 
Force manned specifically  to  support  a  crisis  response.  The  
Marine  Corps  plans  to  complete  MCPP-N transformation in fiscal 
year 2016.

    14. Senator Ayotte. General Mills, have the stocks there been fully 
reconstituted?
    General Mills. MCPP-N is fielded with equipment based on approved 
acquisition objectives and Marine Corps fielding priorities. Current 
attainment is 73 percent. Over the course of the next several years, 
and to maximum extent possible, the MCPP-N will be restocked with 
equipment that becomes available as a result of elimination of the 
Maritime Prepositioning Squadron-One (MPSRON-1) and drawdown from 
combat operations in support of Operation Enduring Freedom. This is 
essential to increasing attainment levels in Norway and mitigating risk 
to EUCOM and AFRICOM associated with the loss of MPSRON-1. Though MCPP-
N will mitigate this risk to some extent, it is not a substitute for 
the entire afloat prepositioned capability previously provided by 
MPSRON-1. The Marine Corps plans to fully reconstitute MCPP-N in fiscal 
year 2016.

    [Whereupon, at 10:47 a.m., the subcommittee adjourned.]

                                 
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