    [Senate Hearing 113-465, Part 2]
    [From the U.S. Government Publishing Office]

                                                   S. Hrg. 113-465, Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2015 AND THE FUTURE YEARS DEFENSE PROGRAM

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

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2410

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2015 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
       MILITARY PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR, AND FOR OTHER
                                    PURPOSES

                                   ----------

                                     PART 2

                                    SEAPOWER

                                   ----------

                              APRIL 2 AND 10, 2014

             Printed for the use of the Committee on Armed Services

       DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS
         FOR FISCAL YEAR 2015 AND THE FUTURE YEARS DEFENSE
                    PROGRAM--Part 2  SEAPOWER

                                                    S. Hrg. 113-465 Pt. 2

    DEPARTMENT OF DEFENSE AUTHORIZATION FOR APPROPRIATIONS FOR FISCAL YEAR
                   2015 AND THE FUTURE YEARS DEFENSE PROGRAM
    =======================================================================

                                    HEARINGS

                                   before the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                        ONE HUNDRED THIRTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

                                    S. 2410

         TO AUTHORIZE APPROPRIATIONS FOR FISCAL YEAR 2015 FOR MILITARY
    ACTIVITIES OF THE DEPARTMENT OF DEFENSE, FOR MILITARY CONSTRUCTION, AND
       FOR DEFENSE ACTIVITIES OF THE DEPARTMENT OF ENERGY, TO PRESCRIBE
       MILITARY PERSONNEL STRENGTHS FOR SUCH FISCAL YEAR, AND FOR OTHER
                                    PURPOSES

                                   __________

                                     PART 2

                                    SEAPOWER

                                   __________

                              APRIL 2 AND 10, 2014

                                   __________

             Printed for the use of the Committee on Armed Services

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

                                      _______

                         U.S. GOVERNMENT PUBLISHING OFFICE

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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

                                  ----------

                                 april 2, 2014

                                                                       Page

    Marine Corps Modernization.......................................     1

    Paxton, Gen. John M,. Jr., USMC, Assistant Commandant, U.S.
      Marine Corps...................................................     4
    Glueck, Lt. Gen. Kenneth J., Jr., USMC, Deputy Commandant, Combat
      Development and Integration/Commanding General, Marine Corps
      Combat Development Command, U.S. Marine Corps..................    10
    Questions for the Record.........................................    44

                                 april 10, 2014

    Navy Shipbuilding Programs.......................................    51

    Stackley, Hon. Sean J., Assistant Secretary of the Navy for
      Research, Development, and Acquisition; Accompanied by VADM
      William H. Hilarides, USN, Commander, Naval Sea Systems
      Command; and VADM Joseph P. Mulloy, USN, Deputy Chief of Naval
      Operations, Integration of Capabilities and Resources [N8].....    55
    Questions for the Record.........................................   104

                                     (iii)

     DEPARTMENT OF DEFENSE AUTHORIZATION OF APPROPRIATIONS FOR FISCAL YEAR
                   2015 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                            WEDNESDAY, APRIL 2, 2014

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

                           MARINE CORPS MODERNIZATION

        The subcommittee met, pursuant to notice, at 9:18 a.m. in
    room SR-222, Russell Senate Office Building, Senator Jack Reed
    (chairman of the subcommittee) presiding.
        Committee members present: Senators Reed, Blumenthal,
    Kaine, King, McCain, Sessions, and Wicker.

            OPENING STATEMENT OF SENATOR JACK REED, CHAIRMAN

        Senator Reed. The hearing will come to order. First, let me
    thank Senator McCain and my colleagues for moving up the start
    time by about 15 minutes. There's a vote at 10 a.m. that I'm
    very much involved in. The current plan is that Senator King
    will vote immediately and come over here and the hearing will
    continue forward. But again, let me thank you all for your
    presentations and for your presence today.
        I want to particularly welcome General John M. Paxton, Jr.,
    USMC, the Assistant Commandant of the U.S. Marine Corps; and
    Lieutenant General Kenneth J. Glueck, Jr., USMC, the Deputy
    Commandant, Combat Development and Integration, and Commanding
    General, Marine Corps Combat Development Command of the U.S.
    Marine Corps. Thank you, gentlemen, for your presence, for your
    service, and for your commitment to your marines and to the
    Nation. Thank you very much.
        The Marine Corps has been in a transition for about 2 years
    or more from an appropriate focus on generating forces to
    support counterinsurgency operations and stability operations
    in Iraq and Afghanistan and back to its more historical role of
    force in readiness, forward stationed, deployed, and ready for
    crisis response. This transition has been and will continue to
    be complicated by fiscal uncertainty, including sequestration,
    end strength, and force structure reductions, and nagging
    struggles with combat vehicle modernization based on the
    interacting challenges of technology and affordability.
        Today, our witnesses will update us on their efforts to
    build a globally capable crisis response 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. We understand that based on its most
    recent technology studies, the Marine Corps has once again
    reordered its amphibious combat vehicle (ACV) priorities.
    Instead of developing and fielding a new high water speed
    Armored Amphibious Combat Vehicle (AACV), the Marine Corps will
    accelerate the development and fielding of a Marine Personnel
    Carrier (MPC).
        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 now proposes to sequence its vehicle development and
    acquisition efforts to meet deployed forces' requirements for
    armored amphibious and tactical mobility ashore, and at the
    same time better control the portfolio's affordability.
        We must note, unfortunately, that the Marine Corps'
    painstaking rationalization of its combat and tactical vehicle
    portfolio is at risk if sequestration, as required by the
    Budget Control Act (BCA), is triggered for fiscal year 2016 and
    beyond. No doubt, sequestration at any point on the development
    schedule compounds the challenges to all Marine Corps programs.
    We'd like our witnesses to address the impacts and risks of
    fiscal instability in additional years of sequestration,
    including any extraordinary budget pressures associated with
    continuing operations in Afghanistan.
        Last year I emphasized what I considered the central
    planning issue facing the Marine Corps regarding the
    appropriate size and structure of the Nation's armored
    amphibious assault capability and the mix of armored combat and
    tactical vehicles--and ship-to-shore connectors--to support the
    Nation's defense strategy. Coming off the cancellation of the
    Expeditionary Fighting Vehicle (EFV) in 2011 and the
    affordability tradeoffs made with respect to the cost of the
    system and numbers of Amphibious Assault Vehicles (AAV) during
    the program's development, several questions were raised about
    the tactical implications of the scope and pace of the buildup
    of combat power ashore and the risks to mission success.
        I remain concerned that substituting wheeled MPCs or
    Armored Personnel Carriers (APC) for amphibious tractors could
    erode the Marine Corps' amphibious assault capability--the
    capability that separates the Marine Corps from the other
    Services of the Nation. I look forward to an update on the
    fleet mix study, its findings, if any, and continuing our
    discussion of this issue.
        Finally, and related to our interest in the challenges of
    modern operations from the sea, we observed last year that the
    Marine Corps has rejuvenated major amphibious exercises that
    will, so to speak, stretch some tactical muscles that have not
    been exercised in many years. We'd welcome your views on the
    results of these exercises and what the Marine Corps has
    learned about joint and combined amphibious operations
    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.
        The Nation could not be more proud of what the marines and
    their families have accomplished over the last decade, and in
    fact, the history of the country. We're deeply grateful and ask
    you to pass our thanks on to your marines. Thank you.
        Senator McCain.

                    STATEMENT OF SENATOR JOHN McCAIN

        Senator McCain. Thank you, Mr. Chairman. I will ask to
    submit my opening statement for the record, given the fact that
    we have a vote beginning at 10 a.m.
        I just would add one caution to our witnesses. The EFV was
    a disaster. I want to make sure that we never repeat a $3
    billion mistake again.
        I thank you, Mr. Chairman. I submit my opening statement
    for the record.
        [The prepared statement of Senator McCain follows:]
                   Prepared Statement by Senator John McCain
        Thank you, Senator Reed, I join you in welcoming our distinguished
    panel of witnesses and thank you for holding this important hearing.
        We are here today to discuss Marine Corps modernization as part of
    their fiscal year 2015 budget request. The fiscal year 2015 President's
    budget request draws down Marine Corps end strength to 175,000 by the
    end of fiscal year 2017, from 182,700 in fiscal year 2015.
        We live in troubling times, with more instability and unrest around
    the world than we've seen in recent history. I believe the drop to
    dangerously low end strength levels will impact the ability of the
    Marine Corps to respond effectively to national security contingencies
    and global crises when we need the Corps to do so.
        In the fiscal year 2015 budget request, the Marine Corps has been
    forced to trade future readiness and infrastructure investments in
    order to finance near-term readiness. While this reflects the right
    priority, it achieves this trade-off at a very high price.
        The base budget request for the procurement of Marine Corps, not
    including the amphibious ship program, is $983.3 million--roughly 28
    percent less than the fiscal year 2014 enacted level. Even with the
    Navy taking a great deal of pressure off Marine Corps procurement
    accounts by funding Marine Corps aviation and amphibious ship programs,
    I am concerned with the affordability of, among other things, the
    Marine Corps' ground vehicle program. Applying fiscal scrutiny to
    defined operational requirements is especially important here since, as
    General Amos put it, 62 cents of every dollar goes towards compensation
    and benefits. The horror story that was the Expeditionary Fighting
    Vehicle program, which was cancelled after nearly $3 billion was sunk
    into it without delivering any appreciable combat capability, cannot be
    repeated. Quite simply, the Marine Corps can't afford to repeat that
    grievous mistake.
        Indeed, the modernization of the Marine Corps' ground combat
    vehicle capabilities is essential to the Marine Corps' ability to
    execute current and future operations. The fiscal year 2015 budget
    request includes funding for the procurement of the Joint Light
    Tactical Vehicle; development of the Amphibious Combat Vehicle; and
    sustainment of the High Mobility Multi-Purpose Wheeled Vehicle fleet.
    This subcommittee would be interested in hearing how the Marine Corps
    is managing these programs so that their acquisition and sustainment
    costs are affordable in not only today's fiscal environment but also
    that of the future. We would also like to know how these programs will
    be incorporated operationally into the pivot to the Pacific.
        I am disappointed there has not been much change in the Navy
    shipbuilding for amphibious ships from last year. The Marine Corps
    still has a requirement for 38 amphibious ships to support the Marine
    Corps mission. But the Navy's shipbuilding plan calls for only 30 ships
    by the end of fiscal year 2015 and 33 amphibious ships by the end of
    2019. This has forced the Marine Corps to employ Special Purpose Marine
    Air-Ground Tasks Forces (MAGTFs) which essentially means they are have
    MAGTFs employed ashore because the shortfall in amphibious ships.
        Finally, I believe that the Commandant's decision to delay the
    near-term acquisition of a high water-speed amphibious vehicle for
    ship-to-shore maneuvers was a prudent move given the current fiscal
    environment. But I wonder if the near-term solution changes Marine
    Corps doctrine or is simply driven by affordability concerns. In other
    words, is our acquisition strategy influencing doctrine, or the other
    way around?
        In summary, I believe that all members of this subcommittee will
    want to fully understand how the Marine Corps has realigned its limited
    resources with the fiscal realities and operational requirements it
    faces today and is likely to face tomorrow. It is our responsibility to
    ensure the Marine Corps has the resources required to execute its
    mission in defense of our Nation. With that in mind, I look forward to
    the testimony of all the witnesses.

        Senator Reed. Thank you very much, Senator McCain.
        General Paxton, please.

        STATEMENT OF GEN. JOHN M. PAXTON, JR., USMC, ASSISTANT
                     COMMANDANT, U.S. MARINE CORPS

        General Paxton. Thank you, Mr. Chairman. Chairman Reed,
    Ranking Member McCain, distinguished members of the
    subcommittee: Thank you for the opportunity to report on
    modernization investments in your U.S. Marine Corps.
        Today, as always, the Marine Corps is committed to
    remaining as our Nation's force in readiness and a force that's
    truly capable of responding to any crisis anywhere around the
    globe at a moment's notice. As we gather here today and,
    Senator, as we spoke earlier, we have some 37,000 marines who
    are forward deployed, promoting peace, protecting the national
    interest, and securing our defense.
        To your specific point about examples, sir, we do have 2
    Marine Expeditionary Units (MEU) and 6,200 marines over off the
    eastern coast of Korea right now exercising with our allies and
    counterparts over there. In addition, there are more than 6,000
    marines in Afghanistan who continue to make a huge difference
    to our Nation, our allies, and the world.
        All your marines forward remain well-trained, well-
    equipped, well-led, and at a high state of readiness. Our
    readiness was proven last year, and if I may offer you just two
    examples here, when the Marine Corps displayed agility,
    responsiveness, and saving lives, first in the aftermath of the
    Super Typhoon in the Philippines in November, and then shortly
    thereafter when we did a rescue mission of some American
    citizens in South Sudan over the Christmas time. Both of these
    events demonstrate the reality and the obligation of
    maintaining a combat-ready force that's capable of handling
    today's crisis today. Such an investment is essential to
    maintaining our Nation's security and our prosperity for the
    future.
        We fully appreciate that our readiness today and the
    ability to maintain it in the future are directly related to
    the innovations and investments we continue to make in the
    refinement of expeditionary amphibious concepts and the
    necessity to modernize decades-old equipment. All of this must
    be accomplished in concert with the fiscal realities that we
    face and particularly in the Department of Defense (DOD)
    budget.
        As our Nation continues to face those uncertainties, we're
    making hard but necessary choices to protect our near-term
    readiness, and also to put the Marine Corps on the best
    trajectory to meet future defense requirements. I look forward
    to the opportunity to elaborate on some examples of those
    choices that we have made.
        As we navigate the fiscal environment, if I may, I'd just
    like to remind you of the five pillars by which we grade
    ourselves for Marine Corps readiness: first and foremost, the
    recruiting and retention of high quality people; second,
    maintaining a high state of unit readiness; third, our ability
    to meet combatant commander demand requirements; fourth,
    ensuring that we maintain appropriate infrastructure for
    investments; and then fifth, keeping an eye towards investment
    for the future and the capabilities we'll need for tomorrow's
    challenges.
        Sir, just in closing, if I may, just three short examples
    here to highlight how all these pillars are unique to the
    modernization that we came here to testify about today. First,
    the Marine Corps has and will source our best trained and most
    ready units to keep them forward to meet combatant command
    requirements. In doing so, the Marine Corps will protect
    readiness today with the realization that our modernization
    investments may be negatively impacted over the long-term. In
    fact, the Marine Corps has accepted the greatest amount of risk
    in this particular area. Such tradeoffs portend future risks
    for us in the costs involved in maintaining long-term
    readiness.
        Second, the Marine Corps, as always, does not man the
    equipment; we equip the marine. Therefore, in anticipation of
    the emerging national security environment, what we call the
    new normal, and our continued drawdown in Afghanistan, the
    Marine Corps is continuing to look at how we identify equipment
    that we will need to best retain, to reset, or to divest.
        Additionally, while balancing capabilities and costs, the
    Marine Corps will continue its look at critical investments and
    in particular for this subcommittee, sir, the ACV, the Joint
    Strike Fighter (JSF), and Advanced Radar, to name a few. We
    will endeavor to posture ourselves so your U.S. Marine Corps is
    most ready when the Nation is least ready.
        Then third and finally, sir, just a reminder that we will
    continue to be, as always, naval in heritage, naval in
    partnership, and naval in outlook. We will continue to look at
    the future, realize that we have to be sea-based, forward
    deployed naval forces that provide day-to-day engagement,
    crisis response, and assured access to the global commons. So,
    a critical component there is to build, train, and maintain an
    expeditionary forward presence that is both available and ready
    on amphibious shipping.
        So, sir, if I may, I'll just delay the rest of the oral
    statement, if I may submit that for the record, sir. I thank
    you for the opportunity and look forward to the questions.
        [The joint prepared statement of General Paxton and General
    Glueck follows:]
        Joint Prepared Statement by Gen. John M. Paxton, Jr., USMC, and
                     Lt. Gen. Kenneth J. Glueck, Jr., 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.
        The Marine Corps remains the Nation's premiere Expeditionary Force
    in Readiness. This means that we remain most ready when the Nation is
    least ready to answer the call globally and respond to all matter of
    unforeseen events. We operate capably and freely throughout the
    spectrum of threats, whether they are conventional, irregular or the
    uncertain hybrid areas where they overlap. Our ability to deploy from
    the sea in austere environments at a time and place of our choosing--a
    significant asymmetric, strategic, and operational advantage--remains
    our most important characteristic.
        Our modernization investments allow us to develop and sustain a
    ready and flexible force that serves as a highly effective hedge
    against global and regional instability. Our innovative spirit, strong
    leadership, and enduring stewardship of the Nation's resources guide
    our modernization efforts. We invest in our marines as they are the
    foundation of the Marine Corps. We continue to reset our warfighting
    equipment and reconstitute our force after more than a decade of combat
    operations. We maintain our investments in the research and development
    of new equipment and technologies that ensure our Nation's crisis
    response force remains relevant and ready well into the 21st century.
        However, as fiscal realities shrink the Department of Defense's
    budget, the Marine Corps has forgone some investments to maintain near-
    term readiness. These trades cannot be sustained long-term and portend
    future increased costs. As America's crisis response force, however,
    your Corps does not have a choice. We are required to maintain a
    posture that facilitates our ability to deploy today. As we continue to
    face the possibility of further budget reductions under sequestration,
    we may be forced into adopting some variation of a less ready,
    temporarily tiered status, within the next few years in order to make
    critical investments that are being deferred today.
                             operating environment
    Afghanistan
        In the past year, marines in Afghanistan have transitioned from
    counter-insurgency operations to training, advising, and assisting the
    Afghan National Security Forces (ANSF). With expanding capabilities and
    increased confidence, the ANSF is firmly in the lead for security in
    support of the Government of the Islamic Republic of Afghanistan
    throughout Helmand and Nimroz Provinces.
        Today, more than 4,000 Active and Reserve marines are forward
    deployed in Regional Command Southwest (RC(SW)) in support of the
    Afghan National Police (ANP), and Afghan National Army (ANA). In 2013,
    we reduced our coalition force advisory teams from 43 to 15, and
    shifted our emphasis from tactical operations to Brigade-level
    planning, supply chain management, infrastructure management, and
    healthcare development. In January 2013, there were over 60 ISAF
    (principally U.S., U.K., and Georgian) bases in RC(SW). Today only
    seven remain. In addition, we removed permanent coalition presence in 7
    of 12 districts with Marine forces located in only 1 remaining district
    center.
    Globally Engaged
        As we transition out of Afghanistan, your Marine Corps remains a
    forward stationed and forward deployed force operating ``in every clime
    and place.'' As part of the strategic shift outlined in the 2012
    Defense Strategic Guidance we have strengthened our ties with our
    Pacific partners. Marines forward deployed and based in the Asia-
    Pacific Theater conduct more than 70 exercises a year, all designed to
    increase interoperability with our regional partners, build theater
    security cooperation, and enhance prosperity and stability in this
    region. This year, the Marines will deploy a rotational force of 2,500
    in Darwin, Australia to continue to expand this effort.
        Throughout more than a decade of sustained operations ashore in
    Iraq, Afghanistan, and elsewhere, we continued to deploy thousands of
    Marines aboard amphibious warships around the globe. The Navy and
    Marine Corps team remains postured to provide persistent presence and
    engagement, maintaining a constant watch for conflict and regional
    unrest. Well-trained Marine units embarked aboard U.S. Navy warships
    increase the Nation's ability to deter and defend against emerging
    threats. Our adaptability and flexibility provide unmatched
    capabilities to combatant commanders, whose demand for these forces
    routinely exceeds our current resources.
        In an effort to meet this growing demand, the Marine Corps has
    stationed additional crisis response forces in the form of Special
    Purpose MAGTFs (SP-MAGTF) ashore in support of U.S. Africa Command and
    U.S. European Command. These forces provide the combatant commanders a
    self-deploying and self-sustaining capability that can support U.S. and
    partner security interests throughout the theaters of operation, to
    include embassy reinforcement, non-combatant evacuation operations, and
    tactical recovery of aircraft and personnel even in periods of absence
    of naval shipping. They demonstrated their unparalleled capability
    following the recent deterioration of the security situation in South
    Sudan. After receiving notification of their mission, SPMAGTF-CR staged
    their forces at Camp Lemonier, Djibouti on the Horn of Africa after
    traveling over 3,400 miles non-stop from Spain. The next day, marines
    flew to Uganda to prepare for a potential non-combatant evacuation
    operation and to bolster our East Africa Response Force.
    Future Environment
        If one characteristic defines the future operating environment it
    is uncertainty. Crises, whether natural disasters such as Typhoon
    Haiyan or manmade ones such as those in South Sudan, will continue to
    arise at an ever increasing pace. The 2014 Quadrennial Defense Review
    correctly states that ``the international security environment remains
    uncertain and complicated. The United States will likely face a broad
    array of threats and opportunities and must prepare to address both
    effectively in the coming years.'' Exacerbating these future threats is
    the nature of our adversary's capabilities. We continue to see the
    power of disruptive technologies distributed to more diffused and
    decentralized actors. 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.
        In order to operate in this environment the Marine Corps maintains
    a solid operational and doctrinal foundation that incorporates proven
    concepts such as Operational Maneuver From the Sea, Ship-to-Objective
    Maneuver and Seabasing. With a renewed emphasis on expeditionary
    operations to respond to the threats encompassed in the `new normal',
    the Marine Corps undertook a deliberate effort to validate and enhance
    these concepts to ensure they remain valid far into the future. The
    results of this effort are codified in our new capstone concept:
    Expeditionary Force 21.
        Expeditionary Force 21 establishes our vision and goals for the
    next 10 years and provides a plan for guiding the design and
    development of the future force that will fight and win in this
    environment. It will inform future decisions regarding how we will
    adjust our organizational structure to exploit the value of regionally
    focused forces and provide the basis for future Navy and Marine Corps
    capability development to meet the challenges of the 21st century. The
    vision for Expeditionary Force 21 is to provide guidance for how the
    Marine Corps will be postured, organized, trained, and equipped to
    fulfill the responsibilities and missions required around the world.
    Through Expeditionary Force 21 we intend to operate from the sea and
    provide the right sized force in the right place, at the right time.
                                     reset
        We have made significant strides in resetting our equipment after
    12 years of wartime wear and tear. We are executing a reset strategy
    that emphasizes both our commitment to the American taxpayer and the
    critical linkage of balancing reset and readiness levels. Over 77
    percent of the Marine Corps equipment and supplies in RC(SW) has been
    retrograded. The Marine Corps requires continued funding to complete
    the reset of equipment still being utilized overseas, to reconstitute
    home station equipment, and to modernize the force.
        The Marine Corps' Operation Enduring Freedom Ground Equipment Reset
    Strategy, released in January 2012, guides the execution of our reset
    and divestiture strategy. The reset strategy prioritizes investment and
    modernization decisions to develop our force. Last year our reset
    liability was estimated at less than $3.2 billion. Based on our recent
    plans for force drawdown, reduction in our enduring requirement for
    weapon systems, and aggressive efforts in identifying those items only
    absolutely required, we have refined that estimate for fiscal year 2015
    and beyond to approximately $1 billion. 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. We anticipate further refinements over the coming
    months as we drawdown further and gain a more refined perspective on
    both the totality of the costs associated with returning our equipment
    from Afghanistan and the detailed costs associated with resetting that
    gear after over 12 years of combat. We currently estimate that reset
    funding will be needed for at least 24 months from the return of our
    last pieces of equipment from Afghanistan.
                            equipment 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.
    As previously discussed, long-term shortfalls in modernization would
    have a detrimental 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.
    Amphibious Combat Vehicle
        The Amphibious Combat Vehicle (ACV) is the Marine Corps' top ground
    modernization priority and the fiscal year 2015 President's budget
    request includes $106 million for this effort. Many of our systems show
    the signs of age, but none more than the current Amphibious Assault
    Vehicle (AAV) which has been in service since 1972. The legacy AAV has
    served the Corps well for over 40 years, but faces multiple component
    obsolescence issues that affect readiness, sustainment costs, safety,
    and our ability to respond from the sea. The ACV is needed to replace
    this aging fleet.
        In 2011, we established an Amphibious Capabilities Working Group
    that examined current and emerging intelligence, surveillance, and
    reconnaissance capabilities, strike capabilities, and their integration
    into potential adversaries' approaches to anti-access, area denial (A2/
    AD). We noted, with particular concern, the impact (i.e. risk to
    mission and force) of future loitering top-attack munitions and the
    proliferation of guided rockets, artillery, missiles, and mortars among
    other advanced threats.
        From this threat assessment, we concluded that we would either need
    to expand the scope, speed and duration of our shaping operations and
    littoral maneuver, or apply some combination of these actions. This
    systems approach may require the launch of initial forces from greater
    ranges offshore. Next, as part of the Marine Personnel Carrier (MPC)
    program we examined commercial off-the-shelf/non-developmental wheeled
    combat vehicles and discovered several important points. First, modern
    wheeled vehicles have substantially closed the maneuver performance gap
    that previously existed between tracked and wheeled vehicles with
    improved cross country performance and shore-to-shore swimming
    capability. Second, current wheeled vehicle technology contributes to
    improved protection against mines and improvised explosive devices.
        We concluded that our concepts for operational maneuver from the
    sea and ship-to-objective maneuver remain valid, and we will continue
    to refine our complimentary portfolio of capabilities to meet the
    evolving threats. The current ACV program has subsequently been refined
    to reflect a family of systems approach to the military problem--the
    necessity to conduct amphibious operations rapidly from further
    offshore while enhancing protected mobility for the mission on land. It
    leverages experience gained in the EFV program, the MPC program, threat
    analysis, and combat experience. It will be procured on a phased
    approach in concert with a revision to our concept of operations for
    littoral maneuver. ACV will initially provide an amphibious wheeled
    vehicle (Phase I) that complements the existing AAV and provides
    enhanced protected mobility ashore. The ACV could conduct most of its
    ship-to-shore movement via existing and programmed high-speed
    connectors. Our long-term effort (Phase II) will continue the research
    and development to explore capabilities that better enable us to
    conduct extended range littoral maneuver from ship to shore. The fruits
    of this phased effort are aimed at producing an amphibious vehicle
    capable of deploying from greater distances at greater speeds that
    ensure greater stand-off distances for our Naval Forces. Given
    continuing advancements in applicable technologies, we believe that
    further investment in these technologies will lead to the envisioned
    high water speed capability. While high-speed technology exists today,
    it currently requires too many capability and cost tradeoffs to be an
    acceptable solution.
    Amphibious Assault Vehicle Enhancements
        To maintain affordability and capacity in the interim, the Marine
    Corps is conducting only essential survivability and sustainment
    upgrades and only to a limited number of AAVs. This is a capability
    upgrade designed to improve force protection and vehicle survivability.
    An additional initiative to improve sustainability of the AAV fleet is
    being developed that will focus on obsolescence drivers and improving
    reliability that will allow the AAV to serve as an effective bridge
    until it is replaced by the ACV Phase II.
    Other Ground Programs
        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.
        While the ACV remains the Marine Corps' number one priority, it
    will be part of a broader acquisition strategy aimed at providing the
    Marine Corps with balanced maneuver and mobility capabilities and
    capacities. This strategy involves retaining and recapitalizing
    portions of our Mine Resistant Ambush Protected (MRAP) vehicle and High
    Mobility Multipurpose Wheeled Vehicle (HMMWV) fleets. In addition to
    preserving these legacy systems we remain firmly partnered with the
    U.S. Army in fielding a Joint Light Tactical Vehicle (JLTV) that lives
    up to its name, while also being affordable.
    Mine Resistant Ambush Protected
        The Marine Corps has an enduring requirement to keep a large
    portion of our current MRAP fleet for future anticipated operations. We
    will place MRAPs in our Prepositioning Programs, with designated MEF
    units for potential use during contingencies, position them at various
    training and exercise locations and place several hundred in long- and
    short-term storage programs. The Marine Corps will divest a portion of
    the vehicles through inter-service transfer and to other partner
    nations who have identified a requirement as Excess Defense Articles.
    We will return the balance of our MRAPs currently in Afghanistan today
    leaving none to be demilitarized in theater.
    Joint Light Tactical Vehicle
        The JLTV is needed to provide the MAGTF with modern expeditionary
    light combat and tactical mobility while increasing the protection of
    our light vehicle fleet. Working closely with the Army as the lead
    Service, the Marine Corps is an equal partner in developing this key
    system in the tactical wheeled vehicle fleet of the joint force. The
    fiscal year 2015 budget request includes $11.5 million for RDT&E and
    $7.5 million for procurement of seven test vehicles. Between fiscal
    year 2016-2021 the Marine Corps will purchase and field a total of
    5,500 vehicles which will replace approximately one-third of our legacy
    HMMWV fleet. The JLTV will greatly enhance reliability and
    survivability from these overburdened platforms that currently perform
    critical missions in unforgiving conditions.
    Light Armored Vehicle
        The fiscal year 2015 budget includes a request for $77.7 million to
    address obsolescence issues in our 40-year-old Light Armored Vehicle
    (LAV) fleet. The upgrades made to the LAV family of vehicles will
    extend the life of this important platform and provide mobility,
    lethality, and survivability upgrades that are sorely needed to
    maintain the relevance of this unique platform on the battlefield. In
    addition to ensuring the operational effectiveness of these vehicles
    through 2035, it will align the main weapon system of the LAV-Anti-Tank
    variant with comparable systems already fielded in both the Marine
    Corps and the Army, increasing commonality and gaining overall
    efficiencies in the acquisition of parts and ammunition.
    Connectors
        Connectors, both aviation and surface, are the platforms that allow
    commanders the flexibility to employ and sustain forces from the
    seabase and amphibious warships. Connectors are the lynchpin to a core
    capability--the ability to project power from amphibious platforms and
    to maneuver once ashore. These connectors with enhanced speed and
    range, will provide future expeditionary force commanders greater
    flexibility to operate in contested environments. The President's
    budget includes $191 million for the Ship-to-Shore Connector air-
    cushioned vehicles and $4 million for the Surface Connector Replacement
    (SC(X)(R)) program that will replace the aging LCUs. These platforms
    are essential in connecting the combat power and logistical sustainment
    that the sea base provides, to our forces that are operating in the
    littorals and inland missions. The Navy Marine Corps team will continue
    to explore and invest in future connector options that will increase
    our ability to exploit the sea as maneuver space by increasing range,
    speed, and capacity.
    Ground/Air Task Oriented Radar
        In addition to our critical investments in mobility, the fiscal
    year 2015 budget includes a request for $89.2 million to procure the
    next generation radar that will replace five of our legacy systems.
    These funds will provide two low rate initial production models to the
    Marine Corps. The Ground/Air Task Oriented Radar is a multi-role,
    ground based, expeditionary radar that satisfies the capabilities
    requirements of both Marine Air Command and Control System and Counter
    Fire/Counter Battery systems. This critical system provides
    unprecedented reach, volume and precision to identify and track both
    friendly and hostile forces and interfaces with existing Navy systems
    to project land and sea power beyond the littorals.
                                   conclusion
        On behalf of the marines and sailors who provide the Nation with
    its forward deployed crisis-response force, we thank you for your
    constant support in an era of competing challenges. We are proud of our
    reputation for frugality and we remain one of the best values for the
    defense dollar. These critical modernization investments, among many
    others, will ensure our success not if, but when future conflict
    occurs. Fiscal uncertainty has threatened both our capacity and
    capabilities, forcing us to sacrifice our long-term operating and
    training health for near-term readiness. Recognizing these fiscal
    challenges, we remain committed to fielding the most ready Marine Corps
    the Nation can afford.
        The priorities reflected in the fiscal year 2015 budget are the
    modernization efforts that we must have to remain an affordable
    insurance policy for the American people. These efforts will allow the
    Marine Corps to remain a highly efficient and effective hedge against
    global and regional tensions that cause instability. As always, we will
    continue to provide our Nation's leaders with the time and decision
    space they need by responding to today's crisis, with today's forces .
    . . TODAY.

        Senator Reed. Thank you very much. All the statements will
    be made part of the record.
        General Glueck, please.

      STATEMENT OF LT. GEN. KENNETH J. GLUECK, JR., USMC, DEPUTY
       COMMANDANT, COMBAT DEVELOPMENT AND INTEGRATION/COMMANDING
     GENERAL, MARINE CORPS COMBAT DEVELOPMENT COMMAND, U.S. MARINE
                                 CORPS

        General Glueck. Chairman Reed, Ranking Member McCain: Thank
    you for the opportunity to testify before you today. The Marine
    Corps' ability to serve as our Nation's premier crisis response
    force is due to a large part to this subcommittee's strong
    support. On behalf of all marines, I say ``thank you.''
        A forward-deployed Marine Corps provides our combatant
    commanders a universal tool they can immediately employ. This
    force can serve as a leading edge of a larger joint force or
    deploy and sustain itself even in the most austere of
    environments. This ability to rapidly respond to developing
    crisis not only ensures the combatant commander has the right
    force in the right place at the right time, but also provides
    our national leaders valuable decision space.
        Flexible and scaleable by organizational design and
    instinctively adaptive by culture, the Marine Corps is guided
    by our expeditionary ethos and bias for action. These
    characteristics are the hallmark of our Marine Corps' capstone
    concept, Expeditionary Force 21. We have given you a small
    pamphlet there that highlights some of the information that's
    in that concept.
        [The information referred to follows:]

        General Glueck. Expeditionary Force 21 blends our time-
    tested concepts of operational maneuver from the sea, ship-to-
    objective maneuver, sea-basing, with the strategic agility,
    operational reach, and tactical flexibility that our forward-
    stationed and deployed expeditionary units provide. Crucial to
    these capabilities and persistent presence are our amphibious
    warships. They are versatile, interoperable warfighting
    platforms capable of going into harm's way and serve as the
    cornerstone of America's ability to project power and respond
    to the full range of crises. With embarked marines, the
    amphibious ships are the Swiss army knife of the fleet,
    providing diverse capabilities unlike any other naval platform.
    They are critical to both our combatant commanders' theater
    engagement strategy and crisis response options, significantly
    contributing to both regional security and stability. From
    humanitarian assistance, to disaster relief, to forcible entry
    operations, it is the amphibious fleet that answers the call.
        Innovative warfighting approaches and can-do leadership are
    hallmarks of the Marine Corps, but these cannot overcome the
    vulnerabilities created by our rapidly aging fleet of vehicles.
    Long-term shortfalls in modernization will have a detrimental
    impact on readiness and degrade our crisis response capability.
    Sustaining fleets of severely worn and legacy vehicles becomes
    inefficient and no longer cost effective.
        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 capabilities and costs.
    With the smallest modernization budget in DOD, the Marine Corps
    continually seeks to leverage the investments of other Services
    to those areas which are most fiscally prudent and those that
    promise the most operationally effective payoffs.
        The future security environment requires a robust
    capability to operate from the sea and to maneuver ashore to
    positions of advantage. The ACV provides us this capability and
    is our Marine Corps' number one ground modernization priority.
    It will be procured on a phased approach, thus complementing
    existing capabilities to maximize both the surface power
    projection and littoral maneuver. The benefits of this phased
    effort are aimed at producing an amphibious capability that
    deploys from greater distances and speeds, thus ensuring
    greater standoff distances for our forces.
        Given continuing advancements in applicable technology, the
    Marine Corps believes that further investment in these
    technologies will lead to the envisioned high water speed
    capability.
        Additionally, as part of the systems approach, the Navy/
    Marine Corps team will continue its investment in the next
    generation of future connectors. These connectors, with
    enhanced speed and range, both aviation and surface, will
    provide future expeditionary force commanders greater
    flexibility to operate in contested environments. The type of
    transformational technology that the MV-22 Osprey has already
    demonstrated needs to be brought to our surface connector
    fleet.
        While the ACV remains the Marine Corps' number one
    priority, it will be part of a broader acquisition strategy
    aimed at providing us a mixed fleet of balanced capabilities.
    This strategy involves retaining and recapitalizing portions of
    our AAV, Mine-Resistant Ambush Protected (MRAP) vehicle, and
    High Mobility Multipurpose Wheeled Vehicle (HMMWV) fleets. We
    will also address obsolescence issues in our Light Armored
    Vehicle fleet that are sorely needed to maintain the relevance
    of this unique platform.
        In addition to preserving these legacy systems, we will
    remain firmly partnered with the United States Army in fielding
    the affordable Joint Light Tactical Vehicle (JLTV). The JLTV
    will greatly enhance reliability and survivability of our
    overburdened HMMWV platforms.
        In addition to our critical investments in mobility, the
    fiscal year 2015 budget includes a request for the next
    generation radar, which will replace five of our legacy
    systems. The ground-air task-oriented radar is a multimode,
    ground-based, expeditionary radar that provides unprecedented
    reach, volume, and precision to identify and track both
    friendly and hostile forces and interfaces with existing naval
    systems to project land and sea power beyond the littorals.
        Clearly, there are challenges in operating in today's new
    normal security environment, as well as challenges of
    constrained and uncertain budgets. But rest assured that our
    forward-stationed and deployed marines are poised to remain our
    Nation's premier expeditionary response force in readiness.
    Modernization priorities reflected in the fiscal year 2015
    budget are paramount to maintaining future combat readiness and
    these investments will ensure that our Marine Corps remains
    most ready when the Nation is least ready.
        In partnership with the Navy, the Marine Corps looks
    forward to working with you to address the issues. Thank you
    for the opportunity to be here and I look forward to answering
    your questions.
        Senator Reed. Thank you very much, General Paxton and
    General Glueck.
        We've been joined by Senator Kaine. Thank you.
        We'll do 6 minutes and as many rounds as we have time
    before the vote or after.
        Let me begin with a question that we've raised. You're in
    many respects talking about long-term system development, but
    you're going to run into, by at least 2016, legal requirements
    of sequestration. So how are you managing that in terms of
    risk, in terms of program development, General Paxton and
    General Glueck?
        General Paxton. Thank you, Senator Reed. Chairman, within
    each dollar that the Marine Corps has, unfortunately we're only
    spending about 8 cents of the dollar on modernization. We're
    spending about 63 cents on people, about 27 percent on our
    operations and maintenance, about 8 cents on modernization, and
    2 percent on sustainment and restoration.
        So, these are hard choices that we've had to make as we
    look at not only the current size and capability of the Marine
    Corps, but what we anticipate that future Marine Corps will be.
    We had done a rather exhaustive study to try and keep a
    balanced air, ground, logistics Marine Corps that we can future
    deploy, and the optimal strength of the Marine Corps remains
    186,800, sir. But the Marine Corps that we are bracing for
    under sequestration is 175,000. That's a Marine Corps that has
    at least moderate risk, sir, for our operation plan and
    warfighting capability.
        What we are trying to do, sir, as we look at the size of
    the Marine Corps is to make sure that neither the national
    command authority nor Congress ever have to make that hard
    choice between do you want a well-manned force, a well-trained
    force, or a well-equipped force. We're trying to keep that
    balance, air, ground, logistics, but between manning, training,
    equipping, as we come down to 175,000.
        That, in a nutshell, is the way we're looking at
    sequestration and the negative impacts. We talked earlier with
    Senator McCain, sir, and we had originally forecasted that we
    would see significant changes in readiness as of about this
    time this year before sequestration kicked in. The President's
    budget gave us some extra money. We had some returned
    unobligated money that we were able to put into readiness, and
    each of our extra dollars over the last year went into buying
    back near-term readiness. We have not seen the immediate
    effects of that downward spiral, but we still predict that
    within about the next 12 to 14 months, with each budget cycle,
    we will continue to erode.
        Probably the most significant and initially, the most
    visible impact on us will be on our aircraft, because we will
    have aircraft that will be out of reporting. Squadrons that
    would normally have 12 aircraft, that may have 8 now, could
    easily go down to 6 and be 45 to 55 percent manned, because
    there will be a backlog of depot maintenance because of parts,
    maintenance, people, and money. Then consequently the pilots
    that are in the squadron will have more pilots, fewer aircraft,
    and we'll see that downward spiral.
        If that answers your question, sir, that's how we're
    looking at the size of the Marine Corps and the immediate
    impacts of sequestration.
        Senator Reed. Thank you.
        General Glueck, do you have any comments?
        General Glueck. Sir, I agree with everything that General
    Paxton said. I'm in charge of ground modernization for the
    Marine Corps. In the last 2 years we've had to reduce that by
    about 25 percent. But we know that we did with a purpose. We're
    mortgaging some of our capability and development to maintain
    our current readiness. We're going to go ahead and move ahead
    on that. Some projects we had to cancel, other ones we've had
    to curtail.
        But it's all in the name of maintaining our current
    readiness. I would say that as I was talking with Senator
    McCain, our marines that are forward-stationed and forward-
    deployed like we have today in Ssangyong up in Korea do not
    feel the impact of this. As far as they know, it's business as
    usual. It's the forces that are left behind that are feeling
    the major impact.
        Thank you.
        Senator Reed. Thank you, General.
        We mentioned the fact that you're beginning to exercise
    more, which is a very, I think, positive development. You're
    just, as you mentioned, General, about to complete the exercise
    in Korea. Part of these exercises, you get the results
    sometimes based upon the assumptions you make. In the very few
    minutes that I have remaining, in these exercises, are you
    assuming air superiority, close access to the beach, and
    uninterrupted communications, so that electronic systems like
    Global Positioning Systems work constantly? Because there seems
    to be capabilities developing worldwide where some of these
    things that we took for granted 10 years ago might not be the
    operational environment that you are faced with.
        General Paxton. Thank you, Senator. We never want to assume
    that. I think invariably when we do exercises, you always posit
    the worst case scenario. In honesty, because we have been doing
    so much counterinsurgency work in Iraq and Afghanistan, and
    because we have a deficit in the training level, both
    nationally, as well as bilaterally and internationally, some of
    these exercises we have put that in as an example we'll do
    periodically. You'll go into Emission Control, you'll go into
    No Communication plans, you will go into a restricted
    environment of some sort.
        But in order to regenerate the capacity and the capability,
    amphibious and expeditionary, that we haven't exercised for a
    while, the focus upfront, in all candor, sir, is to get back in
    to do those nuts and bolts things that we've been away from for
    12 years. But we fully realize that both operationally,
    exercise, and modernization, we have to look at an environment
    where we'll be denied access, denied communications, things
    like that.
        Senator Reed. So, at this point, we're getting back into
    the amphibious game, if you will, the basics, getting off the
    ship, getting on the beach, assuming that you don't have
    further complicating factors. But your long-term exercise
    planning recognizes that these emerging threats are there?
        General Paxton. Absolutely, sir, absolutely.
        Senator Reed. Senator McCain.
        Senator McCain. I thank the witnesses.
        General Paxton, you have some relief for 2014 and 2015, but
    without further change, sequestration kicks in again, right?
    One, how does that affect your planning? Two, what effect would
    it have if sequestration kicked in again in 2016?
        General Paxton. Thank you, Senator. We fully anticipate the
    worst case scenario, that in 2016 sequestration will kick in
    again. As I said earlier, sir, that's why we're planning on a
    175,000-man Marine Corps as opposed to 186,800. We expect that
    we will see aircraft that go out of cycle reporting. We expect
    we'll have a maintenance backlog.
        The net impact, Senator, will be that we will have our
    units ready to deploy and the next ones on the bench, but then
    the ones behind that will not be ready, sir. That'll be a
    decreasing spiral, in that the equipment won't be ready because
    it won't come out of maintenance and depots, the training won't
    be done, whether it's the ground side or the air side, and
    we'll pay for it in the tyranny of time and the tyranny of
    distance, sir. We won't be able to get, in the case of a major
    theater war plan, the two that we look at, the forces will not
    arrive as fast and they won't be as trained when they get
    there, and it could result in more casualties and things like
    that, Senator.
        Senator McCain. Mr. Chairman, it's an issue for the full
    committee, but maybe we ought to get an assessment from the
    Joint Chiefs of Staff exactly of what the impact of the renewal
    of the sequestration would have on our military. I think that
    it would be devastating, obviously.
        General Glueck, the Government Accountability Office (GAO)
    recently identified deficiencies with software development in
    the F-35 that they say could stress its cost, schedule, and
    performance. Have you taken a look at that GAO report?
        General Glueck. Senator, no, I have not read that GAO
    report. I know General Schmidle, who's our Deputy Commandant
    for Aviation, is very familiar with that report.
        Senator McCain. I'd like you to take a look at it and maybe
    give us an answer in writing, because the GAO has been
    consistently correct on the problems with the F-35. They have
    not been wrong a single time. Unfortunately, the military, DOD,
    has been wrong every time, as we've watched the cost skyrocket.
    We still don't have the initial operational capability
    achieved.
        Right now, what are your plans as to when we reach the
    initial operational capability for the F-35?
        General Glueck. Senator, that's when the conditions are
    going to be met. If the software is not developed to meet the
    requirement, then we will not declare Initial Operating
    Capability (IOC).
        Senator McCain. What are your plans now for it to be
    operationally capable?
        General Glueck. Sir, I'd have to take that for the record
    and discuss that with General Schmidle, our Departure Control
    System-Aviation.
        [The information referred to follows:]

        The F-35B is on track to Initial Operating Capability (IOC) in July
    2015 with Block 2B software. The Marine Corps is working very closely
    with the Joint Strike Fighter Program Office to ensure we meet the
    planned IOC timeline. The aircraft has demonstrated its warfighting
    capabilities in developmental tests to include successful preplanned
    delivery of Joint Direct Attack Munitions, successful GBU-12 delivery
    using the F-35B's onboard electro-optical targeting system laser, and
    successful Advanced Medium-Range Air-to-Air Missile launch and guide
    demonstrations. At IOC the aircraft will have the capability to execute
    Close Air Support, limited Offensive and Defensive Counter Air, Air
    Interdiction, Assault Support Escort, Armed Reconnaissance, and limited
    Suppression of Enemy Air Defense missions.

