    [Senate Hearing 115-852]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-852

            OPTIONS AND CONSIDERATIONS FOR ACHIEVING A 355-SHIP NAVY

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

                                    HEARINGS

                                   before the

                            SUBCOMMITTEE ON SEAPOWER

                                     of the

                          COMMITTEE ON ARMED SERVICES
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                          MAY 24, 2017; JULY 25, 2017

                                   __________

             Printed for the use of the Committee on Armed Services

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                     Available via http://www.govinfo.gov/

                                ______

                 U.S. GOVERNMENT PUBLISHING OFFICE
     41-882               WASHINGTON : 2020

                          COMMITTEE ON ARMED SERVICES

      JOHN McCAIN, Arizona, Chairman    JACK REED, Rhode Island
    JAMES M. INHOFE, Oklahoma           BILL NELSON, Florida
    ROGER F. WICKER, Mississippi        CLAIRE McCASKILL, Missouri
    DEB FISCHER, Nebraska               JEANNE SHAHEEN, New Hampshire
    TOM COTTON, Arkansas                KIRSTEN E. GILLIBRAND, New York
    MIKE ROUNDS, South Dakota           RICHARD BLUMENTHAL, Connecticut
    JONI ERNST, Iowa                    JOE DONNELLY, Indiana
    THOM TILLIS, North Carolina         MAZIE K. HIRONO, Hawaii
    DAN SULLIVAN, Alaska                TIM KAINE, Virginia
    DAVID PERDUE, Georgia               ANGUS S. KING, JR., Maine
    TED CRUZ, Texas                     MARTIN HEINRICH, New Mexico
    LINDSEY GRAHAM, South Carolina      ELIZABETH WARREN, Massachusetts
    BEN SASSE, Nebraska                 GARY C. PETERS, Michigan
    LUTHER STRANGE, Alabama

                      Christian D. Brose, Staff Director
                       Elizabeth L. King, Minority Staff
                                    Director

                            Subcommittee on Seapower

      ROGER F. WICKER, Mississippi,     MAZIE K. HIRONO, Hawaii
                 Chairman               JEANNE SHAHEEN, New Hampshire
    TOM COTTON, Arkansas                RICHARD BLUMENTHAL, Connecticut
    MIKE ROUNDS, South Dakota           TIM KAINE, Virginia
    THOM TILLIS, North Carolina         ANGUS S. KING, JR., Maine
    DAN SULLIVAN, Alaska
    LUTHER STRANGE, Alabama

                                      (ii)

                                C O N T E N T S

                                  MAY 24, 2017

                                                                       Page

    Industry Perspectives on Options and Considerations for Achieving     1
      a 355-Ship Navy.

    Cuccias, Brian J., Executive Vice President, Huntington Ingalls       4
      Industries and President, Ingalls Shipbuilding.
    Casey, John P., Executive Vice President, Marine Systems,
      General Dynamics...............................................    10
    Paxton, Matthew P., President, Shipbuilders Council of America...    22

    APPENDIX A.......................................................    47

                                 JULY 25, 2017

                                                                       Page

    Options and Considerations for Achieving a 355-Ship Navy From        55
      Naval Analysts.

    Labs, Dr. Eric, Senior Analyst for Naval Forces and Weapons,         58
      Congressional Budget Office.
    O'Rourke, Ronald, Specialist in Naval Affairs, Congressional         73
      Research Service.
    Hendrix, Dr. Jerry, Senior Fellow and Director of the Defense        95
      Strategies and Assessments Program at the Center for a New
      American Security.
    Clark, Bryan, Senior Fellow, Center for Strategic and Budgetary     100
      Assessments.

                                     (iii)

                      INDUSTRY PERSPECTIVES ON OPTIONS AND

                         CONSIDERATIONS FOR ACHIEVING A

                                 355-SHIP NAVY

                                  ----------

                            WEDNESDAY, MAY 24, 2017

                          United States Senate,
                              Subcommittee on Seapower,
                                   Committee on Armed Services,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 9:34 a.m. in
    Room SR-232A, Russell Senate Office Building, Senator Roger
    Wicker (chairman of the subcommittee) presiding.
        Committee Members present: Senators Wicker, Tillis,
    Sullivan, Hirono, Shaheen, Blumenthal, Kaine, and King.

               OPENING STATEMENT OF SENATOR ROGER WICKER

        Senator Wicker. This hearing of the Seapower Subcommittee
    will come to order.
        The Senate Armed Services Subcommittee on Seapower convenes
    today to receive testimony on industry perspectives and options
    and considerations for achieving a 355-ship Navy.
        We welcome our three witnesses who are leaders in our
    shipbuilding industry: Mr. Brian Cuccias, Executive Vice
    President of Huntington Ingalls Industries and President of
    Ingalls Shipbuilding, representing America's largest
    shipbuilder with nearly 37,000 employees and with shipyards in
    Mississippi and Virginia; also, Mr. John Casey, Executive Vice
    President of General Dynamics Marine Group, which includes
    25,000 employees, with shipyards in California, Connecticut,
    Maine, and Rhode Island; and Mr. Matthew Paxton, President of
    the Shipbuilders Council of America, a national trade
    association representing U.S. shipbuilders, ship repairers, and
    the shipyard supplier base with members in 34 States.
        Gentlemen, our subcommittee is grateful to you for agreeing
    to testify today. Your expertise and counsel will be invaluable
    today and in the future as we consider options for increasing
    the size of our fleet.
        We have long argued that the United States Navy's dominant
    maritime position would not be possible without the unique
    skills, capabilities, and capacities across the maritime
    industrial base. So thank you for all you do.
        Now more than ever, a strong Navy and Marine Corps are
    central to our Nation's ability to deter adversaries, assure
    our allies, and defend our national interests. Our sailors and
    marines are at the forefront of our rebalance to Asia, ongoing
    operations against the Islamic State, responses to a resurgent
    Russia, and efforts to deter rogue states such as Iran and
    North Korea.
        Yesterday, this subcommittee held a classified roundtable
    discussion with Navy leaders to discuss current readiness
    challenges, emerging threats, and the requirements underpinning
    the 355-ship force structure objective that was established in
    December of last year. It is clear that our current fleet of
    275 ships is insufficient to address the security challenges we
    face today and that we anticipate in the future.
        Even with recent shipbuilding increases, many of which were
    initiated by this subcommittee, the fleet would have peaked at
    313 ships in 2025 under the Navy's 2017 30-year shipbuilding
    plan. We look forward to receiving the Navy's updated 30-year
    shipbuilding plan, which by law should have accompanied the
    budget submitted yesterday. We would like to receive that as
    soon as possible and expect it to contain the recommended path
    to achieving the 355-ship requirement. We want to help and we
    want to lead in this regard.
        This morning, I would like to hear from our witnesses on
    what I consider four key issues.
        First, industrial base readiness to increase production.
    Last week, the Chief of Naval Operations released a white paper
    entitled ``The Future Navy'' which identified 29 additional
    ships that could be procured over the next 7 years, or roughly
    four additional ships per year. This document states hot
    production lines can do more economically. I would like to hear
    your assessments of your companies' readiness, including
    vendors and subcontractors, to increase production in line with
    this Navy document, or potentially faster.
        Second, the importance of stable and predictable workload.
    Shipbuilding requires a long-term commitment. For example, it
    takes millions of man-hours over 3 to 4 years to build each
    destroyer and about 5 years to build each fast attack
    submarine. I would like to hear your views on the importance of
    a national commitment and budgetary certainty to enable sound
    decision-making and efficient planning to align our workforce
    with the anticipated workload.
        Third, options to improve efficiency and cost
    effectiveness. While this subcommittee will continue to
    exercise its oversight responsibilities on each shipbuilding
    program, there are certain authorities to save time and money
    that only Congress can authorize. In addition, I recognize
    companies of all sizes across the supply chain will need to
    invest in facilities, equipment, and workforce to meet higher
    demand if we are to get this done. I am interested in your
    recommendations on what the subcommittee can do this year to
    enable the companies you represent to reduce unit cost and
    deliver ships the Navy needs and deliver them faster.
        Finally, best practices to ensure success. Similar to the
    Reagan buildup, in which 91 ships were added to the fleet
    between 1980 and 1987, to reach 355 ships will be an increase
    of 80 ships compared to today's fleet. So with our witnesses'
    considerable experience in all facets of shipbuilding, I hope
    you will describe those best practices that are absolutely
    essential to get right as we grow the Navy.
        In closing, let me say that I am open to all options to
    meet the Navy's 355-ship objective as soon as possible. This
    will be a historic undertaking, depending on assumptions such
    as such a buildup would take more than 25 years or as few as 8
    years. So help us out there.
        In any case, the new construction options we will discuss
    today are critical. However, I believe we must also look at
    other options such as extending the service lives of existing
    ships and reactivating decommissioned ships. This committee
    will continue to explore these options and more in the coming
    weeks.
        With that in mind, I turn to our ranking member, Senator
    Hirono, who had very major surgery only 1 week ago today and in
    an amazing way was back voting on the floor and helping us with
    this subcommittee. So the amazing Mazie Hirono is recognized
    for her remarks.

                   STATEMENT OF SENATOR MAZIE HIRONO

        Senator Hirono. Thank you very much, Mr. Chairman. I would
    like to join you in thanking our witnesses for being here with
    us this morning to discuss how we can get to the goal of a 355-
    ship Navy.
        I think we need to be very realistic in the short-term and
    in the long-term of ways that we can get to this goal. Of
    course, in Hawaii we understand the threats our country faces
    and the Navy's role in confronting them. This is particularly
    true at a time when four out of five of our country's most
    pressing national security challenges are present in the
    Pacific theater.
        The growing importance of the Indo-Asia-Pacific region is a
    primary driver of the Navy's goal to increase the number of
    ships in its fleet from 308 to 355. But after 2 decades of
    restructuring the shipbuilding industry to support a much
    smaller fleet, meeting this goal presents a unique set of
    challenges, particularly in how to pay for the construction and
    the maintenance of a significantly larger fleet.
        Earlier this year, I attended the graduation ceremony for
    the apprenticeship program at Pearl Harbor Navy Shipyard, which
    plays a critical role in keeping our Navy fit to fight. Any
    plan to expand the size of our Navy must provide a simultaneous
    commitment to continuing shipyard modernization, funding
    maintenance availability, and developing a skilled workforce to
    maintain the fleet.
        Because her diving certifications have expired, the USS
    Boise is tied up at a pier and will be unable to operate until
    the Navy overhauls and inspects the boat. The current Navy plan
    is to fund planning and design in fiscal year 2018 and conduct
    the overhaul sometime in fiscal year 2019, which means the boat
    will have sat idle for roughly 2 years before the maintenance
    begins. It makes little sense for combatant commanders to be
    asking for more attack submarine deployments while we have a $1
    billion submarine tied up at a pier for lack of maintenance.
        I am also looking forward to hearing more about impediments
    to expanding our shipbuilding industry and what our partners
    can and should do to help in this effort. This testimony that
    you provide today will be crucial as we try to understand the
    context within which the Navy has made budgetary decisions for
    the 2018 budget and future years defense program.
        Thank you again, Mr. Chairman, for conducting this hearing.
    I look forward to the testimony.
        Senator Wicker. Thank you, Senator Hirono.
        We will begin our testimony at this point with Mr. Cuccias.
    Thank you, sir, for being here.

       STATEMENT OF BRIAN J. CUCCIAS, EXECUTIVE VICE PRESIDENT,
         HUNTINGTON INGALLS INDUSTRIES AND PRESIDENT, INGALLS
                              SHIPBUILDING

        Mr. Cuccias. Well, thank you, Chairman Wicker, Ranking
    Member Hirono, distinguished members of the Seapower
    Subcommittee. Good morning. My name is Brian Cuccias, and I am
    honored to address you today, along with my colleagues, on how
    the shipbuilding industry can help the Navy and the Nation
    achieve a 355-ship Navy.
        Chairman Wicker, I greatly appreciate the attention you are
    devoting to this critical national initiative.
        I would like to thank the subcommittee for its longstanding
    support for shipbuilding and the Navy and Marine Corps team.
        I plan to limit my oral remarks to a brief summary and ask
    that my written testimony be submitted for the record.
        Senator Wicker. Without objection.
        Mr. Cuccias. I am here today representing Huntington
    Ingalls Industries which operates two of the Nation's major
    shipyards; Ingalls Shipbuilding, of which I am President; and
    Newport News Shipbuilding. Newport News has been building ships
    for 131 years; Ingalls for nearly 80 years. We also operate
    Continental Maritime, a small repair yard in San Diego.
        Together, we have built more than 2,800 ships, submarines,
    vessels, including 70 percent of the Navy's fleet of warships.
    Our three yards employ more than 30,000 shipbuilders. We are
    the largest employer in the State of Mississippi and the
    largest industrial employer in the State of Virginia.
    Supporting the work at these yards are roughly 5,000 suppliers
    from virtually all 50 States.
        We appreciated Chairman McCain's recommendations in January
    contained in Restoring American Power. This document, coupled
    with several other studies, including the Navy's own force
    structure assessment, provides a compelling rationale for
    increasing the size of the Navy. We are proud to partner with
    the Navy and Congress in providing the United States with the
    fleet it needs.
        Turning now to the tools and resources industry needs to
    carry out an accelerated military shipbuilding plan, I will
    offer several recommendations for your consideration.
        First and foremost, leveraging successful platforms on
    current hot production lines will provide the fastest results.
    I would note that many of the proposals in Chairman McCain's
    paper, such as compressing deliveries on Ford aircraft carriers
    to 4 years, building DDGs on 9-month centers, increasing
    submarine production, and accelerating the LXR program, are all
    efforts that we ourselves would recommend and are ready now to
    execute.
        In my view, it is a best practice to keep current
    production lines hot, utilizing existing designs. When the
    production line is stopped and subsequently restarted, we
    traditionally experience significant cost as a result of loss
    of shipbuilder learning. In the 5-year break in production in
    the DDG program, the first ship in the restart resulted in a
    labor premium of over 20 percent.
        With your help and support, we have kept the LPD line at
    Ingalls hot and hope to continue to building amphibious ships
    for the Marine Corps without a break in production. We assumed
    the benefits of zero production. Costs are coming down in this
    program, and we are in a position to deliver more capability to
    the Marines at the program of record cost if we do not break
    the hot production line.
        Second, I cannot underestimate the importance of a steady
    and predictable funding and a stable shipbuilding plan.
    Continuing resolutions can impact our business significantly,
    not only causing delays in meeting milestones but increasing
    costs. Unpredictable funding is hard for shipbuilders to
    manage, but it is even more difficult for our suppliers, two-
    thirds of which are small businesses. A clear and consistent
    demand signal would go a long way in promoting a healthy,
    efficient, and productive industrial and supplier base.
        Perhaps one of the most impactful tools are procurement
    strategies such as block buys and multiyear procurement
    authority. Multiyear procurements provide a demand signal to
    industry which stabilizes not only the work at our shipyard but
    also in our suppliers' facilities.
        Furthermore, a predictable demand from the government
    allows us and our suppliers to make facility and human capital
    investments and process improvements that ultimately will
    enable us to build ships faster and more affordably.
        We encourage Congress to make the broadest use of multi-
    ship block buy contracts, particularly for mature programs,
    including amphibious warships, destroyers, aircraft carriers,
    and submarines. The savings from a multi-ship procurement alone
    could be as much as $1 billion for amphibious warships and $1.5
    billion for aircraft carriers. A multi-ship buy of carriers
    would not only reduce the cost of these ships but also help
    stabilize the industrial base that would benefit the overall
    shipbuilding industry.
        Third, I recommend that Congress authorize and fund new
    ship construction on optimum intervals. This would allow us to
    deploy our workforce as effectively as possible. For example,
    the LHA program of record currently has a 7-year gap between
    LHA-8, which we are now building, and LHA-9. This production
    break would require us to drastically reduce our LHA workforce,
    then having to ramp up and retrain a workforce 7 years later.
    The interval between 3 and 4 years for these ships would enable
    us to operate most efficiently and return our skilled workforce
    as well as our supplier base.
        Finally, we must invest in infrastructure improvements in
    our shipyard and our supplier facilities. At Huntington
    Ingalls, we will invest in $1.5 billion in our shipyards to
    make sure we are ready to build the future fleet. At Ingalls
    alone, we are investing hundreds of millions of dollars in
    recapitalization of the shipyard. We call it the shipyard of
    the future. This effort has been strongly supported by not only
    the corporation but also the State of Mississippi. We need the
    Federal Government to be a strong partner as well.
        These efforts will help accelerate the delivery of our
    ships to our Navy and Coast Guard, save taxpayer dollars,
    stabilize the industrial base, preserve American jobs, and
    improve the security of our great Nation.
        Thank you and I look forward to your questions.
        [The prepared statement of Mr. Cuccias follows:]

                      Prepared Statement by Brian Cuccias

        Chairman Wicker, Ranking Member Hirono and distinguished
    members of the Seapower Subcommittee, thank you for inviting me
    to appear before you to discuss the state of military
    shipbuilding and share our ideas on how we increase the size of
    the U.S. Navy's fleet to 355 ships as efficiently and
    effectively as possible.
        I am here today representing Huntington Ingalls Industries,
    which operates two of our nation's major shipyards: Ingalls
    Shipbuilding, of which I am the president, and Newport News
    Shipbuilding, where my colleague Matt Mulherin will soon turn
    over the reins to Jennifer Boykin. We also own and operate
    Continental Maritime, a small repair yard in San Diego.
        Today I will discuss the investments and improvements we
    are making at our shipyards to accelerate and make more cost-
    effective our military shipbuilding efforts. I will also
    discuss what we recommend are best practices and the tools and
    resources to fully meet an accelerated shipbuilding plan,
    including leveraging hot production lines and employing multi-
    ship procurement strategies.
        Newport News has been building ships for 131 years, and
    Ingalls for over 79 years. Together, we have built more than 70
    percent of the Navy's fleet of warships. Our yards employ more
    than 30,000 shipbuilders, including more than 5,000 engineers
    and designers. We are the largest employer in the State of
    Mississippi and the largest industrial employer in the State of
    Virginia. Supporting the work at both yards are roughly 5,000
    suppliers from all 50 states. Throughout our company, we have
    more than 1,000 employees with 40 years or more with the
    company; we honor them with the title of Master Shipbuilder.
        We build ships that last for decades. In February, we
    authenticated the keel of the destroyer Frank E. Petersen Jr.
    (DDG 121). That ship will be still be in service in 2050. At
    Newport News, the aircraft carrier Gerald R. Ford recently
    successfully completed builder's sea trails. She will be in
    service until nearly 2070.
        We appreciate the widespread support for increasing the
    size of the Navy's fleet, and we look forward to participating
    in the dialogue on the best way to do this. We especially
    appreciate Chairman McCain's recommendations in January
    contained in ``Restoring American Power.'' This document--
    coupled with numerous other studies, including the Navy's own
    Force Structure Assessment--provides a compelling rationale for
    increasing the size of the Navy. As a partner with the Navy and
    Congress on providing the nation with the fleet it needs, we
    are always looking for ways to provide more buying power for
    our customer.
        Before I discuss ways to accelerate our Navy's drive to
    355-ships, let me tell you a bit about our industry. Building
    warships is hard work. These are unbelievably complex
    machines--challenging to design and challenging to build. We
    used to measure complexity and capability of a ship by the tons
    of steel required to build it. While steel still matters, the
    requirement for life-cycle cost-savings through crew-size
    reduction and for increased lethality of these weapons systems
    increases the complexity of the design. For instance, Ford
    contains 10 million feet of electrical cable and 4 million feet
    of fiber optic cable--a 200 percent increase in the amount of
    cable over USS Abraham Lincoln when she was commissioned in
    1989.
        Unlike many other Department of Defense acquisition
    programs, we don't build prototypes, test articles or construct
    low-rate initial production runs before producing the first
    ship in a class. The first ship in a class is the prototype; it
    is commissioned and sent into harm's way and is expected to
    serve for between 30 and 50 years, depending on the ship class.
    The idea of not having a prototype is part of the issue with
    why a first-of-class ship has cost challenges built into the
    effort. Also unlike many other programs, the construction of
    one ship will span years and cover multiple budget submissions
    and legislative cycles.
        Shipbuilding is largely outdoor work. Although I will talk
    later about ways we are providing cover for our shipbuilders,
    we build ships outdoors, in the heat, cold, sun, wind, rain and
    snow.
        As I mentioned earlier, we are supported by roughly 5,000
    suppliers in all 50 states. Our supplier base has seen
    significant changes as the size of the fleet has decreased.
        For nuclear shipbuilding, during the 20-year period between
    1977 and 1996, Electric Boat, Newport News and the industrial
    base delivered almost 90 nuclear ships in the Ohio-, Los
    Angeles-, Seawolf- and Nimitz-class programs. The industrial
    base population during that time was in excess of 17,000
    suppliers between both Electric Boat and Newport News. Critical
    suppliers decreased 27 percent over the years as suppliers left
    the submarine industry due to low-rate production. Ownership
    changes and corporate consolidations caused further contraction
    of the industrial base by an additional 16 percent. For
    example, major suppliers that left the industrial base during
    this time included General Electric and Westinghouse, resulting
    in the components they had provided becoming single-sourced.
    Overall, the outcome of low-rate production and lead time to
    enter our marketplace resulted in a reduction in competition
    and an increase in the number of single- and sole-source
    acquisitions, which now account for approximately 65 percent of
    total spend at Newport News. After the major contraction
    described above, approximately 3,000 suppliers remain to
    support submarine and CVN programs as first-tier suppliers.
        Qualifying to be a supplier is a difficult process.
    Depending on the commodity, it may take up to 36 months. That
    is a big burden on some of these small businesses. This is why
    creating sufficient volume and exercising early contractual
    authorization and advance procurement funding is necessary to
    grow the supplier base, and not just for traditional long-lead
    time components; that effort needs to expand to critical
    components and commodities that today are controlling the build
    rate of submarines and carriers alike. Many of our suppliers
    are small businesses and can only make decisions to invest in
    people, plant and tooling when they are awarded a purchase
    order. We need to consider how we can make commitments to
    suppliers early enough to ensure material readiness and
    availability when construction schedules demand it.
        With questions about the industry's ability to support an
    increase in shipbuilding, both Newport News and Ingalls have
    undertaken an extensive inventory of our suppliers and assessed
    their ability to ramp up their capacity. We have engaged many
    of our key suppliers to assess their ability to respond to an
    increase in production.
        The fortunes of related industries also impact our
    suppliers, and an increase in demand from the oil and gas
    industry may stretch our supply base. Although some low to
    moderate risk remains, I am convinced that our suppliers will
    be able to meet the forecasted Navy demand.
        Next I would like to address ways to accelerate getting
    ships to the fleet. We view this as a team effort with our
    customer, our suppliers and Congress. First I will discuss
    efforts we are undertaking at our yards, and then I would like
    to suggest ways that Congress can help us.
        Huntington Ingalls Industries has made significant capital
    improvements across the two yards, and we are investing $1.5
    billion over five years in improving our facilities. At
    Ingalls, we are continuing a set of improvements we refer to as
    the ``Shipyard of the Future'' that covers all aspects of
    shipbuilding, including infrastructure upgrades, process
    improvements and continuous investment in our workforce. The
    funds are being provided by a combination of corporate, state
    and Navy investment.
        These initiatives include an improved line of robotics;
    assembly halls that will facilitate the modular construction of
    future ships, reducing the time it takes to build those ships;
    areas and tools that protect our most precious asset, the
    people of the workforce, to keep them from the elements and
    give them the ability to be most efficient; as well as the
    addition of a new dry dock that will replace the current dock
    that is more than 30 years old with greater displacement, which
    will provide for increased flexibility and outfitting, allowing
    for greater completion rates prior to launch.
        At Newport News, we are investing nearly $1 billion dollars
    to build facilities that provide the capability to build the
    new class of ballistic missile submarines, the Columbia-class.
    We are also investing in facilities to further drive costs out
    of Virginia-class submarines and Ford-class carriers with added
    automation and bringing work indoors, under cover and out of
    the weather. Additionally, with the help of additional funds
    from Congress, we are investing in a range of process
    improvements that we call Design for Affordability (DFA). On
    the Virginia-class submarine program, DFA initiatives have
    returned $5 for every $1 invested. Given the longer time
    between construction starts, we expect savings of about $2 for
    every $1 invested on the Ford-class.
        Some examples of DFA initiatives that will benefit the
    Ford-class include the implementation of Integrated Digital
    Shipbuilding (IDS), which saves money by eliminating the need
    for traditional paper construction drawings by putting a
    robust, three-dimensional and data-enhanced product model in
    the hands of the shipbuilders on the deckplate. Our goal is for
    CVN 80, the third ship in the Ford-class, to be a paperless
    ship. Other DFA initiatives include the use of improved
    coatings and increasing the size and completeness of
    ``superlifts'' to eliminate smaller erection lifts.
        On the Ford-class, we have also been aggressive in applying
    lessons learned from CVN 78 to drive costs down on CVN 79,
    including modifying more than 7,000 items to increase
    production efficiency and reviewing more than 25,000
    recommendations from our shipbuilders. As a result, we have
    signed a contract on CVN 79 that commits to an 18 percent
    reduction in man-hours from CVN 78.
        Along with our partners at Electric Boat, we have leveraged
    lessons learned from continuous production and made significant
    investment in technology, manufacturing techniques and
    facilities to support aggressive Virginia-class submarine cost
    and schedule reductions. A good example of this is the design
    and construction of a Supplemental Module Outfitting Facility
    (SMOF), a covered facility designed for continuous production
    of VCS bow sections to support a two-per-year VCS construction
    build rate with reduced man-hours. This facility has
    significantly contributed to program cost-reductions and the
    ability to reduce VCS construction time spans from greater than
    84 months to less than 66 months.
        At Ingalls, in addition to the Shipyard of the Future
    infrastructure improvements already discussed, we are taking
    steps to make design choices that improve producibility,
    streamline our equipment packaging and improve our overall
    process flow throughout the yard. These efforts are paying off,
    and I am proud to tell you that right now Ingalls is over 1
    million man-hours ahead of schedule across all our ship
    classes.
        Additional investments aside, both yards are relentlessly
    looking to exploit opportunities for process improvements. We
    constantly look to move work ``upstream'' and away from the
    waterfront. If you've visited our shipyards, you may have heard
    about the 1-3-8 rule. Consider work done inside a shop, with
    adequate lighting, ventilation and easy access to tools and
    materials as costing one ``unit'' of work. The same work, done
    in an assembled module, where one of our shipbuilders is
    working outside, and perhaps working above their head, may cost
    three ``units.'' Work done on a nearly complete ship, where our
    shipbuilders have to climb up ladders, often with their tools,
    and work in increasingly confined spaces and integrate their
    work with other teams on the ship costs eight times what it
    would cost in a shop.
        We are also investing in our workforce. The skills required
    are many and varied, and mastery does not occur overnight. We
    have master craftsmen who are machinists, electricians,
    welders, pipefitters, crane operators, fabricators and experts
    at a host of other technical skills. We also employ naval
    architects, structural engineers, designers, test engineers and
    a variety of other professionals. It takes three to five years
    to hire someone off the street, then train and develop him or
    her into a journeyman-level employee, and it takes an average
    of eight years to develop a fully certified nuclear pipefitter.
        We operate apprentice schools at both shipyards. These
    nationally recognized schools, with highly competitive
    application processes, provide us with well-trained,
    professional shipbuilders who go on to become leaders in the
    shops and on the waterfront. Several of our vice presidents are
    Apprentice School graduates. In addition to continuous
    training, the company has invested in health centers for our
    employees and their families, and we are now undertaking an
    effort to increase our employees' financial literacy.
        Congress has been very supportive of the shipbuilding
    industry, but let me suggest ways that we can work better
    together. All these suggestions will have two things in common:
    stability and predictability--in design and requirements, in
    funding, and in schedule.
        Maintaining a stable design and stable requirements on
    short and predictable construction centers provides us a
    foundation to make the process improvements I spoke about
    earlier. As I said, building a complex warship is a multi-year
    endeavor. Although it is difficult, we try to replicate the
    benefits you would expect from an assembly line as much as
    possible. My goal is to have one of my teams finish performing
    a set task on one ship and then move immediately to perform the
    same task on the next ship. This is really where we see
    savings. This practice also allows for innovation to come from
    our shipbuilders. When they are allowed to repeatedly perform
    the same task, not only do they get really good at it, they
    figure out ways to do it better.
        Stability and predictability in funding allows us and our
    suppliers to properly plan and make long-range hiring plans. At
    Newport News, we are still feeling the effect of decisions made
    as a result of sequestration after the passage of the Budget
    Control Act. Until Congress acted forcefully, the Navy had
    proposed delaying the refueling and complex overhaul of the
    aircraft carrier USS George Washington. This delay was one of
    the major factors in the difficult decision to lay off 1,500
    Newport News shipbuilders in 2015 and 2016. Newport News is now
    hiring shipbuilders as work begins to climb back up--what we
    call ``green labor,'' new shipbuilders lacking experience,
    where training is very expensive.
        Along with a stable design, the intervals at which we begin
    construction, what we refer to as centers, have to be set
    correctly to let us optimize the learning I just discussed. We
    were pleased that Chairman McCain, in ``Restoring American
    Power,'' recommended accelerating production of the Ford-class
    aircraft carriers to four-year centers to support an increase
    to 12 CVNs. If the construction intervals get too long, it is
    like we are starting at square one again. For instance, the
    optimal production rate for LHA-class amphibious ships is
    between three and four years, depending on some variables.
    Presently, the program of record reflects a break in production
    between LHAs 8 and 9 of 7 years, which would result in a cost
    increase of as much as $700 million above the optimal build
    plan. In another example, we experienced a five-year break in
    production in the Arleigh Burke-class destroyer program between
    DDGs 110 and 113, which resulted in a vessel labor cost
    increase of more than 20 percent for the first ship in the
    restart. These disruptions to the optimal build interval ripple
    through the industry down to our suppliers, many of whom are
    not as well situated as Ingalls to weather the ups and downs.
        I strongly believe that the fastest results can come from
    leveraging successful platforms on current hot production
    lines. We commend the Navy's decision in 2014 to use the
    existing LPD 17 hull form for the LX(R), which will replace the
    LSD-class amphibious dock landing ships scheduled to retire in
    the coming years. However, we also recommend that the concept
    of commonality be taken even further to best optimize
    efficiency, affordability and capability. Specifically, rather
    than continuing with a new design for LX(R) within the
    ``walls'' of the LPD hull, we can leverage our hot production
    line and supply chain and offer the Navy a variant of the
    existing LPD design that satisfies the aggressive cost targets
    of the LX(R) program while delivering more capability and
    survivability to the fleet at a significantly faster pace than
    the current program. As much as 10-15 percent material savings
    can be realized across the LX(R) program by purchasing
    respective blocks of at least five ships each under a multi-
    year procurement (MYP) approach. In the aggregate, continuing
    production with LPD 30 in fiscal year 2018, coupled with
    successive MYP contracts for the balance of ships, may yield
    savings greater than $1 billion across an 11-ship LX(R)
    program. Additionally, we can deliver five LX(R)s to the Navy
    and Marine Corps in the same timeframe that the current plan
    would deliver two, helping to reduce the shortfall in
    amphibious warships against the stated force requirement of 38
    ships.
        Multi-ship procurements, whether a formal MYP or a block-
    buy, are a proven way to reduce the price of ships. The Navy
    took advantage of these tools on both Virginia-class submarines
    and Arleigh Burke-class destroyers. In addition to the LX(R)
    program mentioned above, expanding multi-ship procurements to
    other ship classes makes sense.
        This is important to remember when we consider procuring an
    icebreaker for the U.S. Coast Guard. We are looking forward to
    participating in that competition, but we hope it will be a
    production run of at least three ships. Given the amount of
    design, engineering, planning, hiring and learning that goes
    into a new ship class, contracting for just a single ship puts
    us and our suppliers in a tough spot.
        The most efficient approach to lower the cost of the Ford-
    class and meet the goal of an increased CVN fleet size is also
    to employ a multi-ship procurement strategy and construct these
    ships at three-year intervals. This approach would maximize the
    material procurement savings benefit through economic order
    quantities procurement and provide labor efficiencies to enable
    rapid acquisition of a 12-ship CVN fleet. This three-ship
    approach would save at least $1.5 billion, not including
    additional savings that could be achieved from government-
    furnished equipment. As part of its Integrated Enterprise Plan,
    we commend the Navy's efforts to explore the prospect of
    material economic order quantity purchasing across carrier and
    submarine programs.
        In closing, let me reiterate that I appreciate the
    opportunity to address you today. The size and capability of a
    nation's Navy has long been a measure of that nation's
    strength, both to deter foes that would do us harm as well as
    assure friends that stand with us. We are partners with
    Congress, the Navy and our supply chain in building the fleet
    the nation needs at a price it can afford. We will continue to
    provide solutions and identify ways to increase productivity
    and lower costs.

