[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/


                                  _______
                                  
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                          Washington, DC 20402-0001



                      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

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                             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.

                                 [all]