[House Hearing, 112 Congress]
[From the U.S. Government Printing Office]
[H.A.S.C. No. 112-127]
HEARING
ON
NATIONAL DEFENSE AUTHORIZATION ACT
FOR FISCAL YEAR 2013
AND
OVERSIGHT OF PREVIOUSLY AUTHORIZED PROGRAMS
BEFORE THE
COMMITTEE ON ARMED SERVICES
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
SECOND SESSION
__________
SUBCOMMITTEE ON SEAPOWER AND PROJECTION FORCES HEARING
ON
OVERSIGHT OF U.S. NAVAL VESSEL
ACQUISITION PROGRAMS AND FORCE
STRUCTURE OF THE DEPARTMENT OF
THE NAVY IN THE FISCAL YEAR 2013
NATIONAL DEFENSE AUTHORIZATION
BUDGET REQUEST
__________
HEARING HELD
MARCH 29, 2012
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SUBCOMMITTEE ON SEAPOWER AND PROJECTION FORCES
W. TODD AKIN, Missouri, Chairman
DUNCAN HUNTER, California MIKE McINTYRE, North Carolina
MIKE COFFMAN, Colorado SUSAN A. DAVIS, California
SCOTT RIGELL, Virginia JAMES R. LANGEVIN, Rhode Island
TIM GRIFFIN, Arkansas RICK LARSEN, Washington
STEVEN PALAZZO, Mississippi JOE COURTNEY, Connecticut
TODD YOUNG, Indiana CHELLIE PINGREE, Maine
ROSCOE G. BARTLETT, Maryland MARK S. CRITZ, Pennsylvania
J. RANDY FORBES, Virginia HANK JOHNSON, Georgia
ROB WITTMAN, Virginia BETTY SUTTON, Ohio
TODD RUSSELL PLATTS, Pennsylvania
Tom MacKenzie, Professional Staff Member
Phil MacNaughton, Professional Staff Member
Emily Waterlander, Staff Assistant
C O N T E N T S
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CHRONOLOGICAL LIST OF HEARINGS
2012
Page
Hearing:
Thursday, March 29, 2012, Oversight of U.S. Naval Vessel
Acquisition Programs and Force Structure of the Department of
the Navy in the Fiscal Year 2013 National Defense Authorization
Budget Request................................................. 1
Appendix:
Thursday, March 29, 2012......................................... 39
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THURSDAY, MARCH 29, 2012
OVERSIGHT OF U.S. NAVAL VESSEL ACQUISITION PROGRAMS AND FORCE STRUCTURE
OF THE DEPARTMENT OF THE NAVY IN THE FISCAL YEAR 2013 NATIONAL DEFENSE
AUTHORIZATION BUDGET REQUEST
STATEMENTS PRESENTED BY MEMBERS OF CONGRESS
Akin, Hon. W. Todd, a Representative from Missouri, Chairman,
Subcommittee on Seapower and Projection Forces................. 1
WITNESSES
Mulherin, Matthew J., President, Newport News Shipbuilding, and
Corporate Vice President, Huntington Ingalls Industries........ 29
Novakovic, Phebe N., Executive Vice President, Marine Group,
General Dynamics Corporation................................... 26
Stackley, Hon. Sean J., Assistant Secretary of the Navy for
Research, Development, and Acquisition; VADM John Terence
Blake, USN, Deputy Chief of Naval Operations for Integration of
Capabilities and Resources (N-8); and LtGen Richard P. Mills,
USMC, Deputy Commandant for Combat Development and Integration
and Commanding General, Marine Corps Combat Development Command 2
APPENDIX
Prepared Statements:
Akin, Hon. W. Todd........................................... 43
Davis, Hon. Susan A.......................................... 45
Mulherin, Matthew J.......................................... 91
Novakovic, Phebe N........................................... 65
Stackley, Hon. Sean J., joint with VADM John Terence Blake
and LtGen Richard P. Mills................................. 47
Documents Submitted for the Record:
[There were no Documents submitted.]