        Senator Wicker. Thank you.
        Mr. Casey, you are recognized.

     STATEMENT OF JOHN P. CASEY, EXECUTIVE VICE PRESIDENT, MARINE
                       SYSTEMS, GENERAL DYNAMICS

        Mr. Casey. Chairman Wicker, Ranking Member Hirono, members
    of the committee, thanks a lot for this invitation to testify
    today and for the committee's long history of support for
    shipbuilding programs.
        With your permission, I would also like to submit my
    statement for the record, and I would summarize it here.
        Ranking Member Hirono, I wish you a speedy recovery. It is
    quite remarkable to see you here today and happy that you made
    it.
        So at General Dynamics Marine Systems is organized as three
    autonomous shipyards. Bath Iron Works builds Navy destroyers.
    Electric Boat, submarines. NASSCO builds Navy auxiliary ships
    as well as commercial vessels. We have facilities in nine
    States: Maine, Rhode Island, Connecticut, Virginia, Georgia,
    Florida, California, Washington, and Hawaii. As you stated, we
    have about 25,000 people, a paltry sum compared to my partner
    here.
        So our initial conclusion right up front here is, yes, we
    can scale up. We do agree that hot production lines are a smart
    way to go, along with the planned expansion necessary to build
    Columbia.
        We are working closely with the Navy in Newport News on
    this integrated enterprise plan. That includes an analysis and
    evaluation of our 5,000 vendors that support the nuclear
    industrial base across all 50 States.
        So let me just talk a little bit of history here. I think
    Brian and I have both been in the business about 4 decades. So
    I thought it would be useful to think back about where we came
    from.
        The first decade of those four, we were building one SSBN
    and three SSNs collectively across the industry. It is about
    five times the number of ships we built in the last decade, so
    to speak, in terms of displacement tons of ships being built.
        Along came the Seawolf program viewed as the future of the
    fast attacks, and it was originally a 30-ship program and it
    was canceled in January of 1992. Groton and Quonset went from
    about 18,000 shipyard folks, not counting the engineers, down
    to about 25,000. No fun for me. A lot of my friends and
    neighbors had to be laid off along the way. Our supply base
    went from about 9,000 to 3,000 after being in a peak in the
    Cold War of about 17,000.
        So coming from where we have been in the last 10 to 20
    years to where we have to go just to meet the Navy's current
    fiscal year 2017 shipbuilding plan goes back to three times the
    past decade or so. So we were at five times down to the 20
    years. Now we go back up to three times. So it is probably not
    quite a little over half of where we were. That is driven
    partially by the Virginia payload module 84-foot hull section,
    along with the Columbia, which I think we all would agree is
    the Nation's highest priority at this point in time.
        So there are three areas that require close attention with
    this growth, and we do not take any of those lightly and we pay
    close attention.
        So first is facilities and capital equipment. Both
    companies have expansion plans, and at the end of that, EB
    would be expecting to be able to deliver one SSBN and two VPM
    SSNs, Virginia payload module fast attacks, per year.
        The labor resources need to be increased. We have unique
    skills, as everybody I think understands. But probably what is
    not well understood is we have hired 10,000 people since 2011.
    We have done that by developing partnerships with the United
    States Department of Labor, the Rhode Island and Connecticut
    governors, technical community colleges, technical high
    schools, and we have internal active learning centers that
    support that.
        We have also re-engineered the hiring process. What used to
    take 163 days will be at 45 days by the end of the year.
    Frankly, the only hiccup we have had in the hiring is getting
    security clearances processed, which is a government-controlled
    process that has been difficult to work through.
        Senator Wicker. Now, say that again because I am kind of
    slow.
        Mr. Casey. When you come to work in the nuclear industry to
    work in the shipyard in most locations, you require a security
    clearance. Those are granted by the government. So we make
    application for those, and we would like it to take a few
    weeks. It has been taking months to process an interim
    clearance, let alone a permanent clearance. So that slows our
    ability to get people into the workforce. We have had some of
    our Representatives and so forth try to deal with the agencies
    in the government that make that happen.
        Senator Wicker. So is it getting better or worse?
        Mr. Casey. I think it is getting better but not by a lot.
        Then the third and equally important, which you asked
    about, is the supplier capability and capacity. So we believe
    we have to expand the number of suppliers, the processes in
    which they are qualified, and the capacity of each of those
    vendors. We would propose early, non-recurring funding of those
    vendors. The EOQ, economic order quantity, process has been
    very supportive and needs to continue and the advanced
    procurement process as well.
        So those three things are what we would propose.
        We would also internally program for longer lead times and
    particularly on the qualified critical suppliers and/or to
    qualify new critical suppliers. We say we have 5,000 suppliers.
    That is a real number. In reality, there is about 150 critical
    suppliers based on the size of what they build, the complexity
    of what they build, or the cost of what they build.
        We work closely with Matt and his Shipbuilding Council of
    America, along with the American Shipbuilders Suppliers
    Association, the Marine Machinery Association, the Submarine
    Industrial Base Council, and the Aircraft Carrier Industrial
    Base Council, to make sure we are touching the suppliers in
    every way we can to make sure they understand what is coming
    and what activity is necessary.
        So we just talked about the Navy's 2017 plan. Let us think
    about how does that compare to the 355-ship plan.
        So, first off, if there are going to be 355 ships, we
    believe efforts need to start immediately like in fiscal year
    2018, not in 2019, not in 2020. It needs to start immediately.
        We also want to confirm what is the objective. I mean, we
    get to 355 by when? If we are going to get there by the middle
    of the 2030s, by the middle of the 2040s, or at some other
    point in time makes a big difference in terms of the capacity
    that is required. We are evaluating right now two scenarios:
    three submarines per year and four submarines per year,
    including Columbia.
        Industry has a challenge of its own and a responsibility.
    With certainty of volume and predictable returns, we have to
    make investment decisions. We have to decide when and how much
    to scale the workforce, and we have to time our material
    procurement.
        What can we hope the government will support? As Brian
    said, multiyear and block procurement contracting authority,
    various capital incentives which exist to help make sure that
    the investments that are acquired are not negative to our
    earnings and cash for a decade in the future. Those things have
    all been done in the past: accelerated depreciation,
    accelerated cash, GOCO facilities, special fixtures and
    features, and recovery commitments, if you will, if programs
    get canceled.
        So we would like to propose and we are evaluating in our
    industrial enterprise work $400 million of funding starting in
    2018, the first increment in 2018, $150 million, to make sure
    we can get vendors up on the step, qualify new vendors, and get
    us back in the place where we have more people to choose from
    basically. We think the acceleration of advanced procurement
    and economic order quantity on the block V ships, which we know
    we are going to build, we know when we are going to build them,
    will help get the industrial base jump-started. It will help
    the vendors get into the mode of producing at higher levels. We
    also think authorization of production spares can support that.
        So to wrap up on the submarine side, we are ready to
    accelerate this historical precedence for what has been asked
    to be done. We understand the challenges associated with that,
    and we take them very seriously. It is not something we take
    lightly.
        Although I was asked to focus on submarines, I think it is
    important just to talk a little bit about the surface side of
    General Dynamics starting with Bath Iron Works. We understand
    the plan would be four DDGs per year split between Bath and
    Ingalls. Frankly, in the decade of 1994 to 2004, we were at two
    destroyers, two DDG 51 destroyers, at Bath. So we believe the
    existing facilities that Bath has are adequate. We got to focus
    on training. Frankly, going to two DDGs per year at Bath would
    avoid what otherwise is going to be an employment reduction. So
    it is not so much we are concerned about having to hire a lot.
    We got to try to make sure we maintain stability there by one
    to two DDG 51s per year.
        At NASSCO, we understand the challenge to be three more
    ESBs, the expeditionary support bases, two T-AO's per year
    beyond the one today. Frankly, NASSCO is very similar to Bath.
    In order to get back to where we were last year, we would
    require that kind of volume on the Navy side. Last year, we
    delivered six commercial tankers out of NASSCO, probably a
    record certainly for that shipyard and maybe for any shipyard.
    But those contracts are wrapped up. The very last one of those
    eight tankers is at sea today as we speak undergoing trials. It
    should be back sometime today before the day is over.
        So, Chairman Wicker, Ranking Member Hirono, and members,
    that concludes my summary of my comments of my written
    testimony. I would be glad to take any questions and help in
    any way I can in this process.
        [The prepared statement of Mr. Casey follows:]