        Senator McCain. Alright. Look, the next time you come
    before this subcommittee I'd like you to have some answers,
    particularly on the major and most cost-consuming program that
    we have, and that's the F-35. So, I guess I have to ask: do you
    think the software challenges could impact the F-35's ability
    to be fully combat ready?
        General Glueck. I think that any software development is
    development, and it moves in stages, sir. If you don't have the
    correct development at the very beginning, then it would have
    impact in the long term.
        Senator McCain. Is the F-35 being delivered now on time and
    on schedule?
        General Paxton. Senator, if I might, the models that we
    have are being delivered on time and on schedule. The software
    is tentatively behind schedule. The IOC is forecasted for July
    2015. We have every expectation that that could be delayed by
    several months, sir. It will continue to be conditions-based.
    We won't declare IOC until we work through these with the
    systems provider, sir.
        Senator McCain. Isn't one of the many lessons here, fly-
    before-you-buy?
        General Paxton. Absolutely, sir.
        Senator McCain. The ACV program, you have a request, which
    is pretty modest, of $105 million. It follows the failed EFV
    program which was terminated in 2011. What is the time schedule
    that we could anticipate for the ACV? As we know, the present
    capabilities are extremely old, 40-year-old AAV.
        General Paxton. Senator, as the subcommittee and you are
    well aware, we have had challenges fielding what used to be the
    EFV in the program we killed. It's a three-part--we move from
    the AAV, which we have now, sir, 40-years-old, 50-year-old
    technology. We tried to move to the Advanced Amphibious Assault
    Vehicle (AAAV) and the issue then was to see how much high
    water speed we could get, if we could get the vehicle up on
    plane; moved it to the EFV, and then that did not bear fruit,
    sir.
        We knew two things here. Number one is we had to actually
    triage the way we're going ahead----
        Senator McCain. I guess my question is: are we looking at
    10 years, are we looking at 5 years, are we looking at--what
    kind of schedule would we have an adequate replacement for this
    40-year-old AAV?
        General Paxton. Sir, fiscal year 2022 was the target window
    that we were trying to get, where we knew we had to do a mix of
    upgrading the AAV, getting an interim tentative replacement
    vehicle, and then trying to see where we could be, knowing we
    would probably only have one more chance to get this right if
    we could get a high water speed vehicle. It would start in
    fiscal year 2019 and we look to field something in 2022. We
    believe now that we can do all three of those pieces, sir, and
    I'll give it to General Glueck----
        Senator McCain. So it's about 7 years?
        General Paxton. Seven years, yes, sir.
        Senator McCain. I thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator McCain.
        Senator Kaine.
        Senator Kaine. Thank you, Mr. Chairman, and thanks to our
    witnesses today. I echo Senator McCain's statements about
    sequester in 2016 and beyond. It was a good thing that we did
    to provide some sequester relief in 2014 and 2015, and I'm just
    struck every time I think about this that the DOD through the
    President's budget has come in and asked, not for the
    elimination of sequestration, but you've basically asked for
    sequester relief that over the course of the sequester would
    suggest that you would absorb about half the sequester cuts,
    actually a little more than half the sequester cuts, and seek
    relief from the remainder. I think that's a very reasonable
    request and look forward to working with my subcommittee
    members on that.
        General Paxton, I want to ask you a couple of personnel
    questions. One, talk a little bit about the integration of
    women into the Military Occupational Specialties (MOS) across
    the Marine Corps, as the decision was announced by Secretary
    Hagel about a year ago that all branches would look at gender-
    neutral criteria for the MOSs. If you could just talk about the
    progress of that, I'd appreciate it.
        General Paxton. Thank you, Senator Kaine. It was a mix of
    both statutory and legal requirements, as well as policy
    requirements. It was actually Secretary Panetta in January who
    started it, sir.
        We have vowed within the building and to Congress that we
    will be deliberate, measured, and responsible as we look at
    this. Right now, sir, the Marine Corps has about 335 MOSs.
    There are approximately 290-some of them to which, other than
    passing the physical fitness test, the combat fitness test,
    there are no additional physical performance standards required
    with those MOSs. There are about 30 for which there are unique
    physical requirements.
        So what we have obligated to ourselves, to Congress, to the
    American public, is to study those MOSs and to see what are
    those physical requirements. In the past, we have had the
    latitude, the luxury, in an all-conscripted force, as opposed
    to an All-Volunteer Force, and things like that, not to focus
    on.
        We have, indeed, hard and fixed training requirements for
    all those MOSs. But we're going to open up the books and look
    at all those requirements individually and collectively. We
    have made, to your point, sir, some initial occupational fields
    where we believe there were no indications of additional
    significant requirements, and we made what is called an
    ``exception to policy'' and we took a closed unit which
    theretofore had not had women assigned and we opened it up.
    First, we assigned junior company-grade officers and senior
    staff noncommissioned officers to make sure that the
    performance was there, the culture was there, before we looked
    to move other marines who happened to be women in at the
    private first class level.
        We're working through that first phase of exception to
    policy. The next step, as the Commandant has articulated, is
    we're going to stand up a ground combat element task force, and
    we're actually going to get in and study not only individual
    standards, but collective and unit standards, and we're going
    to try and study them in a terrain and in an environment where
    that unit will be tested. That will continue the 22-month
    period we had to do this deliberate, measured, responsible look
    at what the actual requirements are in the occupational fields
    before we make either an exception to policy or an exception to
    assignment, sir.
        Senator Kaine. Thank you, General Paxton. I've been asking
    that question at all the posture hearings and exploring it, and
    it's been heartening to see the degree to which each of the
    branches are tackling this a year in. I'm glad to hear the way
    you describe it.
        Another different personnel issue is, in the aftermath of
    the tragic attack on the embassy compound in Benghazi, one of
    the recommendations that the administration and Congress has
    agreed to is an augmentation of the Marine Security Guard (MSG)
    Program. I visited that training facility at Quantico, VA, and
    have been impressed. As I've traveled, largely on Senate
    Foreign Relations Committee travel, I've met a lot of the MSGs
    who are out there, all over the Middle East, especially.
        I think there is a commitment to increase the size of that
    program by about an additional 900 to 1,000 MSGs over time.
    Could you talk a little bit about how that progress is going
    and whether sequester or other funding issues are potentially
    getting in your way as we try to accomplish that important
    objective?
        General Paxton. Thank you, Senator Kaine. Thanks to the
    hard work and support of this subcommittee and Senator McCain,
    in specific, we were able to get an increase of approximately
    1,000 marines. The requirement is 881 marines and then we have
    what's called Transients, Transfers, Prisoners, and Patients,
    which is the training pipeline and the movement and folks who
    are not immediately assignable. But about 1,000 folks, and
    funded, sir.
        So within that reduced force of 175,000 marines, which will
    be the new normal, that includes an increase to our MSG units.
    With the Department of State, we have identified 35 high-threat
    posts, which are additional embassies and consulates around the
    world that would need augmentation.
        So we are now, number one, trying to cover down on those
    high-threat posts. Number two, we have what's called an MSG
    Augmentation Unit, which is trained, equipped, and ready in
    Quantico, VA. If you have a deliberate or an anticipated need,
    you can actually fly them out to augment the posts that are
    already there.
        Then, as you saw, sir, in Libya and other places, we still
    have our Fleet Anti-Terrorism Support Teams who work with the
    Navy and the Marine Corps that can go in and augment on top of
    the MSGs, sir.
        Senator Kaine. One last question, and this may be one for
    the record, because I was going to ask this for Secretary
    Stackley, even though he's not here. The Navy forces laydown
    program had a decrease at Little Creek Fort Story in Virginia
    Beach from 18 to 6 shifts between fiscal year 2013 and fiscal
    year 2020. I was going to ask the question about what the
    Marine Corps' plans are for Little Creek to maintain its hub,
    both for Navy and Marine Corps operations. That might have been
    more appropriately directed at him. If either of you could
    answer that, that would be great. If not, I'll just submit that
    for the record.
        General Paxton. Thank you, sir. I know we have our security
    cooperation group down there, and, of course, we're close to
    Little Creek, so we had some training there. We have moved some
    amphibious ships from Little Creek down to Mayport, FL, and
    changed the homeporting thing. In order to give the details and
    the integration with the Navy and the Marine Corps, I would
    like to take that for the record, sir, and get back with you on
    that.
        Senator Kaine. Yes, absolutely. Thank you.
        [The information referred to follows:]

        The Marine Corps will continue to coordinate with the Navy to
    ensure that we maintain a focus on our expeditionary warfare
    capability. The Marine Corps units stationed aboard Joint Base Little
    Creek-Fort Story are an integral part of this team. Little Creek will
    continue to be the home of three training ships, as many as three Joint
    High Speed Vessels (one long-term), one salvage ship and several Mark
    VI patrol boats. The Navy is currently coordinating with the Coast
    Guard to permanently base two Medium Endurance Cutters at Little Creek
    in 2014 and 2015. Joint Expeditionary Base Little Creek-Fort Story
    currently has approximately 19,500 personnel (Active/Reserve military,
    Department of Defense (DOD) civilian, and contractor). As a result of
    Navy homeport changes through 2019 and with the addition of 2 Coast
    Guard cutters with a crew of 77, the base population (Active/Reserve
    military, DOD civilian and contractor) at Joint Expeditionary Base
    Little Creek-Fort Story is projected to be about 17,450 in 2019.

        Senator Kaine. Thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator Kaine.
        Senator Wicker.
        Senator Wicker. Thank you.
        General Paxton, at a full committee hearing last week I
    entered into the record a March 25 letter from some 20 retired
    Marine Corps generals dealing with, among other things,
    amphibious ships.
        Mr. Chairman, I ask that it be entered into the record of
    this subcommittee hearing.
        Senator Reed. Without objection.

        [The information referred to follows:]

        Senator Wicker. General Paxton, have you read this letter?
    I bet you have.
        General Paxton. I have, Senator.
        Senator Wicker. Last week, in answer to questions, General
    James F. Amos, Commandant of the Marine Corps, and Admiral
    Jonathan W. Greenert, Chief of Naval Operations, testified they
    would need 50-plus amphibious ships to meet the needs of the
    combatant commanders, stating specifically the demand for
    steady-state operations all around the globe would indicate
    somewhere around the right number of 50-plus. Do you agree with
    that?
        General Paxton. I do, Senator. The steady-state demand
    signal is the most pressing demand signal for our amphibious
    fleet.
        Senator Wicker. How are we doing on that need?
        General Paxton. Sir, when we do our amphibious
    shipbuilding, as I'm sure members of the subcommittee are
    aware, we looked at the war plans as the stressing environment,
    as opposed to the steady state, and according to the war plans
    to get the appropriate Marine Expeditionary Brigade amphibious
    lift there was a requirement for 38 amphibious ships. The long-
    term commitment has been to try and keep the amphibious fleet
    at 38.
        Prior to September 11, in a fiscally constrained
    environment and given the industrial base, there was a tacit
    agreement between the Navy and the Marine Corps that we would
    have acceptable risk as long as the fleet stayed at 33. Right
    now, sir, if you look at the next 5 or 8 years, in the near-
    term the fleet is not going to be at 33.
        Our concern on the Navy side, as it is on the Marine Corps
    side, is the monies that are available for maintenance. We have
    worked very closely and I certainly understand the significant
    maintenance challenge the Navy has with their depots and yards.
    But what we call the operational availability (A-sub-O) of the
    ships is not there. Even if we were to have 33 ships, the
    requirement for those aging platforms to get in the yard, to
    get upgraded, maintained, to keep them survivable at sea, to
    keep the communication systems up, we will not have the 33 at a
    minimum that we need.
        We're in a period, the early part of a bathtub, sir, you
    get what we call the 11-11-11 mix of the three hull forms.
    We're not there, sir.
        Senator Wicker. We're nowhere near the 50-plus that we
    would need for the steady state; is that correct?
        General Paxton. That's correct, sir.
        Senator Wicker. What is your assessment of the risk to the
    Marine Corps' ability to execute its objectives, for example,
    in the Asia Pacific, if we do not provide you with the right
    number of ready, capable amphibious ships?
        General Paxton. Sir, I believe Admiral Locklear and General
    Scaparrotti have been here and testified that for their war
    plans there is at least moderate risk there, sir. In terms of
    closing within the time and the distance to meet the war plans,
    we would be challenged, sir.
        Senator Wicker. With regard to the Landing Platform Dock-17
    (LPD-17) program, this was originally planned for 12 warships,
    but was reduced to 11 vessels due to the budget. Do we need
    that 12th LPD to support your mission?
        General Paxton. Sir, operationally we could certainly use
    the LPD. We would never say no to another ship, particularly
    given, number one, the fact that we have----
        Senator Wicker. Is it a frill? Is it an extra, a luxury?
        General Paxton. No, sir. It would get us closer to that,
    either the 38-ship count or the 54-ship count. The challenge,
    sir, as you well know, is the cost of the current ships. It's
    unsustainable at the $2 billion plus that it's currently priced
    at, sir. Given the sequestration that we're all facing, how we
    would absorb that within the top line--and this would have to
    be above top line and a different type of prioritization to get
    that 12th ship.
        It is a proven performer as a single ship deployer. It
    gives us the five fingerprints of lift that we need for
    aircraft, for surface, for people, and for cube and square. But
    how we would cost that and put it within the current program
    would be the challenge, Senator.
        Senator Wicker. Let's assume that this subcommittee and
    this Congress takes care of the sequestration issue. Given that
    assumption, what would your request be to this subcommittee
    with regard to amphibious ships?
        General Paxton. Sir, the Marine Corps would always be in
    favor of looking to increase the amphibious fleet. Even if we
    had relief from sequestration, sir, we'd have to get with the
    Navy, because I know they have their own challenges with the
    Ohio-class submarine and the carriers, and how we balance the
    overall fleet capability is something that I know Secretary
    Mabus and the Navy has to look at, sir.
        Senator Wicker. Okay. Let's assume it's unlikely that we
    can meet the defense budget--that it will be increased, as I
    hope. What tradeoffs will we have to make to strike a balance?
        General Paxton. Sir, I believe that the first tradeoff--
    having been down at Second Marine Expeditionary Force and
    Marine Forces Command in Norfolk, VA, and worked very closely
    with the Navy--the pressing thing for me as a Marine Corps
    commander would always be to work with our Navy counterpart to
    get the maintenance in the yards done, so that that A-sub-O,
    the availability of the ships in the inventory, is higher.
        The Navy goal is to keep it at 90 percent. It is by
    advertisement around 70 percent. We would say it could even be
    a little bit lower than that. The current ships that we have in
    the inventory, if we were to have the 33 in the inventory, sir,
    the issue would be to get them into the yards to maintain so we
    could get them out on a short fuse to do operations.
        I used the example for Senator Reed and Senator McCain
    earlier about the Super Typhoon that went through the
    Philippines. We were able to respond to that very quickly last
    November and December. Regrettably, the initial response was
    all by helicopter because all three of the ships that we needed
    were in the yards. The Navy, to their credit, got two out of
    the yards very quickly to go down there. The third one took
    another 2, 2\1/2\ weeks, and that's because of the requirement
    to get them back into the yards after sustained deployments to
    keep them maintained, Senator.
        Senator Wicker. Thank you very much.
        Thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator Wicker.
        Senator Blumenthal.
        Senator Blumenthal. Thank you, Mr. Chairman.
        Thank you to the witnesses for being here today, and thank
    you for your service and dedication to our country. I think a
    number of us here who have sons who have served or are serving
    currently would join us in thanking you for your leadership,
    but also, I think, reflect to us that the main asset of the
    Marine Corps continues to be its men and women who serve.
        We're here to talk about a lot of hardware and ships and
    planes, but I want to begin by asking whether you're satisfied
    that, with all the uncertainty about sequester, with all of the
    talk about drawdowns and other potentially discouraging news,
    that the men and women who are recruited, men and women who are
    enlisting to serve in the Marine Corps, are of the same quality
    as they have been in the past, in the recent past?
        General Paxton. Your caveat with, ``recent past,'' sir, if
    you go past past, I think they continue to be of higher
    quality, of higher physical quality, higher moral quality,
    higher performance. We've had great marines for 239 years, sir,
    regardless of air, ground, logistics, male, female, officer,
    enlisted, regular, or Reserve.
        Senator Blumenthal. To put it more directly, you don't see
    any reduction either in quality or number of men and women who
    want to serve?
        General Paxton. No, sir. Our recruiting command is finding
    the best and the brightest out there. Truly, it's an All-
    Volunteer Force. They want to serve. All the indications from
    our recruit depots is that the caliber of the young man and
    young woman coming in is still high, and the operational
    commanders when they see them in the fleet early on, it's gone
    very well, sir.
        Senator Blumenthal. Let me shift to the F-35. You testified
    that the date of IOC may have to be postponed by a number of
    months as a result of the software issues. Certainly, I think
    many of us on the subcommittee share the views that have been
    expressed by Senator McCain about the difficulties in reaching
    combat readiness for this aircraft and our desire to make sure
    that we do everything possible to reduce the cost and increase
    the likelihood of on-time delivery.
        My understanding from the Lockheed-Martin representatives
    who came to see me very recently, in fact, within the past few
    days, is that the software will be ready by July 2015. Are you
    saying something different today at this hearing?
        General Paxton. Sir, I'll start and then if General Glueck
    wants to chime in. July 15 is the planned IOC date. We had
    indications that that would be hard to meet. We have been
    assured by Lockheed-Martin that they were taking this on board
    and tackling it hard. I was trying to reiterate what General
    Glueck said to Senator McCain, that this is still going to be
    conditions-based, that we do want to fly it and maintain it and
    make sure it's operationally ready before we declare IOC or
    full operational capability; that we're going to work with the
    contractors collaboratively to make sure that the performance
    requirements and the thresholds are actually met before we do
    any declaration.
        Senator Blumenthal. You're not telling us there will be a
    further delay. You're expressing some caution about July 2015?
        General Paxton. Exactly, sir. That's still 16, 17 months
    out, so it's just cautionary at this time, sir.
        Senator Blumenthal. Those planes, the fifth generation
    fighters, are necessary to the Marine Corps' readiness and
    preparedness, are they not?
        General Paxton. Absolutely, sir. On this I will defer to
    General Glueck as both concept development and as an aviator.
    But it is a leap-ahead technology. It's not an aircraft or an
    air delivery platform. It is an integrated weapons system that
    is essential to the way we'll do business in a denied
    environment, where communications are a challenge, access is a
    challenge, and the time and distance separation to do our
    missions is a challenge. That's exactly what we need to make
    that leap ahead into the next generation, sir.
        Senator Blumenthal. General?
        General Glueck. Sir, I'd just reinforce what General Paxton
    said. It is a transformational capability. When I worked in the
    combat development field earlier around 2000 or so, that's when
    we were trying to figure out what transformational really
    meant. Transformational, what I came to find, was we have
    absolute leap-aheads, such as the V-22 and the JSF.
        Every opportunity that I've had to visit the JSF and get in
    the cockpit of the simulator and what-not, it is an airborne
    integrator and it will replace three of our legacy aircraft,
    and it is a transformational capability.
        Senator Blumenthal. Thank you.
        Let me ask about the Marine Corps heavy lift helicopter
    replacement. Looking to the shift of priorities to the Pacific,
    could you describe what role that helicopter will have in that
    role for the Marine Corps?
        General Glueck. Sir, our current CH-53 As and Es are
    becoming legacy. The newest one, the 53E, which is a three-
    engine aircraft, is coming up on 30-years-old. This is going to
    be a great modernization effort, and we need that heavy lift.
    It's going to have three times the lift capacity of the current
    E model.
        I think when you look at combining that with the effects
    that we're going to have with the MV-22, when you look at our
    future concept of operational maneuver from the sea, they will
    be critical to moving the marines on the airborne connector
    side, to go from greater distances, to be able to move to
    positions in the shoreline.
        Senator Blumenthal. Thank you. Thank you very much for your
    very helpful testimony.
        Thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator.
        Senator Sessions.
        Senator Sessions. General Paxton, I'm worried where we are
    on the budget. We seem to be talking past ourselves on where
    our finances are. People talk about the sequester as causing
    more cuts, but that's not so, the way I look at the numbers.
    It's below the President's request, but it's not below current
    levels.
        This year, 2015, the 050 account, the total is $521
    billion, and it goes to $523 billion in fiscal year 2016, $536
    billion in fiscal year 2017, $549 billion in fiscal year 2018,
    $562 billion in fiscal year 2019, $576 billion in fiscal year
    2020, and $590 billion in fiscal year 2021. That's the current
    law. That's the BCA. That's the caps we have on that number.
        Are you aware of that?
        General Paxton. Sir, I'm aware of the distinction between
    the BCA and the Bipartisan Budget Act (BBA), yes, sir.
        Senator Sessions. BBA filled the gap, because this year was
    a terrible year for DOD. It really would have been damaging to
    DOD. I wasn't comfortable the way they did it, but at least
    they helped this year.
        You're getting by on this year. Fiscal year 2015 is going
    to be the same, and fiscal year 2016 has a little increase, and
    then you begin the $13 billion a year increase in the out-
    years.
        How is that further cuts?
        General Paxton. As I said earlier, sir, immediately prior
    to your arrival, we are planning on a worst case scenario. We
    are planning on the BCA levels. What we do is to buy back the
    readiness that is missing, sir. We continue to fund the people,
    continue to work on the drawdown in people and in equipment as
    we reset, and the additional monies that may come through
    something like the BBA, we will buy back both near-term and
    mid-term readiness, sir.
        Senator Sessions. It's really important because the Marine
    Corps is such a critical part of our defense structure, and in
    a crisis, that's who we call. We're going to have to have you.
        But let me just run these numbers because I'm confused
    about where we are. One of the problems we have is that the
    President and the Democratic Senate has said: We will not give
    another dime to DOD unless we increase spending, likewise, for
    the non-defense departments. That's one reason we're having a
    hard time finding you any extra money--the Commander in Chief.
    That's his position.
        Looking at the budget request, looking for 184,000 marines
    this year, or is that fiscal year 2015, down from 190,000
    marines in fiscal year 2014? You're at 190,000 marines in
    fiscal year 2014, you drop to 184,000 marines in fiscal year
    2015. That's a noticeable drop. It's not a little bitty matter.
    That's the numbers I have here.
        General Paxton. Yes, sir.
        Senator Sessions. Then it goes to 182,000 marines in fiscal
    year 2017, and then the numbers I have says that the Future
    Years Defense Program (FYDP) submitted with the President's
    budget has the Marine Corps reducing to 175,000 marines by the
    end of fiscal year 2019. That's based on the law, the BCA
    numbers which includes the sequester.
        General Paxton. That's correct, Senator. We believe by the
    end of the FYDP we'll be at 175,000 marines.
        Senator Sessions. Have you analyzed--maybe you were asked
    this before I got here--but have you analyzed the impact of
    this? We know we upped the Marine Corps, we surged some for
    this sustained combat you've been involved in, really for a
    decade, more than a decade. Can you go to 175,000 marines and
    still be within the budget, still have some procurement, and be
    able to meet the responsibilities of the force?
        General Paxton. Senator, we did discuss this briefly a
    little tangentially prior to your getting here, sir. We have
    done fairly exhaustive studies about the size and shape of the
    Marine Corps, trying to keep it ready and responsive as our
    Nation needs, most ready when the Nation is least ready, and to
    try and keep that balance between aviation, ground, and
    logistics.
        The optimal Marine Corps would be 186,800, sir. Under BCA
    we believe that the only way we can keep it balanced and ready,
    and that the next plateau would be about 175,000 marines, sir.
    There is risk----
        Senator Sessions. Where were you, what number, do you
    recall, before September 11?
        General Paxton. Sir, on September 10 we were about 185,000
    marines, sir. We knew, thanks to Congress, congressional
    support, when we went to 202,000 marines, that enabled us to do
    what we needed to do in a counterinsurgency environment in
    Afghanistan and Iraq. We knew that that would be fiscally
    unsustainable and we'd have to come back down. So prior to
    sequestration, we started to look at how we reshape as we come
    down, sir.
        Senator Sessions. Now, the Secretary smiled a little bit
    when I said you laid out these numbers. I know you have a
    responsibility and you lay out the worst-case scenario. It may
    not have to be quite so bad. I think he understood what I was
    saying, because he doesn't want to be pollyannaish about trying
    to meet these numbers. But I'm hopeful that that may not be so
    if you manage well. You may be able to get above 175,000 even
    at this level.
        We were promised massive civilian furloughs that didn't
    occur. A few did, but not many, so I'm hopeful. We're going to
    have to get to the bottom of it. That's all I'm telling you.
    We're going to have to have honest reporting on this number and
    Congress can't just keep breaking the budget we agreed to. We
    just can't keep doing this every year. Doctors, they want to
    break the budget to have the doctors. Unemployment insurance,
    they want to do it for that. DOD wants to do it for this.
    Preschool education, they want to do it for that.
        All of this--at some point we have to adhere to the numbers
    we have. Are you aware that interest on the debt was $211
    billion last year, $233 billion, and it's going, according to
    the Congressional Budget Office, to $880 billion 10 years from
    today? $600 billion increase in annual interest payment, which
    is more than the defense budget. You just can't keep borrowing
    and spending. We have a serious financial problem. I'm just
    saying that to my colleagues, who aren't here to hear it.
        Senator King. I am, and I'm listening.
        Senator Sessions. Good. Good for you. I know you managed
    your State well and dealt with the realities of it.
        One more thing. Is my time up? Yes. I'll submit for the
    record a question about the Joint High Speed Vessel (JHSV). I
    believe if you can give me a yes or no: Do you think that has
    potential to play a larger role, General Glueck?
        General Glueck. Sir, the JHSV is going to be a force
    multiplier for us. I used to command the Third Marine
    Expeditionary Force out in Okinawa and we had a similar
    capability in the Western Pacific Express. That brought us the
    capability of carrying over 900 marines and you can carry 20 C-
    17 loads worth of equipment.
        I see that the current fleet that we're developing today
    down at Austal--and I've had a chance to go down and walk the
    decks and see the capability that exists today--it's going to
    be a gamechanger for us.
        Senator Sessions. That's good to hear because it's
    relatively inexpensive. It's under $300 million, whereas--$193
    million, less than $200 million, and compared to $2 billion
    ships--if it can be a force multiplier at that cost, I think it
    has maybe a role, an expanded role to play in the future.
        General Glueck. We look at it to be a critical connector
    for us. In today's environment, you have amphibious ships and
    you have maritime prepositioned ships, and they're going to
    come together at the sea base. A connector like the JHSV would
    be able to offload equipment and personnel and be able to
    change the load, and that could be our high-speed connector to
    get us to the shore.
        Senator Sessions. I'm hearing good reports about its value.
    Thank you for that and I will submit a question for the record.
        Senator King, Mr. Chairman, I turn it over to you.
        Senator King [presiding]. Thank you, sir.
        Gentlemen, I want to apologize. If the Marine Corps was run
    on the same logistics and scheduling system as we do around
    here, you'd still be fighting the War of 1812. There's a vote
    on, a rather important one, so that's created this back and
    forth in the subcommittee.
        General Paxton, I'm always interested in lessons learned
    and I know in your business you do after-action assessments.
    What have we learned from the EFV issue, cancellation, that we
    are using in the developing of the ACV? In other words, are we
    ahead of where we were? Can we avoid some of the mistakes that
    were made in the development of that earlier system? How does
    it look now for the timely and cost-effective development of
    the ACV?
        General Paxton. Thank you, Senator King. I'd like to assure
    you and fellow members of the subcommittee that we have indeed
    captured the lessons learned, both with the AAAV and the EFV,
    to make sure that the mistakes that were made are not repeated.
        I started to articulate this for the subcommittee earlier
    and I'll turn it over to General Glueck as the concept
    developer who is actually in charge of the program now. But we
    did a rather exhaustive 10-month study of, first off, the
    requirement, the ship-to-shore requirement that drove the
    actual procurement and the process; number two, the actual non-
    development, on-the-shelf capabilities that exist around the
    country; and then number three, is where the delta was for
    things that we thought we needed or wanted to have.
        We took a look at what we called the Four Big Areas, which
    are: lethality, troop capacity, direct fire protection, and
    indirect fire protection. Then we tried to balance those
    requirements against affordability and against the novel game-
    changing concept of, can we get high water speed, which is what
    we were trying to do originally.
        The existing AAV is, sir, 40-years-old for the vehicle and
    50-years-old for the technology. We had about 64 different
    permutations and combinations of the costs and the risks and
    the capability. We did things like Monte Carlo analysis and we
    brought in folks from industry, best of industry, best of
    government, to take a look at this for the better part of 10
    months, sir.
        We have concluded that high water speed is capable,
    technologically capable. In order to get the things that we
    need for troop capacity, vehicle protection, and remote weapons
    systems, it will probably be unaffordable in the current--
    certainly in the current environment.
        Senator King. When we say ``high water speed,'' what are we
    talking about?
        General Paxton. Sir, right now the vehicles go 4- to 6-
    miles per hour (MPH). We'd like to get them up certainly into
    the teens, and if you could get 18 to 21 MPH where you could
    get them up on plane--the requirement issue, sir, is that in
    order to get ship-to-shore you have both a 12-hour tidal change
    period and then the roughly 12-hour period of darkness. Whether
    it's a humanitarian assistance disaster relief or whether it's
    a forcible entry operation, what we're trying to do is build up
    that combat power ashore as quickly as we can within one of
    those tidal periods or within one period of darkness.
        Senator King. You determined that the high speed capability
    was inconsistent with the other values you were trying to
    achieve?
        General Paxton. Not inconsistent, sir, and certainly
    desirable. But unfortunately, when you put the triangle there
    it became unaffordable, again particularly in the sequestered
    environment.
        What we have done, sir, is keep the overall requirement
    there, but then we tried to do what we call a triage, where we
    would take the AAV and see what kind of modernization and
    upgrades we could do with it, then we would take a look at non-
    development, off-the-shelf technology that indeed may not be
    what we call self-deployable but can actually swim and have
    better speeds than what we have now, at the same time keeping a
    hard look at what the future technologies would be.
        I see General Glueck there, so he can work with you and
    tell you how we balanced the numbers on the time lines to try
    and keep this as an affordable program and fill in the gaps
    that we need operationally.
        Senator King. Where are we in the development stage now?
    When do we expect to see a product?
        General Glueck. Which product would we be talking about?
        Senator King. The ACV.
        General Glueck. The ACV. Right now there are four
    contractors that have current models that we've actually driven
    in. I took the Commandant out to the Nevada Test Facility out
    there. We rode in every combat vehicle we have within the
    inventory.
        Senator King. How do you test an amphibious vehicle in
    Nevada? [Laughter.]
        General Glueck. For their shore capabilities.
        Senator King. I'm just teasing. [Laughter.]
        General Glueck. The shore capability.
        We drove in all four of these ACVs that'll be probably in
    competition, that are production models. The ride and
    performance was far superior, because we actually had one of
    the old EFVs out there. When you rode in that, the tracked
    vehicle, it was like night and day, the difference.
        Senator King. If they have prototypes, that means once the
    decision is made, the time to delivery shouldn't be that long.
        General Glueck. Yes, sir. We're looking for a streamlined
    delivery of the process that's out there, because we've already
    done a little bit of work on the requirements side earlier with
    the MPC program. Essentially our phase one of the program would
    be to buy that technology as it exists today.
        We looked at if we can stay on track and with the current
    process, that we should be able to have an IOC about by 2020.
        Senator King. As you have developed this, I assume that
    part of the specification was improvised explosive device-
    resistant; is that the case?
        General Glueck. That's correct, sir.
        Senator King. Because that's going to be something we're
    going to deal with practically everywhere, I'm guessing.
        General Glueck. Yes, sir. The previous EFV was very limited
    in the force protection on that side because you had to give up
    weight, weight for speed on the surface of the water. It was
    not as well protected. It was less than 1X. The current fleet
    of vehicles that we're talking about, of the four that we rode,
    the least was 1X and then the other three were over 2X, up to
    2.8X, as far as protection. They're far more protective. But
    they're also far more survivable to a blast.
        Senator King. Now I understand that this is the ACV, the
    vehicle that would be used on both land and on the water. But
    there is also a separate vehicle for connector. Where are we on
    that project?
        General Glueck. As you look at it, we have the AAV fleet
    today, which is about 1,062, and that was to be able to move 12
    battalions worth of lift. The plan right now is that we will go
    ahead and do a survivability upgrade on about 392 of those
    vehicles. That will be able to give us four battalions worth of
    lift, be able to meet our Marine Corps brigade forcible entry
    requirement, and also meet the requirements for all our
    deploying MEUs that are going to be the crisis response forces.
        That will be a bridge. At the same time, we will go ahead
    and develop the ACV phase one that we talked about there, that
    would be a production line variant, whoever wins the contract,
    that they would set up, and we would buy a limited number of
    about 200. That would be the vehicles, essentially, probably 90
    percent of the vehicle that we've already seen today.
        Then 1.2 of that program then would be to buy the rest of
    the vehicles to be able to give us the full additional six
    battalions worth of lift. So you would have the ability to lift
    10 infantry battalions. Four of them would be in the AAVs that
    are going to be upgraded and then the rest would be in the
    ACVs.
        Now for the future, what we wanted to do as phase two was
    to continue to do some research and development on the combat
    vehicle, the high water speed vehicle, to see if there's any
    breakthroughs, if we can come up with a new engine or if
    there's something else that they can do to give us that high
    water speed.
        In lieu of that, we're also going to look at a research and
    development effort to focus on connectors, because we can get
    high water speed through the series of connectors. Currently,
    we have the Landing Craft Air Cushion and we have the Landing
    Craft Utility, but they're legacy systems. They're being
    upgraded, but they're going to give us marginal increases in
    performance. What we're looking for is something more along the
    lines of the JHSV, for example, or another connector similar to
    that, that's going to be able to give us probably 25 to 35
    knots over the water, to be able to move; take our ACVs; we can
    do an at-sea integration between the grey hulls and the JHSV,
    put those on there, and then they'd be able to actually launch
    those into the surf closer in to shore.
        Senator King. We've been talking for my whole series of
    questions about the traditional Marine Corps mission of
    amphibious assault. Yet, Afghanistan was a full-blown ground
    situation. What's your strategic thinking about what you need
    to be prepared for? Do you need to be prepared for both? Where
    do you see the Marine Corps demands of the future? Is it back
    to amphibious or are you going to have to also think about a
    10-year ground war?
        General Glueck. I don't know if you know General Wilhelm,
    retired. He told me that it's like going back to the future
    almost, getting back to our amphibious roots, being our
    Nation's premier crisis response force. As we focus in our
    Expeditionary Force 21 concept, as we look at being that
    expeditionary force in readiness, we're focused on being that
    middleweight fighter. That means you can box up and you can box
    down. But to be that middleweight capability, to provide that
    immediate crisis response, so you have the right force to the
    right place at the right time. That doesn't mean that you can't
    box up in class and go ahead and conduct operations ashore
    alongside with our Army brethren.
        Senator King. General Paxton, any thoughts on that?
        General Paxton. No, sir. I agree with General Glueck. We
    have been since 1952, by congressional mandate, the Nation's
    crisis response force. We are tasked to be most ready when the
    Nation is least ready. Given the amount of space around the
    world that's in the littorals, that you have to have access
    from the sea, you need assured access, and you need access to
    the global commons, we do believe that we need to go back and
    be more amphibious and more expeditionary.
        We've been proud and successful at what we've done for the
    last 12 years in Iraq and Afghanistan but we're trying to
    refocus on the capability that the Nation needs so that we can
    do assured access, power projection, and safeguard our way of
    life around the world, sir.
        Senator King. I'm going to turn it over to Senator Kaine in
    a minute. But I'm delighted that you're working on the ACV and
    that it's moving rapidly. Senator Inhofe, at most of our
    general hearings has a chart of time from concept to delivery,
    and it's getting longer all the time. 23 years is, I think, the
    average now in some of the forces. To the extent that can be
    shortened, I think that's to everybody's benefit.
        It sounds like you think you'll be ready in 2020?
        General Paxton. Yes, sir. As General Glueck said earlier,
    what we have done is the concepts and the state of technology
    in wheeled vehicles have surpassed that of tracked vehicles
    over the last 12 years, so we've gone back to try and
    capitalize on that, so that this interim solution for the ACV
    will actually be non-developmental. It will be off-the-shelf
    technology that surpasses what we have in the AAV. That's a
    good use for the taxpayers' dollars, sir.
        Senator King. That's great. This isn't an admonition to
    you, but I'll share this to you because you can use it on your
    folks. When I was Governor of Maine people would come and say:
    ``that'll take 2 years, or that'll take 3 years.'' I always
    reminded them that Eisenhower retook Europe in 9 months. I
    think that's a good standard for us.
        Gentlemen, thank you very much.
        Senator Kaine.
        Senator Kaine. No, thank you.
        Senator King. Oh, you're all set? Okay.
        The record is going to be held open until 5 p.m. on
    Thursday. There will be additional questions submitted for the
    record. If there are no other questions, the hearing is
    adjourned. Thank you very much, gentlemen.
        [Whereupon, at 10:27 a.m., the subcommittee adjourned.]