Witness Responses to Questions Asked During the Hearing:
Mr. Coffman.................................................. 113
Mr. Courtney................................................. 113
Questions Submitted by Members Post Hearing:
Mr. Langevin................................................. 117
Mr. Wittman.................................................. 120
OVERSIGHT OF U.S. NAVAL VESSEL ACQUISITION PROGRAMS AND FORCE STRUCTURE
OF THE DEPARTMENT OF THE NAVY IN THE FISCAL YEAR 2013 NATIONAL DEFENSE
AUTHORIZATION BUDGET REQUEST
----------
House of Representatives,
Committee on Armed Services,
Subcommittee on Seapower and Projection Forces,
Washington, DC, Thursday, March 29, 2012.
The subcommittee met, pursuant to call, at 10:04 a.m. in
room 2118, Rayburn House Office Building, Hon. W. Todd Akin
(chairman of the subcommittee) presiding.
OPENING STATEMENT OF HON. W. TODD AKIN, A REPRESENTATIVE FROM
MISSOURI, CHAIRMAN, SUBCOMMITTEE ON SEAPOWER AND PROJECTION
FORCES
Mr. Akin. The hearing will come to order.
Heavenly Father, we just thank you again for the freedom we
enjoy and for the people who have sacrificed for that. We ask
your blessing on our deliberations. Help us to be wise, help us
to be good planners, and good stewards. And we pray that you
help us with the somewhat busy schedule this morning, and the
votes and all. And I pray in Jesus' name. Amen.
Gentlemen, we have got a little bit of a curveball that has
been handed to us because they have got votes on kind of 1-hour
bases all through the morning. So I have talked to Assistant
Chairwoman Davis, and we have agreed that we are going to just
postpone making our comments and just leave those for the
record and go directly to our witnesses and--is that the call
for votes? We have already got votes on? Okay.
I think what we will do is run for about 7 minutes or so,
or maybe 10 minutes, then we will be running to vote--time for
a cup of coffee if you haven't had one--and then we will
probably be back I am guessing roughly 20, 25 minutes, but I
don't know the exact number of votes. So let's just go ahead
and proceed.
Is it just one vote? Okay. We may be back quicker than
that.
[The prepared statement of Mr. Akin can be found in the
Appendix on page 43.]
Mr. Akin. So, Admiral Blake, do you want to go first, any--
or--okay.
Secretary Stackley. Yes, sir.
Mr. Akin. Sean, fire away.
STATEMENT OF HON. SEAN J. STACKLEY, ASSISTANT SECRETARY OF THE
NAVY FOR RESEARCH, DEVELOPMENT, AND ACQUISITION; VADM JOHN
TERENCE BLAKE, USN, DEPUTY CHIEF OF NAVAL OPERATIONS FOR
INTEGRATION OF CAPABILITIES AND RESOURCES (N-8); AND LTGEN
RICHARD P. MILLS, USMC, DEPUTY COMMANDANT FOR COMBAT
DEVELOPMENT AND INTEGRATION AND COMMANDING GENERAL, MARINE
CORPS COMBAT DEVELOPMENT COMMAND
Secretary Stackley. Yes, sir. Mr. Chairman, distinguished
members of the subcommittee, thank you for the opportunity to
appear before you today with Vice Admiral Blake, and Lieutenant
General Mills to discuss Navy shipbuilding. And thank you, of
course, for your steadfast support in support of our Navy,
Marine Corps, sailors, and marines who are meeting the Nation's
commitments around the world.
And with the permission of the committee I would like to
make a brief opening statement and provide a more formal
opening statement for the record.