                      Prepared Statement by John P. Casey
        Chairman Wicker, Ranking Member Hirono, members of the Seapower
    Subcommittee, thank you for your invitation to testify today and for
    the committee's long history of support for United States Navy
    shipbuilding.
        Following a brief introduction of the General Dynamics Marine
    Systems shipyards, this testimony will address the issues requested in
    your invitation letter, specifically, the ability of our shipyards to
    support increased shipbuilding demand with a focus on the Submarine
    Industrial Base. The Submarine Industrial Base has unique challenges
    which will be discussed in detail.
           introduction to general dynamics marine systems shipyards
        The General Dynamics Marine Systems business segment includes three
    major business units: Bath Iron Works, Electric Boat, and NASSCO. Bath
    Iron Works operates one full-service shipyard in Bath, Maine, plus
    several fabrication and engineering facilities in the surrounding area.
    Electric Boat operates a full-service shipyard in Groton, Connecticut,
    a submarine module fabrication facility in North Kingstown, Rhode
    Island, and an engineering and design facility in New London,
    Connecticut. Electric Boat also has employees located in Honolulu,
    Hawaii; Washington, DC; and the submarine homeports in Kings Bay,
    Georgia; Pearl Harbor, Hawaii; Portsmouth, Maine; Bangor, Washington;
    Bremerton, Washington; and Norfolk, Virginia. NASSCO operates one full-
    service shipyard in San Diego, California, and four repair shipyards in
    Norfolk, Virginia; Portsmouth, Virginia; Mayport, Florida; and
    Bremerton, Washington. Combined, these shipyards employ more than
    25,000 people. The group designs, builds, repairs and supports
    submarines, surface combatants, auxiliary ships for the United States
    Navy, and commercial ships for the U.S. Jones-Act commercial market.
                                bath iron works
        Bath Iron Works (BIW), located on the Kennebec River in Bath,
    Maine, since 1884, delivered its first ship to the United States Navy
    in 1893. Since then, BIW has delivered 256 military ships. BIW is the
    lead designer for both classes of U.S. Navy destroyers that are
    currently in production--the DDG 51 and the DDG 1000-class destroyers.
    BIW's Planning Yard activities sustain 77 percent of the Navy's active
    surface combatant fleet, offering a full range of surface combatant
    engineering, design, production support, and lifecycle support
    services. BIW is Maine's largest single-site private employer with over
    5,800 highly skilled engineers, designers, and shipbuilders who, on
    average, have over 17 years of ship design and construction experience.
                                 electric boat
        Electric Boat, headquartered in Groton, Connecticut, has been
    designing, building, and repairing submarines for the U.S. Navy since
    1899. Starting with the first nuclear submarine, the USS Nautilus,
    Electric Boat has designed and built the lead ship for 17 of the 20
    U.S. nuclear submarine classes, and has delivered a total of 103
    nuclear submarines to the U.S. Navy from the Groton shipyard. Electric
    Boat employs 15,200 engineers, designers, and tradespeople focused on
    the design, construction, repair and lifecycle support of nuclear
    submarines. Electric Boat is currently building Virginia-class
    submarines and designing the lead ship of the Columbia Program, the
    next SSBN.
                                     nassco
        NASSCO's primary facility, located in San Diego, California, has
    designed, built and delivered 134 new ocean-going vessels (Navy and
    commercial) over the last 57 years. This facility is the only remaining
    private, full-service shipyard on the West Coast designing, building,
    and repairing large vessels for the U.S. Navy and commercial Jones-Act
    customers. NASSCO is the largest industrial manufacturer in San Diego,
    employing 3,100 engineers, designers, and skilled shipbuilding
    craftspeople, plus 300 long-term, on-site subcontractor partners
    supporting the shipyard. NASSCO is currently building expeditionary sea
    bases and cargo ships for commercial customers. NASSCO also has a
    presence in four Navy homeports where its 700 employees and 300
    subcontractor partners conduct surface ship repair for the U.S. Navy.
                                  introduction
        General Dynamics Marine Systems supports the efforts of the
    Administration and the Congress to build a larger fleet for the U.S.
    Navy. It is our belief that the Nation's shipbuilding industrial base
    can scale-up hot production lines for existing ships and mobilize
    additional resources to accomplish the significant challenge of
    achieving the 355-ship Navy as quickly as possible.
        This testimony will discuss what the General Dynamics shipyards
    must do to support the current U.S. Navy 30-year Shipbuilding Plan and
    what additional effort is required if more ships and submarines were to
    be authorized by the Congress to achieve the new fleet levels
    identified in the December 2016 U.S. Navy Force Structure Assessment.
    General Dynamics cannot speak for Newport News Shipbuilding on this
    subject except to note where both companies have been working closely
    together on an Integrated Enterprise Plan focused on co-production of
    both Virginia and Columbia-class submarines and carriers where
    appropriate (e.g., common suppliers etc.) and associated impacts to
    facility plans, trade resource plans, and supply base.
        The Nuclear Submarine Industrial Base, which includes Electric
    Boat, Newport News Shipbuilding, and over 5,000 highly specialized
    suppliers in all 50 states, provides material and components for these
    national assets. Supporting a plan to achieve a 355-ship Navy will be
    the most challenging for the nuclear submarine enterprise. Much of the
    shipyard and industrial base capacity was eliminated following the
    steep drop-off in submarine production that occurred with the
    cancellation of the Seawolf Program in 1992. The entire submarine
    industrial base at all levels of the supply chain will likely need to
    recapitalize some portion of its facilities, workforce, and supply
    chain just to support the current plan to build the Columbia-class SSBN
    program, while concurrently building Virginia-class SSNs. Additional
    SSN procurement will require industry to expand its plans and
    associated investment beyond the level today. After discussing the
    Submarine Industrial Base, this testimony will conclude with a brief
    review of the capability of our two surface ship construction
    shipyards, Bath Iron Works in Bath, Maine and NASSCO in San Diego,
    California, to support new prospective scenarios of increased
    shipbuilding demand, leveraging the work recently completed by the
    Congressional Budget Office (CBO).
                           submarine industrial base
                             historical perspective
        The production of a new class of SSBNs to support the Navy's
    strategic deterrent mission has occurred only twice before in our
    shipbuilding history. The ``41 for Freedom'' SSBNs were constructed by
    four shipyards over the 9-year period from 1957 to 1966. These
    submarines were replaced by 18 Ohio-class SSBNs, all built by Electric
    Boat over a 23-year period from 1974 to 1997. The lead ship USS Ohio
    (SSBN726) was delivered in 1981 and subsequent ships of that class
    joined the fleet at a rate of one ship-per-year in steady state
    continuous production. During this period of Ohio-class construction,
    Electric Boat also delivered 33 Los Angeles-class SSNs. The first EB
    delivery of a Los Angeles-class SSN was the USS Philadelphia (SSN690)
    in 1977 and the last was the USS Columbia (SSN771) in August 1995, an
    average rate of 1.7 SSN deliveries per year. The combined rate of
    submarine deliveries from Electric Boat was 2.7 submarines per year.
    During the same period, Newport News also delivered 29 Los Angeles-
    class SSNs. The lead ship USS Los Angeles (SSN688) was delivered in
    1976 and their last ship USS Cheyenne (SSN773) was delivered in 1996,
    with an average rate of 1.5 SSNs per year. The combined capability of
    the two nuclear submarine shipyards and the associated 17,000 suppliers
    delivered 4.2 submarines per year consisting of one SSBN and 3.2 SSNs
    per year.
        Therefore, as you can see, the last time the industry built a class
    of SSBNs, we also delivered more than three SSNs per year. In fact,
    over the period from 1977 to 1996, our submarine enterprise delivered
    65 SSNs and 17 SSBNs for about 770,000 tons of submarine displacement.
    However, the industry has been away from these levels of production for
    some time.
        The most recent 20 years, from 1997 to 2016, has been a very
    different story. The follow-on SSN to the Los Angeles-class SSN was the
    Seawolf Program. Originally a 30-ship program, it started construction
    in 1989, the year the Berlin Wall came down. That program was cancelled
    in January 1992 with the plan to only complete construction of the lead
    ship, USS Seawolf (SSN21). Funding for the second Seawolf submarine was
    restored by the Congress and construction began later that year in
    September. The program was later restored to three Seawolf-class SSNs
    by the Congress with $700 million appropriated in November 1995 as a
    bridge to the follow-on Virginia-class SSN, which was to start
    construction in 1998 after a period of design development. The lack of
    stability on the Seawolf Program is one thing people still remember
    when they make investment decisions in new facilities and workforce
    development. The backlog in submarine work in 1989 was 32 (19 at EB and
    13 at NNS), and by 1997, the backlog was three (all EB).
        During the course of the 1990's, the submarine industrial base
    ``rationalized'' its facilities, skilled workforce, and unique supply
    base to survive in a period of very low rate submarine production.
    There were five years in the 1990's when no SSNs were authorized
    (fiscal year 2092, fiscal year 2093, fiscal year 2094, fiscal year 2095
    and fiscal year 2097). For example, Electric Boat had four final
    assembly positions dedicated to the Los Angeles-class construction
    program and two final assembly positions dedicated to the Ohio-class
    construction program. Upon completion of the Los Angeles-class build
    program, the Los Angeles-class assembly positions were mothballed,
    reducing the Groton shipyard's final assembly capability to two
    positions. The skilled trade workforce at the Groton shipyard was
    reduced from over 12,000 at peak demand in the early 1980's to about
    1,500 by the time Virginia-class started construction in 1998. Quonset
    Point peaked at 6,000 skilled workers and its workforce was reduced to
    less than 1,000 over the same period. Furthermore, the supply base
    started the 1990's with 9,000 suppliers (Cold War peak was 17,000) and
    was reduced to 3,000 suppliers by the end of that decade.
        Electric Boat had several off-site fabrication and assembly
    locations (e.g., Charleston, SC at 400K sq.ft of facilities and Avenel,
    NJ at 400K sq.ft), as well as significant laydown and warehouse
    capacity in and around Groton, CT and at Quonset Point (which was 2.2
    million sq.ft of facilities during the previous peak). This expanded
    footprint and capacity available during the previous peak construction
    period was eliminated during the decline to low rate production.
    Similarly, NNS had offsite machining and fabrication facilities in
    Asheville, NC and Greeneville, TN, both of which were shuttered as
    shipbuilding demand declined. During this period of decreased build
    rate and low volume, work was moved from shipyard satellite facilities
    and the supply base back to the Shipbuilder to maintain critical skills
    as we adjusted to average build rates of Virginia-class SSN per year at
    each shipyard (low point in year 1999).
        The last 20 years from 1997 to 2016 marks a period of low rate
    production for the submarine enterprise, where 16 SSNs and one SSBN
    were delivered, for a total tonnage of 150,000 tons of combined
    submarine displacement. This represents a reduction of 80 percent from
    the prior 20-year period when we delivered 4.2 submarines per year.
                    today's submarine enterprise capability
        The Virginia-class SSN started construction in 1998 and was
    initially procured at a rate of one SSN per year. The Shipbuilders
    implemented a co-production team agreement in 1997 to effectively share
    the production at SSN per year with one SSN delivery from each shipyard
    every two years on an alternating basis. This approach was sufficient
    to maintain the requisite critical skills at both shipyards for nuclear
    submarine construction and delivery.
        The Virginia-class SSN production rate doubled starting in 2011 and
    has continued at that rate ever since. The Submarine Industrial Base
    has facilitized over the last five years to support this step change in
    demand from one SSN per year to two SSNs per year. These submarines
    have been procured over the last 18 years under one block buy contract
    (i.e., Block I, four ships fiscal year 1998 to fiscal year 2002),
    followed by three separate multi-year contracts (Blocks II, III, IV, 24
    ships, fiscal year 2003 to fiscal year 2018), which provided stability
    in the acquisition process and encouraged private investment across the
    entire submarine value chain. The successes in cost reduction and the
    dramatically reduced production cycle times that we achieved in this
    program would have been impossible without the committee's support for
    multi-year procurement.
        We are currently under contract to build 15 Block III and IV
    Virginia-class submarines, and the President's fiscal year 2018 budget
    is expected to request your authorization for the final two Block IV
    submarines in that multi-year procurement (i.e., fiscal year 2014 to
    fiscal year 2018). The Shipbuilders urge the Committee to continue its
    support of multi-year authority for this program in all subsequent
    blocks of Virginia-class.
        Key facilities were added at both shipyards to support the
    increased production rate from one SSN per year to two SSNs per year. A
    CAPEX incentive feature in the Block III contract supported corporate
    capital investment required for two Virginia-class SSNs per year. A
    total of 27 projects between the two shipbuilders were completed for a
    total of $258 million in capital investment, which supported all
    facility asset categories, including capital equipment, module
    construction facilities, transportation equipment, and final assembly,
    test and launch facilities. For example, Quonset Point added a $50
    million module fabrication facility in 2012, and in 2013, we added a
    $24 million coatings facility with two specialized coatings cells as
    part of Electric Boat's overall capital investment plan.
        Today, each shipyard has two submarine final assembly positions for
    a total of four positions at the enterprise level that are dedicated to
    deliver one Virginia-class SSN per year from each shipyard. The
    waterfront organizations at each shipyard have modules from five
    different Virginia-class SSNs in various states of final assembly and
    test. Virginia-class SSN delivery at one per year from each waterfront
    is just starting to be demonstrated. At Electric Boat, the delivery of
    the Colorado (SSN788) later this summer will demonstrate the shift in
    waterfront cadence from one SSN delivery every two years to one SSN
    delivery every year.
        The facilitization that has occurred to date at both nuclear
    shipyards supports continuation of the Virginia-class construction
    program which is in steady state production at two submarines per year
    for the foreseeable future.
    supporting the increased demand associated with the navy's fiscal year
                             2017 shipbuilding plan
        The Navy's 30-year shipbuilding plan, issued in July 2016, is
    summarized in the figure below for the period that covers the Columbia
    authorization years. The submarine enterprise at all levels of the
    value chain has been working hard to develop facility and workforce
    development master plans and establish associated investment plans to
    support this plan of record.
        We have been told by the Navy that we should be prepared to execute
    a plan that would add a second Virginia-class SSN with Virginia Payload
    Module (VPM) in fiscal year 2021, so Block V is expected to be a 10-
    ship block rather than 9 ships. This would keep Virginia-class SSN
    procurement at two SSNs per year through fiscal year 2023 with three
    submarine authorizations in fiscal year 2021 (two VCS and one
    Columbia).
        There are two major new demand drivers in this plan of record. The
    first is the Virginia Payload Module (VPM) which is an 84' hull section
    with four centerline large-diameter tubes that is inserted into the
    class design for additional payload capability. The VPM will provide
    additional payload capacity in each Virginia-class submarine to
    partially offset the loss in payload capacity from the four Ohio-class
    SSGNs that will begin to come out of service starting in 2026. This
    configuration of the Virginia-class SSN is planned for all subsequent
    Virginia-class SSNs starting in 2019 (ship two of that year). The VPM
    will increase the volume of work at the shipyards and in the supply
    base by about 28 percent based on displacement.
        The second major demand driver is the Columbia-class SSBN
    construction program which is expected to be for 12 submarines and will
    reach steady state production starting with the fiscal year 2026 ship
    authorization. Each Columbia-class SSBN is more than double the
    displacement of a Virginia-class SSN. The Columbia construction program
    begins in fiscal year 2021, two years after the Virginia Block V fiscal
    year 2019 award.
        The figure below illustrates the challenge in the submarine
    industrial base. Delivered nuclear submarine capability on an annual
    basis as measured by submerged displacement is plotted for different
    demand scenarios. As the chart illustrates, the major inflection points
    since the beginning of the Virginia-class SSN program are captured on
    the x-axis. The transition to two Virginia-class SSNs per year
    (doubling of demand) is occurring from 2016 to 2023. This is followed
    by a brief three-year period of increased demand at 28 percent for VPM.
    In the steady state, the annual demand jumps to double or triple,
    depending on the procurement rate of Virginia-class SSNs, either two
    Virginia-class SSNs per year or three, as noted in the figure below.
      growth in submarine tonnage per year--delivered submarine capability
        Over the next 20-year period that starts in 2017, the Submarine
    Industrial Base is expected to deliver 32 SSNs, 16 with the VPM
    configuration, and the first 8 Columbia-class SSBNs based on the Navy's
    fiscal year 2017 30-year Navy Shipbuilding Plan. The increase in
    demand, just to support the Navy's fiscal year 2017 Shipbuilding Plan
    of Record, is three times the level of the last 20 years that ended in
    2016 (an increase of greater than 200 percent), with a projected
    454,000 tons of delivered submarine displacement. In this plan of
    record scenario, Virginia-class procurement would drop to one SSN per
    year starting in 2026 when the Columbia is expected to reach steady
    state production at one SSBN per year. At this point, the production
    rate for the submarine enterprise is two submarines per year, one SSBN
    and one SSN (with VPM).
        The two nuclear submarine shipbuilders, Electric Boat and Newport
    News Shipbuilding, have been working an Integrated Enterprise Plan
    (IEP) to address the impacts to each company's skilled workforce,
    facilities, and supply base of this new shipbuilding era marked by the
    generational increase in demand of multi-class construction.
        The two companies signed a team agreement in March 2015 to co-
    produce the Columbia-class SSBN and amended that agreement in February
    2016 to be consistent with the Navy's Submarine Unified Build Strategy
    (SUBS). The approach maintains a plant focus for major module
    construction between the Columbia and Virginia-class submarines (e.g.,
    Newport News builds bows for both programs, Electric Boat builds
    missile compartments for both programs, etc.).
        There are three major resource areas that affect the Shipbuilders'
    ability to increase nuclear submarine production:
          Shipyard facilities and capital equipment
          Skilled shipyard trade and support labor resources
          Supply base capability and capacity
                        facilities and capital equipment
        Shipyard facilities and capital equipment under the current co-
    production plan for SSNs and SSBNs (i.e., the Navy's SUBS-E Plan)
    consists of the combined assets of the two nuclear shipbuilders,
    including hull fabrication facilities, modular manufacturing and
    outfitting facilities, final assembly, test and launch facilities,
    transportation assets, and post launch facilities.
        Each shipyard has developed a Facility Master Plan that adds assets
    to support Virginia Payload Module construction or Columbia-class
    construction. Under the plan of record scenario, both companies are
    expanding shipyard module construction and final assembly capabilities
    and adding module transportation assets to support the build plans of
    both programs at the required levels. For example, at Electric Boat, we
    will be adding additional hull fabrication facilities and tooling to
    support the increased demand associated with the Block V Virginia
    Payload Module. Module fabrication and outfitting facilities are being
    added to the Quonset Point footprint starting next year. The current
    plan adds up to 575,000 square feet of new facilities to support the
    plan of record. Newport News Shipbuilding is also adding facilities to
    its shipyard to support the increased volume associated with multi-
    program construction of bows and sterns, among other modules.
        Electric Boat and Newport News Shipbuilding are both working to
    expand final assembly capabilities to support increased combined
    throughput of submarine deliveries. As in the past, Electric Boat is
    evaluating whether to maintain separate facilities for SSN and SSBN
    final assembly and launch. The two final assembly and launch facilities
    on the Groton waterfront would be capable of delivering one SSBN per
    year (from a new South Yard facility with two final assembly positions)
    and up to two SSNs per year (from the existing North Yard facility that
    will be modified for VPM). Supporting this plan requires an investment
    that is currently estimated to be greater than $1.5 billion over the
    next 10 years.
        In a similar fashion, Newport News is modifying its Modular
    Outfitting Facility (MOF) to place into service two additional final
    assembly positions, bringing its total shipyard capacity to four final
    assembly positions. This configuration will support a higher throughput
    of Virginia-class deliveries with VPM.
                                labor resources
        Shipyard labor resources include the skilled trades needed to
    fabricate, build and outfit major modules, perform assembly, test and
    launch of submarines, and associated support organizations that include
    planning, material procurement, inspection, quality assurance, and ship
    certification. Since there is no commercial equivalency for Naval
    nuclear submarine shipbuilding, these trade resources cannot be easily
    acquired in large numbers from other industries. Rather, these shipyard
    resources must be acquired and developed over time to ensure the unique
    knowledge and know-how associated with nuclear submarine shipbuilding
    is passed on to the next generation of shipbuilders. The mechanisms of
    knowledge transfer require sufficient lead time to create the
    proficient, skilled craftsmen in each key trade including welding,
    electrical, machining, shipfitting, pipe welding, painting, and
    carpentry, which are among the largest trades that would need to grow
    to support increased demand. These trades will need to be hired in the
    numbers required to support the increased workload. Both shipyards have
    scalable processes in place to acquire, train, and develop the skilled
    workforce they need to build nuclear ships. These processes and
    associated training facilities need to be expanded to support the
    increased demand. As with the shipyards, the same limiting factors
    associated with facilities, workforce, and supply chain also limit the
    submarine unique first tier suppliers and sub-tiers in the industrial
    base for which there is no commercial equivalency.
        Electric Boat has reengineered hiring to improve recruiting,
    streamline processes, and reduce the time to recruit new talent in
    order to appeal to the next generation of prospective shipyard workers.
    At Electric Boat, the time from application to start has been reduced
    from 163 days to 60 days with the goal of getting to 45 days by the end
    of this year. Electric Boat has increased hiring since 2011 when
    Virginia-class construction increased from one ship per year to two
    ships per year. Quonset Point has hired over 3,200 people since 2011,
    and Groton has hired about 3,300.
        Electric Boat has established partnerships with the Department of
    Labor, State Governors, and their respective workforce development
    organizations to implement pipeline programs aimed at acquiring and
    training the requisite number of people in the skilled trades we need
    in submarine construction. Electric Boat has also established
    partnerships with area technical community colleges that are currently
    sized to support training for over 3,000 tradesmen per year and
    embedded maritime trade curriculum into eight area career and technical
    education (CTE) schools in Rhode Island. This year, Electric Boat
    reinstituted apprentice programs in Groton for skilled trades and
    draftsmen, and plans to kick off an apprentice program at Quonset Point
    next year. Electric Boat also increased the effectiveness of internal
    training programs through active learning centers that provide training
    aids and mock-ups that deliver more hands-on learning. These active
    learning centers are designed to appeal to how people learn today and
    have reduced the time to develop proficiency for new hires on basic
    skills, as well as teach advanced skills. Lastly, Electric Boat's
    operations supervision and leadership programs, which draw on area
    colleges for content and instruction, have also been improved to
    increase volume and throughput.
        We provide our demand signals for skilled trades to our community
    partners to support future growth and offer competitive employment
    opportunities at the end of the line, which is a win-win for all
    involved.
                      supply base capability and capacity
        The supply base is the third resource that will need to be expanded
    to meet the increased demand over the next 20 years. During the OHIO,
    688 and SEAWOLF construction programs, there were over 17,000 suppliers
    supporting submarine construction programs. That resource base was
    ``rationalized'' during submarine low rate production over the last 20
    years. The current submarine industrial base reflects about 5,000
    suppliers, of which about 3,000 are currently active (i.e., orders
    placed within the last 5 years), 80 percent of which are single or sole
    source (based on $). It will take roughly 20 years to build the 12
    Columbia-class submarines that starts construction in fiscal year 2021.
    The shipyards are expanding strategic sourcing of appropriate non-core
    products (e.g., decks, tanks, etc.) in order to focus on core work at
    each shipyard facility (e.g., module outfitting and assembly).
    Strategic sourcing will move demand into the supply base where capacity
    may exist or where it can be developed more easily. This approach could
    offer the potential for cost savings by competition or shifting work to
    lower cost work centers throughout the country. Each shipyard has a
    process to assess their current supply base capacity and capability and
    to determine where it would be most advantageous to perform work in the
    supply base.
        Today, the Shipbuilders have approximately 147 critical suppliers
    based on contract value, part complexity, and current risk profile.
    Some of the suppliers are common between the two Shipbuilders and GFE
    prime contractors, making it more difficult to meet the demand
    challenges ahead of us. In response, the Shipbuilders have engaged the
    Tier-1 suppliers (i.e. survey and visits), and made additional
    inquiries of the second and third tier suppliers, to ascertain capacity
    and capability shortfalls with the advancing build-rate increase. The
    Shipbuilders anticipate the information gleaned from these inquiries to
    be the first step toward identifying critical capacity shortages at the
    Tier-1 suppliers, as well as pinch-points at the second and third
    tiers. The Shipbuilders further anticipate that much of the capacity
    shortfall will reside in the second and third tiers (e.g., ball valve
    castings & forgings for bodies, pump housings, motor bearings, etc.)
    and will require expansion of both the number of critical suppliers as
    well as select process capacity (e.g., non-destructive testing) within
    existing suppliers. In addition, the increase may offer opportunities,
    in some cases, to create new Tier-1 suppliers, thereby gaining
    additional resiliency and creating competition for critical components
    to further reduce material costs.
        Achieving the increased rate of production and reducing the cost of
    submarines will require the Shipbuilders to rely on the supply base for
    more non-core products such as structural fabrication, sheet metal,
    machining, electrical, and standard parts. The supply base must be made
    ready to execute work with submarine-specific requirements at a rate
    and volume that they are not currently prepared to perform. Preparing
    the supply base to execute increased demand requires early non-
    recurring funding to support cross-program construction readiness and
    EOQ funding to procure material in a manner that does not hold up
    existing ship construction schedules should problems arise in supplier
    qualification programs. This requires longer lead times (estimates of
    three years to create a new qualified, critical supplier) than the
    current funding profile supports.
        The Extended Enterprise initiative is an enabler to support higher
    demand in the nuclear ship enterprise. In the past, insufficient
    supplier and shipbuilder capacity and readiness have been some of the
    most significant contributing factors for lead ship overruns and cost
    growths in major shipbuilding programs. CBO reported in its analysis of
    the Navy's fiscal year 2017 shipbuilding plan that cost growth in lead
    ships almost always exceeds 10 percent and has averaged 45 percent (27
    percent weighted average) for the most recent ships. Being prepared via
    this funded effort will result in cost mitigation and/or cost
    avoidance.
        Funding of $400 million over a 3-year period starting in 2018 is
    required for supplier base development. This funding is needed to
    ``prime the pump'', help identify pinch points in the supply chain
    (which are more likely to be in the sub-tier supply base), and
    establish capacity and capability ahead of the significant increase in
    VCS (with VPM) Columbia and CVN demand. Additionally, the investment is
    needed at an important inflection point in history. Signals from the
    President indicate that the unprecedented investment planned in
    infrastructure projects in the United States will require U.S.
    materials, effectively creating competition for material in non-
    traditional markets, where early movers will have advantages.
    Competition will also be heightened for skilled labor, making key
    elements of the investment request represented in this document even
    more time critical.
        We need to rely on market principles to allow suppliers, the
    shipyards and GFE material providers to sort through the complicated
    demand equation across the multiple ship programs. Supplier development
    funding previously mentioned would support non-recurring efforts which
    are needed to place increased orders for material in multiple market
    spaces. Examples would include valves, build-to-print fabrication work,
    commodities, specialty material, engineering components, etc. We are
    engaging our marine industry associations to help foster innovative
    approaches that could reduce costs and gain efficiency for this
    increased volume. We have active efforts with the following key
    associations:
          Shipbuilding Council of America (SCA)
          American Shipbuilders Suppliers Association (ASSA)
          Marine Machinery Association (MMA)
          Submarine Industrial Base Council (SIBC)
          Aircraft Carrier Industrial Base Council (ACIBC)
        These associations have existing infrastructure and memberships
    that can reach out to suppliers in all 50 states, at all levels of the
    supply chain, including first tier and sub-tiers. By partnering with
    Department of Labor, we can create programs that support workforce
    development and encourage investment in facilities and infrastructure.
    This is a ``Buy American'' initiative which the entire Congress and
    Administration should be able to agree on.
        supporting the navy's 355-ship navy in the submarine enterprise
        Based on the Navy's force structure assessment issued in December
    2016, the SSN force level would be increased from 48 SSNs to 66 SSNs,
    an increase of 38 percent. Efforts to step-up production to support
    increased SSN deliveries would need to begin immediately due to the
    long lead time that is required to add capacity and capability at the
    two nuclear submarine shipyards and the associated unique supply base.
    We have looked at two scenarios of increased SSN demand that are within
    the historical precedence of one SSBN per year and up to three SSNs per
    year. Below are two scenarios to help bracket the discussion.
        The first scenario would maintain Virginia-class procurement at two
    SSNs per year during the entire 15-year period of Columbia-class SSBN
    authorizations (i.e., fiscal year 2021 to fiscal year 2035). This
    scenario effectively adds 10 Virginia-class SSNs to the Navy 30-year
    shipbuilding plan (which includes the second Virginia-class SSN in
    fiscal year 2021). Under this scenario, the Navy would reach its force
    level goal of 66 SSN in three decades by the mid 2040's. Scenario one
    reflects three submarines per year in the steady state starting in
    fiscal year 2026 which would consists of two SSNs and one SSBN per
    year. Over the next 20-year period that starts in 2017, the Submarine
    Industrial Base would be expected to deliver 39 SSNs, 24 with the VPM
    configuration, and the first 8 Columbia-class SSBNs. That level of
    submarine construction is 3.5 times the level of the last 20 years that
    ended in 2016 (an increase of greater than 250 percent), and includes a
    projected 525,000 tons of delivered submarine displacement.
        The second scenario would increase the rate of SSN procurement
    starting in fiscal year 2020 to three Virginia-class SSNs per year.
    fiscal year 2020 would allow two-year advance procurement (AP) to be
    programmed into the fiscal year 2018 budget should the Congress elect
    to begin as soon as possible. Under this scenario, the Navy would reach
    its force structure target one decade earlier in the mid 2030's. The
    figure below illustrates the two scenarios. Scenario two reflects four
    submarines per year in the steady state starting in fiscal year 2026
    which would consist of three SSNs and one SSBN per year. Over the next
    20-year period that starts in 2017, the Submarine Industrial Base would
    be expected to deliver 50 SSNs, 35 would include the VPM configuration,
    and the first 8 Columbia-class SSBNs. That level of submarine
    construction is 4.2 times the level of the last 20 years that ended in
    2016 (increase of greater than 320 percent), and includes a projected
    636,000 tons of delivered submarine displacement.
        Cummulative Effect of Submarine Deliveries over 20-Year Period
                             government commitment
        Supporting the 355-ship Navy will require Industry to add
    capability and capacity across the entire Navy Shipbuilding value
    chain. Industry will need to make investment decisions for additional
    capital spend starting now in order to meet a step change in demand
    that would begin in fiscal year 2019 or fiscal year 2020. For the
    submarine enterprise, the step change was already envisioned and
    investment plans that embraced a growth trajectory were already being
    formulated. Increasing demand by adding additional submarines will
    require scaling facility and workforce development plans to operate at
    a higher rate of production. The nuclear shipyards would also look to
    increase material procurement proportionally to the increased demand.
    In some cases, the shipyard facilities may be constrained with existing
    capacity and may look to source additional work in the supply base
    where capacity exists or where there are competitive business
    advantages to be realized. Creating additional capacity in the supply
    base will require non-recurring investment in supplier qualification,
    facilities, capital equipment and workforce training and development.
        Industry is more likely to increase investment in new capability
    and capacity if there is certainty that the Navy will proceed with a
    stable shipbuilding plan. Positive signals of commitment from the
    Government must go beyond a published 30-year Navy Shipbuilding Plan
    and line items in the Future Years Defense Plan (FYDP) and should
    include:
          Multi-year contracting for Block procurement which
    provides stability in the industrial base and encourages investment in
    facilities and workforce development
          Funding for supplier development to support training,
    qualification, and facilitization efforts--Electric Boat and Newport
    News have recommended to the Navy funding of $400 million over a 3-year
    period starting in 2018 to support supplier development for the
    Submarine Industrial Base as part of an Integrated Enterprise Plan
    Extended Enterprise initiative
          Acceleration of Advance Procurement and/or Economic Order
    Quantities (EOQ) procurement from fiscal year 2019 to fiscal year 2018
    for Virginia Block V
          Government incentives for construction readiness and
    facilities / special tooling for shipyard and supplier facilities,
    which help cash flow capital investment ahead of construction contract
    awards
          Procurement of additional production back-up (PBU)
    material to help ensure a ready supply of material to mitigate
    construction schedule risk
                       submarine industrial base summary
        The Submarine Industrial Base stands ready to expand the scope of
    effort required to support increased submarine procurement if the
    nation has determined it needs additional submarines. Supporting three
    SSNs per year plus one SSBN per year is within historical precedence.
    The Columbia-class SSBN Program is the Navy's top development priority
    and, as the Chief of Naval Operations has stated, it is ``foundational
    to the security of the Nation''. Supporting increased SSN demand beyond
    the Navy's fiscal year 2017 Shipbuilding Plan can be supported by
    scaling-up already existing master plans in shipyard facilities and
    workforce development. The nuclear shipyards will need to expand
    efforts to place work into the supply base, perhaps beyond
    proportionally increased levels due to constraints at shipyard
    facilities. Enabling the supply base to expand its support of increased
    submarine procurement will require additional non-recurring funding for
    supplier development and facilitization where submarine-unique
    capability at the required level may not exist anymore. It will take up
    to three years in some cases to develop and qualify new suppliers and/
    or new capabilities which in some cases will require qualification
    hardware to be built and tested. This non-recurring effort must begin
    now in the fiscal year 2018 budget. The Shipbuilders urge a minimum of
    $150 million in fiscal year 2018 to support development of new capacity
    and capability in the supply base. In addition, increasing the level of
    material procurement for Virginia-class Block V and Columbia-class will
    establish a strong signal of Government commitment to industry to
    encourage additional investment in new capability, capacity,
    facilities, capital equipment, and workforce development that will need
    to be in place to support increasing levels of demand that are up to
    four times the level over the last 20 years.
                              surface ship summary
        So far, this testimony has focused on the Submarine Industrial
    Base, but the General Dynamics Marine Systems portfolio also includes
    surface ship construction. Unlike Electric Boat, Bath Iron Works and
    NASSCO are able to support increased demand without a significant
    increase in resources.
                                bath iron works
        Bath Iron Works is well positioned to support the Administration's
    announced goal of increasing the size of the Navy fleet to 355 ships.
    For BIW that would mean increasing the total current procurement rate
    of two DDG 51s per year to as many as four DDGs per year, allocated
    equally between BIW and HII. This is the same rate that the surface
    combatant industrial base sustained over the first decade of full rate
    production of the DDG 51-class (1989 to 1999). Over this period, BIW
    was awarded two construction contracts per year and from 1994 to 2004
    sustained an average delivery rate of two ships per year. Since then,
    the Navy's procurement rate has declined to only two ships per year
    and, although BIW adjusted to this lower volume, the company continued
    to invest in facility modernization.
        No significant capital investment in new facilities is required to
    accommodate delivering two DDGs per year. However, additional funding
    will be required to train future shipbuilders and maintain equipment.
    Current hiring and training processes support the projected need, and
    have proven to be successful in the recent past. BIW has invested
    significantly in its training programs since 2014 with the restart of
    the DDG 51 program and given these investments and the current market
    in Maine, there is little concern of meeting the increase in resources
    required under the projected plans.
        A predictable and sustainable Navy workload is essential to justify
    expanding hiring/training programs. BIW would need the Navy's
    commitment that the Navy's plan will not change before it would proceed
    with additional hiring and training to support increased production.
        BIW's supply chain is prepared to support a procurement rate
    increase of up to four DDG 51s per year for the DDG 51 Program. BIW has
    long-term purchasing agreements in place for all major equipment and
    material for the DDG 51 Program. These agreements provide for material
    lead time and pricing, and are not constrained by the number of ships
    ordered in a year. BIW confirmed with all of its critical suppliers
    that they can support this increased procurement rate.
        BIW is prepared to ramp up for increased production and looks
    forward to working with the Navy in support of increased surface
    combatant demand.
                                     nassco
        NASSCO builds Combat Logistics Force ships, strategic sealift and
    other support ships like the Expeditionary Sea Base (ESB). NASSCO is
    currently building ESB 4 and 5, the last of these ships currently
    programmed. NASSCO is designing the Navy Fleet Replacement Oiler (T-AO
    205-class) and construction will commence on the lead ship in September
    2018. The Navy currently plans a production rate of one ship per year
    for the balance of a 17-ship class.
        The Navy's Force Structure Assessment calls for three additional
    ESBs. Additionally, NASSCO has been asked by the Navy and the
    Congressional Budget Office (CBO) to evaluate its ability to increase
    the production rate of T-AOs to two ships per year. NASSCO has the
    capacity to build three more ESBs at a rate of one ship per year while
    building two T-AOs per year. The most cost effective funding profile
    requires funding ESB 6 in fiscal year 2018 and the following ships in
    subsequent fiscal years to avoid increased cost resulting from a break
    in the production line. The most cost effective funding profile to
    enable a production rate of two T-AO ships per year requires funding an
    additional long lead time equipment set beginning in fiscal year 2019
    and an additional ship each year beginning in fiscal year 2020.
        NASSCO must now reduce its employment levels due to completion of a
    series of commercial programs which resulted in the delivery of six
    ships in 2016. The proposed increase in Navy shipbuilding stabilizes
    NASSCO's workload and workforce to levels that were readily
    demonstrated over the last several years.
        Some moderate investment in the NASSCO shipyard will be needed to
    reach this level of production. The recent CBO report on the costs of
    building a 355-ship Navy accurately summarized NASSCO's ability to
    reach the above production rate stating, ``building more . . . combat
    logistics and support ships would be the least problematic for the
    shipyards.''
        As NASSCO builds ships to commercial standards, its supplier base
    is robust, flexible and fully capable of supporting increased
    production of both ESBs and T-AOs.
        I would like to thank the committee for the opportunity to speak
    this morning and I am ready to answer your questions.

        Senator Wicker. Thank you, Mr. Casey.
        Mr. Paxton?

    STATEMENT OF MATTHEW P. PAXTON, PRESIDENT, SHIPBUILDERS COUNCIL
                               OF AMERICA

        Mr. Paxton. Thank you. On behalf of the Shipbuilders
    Council of America, I would like to thank Chairman Wicker,
    Ranking Member Hirono, and members of the Seapower Subcommittee
    for the opportunity to provide industry perspectives on the
    domestic shipyard's capacity and capability to build a 355-ship
    Navy.
        I would ask that my full written testimony be submitted for
    the record.
        Senator Wicker. Without objection.
        Mr. Paxton. To meet the demand for increased vessel
    construction, while sustaining the vessels we currently have,
    will require U.S. shipyards to expand their workforces and
    improve their infrastructure in varying degrees depending on
    ship type and ship mix, a requirement our Nation's shipyards
    are eager to meet. But first, in order to build these ships in
    as timely and affordable manner as possible, stable and robust
    funding is necessary to sustain those industrial capabilities
    which support Navy shipbuilding and ship maintenance and
    modernization.
        Congress must find a way to remove the defense spending
    caps set in place by the 2011 Budget Control Act. In recent
    years, Congress has worked around sequestration with short-term
    deals. However, without a long-term solution, uncertainty
    continues regarding the specific effects of sequestration in
    2018 through 2021. Although it is difficult to determine the
    exact impacts going forward, 5 years of budgetary reductions,
    of funding restrictions have already led to furloughs, deferred
    maintenance, delayed recapitalization programs, and increased
    deployment times. A sustained investment in our naval fleet
    requires the threat of sequestration be permanently eliminated.
        In addition, Congress and this subcommittee can support the
    use of acquisition strategies to provide funding stability and
    enhance cost reduction. Alternative funding approaches such as
    advanced procurement, incremental or split funding, and bock
    buy contracting already in use in naval shipbuilding can help
    increase stability and affordability in building a 355-ship
    Navy.
        Through the use of advanced procurement, Congress provides
    upfront funding for the purchase of long lead time material and
    components and provides the balance of ship funding in the
    subsequent year. For the shipbuilding industry and the critical
    supplier base, this creates an early financial commitment which
    enhances job security, allows for strategic planning, hiring
    and training, as well as encourages capital investment.
        Incremental or split funding, where cost is divided into
    two or more annual increments, allows for Navy ships to be
    procured while avoiding or mitigating budget spikes and major
    fluctuations in year-to-year budget totals. Incremental funding
    would also allow construction to start on a large number of
    ships in a given year so as to achieve better production
    economies.
        Beyond that, Congress can consider block buys of ships.
    Block buy contracting permits the Department of Defense to use
    a single contract for more than 1 year's worth of procurement
    of a given kind of ship without having to exercise contract
    options for each year after the initial procurement year.
    Purchasing ships through block buy contracting enables
    shipyards to leverage hot production lines and streamline the
    acquisition process for these shipyards.
        The selection or combination of these type of strategies
    will signal to U.S. shipbuilding and repair industry and the
    critical supplier chain that Congress is committed to building
    a 355-ship Navy and our industry is ready to respond
    accordingly.
        Beyond providing for the building of the naval fleet, there
    must also be provision to fund the tail, the maintenance of the
    current and new ships entering the fleet. Target fleet size
    cannot be reached if existing ships are not maintained to their
    full service lives. Maintenance has been deferred in the last
    few years because of across-the-boards budget cuts. Investment
    in building ships must be complemented by the investment to
    maintain those ships to their full life expectancy.
        Long term there needs to be a workforce expansion, and some
    shipyards will need to reconfigure or expand production lines.
    This can and will be done if adequate, stable budgets and
    procurement plans are established and sustained for the long
    term. Funding predictability and sustainability will allow the
    industry to invest in facilities and more effectively grow its
    skilled workforce. The development of that critical workforce
    will take time and a concerted effort in a partnership between
    industry and the Federal Government.
        In conclusion, the U.S. shipyard industry is certainly up
    to the task of building a 355-ship Navy and has the expertise,
    the capability, the critical capacity, and the unmatched
    skilled workforce to build these national assets. Meeting the
    Navy's goal of a much larger fleet will require sustained
    investment by Congress and the Navy's partnership with the
    defense industrial base that can further attract and retain a
    highly skilled workforce.
        Again, I would like to thank the subcommittee for inviting
    me to testify alongside such distinguished witnesses. As a
    representative of our Nation's private shipyards, I can say
    with confidence and certainty that our domestic shipyards and
    skilled workers are ready, willing, and able to build and
    maintain the Navy's future fleet. Thank you, sir.
        [The prepared statement of Mr. Paxton follows:]