        [Questions for the record with answers supplied follow:]
                    Questions Submitted by Senator Jack Reed
             marine corps support modules for littoral combat ships
        1. Senator Reed. General Paxton, in the past, the Marine Corps has
    expressed interest in developing and fielding some module for the
    Littoral Combat Ship (LCS) that would support Marine Corps amphibious
    missions. Is there any update of any analysis or conceptualization of
    the attributes you would want to achieve in an LCS module for Marine
    Corps amphibious missions?
        General Paxton. There have been discussions about what we call a
    Marine Module for LCS and there are potential applications that would
    require further analysis. The attributes the Marine Corps would want to
    achieve in an LCS model are: a larger mission bay, a flight deck with
    increased load strength to support the CH-53, and the capability for
    at-sea offload. Neither the LCS-1 nor 2 have these attributes. The
    Marine Corps continues to explore LCS options.

        2. Senator Reed. General Glueck, has the Navy conducted any further
    work on an amphibious warfare mission module or other mission modules
    that might address other warfare areas?
        General Glueck. There have been discussions, but potential
    application would require further analysis. Marine Corps operational
    requirements were not taken into consideration during LCS development
    since it was primarily designed to support three Navy missions in the
    littorals: mine warfare, anti-submarine warfare, and surface warfare.

                       armored vehicle mix and quantities
        3. Senator Reed. General Paxton and General Glueck, the Marine
    Corps argues that without a self-deploying Amphibious Combat Vehicle
    (ACV), a landing force cannot overcome an enemy defense of the
    shoreline. A landing force using the Landing Craft Air Cushion (LCAC)
    is only capable of an administrative off-load on the beach. However,
    armored vehicles like the Marine Personnel Carrier (MPC), tanks,
    artillery, light armored vehicles, and other combat support systems
    require a ship-to-shore connector like the LCAC to get there. Adding a
    new MPC system to the non-amphibious tactical vehicle mix increases
    demand on the existing LCAC fleet and has implications for the rapid
    buildup of combat power ashore. What is the Marine Corps' assessment of
    the capabilities and mix of its amphibious, combat, and tactical
    vehicles, and the ship-to-shore lift required to transport them to
    support operations ashore?
        General Paxton and General Glueck. The Marine Corps' Ground Combat
    and Tactical Vehicle Strategy provides the basis for planning,
    programming, and budgeting to provide balanced maneuver and mobility
    capabilities to the Marine Corps' Operating Forces. We remain committed
    to the process and continually assess the requirements of the force as
    we refine the platforms that will be available. The Marine Corps' way
    ahead is to develop and procure Joint Light Tactical Vehicle (JLTV) in
    conjunction with Assault Amphibious Vehicle (AAV) modernization, refine
    AAV upgrade and ACV Phase I acquisition objectives, and fund a modern
    armored amphibious wheeled vehicle as a complementary capability to an
    upgraded AAV. As ACV characteristics and capabilities are solidified,
    they will have to be integrated within our connector strategy. In the
    near-term, marines will transit from amphibious shipping and leverage
    assets such as the Mobile Landing Platform (MLP), large, medium-speed,
    roll-on/roll-off ships (LMSR), and T-AKE to integrate marines and
    equipment at sea. Marines will transit towards objectives ashore using
    self-deploying AAVs, the ACV paired with ship-to-shore surface
    connectors, and vertical connectors like the MV-22 and CH-53E/K they
    will transit towards the objectives ashore. Via connectors like the
    LCAC and its replacement the ship-to-shore connector (SSC), the Landing
    Craft Utility (LCU) and its replacement the Surface Connector (X), as
    well as intra-theater connectors like the Joint High Speed Vehicle
    (JHSV); the Marine Corps will transport combat power in the form of
    heavy combat equipment, large numbers of marines and sustainment across
    the shore. In the future, we expect forward and rapidly deploying
    forces will begin operations from increasing distances offshore.
    Vertical connectors will move a landing force rapidly from over the
    horizon to objectives hundreds of miles inland. Amphibious Warships and
    Maritime Sealift Command heavy lift assets will marry at the seabase
    and conduct at sea transfer. Using high speed connectors marines will
    rapidly close this distance from the seabase towards the objective.
    These connectors will conduct in-stream offload in the vicinity of the
    beach and the marines will debark ashore at a location of our choosing,
    exploiting the seams of the defense and continuing inland towards the
    objective.

        4. Senator Reed. General Paxton and General Glueck, how does the
    Marine Corps propose to manage this risk in deciding on the size, mix,
    and affordability of its amphibious and ground vehicle fleets?
        General Paxton and General Glueck. We are managing risk by focusing
    on the most pressing priorities, by sequencing the procurement of those
    priorities and by pursuing mature, low risk technological solutions.

        5. Senator Reed. General Paxton and General Glueck, the Marine
    Corps emphasizes the tactical importance of coherent rifle squads
    moving and maneuvering as a single unit. This objective has driven the
    size requirements for amphibious vehicles--that is, the capacity to
    internally transport a complete rifle squad. Is the Marine Corps
    changing its views on keeping rifle squads together?
        General Paxton and General Glueck. No. The previous design of the
    Expeditionary Fighting Vehicle was based on a requirement to carry a
    reinforced rifle squad (17 marines) from ship to inland objectives.
    This requirement achieved squad integrity while minimizing the number
    of vehicles required. Our objective remains the capability to carry a
    squad in a single vehicle; however, splitting the squad and
    reinforcements across two vehicles enables us to capitalize on non-
    developmental designs and we have determined through analysis that the
    tactical dispersion afforded a split squad while mounted in vehicles
    actually increases the survivability of that squad.

        6. Senator Reed. General Paxton and General Glueck, is splitting
    squads now considered operationally beneficial rather than a drawback
    to be avoided wherever possible?
        General Paxton and General Glueck. Tactical dispersion is not a
    drawback and has never been viewed as detrimental. Tactical dispersion
    can increase survivability, lethality, and employment flexibility.
    Maintaining squad integrity, while mounted in vehicles, can simplify
    tactical employment, command, and control and can reduce the number of
    vehicles required; however, vehicles must still be planned for support
    elements that are normally employed with rifle squads.
                                     ______

                    Question Submitted by Senator Tim Kaine
                       joint base little creek-fort story
        7. Senator Kaine. General Paxton, the Navy's force laydown program
    included a decrease from 18 to 6 ships between fiscal year 2013 and
    fiscal year 2020. What is the plan for Little Creek to maintain its
    prominence as a hub for Navy and Marine Corps expeditionary warfare?
        General Paxton. The Marine Corps will continue to coordinate with
    the Navy to ensure that we maintain a focus on our expeditionary
    warfare capability. The Marine Corps units stationed aboard Joint Base
    Little Creek-Fort Story are an integral part of this team. Little Creek
    will continue to be the home of three training ships, as many as three
    Joint High Speed Vessels (one long-term), one salvage ship, and several
    Mark VI patrol boats. The Navy is currently coordinating with the Coast
    Guard to permanently base two Medium Endurance Cutters at Little Creek
    in 2014 and 2015. Joint Expeditionary Base Little Creek-Fort Story
    currently has approximately 19,500 personnel (Active/Reserve military
    and Department of Defense (DOD) civilian and contractor). As a result
    of Navy homeport changes through 2019 and with the additional 2 Coast
    Guard cutters with a crew of 77, the base population (Active/Reserve
    military and DOD civilian and contractor) at Joint Expeditionary Base
    Little Creek-Fort Story is projected to be about 17,450 in 2019.
                                     ______

                  Questions Submitted by Senator Kelly Ayotte
                              forgone investments
        8. Senator Ayotte. General Paxton and General Glueck, in your
    prepared joint statement, you state that the ``Marine Corps has forgone
    some investments to maintain near-term readiness.'' What investments
    has the Marine Corps forgone to maintain near-term readiness?
        General Paxton and General Glueck. With the smallest modernization
    budget in DOD, 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 Marine Corps, but these cannot overcome the vulnerabilities
    created by our rapidly aging fleet of vehicles, systems, and aircraft.
    Long-term shortfalls in modernization will have a detrimental impact on
    readiness and, 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.

        9. Senator Ayotte. General Paxton and General Glueck, the Navy's
    force laydown program included a decrease from 18 to 6 ships. What is
    the readiness impact of not making those investments?
        General Paxton and General Glueck. The Marine Corps will continue
    to coordinate with the Navy to ensure that we maintain a focus on our
    expeditionary warfare capability. The Marine Corps units stationed
    aboard Joint Base Little Creek-Fort Story are an integral part of this
    team. Little Creek will continue to be the home of three training
    ships, as many as three Joint High Speed Vessels (one long-term), one
    salvage ship, and several Mark VI patrol boats. The Navy is currently
    coordinating with the Coast Guard to permanently base two Medium
    Endurance Cutters at Little Creek in 2014 and 2015. Joint Expeditionary
    Base Little Creek-Fort Story currently has approximately 19,500
    personnel (Active/Reserve military and DOD civilian and contractor). As
    a result of Navy homeport changes through 2019 and with the additional
    2 Coast Guard cutters with a crew of 77, the base population (Active/
    Reserve military and DOD civilian and contractor) at Joint
    Expeditionary Base Little Creek-Fort Story is projected to be about
    17,450 in 2019.

                     less ready, temporarily tiered status
        10. Senator Ayotte. General Paxton and General Glueck, in your
    prepared joint statement, you state that, ``As we continue to face the
    possibility of further budget reductions under sequestration, we may be
    forced into adopting some variation of a less ready, temporarily tiered
    status within the next few years in order to make critical investments
    that are being deferred today.'' Can you describe in more detail what
    you mean by a ``less ready, temporarily tiered status''?
        General Paxton and General Glueck. It will manifest itself in fewer
    Active component marines, less investment in training and
    infrastructure, and forgoing modernization. If forced to continue along
    this path, we will risk a force that is tiered in its capabilities.
    Forces rotated or deployed forward will leave the continental United
    States best-dressed, but most of those remaining back at their home
    base or station will be degraded. In aggregate, the force will likely
    be one that is less well-trained, equipped, and ready for war than what
    the American people have come to expect from their All-Volunteer
    military.

        11. Senator Ayotte. General Paxton and General Glueck, how can
    Congress help you avoid making these tradeoffs?
        General Paxton and General Glueck. During this first year of
    sequestration, the Marine Corps was able to realign funds to maintain
    the near-term readiness of our forward deployed forces and those units
    preparing to deploy. If further budget reductions under sequestration
    return in 2016, we need Congress to intervene and provide us the
    flexibility to determine where those reductions are made rather than
    the mandatory across the board cuts that the law requires.

                    modernization priorities and shortfalls
        12. Senator Ayotte. General Paxton and General Glueck, what are the
    Marine Corps' leading modernization priorities?
        General Paxton and General Glueck. The Marine Corps has several
    critical modernization priorities in the fiscal year 2015 budget. These
    priorities are balanced between our ground and aviation programs to
    continue to enhance the flexibility and capability of the Marine Corps
    Air-Ground Task Force. Our key ground programs are the ACV, JLTV, and
    enhancements to our aging AAV fleet. These modernization efforts
    coupled with Navy investments in enhanced surface connectors are key
    enablers of the Marine Corps' ability to remain an elite expeditionary
    force. Our aviation priorities are the F-35B, the MV-22, and the CH-
    53K. The combination of capabilities that these aviation and ground
    programs provide our Service, and our Nation, are critical to the way
    that the Marine Corps envisions being employed into the 21st century.

        13. Senator Ayotte. General Paxton and General Glueck, does the
    fiscal year 2015 budget request adequately resource your modernization
    priorities?
        General Paxton and General Glueck. The fiscal year 2015 budget
    protects funding for these key priorities, at the cost to other
    programs and investments in infrastructure. With the smallest
    modernization budget in DOD, 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 Marine Corps, but these cannot overcome
    the vulnerabilities created by our rapidly aging fleet of vehicles,
    systems, and aircraft. Long-term shortfalls in modernization will have
    a detrimental impact on readiness and, 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.

        14. Senator Ayotte. General Paxton and General Glueck, how will
    sequestration in fiscal year 2016 and beyond impact your modernization
    priorities?
        General Paxton and General Glueck. A fully sequestered budget in
    fiscal year 2016 will cause the Marine Corps to preserve investments in
    these key modernization priorities at a greater cost to other
    investments and programs. Under sequestration we will begin to see
    impacts on these major acquisition programs, for example the CH-53K
    program could see a delay in IOC by 1 year and procurement of 10
    aircraft deferred outside the Future Years Defense Program. The already
    difficult trades being made today will only increase in quantity and
    severity to preserve funding for key priorities; this includes
    significant costs to near-term readiness levels.

                                     reset
        15. Senator Ayotte. General Paxton and General Glueck, in your
    prepared joint statement, you say that the Marine Corps needs $1
    billion to reset your ground equipment as we transition in Afghanistan.
    You go on to say that the Marine Corps will need ``at least 24 months''
    of reset funding from when the last pieces of equipment return from
    Afghanistan. What specifically will this reset funding be used for?
        General Paxton and General Glueck. Reset funding will be used to
    repair, recapitalize, or replace ground combat equipment deployed in
    support of Operation Enduring Freedom (OEF) and to posture the Marine
    Corps for future missions. Recognizing the magnitude and importance of
    the reset effort, we developed an OEF Reset Strategy in January 2012
    that represents an institutional commitment to addressing the
    complexities of returning our equipment from Afghanistan and restoring
    those capabilities through depot rebuild and replacement, if required.
    This comprehensive strategy ensures that our retrograde and reset
    actions are informed by equipment requirements of the post-OEF force,
    total life cycle management strategies, acquisition and modernization
    plans, and accurate serviceability assessments, while prioritizing the
    divestiture of equipment that is either obsolete or excess to our
    future needs.

        16. Senator Ayotte. General Paxton and General Glueck, what is the
    readiness impact if Congress does not provide this reset funding?
        General Paxton and General Glueck. Due to the generosity and
    support of Congress, the Marine Corps is over 45 percent complete with
    the reset of ground combat equipment returned from Afghanistan.
    However, a significant amount of reset work remains to be done through
    an effort that is expected to continue through fiscal year 2016. In the
    absence of funding needed to repair, recapitalize, and replace
    remaining ground combat equipment, the Marine Corps would not achieve
    reconstitution of the force by fiscal year 2017 and would likely
    confront readiness challenges in the operating forces as equipment
    would not be available for issue from our depots. Currently, over half
    of nondeployed units have equipment shortfalls resulting from
    longstanding Commandant of the Marine Corps guidance to fully equip
    forward deployed forces. This imbalance of readiness across the Marine
    Corps would be further exacerbated if reset funding is not provided.
    Nondeployed forces serve as a shock absorber, providing a timely
    response to unexpected crises or large-scale contingencies. If those
    units are not fully equipped, it could result in a delayed response to
    resolve a contingency or execute operations abroad.

        17. Senator Ayotte. General Paxton and General Glueck, what are the
    risks if Congress does not fully fund reset?
        General Paxton and General Glueck. The Marine Corps requires
    continued funding to complete the reset of ground combat equipment,
    reconstitute home station units, and modernize the force. A reduction
    in reset funding would ultimately delay completion of those critical
    readiness-generating activities needed to reconstitute the force in
    support of forward presence and potential crisis response missions.
    Reduced reset funding would create a backlog of equipment at our
    organic depot facilities, delay the repair of equipment, and further
    perpetuate the imbalance of equipment readiness levels that exists
    between our deployed and nondeployed forces. Reduced reset funding
    would also risk further delay in essential elements of equipment
    modernization resulting from our priority to preserve current
    readiness.

                           amphibious combat vehicle
        18. Senator Ayotte. General Paxton and General Glueck, the Marine
    Corps fiscal year 2015 procurement request is $983.3 million, down from
    $1.2 billion fiscal year 2014 enacted levels. This is a 28 percent
    reduction. The ACV is a high priority. The Marine Corps has stopped and
    started this program several times. Do you believe this program is on
    track?
        General Paxton and General Glueck. Yes, we believe the program is
    on track. Given the uncertainty of the fiscal picture, we were forced
    to defund MPC in order to protect near-term readiness; however, the
    Marine Corps still retained the MPC as a validated, but unfunded
    requirement inside the Ground Combat and Tactical Vehicle portfolio. We
    are leveraging the previously developed MPC requirements and
    engineering, and government evaluation of vendor prototypes to
    streamline the acquisition process. The draft requirements for the MPC
    are the capability basis for ACV Phase I. These requirements account
    for lessons learned over the past 3 years of MPC and ACV capability
    development and the emerging reprioritized way ahead for AAV
    modernization.

                  joint light tactical wheeled vehicle program
        19. Senator Ayotte. General Paxton and General Glueck, what is your
    assessment of the JLTV program?
        General Paxton and General Glueck. The JLTV is needed to provide
    the Corps with modern expeditionary light combat and tactical mobility
    while increasing the force protection and survivability of that class
    of vehicles. Working closely with the Army as the lead Service, the
    Marine Corps is an equal partner in developing this key system in the
    tactical wheeled vehicle fleet of the joint force. We initially plan to
    procure 5,500 JLTVs to meet the most critical need in the light combat
    mission roles.

        20. Senator Ayotte. General Paxton and General Glueck, how
    important is the JLTV to the Marine Corps?
        General Paxton and General Glueck. The JLTV is needed to provide
    the Corps with modern expeditionary light combat and tactical mobility
    while increasing the force protection and survivability of that class
    of vehicles. We initially plan to procure 5,500 JLTVs to meet the most
    critical need in the light combat mission roles.

        21. Senator Ayotte. General Paxton and General Glueck, what is the
    level of collaboration on the program with the Army?
        General Paxton and General Glueck. We remain fully partnered with
    the Army. 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 and the
    research, development, and acquisition of technical solutions to meet
    the program requirements.

        22. Senator Ayotte. General Paxton and General Glueck, are the Army
    and Marine Corps collaborating sufficiently to improve efficiency and
    achieve economies of scale?
        General Paxton and General Glueck. Yes. 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 baseline vehicles.

                    overseas contingency operations funding
        23. Senator Ayotte. General Paxton and General Glueck, overall
    Marine Corps operations and maintenance (O&M) accounts are up $531.2
    million over fiscal year 2014 enacted levels. However, depot
    maintenance is only funded at 83 percent of the requirement and reset
    requirements have not been addressed in Overseas Contingency Operations
    (OCO). I understand your reset requirement and some of your depot
    maintenance requirements are funded through OCO. What is the impact on
    readiness if these requirements are not met in OCO?
        General Paxton and General Glueck. The fiscal year 2015 growth in
    O&M, Marine Corps of $531.2 million reflects the baseline restoration
    of the $700 million transferred to OCO in the 2014 Consolidated
    Appropriations Act and $168.8 million of programmatic reductions.
    Approximately 77 percent of equipment has retrograded from theater;
    however, only approximately 40 percent has been reset and returned to
    the operating forces to support home station readiness or redeployed in
    support of steady state operations. As such, the Marine Corps will
    continue to require OCO for the next several years to complete
    retrograde and reset requirements after more than a decade of sustained
    combat operations. In the absence of reset funding to repair,
    recapitalize, and replace ground combat equipment, the Marine Corps
    would experience a gradual but dangerous decline in readiness.
    Currently, over half of nondeployed units have equipment shortfalls as
    a result of the priority to fully support forward presence and crisis
    response. In the short-term, the absence of reset funding would further
    degrade nondeployed readiness in order to fully equip forward deployed
    forces. Nondeployed forces serve as a shock absorber, providing a
    timely response to unexpected crises or large-scale contingencies. If
    those units are not ready, it could cause a delay in our response to
    contingencies or combat operations. Ignoring the impact of funding
    deployed units at the expense of readiness of nondeployed units for any
    sustained period will adversely affect the force in the long-term, and
    create unacceptable risk for national defense.

        24. Senator Ayotte. General Paxton and General Glueck, can the
    Marine Corps absorb that expense in your base budget?
        General Paxton and General Glueck. The Marine Corps cannot absorb
    estimated reset and retrograde liabilities within our baseline budget
    levels. The Marine Corps estimates the remaining ground equipment reset
    liability for fiscal year 2015 and beyond to be approximately $1
    billion. In addition, the Marine Corps estimates the remaining
    retrograde requirement for fiscal year 2015 and beyond to be between
    $150 million and $250 million, based on the anticipated drawdown in
    Afghanistan and the available modes of transportation back to the
    continental United States.

                          amphibious ship requirement
        25. Senator Ayotte. General Paxton and General Glueck, I understand
    that the Marine Corps amphibious ship requirement is 38. The current
    budget includes 30 at the end of fiscal year 2015 and 33 by the end of
    fiscal year 2019. What is the readiness impact or opportunity costs of
    not meeting the requirement of 38?
        General Paxton and General Glueck. The Navy's investment in
    amphibious warships represents critical investments that enable naval
    forces to execute their assigned forward presence and crisis response
    missions. The Chief of Naval Operations and Commandant of the Marine
    Corps have determined that the force structure required to support a
    2.0 Marine Expeditionary Brigade (MEB) Assault Echelon (AE) is 38
    amphibious warfare ships, as communicated to the House and Senate
    Appropriations Committees and the House and Senate Armed Services
    Committees by the Secretary of the Navy/Chief of Naval Operations/
    Commandant of the Marine Corps letter dated January 7, 2009. Given
    fiscal constraints, the Navy determined a minimum inventory of 33 total
    amphibious warfare ships, including 11 Amphibious Assault Ships LHD/
    LHA(R), 11 LPD 17, and 11 LSD 41/49s; this represents the limit of
    acceptable risk in meeting the 38-ship requirement for the AE in a 2
    MEB forcible entry operation. The Long Range Plan for Construction of
    Naval Vessels for 2015 shows the Navy achieving 33 amphibious ships by
    fiscal year 2019, the preferred mix of 11/11/11 isn't reached until
    fiscal year 2025. This inventory provides only the minimum capacity for
    steady state Amphibious Ready Group/Marine Expeditionary Unit
    deployments and single-ship deployments for theater security
    cooperation activities. Furthermore, this inventory does not provide
    the capacity to support additional independent amphibious warship
    demands, such as maritime security operations. A reduction in capacity
    detracts from the ability of the Navy and the Marine Corps to
    accomplish forward presence and crisis response missions in today's
    exceptionally dynamic and uncertain operational environment. The cost
    of not meeting the requirement of 38 ships results in our Nation being
    less capable to rapidly respond to emerging crises.

        26. Senator Ayotte. General Paxton and General Glueck, what is the
    Marine Corps doing to mitigate this shortfall?
        General Paxton and General Glueck. In the short-term, we are
    accepting risk to aviation and vehicle lift. We may be able to further
    reduce the risk through temporary coordination of carrier tactical
    aviation or joint force air-support, and by delivering additional
    support vehicles via MLP and/or JHSV to support ground maneuver.
    Innovative approaches and employment models are being planned to
    mitigate some impacts to presence missions caused by early ship
    retirements. With increased investment in the capabilities of JHSV and
    MLP, some of the risk associated with missions in permissive
    environments may be reduced by increasing reliance on these platforms.
    These new ships can take on a potentially valuable role in security
    cooperation, humanitarian assistance, and disaster response, which
    could release amphibious warships to meet other global demand signals.
    Furthermore, intended follow-on assault support shipping could be
    utilized to reduce risk in lift capacity under certain scenarios and
    during specific phases of an operation.

     DEPARTMENT OF DEFENSE AUTHORIZATION OF APPROPRIATIONS FOR FISCAL YEAR
                   2015 AND THE FUTURE YEARS DEFENSE PROGRAM

                                  ----------

                            THURSDAY, APRIL 10, 2014

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

                           NAVY SHIPBUILDING PROGRAMS

        The subcommittee met, pursuant to notice, at 2:33 p.m. in
    room SR-222, Russell Senate Office Building, Senator Jack Reed
    (chairman of the subcommittee) presiding.
        Committee members present: Senators Reed, Shaheen,
    Blumenthal, Kaine, King, McCain, Sessions, and Wicker.

            OPENING STATEMENT OF SENATOR JACK REED, CHAIRMAN

        Senator Reed. The hearing will come to order. Let me
    welcome the witnesses and my colleagues this afternoon. We're
    honored to have the Honorable Sean J. Stackley, Assistant
    Secretary of the Navy for Research, Development, and
    Acquisition; Vice Admiral William H. Hilarides, USN, Commander,
    Navy Sea Systems Command; and Vice Admiral Joseph P. Mulloy,
    USN, Deputy Chief of Naval Operations for Integration of
    Capabilities and Resources. Thank you, gentlemen.
        We are grateful to each of you for your service to the
    Nation and your truly professional service to our Navy and to
    our Nation, but also we're grateful for the professional
    service of the men and women under your command. Please thank
    them for us. We also pay tribute to their families because,
    obviously, they serve as well.
        I especially want to welcome Admiral Hilarides this
    afternoon because I believe this is your first opportunity to
    appear before the committee as Commander of the Naval Sea
    Systems Command. Welcome, Admiral.
        Today our witnesses face huge challenges as they strive to
    balance the need to support ongoing operations and sustain
    readiness with the need to modernize and keep the technological
    advantage that is so critical to military success. These
    challenges have been made particularly difficult by the
    spending caps imposed by the Budget Control Act (BCA), caps
    that were modestly relieved for fiscal year 2015 in the
    Bipartisan Budget Act (BBA) that we enacted in December.
    However, these caps are scheduled to resume in fiscal year 2016
    and beyond.
        These caps already seriously challenge our ability to meet
    our national security needs and have already forced all of the
    military departments to make painful tradeoffs. Unless modified
    for the years after fiscal year 2015, they will threaten our
    long-term national security interests.
        The Navy continues to face a number of critical issues as
    it tries to balance its modernization and procurement needs
    against the cost of current operations. Principally
    complicating these efforts this year to support current
    operations throughout the world is the specter of
    sequestration. The shipbuilding budget remains at a level where
    it will be difficult, if not impossible, to field the Navy that
    we believe we need. Sequestration in fiscal year 2016 and later
    will only exacerbate the shortfall that we anticipate.
        We need to understand how sequestration may complicate the
    Navy's job of maintaining current readiness while building the
    fleet of the future. With that in mind, a continuing focus of
    this subcommittee has been to see that we improve our
    acquisition stewardship and thereby ensure that we are getting
    good value for every shipbuilding dollar that we spend.
        We're pleased at the overall stability and performance and
    the Virginia-class submarine production level of two ships a
    year. I would note that in a former life Admiral Hilarides was
    the program executive officer in charge of the Virginia-class
    procurement. Thank you, sir. We also support the Navy's current
    efforts and continuing efforts to drive cost out of the Ohio
    replacement program (ORP). The strategic submarines will remain
    a vital leg of the nuclear triad for the foreseeable future.
    Establishing and achieving cost reduction goals on these Ohio-
    class and Virginia-class programs will yield significant
    stability to our Navy's submarine industrial base.
        There is one concern, among many, and that is that cuts in
    the National Nuclear Security Administration (NNSA), which is
    outside the scope of this subcommittee, in the Department of
    Energy (DOE), may have consequences for the ORP schedule. We
    need to hear about that this afternoon in terms of the impacts
    of the DOE budget on your operations.
        The aircraft carrier programs are another important area
    for discussion as well. We need to hear about the progress the
    Navy and the contractors are making to deliver USS Gerald R.
    Ford (CVN-78) within the cost cap we modified last year, what
    progress is being made on reducing the production costs of the
    USS John F. Kennedy (CVN-79), and later carriers.
        In addition, the Navy budget and the Future Years Defense
    Program (FYDP) will retire the USS George Washington rather
    than execute the refueling overhaul as planned last year. This
    would lead to a permanent reduction of the carrier force
    structure to 10 carriers and 9 air wings.
        Another topic that we have to address is the Littoral
    Combat Ship (LCS). Senator McCain delivered a very thoughtful,
    very eloquent speech last evening. I was particularly struck by
    one point he made that we designed many of our shipbuilding
    programs, not just LCS, with the notion of a permissive
    environment at sea and that is rapidly changing. I think in
    every shipbuilding program we have to factor that in, and he
    made that point very thoughtfully last evening.
        Last, we really have to assess where the Navy and the
    contractors stand on improving the overall cost, quality, and
    schedule performance of Navy shipbuilding programs, every
    shipbuilding program. We can always do better.
        When the subcommittee has met in the last few years, we've
    focused primarily on these programs, particularly programs with
    quality control and cost problems. It's never a pleasant
    situation. We received testimony from the Navy that you're
    aware of the problems, you're dealing with the problems, but we
    want to hear today the progress you've made and the progress
    you have yet to make in the future, because every dollar we're
    able to save through efficiencies in shipbuilding is a dollar
    we can use for operations and maintenance (O&M), and
    maintaining not only the fleet, but to maintain our national
    security.
        Thank you very much for what you've done. I don't have to
    remind everyone or anyone in this room that the fiscal
    environment is very difficult as we look forward to try to
    build the Navy that the Nation needs. We have to manage these
    programs in a way that we have the dollars necessary to build
    that fleet.
        I look forward to your testimony. At this point, I'd like
    to recognize Senator McCain.
        Senator McCain. Thank you, Mr. Chairman. Thank you for
    holding this hearing on the Navy's shipbuilding program and the
    President's budget request. I look forward to working with you
    to ensure that the subcommittee and our Nation have a clear
    understanding of the needs of our naval forces. I want to thank
    our witnesses and the men and women in the Navy and Marine
    Corps for their dedicated public service. I just will highlight
    a few issues that I look forward to discussing with the panel.
        At a time when the United States and our allies are being
    challenged by emerging powers and old rivals alike,
    insufficient resources and wasteful procurement policies
    threaten to put our Navy in a state of decline. Within the
    shipbuilding program, critical issues like quality control,
    cost containment, and survivability remain elusive. Even
    identifying operational requirements and validating ship
    designs before production, a common-sense practice, seems
    beyond the reach of the procurement system.
        I trust that our witnesses are prepared to address these
    issues today with the subcommittee and outline specific steps
    under way to ensure the Navy's shipbuilding programs are on the
    right course, particularly on the issue of cost containment.
        I'll skip a couple of paragraphs here in my statement and
    ask that my full statement be made part of the record.
        Recently, Admiral Jonathan W. Greenert, USN, Chief of Naval
    Operations (CNO), pointed out that the Navy would need a 450-
    ship fleet in order to meet the needs of combatant commanders.
    Just to sustain a 300-ship fleet, the Navy will need to buy 10
    ships per year with an average service life of 30 years. Last
    year's budget bought eight ships. This year's budget buys only
    seven. The Navy shipbuilding plan does not include enough
    annual funding to sustain its goal of a 306-ship fleet.
        Because of sequestration, as well as a lack of budget
    discipline, the Navy is having to resort to a gimmick under
    which it is laying up ships in a reduced operating status for
    up to 10 years and calling it a phased maintenance plan.
        Finally, regarding the LCS, last week the Government
    Accountability Office (GAO) released its annual weapons
    assessment, yet again raising concerns about this troubled
    program. I've spoken at length about the LCS, most recently on
    the Senate floor just yesterday. I'm glad to see that the
    program appears to be getting the level of attention it needs
    all the way up to Secretary of Defense Chuck Hagel. The
    Secretary is now proposing to cap LCS production at 32 ships.
    But as outlined in last year's National Defense Authorization
    Act (NDAA), unless the Navy meets required performance
    parameters by 2016, the procurement will end at 24 ships. I
    take great interest in this important project and look forward
    to your update on the status of the program.
        Thank you, Mr. Chairman.
        [The prepared statement of Senator McCain follows:]
                   Prepared Statement by Senator John McCain
        Mr. Chairman, thank you for holding this hearing on the Navy's
    shipbuilding programs in the President's budget request for fiscal year
    2015. I look forward to working with you to ensure that the committee
    and our Nation have a clear understanding of the needs of our naval
    forces.
        I want to thank our witnesses and the men and women of the U.S.
    Navy and Marine Corps for their dedicated public service. In the
    interest of time for questions, I will highlight a few issues that I
    look forward to discussing with the panel.
        At a time when the United States and its allies are being
    challenged by emerging powers and old rivals alike, insufficient
    resources and wasteful procurement policies threaten to put our Navy in
    a state of decline. Within the shipbuilding program, critical issues
    like quality-control, cost-containment, and survivability remain
    elusive. Even identifying operational requirements and validating ship
    designs before production--a common-sense practice--seem beyond the
    reach of the procurement system. I trust that our witnesses are
    prepared to address these issues today with the committee and outline
    specific steps underway to ensure the Navy's shipbuilding programs are
    on the right course--particularly on the issue of cost containment.
        With that said, there continues to be a discrepancy between the
    global threats facing our country and the President's apparent
    reluctance to take those threats into account in the budgets he has
    submitted to Congress. This inconsistency sends mixed messages to our
    allies, limits our strategic options both now and in the future, and
    signals a fundamental retreat from world affairs at a time when
    American leadership is needed most. Events across the Middle East,
    Africa, the East and South China Seas, and most recently in Ukraine
    have brought into sharp focus a reality the President seems unwilling
    to accept: threats to our security are not receding--they are on the
    rise. Drawing down our forces and defense spending might save dollars
    today, but they will likely jeopardize our security in the future. For
    this reason, the President's budget for defense spending for fiscal
    year 2015 is misguided.
        Moreover, the administration has not yet made its long-term
    shipbuilding plan clear. Whatever goals the President has for the Navy,
    they will be difficult to achieve if we continue indiscriminately
    slashing our national security budget. The course the President is
    charting will not only leave us with a smaller Navy but with a less
    capable one. We risk repeating failed budget-reduction strategies of
    our past. Additionally, the Navy seems to be placing too much trust in
    untested, unproven ship classes and weapon systems to replace legacy
    platforms. Those legacy platforms are being retired before their
    replacements can be fully tested, funded, and fielded.
        Recently, Admiral Greenert pointed out that the Navy would need a
    450-ship fleet in order to meet the needs of combatant commanders. Just
    to sustain a 300-ship fleet, the Navy will need to buy 10 ships per
    year, with an average service life of 30 years. Last year's budget
    bought eight ships: this year's budget buys only seven. The Navy's
    shipbuilding plan does not include enough annual funding to sustain its
    goal of a 306-ship fleet.
        Our combatant commanders are feeling the effect of limited
    resources just as our global competitors are ramping up their naval
    capabilities. Last month, U.S. Pacific Command Commander Admiral
    Locklear testified that anti-submarine requirements in his area of
    responsibility are not being met. How can our allies and our
    adversaries take the so-called pivot to the Pacific seriously, when we
    aren't even adequately resourcing the requirements of our combatant
    commanders? While the President has decided to shrink the submarine
    force, the Chinese are investing to grow theirs. They are also building
    aircraft carriers and developing a new ballistic missile that will
    continue to close the gap between our respective maritime capabilities.
        Further complicating our ability to sustain even a 300-ship Navy is
    the enormously expensive acquisition of a replacement for the aging
    Ohio-class ballistic missile submarine, the centerpiece of our naval
    nuclear deterrent. The Navy must come up with an affordable way to
    build the new Ohio. An expensive new Ohio could jeopardize the 300-ship
    goal by limiting funding for other naval procurements, weaken the
    Navy's nuclear deterrent--or both. The new Ohio will require annual
    spending of well over $6 billion per year. Without additional Navy
    procurement funding, the Ohio replacement will crowd out other ships,
    as well as other Navy and Marine Corps investment and readiness needs--
    greatly increasing the prospect of a hollow naval force.
        Because of sequestration as well as a lack of budget discipline,
    the Navy is having to resort to a gimmick under which it is laying up
    ships in a ``reduced operating status'' for up to 10 years and calling
    it a ``phased maintenance plan''. These ships would be stripped of
    their crews to free up funds, which would be used to repair the ships
    and extend their service life. This plan will make the pivot to the
    Pacific even more challenging.
        Finally, regarding the Littoral Combat Ship (LCS), last week the
    Government Accountability Office released its annual weapons
    assessment, yet again raising concerns about this troubled program. I
    have spoken at length about LCS--most recently on the Senate floor just
    yesterday. I am glad to see that the program appears to be getting the
    level of attention it needs, all the way up to the Secretary of
    Defense. The Secretary is proposing to cap LCS production at 32 ships.
    But, as outlined in last year's National Defense Authorization Act,
    unless the Navy meets required performance parameters by 2016, the
    procurement will end at 24 ships. I take great interest in this
    important project, and look forward to your update on the status of the
    program.
        The President's budget submission puts the Navy's global-presence
    mission in peril, and it's looking more and more likely to succumb to
    the same fate that has befallen the once-mighty British fleet. The
    Nation needs to reset its fiscal priorities and embark on a second
    Reagan-like build-up of our Nation's Armed Forces, and in particular,
    our Navy. But additional fiscal commitment, while necessary, is not
    enough. Even with more funding, we cannot afford--financially or
    operationally--to make expensive mistakes in program management and
    oversight.
        I look forward to hearing from our witnesses. Thank you, Mr.
    Chairman.

        Senator Reed. Thank you, Senator McCain.
        Do any of my colleagues want to make a brief statement? [No
    response.]
        If not, we'll go to the witnesses. Thank you very much.
    Secretary Stackley, please proceed.