Today we are a battle force of 282 ships, nearly half of
which on any given day are under way performing missions around
the globe: supporting operations in Afghanistan; providing
maritime security along the world's vital sea lanes of
communication; missile defense in the Mediterranean and Sea of
Japan; intelligence, surveillance, and reconnaissance where
needed, as needed; global presence at sea; and with embarked
Marine expeditionary forces ready to move ashore, conducting
antipiracy patrols, global partnership stations, humanitarian
assistance, training to ensure constant readiness in
preparation for the next deployment, next operation, and all
the while quietly, reliably on patrol providing strategic
deterrence.
In support of the defense strategic guidance we are
building towards a battle force of 300 warships, platforms that
will provide our sailors and marines the capability and, two,
the capacity needed to maintain our maritime superiority today
and for the foreseeable future. This objective is cast
alongside the fiscal realities that come with the Budget
Control Act of 2011, and so in reshaping our shipbuilding plan
of a year ago to reflect the priorities of the new defense
strategy and the new budget top line this year's shipbuilding
plan strikes a balance between capacity, capability,
affordability, and the industrial base.
We have important work to do as we continue to assess,
plan, and execute in order to close out-year gaps and risks
identified by the long-range shipbuilding plan. In doing so, we
need to drive the equation to deliver the full capability our
warfighters need at the lowest possible cost.
The Secretary of the Navy remains strongly committed to
investing in shipbuilding and we have put that commitment to
work over the last year. Since this time last year two
destroyers, a submarine, a dry cargo ammunition ship have
joined the fleet and the LPD [Landing Platform Dock Ship] San
Diego and submarine Mississippi will commission this spring.
Another half-dozen ships are being christened while keels have
been laid for the lead ship of the DDG 1000 class [USS Zumwalt
Class Destroyer], the next littoral combat ship, the next
Virginia, and the next T-AKE ship [Dry Cargo/Ammunition Ship].
In total, since December 2010 we have awarded contracts to
procure 38 ships, including options--most competitively
awarded, all fixed-price contracts, and we are on track to
increase that number to 40 this spring with the anticipated
awards of the next Amphibious Assault Ship, LHA 7, and the 11th
and final ship of the LPD 17 [USS San Antonio] class. Stable
production and mature designs represented in these fixed-price
contracts provide an important degree of certainty to our
industrial base in an otherwise uncertain period in defense
spending.
We recognize, however, that we must remain focused
relentlessly on improving affordability in shipbuilding
programs, but we must sustain our planned investment in
modernizing the current force. To this end, our fiscal year
2013 budget request includes funding for 10 ships and asks for
multiyear procurement authority for the Virginia class and the
DDG 51 Arleigh Burke class.
The shipbuilding program includes 41 ships to be procured
over the 5 years of the 2013 Future Years Defense Program, a
reduction in ship count compared to the 2012 Future Years
Defense Program, reflecting the fact of life top-line
reductions consistent with the Budget Control Act of 2011.
However, within these controls we have been careful to maintain
priority on the capabilities called for in the new defense
strategy.
The strength of our shipbuilding plan is closely coupled
with the strength of our shipbuilding industrial base. The
critical skills, capabilities, and capacities inherent to our
new construction shipyards and weapon systems developers
inarguably underpin the U.S. Navy's dominant maritime position.
Accordingly, in the course of balancing resources and
requirements in the formulation of the shipbuilding plan, the
effect of program decisions on the industrial base must be
closely weighed.
Over the past several years the Navy has placed a priority
on increasing shipbuilding rates and providing stability for
the shipbuilding industrial base. Stability translates into
retention of skilled labor, improved material purchasing and
workforce planning, strong learning curve performance, and the
ability for industry to invest in facility improvements; all
resulting in more efficient ship construction and a more
affordable shipbuilding program.
The strategy going forward must continue to center upon
improving affordability. One of the greatest challenges to our
future shipbuilding program, and therefore to elements of our
industrial base, is the rapidly increasing cost of our ship
programs. To this end, in addition to the emphasis on stability
discussed above the Navy is establishing affordability
requirements and investing in design for affordability for
future ship programs; mandating use of open system design;
leveraging competition where it exists in shipbuilding;
employing fixed-price contracts to control cost for ships and
weapon systems in production; imposing strict criteria limiting
disruptive changes to contracts; investing in industry-wide
manufacturing process improvements through the National
Shipbuilding Research Program; and incentivizing capital
investment in facilities where warranted.