                    Prepared Statement by Matthew O. Paxton
        On behalf of the Shipbuilders Council of America (SCA), I would
    like to thank Chairman Wicker, Ranking Member Hirono and members of the
    Seapower Subcommittee for the opportunity to provide industry
    perspectives on the domestic shipyard industry's capacity and
    capability to achieve a 355-ship Navy.
        I am Matthew Paxton, President of the Shipbuilders Council of
    America, the largest national trade association representing the U.S.
    shipyard industry. The SCA has been in existence since 1920 and
    represents 85 member shipyard facilities and 99 industry partner member
    companies that are part of the vital supply chain that make up the
    shipyard industrial base.
        SCA member shipyards are located along the eastern seaboard, the
    Gulf coast, Great Lakes, on the inland river system, West Coast, Alaska
    and Hawaii and constitute the shipyard industrial base that builds,
    repairs, maintains and modernizes U.S. Navy ships and craft, U.S. Coast
    Guard vessels of all sizes, numerous Army vessels, as well as vessels
    for other U.S. Government agencies. In addition, SCA member shipyards
    build, repair and maintain America's commercial fleet of 40,000 vessels
    that operate along our coastline, inland waterways and between Alaska,
    Hawaii and Puerto Rico. The nearly 100 partner members of the SCA
    represent a significant portion of the vast supplier industrial base
    that provide goods and services to support commercial and government
    shipbuilding and ship repair in the United States.
        My testimony this morning will focus primarily on the capability
    and capacity of the domestic shipyard industry to build and maintain a
    355-ship Navy. The shipyard membership of this trade association builds
    the Navy's fleet of aircraft carriers, surface combatants, submarines,
    amphibious vessels and support ships. To be clear, the trade
    association advocates for policies and budgets that support our
    members' combined interests and refrains from promoting specific
    platforms or mixes of ships.
        In December 2016, the Navy released a new force structure
    assessment (FSA) that called for a fleet of 355 ships--substantially
    larger than the current fleet of 275 ships and also larger than the
    Navy's previously stated goal of 308 ships. To increase the Navy's
    Fleet to 355 ships, a substantial and sustained investment is required
    in both procurement and readiness. However, let me be clear: building
    and sustaining the larger required Fleet is achievable and our industry
    stands ready to help achieve that important national security
    objective.
        To meet the demand for increased vessel construction while
    sustaining the vessels we currently have will require U.S. shipyards to
    expand their work forces and improve their infrastructure in varying
    degrees depending on ship type and ship mix--a requirement our Nation's
    shipyards are eager to meet. But first, in order to build these ships
    in as timely and affordable manner as possible, stable and robust
    funding is necessary to sustain those industrial capabilities which
    support Navy shipbuilding and ship maintenance and modernization.
        First, Congress must find a way to remove the defense spending caps
    set in place by the 2011 Budget Control Act, which enacted the 10-year
    slate of reductions known as sequestration. In recent years, Congress
    has worked around sequestration with short-term deals, however, without
    a long-term solution uncertainty continues regarding the specific
    effects of sequestration in fiscal years 2018 through 2021. Although it
    is difficult to determine exact impacts going forward, five years of
    restrictions and reductions have already led to furloughs, deferred
    maintenance, delayed recapitalization and modernization programs, and
    increased deployment times. The easiest or least harmful of the
    reductions have already been made. Any cuts going forward will have
    incrementally more of an impact and will be more difficult to reverse
    causing further strain to the readiness of the Fleet. A sustained
    investment in our Naval Fleet requires as an essential precondition
    that the threat of sequestration be permanently eliminated.
        In addition to eliminating sequestration, Congress can support the
    use of acquisition strategies to provide stability and enhance cost
    reduction rather than requiring the entire procurement cost of a ship
    to be funded in one fiscal year. Alternative funding approaches such as
    advance procurement, incremental or split funding and block buy
    contracting--all already in use in Navy shipbuilding--can help increase
    stability and affordability in Navy shipbuilding.
        Through the use of advanced procurement, Congress provides upfront
    funding for the purchase of long-lead time ship material and components
    and provides the balance of ship funding in the subsequent fiscal year.
    For the shipbuilding industry and the supplier base this creates an
    early financial commitment which enhances job security, allows for
    strategic planning, training, hiring as well as encourages capital
    investment. Additionally, advance procurement can reduce the total
    construction cost of ships through improved sequencing or year-to-year
    balancing of shipyard construction work and the purchase of batch items
    that can be manufactured in a more efficient and economic manner.
        Incremental or split funding, where cost is divided into two or
    more annual increments, allows for expensive items, such as large Navy
    ships, to be procured while avoiding or mitigating budget ``spikes''
    and major fluctuations in year-to-year budget totals. Incremental
    funding would also allow construction to start on a larger number of
    ships in a given year so as to achieve better production economies. An
    added benefit often not considered is a reduction in the amount of
    unobligated balances associated with DOD procurement programs.
        Beyond that, Congress can consider block buys of ships. Block buy
    contracting permits the Department of Defense to use a single contract
    for more than one year's worth of procurement of a given kind of ship
    without having to exercise contract options for each year after the
    initial procurement year. This is currently how Virginia-class
    submarines are procured, and during the Reagan years the Federal
    Government twice purchased two aircraft carriers at once. Purchasing
    ships through block buy contracting enables shipyards to leverage
    ``hot'' production lines--those assembling current ships --and
    streamline the acquisition process for these vessels. We cannot get to
    or sustain the target fleet size if we do not maintain the ships we
    already have to their expected service life while simultaneously
    building new ships.
        The selection or combination of these types of strategies will
    signal to the U.S. shipbuilding and repair industry that Congress is
    committed to building a 355-ship Navy and our industry is ready to
    respond accordingly.
        Beyond providing for the building of a 355-ship Navy, there must
    also be provision to fund the ``tail,'' the maintenance of the current
    and new ships entering the fleet. Target fleet size cannot be reached
    if existing ships are not maintained to their full service lives, while
    building those new ships. Maintenance has been deferred in the last few
    years because of across-the-board budget cuts. As a result of the wars
    in Afghanistan and Iraq, combined with commitments in Asia and other
    priorities, have lengthened ship deployments to eight to 11 months.
    This in turn has stretched the Navy's maintenance budget and kept
    families apart far longer than the Navy wants. The risk the Navy takes
    on when it has less than full operations and maintenance funding means
    accepting less readiness across the whole of the Navy, less capacity to
    surge in crisis or wartime, and preventing ships and submarines from
    reaching the end of their service lives. Any investment in building
    ships must be complemented by the investment to maintain those ships to
    their full life expectancy.
        The domestic shipyard industry certainly has the capability and
    know-how to build and maintain a 355-ship Navy. The Maritime
    Administration determined in a recent study on the Economic Benefits of
    the U.S. Shipyard Industry that there are nearly 110,000 skilled men
    and women in the Nation's private shipyards building, repairing and
    maintaining America's military and commercial fleets. \1\ The report
    found the U.S. shipbuilding industry supports nearly 400,000 jobs
    across the country and generates $25.1 billion in income and $37.3
    billion worth of goods and services each year. In fact, the MARAD
    report found that the shipyard industry creates direct and induced
    employment in every State and Congressional District and each job in
    the private shipbuilding and repairing industry supports another 2.6
    jobs nationally.
    ---------------------------------------------------------------------------
        \1\ ``Economic Importance of the U.S. Shipbuilding and Repairing
    Industry''. Maritime Administration (MARAD), November 2015.
    ---------------------------------------------------------------------------
        This data confirms the significant economic impact of this
    manufacturing sector, but also that the skilled workforce and
    industrial base exists domestically to build these ships. Long-term,
    there needs to be a workforce expansion and some shipyards will need to
    reconfigure or expand production lines. This can and will be done as
    required to meet the need if adequate, stable budgets and procurement
    plans are established and sustained for the long-term. Funding
    predictability and sustainability will allow industry to invest in
    facilities and more effectively grow its skilled workforce. The
    development of that critical workforce will take time and a concerted
    effort in a partnership between industry and the Federal Government.
        U.S. shipyards pride themselves on implementing state of the art
    training and apprenticeship programs to develop skilled men and women
    that can cut, weld, and bend steel and aluminum and who can design,
    build and maintain the best Navy in the world. However, the
    shipbuilding industry, like so many other manufacturing sectors, faces
    an aging workforce. Attracting and retaining the next generation
    shipyard worker for an industry career is critical. Working together
    with the Navy, and local and state resources, our association is
    committed to building a robust training and development pipeline for
    skilled shipyard workers. In addition to repealing sequestration and
    stabilizing funding the continued development of a skilled workforce
    also needs to be included in our national maritime strategy.
        A critical part of maintaining and growing the workforce and
    industrial base to build a 355-ship Navy is the strong support of the
    Jones Act. The Jones Act ensures a commercial shipbuilding industry and
    supplier chain exists domestically which also supports Navy
    shipbuilding and reduces costs. There is strong bipartisan support for
    this law, however, we must be vigilant that the law is consistently
    enforced and not eroded by administrative rulemaking. A recent decision
    by the Department of Homeland Security to not revoke a series of letter
    rulings that have allowed foreign-built and foreign crewed offshore
    supply vessels to operate in violation of the Jones Act has created
    uncertainty and resulted in numerous new U.S. vessel construction
    contracts to be cancelled. I raise this issue as an example of how a
    decision by an agency to not properly enforce the Jones Act can have
    such an adverse impact on commercial shipbuilding that reverberates
    throughout the entire shipyard industrial base.
        The U.S. Navy has always and continues to support the Jones Act
    because of its national security benefits. A strong commercial shipyard
    base and a strong cadre of skilled mariners is crucial to fulfilling
    the Navy's role in maintaining a forward presence in the world's sea
    lanes and trouble spots. In a recent study, the independent Government
    Accountability Office (GAO) put it this way: ``the military strategy of
    the United States relies on the use of commercial U.S.-flag ships and
    crews and the availability of a shipyard industry base to support
    national defense needs.''
        Additionally, while the Department of Homeland Security falls under
    the oversight of another Senate Committee, we must remember that
    another key component of the National Fleet is the United States Coast
    Guard. Shipyard capacity is required for the Service's desperately
    needed fleet modernization of its entire fleet from inland aids to
    navigation vessels to cutters of all sizes to icebreakers.
        In conclusion, the U.S. shipyard industry is certainly up to the
    task of building a 355-ship Navy and has the expertise, the capability,
    the critical capacity and the unmatched skilled workforce to build
    these national assets. Meeting the Navy's goal of a 355-ship fleet and
    securing America's naval dominance for the decades ahead will require
    sustained investment by Congress and Navy's partnership with a defense
    industrial base that can further attract and retain a highly-skilled
    workforce with critical skill sets. Again, I would like to thank this
    Subcommittee for inviting me to testify alongside such distinguished
    witnesses. As a representative of our nation's private shipyards, I can
    say, with confidence and certainty, that our domestic shipyards and
    skilled workers are ready, willing and able to build and maintain the
    Navy's 355-ship Fleet.