    STATEMENT OF HON. SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE
    NAVY FOR RESEARCH, DEVELOPMENT, AND ACQUISITION; ACCOMPANIED BY
      VADM WILLIAM H. HILARIDES, USN, COMMANDER OF THE NAVAL SEA
     SYSTEMS COMMAND; AND VADM JOSEPH P. MULLOY, USN, DEPUTY CHIEF
        OF NAVAL OPERATIONS FOR INTEGRATION OF CAPABILITIES AND
                             RESOURCES (N8)

        Mr. Stackley. Yes, sir. Thank you, Mr. Chairman. Chairman
    Reed, Ranking Member McCain, distinguished members of the
    subcommittee: Thank you for the opportunity to appear before
    you today to address Navy shipbuilding programs. Joining me
    today are the Deputy Chief of Naval Operations for Capabilities
    and Resources, Vice Admiral Mulloy, and the Commander of Naval
    Sea Systems Command, Vice Admiral Hilarides.
        With the permission of the subcommittee, I propose to
    provide brief opening remarks and submit a separate formal
    joint statement for the record.
        Senator Reed. All statements will be made part of the
    record, from my colleagues and the witnesses.
        Mr. Stackley. Thank you, sir.
        Just 2 years ago in testimony before this subcommittee, the
    Navy described how we had reshaped our shipbuilding, aviation,
    weapons, and tactical vehicle plans to reflect the priorities
    of the new defense strategy, and Congress strongly supported
    that year's 2013 budget request. In fact, funding was increased
    for additional ships and aircraft. However, sequestration more
    than offset those gains and the Department of the Navy ended up
    about $11 billion out of balance across O&M and investment.
        Last year, we again submitted a budget sized and shaped to
    provide the capability, capacity, and readiness required by the
    defense strategy. While this subcommittee was particularly
    supportive of our request, at the end of the day, the bottom
    line is the BBA reduced the Navy-Marine Corps budget by $6
    billion in 2014 and another $15 billion in 2015.
        This year's budget submission is anchored by the BBA in
    2015 and, though we exceed the BCA caps across the FYDP, the
    Navy-Marine Corps request falls $38 billion below the level
    planned just 1 year ago.
        To minimize the impact of this reduced top line, we've
    leveraged every tool available to drive down cost. We've
    tightened requirements, maximized competition, capitalized on
    multi-year procurements for major weapons systems, and we've
    attacked our cost of doing business from headquarters billets
    to service contracts, so that more of our resources can be
    dedicated to making warfighting capability.
        In balancing resources and requirements, we have placed a
    priority on forward presence, near-term readiness, stability in
    our ship-building program, and investment in those future
    capabilities that are critical to our long-term technical
    superiority.
        With particular regard to Navy shipbuilding, we have kept
    on track towards our objective of the 300-ship Navy--7 first-
    of-class ships met major milestones:

             Gerald R. Ford, the first new designed carrier
            since Nimitz;
             Zumwalt, the first new designed destroyer
            since Arleigh Burke, both launched this past year, just
            1 week apart;
             Amphibious assault ship (AAS) America (LHA-6);
             Joint high speed vessel (JHSV) Spearhead
            (JHSV-1);
             Mobile landing platform (MLP) Montford Point
            (MLP-1), all three delivered to the fleet;
             Freedom (LCS-1) completed her 10-month maiden
            deployment; and finally
             We laid the keel for the first afloat forward
            staging base (AFSB), Puller (MLP-3).

        We are on schedule in the accomplishment of design and
    development of the ORP, the LHA-8 AAS, the Flight 3 DDG-51
    destroyer, and its air and missile defense radar.
        In total, 43 ships are under construction in shipyards and
    weapons factories stretching across the country. Most have been
    competitively awarded and, with the exception of the lead ships
    of the Zumwalt and Gerald R. Ford class, all are fixed price,
    and program-by-program cost and quality are demonstrating
    steady improvement ship over ship.
        Yet, this critical industrial base is fragile and we will
    need to work closely with Congress and industry and ultimately
    rely upon Congress' support to keep it whole as we navigate the
    budget beyond the BBA. However, if we are required to return
    our budget to BCA levels in 2016, then, even with the priority
    placed on shipbuilding across the board, with the lone
    exception of our highest priority program, the ORP, every ship
    program will suffer reductions.
        I would like to briefly describe three critical issues
    posed by our budget request. First, the refueling complex
    overhaul of George Washington (CVN-73). The Navy has a
    requirement for 11 aircraft carriers and title 10 requires the
    Navy to retain 11 aircraft carriers, and the 2014 President's
    budget included funding to commence the CVN-73 refueling and
    complex overhaul (RCOH) in September 2016. In formulating the
    2015 budget, concurrent with conducting the strategic choices
    management review, the Department of Defense (DOD) determined
    that if we are required to budget to BCA levels we would be
    compelled to inactivate two or three aircraft carriers.
        The Navy rebalanced the rest of its program, leveraged
    across-the-board efficiencies, and accepted risk in other areas
    in order to reduce the impact of BCA-level funding to the
    potential loss of one carrier only. Yet undetermined is whether
    we will be required to budget to BCA levels in 2016 and beyond.
        There is sufficient schedule margin at Newport News to
    delay the start of the CVN-73 RCOH a full year or more without
    impacting the start of the following carrier, USS John C.
    Stennis (CVN-74), in her refueling overhaul. Therefore, the
    Navy is proceeding under Program Objective Memorandum (POM)-16
    guidance to program the CVN-73 refueling complex overhaul,
    albeit delayed, pending a final determination, presumably
    following Congress' action on the 2015 budget, regarding out-
    year budget assumptions.
        In all scenarios we have to be mindful of the cost to
    refuel CVN-73 plus maintain its air wing manpower and support,
    approximately $7 billion across the years 2015 to 2019.
        Second, cruiser and dock landing ship (LSD) modernization.
    The oldest 11 cruisers, CG-52 through 62, have been modernized
    and will deploy with carrier battle groups until their end of
    service, commencing in 2019. The Navy plans to modernize and
    extend the service life of the remaining 11 cruisers, CG-63
    through 73, through an extended phases modernization program.
    The elements of the program are that we will commence in 2015
    the planning and material procurement for repair and
    modernization of hull, mechanical, and electrical systems for
    all 11 cruisers. The work will be scheduled to ensure efficient
    execution and to the extent practical to provide stability to
    the industrial base. Once complete, the hull, mechanical, and
    electrical phase, these cruisers will be maintained in the
    modernization program until completion of their subsequent
    combat systems modernization, which will be aligned with the
    retirement of the first 11 cruisers.
        A similar yet simpler approach is planned for three of the
    LSD-41 class ships. This Navy plan is made affordable by
    drawing down ship manpower and operating costs during the
    extended modernization period, a cost avoidance in excess of $6
    billion. It ensures we are able to sustain the 12-ship LSD-41/
    49 class for its full service life and the critical air defense
    commander capabilities of the cruiser force beyond its current
    service life into the 2040s.
        It also retains flexibility, if needed, to accelerate
    completion of the modernization pending availability of added
    funding and training of additional crews.
        Third, the LCS program. The CNO's requirement for 52 small
    surface combatants (SSC) remains solid. The LCS shipbuilding
    program is demonstrating significant cost improvement as a
    result of the block buy. The most recently awarded ship
    contracts are less than half the cost of the lead ship in
    constant year dollars. Requirements are stable and contract
    changes since the lead ships have tracked on the order of 1
    percent of the ship's cost, significantly less than other
    surface combatant ships.
        Mission packages are executing in accordance with their
    approved test plans, with operational testing of the first
    increment surface warfare mission package completing this
    month; operational testing of the mine countermeasures and
    antisubmarine warfare (ASW), mission packages on track for 2015
    and 2016, respectively.
        USS Freedom performed her required missions plus supported
    humanitarian assistance, disaster relief efforts following
    Super Typhoon Haiyan during her 10-month deployment and
    valuable lessons from her deployment are being used to shape
    support strategies for future LCS deployments.
        Separately, we are conducting a thorough review of LCS
    requirements, capabilities, and concepts of operation to
    determine, in accordance with the directions of the Secretary
    of Defense, how to increase the lethality and capabilities of
    the Navy's SSCs. We will consider a new design, alternative
    existing designs, and a modified LCS in this study, and the
    results are intended to inform our 2016 budget submission.
        In total, as a result of the cumulative impact of the
    sequestration in 2013, the BBA-level funding in 2014 and 2015,
    and the reductions across 2015 through 2019, the Department of
    the Navy has been judicious in controlling costs, reducing
    procurements, stretching developments, and delaying
    modernization. However, these actions necessarily add cost to
    our programs, add risk to our industrial base, and add risk to
    our ability to meet the Defense Strategic Guidance (DSG).
        If we are forced to execute at BCA levels in fiscal years
    2016 and beyond, these cuts will go deeper and we fundamentally
    change our Navy and Marine Corps and the industrial base we
    rely upon.
        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, Admiral
    Hilarides, and Admiral Mulloy follows:]
    Prepared Statement by Hon. Sean J. Stackley, VADM William H. Hilarides,
                      USN, and VADM Joseph P. Mulloy, USN
        Chairman Reed, Senator McCain, and distinguished members of the
    subcommittee, thank you for the opportunity to appear before you today
    to address the Department of the Navy Shipbuilding Programs. The fiscal
    year 2015 President's budget submission is governed by the 2014
    Quadrennial Defense Review which implements the 2012 Defense Strategic
    Guidance (DSG), albeit with higher risk, and continues our efforts to
    ensure our ability to fight and win the Nation's wars, operate forward,
    and sustain readiness. Although forestalled somewhat in fiscal year
    2014 and 2015 by the Bipartisan Budget Act (BBA) of 2013, the principal
    risk to the Department's ability to meet the DSG remains the
    considerable uncertainty in future funding. This uncertainty hinders
    planning and impedes balancing near- and long-term readiness and
    capability. In working to mitigate this challenge, we have set
    priorities in our shipbuilding, aviation, weapons, and combat vehicle
    plans. We have worked aggressively within the Department of the Navy to
    reduce and control the costs of our acquisition programs. In all these
    efforts, our principal requirement remains to equip the Navy and Marine
    Corps with the most effective warfare systems, through procurement,
    modernization, and sustainment, to address the security challenges of
    today and tomorrow. The Department will continue to work closely with
    Congress to maintain the right balance across capacity, capability,
    readiness, and the industrial base.
        Though budget issues, including furloughs and the Government
    shutdown, have been hard on the Department, our sailors and marines
    deployed around the world continued to perform the mission last year
    and get the job done, being where it mattered when it mattered.
        The year began with the USS John C Stennis (CVN-74) carrier strike
    group and the USS Bonhomme Richard (LHD-6) amphibious ready group,
    embarked with the 31st Marine Expeditionary Unit, both on patrol.
    Carrier Air Wing 7 and USS Dwight D Eisenhower (CVN-69) left for a 4-
    month deployment only 2 months after returning home from a 6-month
    deployment. The carrier strike group included, for the first time, a
    German ship--FGS Hamburg. Our submarine forces continued to perform
    superbly around the globe. For example, in April, USS Alabama (Gold)
    (SSBN-731) completed a 108-day strategic patrol, one of the longest
    strategic ballistic missile submarines (SSBN) patrols in recent years.
    In recent weeks, the destroyer USS Kidd (DDG-100), P-3 aircraft, and
    our newest maritime patrol aircraft, the P-8A, have provided critical
    support in the search for the missing Malaysian airliner.
        The Marine Corps continues to excel in response to today's evolving
    security environment. In April, marines stood up Special Purpose Marine
    Ground Task Force-Crisis Response in support of AFRICOM. In May, a
    marine rotational force deployed to Darwin, Australia in support of the
    Nation's Pacific Pivot.
        In Afghanistan, I Marine Expeditionary Force (MEF) completed a
    year-long deployment furthering stability operations and transitioning
    the fight to Afghan-led operations. II MEF relieved I MEF at Camp
    Leatherneck in Helmand province. In March, Carrier Air Wing 9 left the
    U.S. Fifth Fleet area of responsibility after flying more than 9,000
    sorties in support of coalition forces in Afghanistan.
        In August, the Department of the Navy responded to chemical weapons
    attacks in Syria by patrolling four destroyers and USS San Antonio
    (LPD-17), with elements of the 26th Marine Expeditionary Unit onboard,
    in the Eastern Mediterranean to provide stability to the region. USS
    Harry S Truman (CVN-75), USS Gettysburg (CG-64), and USS Bulkeley (DDG-
    84) safeguarded the Northern Arabian Sea while the USS Nimitz (CVN-68)
    patrolled the Red Sea.
        In November, the Navy and Marine Corps responded following the
    devastation of Typhoon Haiyan. USS George Washington (CVN-73), USS
    Freedom (LCS-1), USS Ashland (LSD-48), and USS Germantown (LSD-42)
    transited to the Philippines in support of relief efforts. More than
    900 marines delivered supplies to the thousands of survivors left
    without food and water.
        Our Nation's away team, the Navy and Marine Corps, continued this
    pattern of assuming the watch again and again throughout 2013. This
    operational tempo keeps nearly half of our fleet underway every day.
    Forty-eight thousand sailors and marines stand watch daily around the
    globe, constantly ready to do that which our Nation may ask them to do.
    No other military and no other nation on earth today, has the reach,
    the presence, the capability, the training and the resolve to maintain
    this pace or breadth of operations.
        The Navy and Marine Corps are well-suited and uniquely positioned
    to perform the missions of the DSG, as implemented by the 2014 QDR. In
    addressing these requirements, the Department's fiscal year 2015 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. These tenets guide the priorities and
    direction of the Department of the Navy's fiscal year 2015 President's
    budget request.
        However, the potential for a return to sequestration-level funding
    in fiscal year 2016 and future years increases our risk in meeting the
    current and future requirements necessary to meet our missions.
        Despite its serious impacts, the 2013 sequestration was manageable
    in part because of key budget reprogrammings made by the Department,
    with congressional support. The Department was able to execute its
    plans for procurement of the ships appropriated for fiscal year 2013,
    and in particular was able to award the fiscal year 2013-2017 multi-
    year procurement (MYP) of DDG-51 class destroyers. In order to
    accomplish this however, the Department also had to mitigate impacts to
    some programs in execution to temporarily avoid reductions by deferring
    costs to future years.
        Congress' passage of the BBA of 2013, which raised discretionary
    funding caps above the sequestration level for fiscal year 2014 and
    fiscal year 2015, allowed us to avoid indiscriminate funding reductions
    across all programs. As a result, the Department will be able to
    procure the eight ships appropriated in fiscal year 2014, including the
    additional 10th destroyer in the MYP. However, while the BBA provided
    some relief in fiscal year 2014 and fiscal year 2015, the lower funding
    levels compared to our fiscal year 2014 President's budget compelled
    the Department of the Navy to make tough choices and accept higher risk
    in our ability to meet the DSG. Today, the Navy is trying to manage the
    reduced funding levels by improving efficiencies, reducing costs, and
    providing stability where possible. The fiscal year 2015 request
    reflects the results of these efforts.
                the fiscal year 2015 president's budget request
        As the Department moves into fiscal year 2015 and beyond, the
    fiscal year 2015 President's budget submission balances force
    structure, readiness, and capability to meet national security
    commitments. Simultaneously the plan is developed to minimize impacts
    to the industrial base where possible, in order to avoid further future
    increases in cost, or perhaps even permanent losses to our national
    industrial capability. A brief overview of shipbuilding programs
    follows.
    Shipbuilding
        The Navy reported to Congress in January 2013 the results of the
    Force Structure Assessment (FSA), which determined the capabilities of
    the future force needed to meet the full range of missions required of
    the Department of the Navy in support of the DSG. The FSA analysis
    resulted in a battle force requirement of 306 ships.\1\
    ---------------------------------------------------------------------------
        \1\ It should be noted that the Department of the Navy revised
    guidelines for accounting for the size of the Navy's battle force.
    Therefore, numbers in this statement are not directly comparable to
    those used in prior testimony. Changes to guidelines include clarifying
    the accounting for smaller, forward deployed ships (e.g. patrol
    coastal, mine countermeasures ships, high speed transports) and ships
    routinely requested by combatant commanders (e.g, hospital ships).
    ---------------------------------------------------------------------------
        The following table illustrates the differences between new and old
    Battle Force accounting guidelines:

    ----------------------------------------------------------------------------------------------------------------
                                                                    Today  (April     Fiscal Year      Fiscal Year
                                                                       3, 2014)           2015             2020
    ----------------------------------------------------------------------------------------------------------------
    PB-15: New Guidelines........................................             289              284              308
    PB-15: Old Guidelines........................................             283              274              304
    ----------------------------------------------------------------------------------------------------------------

        The Department's shipbuilding plan continues to build toward the
    balanced force required by the FSA. In support of this, the fiscal year
    2015 President's budget requests funding for seven ships: two Virginia-
    class attack submarines, two DDG-51 Arleigh Burke-class destroyers, and
    three Littoral Combat Ships (LCS). Additionally, the budget request
    includes continued incremental funding for CVN-79. The fiscal year 2015
    submission for the Future Years Defense Program (FYDP) (fiscal year
    2015 to fiscal year 2019) plans for the procurement of 44 ships.
        While the Navy's fiscal year 2015 plan maintains our steady
    momentum towards achieving the FSA requirements, as the Chief of Naval
    Operations (CNO) stressed in his recent posture statement to the full
    committee, in order to remain a balanced and ready force while
    complying with the reduction in funding below our fiscal year 2014
    levels, we were compelled to make difficult choices in the fiscal year
    2015 plan. The fiscal year 2015 President's budget maintains the option
    to refuel or inactivate one nuclear aircraft carrier (CVN), and operate
    or shutdown a carrier air wing (CVW). If reduced Budget Control Act
    (BCA) levels remain in place in fiscal year 2016, USS George Washington
    (CVN-73) and associated air wing would need to be inactivated in lieu
    of conducting the planned refueling complex overhaul (RCOH). This
    decision will be made as part of our fiscal year 2016 budget
    submission.
        An additional key component of our budget plan is a phased
    modernization of 11 cruisers, which are the most capable ships for
    controlling the air defense of a carrier strike group.
        The Navy's Cruiser Modernization Plan will allow the Navy to reduce
    funding requirements while most efficiently increasing the capability
    and extending the service life of our large surface combatants.
        Just beyond the FYDP, the Navy must recapitalize our SSBN force,
    manage the block retirements and replacement of aging SSBNs built in
    the 1980s and 1990s, and contain the cost of replacing these ships. The
    significant cost associated with recapitalizing the Nation's sea based
    strategic deterrent will require an increase of the shipbuilding
    budget, up to $19 billion (fiscal year 2014 dollars). Our ability to
    meet the FSA battle force requirements is heavily dependent upon
    attaining this level of funding.
        The key elements of the fiscal year 2015 shipbuilding request will
    now be discussed for each area of the plan.
    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 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 logistical burdens upon our allies or
    potential partners.
        Ford-class carriers will be the premier forward deployed asset for
    crisis response and early decisive striking power in major combat
    operations for the next half-century. We have established a steady
    state Ford-class procurement plan designed to deliver each new ship in
    close alignment with the Nimitz-class ship it replaces. The design
    improves warfighting capability, survivability, operational
    availability, and quality of life improvements for our sailors, while
    reducing crew and aviation wing size by as many as 1,200 personnel and
    decreasing total ownership costs by approximately $4 billion per ship.
    Gerald R. Ford (CVN-78), the lead ship of the class, was launched on
    November 17, 2013. CVN-78 displaced 77,000 tons at launch and was 70
    percent complete--the highest levels attained in aircraft carrier new
    construction. This unprecedented level of completeness by launch
    included the installation of the dual band radar (DBR) arrays, and the
    pulling of over 60 percent of electrical cable. As a result, CVN-78 is
    optimally prepared for its post-launch test program. CVN-78 will be
    delivered in fiscal year 2016 as the numerical replacement for the USS
    Enterprise (CVN-65), which was inactivated on December 1, 2012 after 51
    years of active service.
        The Navy is committed to delivering CVN-78 within the cost cap. We
    are continuing efforts to identify cost reductions; drive improved cost
    and schedule performance to contain cost growth; and reverse the rising
    cost trends associated with first-of-class non-recurring engineering,
    contractor and government furnished equipment (GFE), and ship
    production issues on the lead ship. The National Defense Authorization
    Act (NDAA) for Fiscal Year 2014 revised the CVN-78 cost cap to $12,887
    million. The fiscal year 2015 President's budget request aligns the
    CVN-78 budget with the cost cap.
        The Navy and shipbuilder are also committed to driving down and
    stabilizing aircraft carrier construction costs for John F. Kennedy
    (CVN-79) and subsequent hulls. As a result of the lessons learned on
    CVN-78, the approach to carrier construction has undergone an extensive
    affordability review. The Navy and the shipbuilder have made
    significant changes on CVN-79 to reduce the cost to build the ship.
    These efforts, identified in the May 2013, CVN-79 Report to Congress,
    include the following:

            - Improvements in material availability and pricing;
            - Major changes in build strategy and processes with a
            determined focus on executing construction activities where
            they can most efficiently be performed;
            - Design changes for greater producibility; and
            - Aggressive measures for cost control in GFE.

        These efforts are ongoing and additional process improvements
    continue to be identified.
        The Navy extended the CVN-79 construction preparation contract into
    2014 to enable continuation of ongoing planning, construction, and
    material procurement while capturing lessons learned associated with
    lead ship construction and early test results. The continued
    negotiations of the DD&C contract afford an opportunity to incorporate
    further construction process improvements and cost reduction efforts.
    Award of the DD&C contract is expected in late 2014.
        The National Defense Authorization Act (NDAA) for Fiscal Year 2014
    adjusted the CVN-79 and follow ships cost cap to $11,498 million to
    account for economic inflation and non-recurring engineering for
    incorporation of lead ship lessons learned and design changes to
    improve affordability. The Navy is committed to delivering CVN-79
    within the cost cap by continuously implementing initiatives to reduce
    costs. The fiscal year 2015 President's budget rephases CVN-79 funding,
    resulting in the ship being delivered in mid-fiscal year 2023 vice late
    fiscal year 2022. The delay will have no impact on projected force
    structure, with USS Nimitz (CVN-68) not due to be inactivated until
    fiscal year 2025.
        With more than half of the service life of the Nimitz-class still
    remaining, the RCOH continues as a key enabler for the enduring
    presence of the aircraft carrier Fleet. This year's budget request
    includes cost to complete the RCOH for USS Abraham Lincoln (CVN-72)
    partially restoring program funding removed during the fiscal year 2013
    sequestration. It also includes funding for advance planning for
    defueling USS George Washington (CVN-73), work common to either
    inactivation or RCOH. However, the final decision on the future of CVN-
    73 will be made in the fiscal year 2016 President's budget request.
        If sequestration spending levels remain in place in fiscal year
    2016, CVN-73 would be inactivated. This path has a cost avoidance of
    approximately $7 billion in the 2015-2019 FYDP, which includes the cost
    to overhaul and retain CVN-73 with her associated air wing and the
    logistics, manpower and training support costs. This permanent
    reduction in the aircraft carrier force is unavoidable if
    sequestration-level cuts are re-imposed, and will result in a
    corresponding decrease in operational availability to meet global
    demands and emergent crises. In this event, the Navy will be unable to
    meet historical combatant commander demands.
    Submarines
        Submarines' stealth and ability to conduct sustained forward-
    deployed operations in anti-access/area-denial environments serve as
    force multipliers 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 warfare and undersea 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. The Navy is mitigating an impending attack submarine force
    structure shortfall in the 2020s through three parallel efforts:
    continuing procurement of two Virginia-class submarines per year;
    reducing the construction span of Virginia-class submarines; and
    extending the service lives of selected attack submarines. While each
    of our attack submarines provides considerable strike capacity, our
    guided missile (SSGN) submarines provide substantially more strike
    capacity and a robust capability to covertly deploy Special Operations
    Force (SOF) personnel. Lastly, the Navy's 14 SSBNs provide the Nation
    with an around-the-clock, credible, modern and survivable sea-based
    strategic deterrent.
        The fiscal year 2015 President's budget requests full-funding of
    two Virginia-class submarines and advanced procurement for the fiscal
    year 2016 and fiscal year 2017 vessels. The Virginia-class submarine
    program has delivered the last six ships on budget and ahead of
    schedule. The next ship, North Dakota (SSN-784), fully encompasses the
    Design for Affordability efforts begun in 2005, which include a
    completely redesigned bow section, and is expected to have the shortest
    construction span for a Virginia-class submarine.
        The Under Secretary of Defense (Acquisition, Technology, and
    Logistics) notified Congress on March 26, 2014 of our intent to award
    the next 10-ship, MYP contract, planned for April 2014. The contract
    continues the co-production of the Virginia-class submarines between
    General Dynamics Electric Boat and Huntington Ingalls Industries-
    Newport News Shipbuilding through fiscal year 2018.
        Ballistic missile submarines, coupled with the TRIDENT II D-5
    strategic weapons system, represent the most survivable leg of the
    Nation's strategic arsenal and provide the Nation's only assured
    nuclear response capability. SSBNs 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 U.S. would retain a nuclear triad under the
    New START including the 14 SSBNs currently in-service. Originally
    designed for a 30-year service life, the Ohio-class was extended to its
    limit at 42 years of operation. With the Ohio-class SSBNs being an
    average of 23.3 years old, the United States must continue development
    of the follow-on 12-ship Ohio Replacement as the current SSBNs' life
    cycles cannot be extended further. This is our top priority program
    within the Department of the Navy.
        In December 2012, the Navy awarded a research and development
    contract for the Ohio Replacement. This contract focuses on meeting the
    program's performance requirements while reducing costs across design,
    production, and operations and sustainment. The Navy recently validated
    that its industry partners met or exceeded the cost-reduction targets
    established for fiscal year 2013. These reductions bring the Navy
    closer to its cost goals and serve as a positive start for what will be
    a long-term effort to minimize costs while delivering the required
    warfighting capability. The cost reduction efforts will continue
    throughout the design phase.
        The fiscal year 2015 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. Given the need to recapitalize
    this aging strategic asset, coupled with the ongoing need to support
    Navy force structure, the Navy continues to pursue the means to
    resource construction of the next generation nuclear ballistic missile
    submarine in time to fulfill U.S. Strategic Command requirements.
        The Navy's four guided missile submarines (SSGNs) provide
    significant warfighting capability but will be retired in the mid-2020s
    after 42 years of service. To mitigate the 60 percent reduction in
    undersea strike capacity when they retire, the Navy is exploring using
    the inherent modularity of the Virginia-class SSN and is designing a
    Virginia payload module (VPM) that will include four 87-inch wide
    missile tubes each capable of launching seven Tomahawk cruise missiles.
    This module provides greater than three times the payload capacity with
    less than 15 percent the cost increase to mitigate the large undersea
    strike capacity lost when SSGNs retires. The President's budget for
    fiscal year 2015 requests continued VPM research and development,
    providing an option to start procurement as part of the Block V
    contract scheduled for award in early fiscal year 2019.
    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) and
    integrated air and missile defense (IAMD) continue to be a focal point.
    In order to meet the increased demand for BMD, the Navy is forward
    deploying four BMD capable DDGs to Rota, Spain. The USS Donald Cook
    (DDG-75) arrived in Rota in February 2014. One additional ship will
    arrive later this fiscal year, and the remaining two will arrive in
    fiscal year 2015.
        The Arleigh Burke-class (DDG-51) program remains one of the Navy's
    most successful shipbuilding programs--62 ships are currently operating
    in the fleet. The fiscal year 2015 President's budget request includes
    funding to execute the third year of the MYP and procure two DDG-51
    destroyers. The ships will incorporate IAMD and provide additional BMD
    capacity to the fleet when they deliver in the early fiscal year 2020s.
    The President's budget also includes a funding request to complete the
    construction of John Finn (DDG-113), Ralph Johnson (DDG-114), and
    Rafael Peralta (DDG-115) to restore program funding removed by the
    fiscal year 2013 sequestration.
        Air and missile defense radar (AMDR) is the future multi-mission
    radar of the Navy's surface combatant fleet, which will meet the
    growing ballistic missile threat by improving radar sensitivity and
    enabling longer range detection for engagement of increasingly complex
    threats. In October 2013, the Navy awarded the contract for development
    of the AMDR, with options for up to nine low rate initial production
    (LRIP) units. This scalable radar is on track for installation on the
    second fiscal year 2016 DDG-51 hull to make it the first Flight III
    ship that will better 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 defense. The program
    demonstrated during a March 2014 total ship design review that the
    Flight III design is on track to have adequate space, weight, power,
    and cooling service life margins. Engineering change proposal detail
    design efforts for the DDG Flight III design must continue in fiscal
    year 2015 to support introduction on one of the fiscal year 2016 ships.
        The DDG-1000 Zumwalt-class guided missile destroyer will be an
    optimally crewed, multi-mission, surface combatant designed to provide
    long-range, precision, naval surface fire support to marines conducting
    littoral maneuver and subsequent operations ashore. In addition to the
    ship's two 155mm Advanced Gun Systems capable of engaging targets with
    the Long Range Land Attack Projectiles (LRLAP), the ship will be
    capable of conducting anti-submarine warfare (ASW), land attack and
    will provide valuable advancements in technology such as signature
    reduction (both acoustic and radar cross-section), active and passive
    self-defense systems, enhanced survivability features, and shipboard
    automation (in support of reduced manning). The DDG-1000 program
    concluded 15 of 15 successful LRLAP test firings in 2013, completing
    the guided flight test program. As a result, the LRLAP is on track for
    at-sea testing which is planned for fiscal year 2015. The program also
    completed a competition for a steel deckhouse for the DDG 1002. The
    competition for the deckhouse is one example of the Navy's ongoing
    initiatives to control program cost. The first ship of the DDG-1000
    program, USS Zumwalt, will be christened this coming weekend, on April
    12, and will enter the Fleet in 2016. The fiscal year 2015 budget
    requests funds to continue the DDG-1000 program.
    Small Surface Combatants
        The Littoral Combat Ship (LCS) enables the Navy to implement the
    DSG imperative to develop innovative, low-cost, and small-footprint
    approaches to achieve our security objectives. The modular, open
    systems architecture inherent in LCS's combat system allows for rapid
    integration of technological solutions that increase capability at
    reduced cost. The LCS complements our inherent blue water capability
    and fills 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,
    allow LCS to bring unique strengths and capabilities to the mission.
        The fiscal year 2015 President's budget includes funding for three
    LCSs. The reduction to the number of ships procured in fiscal year 2015
    is the result of the tough choices required under reduced funding
    levels in fiscal year 2015 relative to the fiscal year 2014 plan. The
    reduction from four to three LCSs in fiscal year 2015 will require the
    Navy to extend the pricing for one block buy ship. The fiscal year 2015
    President's budget request also includes funding to complete
    construction on LCS 5 through LCS 16 that was deferred due to
    sequestration in fiscal year 2013.
        The LCS mission modules program continues its efforts to field
    capability incrementally as individual mission systems become
    available, rather than wait for all the mission systems needed for the
    end-state capability. Beginning in March 2014, the program commenced
    initial operational test and evaluation (IOT&E) on the surface warfare
    (SUW) mission packages (MP). The Remote Minehunting System (RMS)
    completed its reliability growth program this past year and continues
    to test well. RMS supports the mine countermeasure (MCM) MP which
    expects to begin IOT&E in 2015. The ASW MP is planning a preliminary
    design review in 2014 with IOT&E scheduled to begin in 2016. The LCS,
    with a MP, provides capability that is equal to or exceeds the current
    capability of the ships that it is replacing. The fiscal year 2015
    budget requests funding for three modules (one MCM, two SUW).
        The Navy successfully validated LCS's operational flexibility
    during a 10-month deployment to Southeast Asia with the manning concept
    of rotational crewing, shore-based training, and LCS maintenance
    strategies. This deployment will be followed by the USS Fort Worth
    (LCS-3) deployment in 2014. While the Navy continues to focus on the
    merits of LCS and the capabilities it brings to the fleet, the service
    also recognizes the importance of maintaining awareness of emerging
    threats and capabilities of our Nation's adversaries. As a result, the
    Navy is examining options to increase the lethality of our small
    surface combatant force. Specifically, the Navy is studying existing
    ship designs (including the LCS), a modified LCS, and a completely new
    ship design, including their estimated cost, to determine the most
    affordable method for improving the capability of this critical element
    of our force. Pending the results of this study (due in support of
    fiscal year 2016 budget formulation), the Navy will restrict LCS
    contract actions within the first 32 ships of the class.
    Amphibious Ships
        History demonstrates that when fiscal austerity reduces the size of
    available forces, the Nation must rely on the persistent presence and
    power projection capabilities of the Navy and Marine Corps. 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 events ashore.
        The future security environment requires a robust capability to
    operate from the sea and maneuver over land to positions of advantage.
    A core capability of expeditionary forces is the ability to project
    forces ashore from amphibious platforms and to maneuver once ashore.
    Their flexibility and adaptability provide unmatched capability to
    combatant commanders, and their demand for these forces always exceeds
    our existing capacity.
        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 an
    excellent means 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 logistical 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.
        The Chief of Naval Operations and Commandant of the Marine Corps
    have determined that the force structure for amphibious lift
    requirements is 38 amphibious ships. Balancing the total naval force
    structure requirements against fiscal projections imposes risk on
    meeting this requirement. Based on the footprint of a 2.0 MEB 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). Planning factors call for a force of 33 ships to achieve
    this availability, and this will be achieved in total in fiscal year
    2018, and with the required mix (11/11/11) in fiscal year 2024 with
    delivery of LHA-8. At the end of fiscal year 2015, the amphibious force
    structure will stand at 30 ships, which includes 9 LHD/LHAs, 9 LPDs,
    and 12 LSDs.
        LHA(R) class ships are flexible, multi-mission platforms with
    capabilities that span the range of military operations--from forward
    deployed crisis response to forcible entry operations. These ships will
    provide the modern replacements for the remaining LHA-1 Tarawa-class
    ship and the aging LHD-1 Wasp-class ships as they begin decommissioning
    in the late 2020s. America (LHA-6) and Tripoli (LHA-7) are optimized
    for aviation capability in lieu of a well deck and will deliver in
    April 2014 and 2018, respectively. LHA-8, the first Flight 1 ship, will
    have a well deck to increase operational flexibility and a smaller
    island that increases flight deck space to retain aviation capability.
    It will be funded in fiscal year 2017 and will deliver in fiscal year
    2024. The Navy expanded the early industry involvement efforts for the
    LHA- 8 design and initiated a phased approach to the design for
    affordability of amphibious ships. The increased funding in fiscal year
    2014 will fund these affordability efforts that foster an interactive
    competition with industry partners in developing a more affordable,
    producible detail design and build strategy, and drive towards more
    affordable ships. Funding for LHA(R) planning, testing, outfitting, and
    post-delivery is included in the President's budget.
        The San Antonio-class (LPD-17) provides the ability to embark,
    transport control, insert, sustain, and extract elements of a Marine
    Air-Ground Task Force (MAGTF) and supporting forces by helicopters,
    tilt rotor aircraft, landing craft, and amphibious vehicles. The Navy
    accepted delivery of USS Somerset (LPD-25) in October 2013, the 9th of
    11 ships. The remaining two ships are under construction and will
    deliver in spring 2016 and summer 2017, respectively. The fiscal year
    2015 President's budget requests funding for cost to complete,
    outfitting, post-delivery, and program close-out costs.
        LX(R) is the replacement program for the landing ship dock, LSD-41
    and LSD-49 classes, which will begin reaching their estimated service
    life in the mid-2020s. The Navy will leverage LX(R)'s analysis of
    alternatives (AoA), which will conclude in fiscal year 2014, to
    determine the ship's key performance parameters. The program is
    anticipated to begin technology development in early fiscal year 2015.
    Throughout development, affordability will be a key focus for this ship
    class. Industry will be involved in identifying cost drivers on this
    class of ship. Advanced procurement funding in fiscal year 2019 is
    planned with the lead LX(R) class ship planned in fiscal year 2020. The
    lead LX(R) will deliver in time for LSD-43's retirement in fiscal year
    2027. The Navy plans to maintain 11 deployable LSDs in the Active Force
    until LX(R) delivers by rotating three LSDs to complete phased
    modernizations beginning in fiscal year 2016. This will extend USS
    Whidbey Island (LSD-41) and USS Germantown (LSD-42) (with mid-life
    complete) to 45 operational years of service. USS Tortuga (LSD-46) will
    complete a mid-life availability so as to achieve the desired 40 year
    operational service. This plan mitigates presence shortfalls and 2.0
    MEB assault echelon shipping requirements.
    Surface Connectors
        The Navy-Marine Corps team will continue its investment in future
    surface connectors. These connectors will provide future expeditionary
    force commanders greater flexibility to operate in contested
    environments. The President's budget includes the ship-to-shore
    connector (SSC) air-cushioned vehicles and the surface connector
    replacement (SC(X)(R)) program that will replace the aging landing
    craft utilities. These platforms are essential in connecting the combat
    power and logistical sustainment that the sea base provides, with the
    forces that are operating in the littorals and inland for all missions.
    We will continue to explore future connector options that will increase
    our ability to exploit the sea as maneuver space by increasing range,
    speed, and capacity.
    Auxiliary Ships
        Support vessels such as the mobile landing platform (MLP) and the
    joint high speed vessel (JHSV) provide additional flexibility to the
    combatant commanders. The USNS Montford Point (T-MLP-1) and USNS John
    Glenn (MLP-2) ships are designed to support the Maritime Prepositioning
    Forces, enabling at-sea transfer of vehicles from cargo ships to
    facilitate the delivery of these vehicles, equipment, personnel and
    supplies between the sea and restricted access locations ashore. MLP-1
    delivered, and with the installation of the core capability set (CCS)
    completing in spring 2014, it will continue with its integrated testing
    and evaluation phase throughout the summer and fall to explore further
    use beyond MPF to facilitate expeditionary operations. The shipyard's
    delivery of MLP-2 occurred in March 2014; the ship will have its CCS
    installation completed by early fiscal year 2015. Both MLP-1 and MLP-2
    were delivered by the shipyard on cost and on schedule. MLP afloat
    forward staging base (AFSB) variant utilizes the MLP base ship, but is
    outfitted with an AFSB capability vice the CCS. The MLP AFSB variant
    will retain sealift capabilities inherent to the baseline MLP with
    added vertical lift capability to support sealift and other missions in
    response to combatant commanders' requirements. In the past, the Navy
    provided fleet assets to address the AFSB demand. In order to avoid
    diverting a fleet asset to fulfill this request, the Department of the
    Navy converted the USS Ponce (AFSB-(I)) to provide an interim AFSB
    capability. Three MLP AFSB variants are currently planned. Lewis B.
    Puller MLP-3, the first AFSB variant, is under construction and will
    deliver in late 2015, in time to replace USS Ponce by fiscal year 2017.
    The Navy plans to award MLP-4 AFSB and MLP-5 AFSB in fiscal year 2014
    and fiscal year 2017, respectively.
        The JHSV provides a high-speed, shallow-draft alternative to moving
    personnel and materiel within and between the operating areas, and to
    supporting security cooperation and engagement missions. In fiscal year
    2013, the 10th and final JHSV was awarded and USNS Spearhead (JHSV-1)
    and USNS Choctaw County (JHSV-2) delivered. USNS MIllinocket (JHSV-3)
    delivered in March 2014. The Navy is exploring opportunities to further
    enhance JHSV's operational profile to support/enhance warfighter
    requirements such as Special Operations support; maritime interdiction
    operations; submarine rescue; and intelligence, surveillance, and
    reconnaissance missions. The fiscal year 2015 President's budget
    requests program support and close out costs, and cost to complete
    funding for Brunswick (JHSV-6), Yuma (JHSV-8), Bismarck (JHSV-9) and
    Burlington (JHSV-10) in order to restore funding reduced by fiscal year
    2013 sequestration.
        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 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 replenishment oilers. The T-AO and T-AKE
    ships serve as shuttle ships between resupply ports and their customer
    ships, while the T-AOE ships serve as station ships, accompanying and
    staying on-station with a carrier strike group to provide fuel as
    required to customer ships.
        Research and development efforts continue as the Navy matures its
    concept for the replacement of the Kaiser-class (T-AO-187) of fleet
    replenishment oilers. The new replacement oilers, currently designated
    as T-AO(X), will be double-hulled and meet Oil Pollution Act 1990 and
    International Marine Pollution Regulations. Similar to the LHA(R) and
    LX(R) programs, T-AO(X) benefitted from early industry engagement in
    terms of cost/capability trade-off studies that will help to refine the
    ship specifications. The Navy's budget request plans the lead ship in
    2016 with serial production beginning in 2018. The total ship quantity
    is expected to be 17 ships.
    Affordability and the Shipbuilding Industrial Base
        The interconnectivity of today's shipbuilding industry with its
    supplier and vendors is complex, and there is a cascading effect that
    today's decisions can have near-term as well as years into the future.
    A healthy design and production industrial base is critical to
    achieving the Department of the Navy's priorities and fulfilling the
    Navy's needs going forward. Perturbations in naval ship design and
    construction plans are significant because of the long-lead time,
    specialized skills, and extent of integration needed to build military
    ships. The complex configuration and size of naval vessels result in
    design times that range from 2 to 7 or more years, and construction
    schedules that can span up to 9 years. Individual ships cost from
    hundreds of millions to several billions of dollars, making each one a
    significant fraction of not only the Navy's shipbuilding budget, but
    also industry's workload and regional employment numbers. Consequently,
    the timing of ship procurements is a critical matter to the health and
    sustainment of U.S. shipbuilding and combat system industries.
        Stability and predictability matter
        It matters to the Navy, to industry, to their workforce, to their
    families and to their communities. Our Nation's defense industrial
    workers are skilled, experienced, and innovative and they can't be
    easily replaced. The Department must provide stability and
    predictability to the industrial base to maintain our ability to
    continue to build the future Fleet.
        Affordability and quality matter
        Together with our industry partners, we have made significant
    progress in the past few years improving both measures. The quality of
    our ships improved as evidenced by the reduction in the number of
    critical deficiencies issued by the Board of Inspection and Survey
    during acceptance trials. The Department of the Navy is also focusing
    on affordability efforts across all phases of acquisition. For ships
    under contract, we have held the line on minimizing change. We have
    demanded discipline in waiting until designs are nearly complete before
    starting production. We have used competition to reduce costs. With the
    assistance of Congress, we have employed MYP and block buy contracts to
    provide stability, obtain economic order quantity discounts, and
    facilitate learning, which yielded cost savings. We are driving
    affordability earlier and earlier into the life cycle: interacting with
    the users and sponsors to better understand the requirements and how
    they drive cost; and engaging with our industry partners to better
    understand the trade-offs and inflection points between performance and
    cost. We are setting affordability cost targets at both the procurement
    and operating and support levels, to ensure that we do not optimize one
    at the expense of the other. We are looking internally as well to
    maximize our buying power and eliminate less value added processes and
    oversight.
        Our ability to mitigate the adverse impacts on the shipbuilding
    industrial base from constrained resources has its limits. At the
    reduced BCA levels we are facing starting in fiscal year 2016, Navy
    funding of the Ohio Replacement will significantly impact the
    industrial base and the future ship mix due to reduced procurement of
    other ship classes. The result will be increased risk in the Navy's
    ability to support the DSG, and inevitably reductions in the
    shipbuilding and combat system industrial base, with further long-term
    impacts on platform affordability and force size.
    Surface Ship Modernization
        The President's budget request for fiscal year 2015 proposes a CG/
    LSD Phased Modernization Plan that will provide the means to retain the
    best Air Defense Commander and Marine expeditionary lift capabilities
    through the 2030s and CGs into the 2040s. This plan paces the threat
    through the installation of the latest technological advances in combat
    systems and engineering in CGs 63-73 and LSDs 41, 42 and 46. As a
    result, these ships remain relevant and viable throughout their entire
    service life, enabling the Navy to sustain dominant force structure. To
    date the Navy has modernized CGs-52-58 with the Advanced Capability
    Build (ACB) 08 Combat System as well as substantial hull, mechanical,
    and electrical (HM&E) upgrades, and has nearly completed modernization
    on CGs 59-62 with the improved ACB 12. These investments have allowed
    the first 11 ships of the Ticonderoga-class to remain the world's
    premier air defense commander platform, fully capable of integrating
    into the carrier strike group construct or operating independently in
    support of combatant commander demands.
        The Navy has developed an affordable framework to retain the
    remaining 11 cruisers (CG-63-73) in the active fleet, through induction
    into a phased modernization period starting in fiscal year 2015. The
    Navy will begin the phased modernization of these ships with material
    assessments, detailed availability planning, and material procurements.
    Subsequently, the Navy will perform HM&E upgrades, critical structural
    repairs, and extensive corrective and condition-based maintenance. The
    final phase will include combat system installation, integration, and
    testing. This will occur concurrently with re-manning the ship,
    immediately preceding restoration to the Fleet. By combat systems
    modernization occurring immediately prior to restoration, these ships
    will have the latest practicable combat systems upgrades while
    mitigating the risk and cost of technical obsolescence. The Navy
    intends to draw down the manpower for these CGs during their
    modernization, thus greatly reducing the cruiser costs during the
    period. The current plan is to complete modernization of each cruiser
    on a schedule that sustains 11 deployable air defense commander CGs (1
    per carrier strike group) into the 2040s.
        Similarly, the Navy plans to perform the final Whidbey Island-class
    modernization through this phased modernization plan. This plan
    modernizes LSD-46, and installs additional structural, engineering, and
    combat systems modifications on LSDs-41 and -42. As a result of the
    modernization investment, the Navy will extend the operational service
    life of these ships, during which time they will remain relevant and
    reliable until they retire 44-51 years after commissioning.
        The phased modernization plan for CGs and LSDs allows the Navy to
    garner 172 additional operational ship years above the permanent force
    structure cuts required to meet the limits imposed by the BCA, and
    precludes the Navy from having to increase our overall end strength by
    about 3,700 people, which would otherwise be required to fill critical
    shortfalls in our training pipelines and fleet manning. Phased
    modernization also greatly benefits the industrial base by providing a
    steady, predictable work flow which increases production efficiency and
    lowers cost to the Navy. The HM&E-centric maintenance and modernization
    availabilities can be scheduled at times when there is a shortage of
    work in the various homeports, thereby leveling the work load and
    effectively utilizing industrial facilities, such as drydocks and
    piers. Without the pressure of meeting near-term fleet deployment
    schedules, the work can be planned in the most economical and efficient
    manner, including reducing the need for costly overtime rates and
    hiring subcontractors to supplement shipyard workforce. An additional
    advantage of the phased modernization approach is that it provides an
    option to restore the ships to service in the event of a shift in the
    strategic environment in much less time than would be required to
    construct new ships.
        The fiscal year 2015 President's budget request also includes
    funding for the modernization of 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. The
    Navy is proposing a two-pronged modernization plan to maintain
    relevance throughout the destroyer fleet: continue to modernize the
    Flight I/II destroyers, and modernize the Flight IIA destroyers
    beginning in fiscal year 2017. This approach maximizes return on
    investment by modernizing the ships close to their midlife, and
    increases BMD capacity by installing BMD on Flight IIA destroyers. The
    destroyer modernization program includes HM&E upgrades as well as
    advances in warfighting capability and open architecture combat
    systems. This renovation reduces total ownership costs and expands
    mission capability for current and future combat capabilities.
                                    summary
        The Department's shipbuilding plan continues to build toward the
    306-ship force requirement that is defined by the Force Structure
    Assessment. The Department of the Navy 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.
    The request for fiscal year 2015 includes two Virginia-class attack
    submarines, two DDG-51 Arleigh Burke-class destroyers, and three
    Littoral Combat Ships. 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.
    Budget uncertainties may slow progress towards our goals, but the
    tenets which guide our decisions remain firm. The Navy and Marine Corps
    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 2015 President's budget request for the
    Department of the Navy's program.

