[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.]