        Senator Wicker. Thank you very much.
        I am going to ask the clerk to do 6-minute rounds, if we
    can do that. I will start off. There are five of us here. I
    want to try to be a little less formal, much as we were
    yesterday down in the SCIF. So if someone wants to interject,
    we will do it that way and have more of a roundtable approach.
    If it gets out of hand, I will be surprised.
        Mr. Casey and Mr. Cuccias, I am sure you agree but let me
    get you in the record with Mr. Paxton's statement about
    sequestration. Could we possibly embark on this ambitious
    undertaking unless we lift sequestration? Mr. Cuccias?
        Mr. Cuccias. Well, I think sequestration actually puts
    instability into the marketplace. It is hard to plan. It is
    hard to predict. The overhaul on Washington was impacted and we
    had to lay off hundreds of workers to just, at a later point,
    go back and hire and retrain.
        So if the Nation really wants to build the Navy, it has to
    create stability, and the Budget Control Act and sequestration
    actually impact that greatly because you cannot invest. The
    vendors will not hire, and the supply chain is actually the
    critical path to build a ship. If the ship already exists,
    without the vendor and the supply base to provide the product
    and to hire the resources they need to build, ships will not
    come on time. They need 18 months and sometimes 2 years'
    advance notice before you want to start actually the shipyard
    to build a ship to actually signal the supply base to hire, to
    train, and to build. Sequestration does not put stability in
    that. It actually harms it. It harms the vendors to lay offs
    and rehire, and it harms the shipbuilders as well.
        Senator Wicker. Mr. Casey?
        Mr. Casey. I believe that a constrained shipbuilding and
    R&D accounts, the operational accounts insofar as maintenance
    is concerned, will preclude the Nation from achieving 355
    ships.
        Senator Wicker. Okay. I believe you said, Mr. Casey, that
    we need to start in fiscal year 2018. Was that your testimony?
        Mr. Casey. Yes, sir.
        Senator Wicker. If you will, if each of you would tell us
    if we want to get started realistically with this, what do you
    need in the next NDAA to get this started?
        Mr. Casey. We would propose to start the $400 million which
    is necessary to jump-start the supply chain, if you will. I
    agree with Brian's statements that the critical path on the
    ship at the beginning is to get the pieces and parts you need
    in place.
        On the existing Virginia-class program, we accelerated
    advanced procurement monies to buy materials, and it allowed us
    to accelerate 2 million hours of construction work, eliminate 2
    years from the construction cycle, and do it for 2 million less
    hours. So 2 years less, 2 million less hours, and we
    accelerated into the first half of the construction cycle. So
    we ultimately took an 84/87-month ship and got it down to about
    66 months, largely on the basis of getting the material at the
    dock the day we were ready to start construction.
        So we would propose to start that $400 million with $150
    million in this fiscal year 2018's authorization act.
        Senator Wicker. Is there anything else?
        Mr. Casey. I think we have laid out in detail what we can
    do to build on the Virginia program that exists today and to
    put monies in place that will cause the industrial base to
    become stressed--the supply chain, if you will, to become
    stressed--before we get to the point of trying to get to three
    or four submarines per year. If we can stress them today by
    authorizing them to start building pieces and parts that we
    know we intend to use, we think that will go a long way toward
    supporting the program to get to 355 ships.
        Senator Wicker. Can you elaborate on what you were saying
    in your testimony about accelerated depreciation?
        Mr. Casey. That is more on our capital investments. If we
    are to make a capital investment on any given program and the
    program does not start for 5 years and we do not really get
    into the meaningful production until 5 years later, your
    investment is somewhat stranded.
        Senator Wicker. So you are going to need a change in tax
    policy.
        Mr. Casey. No, sir. I do not believe a tax policy is
    necessary. All six of the suggestions that we have made in my
    testimony have been used by the Navy in the past. Those are
    methodologies that exist in the current FAR as I understand it.
        Senator Wicker. Okay.
        Mr. Cuccias, anything else?
        Mr. Cuccias. I would say the ideal was a multi-ship
    procurement. For example, two carriers, if they were bought
    together, would significantly take the cost of carriers. But
    also I think it would significantly stabilize the overall
    industrial base because of the breadth of the supplies. Multi-
    ship LPDs, multi-ship destroyers--that would be the best
    condition.
        But a fallback position is you have to have advanced
    procurement. If you do not have AP for the procurement, the GFE
    equipment is not even bought, let alone the material that the
    shipyards buy. You have to prime the pump. You have to get the
    supply chain lead time in advance or when you make the
    decision, the lead time strikes when the procurement lead time
    starts. AP must be in there. Ideally it is a multi-ship
    procurement I believe, to answer the question.
        Senator Wicker. Mr. Paxton, anything to add there?
        Mr. Paxton. Yes, sir. Just authorize these type of
    acquisition strategies. I think they are important. Buying a
    ship all in 1 year is difficult, huge budget swings, and we
    need to mitigate those spikes. If we are going to go to
    building 12 ships a year or more, if we do not have these
    acquisition strategies like advanced procurement, multi-
    contract, block buys, it will be hard to see how you would do
    it.
        The last thing, sir, I would say this committee can always
    encourage the Navy--not require, but encourage the Navy--to get
    requirements stable and consistent. Let us build things when we
    are ready to go. Encourage the Navy to get programs set and
    locked in.
        Senator Wicker. Senator Hirono?
        Senator Hirono. Thank you, Mr. Chairman.
        I think all of you testified that you liked the idea of the
    multiyear procurement contracts and also the multi-ship block
    grant contracts. Is that correct? All of you liked that.
        Now, is there not an underlying statutory basis for the--is
    it the multiyear procurement method, or is it the multi-ship
    procurement that has an underlying legislation?
        Mr. Cuccias. I would certainly like to take that question
    for the record.
        My response was more on how to produce ships more
    efficiently, more affordably, and so my response was if that
    was available, shipbuilders and the supply chain I believe can
    produce ships at a better value to the taxpayer and in a more
    efficient, faster manner.
        In terms of the policy that is behind it, I was addressing
    that more in the most efficient way to produce the products.
        Senator Hirono. My understanding is that one of these
    methods of procurement has a statutory basis for it. So the
    questions I have were whether both of them should have some
    sort of statutory basis so that you have a clear path as to
    what is required in order for us to have these kinds of
    contracts. But I will check on that.
        Mr. Casey. Ma'am, I think if I can help with that, as I
    understand it, both the destroyers the Navy builds and the
    submarines they build today are multiyear, multi-ship
    contracts. So they are 5-year contracts, in the case of
    submarines, two per year; in the case of destroyers, two per
    year split between two yards. So the Navy I believe is granted
    the authority by the Congress to put multiple ships under
    contract, and it takes multiple years to build those ships. I
    think that is what you question is, but I am not 100 percent
    sure I understood it.
        Senator Hirono. I just want to make sure that if we need to
    look at the statutory basis for us going forward with these two
    kinds of contracts that you all agree are good, then I will
    explore that.
        Mr. Casey, I was curious to know when you mentioned that
    since 2011 you have hired 10,000 people and that you have
    reduced, if I heard you correctly, the hiring process time
    frame from 165 days to 45 days. That is a significant
    shortening of the time frame. So what was shortened that you
    managed to do this?
        Mr. Casey. We have taken an approach in the human resources
    department that does the personnel hiring, and they are
    handling that department like a lean six sigma challenge. In
    other words, each phase of the hiring process is laid out on a
    process flow map, and all the hours, if you will, days where we
    were not productive we did not believe then gleaned out of that
    process. So there was a detailed process review, led by Mora
    Dunn, who runs our human resource department, new to Electric
    Boat, frankly from another part of General Dynamics. She has
    just done an outstanding job at looking at H.R. more like a
    production person would look at operations.
        Senator Hirono. I commend you for that because that was
    something that you did internally. You were able to effect a
    shortening of the time frame for when you would be able to hire
    the needed workers. That is great.
        Then in addition, I think there was some concern about the
    clearances that the government needs to provide and that there
    may be some issues around that, which I know the chairman has
    also asked you about. So that is another part of the whole
    process that we could be possibly of some assistance with.
        Thank you.
        I am glad that you all mentioned the importance of the
    thousands of suppliers that you all rely upon. I was
    particularly interested, Mr. Casey, when you said that of the
    5,000-plus suppliers that you deal with, many of whom are small
    businesses, that there are 150 who are critical suppliers. That
    would be the same for you, Mr. Cuccias?
        Mr. Cuccias. Yes.
        Senator Hirono. So out of the thousands that you work with,
    there are a number who are deemed critical, crucial, and maybe
    there is some way that we can stabilize the funding and the--
    well, stabilize would be a good way so that these critical
    suppliers have something that they can count on in terms of the
    funding. So is that something that we should be working on in a
    separate fashion to facilitate?
        Mr. Cuccias. Senator, I think it gets back to stabilizing
    the industry, and the multiyear and block buys actually do
    that.
        Obviously, multiyear and block buy will do a couple things.
    One, for the critical suppliers, it gives them stability. Every
    supplier is critical if you need the part. So the whole
    industrial chain is really important.
        I think actually it will bring other vendors in. It will
    actually create a more healthy supply base, hiring across the
    country. It will actually be an entry point I think for other
    companies and businesses to maybe get into the market where you
    are not so tied to single soul source vendors where they are
    all so critical. The BCA and sequestration actually helps cause
    that limiting of suppliers exiting in the market. The opposite,
    providing stability creates more vendors that would create
    stability and more vendors would come in the marketplace.
        Senator Hirono. We do have bipartisan support for
    eliminating the sequestration, but we have not quite been able
    to achieve that and we have kind of kicked the can----
        Senator Wicker. Well, we just do not have the bipartisan
    votes.
        [Laughter.]
        Senator Hirono. Or a bipartisan agreement on how the heck
    we should do it.
        I know that we have a maintenance backlog, and a recent
    RAND report indicated that public shipyards resourcing
    suggested more maintenance work could be transferred to the
    private yards to address the backlog. Do your yards have the
    capacity to take on more maintenance availabilities?
        Mr. Casey. Yes, ma'am. Right now, for example, at Electric
    Boat, they are doing the Montpelier maintenance work which will
    wrap up roughly at the end of this year. It is another example
    of--we are out to bid in competition with Newport News right
    now for the Boise. I think that was mentioned as being laid up.
    That is exactly right. We are in competition for that ship
    right now.
        Electric Boat actually requires that kind of volume of work
    to avoid having to reduce its workforce while we have the sight
    of Columbia in our eyes. Columbia is a vision in the future. If
    we do not have some interim work between what we are doing
    today in the repair world and what we need to do when we start
    Columbia, we will actually be reducing people not hiring. So it
    is a difficult dilemma to have as a company to be in, but that
    is where we find ourselves.
        So that is why the Boise is an important availability to
    Electric Boat. I appreciate the committee's support on moving
    any other work that exceeds the other shipyard capacity in the
    nuclear world.
        Of course, on the surface ships, virtually all the work is
    done in the private industry. So it is a different kind of
    issue there, but nevertheless, we definitely have the capacity.
    We are way short in Norfolk--we have a couple repair yards down
    there--of repair work relative to the capability of the port.
    We are also, as I just pointed out, short in the submarine
    business.
        Senator Hirono. Mr. Chairman, if I could just have Mr.
    Cuccias answer yes or no as to their capacity to do maintenance
    work.
        Mr. Cuccias. Newport News does have the ability to do
    maintenance work on both carriers. Lincoln was just redelivered
    in May, and George Washington is now under contract planning.
    We have contracts of Columbus and Helena. We have submarine
    overhaul work as well. From the surface side, it really depends
    on the yard's loading in terms of a new construction balance.
    Certainly we have the capability where Ramage is being
    overhauled at Ingalls at the moment. That job is going quite
    well. I believe we will be ahead of schedule. So I think both
    facilities have ability to do overhaul and repair.
        Senator Hirono. Thank you, Mr. Chairman.
        Senator Wicker. Senator Tillis?
        Senator Tillis. Thank you, Mr. Chair.
        Senator Hirono, it is great to see you back.
        I had one quick question for Mr. Casey. We were talking
    about clearances. I chair the Personnel Subcommittee. We are
    dealing with clearance issues in that capacity. What specific
    recommendations would you have on things that we could do to
    expedite the process from our end?
        Mr. Casey. Senator, I am not an expert on the criteria that
    the government uses to grant these clearances. My view as an
    individual citizen of the country is that there is some basic
    criteria that could be established by the various agencies that
    oversee this to make sure people are at least granted interim
    clearances on a more immediate basis. Then if there is a more
    detailed review of somebody's history or record, that that
    could be done in parallel.
        The other thing we are trying to do internally, frankly, is
    shrink down the areas in the shipyard that require these
    clearances. That is something we are working closely with the
    Navy on. We have been somewhat successful. But as a ship is
    getting near completion and you have a live reactor core inside
    a ship, the rules are pretty tight. Those are the areas where
    we absolutely have to have people.
        It is, frankly, difficult to sit in a production meeting,
    which I still do--since that is where I came from and I still
    like to sit in those once in a while--and have the general
    foreman or the foreman say, I am short 10 people and I know I
    have got 300 people that are waiting for their clearances right
    outside the gate ready to come to work.
        The down side effect of that is sometimes people get
    impatient. So we have gone to a lot of trouble to get somebody
    interviewed, get them hired, get them into the sort of queue
    and then having to say, well, I have got to wait 4 or 5, 6
    months, then I am going to find something else to do to support
    my family. So any efforts, sir, that you could do on that would
    be hugely helpful.
        Senator Tillis. Well, with people that are in that lane
    within the organization, it would be good to get back with our
    office to talk about specific points that they think could be
    improved in terms of the process.
        I have a broad question for all of you. I think I heard we
    need longer lead times. We need the certainty of volume. We
    need to fund the tail. If not a block buy, at least advanced
    procurement. I have only been in politics for about 12 years.
    So I did not follow this at a detailed level at the Senate
    level until 2 years ago. But the last time I would have heard
    any of these things being said about policies coming out of
    Capitol Hill, disco and leisure suits were still popular. It
    has been a very long time.
        When is the last time you have been able to go back to your
    businesses and your industries and feel like you had the
    certainty to ramp up your supply chains to get the resources
    and the supply chains in place? How long ago has it been since
    you have really been able to do that as an industry?
        Mr. Casey. I think, frankly--and I will stick with the
    submarine part of the business, since that is where I came
    from, for now even though the other two are equally important--
    when we went to two submarines per year, originally the plan
    was to do that in 2001. It never happened until 2011. So there
    was a 10-year change in policy I think is what you are
    describing, 10 years of we are on path A in our vision, but in
    reality we are living on path B. So finally, when we got to the
    point of the block III ships where we went from one per year to
    two per year, in the middle of that block to block IV where we
    had 10 ships authorized over 5 years, then there was some
    confidence that we know what we are dealing with.
        Senator Tillis. You take a look at the way the world has
    changed since then. It is amazing that we have got ourselves
    caught in this rut.
        Do you all as an industry or as the businesses
    represented--have you done any analysis in terms of the
    inherent cost multiplier for the way that we are acquiring in
    this case ships, but weapons systems in general, how much more
    we are having to pay for it because of the lack of certainty
    and as a result, the lack of optimization, just the inherent
    inefficiencies that we need to pay for?
        Mr. Cuccias. I think it is significant. When you look at a
    single ship buy, a procurement versus multiyear, when I just
    look at some of the data, it would be in real then-year term
    dollars much greater than 10 percent. I have seen some 20. I
    have seen some vendors provide 20 percent reductions in then-
    year. So it is the real then-year cost without escalation that
    you get today. So I think there are significant volumes. When
    vendors in the communities, both government and shipyard
    provided products--when they get a demand signal that
    structures multiple years, they get to plan their facility.
        Senator Tillis. It would not surprise me if we are paying
    25 to 30 percent premiums based on lack of an optimized supply
    chain. I used to run a supply chain optimization practice at
    PriceWaterhouse, and the inherent inefficiencies in here, the
    multiplier that we could get out of more ships built sooner is
    something that we have to go from bipartisan discussion about
    the Budget Control Act and about the things we are talking
    about here to bipartisan results.
        Senator Wicker. What sort of assurances could you give us
    about that if you crunched the numbers a little better?
        Senator Tillis. Let me see if could answer it from a
    consultant's perspective. You should be able to give us quite a
    bit of assurances. If we can give you a 10-year tail or a 5-
    year planning horizon that we are willing to commit to, I know
    very well that you can optimize in double-digit numbers based
    on the baseline numbers that we have today and current
    budgeting practices.
        Senator Wicker. What do you say to that?
        Mr. Casey. Senators, on the latest block buy, we documented
    $200 million unit cost reduction just for the volume, $200
    million as a result of getting down to 66 months. So there are
    $400 million, which got us to $2 billion per copy lower than
    they had previously been as measured, I think, in fiscal year
    2010 dollars. So the kind of numbers you are talking about are
    exactly the targets we should have, but not only are they
    targets, they are contractual commitments on the current block
    buy----
        Senator Tillis. What you need is the certainty out of this
    institution that what we say this year is what we mean next
    year. That is not what we are delivering today. There is no way
    that any business of your size and scope can go on these 3- to
    5-year, 10-year horizons and get an update from us every 6
    months to a year. It just will not happen.
        Thank you, Mr. Chair.
        Senator Wicker. Thank you, Senator Tillis.
        Senator Kaine?
        Senator Kaine. Thanks to our witnesses.
        You have all touched on this in your testimony, but I just
    want to make sure that I ask you specifically. Last week, the
    CNO, Admiral Richardson, released a white paper titled ``The
    Future Navy,'' and his conclusion was this, that today's
    industrial base has the capacity to construct 29 more ships
    over the next 7 years than our current plan. Do you generally
    agree with that assessment that that is about the magnitude of
    the additional production we could generate under the current
    capacity?
        Mr. Cuccias. When I looked at the capacity, Senator, in
    principle we can support the demand. Depending on how it goes
    from the plan to the authorization of awarding contracts and to
    the shipbuilders, the LHA may have to move to a 4-year center.
    But other than that, we have the capacity to deliver all of it
    from both Newport News and Ingalls.
        Senator Kaine. The other witnesses?
        Mr. Casey. Agreed, Senator. I just read that document last
    night, as a matter of fact. He is very general about what
    specifically he is talking, if that were 29 submarines or 29 of
    a blend of submarines, LHAs, aircraft carriers, et cetera. It
    is a little bit difficult to understand what the mix of the 29
    is, but I am very confident, depending on the Navy's mix that
    is in that analysis. We have sort of an open book with the
    Navy. They understand the ins and outs of our businesses much
    more intimately than most relationships I think. So I am sure
    that came from information that we in part provided.
        Senator Wicker. Based on the Navy's mix, how much more
    would that cost the taxpayers?
        Mr. Casey. The 29 ships?
        Senator Wicker. Yes.
        Mr. Casey. I cannot answer that. I do not know what the mix
    is ultimately.
        Mr. Paxton. Yes, Senator. I get to represent the entire
    industry.
        There is that capacity out there, and we think probably 29
    is not the top number. We could probably go farther than that.
    But it goes to what Mr. Casey said about ship mix and ship
    type. But certainly there is excess capacity that can be
    reconfigured, can be utilized to meet the 29 and do better.
        Senator Kaine. Let me ask a question about ship mix. I was
    at a brief at DARPA recently, and I do not want to get too much
    into it because it was in a classified setting. But the staff
    was briefing me on some thoughts about different visions of
    future fleet architecture.
        If we embark on an aggressive build plan of the kind we are
    discussing here, which results in the hot production lines that
    you guys say is best--and I agree with you on that--how
    difficult is it to incorporate new ship designs if there is a
    decision that the architecture needs to be dramatically
    different than we have been predicting recently?
        Mr. Casey. I think there is a big difference between serial
    production and introduction of new technology and new designs.
    I can tell you during the period of low rate production, we
    canceled the Seawolf, but we also designed and built the
    Virginia virtually on time, only about 3 months late for the
    schedule that was created 10 years earlier. We designed and
    built on time and under cost the SSGN modification to the
    existing Tridents to make them capable of being strike vessels
    without having ballistic missiles aboard. We redesigned the
    third Seawolf to become the Jimmy Carter, which was basically
    written on the back of a ``while you were out'' pad as a
    concept, and 8 to 10 years later, it was at sea performing its
    mission.
        So we have had a string of successes. I think if you are a
    business that has a very tight integration between your design,
    your supply chain, and your construction, you are more able to
    adapt.
        The Navy on submarines, for whatever reason--I am not
    sure--has not introduced so much on other classes of ships as a
    design/build process, assuming these were all the people that
    are involved in planning the ship, buying parts for the ship,
    estimating the cost of the ship, or part of the design
    function. They are authorized to do their work during the
    design. So when you develop a manufacturing and assembly plan,
    everybody is signed up for it from the guy that has got to weld
    the joints on the boat to the people who have to estimate the
    cost of the boat, the people who have to buy the material for
    the boat.
        That is different than the historic concept design that
    turns in detailed design. You throw two shipbuilders and say go
    tell me how much it is going to cost because there is a whole
    different phasing that is required.
        So I believe that was the secret sauce that allowed those
    three kinds of ships to be built basically in a very narrow
    window without disrupting normal processes.
        Senator Kaine. Thank you.
        Mr. Cuccias, let me ask you this. I visited the apprentice
    school in Newport News. You had a wonderful program last year.
    I mean, you also have a wonderful program at Ingalls. These
    schools are a pretty big investment at a time when there is a
    lot of pressure to keep the cost down. Talk about the business
    case for operating these schools.
        Mr. Cuccias. We take a lot of pride in building the finest
    ships in the world. But I think we also produce the finest
    workers in the world. I think we produce--our trained workforce
    is paramount in terms of being in the business. I do not know
    if there is a business case. You need a qualified worker. You
    need a trained worker. We provide great training for them. I
    think it has been one of the key ingredients to allow us to
    attain and retain the skills that you need into an overall
    industry outside of the United States across the board. It is
    not really a heavy industry marketplace anymore. So we have to
    kind of create our own. The marketplace does not really allow
    that.
        We have gotten very good at it. The Newport News apprentice
    school I think is really the gold standard. We have emulated a
    lot of that in Pascagoula and we have a fine maritime academy
    there as well. I just think it is what we think--we call it the
    fundamentals--I would call the business. It is hire, training,
    and retaining employees. So we do not look at it as a business
    case. We look at it as a smart investment to keep, quote, the
    talent that you need to build the future fleet.
        Senator Kaine. Let me just say, Mr. Chair, if I could, one
    last point. I am on the HELP Committee and one of the goals of
    Chairman Alexander and Ranking Member Murray is to rewrite the
    Higher Ed Act during this term in Congress. One of my main
    goals in working on that is to make sure we define higher
    education broadly enough to include career and technical
    apprenticeship programs. Mr. Casey, you testified a bit about
    the wide range of kinds of training opportunities you use at
    General Dynamics. I just want to make sure that we give these
    programs the same elevation as we are thinking about them in
    higher education. So I would encourage your industry to pay
    attention to what we are doing on the HELP side when we get
    into the Higher Ed Act rewrite because there may be some things
    we can do as a part of that legislation that would be helpful
    in creating the workforce that you would need to do this
    scaled-up production.
        Thank you, Mr. Chair.
        Senator Wicker. Thank you, Senator Kaine.
        Senator King?
        Senator King. Thank you, Mr. Chairman.
        Just to follow up on that discussion, is it fair to say,
    gentlemen, you both testified--or all three of you testified
    that the industry base, in terms of physical assets, is ready
    to go? It would not take a huge amount of capital investment to
    scale up to meet these new requirements. Is it fair to say that
    the obstacle, if it is one, is workforce and development of a
    new workforce? I know in Bath, we are having a lot of
    retirements, and I suspect that is true in all of the
    shipbuilding industry. People are starting to age out and a
    very large turnover, which implies additional training. Mr.
    Cuccias, what do you see?
        Mr. Cuccias. From the vendor--I will go from vendor. Then I
    will talk to the shipyards. So from the vendor community, I
    think the basic infrastructure of the vendor base--a lot of
    that exists. The talent does not exist in terms of hiring up.
    So from particular components, if you go to a vendor and say
    how come I cannot get my product because another program
    basically took your lead time spot, and there is not enough
    volume for them to hire up to meet a higher demand.
        Senator Wicker. So you are making Mr. Kaine's point really.
    Are you not?
        Mr. Cuccias. Yes, sir. I think you see that across the
    marketplace. Depending on certain product lines, they may have
    to have some other facility investments depending on terms of
    rate of production and what that requires. The most near-term
    critical point is the labor force and sending the right signal
    to hire and train the labor market.
        Senator Wicker. Mr. King's first statement about the
    infrastructure pretty much being where it needs to be--do you
    all of you agree with that?
        Mr. Casey. I agree with that on the surface ship side of
    the equation for certain. I do not believe--I mean, we are
    making an investment at NASSCO right now mostly for efficiency
    purposes, not to be able to have the capacity that is
    necessary. I believe Bath is in a similar situation. They have
    adequate facilities to perform this side of the work.
        In the case of the Columbia program, that is not the case.
    There is no infrastructure required to build that program, and
    that is what we are all trying to figure out what the right
    path ahead to do that is.
        So the fast attack submarines--basically the infrastructure
    is in place for the existing model of fast attack submarines.
    The infrastructure we need to build the Virginia payload module
    with the processes we use today--in fact, I invite you all to
    get up to Electric Boat and take a look at the process of
    building these quad packs for the Columbia, a very, very
    different process than what was used in the past. There is a
    very similar concept that we have developed for the Virginia
    payload module to put those four vertical missile tubes in.
        But outside of Columbia, I agree with you, Senator, that
    basically the physical resources at the shipyards that we need
    to continue is----
        Senator King. Do you agree then that the challenge is in
    workforce?
        Mr. Casey. Yes. I mean, I think even though we are fairly
    stable at Bath right now, when we complete the DDG-1000-class,
    which will be in 2019, we have a significant dropoff. But in
    parallel with that there is somewhat of a bifurcation in the
    longevity of the people in the yard. So there is a lot of entry
    level or newer people less than 10 years, and a lot of people
    who have been there more than 30 years. So as the more senior
    people retire, we have to hire and replace them. Absolutely. So
    that can always be a challenge, and when we hire new people to
    replace more senior people, we need to get them through a
    training process.
        Mr. Paxton. Senator King, I would say industry-wide, the
    single biggest challenge is going to be workforce development.
    CBO estimates over the next 5 to 10 years the seven yards
    building naval assets will have to increase the workforce by 40
    percent. That is a real number. That takes a real concerted
    effort.
        I agree, Senator Kaine, with your legislation. We supported
    that as a trade association. We really do need this technical
    education to be thought of as a 4-year degree just as well.
        The last thing I would say on that, sir, is we have a lot
    of veterans that do not know enough about our industry. What we
    have tried to do as a trade association is a concept called the
    Military to Maritime. We held an event down in Norfolk where
    the Virginia Governor came down, and we have done this now in
    Houston and Jacksonville and New Orleans. What we are trying to
    do is raise the awareness of the veterans for the shipbuilding
    industry, obviously. That is what I care about. But it is also
    ship operators. It is folks working on all sorts of craft that
    ply our waterway systems. So we want to get our veterans in
    there. They are highly skilled and highly trained, and they can
    help in the industry.
        Senator King. Two general points out of this, Mr. Chairman.
    I think clearly this is an issue. This workforce is an issue
    here in this subcommittee. This an issue across our economy. I
    am hearing it from virtually every employer in Maine. The
    problem is a trained and qualified workforce. So we really got
    to think hard about that I think in the Congress.
        The other issue that you have touched on is the whole issue
    of clearances. I keep hearing that in other areas, and that
    just may be a matter of enough people to do the clearance work,
    enough people to do the processing in the FBI or Homeland
    Security or wherever it is. I think we have got to attend to
    that because that is a bottleneck. I know of people applying in
    some of our security agencies or the State Department. They are
    waiting more than a year and a half for their clearances, some
    of whom I know have given up, and the government has lost
    qualified, good, capable people because the clearance process
    was just so cumbersome and slow.
        A final question. I am a little confused by two things, a
    combination of two things. We have been talking about a 355-
    ship Navy. That is what everybody is looking at. Part of that
    implies more DDGs, which is something I know something about,
    talking about four a year. I look at the budget that was
    submitted yesterday, and it shows two a year out to 2022. Which
    is it? Is the administration's proposal, the 355-ship Navy or
    is this a preliminary budget? Any ideas on that inconsistency?
        Mr. Casey. I certainly do not want to try to speak on
    behalf of the administration, but the only comment I would make
    is that I think the emphasis this year by DOD is supposed to be
    readiness and they have not really come through a detailed
    plan. But I can tell you from industry's point of view, if we
    want to get to 355, we need to start sooner rather than later.
    That is for sure.
        Senator King. That is what bothers me about this budget is
    it shows two a year all the way out into 2022, and we are not
    going to get to 355 in any kind of a decent time horizon if we
    do not start until later than that.
        Thank you, Mr. Chairman.
        Senator Wicker. Senator Shaheen?
        Senator Shaheen. Thank you, Mr. Chairman.
        Thank you all for being here.
        I want to follow up on the workforce issue because I
    certainly agree with the comments of both Senators Kaine and
    King that this is a huge issue, and you all have acknowledged
    that. It is an issue I hear everywhere I go in New Hampshire.
    Is the reality not that it is not just about workers having the
    training that they need, but we have a workforce in this
    country that is aging out and we are not producing enough new
    workers for the jobs that we need in the future? All of the
    statistics and the analyses that I have seen suggests that. Is
    that something that you all--Mr. Paxton, you are nodding your
    head. Is that something that you have seen as well?
        Mr. Paxton. Yes, Senator. Like a lot of manufacturing
    sectors, the shipyard industry is facing an aging workforce.
    But on top of that, we are facing the reality that we need to
    ramp up quickly. So we are seeing it in our area as well.
        What we do also see, though, is we are generational. If you
    have somebody who has worked in a shipyard, you will find a
    daughter or a son or a nephew or cousin will know about it and
    will enter.
        It gets back to also legislation that tries to emphasize in
    our community colleges, our technical schools that this is a
    good option and educating that as opposed to getting a 4-year
    degree.
        Senator Shaheen. Are immigrant works not also important as
    we look at how we are going to fill our workforce needs? I was
    down at Austal for a christening of an LCS ship down there, and
    one of the things that I noticed and they talked about were the
    number of immigrants who were working in that yard and doing
    very good work. But is this not one of the other answers to our
    workforce challenges in the future? Anybody.
        Mr. Casey. I am not sure where that question is headed, but
    I know we have a challenge in the nuclear part of the business
    because everybody has to be a U.S. citizen. So that might be a
    unique challenge to the nuclear part of the business. The
    shipyard we have in San Diego certainly has a lot of people
    that are properly vetted and work in that shipyard.
        Senator Shaheen. I am assuming that everybody who works in
    the shipyard who may be an immigrant and many who are U.S.
    citizens who have immigrated to this country are properly
    vetted. Otherwise they would not be hired.
        Mr. Casey. About 60 percent of NASSCO's workforce are
    considered minorities, if you will, and that is largely based
    upon their proximity to Mexico and so forth. So all those folks
    that come into NASSCO every day legally and they are vetted
    accordingly are fantastic additions. They have got a great work
    ethic, and we would not be where we are today without them.
        Senator Shaheen. So that is going to be an important role
    as we think about how we fill the workforce needs that we have
    in the future. Would you all agree with that?
        Mr. Casey. Locally, true.
        Senator Shaheen. Mr. Paxton, I want to--we have all talked
    about the workforce challenges, the budgetary challenges as we
    think about how we get our budgetary house in order. But I
    noticed in your testimony that you also talked about a recent
    decision by the Department of Homeland Security to not revoke a
    series of letter rulings that have allowed foreign-built and
    foreign crude supply vessels to operate in violation of the
    Jones Act, and that that has created uncertainty. Can you talk
    about both what happened there and why that is a problem? Are
    there other unintended consequences from decisions that are
    made that are affecting our ability to do this ramp-up that we
    would like to do?
        Mr. Paxton. Thank you, Senator.
        Yes, real briefly. We had a situation where CBP--they had
    the situation in 2009, but waited 8 years and issued a series
    of revocations of letter rulings that were made ex parte to
    individual foreign companies to operate on the offshore oil
    patch in the Gulf of Mexico. Why this is particularly troubling
    is you do not know who got it, how they got it, and how they
    are operating out there.
        So what happened was over a series of years, we found out
    there were several foreign operators who pay either zero tax or
    5 percent tax versus our operators who are fully U.S.-owned,
    U.S.-crewed, and U.S.-built paying in the 38.5 percent tax
    range.
        If we are talking ``buy America, hire America,'' this is
    the quintessential ``buy America, hire America'' situation.
    Unfortunately, CBP pulled those letter ruling revocations back.
    It was really a shot in the gut for an industry who----
        Senator Shaheen. Can I just ask you when this happened?
        Mr. Paxton. This happened just last month.
        Right now, the Gulf of Mexico is experiencing a low price
    of oil. We have a lot of work boats, highly complicated, large
    boats, that are tied up. This would have really put about 30
    boats to work. It would have put a lot of mariners to work. So
    it was frustrating.
        As a trade association, we work on a policy level, and one
    of our policy levels is rule of law. If it is the law, let us
    enforce it. We say the Jones Act is an important law. We should
    enforce that. The Jones Act on the Gulf coast is an example of
    why that law works. It applied to offshore oil and gas, and
    because it applied to offshore oil and gas, when 3,800 rigs
    were operating offshore, the industry stepped up and built for
    the offshore oil sector. Guess what happened. We ended up being
    a net exporter of a half a billion dollars a year in vessels
    being sold internationally because we dominated that market
    because that market was here under the Jones Act.
        So not to belabor the point too much, Senator, but it was a
    real disappointment. We are working with this administration,
    again, going back to their policy of ``buy America, hire
    America.'' How this could happen? There seems to be a little
    bit of work that needs to be done to understand it a little bit
    better. But it is an important aspect of our industry, and this
    was an unfortunate situation.
        Senator Shaheen. Thank you.
        Thank you, Mr. Chairman. My time is out.
        Senator Wicker. Thank you, Senator Shaheen.
        Senator Sullivan and then Senator Blumenthal.
        Senator Sullivan. Thank you, Mr. Chairman.
        Gentlemen, thank you for your testimony.
        I want to talk about icebreakers. I do not know if anyone
    else has raised the topic yet.
        Senator Wicker. We were waiting for you, but we are glad
    you got here.
        Senator Sullivan. Well, I saw Senator King was here. So I
    thought maybe he had.
        So you may have seen the President Trump's Coast Guard
    speech. He talked about the need for icebreakers. A number of
    us on the committee, very bipartisan, have focused on this.
    President Obama talked about it, you know, in terms of our kind
    of competitiveness for the growing strategic importance of the
    Arctic region of the world. Russia now has 40 icebreakers,
    building 13 more, some of which are nuclear powered. We have
    two. One is broken. They are in a horrible state of disrepair.
    Shameful in my view to put men and women in the U.S. military
    with a uniform of the U.S. military on ships like this. If you
    have ever seen them, you would, I guarantee, agree with me.
        Senator King had the very eloquent statement saying the
    icebreakers are the highways of the Arctic. The Russians have
    super highways, and we have dirt roads with potholes, something
    like that. But it was well stated. It was very well stated.
        So we have a bit of a frustrating issue that we have to
    deal with here which is kind of the hot potato between the
    Coast Guard and the Navy. Whenever the topic comes up, nobody
    seems to want to own it, and we will have to deal with that.
        But there is also this discussion, kind of this
    conventional wisdom out there that comes I think mostly from
    the Coast Guard that if we do get the funding to build an
    icebreaker, it will take $1 billion and 10 years to build. You
    know, every time I hear that I am like, my gosh, we put a man
    on the moon inside of 10 years. We cannot build one icebreaker
    inside of 10 years?
        So I have kind of looked around the world, and the Fins are
    very interested. You know, they say they can build heavy
    icebreakers for $250 million. Singapore has a similar kind of
    gauge in what their industrial capacity is able to do.
        So what is the deal with icebreakers? Do you agree that it
    should take 10 years and a billion dollars to build one medium
    or heavy icebreaker? If not, what are we doing wrong? Why does
    it look like our industrial base has no capacity when there are
    other countries in the world that seem to be on this, can do it
    in 2 to 3 years, a quarter of million dollars. We are saying 10
    years, a billion. What do we need to learn here about this? It
    is a very frustrating topic because nobody seems to have the
    right answers.
        Mr. Casey. Senator, there have been I think it is five
    different shipyards that are in the middle of detailed studies
    to produce the very icebreakers that you are talking about.
        Relative to the cost and the time it takes to build them,
    it is largely, at this stage, driven by the requirements that
    are determined to be necessary. So when you are looking at the
    cost of any ship, we like to think about it in terms of ISSR,
    the inherent cost of the design, if you will, the requirements.
    What would you like to have as part of that icebreaker? There
    is medium weight. There is heavy weight. There is nuclear
    power. There is diesel power. There are thicknesses of ice that
    it has to travel through. All those things can determine the
    cost.
        We are actually teamed at NASSCO with a branch, if you
    will, of some of those foreign companies that have built many,
    many icebreakers to make sure we can come up with one of the
    best concepts as part of the design studies.
        So the numbers that you are using I cannot comment on
    specifically because we are not sure of the source or what the
    requirements used----
        Senator Sullivan. Should it take 10 years and $1 billion?
        Mr. Casey. We would like for it not to.
        Senator Sullivan. So would we. But you do not know the
    answer to that?
        Mr. Casey. I do not because it depends on when the funding
    is authorized, when the design is complete. Do you do design
    and advanced procurement before you start construction? There
    are a lot of different ways to measure that. I think you could
    probably come up with a scenario. Obviously, the Coast Guard
    did. They are our direct customer on this, and we do not think
    it is a great thing to be alienating them right now. But we
    will develop for them the best, fastest, cheapest icebreaker
    that can be built within the constraints of the design criteria
    that they establish.
        Senator Wicker. Are the designs unrealistic? Are they
    asking too much in terms of requirements?
        Mr. Casey. I think they are very open-ended at this point.
    I think they are very general at this point.
        Senator Sullivan. Would it make sense to go to the Fins and
    just say----
        Mr. Casey. No.
        Senator Sullivan. No?
        [Laughter.]
        Senator Sullivan. Well, that is a rhetorical question, as
    you can imagine. But, I mean, I am very supportive of our
    industrial base, but if the industrial base takes 10 years to
    be able to do something that really should not--let us face it.
    It should not take 10 years to build an icebreaker. I do not
    know if that is our problem or the Coast Guard's problem. But
    it would be helpful if you guys had suggestions on how to make
    it so we do not need to go to Singapore or Finland and say,
    well, you guys seem to know how to do this much better, much
    cheaper, much more efficiently than our own industrial base. I
    do not think that is where anyone wants to go, but at a certain
    point, 10 years is kind of a crazy idea that we cannot do
    anything in that amount of time.
        Anyone else have a thought?
        Mr. Cuccias. Senator, I think something that the Coast
    Guard is doing that is quite smart is they are involving
    industry early in the requirements definition. We all have seen
    designs take longer and construction take longer, and it is
    where the requirements were poorly defined and construction was
    started, and the design was not finished. To bring the industry
    in, the shipbuilders in to ask for their ideas--and industry is
    involved then in terms of the world standards for icebreaking.
    I was at Avondale when Healy was designed and built, the last
    icebreaker in this country.
        But we have brought in members from all around the world to
    find out what the best ideas are. For the Coast Guard to be
    asking industry what are your ideas, what do you think, and
    then how much will this cost with this idea, to have those
    discussions now I think is extremely healthy, and I think it
    will actually take the Coast Guard to a good place.
        Senator Sullivan. Thank you.
        Thank you, Mr. Chairman.
        Mr. Paxton. Senator, I will just add that it is a good
    thing that we have five shipyards competing for this. It shows
    that we do have an industrial base that can meet the challenge
    of building hopefully not one--we need to build six or more,
    and you can get the economies of scale in.
        Senator Wicker. Hear, hear.
        Senator Blumenthal?
        Senator Blumenthal. Thanks, Senator Wicker.
        I want to begin by agreeing with my colleagues about the
    need for skilled training and sort of mention the elephant in
    the room, which is that we see a 10 percent increase in our
    defense budget and a cut in skill training funding in the Labor
    Department. I have said at Electric Boat, when I visited, and
    to the countless workers in the supply chain that they are as
    essential to our national security as the men and women who
    serve, and two of my sons have served recently in uniform. I
    believe passionately that we must do more to invest in them.
    But cutting the budget for skill training is not the way to do
    it. I am not asking you to go outside the mission of your being
    here today to be critical of the Trump budget, but I think we
    need to invest more, not less in that kind of training
    activity. I associate myself with all the remarks that have
    been made to that effect.
        I am very happy that the Navy has heeded the calls from
    many of us for an additional submarine in 2021. I believe that
    the investment of more than $5 billion in two Virginia attack
    submarines, including $1.9 billion in advanced procurement is
    also welcomed.
        I am concerned that this advanced procurement will be
    inadequate to advance the total advanced procurement for those
    years. I am going to be advocating an additional $200 million,
    and I wonder if you could comment on that, Mr. Casey.
        Mr. Casey. We appreciate your support, Senator, in every
    way. What you just described is certainly going to be--the
    benefits of that we are going to lay out in detail and provide
    to all the members on the various committees that evaluate
    those sorts of changes to the proposed budget. So we concur
    with that number. We think there is a rationale to do so.
        Frankly, when we started up this block IV that we are in
    the middle of right now, I think we have realized very quickly
    that we did not sort of get out of the gate as soon as we could
    have. We actually had some material shortages when we started
    construction that made it more difficult to achieve the goals
    that we are setting for ourselves. The sooner we get that
    material on our dock, the sooner we can go back to that 2, 2,
    2, you know, 2 years earlier, 2 million less hours per ship,
    and that is the key too, is having the advanced procurement
    money 2 years before you actually need to start construction of
    the ship.
        Senator Blumenthal. That $200 million can be a real force
    multiplier or leverage point to diminish costs in the future.
        Mr. Casey. It also helps the supply chain ready themselves
    for this increased volume in the long run. The more we can kind
    of task them early, the better off I think we will all be.
        Senator Blumenthal. The more support you can give us in
    detail, the better, obviously. I know that you will.
        The same applies to I think the $150 million that you
    mentioned for fiscal year 2018 because I agree totally, and I
    will be a strong advocate for it. I am hopeful that members of
    the subcommittee will agree as well.
        I want to talk for the moment about maintenance, which is
    the less glamorous side of what you do, but equally important
    and cost effective because as much as we are building new
    submarines and I think the addition of a second submarine in
    2021 shows how deeply the Navy--and I think we all should
    agree--believe that submarines and their stealth and strength
    are unexcelled as a weapons platform.
        But maintenance is extremely important, and to go back to
    the USS Boise, which is now tied up pier side unable to
    submerge, I have written to advocate that that work in fact be
    accelerated which would, as you pointed out earlier, not only
    be good for our national security but also for the industrial
    base at Electric Boat because it would fill a lull or a gap and
    thereby enable us to sustain that workforce.
        Perhaps you can talk a little bit more about the capacity
    of Electric Boat to do that work in a private shipyard so it
    does not have to be done later in a public shipyard and how it
    would sustain that industrial base.
        Mr. Casey. Well, the Boise would be a natural follow-on to
    the Montpelier that is undergoing maintenance today at Electric
    Boat, which is scheduled to finish roughly at the end of this
    year. We are in the process of responding to a request for
    proposal from the Navy which is due, I believe, in mid June on
    the Boise. We will be submitting that proposal, and as soon as
    the Navy can act on that and authorize planning and procurement
    of materials necessary to conduct the availability, we would be
    ready to go.
        You stated it quite eloquently and accurately that that
    will fill our workload gap should we win that competition on
    the Boise. So we appreciate your support in that regard,
    Senator.
        Senator Blumenthal. Well, I raised this issue yesterday in
    a similar subcommittee meeting. It was a closed setting, so I
    am not at liberty to discuss it. But I believe it really should
    be a priority for the Navy because to have one of our
    submarines unable to submerge and potentially missing
    deployments I think would be very regrettable. In addition, it
    would be helpful to Electric Boat in sustaining the industrial
    base. So thank you.
        Thank you, Mr. Chairman.
        Senator Wicker. Mr. Casey, you discussed this, and I do not
    think we followed up with a question. When we hear about the
    355-ship requirement, which is budget informed, realistically
    how quickly could we get there, and what do you understand from
    the Navy as to how quickly they would like to get there?
        Mr. Casey. Senator, I am privy to alternatives that get us
    there in the mid 2030s or the mid 2040s. As you point out, that
    is budget-driven. It all starts with a commitment I think from
    the government and the desires to be budgeted and there to be
    certainty into what needs to be done so the process can start.
    So the sooner we start, the sooner we can get there, but it
    largely depends on the rate at which we are expected to
    perform. That is what determines our capacity. I am not sure if
    that is clear enough of an answer, but that is how I see it.
        Senator Wicker. Anyone else want to help us with that?
        Mr. Cuccias. The 355 includes a lot of platforms. So
    really, I can only speak for the platforms that we provide.
    Carriers right now are on 5-year, 6-year centers. They can go
    to 3-year centers. LPDs are not on any center right now and
    they can go to a 1-year center. The DDGs can go faster than 1-
    year centers than two a year. LHA is right now on 7-year
    centers. LHAs can go to a 3- to 4-year center. So all the
    increased volumes in terms of the ships that we provide, we can
    produce those at a much faster rate.
        Senator Wicker. Can you put a price tag on what you just
    said?
        Mr. Cuccias. Not right now.
        Senator Wicker. Do you think you could back to us on the
    record with a guesstimate?
        Mr. Cuccias. Yes, sir.
        Senator Wicker. What are we learning from our partner
    nations in terms of how they are building ships, and what are
    we learning from our adversaries that might be helpful to this
    committee or this Congress?
        Mr. Paxton. Mr. Chairman, I would say one thing that we
    have learned--and it is kind of in the reverse--is what we do
    not want to repeat is some of the examples we have seen in
    shipbuilding in Britain and shipbuilding in Canada and
    Australia where they really atrophied their industrial base. We
    do not want to ever get there. So it is kind of the reverse of
    your question on what we have seen. But it is an important
    cautionary tale because there are things that this Congress can
    do policy-wise that could really harm our industrial base and
    harm our supplier chain. So we want to avoid those things and
    do better, especially if we are going to build up a larger
    Navy.
        The only other thing I would say--and this is not in my
    area, but I know we benchmark ourselves against international
    shipyards and try to do better and learn from them. So we are
    taking in best practices and trying to implement those in how
    we build.
        Senator Wicker. Can any of you tell us what the Russians
    are doing right, wrong, what the Chinese are doing right or
    wrong?
        Mr. Casey. No, I cannot.
        Mr. Cuccias. No, sir, I do not have that insight.
        Senator Wicker. Senator Hirono?
        Senator Hirono. Mr. Chairman, I just wanted to note that as
    a very strong supporter of the Jones Act, not only is the Jones
    Act important to maintaining our industrial base, but it is a
    very important part of national security. We need those Jones
    Act ships. So thank you very much, Mr. Paxton, for going into a
    little bit of these letter rulings, which concern me very much.
    Mr. Chairman, I intend to follow up on what we can do to clear
    things up.
        Mr. Paxton. Thank you, Senator. I appreciate that.
        Senator Wicker. Gentlemen, before I turn to Senator King
    again, I want to put in the record at this point an article by
    Jerry Hendrix and Robert S. O'Brien dated April 13, 2017 from
    Politico, ``How Trump Can Build a 350 Ship Navy.'' It
    advocates, among other things bringing some ships out of
    mothballs. So we will put that in the record, without
    objection, at this point.
        [The information follows:]

        Please see Appendix A.

        Senator Wicker. Comment about that, Mr. Cuccias--well,
    actually all three of you. Is there anything to be said for
    this? Obviously, we put ships in mothballs rather than scuttle
    them for some reason. What role might your yards have in making
    this sort of concept a reality? Is there any there there?
        Mr. Cuccias. Well, Senator, I have not read the article. I
    am not really familiar with it. So it is hard to comment on it.
        I know on refurbishment, there are life cycles on just the
    operating the plans. There are the logistic chains that should
    be considered. There is the operational cost part that has to
    be considered. Without more insight to the article, it is hard
    to comment more than that.
        Senator Wicker. All right.
        Mr. Casey. Senator, I would only say that the Navy had
    begun a working group to look at the cruisers in particular,
    and I think there was an amphib or two in the pile where they
    have called industry in to talk about developing a program that
    would allow those ships to be brought back into service.
        Senator Wicker. Is this ongoing--this working group
    ongoing?
        Mr. Casey. Yes. It is run by the Naval Sea Systems Command,
    the Program Executive Office. I do not think we have met in the
    last couple of months, as far as I know, but they are in
    discussions about how to do that efficiently.
        Senator Wicker. But conceptually your company might be able
    to participate in such a----
        Mr. Casey. Well over half of NASSCO's business is repair
    business. You know, Electric Boat is doing submarines a little
    bit, and Bath is pretty much totally focused on construction.
    But NASSCO--about 50 percent of what they do is repair largely
    out of the Norfolk area. So NASSCO will definitely look at the
    details of that to see where we might add value.
        Senator Wicker. I just think we ought to be looking at all
    alternatives and thinking outside the box. That is why I was
    asking about our international partners and competitors.
        Mr. Paxton, any thoughts there?
        Mr. Paxton. No, Mr. Chairman.
        The only other comment I would make is I know recently we
    did refurbish some vessels for foreign sale I believe to Japan,
    and the comment made by Navy officers were those vessels looked
    great when they came back on line and were ready to go. So we
    have the capability and capacity to do it, and we make them
    look really good when we are done. So if it is an option, our
    industry is there to do it.
        Senator Wicker. Senator King?
        Senator King. No questions.
        Senator Wicker. Well, if the witnesses will bear with us
    for a moment.
        Thank you very, very much. I think this has been most
    helpful, and we had great participation from some seven members
    of the subcommittee. That is unusual and outstanding. I think
    it reflects the level of interest that this subcommittee has in
    the subject matter.
        We will leave the record open for some 5 days so people can
    ask questions on the record.
        This subcommittee hearing is adjourned with the thanks of
    the membership.
        [Whereupon, at 11:06 a.m., the Subcommittee adjourned.]

                               APPENDIX A

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                         OPTIONS AND CONSIDERATIONS FOR

                         ACHIEVING A 355-SHIP NAVY FROM

                                 NAVAL ANALYSTS

                                  ----------

                             TUESDAY, JULY 25, 2017

                          United States Senate,
                              Subcommittee on Seapower,
                                   Committee on Armed Services,
                                                        Washington, DC.
        The subcommittee met, pursuant to notice, at 3:12 p.m. in
    Room SR-222, Russell Senate Office Building, Senator Roger F.
    Wicker (chairman of the subcommittee) presiding.
        Committee Members present: Senators Wicker, Rounds,
    Shaheen, Kaine, and King.