        Senator Reed. Thank you very much, Mr. Secretary.
        I've just been informed that there's a possible procedural
    vote at 3 p.m., so we will try to work around that in terms of
    getting our questions to you and your responses.
        Let me begin. We've looked over the last several years at a
    number of shipbuilding programs, obviously those that have cost
    overrun problems or quality problems. One program, not the only
    one, but one that we've paid attention to, is the LPD-17. Last
    year, Secretary Stackley, you indicated that you saw some real
    progress in terms of cost control and quality increases in that
    program. Could you elaborate on that, and are we continuing in
    that direction?
        Mr. Stackley. Yes, sir. I'll start this answer and I'll
    turn it over the back half to Admiral Hilarides, who is
    responsible for the Supervisor of Shipbuilding (SUPSHIPS).
        The LPD-17 has remained very stable in terms of cost
    performance as we complete the last handful of ships. The last
    two ships delivered to the Navy, LPD-25 and -26, very high
    quality, very stable, predictable cost performance. In fact,
    LPD-26 delivered without starred card deficiencies, where a
    starred card is the highest level deficiency, and to achieve a
    zero starred card level at acceptance is extraordinary.
        The additional challenge that we've been able to control is
    completing the class. As we complete production, we've been
    able to keep costs under control and not see a tail-up at the
    end of production, which is fairly typical of any long-term
    production run. Stable, mature designs, fixed price contracts,
    close collaboration between the Navy and the shipbuilder to
    keep costs under control, quality at delivery.
        I think Admiral Hilarides, I'd like him to expand on the
    efforts that Naval Sea Systems Command (NAVSEA) with the
    Supervisor have put in place to ensure we stay on top of the
    quality of ships.
        Senator Reed. Admiral Hilarides?
        Admiral Hilarides. Yes, sir. Senator, as Secretary Stackley
    said, the finish quality of the late LPD-17s has been as good
    as we've seen across the shipbuilding portfolio. A lot of hard
    work by the shipbuilder. My supervisor is fully integrated into
    that shipbuilding team to go help them over the initial quality
    problems we had with those ships, and are bringing to bear the
    engineering and contract oversight resources to go make that
    program perform well, on cost, as the quality has improved.
        That quality performance, which has continued to improve
    across the LPD-17 class, has actually begun to show on the LHA
    class as well. America's in-serve is also very successful, fit
    and finish of that ship is extremely good and better than any
    of the previous ones we've seen in the last 10 or 15 years. The
    commitment of the supervisor, working closely with the
    shipyard, has borne fruit and quality performance is
    dramatically better.
        Senator Reed. May I ask you a related question? In one of
    our previous hearings in 2013, one of the areas of attention--
    particularly to the attention of Vice Admiral Kevin M. McCoy,
    USN, the Commander of Naval Sea Systems Command at that time--
    was increasing the skill and the ability of the supervisor and
    his staff, SUPSHIPS, because they are literally your people on
    the docks and in the construction areas. Can you talk about if
    we are making continued progress to raise the quality and the
    training and the effectiveness of the SUPSHIPS personnel?
        Admiral Hilarides. Yes, Senator. We had made a modest
    increase in the size of that staff and that increase, although
    it was slowed by the events, the hiring freeze, and other
    things that occurred in 2013, that supervisor is now
    approaching being fully manned.
        Our commitment to train the engineering resources, that is
    to push the engineering decisions down to the waterfront, has
    borne fruit. That requires that training that you talked about
    and the full engagement of my technical staff in Washington
    with the technical folks on the deckplate. That training
    program is going well. Still plenty of work to do, but the
    teamwork that has been established, the improvements in quality
    and the improvements in schedule adherence are really showing
    that that investment has turned out very well. Admiral McCoy is
    on the right track.
        Senator Reed. Just quickly, you're satisfied you have the
    sufficient number of personnel and that they are adequately
    trained and they also have the cooperation and collaboration
    with the contractors to get the job done?
        Admiral Hilarides. Yes, sir, I am.
        Senator Reed. Mr. Secretary?
        Mr. Stackley. I'm going to just expand on that a bit.
        Senator Reed. Please.
        Mr. Stackley. That's been a long-term effort to get that
    work force in place. All of our manpower accounts are under
    great pressure right now. In all the budget deliberations in
    terms of the impacts of budget drawdowns, we are having to hold
    our ground to not go in reverse in terms of what we knew we had
    to do and did to get the eyes on site at SUPSHIPS.
        Senator Reed. One of my impressions is that this, the value
    of these individuals, wasn't truly appreciated until we had the
    overruns and the inefficiencies and the problems, and then we
    recognized we have to have these people on the waterfront with
    the ability and training. The pressure between putting people
    on the waterfront supervising contracts and putting people in
    the air flying aircraft or undersea driving ships is acute when
    they're building; is that fair?
        Admiral Hilarides. That's very fair, sir.
        Senator Reed. Quickly, the ORP. There is an implication
    from the fallout of both sequestration and the BCA on the NNSA,
    which plays a role in the development of the nuclear power
    plant. There's the suggestion that there could be as much as a
    6-month delay because of issues involving the nuclear power
    plant. Can you provide us any insights into this potential
    delay, any way we can resolve it, and does this require
    attention--it does require attention of the Navy, but also from
    the NNSA?
        Mr. Stackley. Yes, sir. The total shortfall that we are
    struggling with right now is about $150 million associated with
    NNSA. The 6-month impact--that's the assessment of Admiral John
    M. Richardson, USN, Director of the Naval Nuclear Propulsion
    Program, in terms of what that shortfall as it hits his
    requirements for development of the reactor plant for the ORP,
    that's upfront. A 6-month delay upfront you cannot recover
    downstream.
        We're trying to draw the line here on this issue, working
    with NNSA, making Congress aware. Inside DOD, it has the high-
    level attention from the Nuclear Council inside of DOD. But we
    don't have a solution today. Today we're staring at this coming
    our way. We do not have a solution. Our ability to try to
    mitigate that 6-month potential impact if the funding doesn't
    arrive is going to be very limited, and what that places at
    risk is the follow-on schedule for the ORP.
        Frankly, we're sitting here in 2014 deliberating on the
    2015 budget for a boat that is required to be on patrol in
    2031. This is simply the first stage of what will be a year-
    upon-year effort to try to keep that program's funding whole.
        Senator Reed. This is a key factor in keeping the cost of
    the program well within the envelope you've laid out?
        Mr. Stackley. Yes, sir.
        Senator Reed. Thank you very much.
        Senator McCain.
        Senator McCain. Thank you, Mr. Chairman.
        I thank the witnesses. Secretary Stackley, the cost of the
    Gerald R. Ford was $12 billion, is that correct?
        Mr. Stackley. Actually, sir, the cost cap, the budget, and
    the estimate at completion are all $12.8 billion.
        Senator McCain. $12.8 billion. Is that a $2.8 billion cost
    overrun?
        Mr. Stackley. The cost cap that was established in 2006 for
    the Gerald R. Ford was $10.5 billion in 2006 dollars.
        Senator McCain. So it's a $2.3 billion cost overrun?
        Mr. Stackley. Yes, sir.
        Senator McCain. Have we ever figured out what caused all of
    that?
        Mr. Stackley. Yes, sir, we can give you a very detailed
    breakdown.
        Senator McCain. For the record you could provide us with a
    readout as to what caused that.
        [The information referred to follows:]

        Total cost growth on CVN-78 since contract award in 2008 is
    approximately $2.4 billion (22.9 percent). The causes of cost growth
    can be attributed to the ship design costing more than the Department
    of Defense estimated ($738 million), the shipbuilder underestimating
    the cost of components ($336 million), unforeseen issues with new
    design features inherent in a first-of-class ship as well as late
    delivery of components to support the ship construction schedule ($334
    million), and increases in design and production of developmental
    technology for CVN-78 ($955 million).
        The lead ship design was more costly than the Navy anticipated in
    2008. The scope of the design was underestimated and resulted in $738
    million of cost growth. Design is largely complete and there is no
    additional risk to the funding for design efforts.
        When the ship design was immature, the shipbuilder, Huntington
    Ingalls Industries, underestimated quantities and/or the unit costs of
    particular items. For many components, the shipbuilder overestimated
    the success of reducing procurement costs through negotiation with
    vendors. Lastly, escalation in the prices of commodities, particularly
    steel, exceeded the projections made at contract award. Material
    purchases for the ship are complete so the cost growth of $336 million
    remains unchanged.
        Much of the variances in shipbuilder performance can be attributed
    to unforeseen issues encountered with the new design features inherent
    in the first-of-class ship. As examples, thinner decking incorporated
    into the design to reduce weight proved to be significantly difficult
    to weld while maintaining critical tolerances for alignment and deck
    fairness. Similarly, large inconel forgings such as sea chests,
    exhibited cracking, resulting in rework and disruption to the
    construction schedule. The startup of new processes for advanced
    coating systems have required more labor hours than initially expected.
    Also, late deliveries of contractor furnished equipment impacted
    production, causing unit pre-outfit levels to fall well below standard.
    For example, delays in delivery of a large number of unique critical
    system valves have proven particularly disruptive, causing many
    compartments to be temporarily outfitted with spool pieces pending
    receipt of the proper valves. In the extreme case, the CVN-78 erection
    schedule was disrupted to accommodate the late delivery of the ship's
    air conditioning plants. As the ship is now entering the test phase of
    the program, this cost growth is not expected to change ($334 million).
        Finally, the Navy experienced cost growth in developmental
    technology incorporated into CVN-78. Examples of these systems include
    the electromagnetic aircraft launch system, the advanced arresting
    gear, dual band radar, and integration of smaller systems into the
    combat system. These systems have been procured and largely installed
    in CVN-78 so the $955 million of cost growth should not increase.
        CVN-78 is entering the critical shipboard test phase of the
    program. This is the single area of risk that could affect the cost
    cap.
        Follow-on carriers of the Ford-class are not expected to experience
    the same cost challenges faced by CVN-78 since they will not be
    affected by the first-of-class issues facing the lead ship. In addition
    to working with the shipbuilder to incorporate lessons learned from
    CVN-78 design and construction, joint Government shipbuilder integrated
    product teams have been established to aggressively pursue further cost
    reduction goals for CVN-79 in the areas of material, labor, and design.

        Senator McCain. Now, what's going to be the cost of the
    John F. Kennedy?
        Mr. Stackley. The John F. Kennedy's budget and cost cap are
    set at $11.498 billion.
        Senator McCain. Are we going to make that number?
        Mr. Stackley. Yes, sir. We are totally committed to doing
    better than that number.
        Senator McCain. The Enterprise?
        Mr. Stackley. The Enterprise, she's just starting to show
    in the budget, so right now all we have is the cost cap
    associated with the Enterprise, which is equal to the John F.
    Kennedy's plus inflation.
        Senator McCain. I'd appreciate very much in writing exactly
    what took place that caused this horrendous overrun of the
    Gerald R. Ford.
        Mr. Stackley. We'll give you a detailed breakout, Senator.
        Senator McCain. We just can't have that. It's not
    acceptable. Also, how, when it's the only game in town, we are
    able to keep costs under control when there is clearly no
    competition nor any prospect of it.
        Secretary Stackley, are you familiar with the GAO report
    released just recently? The title of it is: ``Additional
    Testing and Improved Weight Management Needed Prior to Further
    Investments.'' According to GAO: ``Several Seventh Fleet
    officials told us they thought the LCS in general might be
    better suited to operations in the smaller Persian Gulf. The
    Commander of the U.S. Pacific Command (PACOM), Admiral Samuel
    J. Locklear, III, USN, said that the LCS is only partially
    effective in fulfilling his operational requirements.''
        Have you seen that GAO report?
        Mr. Stackley. Yes, I have, sir.
        Senator McCain. Have you had a chance to examine it and
    have a response to it?
        Mr. Stackley. Yes, sir. I've gone through it in fairly good
    detail and each issue that they've brought up we've gotten down
    to the base of to determine is it correct, is it incomplete
    information they're working with, is it an issue that we're
    already working on.
        In specific, you mentioned two items in particular.
    Referring to Seventh Fleet officials and whether the LCS is
    better suited to the Gulf or to the Pacific, I can't trace that
    down because I don't know who the Seventh Fleet officials were.
    My dialogue has been with the Commander, Naval Surface Forces,
    in terms of the LCS and its applicability to all regions where
    it should be called upon to operate in, and there has been no
    reluctance, no concern in that regard.
        Now, that said----
        Senator McCain. Could I just interrupt----
        Mr. Stackley. Yes, sir.
        Senator McCain.--if you don't mind. Admiral Locklear told
    the committee that the LCS is only partially effective in
    fulfilling his operational requirements. That wasn't an
    anonymous official.
        Mr. Stackley. In terms of Admiral Locklear's testimony, I
    watched and reviewed that and, frankly, his comments I will say
    are very similar to Commander, U.S. Fleet Forces Command. When
    they look at our naval force structure and they consider the
    fact that we are below 300 ships today, they are concerned with
    the balance between SSCs, large surface combatants, and
    submarines. They have not addressed a shortfall in terms of the
    LCS requirements. Their concern has been with the overall force
    structure.
        Senator McCain. Why do you think, then, that the Secretary
    of Defense directed the Secretary of the Navy (SECNAV) to
    reduce the buy of LCS?
        Mr. Stackley. The specific direction that we received was
    to not put any additional ships on contract beyond 32 until we
    have completed a study to take a look at increasing the
    lethality of our SSCs and basically return with the results of
    testing on the program. We've been directed to look at three
    different alternatives: new ship design, existing alternative
    ships, and potentially modifying the LCS.
        Senator McCain. Modifying the LCS, after 12 years.
        By the way, I read the Secretary of Defense's full
    statement. I think you left out a couple of phrases in there.
    Maybe my staff has his full statement, but he said a lot more
    than that in ordering the reduction in the numbers acquisition.
        The GAO report basically says we haven't received the
    mission modules completed and a couple of them won't be done
    for several years; is that correct?
        Mr. Stackley. We have three mission packages that are in
    testing right now. The surface warfare mission package, the
    first increment completes her testing this month and it's in
    very solid shape. The second mission package is mine
    countermeasures mission package, which starts her developmental
    testing this year, going into operational testing next year.
    The elements of the mine countermeasure mission----
        Senator McCain. Operational that next year----
        Mr. Stackley. Yes, sir.
        Senator McCain.--with completion of that testing when?
        Mr. Stackley. August 2015.
        The individual elements of the mine----
        Senator McCain. The third?
        Mr. Stackley. I'm sorry. The third mission package is the
    antisubmarine warfare mission package, which goes into
    operational testing in June 2016.
        Senator McCain. To be completed?
        Mr. Stackley. It's about a 1-month period for operational
    testing. It would be the summer of 2016.
        Senator McCain. It was, I believe, 2002 when we embarked on
    the effort to acquire a LCS?
        Mr. Stackley. 2005 is when the first two ships were
    awarded. 2002 would have been when the design and developments
    were started.
        Senator McCain. I see, so now we're looking at 2016 or 2017
    by the time the ship is operationally capable?
        Mr. Stackley. The first ships are going to be deploying
    with the surface warfare mission package. Freedom went with the
    surface warfare mission package. Fort Worth deploys later this
    year with a surface warfare mission package. Frankly, I will
    tell you that the priority is placed on the mine
    countermeasures mission package because that's where we have
    the greatest warfighting capability gap, and so we're doing
    everything we can to ensure that that operational testing stays
    on track.
        Senator McCain. Again, Secretary Stackley, I appreciate
    your testimony, but I would like to quote you what the
    Secretary of Defense said: ``The LCS was designed to perform
    certain missions, such as minesweeping and antisubmarine
    warfare, in a relatively permissive environment. But we need to
    closely examine whether the LCS has the independent protection
    and firepower to operate and survive against a more advanced
    military adversary and emerging new technologies, especially in
    the Asia-Pacific region.''
        I think that puts a little bit different slant on, frankly,
    why the Secretary decided to reduce the buy of the LCS, because
    we still don't know if it is capable in a nonpermissive
    environment, relatively permissive environment. That's what the
    Secretary of Defense says.
        I think your answer, frankly, was a little incomplete to my
    question.
        Mr. Stackley. Can I provide a more complete response, sir?
        Senator McCain. Please.
        Mr. Stackley. Yes, sir. The LCS is designed for what's
    referred to as level 1 survivability, and it has a self-defense
    capability that gives it the ability to defend against certain
    air threats. The Secretary of Defense's concern is that when
    you look at the increasing threat environment in the Pacific,
    we need to take a look at raising that level of lethality on
    that platform. That's exactly what we're going about doing.
        Senator McCain. Again, I say with respect, he says: ``We
    must direct future shipbuilding resources toward platforms that
    can operate in every region and along the full spectrum of
    conflict''--again bringing into question whether the LCS is
    capable of performing all of those missions.
        But my time has long expired. I thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator McCain.
        We have a vote pending now. We're more than halfway through
    it. There's two basic options, a short recess where we all vote
    or I could recognize Senator King and then Senator Sessions
    could follow. Do you have any preference? Senator King?
        Senator King. I suggest we have a brief recess and we all
    go.
        Senator Reed. A recess and then we will--with the wisdom of
    the panel, we will recess briefly and return, and ask you
    gentlemen to stay. The subcommittee stands in recess until the
    call of the Chair.
        [Recess from 3:08 p.m. to 3:22 p.m.]
        Senator Reed. I'd like to call the hearing to order again
    and recognize Senator Wicker.
        Senator Wicker. Thank you, Mr. Chairman.
        Secretary Stackley, let me ask you about the LPD-26. The
    subcommittee has had numerous hearings in the past on the
    performance and quality of ships entering our Navy fleet. As
    the USS John P. Murtha nears completion and delivery, what is
    your assessment today of the quality and performance of the
    LPD-17 class ship?
        Mr. Stackley. Yes, sir. Thanks for the question. It's
    consistent with my earlier response with Senator Reed that the
    quality of the LPD has steadily improved to the point that the
    recently delivered ships are of the highest quality. The focus
    right now is pushing that quality control upstream in the
    process, because the delivered quality is good, the practices
    are there; the more we can push that upstream, the better the
    cost will improve along with that.
        Senator Wicker. That's good to hear.
        Let me then ask you about requirements. Are you aware of
    the letter regarding amphibious ship shortfalls that was signed
    by a group of 20 retired Marine Corps generals, including
    former Commandant of the Marine Corps General James T. Conway
    and former Commander of the Central Command General James N.
    Mattis?
        Mr. Stackley. Yes, sir, I am.
        Senator Wicker. Consistent with that letter from our
    retired Marine Corps generals, Commandant James F. Amos and CNO
    Jonathan W. Greenert, testified last month that they would need
    50-plus amphibious ships to meet the current needs of the
    combatant commanders. Now, the LPD-17 program was originally
    planned for 12 warships, but was reduced to 11 vessels due to
    budget constraints.
        Do we need that 12th LPD to support your mission?
        Mr. Stackley. Let me walk you through this, sir. The total
    lift requirement for the amphibious force is a total of 38
    amphibious ships. About 4 years ago the CNO and the Commandant
    agreed that they would accept a shortfall to the 38 amphibious
    ships, based on budget constraints, and the risk that's
    associated with it, and that we would build to a 33-ship
    amphibious force, 11 big decks, 11 LPD-17s, and 11 LSD-41/49 or
    their replacement.
        So the unconstrained requirement for two marine
    expeditionary brigade lift is 38 ships. The budget-constrained
    requirement is 33 ships. Today we're at 30 ships, and we get
    back up to 33 ships total in about the 2018 timeframe, although
    we don't get to the mix of 11-11-11 until 2024.
        Senator Wicker. Okay. What risk are we accepting based on
    those numbers?
        Mr. Stackley. The risk between the 38-ship and the 33-ship
    number, what that means is that in a major combat operation
    that's involving the amphibious force, some amount of its
    gear--and it would be prioritized--would have to be delivered
    in a follow-on echelon. It would not be there with the
    immediate assault force. That would become a matter of
    prioritizing which gear is in the assault echelon and which
    gear comes behind in the follow-on echelon.
        Senator Wicker. How serious is that?
        Mr. Stackley. I can't speak for the Commandant. I would say
    that if it was very serious he wouldn't have agreed to the 33-
    ship substitute for the 38-ship requirement. It's of concern,
    but the Commandant would not have signed up for something that
    he couldn't ultimately accept. I think it was a matter of just
    recognizing where we are with the budget and drawing a hard
    line so that it doesn't continue to erode regarding the total
    amphibious force.
        Senator Wicker. What do you say to these 20 distinguished
    Marine Corps generals who signed the letter concerning the
    amphibious ship shortfalls?
        Mr. Stackley. Sir, I have to point towards a letter that
    was cosigned by the Commandant and the CNO in terms of the
    requirement that's handed to the Department of the Navy to
    fulfill. We have a longstanding requirement for a total Marine
    Corps lift. We're short on that. The Commandant and the CNO
    agreed to a lesser number with acceptable risk. We're building
    to that.
        I'll go back to the comments that the CNO and the
    Commandant both made: We need more ships. The CNO's comment
    about a 450-ship force, that would be the total number of ships
    to answer all the demands by the combatant commanders. The
    notion of a 50-ship amphibious ship force, I think that's less
    about the requirement to support major combat operations and
    it's more in recognition of the fact that the versatility of
    those amphibious ships makes them a workhorse in the fleet.
    There's always going to be high demand for that type of
    capability.
        Senator Wicker. Thank you.
        Thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator Wicker.
        I will take my second round now until my colleagues rejoin
    us.
        Admiral Mulloy--and this was alluded to in Senator McCain's
    comments--for years the goal in ship size for the fleet, 313
    ships, last year adjusted down to 306 ships. This year the Navy
    has changed the definition of a ``ship'' which will be included
    in the goal. Can you briefly describe what you're counting,
    what you're not counting, and how does this affect the 306-ship
    goal?
        Admiral Mulloy. Yes, sir. Really there are two separate
    items here. The 306 goal is based upon what's called a force
    structure assessment, which is actually made of 9 separate
    parts, which we total to 306. That requires when we do a study
    on that, and I'll talk about it in a minute, it is 11 aircraft
    carriers, 48 fast attack submarines, 88 large combatants, 52
    small combatants, and you work your way down to auxiliaries.
        That total is 306 ships, but it's actually nine separate
    adds of types of ships. That is done by analysis of what was
    the build and then they actually take what's called the global
    employment of the force, joint force states, and combatant
    command demands. We actually go visit the combatant commanders
    and ask them what ships for the various missions. You have
    command plans, you have theater security cooperation plans, you
    have low-intensity conflict, a wide variety of items. After you
    get the combatant commanders, you go back, pull that together,
    and that then becomes that force structure assessment.
        The ship counting rules were merely a change, a change to
    look at what do we have now and what are they fulfilling. We
    don't have 52 SSCs. We are building the LCS for that. What we
    have now are minesweepers, many of them in the Middle East. We
    have put 10 patrol coastal ships in the Middle East, 10 of the
    13.
        Historically, it was if you couldn't what we call self-
    deploy, you had to be lifted on a ship there, if you're in the
    United States of America you didn't count; when you were
    forward you did. That's why the minesweepers counted, but the
    patrol coastal ships were left off that calculus.
        So we went back and said: Okay, 3 minesweepers in San Diego
    don't count, but the 10 patrol coastal ships forward do. We
    said those are not equivalents to, they don't affect the 52
    count, they're all going to decommission by 2020, which the 306
    was a 2020 number.
        The other ones that were added was the high-speed ferry
    that we have purchased from the U.S. Maritime Administration
    and we're going out with to be able to move marines around the
    Pacific. It completes a theater security cooperation goal, not
    a warfighting goal, and the two hospital ships.
        The CNO and the SECNAV met and said, the hospital ships
    have a wartime mission, they're rated, they're on what's called
    the time-phased deployment plan, they should flow to support
    combat, but they also deploy routinely now each year to support
    missions around the world, once again under the defense
    strategy.
        It was made up of counting deployed ships that don't
    deploy, so you have the mine countermeasures ships and the
    patrol coastal ships, you have the hospital ships, and you have
    the one ferry, and that made up the new counting rules. We
    looked at changing the counting rules last year. It's a SECNAV
    instruction. It was merely to allocate. But it really has
    nothing to do with the 306 ships.
        Senator Reed. Thank you, but I must say that when you count
    deployed ships that don't deploy you get into something; you
    have to really work your mind around to appreciate that. Also,
    when you mentioned accounting it opens up a vast array of
    complex rules that sometimes reflect reality.
        I appreciate your answer, but I think we're going to
    continue to draw some attention to these issues. Thank you very
    much.
        Secretary Stackley, going back to the LCS, it is a block
    buy. You have favorable pricing fiscal years 2011 through 2015
    based upon two ships from each yard. Yet, as I see the budget,
    only three ships are going to be acquired this year in your
    proposed budget. How do you do that and still get the
    affordable pricing?
        Mr. Stackley. Yes, sir. Losing the last ship of the block
    buy in 2015 and moving it into 2016 was another one of the
    casualties of the drop in the budget. What we are going to do--
    we have not engaged industry yet--is we're going to sit down
    with the two shipbuilders associated with the LCS program and
    we're going to look at production schedules, the vendor base,
    and performance on the program, and effectively look to extend
    the pricing, the pricing validation date for that last ship
    between the two shipbuilders.
        In terms of what we anticipate as impact, I see zero impact
    in the shipyard based on the production schedules. The concern
    is regarding the vendor base. We have to take a hard look at
    the sequence in which they're ordering material for that last
    ship and try to ensure that we don't incur--there will be some
    cost impact. This isn't going to go to zero. But to minimize
    any cost impact associated with delays to ordering material.
        Senator Reed. Thank you.
        Let me ask a final question for the record, and that is,
    we've talked about specific shipbuilding programs, the carrier
    program, the LCS program. For the record, could you give us a
    status report on all the major shipbuilding programs, in terms
    of how well they're performing, in terms of both cost and
    quality and delivery time, which I think are the three key
    variables? If you can think of more helpful information, please
    include that also. But that's something I think would be
    terribly useful to the subcommittee as we go forward, a status
    report.
        Mr. Stackley. Yes, sir. I'll watch my time on this. I'm
    just going to start at the top of the list and work my way----
        Senator Reed. No, no. If you would take this for the
    record.
        Mr. Stackley. Oh, okay.
        Why don't I send a letter to the subcommittee just giving
    you a walk-through.
        Senator Reed. Exactly.
        Mr. Stackley. Yes, sir.
        Senator Reed. You can spend the time. You can have
    consistent measures program-by-program, so that you can give us
    green, yellow, red. We have green programs, we have yellow
    programs, and we have some red ones. We want to know what the
    red ones are and the green ones.
        Mr. Stackley. Yes, sir.
        Senator Reed. Everybody can't be yellow. [Laughter.]
        Mr. Stackley. We have some green ones, sir.
        [The information referred to follows:]

        Together with our industry partners, Navy has made significant
    progress in the past few years improving performance in terms of cost,
    quality, and schedule. In the last 18 months, Navy delivered eight
    ships to the fleet, including two first of class ships, LHA-6 and MLP-
    1. There are currently 67 ships under contract, with 33 ships in the
    construction phase. All but two ships (i.e., 65 of 67) are fixed price
    contracts. A status update of the major shipbuilding performance by
    ship class is provided below.
    CVN-78 Class
             CVN-78:

                    - CVN-78 is in its 7th year of construction and is 78
                    percent complete. Cost performance issues associated
                    with early design, material procurement, and
                    manufacturing have been thoroughly accounted in other
                    periodic (monthly) CVN-78 reports to Congress.
                    - Construction efforts remain on track for a March 2016
                    delivery date.
                    - Cost performance of the shipbuilder remains stable.
                    - Quality metrics indicate that CVN-78 is being
                    constructed to a high quality standard, particularly
                    for a lead ship of the class.
                    - Integration and test of developmental systems
                    (including electromagnetic aircraft launch system
                    (EMALS), advanced arresting gear (AAG), dual band radar
                    (DBR)), as well as execution of the overall shipboard
                    test program, represent the majority of remaining cost,
                    schedule, and technical risk on CVN-78. The test
                    program has only recently begun in earnest, with
                    initial testing of EMALS, AAG, and DBR slated to begin
                    within the next year.
                    - Land based test programs have been used to mitigate
                    technical risk on CVN-78 developmental systems to the
                    maximum extent practical and have been successful in
                    reducing risk. However, these technologies are complex
                    and issues are likely to be discovered during the
                    shipboard test program that will need to be resolved.

             CVN-79:

                    - The Navy is currently negotiating with Huntington
                    Ingalls Industries-Newport News Shipbuilding (HII-NNS),
                    for the award of CVN-79 detail, design, and
                    construction (DD&C) contract. While negotiations
                    continue, the Navy has extended the construction
                    preparation (CP) contract to allow continuation of
                    ongoing construction and material procurement.
                    - The placement of nearly all (95 percent) direct
                    material on the CP contract is allowing HII-NNS to
                    efficiently procure this material, including
                    implementing economic order quantity procurements.

    SSN-774 Class
             18 ships are under contract with 8 Block III ships
            (SSN-784 to 791) under construction.
             Final Block II ship-Minnesota (SSN-783) was delivered
            to the Navy on June 6, 2013, 11 months early to the contract
            delivery. This is the shortest construction span for a
            Virginia-class submarine delivered by HII-NNS and continues the
            improvement in Block II performance by each of the shipbuilders
            over their previous delivery. The ship was within budget and
            had the highest readiness score of any Virginia-class submarine
            to date, as measured by the Board of Inspection and Survey
            (INSURV).
             The first ship of Block III, North Dakota (SSN-784) is
            projected to deliver this summer.
             The Navy's estimate of savings for the 10 ship fiscal
            year 2014 to fiscal year 2018 multi-year procurement (MYP)
            contract as a result of Block IV contract negotiations is $5.4
            billion or 16.5 percent over annual procurements.
    DDG-1000 Class
             Three ships (DDG-1000 to 1002) are under construction.
             Late delivery of Huntington Ingalls Industries (HII)
            products (DDG-1000 and DDG-1001 deckhouses and hangars) to Bath
            Iron Works (BIW) coupled with the delay in electrical
            completion and HM&E delivery at BIW on DDG-1000 has caused cost
            overruns and schedule delays to delivery of both DDG-1000 and
            DDG-1001. The overruns are covered in the Navy's budget.
             The quality of products for DDG-1000 from BIW and HII
            has been good overall.
             Raytheon and BAE performance on cost, schedule, and
            quality has been good overall.
    DDG-51 Class
             14 ships are under contract with 4 ships (DDG-113 to
            116) under construction.
             All four fiscal years 2010 to 2012 DDG-51s are
            currently forecast to deliver by the contract delivery dates.
            However at BIW, changes to DDG-1000 and DDG-1001 schedules may
            impact DDG-115 and DDG-116 deliveries.
             Both shipyards have experienced loss of learning and
            efficiency on the fiscal years 2010 to 2012 DDG-51s, compared
            to earlier ships of the class, due to the interruption of
            production. Both yards are taking aggressive steps to improve
            labor performance and achieve their former production
            efficiencies. The Navy sees an improving trend at both yards
            but this trend needs to accelerate.
             The quality of products for DDG-51 at both BIW and HII
            remains good.
    Littoral Combat Ship Classes (LCS-1 and LCS-2 Variants)
             20 ships are under contract with 10 ships (LCS 5 to
            14) under construction.
             The total program cost remains within the service cost
            position established at Milestone B in 2010. The ship
            construction schedules have shifted on the initial ships of the
            block buy contracts as required facility upgrades were
            accomplished and manning was ramped up to support serial LCS
            production. The Navy has seen cost growth as a result of
            schedule delays but this growth is covered in the Navy budget.
             The LCS program has been careful to pace ship
            construction with efficient use of newly built facilities and a
            qualified labor force. Navy is continuing to work with both
            yards to capitalize on the facility investments and streamline
            the serial production processes at each location. Beginning in
            early 2015 LCS, each builder will deliver one LCS approximately
            every 6 months.
             The quality of the products at both Austal USA and
            Marinette Marine continues to be good.
    LHA-6 Class
             One ship (LHA-7) is under construction.
             HII delivered LHA-6 (USS America) in April 2014. The
            ship was of high quality, but was late to contract schedule and
            completed at the ceiling price.
             LHA-7 is approximately 5 percent complete.
             The first of flight 1 ship of the America-class, LHA-8
            is more than halfway through preliminary and contract design
            with efforts ongoing under the early industry involvement
            contract to drive affordability into future procurement. LHA-8
            procurement is planned for fiscal year 2017.
    LPD Class
             Two ships (LPD-26 and LPD-27) are under construction.
             HII delivered LPD-25 (USS Somerset) in October 2013.
            The ship was of high quality, but was late to contract schedule
            and completed at the ceiling price.
             LPD-26 and LPD-27 are scheduled to deliver in May 2016
            and July 2017, respectively.
             Early performance on LPD-26 and LPD-27 was challenged
            by facility capacity and an influx of green labor. A portion of
            pipe detail and unit assembly for both ships was/is being
            conducted at the Avondale facility to mitigate impacts from
            those early challenges; and production performance has
            stabilized. Quality, outfitting levels, and rework percentages
            have improved over previous hulls. Both ships' performance
            indicators predict delivery will be late to contract schedule
            and above the contract budget.
    JHSV-1 Class
             Seven ships are under contract with three ships (JHSV-
            4 to JHSV-6) under construction.
             After delaying the initial start of production to meet
            the Navy's production readiness requirements, Austal delivered
            JHSV-1 in December 2012 at high quality. Now in serial
            production, Austal delivered JHSV-2 in June 2013 and JHSV-3 in
            March 2014. The initial operating capability for the class was
            met in November 2013 and JHSV-1 deployed on her maiden voyage
            in January 2014 and performed as expected.
             With a competitive fixed-priced incentive contract,
            the lead ship cost performance was near ceiling, and over
            target costs were experienced on the follow ships under
            construction. These costs were covered in the Navy's budget.
            Both cost and schedule performance are improving on the follow
            ships, although a competition for labor resources within the
            shipyard with the LCS program, has resulted in some schedule
            slip on the JHSVs.
             The Board of INSURV was impressed by the quality of
            both the ships. ``USNS Spearhead (JHSV-1) was found to be a
            highly capable, well-built, and inspection-ready ship'' and
            that ``overall performance compares favorably to more mature
            shipbuilding programs.'' The USNS Choctaw County (JHSV-2)
            raised the bar even higher, with perfect scores in all five
            underway demonstrations of its final contract trial prompting
            the senior INSURV inspector to comment `` . . . this was the
            first ship in his memory that scored 100 percent across the
            board on its demonstrations.''
    MLP-1 Class
             One ship is under construction (MLP-3).
             With design complete before start of construction,
            MLP-1 and MLP-2 were both delivered with high quality, on
            schedule, and on cost.
             MLP-3 will deliver in 2015 and performance indications
            are that this ship will continue the on-schedule and on-cost
            trend for the class.

        Senator Reed. Senator Sessions.
        Senator Sessions. Thank you, Mr. Chairman. Thank you for
    the leadership of this subcommittee and the leadership you're
    providing in the Senate. You do a great job and it's an honor
    to work with you.
        Senator McCain made some criticisms and analyzed areas of
    concern that he had with the LCS. Let me ask you a few
    questions. Secretary Hagel's decision basically affirmed the
    production of 32 ships, and then he said we have to have an
    evaluation after that. The program will stop, which I wish he
    hadn't said, but he said it will stop, but there would be an
    evaluation after that as to where we would go and whether or
    not this ship is proving itself and what capabilities could be
    added to it or whether we needed a new ship, something of that.
        Wasn't that the essence of what Secretary Hagel said?
        Mr. Stackley. Sir, the only thing I have to work with here
    is the memo that he signed out to the SECNAV, which did not say
    that the program will stop. He said the program will not
    contract beyond 32 ships.
        Senator Sessions. You're correct, that's right.
        Mr. Stackley. Conduct a study, SSC study, to inform the
    2016 budget, budget build, and to look at a new design and an
    existing alternative design or a modified LCS to address his
    concerns regarding lethality and survivability of our SSCs.
        Senator Sessions. Rear Admiral Thomas S. Rowden, USN,
    Director of Surface Warfare Division on the staff of the CNO,
    said recently: ``Today LCS is the most cost effective solution
    to address the enduring littoral capability gaps. We remain
    under the congressionally-mandated cost cap.''
        We have a chart. I'll just show it to you.
        [The chart referred to follows:]

        Senator Sessions. Let's follow this and examine the cost.
    This represents our analysis, really with Mr. Ron O'Rourke from
    the Congressional Research Service, his numbers on the ship.
    These are fiscal year 2014 numbers, which make fiscal year
    2005, the first year, look worse than it was. That's more money
    than we actually spent at the time. But it's gone from $650
    million to $750 million and then commenced a downward trend
    since that time.
        It seems to me, having been in the shipyard in Alabama,
    that this ship, it almost looks like an automobile plant in the
    sense that the ship moves through in one of the most modern,
    maybe the most modern, shipyards in the world. By the time it
    hits the water, it's completely outfitted, with little work
    needing to be done while the ship's out on the water. The costs
    continue to fall.
        Would you explain to us how you see the production
    capability and comment on the fact that at 32 ships, it seems
    to me that the cost would be about as low as we would ever see
    it and the errors should be all worked out of the system by
    then and we are really receiving a very fine ship with little
    error and at the lowest possible price.
        Mr. Stackley. Yes, sir. The key factors were first, design
    stability. You see all the costs on the front end of the
    program. That was largely attributed to the fact that there
    were significant design changes on each lead ship right out of
    the blocks, driven by our demand for increased survivability.
    We changed the specifications to increase the survivability of
    the LCS class right about the time that we awarded those first
    ships.
        Senator Sessions. Mr. Chairman, Secretary Stackley, as I
    recall, the initial estimate was about $290 million or
    something a ship, the base ship, almost as a commercial ship.
        Mr. Stackley. Yes, sir.
        Senator Sessions. Then when the Navy added to that it went
    up to about $350 million. It went up from there. But is that
    the kind of thing you have to work your way through every time
    you start a new class of ships?
        Mr. Stackley. That's the kind of thing we did work our way
    through here. Effectively, a change to the design and the
    specifications at the same time we started construction on the
    lead ships, which by itself has significant challenges, and
    that drove the cost on the first of class.
        We locked down the requirements. We stabilized the design.
    At the same time, both shipbuilders invested heavily in their
    facilities. Then we provided through the block buy a long
    period of stable procurement, so then they could also work with
    their vendor base and then come up with a hiring plan to
    provide the skilled workforce that they need so that you can
    see the type of learning and cost improvement that you have on
    your curve there right now.
        Senator Sessions. Now, what is the congressional cost cap?
    Congress when the price was high put a cost cap on it. Do you
    remember when that was? What is the cost cap, and are you under
    it now?
        Mr. Stackley. I think the current cost cap was set in 2010.
    I don't even look at that cost cap any more because we're
    nowhere near it. The cost cap was set in 2010 with an allowance
    to account for escalation, and what's happened is our costs
    have been going down while the cost cap would incrementally
    increase associated with inflation. It's not even a factor in
    terms of our decisionmaking.
        Senator Sessions. You don't look at it because you're so
    far below it?
        Mr. Stackley. Exactly.
        Senator Sessions. Would altering this production rate,
    could that have costs for the Navy if the assembly line is
    broken or there are significant delays?
        Mr. Stackley. That statement is true of all of our
    shipbuilders right now. We have several programs that are in
    stable production flow and they are all at risk of reduced
    production quantities, which will have a cost impact. In the
    case of LCS, the shipbuilders basically tuned their facilities
    to about a two-ship per-year rate. As you can see in the FYDP,
    that drops down to about a two- to three-ship per-year rate.
    When you split it out over the builders, it's about a one and a
    half-ship per-year rate.
        That reduced rate is going to have some cost impact when we
    look at future contracts.
        Senator Sessions. I believe the Navy had stated that the
    ship for survivability purposes meets or exceeds the same
    standards in those elements of survivability and recovery for
    the frigate. I believe the frigate has about 215 sailors to
    operate that ship, is that right, Admiral?
        Admiral Hilarides. Yes, sir.
        Senator Sessions. That this ship would come in at 50, 60,
    or so sailors to operate this highly modern ship. But is its
    survivability, Admiral, consistent with the frigate's
    survivability?
        Admiral Hilarides. I'll go ahead. I think the CNO covered
    in his testimony very well that the elements of survivability
    include susceptibility, that is how easy it is to hit the ship,
    vulnerability, its self-defense capabilities, and then the
    recoverability part, which is what a lot of people think of as
    survivability. The recoverability of the ship with an aluminum
    hull and thinner skin is almost by definition slightly less.
    But the modularity and the ability to go modify the mission
    package to bring susceptibility down dependent upon the threat
    scenario balances out, and I would say that, yes, it is of a
    roughly equal survivability to the frigate.
        Senator Sessions. My time is up. I would just add for the
    record that Congress asked the Navy and the Navy is seeking and
    has sought to develop a faster, more cost-effective ship
    utilizing smaller crews and less fuel with a lot of flexibility
    and a substantial mission bay and capabilities that we may not
    even know today a ship like that may need to have in the
    future.
        This ship, the bugs are coming out of it, the cost is
    dropping, and we're below what the cost cap said significantly.
    The Navy remains committed to it. It's a joint requirement of
    52 ships, fully approved through the normal, tough combatting
    competitive system of the Navy.
        I guess I would say to you gentlemen, you're going to be
    challenged. Senator McCain is going to challenge you, as you
    know he will, and we all should. I respect that. But I do think
    this is an extraordinary ship, very cost-effective, and I
    believe it has capabilities we may not even know we need now,
    that we will have in the future.
        Thank you.
        Senator Reed. Senator, I've had two rounds. If you'd like
    to ask additional questions that you have, it's completely
    appropriate. We are waiting, I think, on some of our colleagues
    who are returning. I have a couple of other comments I could
    make, but if you have additional questions, please, take this
    time.
        Senator Sessions. With regard to deployment of the ship, it
    would normally be deployed with other ships who may have--as an
    aircraft carrier is vulnerable, they are deployed with other
    ships and other air cover and protection. In hostile zones,
    wouldn't this ship also be deployed in concert with other ships
    that would help provide protection?
        Mr. Stackley. Absolutely, sir. In my opening remarks I said
    we were looking at three things: requirements, capabilities,
    and concepts of operations. Under all circumstances, the LCS,
    like most of our fleet, will be operating as part of a larger
    group. While the LCS is designed for its own self-protection,
    it does rely upon Aegis destroyers and cruisers to provide the
    larger air cover over the theater area.
        We are not inclined to send ships in alone and unafraid in
    a hostile environment. Whether it's an LCS or other ships of
    the battle group, we operate as a force, and that concept of
    operations is an important part of what Admiral Hilarides was
    referring to when he described the CNO's characterization of
    survivability.
        When you think about the ships that the LCS is replacing,
    mine countermeasures ships, patrol craft, the current FFG-7
    class, the LCS has a far more robust degree of survivability
    and self-defense than those ships. The mine countermeasures
    ship today has zero self-defense. Zero. When you think about a
    mine countermeasures mission being performed by a LCS, she is
    far more survivable than the ships she is replacing.
        Senator Sessions. Thank you.
        I guess I'll just comment and may ask for the record. Mr.
    Stackley, I respect you and I think all of us on the
    subcommittee do. I think the Nation should be thankful for
    having you at this very tough job that you have. The Navy will
    be facing some tough choices. We just went through the
    military, the Army's downsizing of its members. Over 100,000
    they're talking about, well over 100,000 members.
        I'm having a little difficulty understanding. People talk
    about the sequester. We've already hit the bottom of the cuts.
    The budget's supposed to be flat the next couple of years and
    then grow at 2.5 percent a year for the next 6 years, I
    believe, or 7 years, which is about $13 billion a year for the
    defense budget increases.
        It seems to me you have a difficult time right now with
    flat budgets and you still haven't fully achieved the savings.
    Steps you take now to save money may only save money several
    years out in the future.
        It seems to me your budget situation would be better 5
    years from now if nothing changes than it is right now, instead
    of worse.
        Mr. Stackley. Actually, sir, as you're aware, the budget
    that we submitted across the FYDP is about $115 billion above
    BCA levels.
        Senator Sessions. That's your submission. The law of the
    United States of America is the BCA, as modified by Ryan-
    Murray, which helped this year and next year some.
        Mr. Stackley. Yes, sir. The BBA is above what the BCA would
    have placed us at. When we looked at if we dropped back down to
    the BCA levels through the FYDP and we look at what that does
    to our ability to provide for the Nation's security, we
    determined that that's not adequate. Therefore, we laid in a
    budget, constrained as best as we could, as close to the BCA
    level as we could, but it's $115 billion above that, and that
    defines what we believe to be the budget necessary to operate,
    maintain, support, and recapitalize the force to meet the
    national defense strategy.
        Senator Sessions. The BCA reduced the growth of spending
    from a growth of $10 trillion to a growth of $8 trillion over
    10 years. Now, I just had in my office the Legal Services
    Corporation, the National Institutes of Health, both of which
    feel they can't sustain our budget either. We're going to have
    to challenge you to do the best you can, and I think--I will
    just say this. If we have to find money, we're going to have to
    find more money for DOD. It's a core function of government.
    But don't think this is going to be easy to achieve, because
    when Congress makes a commitment to limit its spending, it
    needs to stay there.
        Mr. Stackley. Yes, sir. Sir, there's absolutely no
    complacency. One of the things that we are doing our best at is
    trying to inform Congress as best as possible what the
    difference is between the budget we've submitted and what would
    happen if we dropped down to the BCA levels and what impact
    that has on our ability to provide for the Nation's defense.
        Senator Sessions. I look forward to working with you on
    that.
        Thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator Sessions.
        Before I recognize Senator King, Mr. Secretary, you made
    reference to a memo or a letter from Secretary Hagel with
    respect to LCS. Could we have a copy for the record? That would
    help us, if that's possible.
        Mr. Stackley. I will do my best. I'll go back to the system
    and get it to you for the record.
        [The information referred to follows:]

            Senator Reed. Thank you very much.
        Senator King, please.
        Senator King. Gentlemen, thank you very much for joining
    us. I'm looking forward to welcoming Secretary Stackley and
    Admiral Hilarides to Maine on Saturday for the christening of
    the Zumwalt.
        Secretary Stackley, at the posture hearing last month,
    Admiral Greenert showed us this chart, which I'm sure you're
    familiar with, which indicates that if the sequester returns in
    2016 as it's currently scheduled to do, basically there would
    be three less DDGs, four less support ships, the George
    Washington would be retired with a carrier air wing.
        [The chart referred to follows:]

        Senator King. I have a specific question. If the sequester
    returns in 2016, does that affect the 10-ship DDG contract that
    was just finalized?
        Mr. Stackley. Sir, let me say everything is hypothetical,
    correct?
        Senator King. Right.
        Mr. Stackley. What the CNO provided in that chart is, early
    on in the process in the build of the 2015 budget--and I
    mentioned the strategic choices management review, and we
    looked at going down to the BCA levels--that chart reflects one
    of the standing scenarios that we looked at if we had to stay
    at the BCA. Did that scenario make its way through the budget
    process where we had all the debate that needs to take place,
    and we racked and stacked and visited priorities and things of
    that nature? No. But is that a potential outcome? Yes.
        With regards to the specific question of, if we go down to
    the BCA levels, will that impact the 10-ship multi-year?
        Senator King. In 2016.
        Mr. Stackley. Yes, sir, and that's an unanswerable question
    right now, except for I will tell you that shipbuilding is a
    top priority for the SECNAV. The DDG-51 is an extremely strong-
    performing program, and when it comes time to making those
    decisions if we have to budget at the BCA level, those two
    factors are going to weigh very heavily in that decision.
        Senator King. Thank you. I appreciate that. I assume that's
    as far as you can go, given the knowledge of the situation.
        Mr. Stackley. Anything beyond that would just be projecting
    decisions that haven't been made.
        Senator King. Another question involving destroyers. Does
    the President's budget request and the 5-year plan provide for
    the funding of all three of the DDG-1000s?
        Mr. Stackley. Yes, sir. The DDG-1000s were previously
    appropriated. There's additional funding in the budget request.
    It's tied to, when the program was truncated, that drove costs
    up in the program and so there was a cost-to-completion line
    that was laid in. We request the funding in the year of need
    and that's what you see in the budget.
        Senator King. But that budget request is the one that
    exceeds the caps in the out-years, 2016, starting in 2016. The
    President's budget request is for more money than is within the
    current sequester plus caps.
        Mr. Stackley. Yes, sir. In the FYDP 2016 and out, the total
    budget request is above the BCA level. That does not infer that
    the DDG-1000 funding that's laid out in those years is above
    the BCA level.
        Senator King. Let me ask a more general question about the
    shipbuilding industrial base. What's your assessment of the
    overall health of the shipbuilding industrial base? Where are
    the risks, and not only of the major shipbuilders, of course,
    which I have an interest in, but also the supply chain?
        Mr. Stackley. I'm very concerned with it. All testimony,
    Department of the Navy posture hearings, has been to the effect
    of: we don't have enough ships, the budget is putting pressure
    on our shipbuilding account. You look at the industrial base
    today and I will tell you that half of our shipyards are one
    contract away from going out of business. It's extremely
    fragile.
        Senator King. If that's the case, by the way, that means
    there are an awful lot of companies that most of us haven't
    heard of who may be one contract away from going out of
    business.
        Mr. Stackley. Of the vendor base, we have great insight
    into the health and welfare of the shipyards, the shipbuilders.
    It gets more difficult the further you get away from that first
    tier and delve down into the vendor base, yes, sir.
        Senator King. This is not only an economic concern. This is
    a national security concern, is it not?
        Mr. Stackley. Absolutely. Without our strategic industrial
    base, we don't have a Navy. We have to be very mindful of the
    decisions that we make in our formulation of our budget.
    There's current readiness and there's future readiness. We need
    the industrial base in both halves of that debate.
        Senator King. Turning to the ORP, which I understand is a
    very high priority, the Navy is analyzing something called a
    joint cross-class block-buy contract for the Ohio-class and the
    Virginia-class submarines. Can you explain what this concept
    means and to what extent you think it could produce savings
    compared to doing separate contracts for the two classes?
        Mr. Stackley. It's very preliminary to be talking about how
    we buy the ORP, because that's a 2021 boat. The advanced
    procurement's in 2019. We're at the point in time on that
    program where we have to start making decisions between the two
    boat builders so they can start to invest in facilities that
    will be needed to support the construction of the ORP.
        As we approach those decision points, we're looking at the
    current Virginia-class construction program, looking at
    existing facilities. We're looking at where they currently have
    strengths in the way they divide the construction of the
    Virginias, and that becomes a baseline for determining how the
    ORP will be built, but we have made no decisions yet in that
    regard.
        Senator King. A broader question. If sequester returns
    without any modification in 2016--and Senator Sessions is right
    that 2016 is essentially flat, based upon these 2 years, and
    then there are increases built into the assumptions that go out
    into the out-years--can you reach your goal of a 306-ship Navy
    without some relief from sequester, at least in 2016?
        Mr. Stackley. The reality is that it takes about on average
    4 to 5 years from when you put a ship under contract to when
    it's delivered. There's a lot of energy in the system right
    now. By that, I mean, I described we have 43 ships that are
    currently under construction. In the near-years those ships
    will continue to deliver. We'll stay on our current plan for
    decommissionings. You'll continue to see an increase in our
    ship count in the near-years.
        Sequestration is going to start to impact the 2020s, and
    that's where you're going to start to see significant dropoff
    in our ship count in terms of the total force. That is
    compounded when you overlay on top of that the funding
    requirements for the ORP.
        Senator King. You get hit in the jaw in 2016, but you don't
    feel it until 2020?
        Mr. Stackley. Yes, sir.
        Senator King. Thank you very much.
        Thank you, gentlemen.
        Senator Reed. Thank you, Senator King.
        Senator Kaine, please, in order of appearance, Senator
    Kaine.
        Senator Kaine. Great. Thank you, Mr. Chairman, and thank
    you all for your testimony.
        Secretary Stackley, I want to talk to you about the opening
    comments that you made about the carrier, because I'm just
    trying to work through and make sure I understand this fully
    from having now sat through a number of hearings about it.
        From all the testimony I have heard from Secretary of
    Defense Hagel to Secretary of the Navy Mabus to others who have
    appeared before the full committee and the subcommittee, it
    seems like the following is all a consensus position: It is the
    military policy, desire, of the White House and the DOD to have
    11 carriers, at least. It is a statutory requirement that we
    have an 11-carrier Navy. If we get sequester relief, we are
    committed to having an 11-carrier Navy. Those things have all
    been said.
        But in looking at the budget numbers, we were puzzled, and
    there's been a lot of questions on this full committee and this
    subcommittee about it, because the budget and the FYDP, if we
    grant sequester relief to the Department does not clearly
    identify the funds for the carrier, even though the President
    in his 2014 budget and Congress in our 2014 NDAA and
    appropriations bill put about $245 million into the refueling
    of the George Washington.
        I guess we're trying to get to the point of understanding
    what exactly is the position of the Navy on this, particularly
    on the budgetary side. Your opening testimony suggested we know
    that it's a requirement, we think it's a good idea, we are
    proposing because of budgetary challenges to delay that
    refueling. Do I follow you right?
        Mr. Stackley. Let me clarify. We know it's a requirement.
    It's more than a good idea. It is a hard-core requirement for
    11 carriers. I described that when we started formulating this
    budget and we looked at the results of the Strategic Choices
    and Management Review and we were planning around BCA levels,
    we were looking at losing two to three carriers, and we fought
    to getting that down to being minus one.
        In the end, we ended up coming across with a budget that
    goes above BCA levels. At that last stage, we didn't try to
    shoehorn the carrier back in. There was also a fair degree of
    uncertainty over whether or not ultimately we'd be seeing
    congressional support for anything above BCA levels in the out-
    years.
        What you have heard from Secretary Mabus, and I believe
    also from Secretary Hagel, is a commitment that if we are
    confident in budgets in 2016 and beyond being above the BCA
    level, the carrier will be in there. In fact, we're building
    our POM with that guidance today.
        I'll ask Admiral Mulloy if he wants to add.
        Senator Kaine. Please, Admiral Mulloy.
        Admiral Mulloy. Yes, sir. As we're now working with the
    Office of the Secretary of Defense (OSD), they are looking at
    the total DOD assets and assuming, as Mr. Stackley said, the
    DOD number was $115 billion over the FYDP, the Navy is about
    $30-something billion of that. If that $115 billion appears for
    DOD and there's Navy money, then we would go back and rerack
    and stack. What those trades would be made between us and all
    the Services is not done yet. But the commitment was if the
    $115 billion is there in 2016, then the Navy would have the
    funds and we would make the funds available to keep the
    carrier.
        But once again, it comes back to being a balance of force.
    If I go to the BCA level and I have 11 aircraft carriers, what
    am I not going to have for support ships? What submarines won't
    I have? What airplanes will I not have to be flying off the
    aircraft carrier? Those all are built in shorter time. You have
    to have a balance in what you do and that's my primary focus.
        Senator Kaine. Let me walk through the two forks in this
    decision path that we're on. We give you a budget above the BCA
    level or we don't. On the, we give you the budget above the BCA
    level--and I'm certainly going to do everything I can to
    suggest that we should; I was glad that we were able to provide
    BCA relief in fiscal years 2014 and 2015 as members of the
    Budget Committee. That was a good thing and I want to do it for
    2016 and out.
        It sounds like, give us that relief--and you're only asking
    for essentially relief from about half the sequester. You would
    absorb the other half over the entire length of the sequester.
    But the word to us has been, give us a signal and give us a
    signal in an appropriate time so that we can rerack and stack,
    as you say, and find a way to meet the 11-carrier requirement.
        The timing of the signal is potentially a challenge,
    because since we did a 2-year budget we're not likely to do
    another one until March or April of calendar year 2015, which
    would be in the 2016 fiscal year. But my understanding is,
    based on your own budget schedules, you're going to be
    presenting material to the White House for their work on 2015
    and 2016 budgets by the fall. We will likely not be sending you
    a signal with a 2016 budget until the spring.
        What kind of signal are you looking for and why isn't the
    action of Congress in putting $245 million into procurement for
    this particular item in the fiscal year 2014 omnibus--that's a
    pretty good signal and we just did that about 2 months ago.
    What kind of signal are you looking for to reshuffle to make
    sure that we are providing for that 11th carrier?
        Mr. Stackley. I'm going to give you an inexact answer, sir.
    Here are the tools that Congress has. One, we have public
    hearings. Two, you have the NDAA. Three, would be action on the
    budget itself dealing with the BCA and other tools.
        We are leaning forward. We are leaning forward in terms of
    building our POM to put that carrier back in there. The signal,
    I don't know how clear a signal we're discussing here. But when
    the budget is at OSD at the end of this year and we have the
    2015 NDAA and the 2015 appropriations bill in our hands and all
    other public record and discourse has taken place between DOD
    and Congress, then at the Secretary level I believe they will
    determine whether or not we have the signal to send the carrier
    with the budget in 2016.
        Senator Kaine. Let me ask one other thing about a signal.
    My understanding is we have appropriated $245 million in fiscal
    year 2014 for the refueling, and the Navy's order is to only
    use $63 million of that this year and not use the remainder of
    the $245 million; is that correct?
        Mr. Stackley. That's correct. Here's where we are. $245
    million, of which the first phase of the refueling overhaul is
    a lot like the first phase of a defueling activity.
        Senator Kaine. Right. You need to spend the money
    regardless of which path you're going.
        Mr. Stackley. Exactly. It's planning, it's opening them up,
    and it's starting to pull the fuel. The $63 million is to
    support those mutual activities. In the near term, hopefully
    we'll be seeing defense bill markups and that might be a
    sufficient signal to go ahead and start the work on the balance
    of the $245 million.
        But I will tell you that given where we are today, we're
    not going to recover the schedule back to the original start
    date of September 2016. We will probably be able to improve
    upon it as opposed to losing a full year if we go down that
    path. But we're already eating into that schedule today.
        That would be a measured first step, but the ultimate,
    which is the $7 billion associated with the carrier and the air
    wing and manpower--that measured first step isn't a leap into
    the balance of the funding requirement for that RCOH.
        Senator Kaine. Even if we don't grant additional relief
    from the BCA, there still is an 11-carrier statutory
    requirement.
        Mr. Stackley. There's a law in place.
        Senator Kaine. Yes.
        Mr. Stackley. Yes, sir.
        Senator Kaine. All right, thank you.
        Thank you, Mr. Chairman.
        Senator Reed. Thank you, Senator Kaine.
        Senator Blumenthal, please.
        Senator Blumenthal. Thanks, Mr. Chairman, and thanks for
    holding this hearing. Thank you for being here and for your
    service to our Nation.
        Mr. Secretary, I understood from your earlier testimony
    that the ORP has about a $150 million gap on the nuclear
    reactor development and that that funding is going to be sought
    from alternative sources, specifically the DOE. Can you expand
    a little bit on that?
        Mr. Stackley. Let me clarify. For our nuclear programs, the
    Navy has the responsibility for the boat, the weapons systems,
    and the propulsion plant. But the NNSA under the DOE has
    responsibilities associated with the reactor plant itself. Just
    like DOD, they're dealing with their budget shortfalls and
    they've allocated, I believe the number is about $150 million
    towards their efforts in support of the ORP. That does have a
    direct impact on our schedules, both near-term and long-term.
        Between DOD, DOE, and, frankly, Congress, because we're
    bringing this to you, we have to resolve this shortfall or we
    are losing schedule on the program.
        Senator Blumenthal. To be precise, the shortfall is $150
    million?
        Mr. Stackley. Let me get back to you.
        Joe, do you know?
        Admiral Mulloy. Sir, the $150 million is across a number of
    programs. We'll get the exact specifics. One part of it
    involves the reactor core itself for the ORP. The other
    component, Naval Reactors, was able to protect because it was a
    general $151 million. There are some other areas in nuclear
    training and other areas that don't directly affect the Navy.
        But we'll get you a breakdown via Naval Reactors. There is
    a component that directly affects the core development for the
    ORP and I don't remember the number, but it's not the $150
    million. It's somewhere in the $20 million to $50 million range
    that affects the ORP.
        [The information referred to follows:]

             The fiscal year 2014 Consolidated Appropriations Act
            resulted in a $151 million shortfall to Naval Reactors' fiscal
            year 2014 Department of Energy (DOE) appropriation which
            primarily impacted two key areas:

                    - Nuclear Operating and Infrastructure (NOI) Funding
                    ($99 million reduction) and Spent Fuel Handling
                    Recapitalization Project ($45 million) reduction.

                            - Naval Reactors' entire fiscal year 2014
                            funding request was validated by the Department
                            of Defense (DOD), DOE, and the Office of
                            Management and Budget during the recent Cost
                            Assessment and Program Evaluation (CAPE) review
                            of National Nuclear Security Administration
                            funding.

             Some of the more visible and immediate impacts on the
            Navy that resulted from the fiscal year 2014 reduction include
            impacts on nuclear operator training, delay to Ohio-class
            replacement (OR), and delay to the spent fuel processing
            facility needed to support refueling and defueling work. Given
            the immediate impacts to both the operating fleet and OR
            design, securing $35 million of additional funding is the
            highest priority.

                    - Training ($24 million): Fiscal year 2014 funding
                    level was insufficient to complete the required
                    maintenance for both operating prototype reactors in
                    New York. Naval Reactors prioritized the work needed at
                    the S8G plant, and would have to shut down the MARF
                    plant by April 2015, if funding is not available to
                    complete the work. The fiscal year 2015 impact to the
                    fleet would be 450 fewer qualified operators. That
                    number would grow if the shutdown is extended.
                    - High Performance Computers ($11 million): Fiscal year
                    2014 funding level was insufficient to support a
                    planned procurement ($11 million) of high performance
                    computers (HPC) necessary to complete the reactor
                    design for OR. If not restored in fiscal year 2015, the
                    core design is expected to be delayed up to 6 months.
                    The next planned HPC procurement was fiscal year 2016,
                    but Naval Reactors is considering options to purchase
                    in fiscal year 2015 (assuming adequate funding is
                    available) to minimize the delay to OR. If HPCs are
                    procured at the beginning of fiscal year 2015, Naval
                    Reactors can reduce the impact. While the HPCs are
                    important to OR, they are also an integral part of the
                    toolbox supporting the existing fleet. This is why they
                    are included in laboratory base funding.

             Additional impacts include:

                    - Naval Reactors Facility ($20 million): The current
                    facility is approaching 60 years of age and exhibits
                    commensurate deterioration, including leaking water
                    pools. Naval Reactors is unable to perform necessary
                    maintenance and comply with agreements made with the
                    State of Idaho.
                    - Capital Equipment and Construction/Remediation
                    Projects ($15 million): Naval Reactors is unable to
                    procure and execute capital equipment and construction/
                    remediation projects vital to fleet operations.
                    - Spent Fuel Handling Recapitalization Project (SFHP)
                    ($27 million): Funding is required to support continued
                    conceptual design of the SFHP. This reduction in funds
                    results in a 2-year delay in delivery of the M-290
                    shipping container unloading capability and will
                    require DOD to procure eight additional M-290 shipping
                    containers, at a cost of $200 million, to be used for
                    temporary storage of spent nuclear fuel until the
                    facility becomes available.

        Senator Blumenthal. Forgive me for seeming overly
    simplistic. That seems like a drop in the bucket compared to
    the overall commitment to the entire program.
        Admiral Mulloy. Yes, sir, but once again it comes back to
    being this is in the DOE budget, not the Navy side. There's
    three lines of operation in the Navy side--propulsion plant,
    missile compartment, and total submarine. Naval Reactors and
    NAVSEA work on the propulsion plant, but when it comes to the
    actual reactor core design, that's under the DOE hat that Naval
    Reactors has. It is under their budget. It was not even the
    Senate Armed Services Committee which provided this mark. I
    think it's the Subcommittee on Water and Power of the Senate
    Committee on Energy and Natural Resources mark against DOE and
    NNSA. In the mix of that budget, components fell on weapons and
    other areas.
        We have been attempting with the Office of Management and
    Budget (OMB) and DOE to say, this is an impact. They're saying,
    we're losing money on all of our programs.
        Senator Blumenthal. Isn't this point a weakness in the
    authorization or appropriation process, to potentially put the
    entire ORP, at risk because of this anomaly or idiosyncrasy in
    budgeting?
        Admiral Mulloy. Sir, it also goes all the way back to the
    Atomic Energy Act of 1947.
        Senator Blumenthal. I understand that it has its origins in
    a whole bunch of history and procedure and so forth.
        Admiral Mulloy. Right.
        Senator Blumenthal. I'm looking at it from the taxpayers'
    standpoint. I'm assuming you'd agree we need the ORP.
        Admiral Mulloy. Yes, sir.
        Senator Blumenthal. We need it on time and hopefully under
    budget, as our submarine-building program has done. I'm not
    meaning to put you in defense of a procedure that is anomalous
    and maybe irrational, but that may be something we need to
    change.
        Admiral Mulloy. Sir, I'd have to really get Admiral
    Richardson to come back and talk to you. There are
    interstitials of this entire budget. This is a problem for us.
    That's why I've gone to OMB and OSD Comptroller myself, and the
    SECNAV has gone to the Secretary of Energy. There are
    discussions going on about how can we recover it, but it's not
    a matter as simple as--I can't as the Navy budget officer write
    them a check, under fiduciary law of the United States of
    America. We need to have them try to solve that.
        There are many other consequences where DOE has been able
    to lead and keep reactor plants going long-term along with
    nuclear fuel. It's a very intertwined area. We need to be
    careful about fixing one thing that could have tremendously
    unintended consequences across the full spectrum of our
    relationship with the nuclear industry, sir.
        Senator Blumenthal. Thank you.
        Secretary Stackley, moving to helicopters, I understand
    that the Navy--again, I'm going to put it in probably
    oversimplified terms--is considering declining to order or buy
    about 29 UH-60M aircraft; is that correct?
        Mr. Stackley. That's approximately correct. The Navy buys
    H-60 aircraft off of the Army multi-year contract. Part of this
    is tied to the same issue associated with the aircraft carrier.
    If we're down a carrier, if we're down an air wing, then
    there's some number of helicopters that are affected by it.
        Our last year's procurement in that multi-year is 2016 and
    today the budget reflects zero Navy aircraft in 2016. It would
    be a reduction of 29.
        Senator Blumenthal. Have you considered what the cost will
    be in adding to the ultimate procurement expense involved?
        Mr. Stackley. We're reviewing that right now. There are
    estimates today that range from various factors to the Navy's
    share of an ultimate production shutdown, to termination
    liability for any material that was procured earlier on that's
    associated with the multi-year, to unit cost impacts to the
    Army aircraft. I've had a first round with the Naval Air
    Systems Command as well as the program executive offices and
    I've sent them back with a lot of analysis that I need to back
    up the numbers.
        Senator Blumenthal. Even with the changes that you describe
    in the aircraft carrier, won't there still be a need for the 11
    frigates to have helicopters?
        Mr. Stackley. Our inventory for H-60s, if you pull the
    carrier out of the equation, our inventory for H-60s is very
    healthy right now.
        Joe, do you want to add to that?
        Admiral Mulloy. Sir, we're going to have to analyze that in
    light of the cruisers, the LCS discussion, and the carrier.
    Once again, the commitment is if we go down in 2016 and we're
    appropriated above that level, we will finish the plan of
    record, which was the helicopter buy, the carrier, and all the
    other ships. If we are not at that position, then we would have
    to come back in a 2016 sequester plan to figure out what is the
    total size of the Navy and where the helicopters go.
        They're all intertwined in this whole discussion of the
    2016 and out laydown of the size of the Navy and these various
    platforms. But we are taking advantage of a tremendous price
    buying on this Army one to buy a lot of helicopters. But it was
    clear that the Navy would still always have shutdown costs.
    What it was, we are taking into account what the liability is
    of buying less than we initially thought.
        I was the budget officer for 4\1/2\ years before I came
    into this job. I dealt with the largest budget the Navy's ever
    had. I'm dealing with the single largest dropdown in a short
    period even compared to the 1990s when I worked in the budget
    office before it was back in the fleet again. These are
    dramatic times and we're weighing all the cost, as I work with
    Mr. Stackley, of hard decisions versus what will be the size of
    the Navy and what do we have to retain.
        Senator Blumenthal. Do you have any idea when you'll finish
    this analysis?
        Admiral Mulloy. This will be part of the 2016 budget, sir.
        Senator Blumenthal. Thank you.
        Senator Reed. I had the opportunity of a second round and
    so did Senator Sessions. I would invite any of my colleagues to
    take a second round or ask additional questions. Senator King,
    please.
        Senator King. Secretary Stackley, I certainly don't want to
    make extra work for you, but--I'm sure you're thinking uh-oh. I
    think something that would be really helpful to this
    subcommittee, because this is complex and these decisions are
    all interrelated and very difficult, but we're dealing with our
    colleagues on the issue of the sequester and the effect of what
    happens in 2016 and then 2017 and on out. To the extent you are
    able, if you can tell us what that means in terms of ships that
    would be very helpful. In other words, instead of us just
    saying to our colleagues it'll affect the shipbuilding budget,
    it would be scary, but helpful. You indicated that there's been
    additional analysis done. But I think it would be very helpful
    to the subcommittee if we could say, okay, if we have the full
    sequester as currently scheduled, here is what we would have to
    cut back; if we have a partial relief from the sequester, say
    half, here's what we could do.
        It would help us to put a real face on the sequester in
    terms of discussing it with our colleagues and what the impacts
    would be. I realize it's somewhat speculative, but if you could
    give us your best analysis right now, here's what would happen
    starting in 2016 and this is where we would have to go to
    reduce these expenditures.
        The President's budget is fine. We would all like to see
    that increase. But I don't know if that's going to happen. I
    want to play center field for the Red Sox, too. I'm not sure
    that's going to happen. We really have to have alternatives of
    what the concrete effect would be of different levels of
    sequester relief, including zero relief.
        Mr. Stackley. Yes, sir. Let me bracket the problem a bit.
    We'll just start with three cases. The first is the budget that
    we've submitted, the second is the BCA, and then the third case
    pivots around the ORP. There's been discussion with Congress in
    various hearings and things about the significance of that
    single program on the shipbuilding budget from about the 2020
    through 2035 period, and there's discussion of what if that was
    partially funded from some other source. I'm not suggesting
    that that's the outcome, but that's one of the scenarios that
    we looked at.
        In the best case, if you look at historically where we've
    been over the last handful of years, we have invested about $13
    billion a year into new ship construction. The budget that
    we've submitted supports the 306-ship Navy. We get there about
    the end of the decade. Then, even in the period of the ORP, in
    the long-term view, which is beyond the budget, where we assume
    additional increases to our budget for shipbuilding, then we
    sustain a 300-plus ship Navy throughout that period.
        If you then constrain that to BCA level and say, we're
    going to keep it at the BCA level and then escalate it on out
    beyond and no additional relief associated with the ORP, then
    that 300-plus type of force, you look out in the out-years--not
    in the 2020s, because we start with a large force. But over
    time, as you decommission and as your ship count draws down, at
    the end of the 30-year period you're down to about a 240-ship
    Navy.
        It would be a gradual reduction from today, where we're in
    the 280s. We're at 289 ships by the current method of ship
    counting. We get up to 300-plus by the end of the decade, and
    then in 2016, as we described earlier, the budget reduction's
    impact upon the new construction and the numbers--if you keep
    the numbers capped at about that $13 billion number associated
    with, and then lay in the BCA, you go down to 240 ships.
        If, in fact, during the period of the ORP there was some
    other strategic fund that covered the cost of the ORP or there
    was some relief to the top line for shipbuilding, then we're in
    much better shape. Then we're in the 280s range in terms of a
    long-term force structure.
        That tends to bracket the discussion. Now, let's lay a
    couple of other factors in. The ORP under all circumstances is
    going to be a top priority. We have a reasonable estimate right
    now for what that program's going to cost. We know when it's
    going to be laid in. Whatever you assume for your top line,
    that's the first layer of bricks, the carriers.
        Carriers. One carrier every 5 years nominally to support
    the carrier force structure, that's about a $2 billion plus
    bill. You can lay that in.
        Virginia-class submarines. When we look at requirements in
    terms of force structure, we know already that we're going to
    have a shortfall. Under all scenarios we're going to have a
    shortfall of submarines in the back end of the 2020s. We need
    to sustain about a one and a half Virginia, per-year rate,
    long-term, to maintain a 48-boat force.
        In terms of priorities, you're going to see a priority laid
    in for Virginia. Now, we're not going to be able to sustain a
    two Virginia per-year rate under any circumstance, with the
    ORP. That's going to be throttled some, but that would be the
    next tier you start to see in. That's where it gets very
    difficult because now you're looking at surface combatants,
    you're looking at the amphibious force that we've already
    discussed in terms of our current shortfall to amphibious lift.
        The bottom line is that at BCA level through the 2023
    period, you assume that the Navy's going to fund the full cost
    of the ORP construction, which is the baseline assumption.
    We're looking at four, plus or minus, additional ships per year
    other than----
        Senator King. Of all types?
        Mr. Stackley. Of all types.
        --the ORP and the carrier, the carrier every 5 years,
    during that 15-year window. That's what drives your numbers.
        Now, to get into the specifics in terms of how many
    destroyers, which year, when would the next big deck be, you
    can move those things around with assumptions. But when you
    just grasp what that means--ORP, carrier every 5 years, and
    then four, plus or minus, ships per year elsewise--you are
    entirely reshaping our Navy's force structure and with that
    what the Navy can do for the Nation.
        Senator King. Thank you. It's sobering and straightforward.
    I appreciate that.
        Senator Reed. Thank you very much, Senator King. Thank you
    to my colleagues.
        I want to first cite the witnesses for their very
    insightful and very articulate testimony, and for their
    incredible service to the Nation. Thank you so much.
        I think Senator King raised a very important question and
    your response was very helpful. If you have the ability to
    generate the scenarios--I assume, like every organization,
    you'll have a plan A, a plan B, and a plan C. Whenever that
    might be ready for prime time, you could share it with us.
        A final point and just the impression that I've had, and I
    think it reflects something Senator McCain said, is that
    there's always the debate whether budgets drive strategy or
    strategy drives budgets. We spent the whole afternoon talking
    about budgets, basically, not strategy, not threats, not the
    future. But I think we have to recognize, and Senator McCain
    suggested this, that we might be at an inflection point,
    because the permissive environment that has been the assumption
    of a lot of our shipbuilding and platforms of all varieties
    that we can go anywhere and do anything because the other folks
    don't have the technology and there's a huge gap, that is
    rapidly changing. That has huge strategic implications. That's
    another factor you have to build into your discussions.
        I think it is interesting to note that this whole
    conversation this afternoon has been dominated by budgets, not
    by emerging threats, strategies, new technologies, et cetera.
    We have to remember that, too. In fact, my sense is it's
    becoming more of an issue each day rather than less of an
    issue.
        Let me suggest that the hearing record will remain open
    until April 16th, next Wednesday. If there are additional
    statements for the record from the witnesses, please submit
    them. To my colleagues, if anyone has any written questions,
    we'll get those from you and provide them to the witnesses
    before the 16th or on or about. We'd ask for your prompt
    responses.
        I would thank the witnesses for appearing here today and
    for their service to the Navy and the Nation.
        If there are no further comments or questions, this hearing
    is now adjourned.
        [Whereupon, at 4:23 p.m., the subcommittee adjourned.]