              OPENING STATEMENT OF SENATOR ROGER F. WICKER

        Senator Wicker. The Senate Armed Services Subcommittee on
    Seapower convenes this afternoon to receive testimony from
    prominent naval analysts on achieving the 355-ship Navy.
        We welcome our four witnesses: Dr. Eric Labs, Senior
    Analyst for Naval Forces and Weapons at the Congressional
    Budget Office; Mr. Ronald O'Rourke, Specialist in Naval Affairs
    at the Congressional Research Service; Dr. Jerry Hendrix,
    Senior Fellow and Director of the Defense Strategies and
    Assessments Program at the Center for a New American Security;
    and Mr. Bryan Clark, Senior Fellow at the Center for Strategic
    and Budgetary Assessments.
        Our subcommittee is grateful for these witnesses appearing
    before us. Their thoughtful analysis will be most helpful as we
    consider options for increasing the size and enhancing the
    capability of our Navy.
        Today's hearing represents another step in this
    subcommittee's effort to examine the Navy's 355-ship
    requirement. We have received a classified briefing on the
    requirement, heard from shipbuilders and suppliers, held a
    shipbuilding hearing with Navy officials, and received
    testimony from Reagan administration officials last week. Our
    actions this year will set a firm foundation for an intelligent
    and responsible expansion of the fleet in the future.
        To that end, I would note the bipartisan SHIPS Act
    legislation which would codify the Navy's requirement for 355
    ships as U.S. policy. The full committee has adopted the SHIPS
    Act into the fiscal year 2018 NDAA, and our House counterparts
    have done the same and gotten it passed by the entire House of
    Representatives.
        The seapower title also authorizes additional funding for
    five ships above the administration's budget request while
    maintaining effective cost control measures on existing
    programs.
        Each of our witnesses has made important contributions
    toward analyzing Navy force structure, including the Navy's
    355-ship requirement.
        Dr. Labs' annual analysis of the Navy's 30-year
    shipbuilding plan is really anticipated and widely read. His
    special report this April, which projected costs and time
    frames to achieve a 355-ship Navy, is particularly relevant. In
    this report, he found that 2035 is the earliest date upon which
    a 355-ship fleet could be achieved. That is 18 years from now.
    His report estimates that reaching 355 ships would require
    doubling the historical spending on shipbuilding to about $33
    billion per year for a number of years. In comparison, the
    Navy's budget request included about $20 billion for
    shipbuilding in fiscal year 2018.
        He also found the Navy would need 19,000 more sailors to
    man these extra ships, $15 billion more for associated
    aircraft, and also that annual fleet operating costs would
    increase by 67 percent, or $38 billion, compared to today's
    fleet.
        My understanding is that his analysis did not consider the
    effects of extending service lives for existing ships or
    reactivating decommissioned ships.
        Mr. O'Rourke's government service as a naval analyst began
    in 1984 during our last naval buildup. His frequent reports on
    specific shipbuilding programs, as well as broader naval issues
    are read closely by this subcommittee, by government and
    industry leaders, by our allies and partners, and by our
    competitors. His latest Navy force structure report published
    last month highlights the Navy's proposed mix of ships within
    the 355-ship requirement. He determined that the Navy would
    need to add at least 57 ships over the 30-year shipbuilding
    plan to achieve and maintain a 355-ship fleet. This effort
    would require a minimum increase of $4.6 billion in the annual
    shipbuilding budget unless the service lives of existing ships
    are extended beyond currently planned figures and/or retired
    ships are reactivated.
        As a retired Navy captain and highly regarded analyst, Dr.
    Hendrix is intimately familiar with Navy capability gaps and
    modernization needs. He has written many compelling reports and
    articles, including one which I have previously entered into
    the record entitled ``How Trump Can Build a 350-Ship Navy,''
    co-authored with Robert C. O'Brien for Politico. In this
    article, he asserts that a 350-ship fleet could be attained as
    early as 2024 by increasing the Navy's top line budget, roughly
    $20 billion, cumulative over the next 8 years. To achieve this
    timeline, he proposes several out-of-the-box actions, including
    service life extensions, reactivating decommissioned ships, and
    building foreign designs in U.S. shipyards.
        Finally, as a retired Navy commander and top aide to a
    former Chief of Naval Operations and prominent analyst, Mr.
    Clark has been assessing and making recommendations on Navy
    force structure needs for over a decade. As with all the
    witnesses, his body of work is an excellent resource for this
    subcommittee. Today I would like to focus on his
    congressionally directed future fleet architecture study called
    ``Restoring American Seapower.'' His study calls for a 382-ship
    Navy by 2030, a figure which would cost an additional $4
    billion to $5 billion for shipbuilding every year. The study's
    in-depth analysis of capabilities, platforms, and operating
    concepts and posture were compelling, and I hope to see many of
    these recommendations implemented.
        The subcommittee is interested in the views of these four
    witnesses on the options and considerations for achieving a
    355-ship Navy. Specifically, I hope our witnesses discuss what
    factors are driving the need for a bigger Navy, the right mix
    of ships for our future fleet, timelines and costs for
    achieving the Navy's requirement, innovative options to grow
    the fleet, including extending service lives and reactivating
    decommissioned ships, the additional support necessary to
    generate and maintain the fleet buildup, including personnel,
    aircraft, weapons, other equipment and maintenance, and
    finally, actionable items that this subcommittee should
    consider to lay a firm foundation for a fleet buildup. I look
    forward to our witnesses' testimony.
        I have spoken to Senator Hirono on the floor. Her statement
    will be included at this point in the record.
        [The prepared statement of Senator Hirono follows:]

                 Prepared Statement by Senator Mazie K. Hirono

        Thank you, Mr. Chairman.
        I join the Chairman in welcoming our witnesses to the
    hearing this afternoon.
        Over the past weeks, we've held hearings on the Chief of
    Naval Operation's new Force Structure Assessment to increase
    the Naval fleet to 355 ships.
        That would amount to an increase of some 80 ships from the
    current fleet inventory.
        Last week's witnesses were former Reagan Administration
    officials who talked about President Reagan's expansion of the
    Navy that increased the fleet by roughly 70 ships by the end of
    the 1980s.
        We will need to understand what worked then and why, and
    how the situation we face today may be different from the early
    1980s.
        One major difference is the change in the fiscal
    environment.
        In 1983, when the Reagan Administration added two aircraft
    carriers to the Navy budget, the Administration increased the
    Navy topline unilaterally to account for that addition, with no
    offset elsewhere in DOD or other domestic programs.
        Today we would not be able to take such actions, since
    increases above the budget caps identified in the Budget
    Control Act would be automatically offset.
        In lay person's terms, for every dollar we would add to the
    Defense budget, there would be an equal amount removed by
    sequestration, unless we find agreement to change the law or
    repeal the caps.
        Ultimately, if we do not act to amend or replace the Budget
    Control Act, we could end up cutting, not increasing, the size
    of the Navy.
        And that cutting would not be done with a scalpel, but
    rather the meat cleaver that is sequestration.
        That is not an acceptable option. As we know, to a certain
    degree our industrial base and military are still recovering
    from 2013 sequester impacts.
        I look forward to working with the Chairman, members of
    this Committee and other Senate colleagues to balance the needs
    of our military with critical domestic programs.
        We look forward to hearing your testimony this afternoon.
        Thank you, Mr. Chairman.

        Senator Wicker. We will begin with testimony by Dr. Labs.
    Sir, you are recognized with the thanks of the subcommittee.

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

        Dr. Labs. Thank you, Mr. Chairman. Chairman Wicker, Senator
    Hirono, and members of the subcommittee, it is a pleasure to be
    here today to discuss the Navy's proposal to build a 355-ship
    fleet.
        Mr. Chairman, with your permission, I would like to
    summarize my statement for the record and have it entered,
    without objection, if I may.
        Senator Wicker. Without objection, it will be entered at
    this point.
        Dr. Labs. My written testimony focuses on the costs of
    force structure and implications for industry of building a
    355-ship fleet over 15, 20, 25, or 30 years. It is based on the
    recently released CBO report titled ``Costs of Building a 355-
    Ship Navy.'' In my remarks today, I will focus on the key
    points of that report.
        Building a 355-ship fleet, as outlined in the Navy's
    December 2016 force structure assessment, will require a
    substantial investment of time and money. Even so, the Navy
    will not be able to reach that fleet of 355 ships for 18 years
    using new ship construction. I would like to note here that it
    is possible to build a larger fleet sooner than that, but the
    Navy's force goal of 355 is actually based on a specific set of
    goals for the major combat components of the fleet: 12 aircraft
    carriers, 12 ballistic missile submarines, 66 attack
    submarines, 156 large and small surface combatants, 38
    amphibious ships, and numerous logistics and support ships. If
    those goals were relaxed or the Navy determined it could keep
    ships in service longer than previously planned, then it would
    be possible to reach a fleet of 355-ships much sooner than
    2035.
        To build a larger fleet would require increasing the
    shipbuilding budget substantially. CBO estimates that it would
    cost $26.6 billion per year over 30 years to buy the
    approximately 330 new ships needed to meet and sustain the
    Navy's force goals. That is about a 60 percent increase in the
    average shipbuilding budgets of $16 billion over the past 30
    years or even the $17 billion of the past 5 years.
        Critically, however, how fast the fleet is built up has a
    significant effect on shipbuilding budgets over the next
    decade. The 15-year buildup, for example, would need
    shipbuilding budgets that range from about $20 billion to as
    much as $35 billion per year over the next 10 years. In
    contrast, the budgets of the 30-year buildup range from $20
    billion to $28 billion over the next 10 years.
        In addition to new ship construction costs, CBO estimated
    that it would require an extra $15 billion in aircraft to
    outfit the additional ships with their aviation detachments
    and, in the case of a 12th aircraft carrier, the additional air
    wing.
        A larger fleet of 355 ships will also require larger
    numbers of sailors and civilians, along with higher operation
    support and maintenance budgets. Compared with today's fleet of
    275 ships, a 355-ship Navy will need approximately 19,000 more
    sailors to crew those ships and another 29,000 military and
    civilian personnel in various support roles. Annual operating
    and support costs would average $75 billion over the next 30
    years compared to $56 billion for today's fleet.
        Similar to the new ship construction costs, operation and
    support costs are rising faster than inflation. Thus, in real
    terms, that is, adjusting to remove the effects of inflation,
    O&S budgets will steadily increase over time as new ships are
    added to the fleet and the year-over-year real growth of
    operating and supporting that fleet requires appropriating more
    money.
        Finally, let me spend a few moments on the shipbuilding
    industrial base. All the Navy's new ship construction is
    performed by five large and two smaller yards. Enlarging the
    fleet to 355 ships would place a higher demand on the
    shipbuilding services of the seven yards, as well as on the
    extensive base of parts and components vendors. Under different
    time frames for building a larger fleet, average annual
    shipbuilding rates over the next 10 years would increase 12 to
    15 ships per year. To meet that demand, all seven yards would
    need to increase their workforces, and several would need to
    make improvements to their physical plant. CBO estimates that
    the workforces across those yards would need to increase by
    about 40 percent over the next 5 to 10 years. Managing the
    growth and training of those new workforces, while maintaining
    the current standard of quality and efficiency, would represent
    the most significant challenge that the industry would face.
        In addition, industry and Navy sources indicate that as
    much as $4 billion would be needed to be invested in the
    physical infrastructure of the shipyards to achieve the higher
    production rates of the 15- or 20-year buildups. Much less
    investment would be needed if the time horizon is 25 or 30
    years.
        However, certain sectors face greater obstacles in
    constructing more ships faster than others. Without going into
    too much detail here, increased submarine and carrier
    construction posed the largest challenges to industry,
    submarines in particular, while surface combatant and
    amphibious ship construction much less so. In short, building
    the fleet more quickly would pose much greater but not
    insurmountable challenges to the shipbuilding industry.
        Thank you, Mr. Chairman, and I am happy to answer any
    questions the subcommittee may have.
        [The prepared statement of Dr. Labs follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Wicker. Thank you, Dr. Labs.
        Mr. O'Rourke?

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

        Mr. O'Rourke. Chairman Wicker, Ranking Member Hirono,
    distinguished members of the subcommittee, thank you for the
    opportunity to appear before you today to discuss options and
    considerations for achieving a 355-ship Navy.
        Mr. Chairman, with your permission, I would like to submit
    my written statement for the record and summarize it here
    briefly.
        Senator Wicker. Without objection, it will be submitted and
    accepted.
        Mr. O'Rourke. Navy force structure and shipbuilding has
    been a central focus of my work at CRS since 1984. As you
    noted, Mr. Chairman, I worked on these issues during the Reagan
    era naval buildup. I remember that period quite well.
        Increased shipbuilding for achieving the 355-ship fleet
    would have a substantial cost on the order of billions of
    dollars per year. On the other hand, there would be some
    potential economies in that effort. For one thing, increasing
    annual shipbuilding rates can reduce costs due to improved
    economies of scale. Doubling rates for ships that are procured
    every year, for example, might reduce their cost by roughly 10
    percent. Increasing rates, moreover, can increase opportunities
    for using competition to restrain costs. In addition, using
    multiyear procurement or block buy contracting can reduce costs
    by about 5 percent without economic order quantity purchases
    and by about 10 percent with EOQ purchases. The Navy in recent
    years has made extensive use of multiyear contracting in its
    shipbuilding programs, saving billions of dollars that have
    been used to procure additional ships.
        Finally, cross-program purchases of common materials and
    components such as those authorized under the National Sea-
    based Deterrence Fund can reduce costs further at the margin,
    becoming the latest element of what might be viewed as a quiet
    revolution in recent years in Navy ship funding and contracting
    practices.
        Construction rates cannot be markedly increased overnight.
    Even so, Congress has the option of fully funding additional
    ships in the near term, starting as early as fiscal year 2018
    with the understanding that those additional ships would not
    begin construction until the industrial base is ready to build
    them.
        Fully funding additional ships in the near term could send
    a signal of commitment to industry and a signal of deterrence
    to potential adversaries such as China.
        The option of fully funding additional ships as early as
    fiscal year 2018 includes even nuclear-powered ships such as
    attack submarines for which there has been no prior year
    advanced procurement funding. Congress has done this in the
    past.
        Unmanned vehicles can expand Navy capabilities. Beyond a
    certain point, however, they will not be able to serve as
    substitutes for manned ships and aircraft. So beyond a certain
    point, they cannot act as a general reason for not procuring
    ships and aircraft in needed numbers.
        Discussions of how to get to a force of 66 attack
    submarines can obscure a serious prior issue, which is how to
    address the dip or valley in the attack submarine force level
    that is projected to start in the 2020s. China has taken note
    of this projected valley.
        In addition to procuring additional Virginia-class boats,
    there are some supplemental options for mitigating the valley.
    The Navy is now exploring the possibility of increasing the
    service lives of certain existing surface ships, particularly
    DDG-51s, which could make it possible to defer the procurement
    of some new destroyers, permitting that funding and industrial
    capacity to instead be used for building other ships. Extending
    DDG-51 service lives could involve increasing funding for
    maintaining and modernizing them with the funding increases
    perhaps starting right away.
        The Navy is also exploring the possibility of reactivating
    recently retired ships, particularly Oliver Hazard Perry-class
    frigates. The technical feasibility and potential cost
    effectiveness of this option is not clear. At a minimum,
    however, exploring it can be viewed as a matter of due
    diligence.
        The industrial base in general appears capable of taking on
    the additional shipbuilding to achieve the 355-ship fleet.
    Ramping up to higher rates would require additional tooling at
    shipyards and supplier firms, and additional workers would need
    to be hired and trained. So production could not jump to higher
    rates overnight. Some parts of the industrial base, such as the
    submarine portion, could face more challenges than others in
    ramping up to higher rates.
        Finally, building the additional ships that would be needed
    to achieve the 355-ship fleet could create thousands of
    additional manufacturing and other jobs at shipyards, at
    supplier firms, and elsewhere in the economy.
        Mr. Chairman, this concludes my remarks. Thank you again
    for the opportunity to testify, and I look forward to the
    subcommittee's questions.
        [The prepared statement of Mr. O'Rourke follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Wicker. Thank you very much, Mr. O'Rourke.
        Dr. Hendrix, you are recognized.

     STATEMENT OF DR. JERRY HENDRIX, SENIOR FELLOW AND DIRECTOR OF
     THE DEFENSE STRATEGIES AND ASSESSMENTS PROGRAM AT THE CENTER
                      FOR A NEW AMERICAN SECURITY

        Dr. Hendrix. Thank you, sir. Chairman Wicker, thank you for
    your invitation to address the topic on how the Navy might
    reach its stated requirement of 355 ships as quickly,
    economically, and efficiently as possible.
        I wish to ask for permission to submit my extended written
    statement for the record while I summarize my remarks.
        Senator Wicker. Without objection.
        Dr. Hendrix. Thank you, sir.
        Today I will present a series of options that my friend and
    frequent co-author, Robert O'Brien, and I have suggested as
    providing ready paths to 355 ships. It is important to note
    that none of the ideas that follow are radical and that each
    has been used in the past, to include most recently during the
    Reagan administration's campaign to bring the Cold War to a
    successful conclusion.
        First, it is important to note that the number, 355, as
    enunciated by the Navy is not arbitrary, but rather represents
    a minimum number of ships required to provide persistent
    presence in the 18 maritime regions of the world identified by
    combatant commanders where the United States has strong
    national interests.
        Second, it is just as important to note that the time frame
    associated with the buildup to 355 ships is as critical as the
    raw number itself. Both China and Russia have taken advantage
    of the United States' recent strategic focus on
    counterterrorism campaigns in Afghanistan and Iraq to assume
    challenging profiles on the high seas. To head a future crisis
    off, the U.S. Navy must expand rapidly enough to convince
    others that eventual military victory at sea is not even
    remotely possible. To accomplish this goal, the Navy must reach
    the 355-ship range within 10 years.
        Many tend to focus on new ship construction as the primary
    path to battle force growth at sea. For instance, in January,
    the Navy developed an accelerated shipbuilding plan that
    effectively took warm Virginia-class, Burke-class, LX(R), and
    oiler ships and turned their production lines from warm to hot,
    adding 29 additional ships over and above those contained
    within the current 30-year shipbuilding plan. However, this
    approach, limited as it is by the capacity of current programs,
    only achieves a ship count in the mid-330s. However, there are
    in fact other paths to 355 ships within the time frame
    discussed.
        It is to the Nation's advantage that the Navy is scheduled
    to take delivery of 80 new ships of varying classes between now
    and the end of fiscal year 2024. Given the current battle force
    count of 276 ships, these new ships alone would allow the fleet
    to reach 355 ships. Unfortunately, during the same period, the
    Navy plans to decommission 49 ships from service. These factors
    combined result in a net 31-ship increase to 307 ships.
    However, if a portion of the ships scheduled for
    decommissioning, for instance the five Ticonderoga-class
    cruisers or the nine mine countermeasure ships, could be kept
    in service for another 5 to 10 years through service life
    extension programs, we could have a battle force of 321 ships
    by the end of fiscal year 2024.
        Another option for rapid growth can be found in the ready
    reserve, or ghost fleet. Famously during the administration of
    Ronald Reagan, four Iowa-class battleships were moved from the
    reserve fleet to the active fleet as Reagan built towards a
    600-ship Navy. Currently there are 10 retention assets in the
    reserve fleet, to include a conventionally powered aircraft
    carrier, three light amphibious carriers, and five amphibious
    platform docks. There are also 11 Perry-class frigates
    currently designated for foreign military sales. If 12 of the
    21 ships described were returned to the active fleet within 5
    years of initiating reactivation, this would leave a gap of 23
    ships to achieve the 355-ship goal.
        This brings us back to the original discussion of new ship
    construction. Of course, new construction will have to be part
    of the Navy's buildup. The places in the inventory where the
    Navy needs additional investment are fast attack submarines,
    which will fall to a population of 41 boats from its Cold War
    high of 102 by 2029, and multi-mission frigates, which have
    declined from 115 ships in 1987 to 0 today. Multi-mission
    frigates, as described by the recent requirements document from
    the Navy, will be critical to the Navy maintaining its
    persistent presence across the global maritime commons, as well
    as restoring a capacity to conduct anti-surface, antisubmarine,
    and convoy escort missions in support of military operations
    across the globe. Some care should be given to an ice-hardened
    design or variant that would allow for operations in the
    Arctic.
        The Navy needs a robust new multi-mission frigate design,
    perhaps based on a proven foreign design such as the robust
    European FREMM or an ongoing program here in the United States
    such as the national security cutter currently being built for
    the Coast Guard. To be clear, there is neither the time nor the
    need to consider a new clean sheet design for a frigate, which
    the Navy needs a fair number of. Selecting a mature design
    could allow the Navy to take delivery of a new frigate within a
    5 to 6-year period, depending on which design is selected. Such
    ships would provide naval presence in those areas of the world
    that are on the fringes of our interests but also where law and
    order are most likely to be challenged. While perceived as
    strong, the global system of self-governance is actually quite
    fragile and is in need of constant attention that only a Navy
    of 355 ships can provide.
        Efficiencies can be found in the production of these ships
    by pursuing authorization for multiyear block buys of vessels.
    Such actions would provide stability to shipbuilders and
    downstream parts suppliers, stabilizing or expanding good
    paying jobs and strengthening the Nation's defense industrial
    base.
        While shipbuilding is the focus of this hearing, I would be
    remiss if I did not take a moment to bring to your attention
    the importance of getting the right capabilities balance back
    into the air wings of our aircraft carriers. Ensuring that the
    mission tanker, an unmanned aircraft designated as the MQ-25
    Stingray, is designed to meet certain key mission-enabling
    requirements, such as being able to fully tank two F-35
    Charlies at 500 to 600 miles from the carrier, will be one of
    the major decisions of the next year. A bad decision could
    lessen the relevance of the carrier and hence weaken American
    sea power.
        Senator Wicker. Let me stop you right there.
        Dr. Hendrix. Yes, sir.
        Senator Wicker. Who is making that decision, and how is it
    going?
        Dr. Hendrix. Sir, the requirements document is in
    development, and ultimately that decision will be made by Navy
    leadership, secretary level.
        Senator Wicker. Go ahead. Well, thank you for letting me
    interrupt there.
        Dr. Hendrix. Thank you, sir.
        I have presented some options with regard to service life
    extensions for current ships in the fleet and returning ships
    to active service from the ready reserve fleet. I also
    recommend increased production of submarines and small
    combatants in order to grow the capabilities in anti-surface,
    antisubmarine, and convoy escort in which we are woefully
    short.
        In closing, let me once again thank you for the honor of
    addressing you today. John Adams described the Navy as the
    shield of the republic. May it always be large enough to remain
    so.
        [The prepared statement of Dr. Hendrix follows:]

                  Prepared Statement by Dr. Jerry Hendrix, PhD
        Chairman Wicker, Senator Hirono, and distinguished members of the
    Seapower Subcommittee, thank you for extending the honor of addressing
    the topic of how the Navy might reach its stated requirement of 355
    ships as quickly, economically and efficiently as possible.
        Today I will present a series of options that many people, to
    include my friend and frequent co-author Robert O'Brien, have suggested
    as providing ready paths to 355 ships. It is important to note that
    none of the ideas that follow are radical and that each of them has
    been used in the past, to include most recently during the Reagan
    administration's campaign to bring the Cold War to a successful
    conclusion.
        First it is important to note that the numbers three hundred and
    fifty, first proposed by President Trump in Philadelphia on 7 September
    2016, and three hundred and fifty-five, as enunciated by the Navy on 14
    December of last year, are not arbitrary, but rather represent the
    minimum number of ships required to provide persistent presence in the
    eighteen maritime regions of the world (North Atlantic, Caribbean,
    South Atlantic, Gulf of Guinea, Arctic, Baltic Sea, Western
    Mediterranean, Eastern Mediterranean, Black Sea, Red Sea, Gulf of Oman,
    Arabian Gulf, Indian Ocean, South China Sea, East China Sea, Northern
    Pacific Basin, South West Pacific, South East Pacific), as identified
    by Combatant Commanders, where the United States has strong national
    interests. I must add that increasingly we must consider the Arctic as
    a region where we have increasing interests and plan additions to our
    fleet architecture accordingly. We must remember that in March of 2014,
    former Chief of Naval Operations, Admiral Jonathan Greenert stated
    before the House Armed Services Committee that to fully meet CoCom
    requirements would take a Navy comprised of 450 ships. Based upon
    current maintenance-training-deployment rotational models as well as
    the distances associated with these regions, the number of 355 ships
    has been determined to be the minimum number required to meet Combatant
    Commander demands with no room to spare.
        Second, it is just as important to note that the time frame
    associated with the build-up to 355 ships is equal in consequence as
    the raw number itself. Both China and Russia have taken advantage of
    the United States' recent strategic focus on counter-terrorism
    campaigns in Afghanistan and Iraq to take challenging profiles on the
    high seas. Russia has invested in a new generation of highly capable
    platforms, such as the new Yasen-class fast attack submarine, and China
    is pursuing a maritime strategy that combines outright territorial
    acquisition with a rapid expansion and modernization of its fleet.
        China also faces a series of economic and demographic challenges
    which are forcing the Communist Party's leadership to rush achieve its
    re-emergence as a great power quickly before it becomes consumed with
    internal issues deriving from its one-child policy and rapidly aging
    population. It also has a near total dependence on imported national
    resources to include energy and vital ores. These factors incentivize
    the People's Liberation Army-Navy to achieve dominance and a
    destabilizing sphere of influence in the Western Pacific within a 2025
    to 2030 timeframe. To head a future crisis off, the U.S. Navy must
    expand rapidly enough to effectively deter China from thinking that
    eventual military victory at sea is even remotely possible. To
    accomplish this goal, the Navy must reach 350 to 355 ships as swiftly
    as possible.
        Many tend to focus on new ship construction as the primary path to
    battle force growth at sea. For instance, in January the Navy developed
    an accelerated ship building plan that effectively took ``warm''
    Virginia, Burke, LX(R), and oiler class ships and turned them ``hot'',
    adding 29 additional ships over and above the current 30-year plan.
    However, this approach, limited as it is by the capacity of current
    programs, only achieves a ship count in the mid-330s. Additionally,
    these ships, with the exception of the new oilers, are expensive
    platforms, ranging from $1.6 billion to $2.7 billion each. A build-up
    plan centered on these units will be, of necessity, very expensive.
    However, there are, in fact, other paths to 355 ships within the
    timeframe discussed.
        It is to the nation's advantage that the Navy is scheduled to take
    delivery of 80 new ships of varying classes between now and the end of
    fiscal year 2024. Given the current battle force count of 276 ships,
    these new ships alone would allow the fleet to reach 355 ships.
    Unfortunately, during that same period the Navy plans to decommission
    49 ships, many of whom were built during the Reagan administration
    build up during the 1980s, from service. These factors combined result
    in a net 31 ship increase in the size of the fleet to 307 ships, but
    still 48 ships short of the Navy's goal. However, if a portion of the
    ships scheduled for decommissioning, for instance the five Ticonderoga-
    class cruisers or the nine Mine Counter Measure ships, could be kept in
    service for another five or ten years through a Service Life Extension
    Program that could cost as much as $300 million per cruiser and $50
    million per mine countermeasure ship, then the fleet could be expanded
    commensurately. Such actions are not inexpensive, but they would be
    much cheaper than funding entirely new platforms and in the end could
    result in a battle force of 321 ships by the end of fiscal year 2024.
        Another option for rapid growth can be found in the ready reserve
    or ``ghost fleet.'' Famously, during the administration of Ronald
    Reagan, four Iowa-class battleships were moved from the reserve fleet
    to the active fleet as Reagan built towards a ``600-ship Navy.''
    Currently there are ten ``retention assets'' in the reserve fleet, to
    include a conventionally powered super carrier, three light amphibious
    carriers, and five amphibious platform docks. There are also eleven
    Perry-class frigates currently designated for foreign military sales.
    These frigates will be transferred to partner navies that will
    refurbish them and get another 10 to 20 years of service from them.
    There are also three of the first flight of Ticonderoga-class cruisers,
    built with dual Mk-26 launchers fore and aft rather than the vertical
    launch system tubes that later ships came with, that are scheduled for
    scrapping. These ships were retired early and have ten fewer years at
    sea that the Ticonderoga's that remain in the fleet. Investments
    required to return ships like these to the fleet would be much more
    expensive than Service Life Extension Programs, perhaps $120 million
    for the Perrys and $550 million for the Ticonderogas, to return them to
    service. While costly, these investments are significantly less than
    new construction of ships with similar warfare characteristics. If only
    half of these ships, say 12 of the 23 ships described, could be
    returned to the active fleet within five years of initiating re-
    activation, leaving a gap of 23 additional ships to achieve the goal of
    355.
        This brings us back to the original discussion of new ship
    construction. Of course, new construction will have to be part of the
    Navy's build-up. However, the choices in this regard need to be both
    efficient and effective. While the idea of taking current ``warm''
    production lines and turning them ``hot'' is a responsible approach,
    policy makers should recognize that there are many ``warm'' production
    lines and should make wise choices as to which lines should receive
    additional investments and which ones represent capabilities the Navy
    has in sufficient numbers. For instance, the average number of large
    surface combatants, air and ballistic missile defense Ticonderoga-class
    cruisers and Burke-class destroyers, has hovered around 82 ships over
    the last two decades, but is projected to rise to 100 under the most
    recent 30-year shipbuilding plan and then hold at that level until
    2028. The current two-per-year production schedule should be sufficient
    to maintain American overmatch in the large surface combatant category
    for the foreseeable future.
        The places in the inventory where the Navy does need additional
    investment are fast attack submarines, which will fall to a population
    of 41 boats from its Cold War high of 102 by 2029 and multi-mission
    frigates, which have declined from 115 ships in 1987 to zero today.
    Submarines are the silent sentinels of the deep and are in constant
    demand around the world. The forthcoming Virginia-class fast attack
    boats, which will come with the addition of payload modules, bring
    additional long range striking power that will be critical in taking on
    new anti-access/area denial systems presently emerging. Multi-mission
    frigates, as described by the recent requirements document from the
    Navy and are not be confused with the present single-mission Littoral
    Combat Ships, will be critical to the Navy maintaining its persistent
    presence across the global maritime commons as well as restoring a
    capacity to conduct anti-surface, anti-submarine and convoy escort
    missions in support of military operations across the globe. I am
    somewhat concerned about certain aspects of the requirements document
    issued by the Navy, specifically its mention of a 3,000 mile range at
    16 knots, which seems too short, and its recommendation that the ship
    have a 3-D air search radar, which seemed expensive and not necessary
    given the number or large Aegis equipped surface combatant. Some care
    should be given to an ice-hardened design or variant that would allow
    for operations in the Arctic ocean.
        The Navy needs a robust new multi-mission frigate design, perhaps
    based upon a proven foreign design such as the European FREMM or an
    ongoing stable domestic program such as the National Security Cutter
    currently being built for the Coast Guard. To be clear, there is
    neither the time nor the need to consider a new ``clean sheet'' design
    for a frigate, which the Navy needs a fair number of. Selecting a
    mature design could allow the Navy to take delivery of a new frigate
    within a five-to-six-year period, depending on which design is
    selected. Standard fleet mixes would suggest a requirement for as many
    as 70 multi-mission frigates but certainly no less than 50. The multi-
    mission frigate will be a critical enabling element of the 355-ship
    Navy.
        The Navy should also consider commissioning a class of smaller
    combatants, either a 200 foot, offshore patrol vessels similar to the
    Ambassador-class ships built in the United States for Egypt or
    extending production of the Joint High Speed Vessel and then equipping
    them with batteries of missiles. The Navy should also consider, from a
    strategic standpoint, whether it has a vested interest in possessing an
    icebreaking capability within its force in order to assure access to
    the arctic region, where the nation has vested interests. Such ships
    would provide naval presence in those areas of the world that are on
    the fringes of our interests, but also where law and order are most
    likely to be challenged and fray. While perceived as strong, the global
    system of self-governance is actually quite fragile and is in need of
    constant attention that only a Navy of 355 ships can provide.
        Efficiencies can be found in the production of these ships by
    pursuing authorization for multi-year block-buys of vessels. Such
    actions would provide stability to shipbuilders and down-stream parts
    suppliers, stabilizing or expanding good paying jobs and strengthening
    the Defense Industrial Base. In fact, this entire plan as described
    would strengthen the Defense Industrial Base. As a historian I can tell
    you that it has been since Eisenhower, and before that the
    administrations of the two Roosevelts, that the Defense Industrial Base
    has been properly viewed as a national security asset and managed
    properly.
        Current ships in the Navy's inventory should have their service
    life extensions performed at the four Navy shipyards at Norfolk,
    Bremerton, Pearl Harbor and Portsmouth-Kittery. Ghost fleet ships being
    returned to the active inventory could be brought aboard in large
    civilian yards in Philadelphia, San Diego, Portland, OR and numerous
    yards along the Gulf Coast. New frigates and offshore patrol vessels
    could be constructed in Wisconsin, Alabama, Louisiana and Oregon
    through partnerships and licensing agreements. All would recreate well-
    paying jobs in the manufacturing and industrial sectors.
        Expeditious decisions to increase submarine production and to
    select a frigate design would allow the Navy to move swiftly into
    procurement and subsequent delivery. Frigates procured before the close
    of the present decade would enter the fleet in the early years of the
    next. Smaller platforms, to include offshore patrol vessels or Joint
    High Speed Vessels could come quicker. While I am not sure we can make
    up the additional 23 ships required in the plan I have outlined prior
    to the end of Fiscal Year 2024, we could get close, and that would send
    a strong message to those nations who would make themselves our enemies
    that they should not risk war with the United States today, tomorrow of
    for the foreseeable future.
        While shipbuilding is the focus of this hearing, I would be remiss
    if I did not take a moment to bring to your attention the importance of
    getting the right capabilities balance back into the air wings of our
    aircraft carriers. The super carrier is the centerpiece of American
    naval power, but the average unrefueled striking range of that air wing
    has fallen from just over 900 miles in the early 1990s to just under
    500 miles today. While the addition of the longer ranged stealth Joint
    Strike Fighter helps, there is a requirement for a mission tanker
    capable of extending the range of the current mix of F-35C and FA-18
    Super Hornets that will be the critical enabler of the air wing in
    anti-access/area denial environments. Ensuring that the mission tanker,
    an unmanned aircraft designated as a MQ-25 Stingray, is designed to
    meet certain key mission enabling requirements such as being able to
    fully tank two F-35C's at 500 to 600 nautical miles from the carrier,
    will be one of the major decisions of the next year. A bad decision
    could lessen the relevance of the carrier and hence American sea power.
        Congress has an oversight and authorizing role in all of these
    decisions. The Constitution made it clear that while the Congress has
    the authority to raise an Army, it must maintain the nation's Navy.
    There is a need for a Navy comprised of at least 355 ships and the
    nation has discovered that we are late in servicing that need. The
    current fleet of 276 ships is insufficient to uphold the nation's
    interests around the world and rising challenges from China and Russia
    will not allow us to take our time in reaching our goal. I have
    presented some options with regard to service life extensions for
    current ships in the fleet and returning ships to active service from
    the ready reserve fleet. I would ask the question with regard to the
    ready reserve that if we do not plan to use them now under the present
    circumstances, when would we use them? With regard to new construction,
    I recommend increased production of submarines and small combatants in
    order to grow capacities in anti-surface, anti-submarine and convoy
    escort capabilities in which we are woefully short. Such an approach
    would fully engage and expand the nation's naval Defense Industrial
    Base and strengthen our economy.
        In closing, let me once again thank you for the honor of addressing
    you today. As a dairy farmer from Indiana who had the privilege of
    serving 26 years in our Navy, it is profoundly humbling to address this
    body and contribute to your deliberations. John Adams described the
    Navy as the Shield of the Republic. May it always be large enough to
    remain so.