        [Questions for the record with answers supplied follow:]
               Questions Submitted by Senator Richard Blumenthal
                               mh-60r helicopter
        1. Senator Blumenthal. Secretary Stackley, the Navy is considering
    ending its buy of the highly praised MH-60R helicopter after this
    year's purchase, which would leave the Navy 29 aircraft short of its
    requirement and would break the current H-60 multi-year procurement
    (MYP) contract. What is the termination liability of such a move, and
    what are the effects this will have on the price of the Army UH-60M
    aircraft for next year if the multi-year is broken?
        Mr. Stackley. The potential cancellation of the final 29 U.S. Navy
    aircraft on the H-60 MYP contract is contingent upon final
    determination regarding CVN-73 refueling and complex overhaul (RCOH).
    If it is determined that due to sequestration of the defense budget in
    2016 and later years that the RCOH cannot be afforded, then the
    requirement for the associated air wing (which includes the requirement
    for the subject 29 MH-60Rs) would be retired. Actual costs associated
    with this potential cancellation have not yet been determined and will
    be calculated in accordance with Federal Acquisition Regulations once
    official notification of cancellation is completed. Potential cost
    increases, if any, to fiscal year 2015 planned procurements have not
    been determined. The official cancellation would occur as a result of
    the fiscal year 2016 appropriations and authorizations acts, if the
    advance procurement proposed in President's fiscal year 2015 budget
    request is approved.

        2. Senator Blumenthal. Secretary Stackley, does there not remain an
    unfulfilled helicopter requirement for the 11 frigates retained by the
    Navy?
        Mr. Stackley. The remaining frigates are scheduled to be
    decommissioned no later than September 2015. There are sufficient
    helicopters to support frigates until they are retired.

        3. Senator Blumenthal. Secretary Stackley, even with the proposed
    cut of Littoral Combat Ship (LCS) purchases from 52 to 32 platforms,
    won't there still remain a requirement for the MH-60R helicopter aboard
    whatever platforms are determined to replace them?
        Mr. Stackley. Yes. The capabilities that the MH-60R brings to anti-
    submarine warfare, anti-surface warfare, and intelligence,
    surveillance, and reconnaissance (ISR) will continue to be vital
    requirements for both LCS and follow-on small surface combatants (SSC).
    Navy will continue to align MH-60R procurement to overall Navy force
    structure--the required quantity of helicopters is also tied to our
    total number of carrier air wings, cruisers, destroyers, and SSCs.

        4. Senator Blumenthal. Secretary Stackley, will this cut of 29
    helicopters have a negative effect on the Navy's operational
    capability?
        Mr. Stackley. The potential reduction to the Navy's MH-60R
    inventory would come as a result of a determination that the CVN-73
    RCOH is not affordable within a sequestered budget. Under that
    circumstance, the reduction to the number of Navy aircraft carriers and
    associated airwings would, in fact, have a negative effect on the
    Navy's operational capability.
                                     ______

                   Questions Submitted by Senator John McCain
                         navy 30-year shipbuilding plan
        5. Senator McCain. Secretary Stackley, section 231 of title 10
    requires the Secretary of Defense to submit to Congress a 30-Year Plan
    for the Construction of Naval Vessels when the President submits an
    annual budget. When will the plan be submitted?
        Mr. Stackley. The Report to Congress on the Annual Long-Range Plan
    for Construction of Naval Vessels for fiscal year 2015 is currently
    being coordinated at senior levels and will be delivered soon.
    Associated data tables were provided with the budget.

        6. Senator McCain. Secretary Stackley, I understand the Navy has
    changed the methodology for counting ships. Can you explain why this
    change was made and state what the fleet size would have been under
    last year's methodology versus the revised methodology?
        Mr. Stackley. The new counting methodology allows ship types
    routinely requested by the combatant commanders and allocated through
    the Global Force Management Allocation Plan (GFMAP) to be counted on a
    case-by-case basis with the recommendation of the Chief of Naval
    Operations (CNO) and approved by the Secretary of the Navy. This will
    be a temporary authorization to include these ships in the ship count
    and will remain in effect until the ships are no longer requested in
    the GFMAP or are retired (whichever occurs first).
        Under the new counting methodology, the battle force will be 284
    ships at the end of fiscal year 2015 and 309 ships at the end of fiscal
    year 2019. Under the previous counting rules the overall battle force
    inventory would have been 274 ships at the end of fiscal year 2015 and
    301 ships at the end of fiscal year 2019.

            meeting and sustaining the fleet size goal of 300 ships
        7. Senator McCain. Secretary Stackley, what average level of
    investment do you need over the next 10 years, the next following 10
    years, and the 10 years after that to meet your shipbuilding goals?
        Mr. Stackley. Based on the cost of ships today, using current
    industrial base capacity and pricing, we project that the required
    average annual budget for new ship construction for the near-term
    planning years of fiscal years 2015 to 2024 will be approximately $15.7
    billion per year using fiscal year 2014 constant dollars. During the
    mid-term planning period (fiscal year 2025 to fiscal year 2034), the
    average budget will be approximately $19.7 billion per year, due in
    large part to ballistic missile submarines (SSBN) recapitalization. In
    the far-term planning period (fiscal year 2035 to fiscal year 2044),
    the average budget will be approximately $14.6 billion per year.
        Over the entire 30-year planning horizon of the shipbuilding plan,
    the estimated average budget for Shipbuilding and Conversion, Navy
    (SCN) is approximately $16.7 billion per year. The funding levels
    presented here are averages through a particular planning period. The
    actual cost will fluctuate as ship types of varying cost are added to
    and removed from the plan.

        8. Senator McCain. Secretary Stackley, what has been the historical
    SCN enacted budget as a percentage of the overall Department of the
    Navy enacted budget for the past 50 years?
        Mr. Stackley. The historical SCN enacted budget, as a percentage of
    overall Department of the Navy enacted budget, averages 9.3 percent
    over the last 50 years (1965 to 2015).

                 realistic budgeting for new ship construction
        9. Senator McCain. Secretary Stackley, what is the total amount and
    percentage of the fiscal year 2015 SCN request that is for previously
    authorized ships? Please provide detail that is broken out among:

        a.  Incrementally funded programs (indicate specific programs/
    amount);
        b.  Cost growth on prior year programs (indicate specific programs/
    amount); and
        c.  Restoral of sequestration reductions (indicate specific
    programs/amount).

        Mr. Stackley. The table below provides the SCN fiscal year 2015
    President's budget request broken down in the requested categories:

                            ohio replacement program
        10. Senator McCain. Secretary Stackley, for the Ohio Replacement
    Program, what is the specific amount of the fiscal year 2015 National
    Nuclear Security Administration (NNSA) funding shortfall?
        Mr. Stackley. Naval Reactor's Department of Energy (DOE) funding
    was reduced by $151 million in fiscal year 2014. As a result of that
    funding shortfall, there was insufficient funding to support a planned
    procurement ($11 million) for high performance computers (HPC) that are
    necessary to complete the reactor design for the Ohio Replacement as
    well as support fleet operations. As a result, the Ohio-class
    replacement reactor core design is expected to be delayed by 6 months
    if funding is not restored.
        Naval Reactors is working with DOE on a path forward that will
    provide resources to procure the computers this year. If that proves
    unsuccessful, Naval Reactors will reprioritize fiscal year 2015
    resources at the decrement of other requirements to procure HPCs,
    dependent upon their fiscal year 2015 appropriation level. If the HPC
    procurement can take place by the beginning of fiscal year 2015, the
    impact to Ohio-class replacement can be minimized.

        11. Senator McCain. Secretary Stackley, is the shortfall manageable
    during execution, and why or why not?
        Mr. Stackley. Naval Reactors is working with DOE on a path forward
    that will provide resources to procure the computers this year. If that
    proves unsuccessful, Naval Reactors will reprioritize fiscal year 2015
    resources at the decrement of other requirements to procure HPCs,
    dependent upon their fiscal year 2015 appropriation level. If the HPC
    procurement can take place by the beginning of fiscal year 2015, the
    impact to Ohio-class replacement can be minimized.

        12. Senator McCain. Secretary Stackley, what is the impact to the
    Ohio ship construction program if this shortfall is not resolved during
    fiscal year 2015?
        Mr. Stackley. Naval Reactor's DOE funding was reduced by $151
    million in fiscal year 2014. As a result of that funding shortfall,
    there was insufficient funding to support a planned procurement ($11
    million) for HPCs that are necessary to complete the reactor design for
    the Ohio Replacement as well as support fleet operations. If the
    shortfall is not resolved, the Ohio-class replacement reactor core
    design will be delayed by 6 months.

        13. Senator McCain. Secretary Stackley, what are you planning to do
    to mitigate that impact?
        Mr. Stackley. Naval Reactors is working with DOE on a path forward
    that will provide resources to procure the computers this year. If that
    proves unsuccessful, Naval Reactors will reprioritize fiscal year 2015
    resources at the decrement of other requirements to procure HPCs,
    dependent upon their fiscal year 2015 appropriation level. If the HPC
    procurement can take place by the beginning of fiscal year 2015, the
    impact to Ohio-class replacement can be minimized.

        14. Senator McCain. Secretary Stackley, what is the estimated SCN
    advance procurement funding by fiscal year that is needed to support
    the lead ship procurement in fiscal year 2021?
        Mr. Stackley. The estimated SCN advance procurement requirements to
    support lead ship detail design efforts as well as long lead time
    material procurements in the Future Years Defense Program (FYDP) are
    identified below.

    ----------------------------------------------------------------------------------------------------------------
                                                                     Fiscal Year
                                                ----------------------------------------------------    FYDP Total
                                                     2016         2017         2018         2019
    ----------------------------------------------------------------------------------------------------------------
    SCN Advance Procurement (TY$M).............       $13.2       $777.8       $791.8     $2,887.9         $4,470.7
    ----------------------------------------------------------------------------------------------------------------

        15. Senator McCain. Secretary Stackley, would you please break the
    advance procurement amount out by nuclear and non-nuclear costs?
        Mr. Stackley. The nuclear and non-nuclear FYDP SCN advance
    procurement funding requirements for the lead ship are estimated below.
    These requirements support lead ship detail design efforts as well as
    lead ship government-furnished equipment procurement.

    ------------------------------------------------------------------------
                       TY$,B                             FYDP Total
    ------------------------------------------------------------------------
    Nuclear Costs.............................  $2.69
    Non-nuclear Costs.........................   1.78
    ------------------------------------------------------------------------
      Total...................................  $4.47
    ------------------------------------------------------------------------

        16. Senator McCain. Secretary Stackley, what is the then-year full-
    funding amount for the lead ship (fiscal year 2021) and what is the
    projected then-year end-cost of the lead ship?
        Mr. Stackley. The total SCN funding requirements for the lead ship
    are estimated to be:

    ------------------------------------------------------------------------
                                                            Total     Total
                                                           (TY$B)   (CY10$B)
    ------------------------------------------------------------------------
    SCN FF (fiscal year 2021)...........................    $10.06    $ 6.70
    SCN Advance Procurement (fiscal year 2016 to fiscal       5.81      4.34
     year 2020)*........................................
    SCN End Cost........................................     15.87     11.04
    ------------------------------------------------------------------------
    Recurring...........................................     10.03      6.76
    Non-recurring.......................................      5.84     4.28
    ------------------------------------------------------------------------
    *These requirements support lead ship detail design efforts as well as
      long lead time material procurements.

                               ddg-51 flight iii
        17. Senator McCain. Secretary Stackley, would you please explain
    how the DDG-51 MYP is planned to be executed with respect to the
    introduction of Flight III?
        Mr. Stackley. The DDG-51 Flight III is planned to be introduced on
    the second fiscal year 2016 ship and both fiscal year 2017 ships of the
    fiscal years 2013 to 2017 DDG-51 Flight IIA MYP. The current MYP is for
    Flight IIA ships as directed by the National Defense Authorization Act
    (NDAA) for Fiscal Year 2013, section 123. The Flight III will be
    introduced as a fixed price engineering change proposal (ECP) that will
    be competed between the two DDG-51 shipbuilders to determine which
    shipyard will have the lead for incorporating the air and missile
    defense radar (AMDR) along with associated power and cooling
    modifications to the ship. The Flight III schedule is on track as
    preliminary design completed in mid-fiscal year 2014, contract design
    is currently in progress, and detail design is scheduled to commence in
    the fourth quarter of fiscal year 2014. The Navy will evaluate maturity
    of design and readiness to proceed, and report to the Under Secretary
    of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) and
    Congress when the Flight III design and production are ready for
    introduction aboard these ships.

        18. Senator McCain. Secretary Stackley, is Flight III considered a
    part of the MYP by the Navy?
        Mr. Stackley. No. The DDG-51 fiscal years 2013 to 2017 MYP consists
    only of Flight IIA ships as directed in the NDAA for Fiscal Year 2013,
    section 123, that grants the MYP authority. The Flight III destroyer
    will be introduced as a separately competed, fixed price ECP that
    incorporates the AMDR and the associated power and cooling
    modifications to the ship.

        19. Senator McCain. Secretary Stackley, if separate, why would the
    Navy not execute a full 10-ship MYP vice a 7-ship MYP?
        Mr. Stackley. The Navy has already completed the MYP contract award
    of 10 DDG-51 Flight IIA ships in fiscal years 2013 to 2017 that was
    described in the USD(AT&L) approved acquisition strategy dated June
    2012 and authorized by Congress in the NDAA for Fiscal Year 2013,
    section 123. The incorporation of the Flight III ECP will proceed based
    on maturity of design and thus our ability to compete this as a fixed
    price ECP. The Navy has a successful track record of incorporating
    combat system upgrades in the course of prior DDG-51 multiyear
    contracts and will adhere to the same standards with this upgrade.

        20. Senator McCain. Secretary Stackley, can additional MYP savings
    be attained if Flight III procurement is delayed until cut in on the
    fiscal year 2018 ships and a subsequent authorized MYP, and if so, how
    much?
        Mr. Stackley. Delaying the introduction of Flight III does not
    produce additional MYP savings. The Navy has already completed the MYP
    contract award of DDG-51 Flight IIA ships for fiscal years 2013 to 2017
    that was described in the USD(AT&L) approved acquisition strategy dated
    June 2012, and authorized by Congress in the NDAA for Fiscal Year 2013,
    section 123. The Flight III ECPs will not affect those already achieved
    savings. The ECP will be competed as a fixed price mod following a
    successful critical design review to ensure maximum affordability.
        While the introduction of any new technology involves risk, no
    contractual commitment in advance of appropriations will be used to
    execute these ECPs. The ECPs will be annually funded. The additional
    technical risk of incorporating the new radar capability is warranted
    because the ships will deliver a significant increase in integrated air
    and missile defense capability. The ECP uses the most efficient method
    to introduce this capability while minimizing risk and potential cost
    growth. The DDG-51 Flight III capability consists of a Flight IIA ship
    which changes the SPY-1D(V) radar to the AMDR along with the associated
    changes to power and cooling.

                            virginia payload module
        21. Senator McCain. Secretary Stackley, what is the current design
    maturity of the Virginia payload module (VPM)?
        Mr. Stackley. Initial concept development for VPM is complete. The
    concept leverages existing technology, previous Navy experience with
    lengthening submarines, and the modular Virginia-class design.
    Necessary modifications and additions to ship systems can be
    accomplished with existing components. For example, VPM tubes have the
    same diameter (87") as the Virginia payload tubes (VPT) located forward
    of the sail in Block III and follow on Blocks. This modification has
    minimal cost and technical risk in terms of development and
    procurement, if funded to the President's budget.
        The Navy has completed advanced modeling to assess the impact of
    the VPM on Virginia-class submarine performance characteristics and has
    determined that this modification will not prevent the ship from
    meeting any of its currently assigned key performance parameters. The
    Joint Requirements Oversight Council (JROC) has validated the
    requirement modification to the Virginia-class submarine by approving
    the strike capability change capability development document in
    December 2013.

        22. Senator McCain. Secretary Stackley, how much is included in
    development for the VPM by fiscal year through program end?
        Mr. Stackley.

                             Non-Recurring Engineering (NRE) for VPM TY$M through the FYDP.
    ----------------------------------------------------------------------------------------------------------------
                                                                   Fiscal Year
                  TY$M               ----------------------------------------------------------------------   FYDP
                                        2013      2014      2015      2016      2017      2018      2019      Total
    ----------------------------------------------------------------------------------------------------------------
    VPM.............................      9.0      59.1     132.6     167.7     193.9     159.5      27.9     749.7
    ----------------------------------------------------------------------------------------------------------------

        23. Senator McCain. Secretary Stackley, with additional payload
    capacity, will the future fleet be able to satisfy combatant command
    demand or will you still have a shortfall in the overall submarine
    fleet size?
        Mr. Stackley. Combatant command demand is not solely driven by
    vertical payload capacity but rather the range of seven core missions
    that fast attack submarines provide. Through the GFMAP, the Navy
    sourced approximately 53 percent of overall combatant commander attack
    submarine requests in fiscal year 2014. This demand gap will continue
    to grow as fast attack submarine force structure shrinks from 53 to a
    low of 41 from fiscal years 2028 to 2030. Navy is mitigating this
    shortfall through three parallel efforts: continuing procurement of two
    Virginia-class submarines per year, reducing the construction span of
    Virginia-class submarines, and extending the service lives of selected
    attack submarines.

        24. 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. VPM is currently on track to support Block V
    contracting in fiscal year 2019. If VPM design is delayed, the Navy
    would then evaluate which fiscal year to incorporate the VPM
    capability. Like the Flight III efforts on DDG-51, VPM could be
    introduced as a change to an existing multiyear contract. From an
    operational perspective, delaying the VPM effort will result in having
    insufficient strike volume to meet campaign requirements, an inability
    to enable early successful prosecution of adversary anti-access/area
    denial (A2/AD) networks, and will close off opportunities to
    significantly improve Virginia-class performance and capabilities
    against advanced adversaries.

                      cvn-78 full funding policy/oversight
        25. Senator McCain. Secretary Stackley, does the Navy ever intend
    to resume complying with the longstanding full funding policy for all
    new construction ships?
        Mr. Stackley. In limited instances, the Navy has requested, and
    Congress has authorized, incremental SCN full funding for some
    shipbuilding programs. The Navy is currently executing incremental SCN
    full funding for two new construction aircraft carriers (CVN-78 and
    CVN-79), two large deck amphibious assault ships (LHA-6 and LHA-7), and
    two aircraft carrier RCOH (CVN-71 and CVN-72).
        Fully funding large capital ships such as aircraft carriers in a
    single year is not the most efficient and effective use of Navy's total
    obligation authority for shipbuilding. Using 6 years of full funding
    avoids funding spikes in the SCN account and allows the Navy to procure
    large capital ships and fund other programs concurrently in order to
    sustain the Navy's 30-year shipbuilding plan. Incremental funding is a
    more practical and effective procurement strategy to maintain a weapon
    system vital to the Nation's defense. The Navy will continue to request
    incremental full funding authority for future new construction aircraft
    carriers, large deck amphibious assault ships, and RCOHs.

        26. Senator McCain. Secretary Stackley, what is the amount needed
    to complete full funding for the USS John F. Kennedy (CVN-79)?
        Mr. Stackley. In response to section 121 of the NDAA for Fiscal
    Year 2014, Navy submitted the first quarterly report on the Program
    Manager's estimated procurement cost of the aircraft carrier John F.
    Kennedy (CVN-79) on April 7, 2014. As stated in the report, the amount
    of SCN funds needed to complete the ship is $11.498 billion, an amount
    equal to both the fiscal year 2015 President's budget request and the
    congressional cost cap for the ship established by section 121 of the
    NDAA for Fiscal Year 2014. Of this amount, $4.736 billion has been
    provided in prior years, and $6.762 billion remains to be appropriated
    in fiscal year 2015 through fiscal year 2018. The Navy is committed to
    stay within this funding estimate, including identifying changes to the
    design, to maximize the likelihood of meeting the cost cap.

        27. Senator McCain. Secretary Stackley, does the long-term 30-year
    plan show only 10 carriers at the end of the 30-year timeframe?
        Mr. Stackley. Based on the current schedule which includes CVN-73
    in the Naval battle force inventory, the aircraft carrier force
    structure will be restored to 11 CVNs with the projected delivery of
    CVN-78 in 2016. The current construction schedule for Ford-class
    carriers based on the 5-year build intervals, as depicted in the Navy's
    30-year shipbuilding plan, maintains a force structure of at least 11
    carriers until 2039, after which the fleet would be reduced to no more
    than 10 CVNs.

        28. Senator McCain. Secretary Stackley, is this due to only
    building a new carrier every 5 years instead of one carrier every 4.5
    years or two every 9 years?
        Mr. Stackley. The current construction schedule for Ford-class
    carriers based on the 5-year build intervals, as depicted in the Navy's
    30-year shipbuilding plan, maintains a force structure of at least 11
    carriers until 2039, after which the fleet would be reduced to no more
    than 10 CVNs.

        29. Senator McCain. Secretary Stackley, will the Navy consider
    employing a block buy of CVNs for the CVN-80 and CVN-81 in fiscal year
    2018, and why or why not?
        Mr. Stackley. The Navy continues to focus on affordability as we
    consider all options to procure future carriers. Previous Navy
    experience with aircraft carrier two-ship buys, procurement of the CVN-
    72 and CVN-73 (awarded in fiscal year 1983) and the CVN-74 and CVN-75
    (awarded in fiscal year 1988), provided significant savings compared to
    other Nimitz-class single ship buys. Having both ships fully funded in
    a single year enabled Navy and the shipbuilder to take advantage of two
    ship-set economic order quantity market savings for material items,
    minimized fact-of-life changes between ships reducing follow ship
    drawing and construction costs, and also allowed the shipbuilder to
    optimize production trades management. The short time between
    deliveries also resulted in design stability, minimized potential
    obsolescence, and greater opportunities for learning.
        The current fiscal uncertainty challenges the Navy's ability to
    plan and budget over the long term. However, the Navy will continue to
    explore the above options to the maximum extent while ensuring we
    sustain the Navy's 30-year shipbuilding plan.

                            cvn-73 george washington
        30. Senator McCain. Secretary Stackley, what is the amount required
    in fiscal year 2015 to support a planned fiscal year 2016 (yard
    induction) refueling and overhaul of the USS George Washington?
        Mr. Stackley. To conduct an RCOH in fiscal year 2016, the Navy
    requires $483.6 million in fiscal year 2015 SCN advance procurement
    funding.

        31. Senator McCain. Secretary Stackley, of that amount, how much is
    for normal advance planning and material, and how much is related to
    support of the nuclear cores?
        Mr. Stackley. The Navy requires all $483.6 million of SCN advance
    procurement funding in fiscal year 2015 to conduct advance planning and
    material procurement for CVN-73 RCOH. None of the fiscal year 2015 SCN
    funding is for refueling cores (reactor power units). Funding for the
    refueling cores is provided in Other Procurement, Navy (OPN).

        32. Senator McCain. Secretary Stackley, what specific ship cores
    are being supported with the required nuclear funds?
        Mr. Stackley. The refueling core (reactor power unit) slated for
    procurement in fiscal year 2015 was not for the refueling of CVN-73,
    but rather for the USS Ronald Reagan (CVN-76) RCOH, as the manufacture
    and assembly time for a Nimitz-class refueling core is approximately 8
    years. This is the first of two refueling cores required to be procured
    for CVN-76. The Navy requires $298.2 million of OPN funding in fiscal
    year 2015 and $231.1 million in fiscal year 2017 for procurement of
    these cores.

        33. Senator McCain. Secretary Stackley, are these funds for cores
    in support of the USS John C. Stennis (CVN-74) or the USS Harry S.
    Truman (CVN-75) or the USS Ronald Reagan (CVN-76), and if so, can the
    fiscal year 2015 nuclear core funding be deferred 1 year to help cover
    the immediate USS George Washington planning and material costs in
    fiscal year 2015?
        Mr. Stackley. As indicated in Question 32, these cores are for the
    USS Ronald Reagan (CVN-76). The Navy requires $298 million of OPN
    funding in fiscal year 2015 and $321.1 million in fiscal year 2017 for
    procurement. The manufacture and assembly time for a Nimitz-class core
    is approximately 8 years.
        Procurement of the first core in fiscal year 2016 is not viable due
    to vendor loading. While a delay will have some impact on the total
    cost of CVN-73's RCOH over the FYDP, depending on when the decision is
    made, the fiscal years 2016 to 2019 costs will be updated with the
    Navy's submission of the President's budget for 2016.

                              littoral combat ship
        34. Senator McCain. Secretary Stackley, what are the current cost
    caps in fiscal year 2015 dollars for the seaframes (ships) and the
    mission equipment?
        Mr. Stackley. The LCS congressional cost cap value of $480 million
    when inflated from fiscal year 2009 to fiscal year 2015 dollars is
    $559.8 million. The value of the cost cap includes basic construction
    cost, government furnished equipment, and change orders.
        There is no congressional cost cap for the mission modules.

        35. Senator McCain. Secretary Stackley, how do those cost caps
    compare to the budget request?
        Mr. Stackley. The LCS seaframe congressional cost cap value in
    fiscal year 2015 dollars is $559.8 million. The average budget request
    for each ship in fiscal year 2015 is $423.1 million in comparison to
    the cost cap. The value of the cost cap includes basic construction
    cost, government furnished equipment, and change orders.
        The mission module program does not have a cost cap. However, the
    December 2013 Selected Acquisition Report states the program
    acquisition unit cost and average procurement unit cost are below the
    requirement approved in the acquisition program baseline (APB).

        36. Senator McCain. Secretary Stackley, what is the acquisition
    strategy for the LCS program in fiscal year 2015 for the three ships?
        Mr. Stackley. The deferral of one block buy ship from fiscal year
    2015 to fiscal year 2016 was a direct result of funding impacts
    associated with the Bipartisan Budget Act (BBA). Navy plans to procure
    the single LCS shifted from fiscal year 2015 to fiscal year 2016 under
    the current block buy contract(s) by making an adjustment to the terms
    of the block buy contracts. The adjustment to the procurement profile
    will be made in consultation with industry, and with consideration of
    cost, production schedule performance, shipyard resource loading, and
    vendor base considerations. Final determination will be made subject to
    bilateral negotiations with a focus on minimizing impact to cost by
    leveraging the affordability initiatives brought to the program by the
    block buy contracts (stable requirements, stable design, stable
    production schedule, skilled workforce, facility investments, long-term
    vendor agreements, and fixed price contracts).

        37. Senator McCain. Secretary Stackley, what is the cost impact to
    the Navy of a 3-ship procurement in fiscal year 2015 instead of a 4-
    ship buy to complete the planned 20-ship block buy?
        Mr. Stackley. The deferral of one block buy ship from fiscal year
    2015 to fiscal year 2016 was a direct result of funding impacts
    associated with the BBA. Navy plans to procure the single LCS shifted
    to fiscal year 2016 under the current block buy contract(s) by making
    an adjustment to the terms of one of the block buy contracts. The
    adjustment to the procurement profile will be made in consultation with
    industry, with consideration of cost, production schedule performance,
    shipyard resource loading, and vendor base considerations. Final
    determination will be made subject to bilateral negotiations with a
    focus on minimizing impact to cost by leveraging the affordability
    initiatives brought to the program by the block buy contracts (stable
    requirements, stable design, stable production schedule, skilled
    workforce, facility investments, long-term vendor agreements, and fixed
    price contracts).

        38. Senator McCain. Secretary Stackley, if not awarded two fiscal
    year 2015 ships, then is there a cost penalty the government must pay
    one of the two shipbuilders, or are the terms of the block buy contract
    simply now opened back up and subject to further negotiation?
        Mr. Stackley. The deferral of one block buy ship from fiscal year
    2015 to fiscal year 2016 was a direct result of funding impacts
    associated with the BBA. Under the terms of the block buy contracts,
    the shipbuilder not awarded two ships in fiscal year 2015, are allowed
    to renegotiate the terms and cost of the remaining ships. However, Navy
    plans to procure the single LCS shifted to fiscal year 2016 under the
    current block buy contract(s) by making an adjustment to the terms of
    one of the block buy contracts. The adjustment to the procurement
    profile will be made in consultation with industry, with consideration
    of cost, production schedule performance, shipyard resource loading,
    and vendor base considerations. Final determination will be made
    subject to bilateral negotiations with a focus on minimizing impact to
    cost by leveraging the affordability initiatives brought to the program
    by the block buy contracts (stable requirements, stable design, stable
    production schedule, skilled workforce, facility investments, long-term
    vendor agreements, and fixed price contracts).

        39. Senator McCain. Secretary Stackley, roughly how much additional
    cost exposure would the government be facing?
        Mr. Stackley. Navy plans to procure the single LCS shifted to
    fiscal year 2016 under the current block buy contract(s) by making an
    adjustment to the terms of one of the block buy contracts. The
    adjustment to the procurement profile will be made in consultation with
    industry, with consideration of cost, production schedule performance,
    shipyard resource loading, and vendor base considerations. Final
    determination will be made subject to bilateral negotiations with a
    focus on minimizing impact to cost by leveraging the affordability
    initiatives brought to the program by the block buy contracts (stable
    requirements, stable design, stable production schedule, skilled
    workforce, facility investments, long-term vendor agreements, and fixed
    price contracts). The cost impact of the shift of one ship will not be
    quantified until approval of the acquisition strategy and subsequent
    engagement with industry which is expected to occur in the fourth
    quarter of fiscal year 2014.

        40. Senator McCain. Secretary Stackley, what other options are
    available to the government to preclude the block buy contract's terms
    from being reopened?
        Mr. Stackley. The deferral of one block buy ship from fiscal year
    2015 to fiscal year 2016 was a direct result of funding impacts
    associated with the BBA. Navy plans to procure the single LCS shifted
    to fiscal year 2016 under the current block buy contract(s) by making
    an adjustment to the terms of the block buy contracts. The adjustment
    to the procurement profile will be made in consultation with industry,
    with consideration of cost, production schedule performance, shipyard
    resource loading, and vendor base considerations. Final determination
    will be made subject to bilateral negotiations with a focus on
    minimizing impact to cost by leveraging the affordability initiatives
    brought to the program by the block buy contracts (stable requirements,
    stable design, stable production schedule, skilled workforce, facility
    investments, long-term vendor agreements, and fixed price contracts).
    Minimal-to-no schedule impact is expected.
        The addition of advance procurement in fiscal year 2015, to fund
    long lead time material associated with construction of one of the
    block buy ships to be deferred to fiscal year 2016, would improve the
    ability of the industry teams and their vendors to minimize the cost
    impact of delayed material buys, and ultimately reduce price to the
    Navy.

        41. Senator McCain. Secretary Stackley, what would be the impact of
    deferring the acquisition of the mission module equipment and instead
    using those funds to acquire the fourth seaframe (ship) in fiscal year
    2015?
        Mr. Stackley. Deferral of the fiscal year 2015 mission package
    procurements will cause a significant operational impact on deployments
    and would disrupt testing, training, and maintenance. There would be an
    insufficient number of mission packages by fiscal year 2017 to meet all
    integration, testing, and operational requirements. If the proposed
    fiscal year 2015 acquisition of 1 mine countermeasures (MCM) and 2
    surface warfare (SUW) mission packages were deferred, then there would
    only be 14 deployable mission packages for 16 LCS ships in fiscal year
    2017. Mission packages procured in fiscal year 2015 deliver in fiscal
    year 2017. The fiscal year 2015 President's budget request supports the
    Navy taking delivery of 10 SUW, 8 MCM, and 1 ASW mission package to
    field aboard 16 delivered LCS ships by fiscal year 2017. However, one
    SUW and one MCM mission package will be needed as training assets and
    the single ASW mission package will be an engineering development model
    that will be undergoing testing and certification to make it a
    deployable asset. Thus, the fiscal year 2015 President's budget request
    supports 16 deployable mission packages and 16 deployable LCS.
        Delay of mission package procurement will increase the program's
    procurement costs. Several fixed price contracts for MCM and SUW
    mission systems and common equipment will be broken and need to be
    renegotiated, which will result in unit cost increases for all mission
    system procurements. For example, the $20.4 million reduction to MCM
    procurement in the Joint Explanatory Statement accompanying H.R. 3547,
    the Consolidated Appropriations Act of 2014, resulted in a 25 percent
    unit cost increase for the procurement of AN/AQS-20A mine-hunting
    sonars ($8.5 million to $10.8 million).
        Additionally, a halt in the acquisition of mission modules in
    fiscal year 2015 will stop the production lines for the Mark 46 30mm
    gun weapon system; SUW and MCM mission package support containers; the
    AN/AQS-20A mine-hunting sonar; Remote Multi-Mission Vehicle, the
    Mission Package Computing Environment; the Multi-Vehicle Communications
    Systems; and the Common Mission Package Trainer (CMPT). There will be a
    cost associated with the restart of each production line in fiscal year
    2016. The loss of the CMPT will also delay the program's Ready for
    Training (RFT) date planned for fiscal year 2017.

        42. Senator McCain. Secretary Stackley, would deferring mission
    equipment 1 year provide more time to complete equipment testing,
    reduce program concurrency, and address concerns raised by the
    Government Accountability Office (GAO)?
        Mr. Stackley. Deferral of mission equipment is not required to
    complete equipment testing. In fact, a 1-year delay to procurement of
    LCS mission packages will disrupt testing, training, and maintenance,
    while also having a significant operational impact on deployments. A 1-
    year deferral of mission equipment procurement would result in an
    insufficient number of mission packages by fiscal year 2017 to meet all
    integration, testing, and operational requirements. Further, a delay
    will result in additional cost to the Mission Modules program.
    Operational Impact
        If the fiscal year 2015 acquisition of 1 MCM and 1 SUW mission
    package) were deferred, then there would only be 14 deployable mission
    packages for 16 LCS ships in fiscal year 2017. Mission packages
    procured in fiscal year 2015 deliver in fiscal year 2017. The fiscal
    year 2015 President's budget request supports the Navy taking delivery
    of 10 SUW, 8 MCM, and 1 ASW mission package to field aboard 16
    delivered LCS ships by fiscal year 2017. However, one SUW and one MCM
    mission package will be needed as training assets and the single ASW
    mission package will be an engineering development model that will be
    undergoing testing and certification to make it a deployable asset.
    Thus, the fiscal year 2015 President's budget for LCS supports 16
    deployable mission packages and 16 LCS ships.
    Testing
        Mission package testing has proceeded according to schedule,
    although unplanned budget reductions remain the largest risk to
    successful execution of the program of record. For example, the
    rescission of fiscal year 2012 RDT&E,N in fiscal year 2013 caused the
    delay of initial operational test and evaluation (IOT&E) of Increment
    One of the MCM mission package from fiscal year 2014 to fiscal year
    2015. The Navy reported this impact in its second, third, and fourth
    LCS Mission Modules Quarterly Reports to Congress, submitted in June
    2013, November 2013, and February 2014, respectively.
    Concurrency
        The LCS Mission Modules program is structured to deliver increased
    capability, in planned increments over time. Mission systems are
    developed and fielded on schedule. This is not concurrency, as future
    increments do not add risk to earlier increments. The program's modular
    approach to design allows the integration of new mission systems
    without disturbing the existing design or revising previously completed
    work. For example, the design of the Increment One MCM mission package,
    which is on track for operational test next year, will be in no way
    impacted by the integration of the Coastal Battlefield Reconnaissance
    and Analysis (COBRA) system, being introduced in MCM mission package
    Increment Two.
    Increased Cost
        Delay of mission package procurement will increase the program's
    procurement costs. Several fixed price contracts for MCM and SUW
    mission systems and common equipment will be broken and will need to be
    renegotiated, which will result in unit cost increases for all mission
    system procurements. For example, the $20.4 million reduction to MCM
    procurement in the report for the Consolidated Appropriations Act of
    2014 resulted in a 25 percent unit cost increase for the procurement of
    AN/AQS-20A minehunting sonars ($8.5 million to $10.8 million).
        Additionally, halting the acquisition of mission packages in fiscal
    year 2015 will stop the production lines for the Mark 46 30mm gun
    weapon system, SUW and MCM mission package support containers, the AN/
    AQS-20A minehunting sonar, Remote Multi-Mission Vehicle, the Mission
    Package Computing Environment, the Multi-Vehicle Communications
    Systems, and the CMPT. There will be a cost associated with the restart
    of each production line in fiscal year 2016. The loss of the CMPT will
    also delay the program's RFT date planned for fiscal year 2017.

        43. Senator McCain. Secretary Stackley, is the Navy planning to
    compete and down select to one builder for ships LCS-25 to LCS-32?
        Mr. Stackley. Navy's acquisition strategy for LCS-25 to LCS-32 is
    still under development and will take into consideration the cost,
    production schedule performance, shipyard resource loading, and vendor
    base. Additionally, the acquisition strategy will take into account the
    results of the Small Surface Combatant Task Force (SSCTF) study to
    support the future procurement of a more capable and more lethal SSC
    and will consider options for a completely new design, existing ship
    designs (including LCS), and a modified LCS.

        44. Senator McCain. Secretary Stackley, when will Congress be
    advised on the Navy's proposed acquisition plan for those ships?
        Mr. Stackley. Navy's acquisition strategy for LCS-25 to LCS-32 is
    still under development and will take into consideration the cost,
    production schedule performance, shipyard resource loading, and vendor
    base. The acquisition strategy will be dependent upon the outcome of
    the fiscal year 2015 budget and subsequent development of the fiscal
    year 2016 President's budget submission. Additionally, the acquisition
    strategy will take into account the results of the SSCTF study to
    support the future procurement of a more capable and more lethal SSC
    which will consider options for a completely new design, existing ship
    designs (including LCS), and a modified LCS. The results of the SSCTF
    will be available as part of the fiscal year 2016 budget submission.