        Senator Wicker. Thank you, Dr. Hendrix.
        Mr. Clark. Mr. Clark, I bet you have a prepared statement
    that you would like entered into the record.

     STATEMENT OF BRYAN CLARK, SENIOR FELLOW, CENTER FOR STRATEGIC
                       AND BUDGETARY ASSESSMENTS

        Mr. Clark. I would, yes. Could I have that entered in the
    record, and I will just summarize here?
        Senator Wicker. Without objection. Does any member object?
        [No response.]
        Senator Wicker. Hearing none, it will be accepted.
        Mr. Clark. I will summarize it here then.
        Chairman Wicker, Senator Hirono, thank you very much for
    inviting us to testify here today on the ability of the U.S.
    Navy to reach a 355-ship fleet and methods to get there more
    quickly.
        The Navy today is in transition. Each class that the Navy
    is building right now is undergoing a change from a current
    variant to a new variant or an entirely new class that is more
    capable than its predecessor.
        At the same time, we are in transition in our strategy for
    the United States. We are encountering the intensification of
    great-power competition with countries like China and Russia.
    We are reviewing our national defense strategy right now to
    look at how to balance those needs to address those great
    powers with requirements to address missions like
    counterinsurgency and counterterrorism. Also we are facing new
    approaches that great-power competitors are using against us
    like gray zone warfare of informationized warfare as China
    practices it.
        Although in our analysis of the requirements to address
    those future strategic missions in our study we found that we
    needed a 382-ship Navy, in reality that is only 340 battle
    force ships in terms of what the Navy would count itself. So a
    340-ship fleet compared to what the Navy is saying they need is
    a 355-ship fleet. I would argue that that is about the same. If
    you look at the requirements that we each came up with, they
    are very similar. So there is very little difference between
    what we at CSBA came up with and what the Navy came up with in
    the overall requirements.
        That is important, though, because that future fleet needs
    to be bigger regardless.
        Senator Wicker. What accounts for the larger number?
        Mr. Clark. So the larger number is a number of patrol ships
    that we recommend the Navy buy that they would not currently
    count under their battle force ship counting rules.
        Senator Wicker. Thank you.
        Mr. Clark. The fleet needs to be larger, and it needs to be
    in about this 355-ship range, though, regardless to address the
    need to tackle today's readiness crisis in the fleet, which
    results from a mismatch between supply and demand for naval
    forces. We also need a bigger fleet to address growing
    requirements in new regions that have been quiet for the last
    25 years since the end of the Cold War, places like the
    Mediterranean, northern Atlantic, Europe, also the South China
    Sea. So we have increased the presence that we need of naval
    forces in those regions, which has put a demand on the Navy
    that exceeds what its supply is able to give. That leads
    directly to the readiness crisis that you hear naval leaders
    talk about today.
        The future fleet, though, will need to be as capable or
    more capable than the current fleet. So to address the fact
    that we have great-power competitors that have long-range
    sensors and weapons and the advent of the kinds of capabilities
    in their militaries that we have in our own and have used for
    decades here, we are going to have to have a fleet that is just
    as capable as the one we have today but probably even more
    capable with the use of new capabilities and sensors and
    weapons, electronic warfare, and unmanned systems.
        That is going to drive what the fleet architecture looks
    like. We will not be able to go to a fleet that is less capable
    than the one today in an effort to buy it more cheaply or more
    quickly. We are going to have to think of ways to be able to
    build a fleet that is as capable as the ships that we have now.
        So one example of that is the advent of gray zone warfare.
    If we are going to address the actions of a country like China
    in the South China Sea, we could send ships there to respond to
    what they are doing against the Philippines and Japanese, but
    we would encounter the fact that they have long-range sensors
    and weapons they can use to threaten our naval forces. Our
    naval forces would then need to be able to survive and persist
    in that environment and fight or else we are going to be forced
    to conduct attacks on the Chinese mainland to degrade their
    sensors and weapons ashore. That requires us to have a more
    capable fleet that is able to survive that environment without
    those highly escalatory attacks ashore.
        This more capable fleet is going to have to be built out of
    the one we have today, and it is probably going to have to rely
    on new construction to a greater degree than bringing ships out
    of retirement or in adding lower-end ships that would be less
    capable.
        A perfect example of that is this discussion about the new
    frigate. So the frigate that the Navy is looking to build,
    based on the request for information that recently came out,
    could have a wide range of capabilities. It could be everything
    from what the existing LCS brings, which is a modest amount of
    offensive capability with relatively low survivability, or it
    could be a highly capable frigate that is able to do air
    defense for itself and others, as well as conduct offensive
    operations. We would argue that the more capable frigate is
    more representative of what we need in the future security
    environment because of the ability of great powers like China
    and Russia to threaten our naval forces at sea and force us
    into this dilemma of either protecting our naval forces where
    they are or attacking the Chinese or Russian systems ashore and
    escalating what could be a gray zone confrontation into a major
    war. Obviously, we are not going to want to do that. So that
    deters us from taking those actions, and it can degrade the
    security assurances we provide to countries that are now facing
    Chinese and Russian aggression.
        Now, with regard to the overall fleet mix, what that argues
    is that we need more of a big/small mix in the fleet rather
    than a high/low mix in the fleet. Some of the discussion we
    have heard talks about bringing ships out of retirement or
    buying additional numbers of smaller, less expensive combatants
    to grow the fleet to 355 more quickly. Those ships that we
    would bring in, though, would not be capable of defending
    themselves and being able to conduct offensive actions in some
    of these highly contested areas like the South China Sea or
    East China Sea or the Baltic. They would then become
    liabilities rather than assets in these regions and force us to
    do something to protect them in turn.
        So the big/small fleet would, instead, be large ships and
    small ships, but both having similar capabilities but with
    different capacities. So, for example, cruisers and destroyers
    are larger ships that are capable of defending themselves and
    other ships and long-range offensive attacks against enemy
    ships and targets ashore. But a frigate and even a small
    missile craft could do the same thing as the destroyer, but
    just at a smaller scale. Those ships would be able to defend
    themselves in those kinds of environments as well and would be
    assets rather than liabilities.
        To more quickly get to this 355-ship fleet of highly
    capable ships, a number of options have been discussed:
    multiyear procurement, using concepts like the Sea-Based
    Deterrence Fund where we can provide funding in one year that
    could be applied to some future years procurement, other
    options for funding ships more flexibly than we are today.
    Those are options to increase ship production and to be able to
    do it more efficiently and perhaps save money as we have found
    with multiyear procurements that usually give us a savings of
    10 percent per ship. We can also ramp up production of existing
    ships within the shipbuilding industrial base, as the Navy has
    described with their recent paper talking about an increase of
    29 ships over the next 7 years.
        The cost of that future fleet, though, will be much higher
    than the fleet of today. We estimated in our study that a Navy
    of about 350 ships will require about 15 to 20 percent more
    procurement funding and about that same amount of additional
    operations and maintenance funding in the out-years. But a
    decision on how much exactly to spend and how big a Navy to
    reach can be changed over the course of time, but if we do not
    start now trying to grow the fleet, we will not have those
    options down the road to decide exactly how big it needs to be.
    So I would argue at this point we do not necessarily need to
    come up with a plan to get to 355 exactly starting today, but
    we need to start moving in that direction so that we have the
    option to be able to eventually get to 355 tomorrow.
        If we fail to grow the Navy with the highly capable ships
    that will be necessary to operate in the kinds of environments
    they are going to face, we are going to undermine the security
    assurances we provide to our allies, and that will affect the
    U.S. position in the world and it will have dilatory effects on
    our economy and our relationships with our allies and partners.
        Thank you very much, and I am looking forward to your
    questions.
        [The prepared statement of Mr. Clark follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Senator Wicker. Well, thank you for four excellent examples
    of testimony.
        Mr. Clark, you say we first need to get started with the
    first year. I could not agree more. So I noted in my little
    statement that not only have we put the Wicker-Whitman SHIPS
    language in both NDAA bills, but we have authorized additional
    funding for five ships above the administration's budget
    request while maintaining cost control measures.
        Is that a good start for the first year?
        Mr. Clark. Yes, sir. That is exactly the kinds of start we
    need to have, start adding additional ships now drawing upon
    the industrial base that we have and the additional capacity
    that is available and start moving in that direction as opposed
    to try to bite it all off at once.
        Senator Wicker. I think I heard you say that getting to the
    355 ships solves not only a modernization problem, but it
    solves a readiness problem.
        Mr. Clark. Yes.
        Senator Wicker. Okay. Help us on that because we have been
    told that there is a competition between readiness and getting
    to the fleet size we need.
        Mr. Clark. Right. So fundamentally readiness comes down to
    supply versus demand. So today the demand for naval forces
    exceeds what the supply can deliver using the current readiness
    processes, the fleet response plan that the Navy uses to
    generate ready forces. So to be able to meet the COCOM's
    demands, what they have been doing is short-circuiting that
    process and sending ships out with not as much maintenance or
    not as much training to be able to meet the combatant commander
    requirements.
        Also, because they are being deployed on short notice
    without a lot of ability to schedule, they are having to
    reschedule maintenance and do maintenance at the last minute,
    which is more expensive and less efficient. So maintenance that
    needs to get done on ships is being deferred until some future
    date when they become available.
        So all those things are happening today, but it is
    fundamentally because the fleet is too small for the demands
    being placed on it. So in the near term, we need to be thinking
    about maybe saying no to some of these deployments to be able
    to shift money into procurement of ships to solve the problem
    that we are going to have tomorrow.
        Senator Wicker. Dr. Hendrix, does that make sense?
        Dr. Hendrix. Absolutely. Sir, one of the things that we
    have noted is that as we have fallen from 400 ships to 350 to
    300, now to 276, is that we are still attempting to forward
    deploy the same number of ships. So I think today it is 104
    ships are out to sea. The problem is that when you a deployment
    cycle where it takes four ships to keep one forward deployed,
    the assumption is that 25 percent of the fleet will be in
    maintenance in some sort of a yard capacity with workmen
    working on it. But when you are still trying to do 100 forward,
    but you only have 276, then you have to shorten up the cycle
    somewhere, and the cost payer now has been in maintenance and
    readiness because you cannot shorten the training cycle working
    them up and you do not want to shorten the deployed cycle, nor
    do you want to decrease the number of ships forward. So it has
    been in maintenance and readiness that the fleet has taken time
    out of the schedule, and that is why we see ships going out
    that, quite frankly, do not look that they are adequately
    prepared and the maintenance records are showing that the
    material readiness of the fleet has been falling off.
        Senator Wicker. Dr. Hendrix, let me ask you about something
    you said on page 2 of your prepared statement. You said it on
    the record also. You mentioned the People's Liberation Army/
    Navy, the fact that we have more or less incentivized them to
    try to achieve dominance in destabilizing a sphere of influence
    in the western Pacific. You say that the Navy needs to reach
    350 or 355 as swiftly as possible to effectively deter them
    from thinking that this is even possible.
        Dr. Hendrix. Yes, sir.
        Senator Wicker. If we sent out the clear signal this year
    and next year that we are going to do this and that we are
    going to put the money where it is needed and we are serious
    about it in the long run, what actions do you think the Chinese
    Army/Navy would take that would indicate we have actually
    convinced them that military victory at sea is not remotely
    possible?
        Dr. Hendrix. Sir, one of the things you look at--you know,
    great-power competition is an attitudinal function of the way
    that states interact with each other. States begin to build
    momentum towards certain ideas, certain perceptions that take a
    life of their own over time, and as the U.S. Navy has declined
    and as our strategic focus has shifted ashore and to Iraq and
    Afghanistan, this has created a condition where China believes
    there is an opportunity to grow and compete and create their
    own sphere of influence essentially in the western Pacific. By
    coming out strong both with our buildup as well as with our
    language and with posturing ourselves through exercises,
    forward deployment, and by meeting them on some of these issues
    that they are raising, such as freedom of navigation operations
    on these artificial creations that they made in the South China
    Sea, then you convince them today and then the day after that
    that a wartime challenge against the United States will not be
    successful. This is part of the ongoing competition amongst
    nations.
        What you might expect them to see is a change in their
    posture, the change in their language as they begin to see an
    exercise of greater numbers of ships in the area, the forward
    presence, and the fact that we are taking a more aggressive
    form, for instance, doing FONOPS. They are operating in a
    normal military mode as opposed to just an innocent passage
    profile. Those types of things convince them that this is not a
    competition that they are going to be able to win with us as we
    come on and be more strong and steadfast.
        Senator Wicker. That actually worked in the 1980s, did it
    not, with a different adversary.
        Dr. Hendrix. Yes, sir, both in some of the Black Sea
    operations and the Baltic Sea operations that we had against
    the Soviet Union where we actually had ships rub up against
    each other out there, had an action of actually demonstrating
    to the Soviet Union that the United States was not going to
    back down.
        Senator Wicker. Thank you. There will be more questions.
        Senator Kaine, you are recognized, sir.
        Senator Kaine. Again, thank you to the witnesses.
        Just two items that I would like to ask about.
        First, we had some wonderful testimony last week, and I
    want to read it with some precision here. Secretary Lehman was
    with us last week, and we were talking about the Navy buildup
    of ships during the Reagan era. He said something, and this was
    the quote. Quote: 90 percent of the deterrent power of this
    buildup could be achieved in the first year. He said it was
    achieved in the first year and we could do it again.
        I think what he meant by that--and I went back and forth
    with him a little bit--is in the first year we started strong,
    and the other side, in that case the Soviet Union, really
    believed we would continue. It was a long buildup, but there
    was a dramatic start and no doubt that we would pursue it.
        Not only did we have the 355-ship amendment as part of the
    bill that came out of this committee to the floor, but we also
    had a let us get rid of sequester.
        If we continue to have budgetary challenges, sequester,
    threats of shutdown, CR, et cetera, even if we say we are going
    to do 355, we are not exactly sending the kind of clear message
    we need. Would you agree that how we overall handle the
    budgetary issues going forward is part of what makes that
    impression that the investment we are on is likely to be
    carried through? That is for all of you.
        Mr. Clark. For me I would argue that is definitely the
    case. Our adversaries, our competitors look at our budgetary
    situation and see that as a weakness or a vulnerability that we
    have and are looking to exploit it in how they coerce their
    neighbors. So part of this gray zone effort of China and Russia
    is going to their neighbors and saying you do not seem to have
    the kind of support from the United States or the United States
    cannot lend you the kind of security assurances that you would
    need. Maybe you should just go along with us.
        Senator Kaine. Other thoughts?
        Mr. O'Rourke. The importance of signal sending is precisely
    why I talk in both my written statement and in my opening
    remarks about the option that Congress has for fully funding
    ships in the near term, starting as early as fiscal year 2018,
    even if those ships will not be ready for production until
    sometime down the road. The signal sending to competitor
    countries, particularly China, that can be accomplished by that
    is potentially substantial, and it is one of the reasons I
    emphasized it in my testimony. One of the things I pointed out
    is that you can even do this with nuclear-powered ships, such
    as attack submarines, for which there has been no prior year
    advance procurement funding. I also pointed out that Congress
    in fact has done this in the past. They have fully funded ships
    upfront, including nuclear-powered ships for which there was no
    prior year AP funding.
        Senator Kaine. Thank you.
        Please, Dr. Labs.
        Dr. Labs. I would agree with what Mr. O'Rourke said and the
    other panelists. If you think about great-power politics and
    deterrence, a lot of it is a signaling game, and those signals
    take many different forms. It is not just one. So the amount of
    money that you want to spend on a particular set of programs
    such as shipbuilding is going to be a signal. So if you
    increase that shipbuilding, you are sending a signal. The
    amount of money that you spend on the defense budget overall
    will be another signal. The things that you say and how you
    then operate those forces is yet a third signal. We can keep
    iterating through that. So all of this becomes signals. So your
    overall approach to your defense budget, your overall approach
    to your shipbuilding budget, and everything else is all going
    to play into the game of great-power politics and have the role
    and bringing up deterrence to be effective.
        Senator Kaine. Let me ask a second question that has
    bedeviled the committee a little bit. Being from Virginia,
    carriers are something I know a little bit about. We have had
    many a hearing in this committee where we have looked at the
    cost overruns on the Ford that was just commissioned, which is
    a wonderful, wonderful piece of technology.
        The cost overruns were driven heavily by not just a new
    design but also new technologies that were put as part of the
    design. So it is one thing to redesign the hull and so many
    aspects of that carrier. It is another thing to put in a new
    kind of arresting gear mechanism, new kind of a catapult
    mechanism.
        So what advice--if we were going to try to dramatically
    build up with some new platforms, what advice would you give to
    us about the way to incorporate new designs and new
    technologies into new designs? Is it sort of a phasing concept?
    Dr. Hendrix, it looks like you want to jump in on that one.
        Dr. Hendrix. Yes, sir. I think there is a historical lesson
    to be learned from the development of the Aegis Mark 7 system,
    which was build a little, test a lot, the idea of building in
    the iterative process so that you really fully mature things as
    they come through time. We knew in the 1990s--and I remember
    this quite distinctly as a junior officer--that we were going
    to take a significant risk with the Ford-class design by the
    fact that we were going to ask to incorporate at a minimum
    three major system redesigns in one platform, which is
    something that we had not done probably since the 1950s when
    the technology was much more rudimentary, for instance, when we
    did the Washington-class ballistic missile submarine.
        We made some bets, and quite frankly, some of those bets
    have paid off. Some have not. So the Ford is coming along
    somewhat slowly. Had we made a decision, for instance, to only
    incorporate one new aspect of design, perhaps the EMALS,
    aircraft launch system, on the first one and then incorporate
    the second one on the second in the class, that that would have
    been a bit more iterative. But I think one of the major lessons
    learned is to kind of look back at Admiral Wayne Meyer and the
    lessons that he taught us on developing the Aegis system.
        Senator Kaine. Please, Mr. O'Rourke. If I can, Mr. Chair. I
    am a little bit over.
        Mr. O'Rourke. I would like to build on what you just heard
    with some additional comments.
        In terms of the cost growth of the carrier, the specific
    question--Eric and I have talked about this over the years, and
    I think it is our view that the cost growth stemmed primarily
    from the fact that the original estimate was just
    unrealistically low. The Navy knew that at the time. They
    assigned a fairly low confidence factor to that estimate. So we
    should not be surprised that the cost of that ship wound up
    being higher than what that earlier estimate was.
        But building on the lessons that you just heard, in my own
    written statement, I have a summary of generalized lessons
    learned for shipbuilding that have accumulated over the years.
    These are things that a lot of people have mentioned over and
    over again that get to the broader issue that you are raising
    with your question. This is what I would say. There are eight
    or nine things here.
        First is to, at the outset, get the operational
    requirements for the program right. Understand what you are
    trying to do. As Jerry said, do not try necessarily to do too
    much with any one program.
        Secondly, impose cost discipline upfront, and that includes
    using realistic cost estimates rather than optimistic ones.
        Employ competition where possible.
        Use a contract type that is appropriate for the amount of
    risk involved.
        Minimize design-construction concurrency, which is one of
    the oldest lessons in shipbuilding.
        Properly supervise the construction work with an adequate
    number of properly trained supervisors of shipbuilding
    personnel.
        Provide stability for the industry, where possible, by
    using multiyear procurement or block buy contracting.
        Maintain a capable government acquisition workforce that
    understands what it is buying so that it can act as a force for
    doing all these other things.
        These lessons are not new. They are actually very old. The
    problem is not identifying them. The problem or the challenge
    is living up to them without letting circumstances lead program
    execution efforts to drift away from them over time.
        Senator Kaine. I am over my time, but I very much
    appreciate that.
        Thank you, Mr. Chair.
        Senator Wicker. Thank you, Senator Kaine.
        Senator King?
        Senator King. Thank you, Mr. Chair.
        Just to follow up a concrete case, as you may know, in the
    national defense bill, there is a 15-ship multiyear procurement
    for the Flight III DDG. Representing Maine, Bath Iron Works is
    somewhat concerned that it is not fully matured and one has not
    been built yet, and we are talking about a block buy and a
    fixed price contract.
        Mr. Hendrix, it seems to me in learning the lessons of the
    original Aegis and also of the carrier, is this an area of
    concern?
        Dr. Hendrix. It is an area of concern, sir. However, the
    Block 3 variant of the Burke is built on an existing
    infrastructure that is well understood so far as power
    capacity, air conditioning, propulsion systems, and so on.
    There are some modifications that will come in with that. Most
    of the advancement, of course, is in the radar systems, some of
    the advanced sensors. So while we realize that it is a stretch
    to move from Flight II to Flight III, there should be a level
    of confidence that can be done with some sense of what the
    actual cost would be associated with it in order to move
    forward. I just drove over the bridge there to look down and
    see the Zumwalts being built and BIW building the Burkes.
    Confidence in that yard is high traditionally. We would hope
    that we see that bid come in soon.
        Senator King. So really it comes down to a factual
    determination of how much change is there in the design and how
    that will impact the rest of the ship. That is a kind of detail
    that really has to be resolved between the Navy and the yards.
        Dr. Labs. One of the ways I would have answered Senator
    Kaine's question relates directly to yours, which is the
    difference between the DDG-1000 and then the Flight III Arleigh
    Burke. The DDG-1000 was going to have 10 brand new technologies
    and all new design. It has proven to be a very expensive ship
    taking a very long time to build before we get it operational.
    We are still quite some ways away before we have truly an
    effective combat unit there.
        The Flight III Burke is doing an evolutionary change to the
    Arleigh Burke-class, not unlike what we did with the Flight IIA
    compared to the Flight I and II. So you have a higher degree of
    confidence that you are going to be able to make that system
    work even though there are going to be kinks to work out. There
    always is in any new shipbuilding program. But an evolutionary
    approach is going to allow you to get those ships into the
    fleet faster, new technologies into the fleet faster than you
    would if you tried some sort of all new, clean slate design
    where you are putting everything in at once, and you are going
    to have to spend a long time figuring out how to build it and
    how to make it work.
        Senator King. But again, it comes down to a factual
    determination of how much is evolutionary and how much is
    significant change that is yet not finalized.
        Dr. Labs. Yes, sir.
        Senator King. By the way, I discovered firsthand a defect
    in the design of the George Washington-class aircraft carrier.
    I spent some time on the aircraft carrier, and I was very
    excited that I was staying in the admiral's quarters. That was
    the good news. The bad news is I learned the admiral's quarters
    were right under the catapult. So because they were doing night
    operations, that was a problem. But it was not a very serious
    one.
        Reactivation. There has been a lot of discussion. We have
    had it come up several times. Give me your thoughts. We do not
    have to go all the way down the panel. Is it feasible to
    reactivate mothballed ships, or is that a waste of time and
    money? I mean, if we have got a perfectly functioning hull, is
    that a place to start, or should we not go down that road,
    again thinking about the fact that the 355-ship Navy will cost
    somewhere on the order of $8 billion a year incrementally over
    the current shipbuilding budget. So would this be a cost-saver?
    Would it be more trouble than it is worth? I would like your
    thoughts. Mr. O'Rourke, what do you think?
        Dr. Labs. Briefly, I think that not unlike what you just
    said before, that is going to come down to a factual
    determination on a hull-by-hull, ship-by-ship basis. So there
    may be situations where some of the ships are in good enough
    condition. The problem is that when the Navy knows they are
    going to retire a ship, they stop investing in the ship. They
    stop maintaining it well and efficiently. So there are going to
    be investments that are going to need to be made just to bring
    the ship back up to the condition that we would have liked it
    to be. Then you are going to have to decade whether you need to
    upgrade and improve the combat systems aboard those same ships
    that you are reactivating. So all of that is going to take
    time, money and effort.
        Senator King. The cost would be of shoehorning a modern
    combat system into an old hull.
        Dr. Labs. That is exactly right. So some ships are going to
    be able to do that. If we take the five Ticonderoga-class
    cruisers, the first five, there was an original plan when the
    Navy was doing the cruiser modernization that they would take
    those five ships, they would spend a healthy amount of money to
    upgrade them, including installing VLS cells in them. For
    various reasons, that never came to pass mostly for budgetary
    reasons. But that is the type of thing that could be done. But
    you are going to have to evaluate that to see whether it is
    worth the time and the effort compared to how long it would
    take you to bring new units into the fleet.
        Senator King. Yes, sir. Dr. Hendrix?
        Dr. Hendrix. Yes, sir. The one thing about that--and there
    are I think three existing of those first five hulls. They have
    10 years less of sea life on them because they have been parked
    for most of the last decade. It is not going to be inexpensive
    to make that investment. In fact, the total of doing the three
    ships is going to be well over a billion, maybe south of $2
    billion to do the three ships. However, the cost of one new
    cruiser, to build it from keel up, would be in excess of $2
    billion, certainly close to $3 billion. The idea--you know,
    what is that tradeoff? Also, those platforms will not last as
    long once we make that investment. But the hope is that by then
    we have ramped up the infrastructure that we will be building
    new ships to replace it. It buys us 10 years, but it gets us
    three hulls with some spy and some VLS on them.
        Senator King. Has there been a study of this option per se?
    In other words, how many hulls are out there? How many could be
    renovated? I think it would be helpful to the committee to have
    some data on this.
        Senator Wicker. I think it would b very helpful. Mr.
    O'Rourke has his hand up.
        Mr. O'Rourke. Yes. I mean, the Navy is actually doing that
    study right now. As a matter of due diligence, they need to
    explore that so that they can answer this question and say,
    yes, we looked at and it either did or did not make sense.
        When you look at these older ships, there are really two
    issues. One is the age and condition of the ship. Some of these
    ships are not as young as the committee may have heard a week
    ago. For example, the Navy is looking in particular at these
    Perry-class frigates. Those frigates are almost 30 and 31 years
    old.
        Senator King. I remember when they were being built in
    Bath.
        Mr. O'Rourke. Exactly.
        Senator King. In the 1980s.
        Mr. O'Rourke. That is right. They all served to the end of
    their expected service lives. The youngest ones are 25 or 26.
    So they have only a handful of years.
        But it is not just a matter of age and condition. It is a
    matter of why are you bringing them back. If you were to bring
    them back, could they actually do something that needs to be
    done. We are not just chasing numbers for their own sake. You
    do not just bring ships back to bring them back and put a mark
    on a chalkboard. You are doing it because you believe that that
    ship in its reactivated capacity can actually do something of
    value to the Navy that is worth the cost that you put into it.
        So you have to, first, look at the condition of the ship
    and say can you even bring that thing back. But then you have
    to ask yourself why and what missions could it perform. There
    may be something creative here we can do with the Perry-class
    frigates or some of the other ships that are in the inactive
    fleet. There were about 48 of them in the inactive fleet as of
    last September. But that is what you would need to look at. The
    Navy is doing that study, and I think they owe the answer back
    to you in the coming weeks and months.
        Senator King. Thank you.
        Senator Wicker. Mr. Clark?
        Mr. Clark. A better approach might be to think about
    keeping some ships in operation longer rather than reactivating
    old ones that have a kind of unknown material condition. We
    have a number of LSDs or amphibious landing docks that are
    getting ready to retire over the next decade. Some of those can
    be kept in service longer and so some of the lower end missions
    that you might use a frigate for. It would cost less to do that
    than it would be to pull a ship out of retirement.
        Senator King. Life extension as opposed to renovation.
        Mr. Clark. Right. We have done that with--amphibious ships
    in particular have been a common choice to do life extensions
    on and get more use out of them to do a different set of
    missions than they were originally designed to accomplish. So
    that may be a better option than trying to start up with
    something that is an unknown quantity.
        Senator Wicker. Dr. Hendrix, you wanted to add another
    brief comment.
        Dr. Hendrix. I would make just a note that the Perry-class
    are some of the most sought after ships for sale to our allies
    and partners who refurbish them and then make them last
    anywhere from 10 to 20 years after that. The idea of--surely
    there is a value there. The types of missions they probably
    would be most appropriately used is the way that our allies and
    partners do, which is doing coastal patrol, convoy escorts,
    some ASUW type missions, not in the highly contested
    environments but in more permissive environments where
    international security and laws need to be upheld. So that
    would be the appropriate place for that type of a ship.
        Senator Wicker. In fact, this committee put a business case
    analysis requirement in the fiscal year 2018 NDAA to look at
    reactivation options. So in response to this, if it stays in
    the law and is signed by the President, the Navy will be
    required to provide us with these details in the coming months.
        Thank you, Senator King.
        Senator Shaheen?
        Senator Shaheen. Thank you, Mr. Chairman.
        Senator King, I am surprised to hear the catapult kept you
    up. I thought, as governor, you learned to sleep through
    anything.
        [Laughter.]
        Senator Shaheen. I just wanted to follow up a little bit on
    the questioning around the Perry-class frigates because, as you
    know, Admiral Richardson stated last month that the Navy is
    considering the possibility of bringing those back. You
    indicated, Mr. O'Rourke, that there is a study underway to take
    a look at that. But do we have currently the need, as you
    described, Dr. Hendrix, to use those ships in a way that would
    free up other ships to do other operations? Is that a realistic
    idea that we can do that, and do we have any idea what it would
    take to modernize them?
        Dr. Hendrix. Ma'am, there are some estimates out there on
    what the cost would be, anywhere from $80,000 million to
    upwards of $180 million per ship to bring the Perry's back and
    do the modernization. Those are some of the numbers that I have
    been provided. Actually, our colleagues probably have better
    estimates on that than I do.
        However, the types of missions where they might be used,
    you know, things in the Mediterranean, things in like the Gulf
    of Guinea, some of these areas where we are providing offshore
    security patrols and so on, those are the types of arenas that
    we would see this. This is not what I would look at as front
    line for something like the South China Sea, but some of the
    areas in Mediterranean patrol and so on that the Perry's would
    most be appropriately. Those would relieve other ships, new
    ships, more highly capable ships to be able to be targeted at
    other areas of more challenging arenas.
        Senator Shaheen. Thank you.
        Do you want to add anything to that, Mr. O'Rourke?
        Mr. O'Rourke. There is one other mission that comes to
    mind. In part of my testimony, I try to raise awareness of the
    national fleet policy, which is the statement signed by the
    Coast Guard and Navy leaders to coordinate their policies and
    optimize our investment in sea power at a national level. The
    Coast Guard will tell you that they do not have enough
    platforms to prosecute the majority of the intelligence reports
    they get out of the southern sector of inbound, seaborne
    illegal drug importation. They know it is happening. They have
    the intelligence. They do not have the platforms to act on it.
        Senator King. 75 percent.
        Mr. O'Rourke. That is right. When those ships land in the
    United States and those drugs get dispersed, it is a lot more
    expensive to stop the drugs at that point than it would have
    been to stop the ship at sea.
        So one possible mission, a low impact mission for a Navy
    ship, if you wanted to see whether something might make sense
    from a mission standpoint, would be to bring them back to
    supplement the platforms that the Coast Guard has for
    intercepting drugs in the Caribbean region or also in the
    Pacific off the coast of California. They would still be Navy
    ships. They would still operate with Navy crews, but they would
    have Coast Guard law enforcement detachments on them. The Coast
    Guard might welcome an opportunity to improve its drug
    interdiction capability because when we took the Perry-class
    frigates out of service, the Coast Guard noted that and they
    expressed disappointment with the fact that they were losing
    access to those platforms as one of the set of assets for
    conducting that mission. So that is one mission you could bring
    them back for.
        By the way, you could even perform that mission to some
    degree with naval reservists on 2-week duties because they are
    just going out of Florida doing that thing and coming back.
        Dr. Labs. Senator, could I add one thing to the Perry
    discussion? Several years ago, Ron and I put this question to
    the Director of Naval Surface Warfare at the time because I was
    exploring an option about extending the lives of the Perry-
    class frigates and along the lines of the way the Australians
    improved and modernized those ships. At that time, the Navy
    said that they had looked at this issue and they found--I
    cannot remember all the details, but they looked at this issue
    and said largely because of the material condition of the
    ships, they did not think it was either smart or cost effective
    to do so. So when the Navy reports back on this current look
    here, it is certainly something that should be looked at
    carefully. I personally will be curious to see how it compares
    to what we were told several years ago along those same lines.
        Senator Shaheen. So define more clearly what you mean by
    the material makeup of the ships.
        Dr. Labs. Well, it has been 3 or 4 years I think since we
    had that conversation, but there were specific issues relating
    to the material condition of the hull, that it was getting very
    thin so it was going to be very expensive or very difficult to
    sort of improve it so that you get enough a life expectancy out
    of the ship to make the investment worthwhile. There would be
    issues related to improving the combat and the sensors on the
    ships to make them more--because you want something that is
    good. If you are going to bring it back and spend money on it,
    you do not want to just keep it for 2 years. You would like to
    keep it for, I would think, 5-plus years. You are going to need
    to improve sort of the actual combat capabilities of the ship
    as well.
        Mr. O'Rourke. The ships are old. Their plumbing gets old.
    So if you want to bring them back, you start looking at ripping
    out their insides. That is why a low impact mission like
    sending them down to the Caribbean might be more within the
    realm of feasibility.
        There is one more limitation on those ships. They are
    weight-limited. In the latter years of their service, they got
    very close to their weight limit and you could hardly put
    anything new on them without having to find something else to
    take off. Again, if you were just doing it for this drug
    operation, you might not have to worry about putting too much
    new heavy equipment onto the ship, and it could be easier to
    manage from that regard as well.
        Mr. Clark. Senator, if I may, one thing I will add on this
    discussion about lower end missions is today the Navy is not
    doing very many of those missions. Since 2013, since
    sequestration basically, the Navy has not been conducting a lot
    of these patrol missions in Southern Command, in the
    Mediterranean, and elsewhere. So we would be bringing these
    ships back into service to do a mission that the Navy has kind
    of walked away from and left to allies or the Coast Guard. It
    would be complementary but not necessarily relieving a larger
    combatant ship to do----
        Senator Wicker. So it is not really part of the requirement
    that the leadership is giving us. Is that your point?
        Mr. Clark. Yes, sir.
        Mr. O'Rourke. It is part of the national requirement but
    not the Navy's specific requirement.
        Senator Shaheen. Can I ask one more question, Mr. Chairman?
        Senator Wicker. Certainly.
        Senator Shaheen. I know my time is over.
        Senator Wicker. Well, we all went over.
        Senator Shaheen. Mr. Labs, in your report you talk about
    the costs to improvements to the shipyard that are needed to
    build ships at higher rates. When you talk about those
    improvements, are you talking about infrastructure
    improvements, additional workforce? What specifically?
        Dr. Labs. I divide that into sort of two different
    sections. So you will definitely need to increase the size of
    your workforce. As indicated in the report, if you want to
    build up to some of the levels that I discussed, a 40 percent
    increase in work forces.
        But when I talk about the cost of the physical plant, the
    upwards perhaps of $4 billion, depending on how fast you want
    to build up the fleet, that is physical plant. So that is going
    to be things like pier spaces. Most of that is associated with
    the submarine industry. So the lion's share of that $4 billion,
    upwards of $3 billion, would be needed to improve the physical
    plant of the two submarine yards so that they can produce
    attack submarines at rates of three per year, in addition to
    the forthcoming Columbia-class.
        Mr. O'Rourke. Can I add one quick addendum, and it relates
    to submarines, which is one of the options for mitigating this
    valley in the attack submarine force that we are projected to
    go to would be to extend the service lives of some of the
    existing Los Angeles-class submarines, the youngest ones, not
    by very far, just by 3 or 4 years. So a 33-year submarine would
    instead serve to 36 or 37 years. We have had at least three Los
    Angeles-class attack submarines that have been extended to that
    age, and if you could take the youngest 688s and do that same
    extension, they could help fill in the front half of that
    valley. You would do that with extra maintenance performed on
    those ships. That is maintenance that would be performed at the
    naval shipyards.
        Now, to the extent that they are running up against
    capacity, you would then want to think about having investments
    made at the naval shipyards to take better care of the 688's,
    to extend their lives a few years to help fill in the front
    part of the valley. Like I said in my opening statement, China
    has taken note of that valley, and we now can see that in their
    own naval literature.
        Senator Shaheen. Well, you bring up something that I think
    is very important that I know and Senator King have been
    working on because we have the Portsmouth Naval Shipyard
    between our States, and that is the importance of making those
    investments so that the shipyard can do the maintenance that is
    required on the Los Angeles-class and on the other subs that
    are being created because that is absolutely critical if we are
    going to keep them so that they are seaworthy.
        Senator Wicker. Mr. O'Rourke, how old are these younger LA-
    class submarines that you are proposing----
        Mr. O'Rourke. The very youngest one--I guess it is the
    Cheyenne that came off the line last--under a 33-year life, it
    would exit service in 2029. That is the year that we hit the
    bottom of the valley. So that ship and the sister ships that
    came just before it--if you can get them 3 or 4 years over to
    the right by extending their service lives that much, they help
    fill in that downward slope on the front half of the valley.
        Again, we have already operated at least three of our
    688's--the hull numbers were 698, 699, and 700--to those ages.
    So if you baby these ships and take good care of them, then in
    some cases at least it might be possible to do that. I am not
    talking a large number of these. It is a handful, but a handful
    could make a difference in helping to fill in this part of that
    valley.
        I am concerned about that valley because, as we go through
    it, it not only puts a greater operational strain on our attack
    submarine force to do all those missions with fewer boats, it
    can also, in the eyes of competitor countries, be taken as a
    signal of reduced conventional deterrence. In other words,
    there is a greater risk of war as we go through that period if
    we do not pay attention to this issue.
        Senator Wicker. Before I recognize Senator Rounds, let me
    just observe that the future Secretary of the Navy is sitting
    three rows behind you gentlemen. He seems to be listening very
    intently to all of this.
        Senator Rounds?
        Senator Rounds. Thank you, Mr. Chairman.
        I am going to follow up on this a little bit more because I
    like the idea of going to a 355-ship Navy, but I have also got
    a concern that once you have got it, you have got to take care
    of it. I am just curious. How do we talk about adding more
    ships and more boats when at the current time we have got
    attack submarines like the USS Boise sitting at dock rather
    than being in depot and we have got two more besides that one
    as I understand it right now that we cannot get to at this
    stage of the game? We can have all we want, but if we not
    taking care of the stuff we have got and if we do not have a
    plan in place to get them back in and operational, it is just
    like not having them at all.
        My question--Mr. O'Rourke, I will direct this to you and
    you can redirect it if you need to. What are we doing about the
    backlog on depot work right now? What is our plan so that if we
    do increase the number that we are going to have, what are we
    going to do to increase the capabilities of more depot work to
    keep those in a sustained position on an active basis rather
    than sitting at dock?
        Mr. O'Rourke. The Navy has testified they are trying to dig
    themselves out of that hole right now. The emphasis had been on
    getting out a maintenance hole that they fell into over a
    period of years with the conventional surface ships. But as you
    noted, they have got a problem now with the submarines as well.
    They just have to spend the time and the money to develop the
    workforce and invest in the capital plant needed to work their
    way out of that.
        But there is something else you can do as well, which is to
    pay attention to the operation and support, the O&S costs of
    the ships that we are building. We are building a lot of DDG-
    51's for the future fleet. Now, those are great ships. They
    have a lot of capability, and the success of that program, as
    indicated in the testimony from a week ago, is reflected in,
    among other things, the fact that we have been procuring that
    ship for so long. The two DDG-51's in this year's budget are to
    be the 78th and 79th ships in the class. That is an amazing
    number of ships, and it is testimony to how capable and well
    respected that design is.
        But the one thing we have not done with that design all
    through this period is take major steps to have a significant
    reduction in its O&S costs. So if you are going to flood the
    future fleet with a lot of DDG-51's and you are not taking
    steps to reduce your O&S costs, you will lock the future fleet
    into a situation of unavoidable, relatively high O&S costs,
    which can really tie the hands of future leaders in terms of
    their ability to pursue other program priorities with whatever
    budgets they may have in the future because they have inherited
    a very large number of ships that we have not taken steps in a
    major way to reduce their O&S costs.
        Senator Rounds. Let us just take a look at the actual boats
    that you have got that are at dock right now. You have got them
    there. This is the third one of these Seapower Subcommittees in
    which we have brought this up. We recognize that they have a
    hole that they are in. At what point will we have a discussion
    about what we are doing to get out the hole? How do we address
    that when we are talking about adding more ships to our
    inventory? But I did not hear anything. I do not see anything
    yet. Maybe there is something that I am not aware of in which
    we are actually proposing to increase our capability to
    maintain this increased number that we are talking about. You
    got to include that.
        Mr. O'Rourke. The Navy has started this effort maybe 3 or 4
    years ago to start digging out of the hole, but it will take
    years to get out of it with the surface ships at least because
    you have to wait for all the different ships to rotate into
    their maintenance availabilities over a several year cycle. So
    we are in the midst of that right now. It costs money. There is
    no way around it. But if you do not do it, you have what is
    called a fester factor where, because you did not invest in
    maintenance at one point, it becomes an even greater
    requirement down the road. You fall behind like you would if
    you are not making your credit card payments.
        Senator Rounds. I really do not mean to beat a dead horse,
    but I guess I am going to try it one more time. If it has been
    3 years and we actually have nuclear attack submarines that are
    sitting at dock and we still do not have a plan in place to get
    out or at least there is not a plan that we have heard yet, it
    seems to me that that is one area where we could actually have
    three more attack subs operational if we had the depot work
    being done in an expedited fashion or at least in some fashion
    if we have known about it for 3 years. Would you agree with me
    on that?
        Mr. O'Rourke. I agree. There is no magic to this. You just
    have to spend the time and money to do it.
        Senator Rounds. Let me add one more. I like the idea of
    having the additional carrier. With that also comes THE reason
    for having the carrier and that is the air group that comes
    with it. What is the plan in place, as we add the carrier, to
    actually acquire, maintain appropriately, and operate the air
    carrier group that would go with that additional carrier? I
    know I am over, but I would like to have that.
        Mr. O'Rourke. Just very quickly, the Navy study that talked
    about building the additional 29 ships also talked about
    building 342 additional aircraft. A big chunk of that 342 can
    go toward forming up the additional air wing that would
    eventually be needed for the 12th carrier. But we do not get to
    a 12th carrier on a sustained basis until about 2030 or later.
    So there is a little bit of time between now and then to form
    up that air wing.
        Senator Rounds. Presuming that we are doing that, though,
    we are looking at--F-35's I am assuming would be the aircraft
    of choice in this case?
        Dr. Labs. In some ways you can build both. You can build
    the F/A-18's and the F-35's. In my report and in my opening
    statement, we estimate that you are going to need the
    additional aircraft for the additional surface combatants and
    the additional air wing. The air wing is driving this cost. It
    is going to cost about an extra $15 billion. But Mr. O'Rourke
    is correct. That carrier does not show up until about 2030. So
    you can lay those aircraft in over the next 10 years, and then
    you are going to have a fully equipped air wing by the time
    that comes around.
        Senator Rounds. That is acquisition cost only that you are
    talking about.
        Dr. Labs. That is acquisition cost only.
        Senator Rounds. Right now, the F-35--we are expecting that
    there is an additional operating cost during its lifetime of an
    additional 70 percent, somewhere in that neighborhood?
        Dr. Labs. That is right. So for the rest of the fleet, in
    terms of the estimates that CBO produced in terms of the
    operation and support costs, that includes the entire fleet. So
    that would include the cost of that additional aircraft
    carrier, as well as the additional air wing.
        I completely agree with you. Without having the specific
    answer to the three submarines that are tied up at the pier,
    the estimates that we produced in this report incorporate the
    fact that you are going to have to support, operate, and
    maintain this fleet and this budget over a long period of time.
    Given the nature of sort of that industry, where its costs are
    rising faster than inflation, the budgets are going to go up
    and they are going to need to be appropriated if you want to
    maintain and operate that fleet effectively.
        Senator Rounds. Mr. Chairman, I do not mean to go on. To me
    this is really important because I do believe that we need to
    increase the size of the Navy, but I just really want to have
    the data upfront in terms of getting it right so that we are
    not coming back in asking afterwards why did we not think about
    the added costs or, in this particular case, the costs of
    keeping a nuclear submarine operational rather than having it
    sitting at dock. I guess this is now the time that we ought to
    be asking the question.
        Senator Wicker. I would note for the record that our crack
    staff would like it known that the NDAA report requires a plan
    for addressing how the backlog is eliminated as the fleet
    grows. The Navy owes us a report on this topic within the
    coming months.
        Thank you, Senator Rounds.
        Which of the four of you is most eager to talk about the
    new request for information on the new frigate?
        [A show of hands.]
        Senator Wicker. Yes. You did not hit your bell, Dr.
    Hendrix. So Mr. Clark gets to go first. What do you think of
    the new RFI and does it move us in the right direction? We will
    start with you and let anybody----
        Mr. Clark. I do not think it does move us in the right
    direction.
        Senator Wicker. You do not.
        Mr. Clark. I do not. I think what it does is it opens up
    the aperture too much in terms of what the future frigate could
    be. It makes it seem like it could be anything from a ship that
    is only able to do surface warfare and ISR missions in support
    of distributed lethality, the Navy's new surface concept. It
    could be anything from that, which is a relatively low-end ship
    or less capable ship, all the way up to a frigate that can do
    air defense for another ship and do antisubmarine warfare.
        I think the Navy needs to, instead of opening a wide
    aperture and seeing what comes in, make some choices about what
    they need this ship to do. It is needs to be a more capable
    ship that is able to do multiple missions. So it needs to do
    antisubmarine warfare and air defense and surface warfare, all
    three of them, all at about the same time. So it needs to be a
    multi-mission ship and not something that is a single-mission
    or a dual-mission ship like the RFI implies.
        Senator Wicker. Dr. Hendrix?
        Dr. Hendrix. Yes, sir. Thank you for the question on this
    because the RFI I found generally to be good. However, there
    are a couple of troubling points within it. Probably the one
    that leapt out at me the most was the requirement within it for
    a 3,000 nautical mile range at 16 knots. Given the reserve fuel
    requirements, because we never run the ships all the way down
    to 0, we always to keep fuel for ballast and emergencies, that
    would actually limit that ship to have to at least to take one
    refueling for even a transatlantic convoy escort. It would seem
    to me that any type of ship that is built and it is written
    into the document needs to be able to do anti-surface warfare,
    antisubmarine warfare, and convoy escort that it ought to be
    able to do convoy escort without having to peel off and hit the
    tanker on the way over. So it struck me that something in the
    4,500 to 6,000 mile range ought to be sort of a walking-in-the-
    door minimum, and the higher the better in order for it to give
    the most independent steaming out of it.
        The other aspect of it as well--and then this is an area
    where I disagree with my friend, Mr. Clark--is I am a little
    concerned about the emphasis on the air defense factor in this.
    I believe that the ship should provide self-air defense, but
    we, as has already been testified to, have been buying excess
    capacity of air defense in the Burke-class for a number of
    years. Where we have a real deficit is anti-surface and
    antisubmarine warfare.
        Anytime that you cause a ship or require a ship to be good
    at all things, you are going to drive up the cost factor on
    this. I think there is a certain sweet spot on costs that if
    you exceed that--and by that, I look generally in the $700
    million to $850 million range per unit--by adding in air
    defense capability, certainly we start edging over a billion
    dollar per copy. At that point in time we will find ourselves
    in an argument which is to the extent of should we not just buy
    some more Burkes. We really need something that we can buy in
    high enough numbers that we can drive up that portion of the
    fleet.
        We talk about the need for 52 small surface combatants.
    Currently we consider the LCS to be part of that 52. I actually
    think that number is higher, that you need something in the 70
    to 75 range on small surface combatants to be able to fill out
    the requirements from the combatant commanders around the
    world. I would like to see this be a robust ASW, anti-surface,
    design with a 6,000 mile range. I think that that is a good
    starting point.
        Senator Wicker. Mr. O'Rourke?
        Mr. O'Rourke. This is what I will say. This is going to be
    our third attempt in the last 15 years to try and get right the
    issue of smalls surface combatant procurement. When we started
    the LCS program in the 2000 to 2003 time frame, the Navy did
    not do all the homework in my view that it needed to do to
    provide a firm analytical foundation for the program, and the
    weakness in that analytical foundation in my view that I have
    argued for many years now is a principal reason behind many of
    the difficulties that the LCS program experienced in subsequent
    years.
        The Navy had a chance to firm up that analytical foundation
    when the program was restructured in 2014, but this time not so
    much due to the Navy's fault but rather to OSD, they missed a
    second opportunity to create a firm analytical foundation for
    what they were doing.
        So this is the Navy's third bite at the apple to put a
    proper, robust analytical foundation to explain to itself and
    others what kind of ship it wants to buy. It needs to be able
    to answer three questions and not just with opinions or
    subjective judgments but with strong, robust numbers. That is,
    first, what are your capability gaps that you are trying to
    address? Second, what is the best general approach for filling
    those gaps? Should it be a big ship, a small ship, a plane,
    something else, some combination? Third, when you pick that
    best general approach, whether it is a ship or something else,
    then what are some of the key attributes that the ship should
    have?
        This is what the Navy did not do in all three instances in
    the two prior attempts. They have a chance to get it right
    again this time. It is their third chance. If they do not put a
    firm analytical foundation under this effort, there will be a
    risk of this effort also experiencing difficulties in execution
    in the years ahead.
        Dr. Labs. Senator?
        Senator Wicker. Dr. Labs?
        Dr. Labs. One last point to that because that was an
    excellent set of comments, and I do not have too much original
    to add to that. I would associate myself with what Mr. Clark
    said about it would be good that there would be more
    specificity in the RFI. Without getting into a recommendation
    of what that specificity ought to be--CBO does not make
    recommendations, but the more specificity you have, the more
    you can zero in and get that ship designed and faster. You can
    get a better cost estimate based on what the specifications are
    going to be. You want to get down a path where you want to be
    careful about not trying to do things too much on the cheap. I
    agree with Dr. Hendrix that you do not want to find yourself in
    a debate whether you should be buying Arleigh Burkes or a
    really expensive frigate. But at the same time, if you can
    design a ship that has a great deal of capability and you can
    get may be two for one, two frigates for the price of one
    Arleigh Burke-class, then you are starting to get somewhere
    with what you are trying to achieve in terms of building a
    larger fleet in a timely manner.
        Senator Wicker. Dr. Hendrix says you can swap two for six
    on destroyers. Do you agree with that? Have I characterized
    your----
        Dr. Hendrix. Sir, in that case what I was talking about was
    for one destroyer, you could look at a couple frigates. You
    could also look at a couple offshore patrol vessels or missile
    boats by perhaps converting a joint high-speed vessel and
    uploading it with missiles. Given that cost range, that you
    could pack six smaller combatants in for the cost of one Burke.
    Yes, sir.
        Senator Wicker. Well, we could go on.
        Dr. Hendrix and Mr. Clark, do you think Dr. Labs is overly
    pessimistic about getting this done?
        Dr. Hendrix. I have always found him to be an ebullient
    personality, sir. However, his fiscal caution is noted, and we
    have had difficulties in the past. So the fact is it is going
    to be a big lift to be able to do this with regard to getting
    the money in the right place, as has been ascertained by the
    last couple years of budgeting.
        Senator Wicker. Are you heartened that he says we can do it
    18 years?
        Dr. Hendrix. Sir, of course, I think that that has to be
    done a lot quicker. I think that given the threat environment,
    that we have to bring it down. Again, I take a different
    innovative approach by looking at the reserve fleet and
    SLEPing, whereas Dr. Labs tends to focus on new construction.
        Senator Wicker. Who wants to make a last comment? No one.
        Gentlemen, thank you for your excellent testimony and
    thought provoking. We look forward to visiting with you in the
    future. I appreciate your help today.
        [Whereupon, at 4:36 p.m., the Committee adjourned.]