        45. Senator McCain. Secretary Stackley, when is Congress likely to
    be advised of the Navy/Department of Defense (DOD) LCS program
    reevaluation?
        Mr. Stackley. DOD has directed that no new contract negotiations
    beyond 32 LCS will go forward until Navy submits alternative proposals
    to procure ``a capable and lethal SSC.'' Navy has been directed to
    consider options including ``a completely new design, existing ship
    designs (including LCS), and a modified LCS.''
        In response to DOD direction, the SSCTF was established in mid-
    March 2014. The primary objective of the SSCTF is to develop and
    evaluate alternative ship design concepts for a capable and lethal SSC
    to inform Navy decisions regarding plans for SSCs. These concepts are
    to be developed consistent with the Force Structure Assessment and
    emerging threat environment and include top level requirements, system
    performance, costs, and schedule for each. The SSCTF consists of
    seasoned naval operators, engineering and technical experts, and
    acquisition professionals.
        As part of the SSCTF efforts, Navy issued two Requests for
    Information (RFI) in order to both solicit industry's ideas and access
    current market information in light of the SSCTF's mission to examine
    potential alternatives for a SSC. The first RFI requested information
    regarding mature ship design concepts for SSCTF consideration. The
    second RFI requested information on systems and technologies that
    provide alternative solutions to more affordably meet future SSC
    capability needs. This information will be used to assess the range of
    feasible alternatives for consideration and to understand the
    performance, design, and cost implications of each. The information
    obtained through this market survey will provide the SSCTF insight into
    industry concepts and ideas as well as a means to assess the technical
    feasibility and costs associated with pursuing SSC alternatives.
        In addition to industry engagement, the SSCTF is actively engaging
    fleet to solicit their current views on the missions, capabilities, and
    operational concepts needed for future SSCs. SSC workshops are
    currently planned in fleet concentration areas as well. Specific
    information and insight to be gained from these events include operator
    and planner perspectives regarding mission needs, capability
    requirements, and the relative value of mission and capability
    requirements for future SSCs. The SSCTF findings will be made available
    to Congress as part of the fiscal year 2016 budget submission.

        46. Senator McCain. Secretary Stackley, where does the Navy stand
    in terms of addressing concerns raised by GAO?
        Mr. Stackley. Two recent GAO reports raised several concerns with
    respect to LCS:

        1.  GAO Report 121166 (Littoral Combat Ship: Additional Testing and
    Improved Weight Management Needed Prior to Further Investments).
        2.  GAO Report 13-530 (Navy Shipbuilding: Significant Investments
    in the Littoral Combat Ship Continue Amid Substantial Unknowns about
    Capabilities, Use, and Cost).

        GAO Report 121166 recommends that:

          Prior to awarding ship contracts beyond the block buy both LCS
    classes should:

        a.  Deploy to a forward overseas location;
        b.  Complete rough water, ship shock, and total ship survivability
    testing; and
        c.  Complete initial operational test and evaluation of SUW mission
    package on Freedom-class and the MCM mission package on Independence-
    class.

        Prior to contracting for ships in fiscal year 2016 and later, the
    LCS program will have completed two deployments of Freedom-class and
    will have completed extensive operation of Independence-class as the
    ship will be preparing to deploy in fiscal year 2016. The program will
    have achieved initial operational capability (IOC) as well as having
    completed several of the required mission package IOT&E on both
    classes.
        To date, USS Freedom (LCS-1) deployment is complete and lessons
    learned are applicable to both classes. In addition, any remote support
    requirements unique to USS Independence (LCS-2) are well understood and
    have been largely validated during 2 years of experience operating
    ``out of area'' during MCM mission package testing in the Gulf of
    Mexico (2010 to 2012). The LCS-3 deployment is planned for later this
    year and the Independence-class will deploy in the early fiscal year
    2016 timeframe.
        With respect to testing, the Independence-class rough water trials
    are complete and total ship survivability testing will be completed
    aboard USS Fort Worth (LCS-3) in late fiscal year 2014 followed by USS
    Coronado (LCS-4) in late fiscal year 2015. USS Fort Worth (LCS-3)
    completed ship and SUW IOT&E testing on April 17, 2014. USS Coronado
    (LCS-4) will complete SUW IOT&E testing for Independence-class in July
    2015 followed by MCM IOT&E on USS Independence (LCS 2) in August 2015.
        GAO Report 13-530 recommends that:

        1.  For LCS-25 and beyond, that Navy only procures the minimum
    quantity and rate of ships required to preserve the mobilization of the
    production base until successful completion of the full-rate production
    decision review.
        2.  Prior to the full-rate production decision and award of any
    additional ship contracts, Navy should report to Congress on relative
    advantages of each ship class for each of the three mission areas.
        3.  The APB submitted for the mission modules Milestone B
    establishes program goals for cost, schedule, and performance for each
    phase per current DOD acquisition policy.
        4.  Navy ensure the purchase of mission modules not outpace key
    milestones, and buy only the minimum quantities of mission module
    systems required to support operational testing.

        The competitive pricing achieved in the LCS block buy is resulting
    in fiscal year 2015 ships being awarded at nearly half the price of
    their first of class predecessors. Reductions to the number of LCS
    procured in fiscal year 2015 (beyond those required as a result of the
    BBA), will delay the delivery of much needed capability to the fleet
    and increase overall costs to the Navy as a result of significant
    impact to shipyard efficiencies and serious impacts to the industrial
    base including sub-tier suppliers. In short, any further reduction to
    the program will cause the Navy to fall short of the required force
    structure of 52 SSCs and the competitive block buy pricing would be
    lost.
        The Defense Acquisition Board, chaired by USD(AT&L), will review
    the program prior to the next ship procurement. With respect to
    establishing program goals, the entire program, as defined by the JROC-
    approved LCS Flight 0+ CDD, consists of a single increment for the
    purposes of DOD 5000.02. The nine mission package increments (four MCM,
    four SUW, one ASW) represent time-phased fielding of capability. The
    major systems that comprise mission packages are established as
    individual programs, with their own APBs including cost, schedule, and
    performance objectives and thresholds. One APB for the entire mission
    modules program, which integrates these programs for LCS, is
    appropriate and compliant with law, regulation, and policy. The APB
    will include well-defined, quantitative cost, schedule, and performance
    thresholds and objectives for the mission modules. This is similar to
    the approach used for other programs which provide time-phased
    capability for platforms. The time-phased fielding of capability and
    the associated performance metrics to conduct testing against will be
    defined in the Capability Production Documents currently under
    development for each mission package increment.
        DOD agrees that LCS mission module procurements should not outpace
    delivery of LCS ships. To keep pace with LCS ships currently under
    contract or remaining under the current block buy through fiscal year
    2015, Navy must procure mission packages at a rate necessary to
    support: (1) developmental and IOT&E of the two LCS classes; (2)
    developmental and operational testing of each incremental mission
    module capability as it is integrated and fielded; (3) fleet training
    needs; and (4) operational LCS units with the tailored capabilities
    required for ship deployments. Navy conducted a Quick Reaction
    Assessment prior to the deployment of USS Freedom (LCS-1) and plans to
    conduct IOT&E of mission modules in ships, in accordance with the
    approved CDD, prior to operational deployment of those capabilities.

                                amphibious ships
        47. Senator McCain. Secretary Stackley, is the Navy currently
    assessing any plan to accelerate the construction of additional
    amphibious ships?
        Mr. Stackley. The fiscal year 2015 President's budget submission
    includes funding for only one amphibious ship, LHA-8 in fiscal year
    2017, and advanced procurement for the LX(R) program in fiscal year
    2019, the replacement program for the LSD-41/49 classes of dock landing
    ships.
        As part of the development of the fiscal year 2016 budget, the Navy
    will assess a number of alternatives, all of which are pre-decisional
    at this time. The potential for a return to sequestration-level funding
    in fiscal year 2016 and future years increases our risk in meeting the
    current and future requirements necessary to meet our missions.

        48. Senator McCain. Secretary Stackley, in lieu of accelerating
    acquisition of a $2 billion Landing Platform/Dock (LPD) ship or a $4
    billion Landing Helicopter Dock (LHD) ship would the acquisition
    instead of 10 to 12 Joint High Speed Vessels (JHSV) help to more
    effectively close the Marine Corps' Marine Expeditionary Brigade (MEB)
    capability gap?
        Mr. Stackley. JHSV was designed for intra-theater lift as a
    transport vessel to swiftly move marines and equipment, but not to
    carry them into the battle space. JHSV is not a warship. It was
    designed to commercial specifications to be operated by Military
    Sealift Command (MSC), and as such does not have the survivability and
    self-defense capabilities of the Navy's LPD or LHD/LHA amphibious
    warships.
        JHSV does not have the embarkation capacity or operational
    capability, even in the aggregate of 10 or 12, of an LPD or LHD/LHA.
    Though JHSV has a mission bay and an onloading/offloading ramp, it has
    no well deck for LCACs or LCUs. JHSV is incapable of the organic
    surface connector lift necessary to move the heavy-armored post-war
    (Iraq and Afghanistan) IED-hardened Marine Corps vehicles to the beach.
        The acquisition of 10 to 12 JHSVs would not help to more
    effectively close the MEB capability gap.

        49. Senator McCain. Secretary Stackley, what is the status of
    fiscal year 2013 funds provided for 12 LPD-17-class ships?
        Mr. Stackley. The fiscal year 2013 Continuing and Further
    Continuing Appropriations Act (P.L. 113-6) added $263 million of
    advance procurement funding for a 12th LPD 17 amphibious transport dock
    ship. With the sequestration mark of approximately $20 million, the net
    advance procurement appropriated for a 12th ship is $243 million. The
    funds remain unobligated because there is no funding in the Navy's
    budget to fully fund the ship.

                              ship force structure
        50. Senator McCain. Secretary Stackley, please update the table
    below:

        Mr. Stackley. The table has been updated to reflect the projected
    battle force inventory at the end of the fiscal year for fiscal years
    2014 to 2019 based on the President's budget for fiscal year 2015. The
    basic table (fiscal year 1948 to fiscal year 2013) is from
    Congressional Research Service report of April 7, 2014, on Navy Force
    Structure and Shipbuilding Plans: Background and Issues for Congress,
    on page 39.

                             ______

                  Questions Submitted by Senator Jeff Sessions
                              littoral combat ship
        51. Senator Sessions. Secretary Stackley, please explain what will
    happen to the cost of LCS if procurement is reduced.
        Mr. Stackley. The deferral of one block buy ship from fiscal year
    2015 to fiscal year 2016 was a direct result of funding impacts
    associated with the BBA. Any further reductions to the LCS program in
    fiscal year 2015 will have serious impacts to the industrial base and
    sub-tier vendors. The cost of the impact will not be quantified until
    subsequent engagement with industry which is expected to occur in the
    fourth quarter of fiscal year 2014. Factors that will impact ship
    procurement cost include renegotiation of existing pricing with
    shipbuilder and sub-tier vendors, lower efficiencies based on lower
    throughput in the construction, and higher material costs associated
    with lower quantity buys. Construction efficiencies can be sustained
    despite the deferral of one block buy ship. However, this is contingent
    upon the fiscal year 2016 procurement profile. Absent advance
    procurement funding, there will be an impact to sub-tier vendors due to
    delays in procurement.

        52. Senator Sessions. Secretary Stackley, please explain your
    concerns about the vendor base if LCS production schedules do not
    remain steady.
        Mr. Stackley. The block buy contracts include a stable procurement
    of two ships per year from each shipyard from fiscal years 2012 to 2015
    and allow the industry teams to keep long-term vendor contracts in
    place providing the Navy with highly competitive pricing for the
    duration of the block buy contract(s). While the Navy believes the
    industry teams can maintain competitive pricing on the shift of one
    ship from fiscal year 2015 to fiscal year 2016, the likelihood that the
    industry teams will be able to recreate these competitive prices as the
    number of ships is further reduced is low. Additionally, industry teams
    may lose preferred vendors completely due to the high cost to maintain
    production lines for low volume specialty items (like the ships
    reduction gears).

        53. Senator Sessions. Secretary Stackley, what is the mission of
    the LCS, and please explain how it will perform as part of a larger
    force.
        Mr. Stackley. LCS enables the Navy to meet presence requirements,
    provide warfighting response, and source the capability for contingency
    operations for the combatant commanders. LCS complements our inherent
    blue water capability and fills warfighting gaps in the littorals and
    strategic choke points around the world. LCS will provide a vital
    component of A2/AD operations, clearing mines, neutralizing enemy
    submarines, and protecting high value units from hostile, swarming
    surface craft. LCS is able to respond to threats quickly with speed,
    maneuverability, shallow draft, and the unique capacity to respond with
    a variety of networked off-board systems.
        LCS is able to accomplish a broad array of missions due to the fact
    the ship is reconfigurable and employs tailored mission packages for
    SUW, MCM, or ASW missions. The modular design gives operational
    commanders flexibility to configure LCS to execute focused missions, as
    required.
        LCS is a component of a balanced force, structured to defeat
    adversaries in times of war, and maintain a sizeable, continuous
    peacetime presence around the globe.

        54. Senator Sessions. Secretary Stackley, is the Navy planning to
    compete and down select to one builder for ships 25 to 32?
        Mr. Stackley. Navy's acquisition strategy for LCS-25 to LCS-32 is
    still under development and will take into consideration the cost,
    production schedule performance, shipyard resource loading, and vendor
    base. Additionally, the acquisition strategy will take into account the
    results of the SSCTF study to support the future procurement of a more
    capable and more lethal SSC and will consider options for a completely
    new design, existing ship designs (including LCS), and a modified LCS.

        55. Senator Sessions. Secretary Stackley, when will Congress be
    advised on the Navy's proposed acquisition plan for those ships?
        Mr. Stackley. Navy's acquisition strategy for LCS-25 to LCS-32 is
    still under development and will take into consideration the cost,
    production schedule performance, shipyard resource loading, and vendor
    base. The acquisition strategy will be dependent upon the outcome of
    the fiscal year 2015 budget and subsequent development of the fiscal
    year 2016 President's budget submission. Additionally, the acquisition
    strategy will take into account the results of the SSCTF study to
    support the future procurement of a more capable and more lethal SSC
    which will consider options for a completely new design, existing ship
    designs (including LCS), and a modified LCS. The results of the SSCTF
    will be available as part of the fiscal year 2016 budget submission.

        56. Senator Sessions. Secretary Stackley, what is the status of the
    Navy/DOD LCS program re-evaluation?
        Mr. Stackley. DOD has directed that no new contract negotiations
    beyond 32 LCS will go forward until Navy submits alternative proposals
    to procure a more capable and more lethal SSC. Navy has been directed
    to consider options including ``a completely new design, existing ship
    designs (including LCS), and a modified LCS.''
        In response to DOD direction, the SSCTF was established in mid-
    March 2014. The primary objective of the SSCTF is to develop and
    evaluate alternative ship design concepts for a more capable and more
    lethal SSC to inform Navy decisions regarding plans for SSCs. These
    concepts are to be developed consistent with the Force Structure
    Assessment and emerging threat environment and include top level
    requirements, system performance, costs, and schedule for each. The
    SSCTF consists of seasoned naval operators, engineering and technical
    experts, and acquisition professionals.
        As part of the SSCTF efforts, Navy issued two RFIs in order to both
    solicit industry's ideas and access current market information in light
    of the SSCTF's mission to examine potential alternatives for a SSC. The
    first RFI requested information regarding mature ship design concepts
    for SSCTF consideration. The second RFI requested information on
    systems and technologies that provide alternative solutions to more
    affordably meet future SSC capability needs. This information will be
    used to assess the range of feasible alternatives for consideration and
    to understand the performance, design, and cost implications of each.
    The information obtained through this market survey will provide the
    SSCTF insight into industry concepts and ideas as well as a means to
    assess the technical feasibility and costs associated with pursuing SSC
    alternatives.
        In addition to industry engagement, the SSCTF is actively engaging
    the fleet to solicit their current views on the missions, capabilities,
    and operational concepts needed for future SSCs. SSC workshops are
    currently planned in fleet concentration areas as well. Specific
    information and insight to be gained from these events include operator
    and planner perspectives regarding mission needs, capability
    requirements, and the relative value of mission and capability
    requirements for future SSCs.

        57. Senator Sessions. Secretary Stackley, where does the Navy stand
    in terms of addressing concerns raised by the recent GAO weapons
    assessment?
        Mr. Stackley. LCS shipbuilding process has improved and streamlined
    as the program matured. LCS-4 showed significant improvement from LCS-2
    in level of completeness and number of high priority trial card
    deficiencies at delivery.
        LCS-1 deployment successfully validated major portions of the LCS
    concept of operations for crew rotation and contracted overseas
    maintenance. The ship service diesel generator and lube oil cooler
    reliability issues were satisfactorily addressed while deployed and
    several engineering changes have been incorporated to prevent and
    mitigate similar problems in the future. Material failures of the radar
    were a result of a procedural error causing the system to reboot,
    however the radar performed to design specification. The procedures
    associated with the radar have been reviewed and clarified to avoid
    such issues in the future.
        GAO assessment of program cost growth incorrectly compares the APB
    against a fiscal year 2004 baseline for four ships, which does not
    reflect the total acquisition of 52 ships in the current weapons
    assessment. In addition, GAO incorrectly assesses there to be excessive
    risk associated with mission package development and procurement
    because developmental testing, combined with capability proven during
    early deployments, has significantly reduced technical risk. Lastly,
    current missile procurement was delayed due to sequestration but the
    program is on track to deliver a capability in late 2016.

        58. Senator Sessions. Secretary Stackley, please explain how the
    development and production of LCS compares to other ships, and how does
    the LCS compare to other ships in terms of affordability?
        Mr. Stackley. The LCS is bringing needed capability to the fleet in
    an effective and affordability manner; the challenges experienced with
    the LCS-1 and LCS-2 development and production are similar to those of
    other lead ships. These early challenges are the result of the
    complexity of establishing a highly tailored new construction
    production line and unique production processes that must be
    established for every ship class. In addition, it can take several
    years before a ship is able to be fully constructed and operated at sea
    to completely test the ship. In order to preclude unnecessary impacts
    to the industrial base and provide fleet capability in a timely manner,
    the Navy must balance the risk of some concurrency between development
    and production of lead ships and production of follow ships because of
    the lengthy design-build timelines associated with complex naval
    shipbuilding.
        The Navy has a proven record of consistently managing issues that
    occur during the construction of the lead ships, implementing
    improvements to follow hulls, and ensuring the ships are affordability
    in follow ships. For example, the Oliver Hazard Perry-class (FFG-7)
    frigates began as a clean sheet design originally conceived as a patrol
    frigate (PF-109). The Navy built a new hull, engineering plant, sonar,
    and gun. FFG-7 was thought not survivable by some and had several
    issues including an unreliable service diesel generator. Additionally,
    a major stern redesign was required in order to accommodate the new
    LAMPS III helicopters. Today, the Oliver Hazard Perry-class frigates
    have been in service for almost 40 years and continue to serve as a
    core part of the fleet. The ships continue to be operated by nine other
    countries.
        The Ticonderoga-class (CG-47) Aegis cruisers were troubled with
    displacement and center of gravity concerns due to additional topside
    weight as a result of the weapon systems. There was concern that the
    ship would be unable to pace the carriers which the ships were designed
    to protect. Over time, Ticonderoga's gas turbine propulsion and Aegis
    combat system proved to be effective systems that enable the ship to
    protect the carriers, and were adopted by Arleigh Burke (DDG-51)
    destroyers. With the proven propulsion and combat system, Ticonderoga's
    addition of the new vertical launch system strengthened it to become
    unparalleled at sea. Several of the Ticonderoga-class cruisers are
    being upgraded with ballistic missile defense systems in order to
    continue to leverage the capable platform.
        Lastly, the Arleigh Burke-class destroyers were delayed twice
    before final delivery because of an immature design and the late
    addition of stealth characteristics. Additionally, the DDG-51 bow
    structure required substantial redesign after experiencing heavy
    weather during her maiden deployment. Once the redesign was complete,
    the correction required backfitting earlier ships as well as modifying
    inline new construction and post shakedown availability ships. The Navy
    currently operates 62 Arleigh Burke destroyers with an additional 14
    ships under contract. In fact, the stability, reliability, and
    affordability of the DDG-51 program will allow the Navy to field an
    increase in ballistic missile defense capability using the AMDR as part
    of the Flight III upgrade.
        While initially encountering some development and production
    issues, the LCS has become a capable, stable, and afordable warship
    program. The LCS program has completed the SUW mission package IOT&E
    and is preparing for the MCM IOT&E in fiscal year 2015. The initial
    design issues with the ship were resolved and the corrections are being
    forwardfit and backfit, as required. LCS costs are contained within
    fixed-price contracts and decreasing as anticipated as part of the
    block buy. The shipbuilders have made significant facility improvements
    and investments in workforce training have greatly improved efficiency
    in each ship's construction. The vendor base is leveraging the
    stability provided by the block buy contracts to drive down cost. As a
    result, the estimated cost of the last block buy ship at Marinette
    Marine Corporation and Austal USA have dropped by almost half as
    compared to the lead ships. Overall, the dual block buy contracts are
    delivering on the $2.9 billion savings announced at award. The LCS is
    bringing increased capability to the fleet and adequately balances risk
    in an affordable and timely manner just as the Navy has with past
    shipbuilding programs.

        59. Senator Sessions. Secretary Stackley, does LCS provide greater
    capabilities than the legacy ships it is designed to replace?
        Mr. Stackley. The LCS equipped with a mission package will provide
    greater capabilities as compared to the legacy systems currently in
    theater.
        LCS with a MCM mission package will provide a new way of conducting
    MCM compared to legacy ships. Through the use off-board vehicles, LCS
    will provide MCM capability without the need to place the ship or
    sailors at risk in the minefield. Additionally, LCS has vastly superior
    self-defense capability compared to the MCM-1 class, and will require
    fewer escorts to operate near mined waters.
        LCS with a SUW mission package will have greater capability and
    capacity against highly maneuverable small surface craft including fast
    in-shore attack craft (FIAC) or larger fast attack craft (FAC) than
    legacy ships. LCS equipped with a SUW mission package is equipped with
    two additional 30mm gun systems in addition to the ship's 57mm gun, a
    package of up to 45 short-range surface-to-surface missiles, and an
    embarked armed helicopter. The ability of LCS to bring a combination of
    missiles, guns, and an aircraft launched weapons make the LCS our most
    lethal anti-FAC/FIAC ship with greater capacity than current surface
    combatants. These combined systems will provide the theater commander
    with greater capability and capacity than current frigates and patrol
    craft.
        LCS with an ASW mission package, which combines the most effective
    anti-submarine technologies currently available, will provide greater
    detection capability than legacy frigates. The ASW mission systems
    include the multi-function towed array, the light weight tow designed
    for torpedo defense, the continuous active sonar/variable depth sonar,
    and the MH-60R helicopter armed with MK 54 torpedoes. These systems
    will increase force lethality against submarines at extended ranges.
        LCS is designed with modularity and open architecture with
    documented interface control documents; therefore, the ships do not
    require major shipyard overhauls to upgrade combat capability as new
    technologies become available. Instead, these interface control
    documents provide the method to insert new advanced systems into the
    LCS mission packages and ships. In this sense, LCS not only exceeds
    current capabilities but has additional potential to out-pace evolving
    threats.
                                     ______

                 Questions Submitted by Senator Kelly A. Ayotte
                           portsmouth naval shipyard
        60. Senator Ayotte. Admiral Hilarides, I am very proud of the
    skilled workers at Portsmouth naval shipyard and the essential work
    they do maintaining our Nation's attack submarine fleet. Based on your
    role as Commander of Naval Sea Systems Command, how is Portsmouth Naval
    Shipyard doing?
        Mr. Stackley. In short, the shipyard is doing very well. As with
    the other naval shipyards, the Portsmouth Naval Shipyard workforce is
    dedicated to its mission of conducting the maintenance, modernization,
    and repair on some of the most complicated ships ever built nuclear
    powered attack submarines.
        Along with the other naval shipyards, and the Navy as a whole,
    Portsmouth faced significant hardships last year: the hiring freeze,
    furloughs, and government shutdown. Yet, the ongoing initiatives of the
    shipyard workforce, designed to improve the shipyard performance,
    allowed them to continue their work in an effective manner.
        Examples of these initiatives are evidenced by Portsmouth
    completing USS Pittsburgh (SSN-720) CNO availability on time and
    actually under budget. The shipyard undocked USS Topeka (SSN-754) on 23
    April 2014, 3 weeks ahead of schedule. Additionally, Portsmouth is
    currently executing three CNO availabilities, each of which is tracking
    toward on-time and on-budget completions in the coming months.
    Portsmouth also completed all its assigned work for fiscal year 2013
    and didn't defer any work into fiscal year 2014.
        Portsmouth Naval Shipyard has a detachment in Point Loma, CA, the
    Portsmouth Naval Shipyard Detachment-San Diego, and it too has been a
    top performer--executing 52 maintenance availabilities on homeported
    and visiting submarines in fiscal year 2013 alone.
        So, despite some real issues we all faced in fiscal year 2013,
    Portsmouth Naval Shipyard demonstrated that it is a top performer and I
    am proud to have them on the Navy Sea Systems Command (NAVSEA) Team.

        virginia-class submarine program and the virginia payload module
        61. Senator Ayotte. Secretary Stackley, you stated in your joint
    statement that the Virginia-class submarine program has delivered the
    last six ships on budget and ahead of schedule. What is the status of
    VPM research and development?
        Mr. Stackley. Initial concept development for VPM is complete. The
    concept leverages existing technology, previous Navy experience with
    lengthening submarines, and the modular Virginia-class design.
    Necessary modifications and additions to ship systems can be
    accomplished with existing components. For example, VPM tubes have the
    same diameter (87") as the VPT located forward of the sail in Block III
    and follow on blocks. This modification has minimal cost and technical
    risk in terms of development and procurement, if funded to the
    President's budget.
        The Navy has completed advanced modeling to assess the impact of
    the VPM on Virginia-class submarine performance characteristics and has
    determined that this modification will not prevent the ship from
    meeting any of its current assigned key performance parameters. The
    JROC has validated the requirement modification to the Virginia-class
    submarine by approving the Strike Capability Change Capability
    Development Document in December 2013.

        62. Senator Ayotte. Secretary Stackley, how can we ensure with the
    incorporation of the VPM into Block V that the Virginia-class program
    remains on budget and on schedule?
        Mr. Stackley. Insertion of the VPM into Block V Virginia-class
    submarines will be managed so as to not result in design instability,
    disrupt the production line, or add cost risk. While providing a
    significant increase in strike capacity, VPM is itself a low technical
    risk design change, integrating existing or scaled-up components.
        The Virginia-class' modular design has been evolving to meet the
    Nation's changing needs, and the production line has proven adaptable.
    All Block III submarines are on track to continue Virginia-class'
    established record of early deliveries, including the first Block III
    submarine, PCU North Dakota (SSN-784). The design and certification
    work being done on the Block III Virginia payload tubes, which will be
    similar to the tubes used for VPM, will further reduce risk to the VPM
    design by ensuring that mature, operational systems are utilized
    throughout the module. It is important to note that the design and
    certification work on the lead Block III ship, PCU North Dakota, is not
    in the critical path for delivery and the ship will still deliver prior
    to its contractual delivery date. A similar, but smaller, investment
    was made in Block IV to reduce total ownership costs.
        The VPM in Block V is the next evolution of this established and
    proven design process. The Navy has extensive experience with
    lengthening existing submarine designs, most recently with the in-
    production addition of the multi-mission module to USS Jimmy Carter
    (SSN-23). The Block V design labor estimates are consistent with the
    Jimmy Carter's redesign, and are only 12 percent of the original
    Virginia-class design for over three times the strike capacity.
        The Navy has already completed advanced modeling to assess the
    impact of the VPM on Virginia-class submarine performance
    characteristics and has determined that this modification will not
    prevent the ship from meeting any of its current assigned key
    performance parameters. The JROC has validated the requirement
    modification to the Virginia-class submarine by approving the Strike
    Capability Change Capability Development Document in December 2013.
        The validated Capability Development Document contained key
    performance parameters for cost and schedule as well as system
    performance. The Department has been finding ways to reduce costs since
    the project's inception. The current concept has been reduced in length
    by over 20 feet. This design will prove less costly to both design and
    build, ensuring the ability to meet the cost constraints in the
    Capability Development Document.

                     changes to assessing naval fleet size
        63. Senator Ayotte. Secretary Stackley, I understand that the Navy
    has revised its guidelines for accounting for the size of the Navy's
    battle force. For example, under the old counting rules, as of April 3,
    2014, we had 283 ships and submarines, but under the new counting
    rules, we have 289 ships and submarines. Similarly, in fiscal year 2015
    under the old counting rules, we will have 274 ships and submarines and
    under the new counting rules, we will have 284 ships and submarines--a
    difference of 10. What was the reason for this change?
        Mr. Stackley. The new counting methodology provides flexibility to
    the combatant commanders to assess the near-term environment and
    changing situations faced in meeting the demands of the Defense
    Strategic Guidance. This could include forward deployed naval forces,
    whether self-deployable or non-self-deployable, being added to the
    battle force count dependent on the mission, location, and required
    capabilities.
        The new counting methodology allows ship types routinely requested
    by the combatant commands and allocated through the GFMAP to be counted
    on a case-by-case basis with the recommendation of the CNO and approved
    by the Secretary of the Navy. This will be a temporary authorization to
    include these ships in the ship count and will remain in effect until
    the ships are no longer requested in the GFMAP or are retired
    (whichever occurs first).
        For example, in fiscal year 2015, the specific impact of the new
    counting methodology resulted in adding 10 Patrol Craft forward
    deployed naval forces currently operating in the 5th Fleet, reducing
    the MCM ship count from 11 ships to the 8 ships forward deployed naval
    forces in 5th Fleet and 7th Fleet, adding 1 high speed transport
    assigned to U.S. Pacific Command (PACOM) to replace the currently
    leased WestPac Express, and adding the 2 hospital ships (T-AH).
        As of May 23, 2014, the Navy's battle force consists of 288 ships.

        64. Senator Ayotte. Secretary Stackley, what vessels are you now
    counting that you weren't counting previously?
        Mr. Stackley. The specific impact of the new counting methodology
    will result in adding 10 Patrol Craft forward deployed naval forces
    currently operating in the 5th Fleet, reducing the MCM ship count from
    11 ships to the 8 ships forward deployed naval force in 5th Fleet and
    7th Fleet, adding 1 high speed transport assigned to PACOM to replace
    the currently leased WestPac Express and adding the 2 hospital ships
    (T-AH) in fiscal year 2015.

                            american naval dominance
        65. Senator Ayotte. Secretary Stackley, in his March 5, 2014,
    prepared statement, Secretary Hagel said, ``With the proliferation of
    more advanced military technologies and other nations pursuing
    comprehensive military modernization, we are entering an era where
    American dominance on the seas, in the skies, and in space can no
    longer be taken for granted.'' With respect to our dominance on the
    seas, do you share Secretary Hagel's assessment, and what must be done
    to address it?
        Mr. Stackley. The U.S. Navy remains the most dominant Navy in the
    world. However, we face a broad array of diverse threats and challenges
    to the Nation's security over the next 10 years, including those that
    place at risk our dominance on the seas. The proliferation of A2/AD
    systems--to include mines, anti-ship cruise and ballistic missiles, and
    integrated air and missile defenses--is one of the most pressing
    concerns for Navy. The nature of modern and emerging threats is such
    that generally no single system or capability can defeat them; we must
    rely on a comprehensive, layered approach using multiple Navy, Joint,
    and allied solutions to wherever possible attack every link in an
    adversary's A2/AD effects chain. To support this approach, Navy uses a
    rigorous analytic agenda to inform investment decisions across multiple
    time horizons and scenarios.
        Similarly, no single platform can support defeating the threats; we
    must build the future force needed to meet the full range of missions
    required of the Department of the Navy in support of the DSG. To
    achieve this goal, the Navy reported to Congress in January 2013 the
    results of the Force Structure Assessment which included a battle force
    requirement of 306 ships. The Department of the Navy continues to build
    toward this balanced force with the procurement of 7 ships in fiscal
    year 2015 and 44 ships over the FYDP (fiscal year 2015 to fiscal year
    2019).
        The Navy maintains its steady momentum towards achieving the Force
    Structure Assessment requirements, but more than the size of our force,
    the threats before us require that priority be placed on investment in
    the development and fielding of those weapon systems that will provide
    the future force decisive advantage on, above, and below the sea. These
    include the MCM systems associated with the LCS mission package; the
    DDG-51 Flight III upgrade that provides the increased air and missile
    defense capability necessary to counter the rising threat to our
    carrier battle groups; advancements in electronic warfare contained
    within programs such as the E/A-18G Growler electronic attack aircraft,
    the Next Generation Jammer, and the Shipboard Electronic Warfare
    Improvement Program (Block III); continual advancements in underwater
    superiority delivered by the Advanced Processing Build program
    (commonly referred to as Acoustic Rapid COTS Insertion, ARCI); the
    further development and fielding of integrated warfare capabilities,
    such as Navy Integrated Fire Control-Counter Air that vastly increases
    the over-the-horizon capability of our air defense systems; the
    development of the Offensive Anti Surface Warfare missile that will
    provide extended reach and lethality against surface threats to our
    force; and the introduction of fifth generation manned and unmanned
    aircraft within our carrier air wings.
        These capabilities all currently in development, when combined with
    our planned new construction and modernization programs, such as Aegis
    destroyer and cruiser modernization, will provide our Navy the
    balanced, capable force in number required to ensure our continued
    dominance.
        However, alongside the threat beyond our shores, the threat posed
    by sequestration and declining budgets, which places these investments
    at risk, likewise places at risk that dominance on, above, and below
    the seas that our Nation has long been able to take for granted.

                            attack submarine demand
        66. Senator Ayotte. Secretary Stackley, you acknowledge in your
    joint statement that submarines provide the opportunity to operate in
    A2/AD environments and provide valuable ISR, as well as indication and
    warning of potential hostile action. Attack submarines are also
    effective in ASW and undersea warfare--creating a significant
    conventional deterrent. What percentage of overall combatant command
    attack submarine requests are being met by the Navy?
        Mr. Stackley. Through the GFMAP, the Navy sourced approximately 53
    percent of overall combatant command attack submarine requests in
    fiscal year 2014.

        67. Senator Ayotte. Secretary Stackley, what percentage of PACOM
    attack submarine requests are being met?
        Mr. Stackley. Specific combatant command demand and sourcing levels
    are classified and can be provided via classified channels, if desired.

                          ship force structure changes
        68. Senator Ayotte. Secretary Stackley, what specific ships are
    planned for retirement as part of the President's fiscal year 2015
    budget?
        Mr. Stackley. The 14 ships listed below are planned for retirement
    in fiscal year 2015:

             USS Taylor (FFG-50)
             USS Gary (FFG-51)
             USS McClusky (FFG-41)
             USS Elrod (FFG-55)
             USS Simpson (FFG-56)
             USS Vandegrift (FFG-48)
             USS Samuel B Roberts (FFG-58)
             USS Kauffman (FFG-59)
             USS Rodney M Davis (FFG-60)
             USS Ingraham (FFG-61)
             USS Peleliu (LHA-5)
             USS La Jolla (SSN-701)
             USS Norfolk (SSN-714)
             USNS Rainier (T-AOE-7)

        69. Senator Ayotte. Secretary Stackley, what specific ships are
    planned for commissioning in fiscal year 2015?
        Mr. Stackley. Fiscal year 2015 projected commissionings (as of May
    8, 2014):

             PCU America (LHA-6)
             PCU Milwaukee (LCS-5)
             PCU Jackson (LCS-6)
             PCU Zumwalt (DDG-1000)

                                    tomahawk
        70. Senator Ayotte. Secretary Stackley, what changed in the past
    year to cause the Navy to revise its Inventory Objective for Tomahawks
    from 9,150 missiles to 7,900 missiles--a 15 percent drop in 1 year?
        Mr. Stackley. Two factors drove Navy's Tomahawk's combat
    requirement down during the fiscal year 2015 President's budget naval
    munitions requirements process. One is the force structure change which
    placed 11 guided missile cruisers in phased modernization status. The
    other is the Joint Chiefs of Staff, Office of the Secretary of Defense,
    combatant commands, and the Services implemented changes to the threat
    development and weapon allocation process. These threat/weapon
    allocation changes resulted in reduced overmatch situations where fewer
    weapon are required to meet the same military objective.

        71. Senator Ayotte. Secretary Stackley, what specific requirement
    input was provided by the combatant command?
        Mr. Stackley. Within the DOD munitions requirements process, the
    combatant commands submit threat data allocated within their area of
    responsibility. The threat data is subsequently used by the Military
    Services to develop munitions inventory requirements. In fiscal year
    2014, the combatant commands, in conjunction with the Joint Chiefs of
    Staff, the Office of the Secretary of Defense, and the Services,
    implemented changes to the threat development and weapon allocation
    process. These threat/weapon allocation changes resulted in reduced
    overmatch situations where fewer Tomahawk weapons are required to meet
    the same military objective.

        72. Senator Ayotte. Secretary Stackley, was this change threat
    based?
        Mr. Stackley. Two factors drove Navy's Tomahawk's combat
    requirement down during the fiscal year 2015 President's budget naval
    munitions requirements process. One is the force structure change which
    placed 11 guided missile cruisers in phased modernization status. The
    other is the Joint Chiefs of Staff, the Office of the Secretary of
    Defense, the combatant commands, and the Services implemented changes
    to the threat development and weapon allocation process. These threat/
    weapon allocation changes resulted in reduced overmatch situations
    where fewer weapons are required to meet the same military objective.

        73. Senator Ayotte. Secretary Stackley, has the Navy conducted a
    business case analysis comparing the costs associated with production
    shut-down and start-up versus ordering a minimum number of missiles to
    keep the production lines open, and if so, what was your analysis, and
    if not, why not?
        Mr. Stackley. We assess that with the procurement of the fiscal
    year 2015 Tomahawk/BLK IV missiles (QTY 100 with deliveries complete
    during the fourth of 2017) the Navy has sufficient all-up-round missile
    assets in inventory to address planned worse case operational needs
    through 2024 when the Next Generation Land Attack Weapon begins
    delivery to the fleet.
        With the truncation of Tomahawk BLK IV missile production in fiscal
    year 2015, the Navy avoids the expenditure of more than $300 million
    per year for procurement of unnecessary inventory (approximately $1.0
    billion for fiscal year 2015 through fiscal year 2019 or approximately
    $1.3 billion for fiscal year 2015 through fiscal year 2020 (program of
    record)).
        In the event that a production restart is required, it is estimated
    approximately $300 million to $400 million of non-recurring restart
    costs would be incurred over a 2- to 3-year period. This estimate is
    based upon similar costs incurred by the Tomahawk program when the
    production line had to be restarted in the past.
        The Navy plans to continue to support the Tomahawk capability by
    deploying and maintaining the weapon system on major surface and
    subsurface combatants through fiscal year 2047. The Navy has also
    planned and budgeted for: Tomahawk modernization starting in fiscal
    year 2015; a major missile recertification program commencing in fiscal
    year 2019, providing an additional 15-year service life to the BLK IV
    weapons; major spare/repair parts procurements; and a missile depot to
    sustain the Tomahawk engineering/logistics core and mitigate risk to
    the Tomahawk industrial base.

        74. Senator Ayotte. Secretary Stackley, what measures will the Navy
    put in place to ensure that the follow-on program will be delivered on-
    time, on-budget, and meets all of the operational requirements?
        Mr. Stackley. The Department of the Navy has already initiated the
    requisite activities needed to ensure on-time/on-budget delivery of
    Next Generation Land Attack Weapon warfighting capabilities. The
    capabilities based assessment for Next Generation Land Attack Weapon is
    ongoing and will inform the next steps in the requirements and
    acquisition process (i.e. completion of the initial capabilities
    document, analysis of alternatives, and acquisition strategy).
        To ensure the lowest cost technically acceptable acquisition
    program, the Navy plans to hold a full and open competition for Next
    Generation Land Attack Weapon with Milestone B in fiscal year 2018 and
    an early operational capability delivered in fiscal year 2024. During
    this process, our systems engineering activities will be worked
    collaboratively with industry to ensure understanding of the key
    technologies and risks; our cost analysts will have the best available
    industry/government data to understand cost and cost drivers; and our
    contracting strategy will incentivize appropriate contactor behavior to
    deliver the requisite capabilities on-time and on-budget.
        In keeping with the provisions of the new DOD 5000.02, our plan
    also includes integration of better buying power initiatives; the
    empowerment and accountability of the program executive officer and
    program manager; and the right balance of executive leadership and
    oversight to provide the needed insight on program progress at key
    knowledge and decision points.

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