Ultimately, we recognize that as we balance requirements,
affordability, and industrial base considerations it is ever
more important that our shipbuilding plan closely align with
the priorities outlined in the new defense strategy. And it is
equally important that we--Navy and industry--continue to
improve the affordability within our programs in order to build
the Navy that our sailors and marines need for future force.
Mr. Chairman, thank you for the opportunity to appear
before you today. We look forward to answering your questions.
[The joint prepared statement of Secretary Stackley,
Admiral Blake, and General Mills can be found in the Appendix
on page 47.]
Mr. Akin. Well, thank you for your comments. And I think
because of the fact we have got 7 minutes left on the vote we
are going to scoot and then come back for the testimony.
And, Mr. Stackley, appreciate your comments. I will have a
question or two on the Virginia class here, but we will take a
break and get back to you. I am hoping maybe it is in as short
as, oh, 10 or 15 minutes now maybe.
Thank you.
[Recess.]
Mr. Akin. Subcommittee will come to order again and we will
continue with the testimony.
Mr. Stackley, I believe you were finished with your opening
comments. You had some things for the record which we will
accept for the record.
And then, who is going to go next?
Admiral, you want to be next, and then General? Okay.
Admiral Blake. Sir, I don't have an opening statement. We
were all on Mr. Stackley's statement.
Mr. Akin. You were all on Mr.--so we are ready for
questions, then?
Admiral Blake. Yes, sir.
Mr. Akin. Well, you guys get things done in a hurry. That
is good.
Okay. I guess first off the question I have is I understand
for purposes of budgeting and trying to make the numbers fit,
which we all have to do--we live within those constraints to a
degree, perhaps those of us in Congress less so even than
yourselves--but somehow or other just the logic of the Virginia
class--we have got those things building on, you know, two-a-
year kind of cycle and all of a sudden what we are going to do
is to break that, not build one for 1 year, and somehow, then,
we go back to the two-a-year cycle in the years that follow.
It seems to me that there are some costs for making that
kind of a decision in the sense it interrupts the supply chain
and the labor force. And ultimately, we are--it seems like from
a need point of view the--those ships, there is a very high
demand on them. So could you comment on what is the kind of
hidden cost of doing this and is there some way, perhaps, that
we could try to move that up so we stay on that two-a-year
build cycle?
Secretary Stackley. Yes, sir. Let me start with the build
cycle. As you are--the committee is well familiar, the Virginia
class program was at a one-per-year rate for an extended period
of time and then set the target to get to two boats per year by
2012. And in fact, the program achieved that in 2011 by driving
down program cost.
So the goal of what was referred to as ``2 for 4''--which
is $4 billion--``in 2012''--this is all old-year dollars--
became ``2 for 4 in 11.'' So the program didn't just drive
costs down but actually tuned production for two boats per year
through the vendor base, through the shipyards. And it is
important not just for affordability reasons but also for the
force structure.
The Navy's requirements for 48 boats near-term and long-
term is in jeopardy as we look out ahead to the decade of late
2020s and 2030s. Because of that extended period of one boat
per year that creates a force structure valley out in the
2030s. So everything we can do to sustain two boat per year
procurement and production rate is critical for affordability
and for national security.
Mr. Akin. The affordability is--first of all, the national
security is farther out, a little bit longer term, or is it all
the way along the line?
Secretary Stackley. It is farther out. It is in the late
2020s and 2030s is when we see the force structure numbers
start to draw down----
Mr. Akin. Okay.
Secretary Stackley [continuing]. But the concern is you
have to address that now.
Mr. Akin. Right.
Secretary Stackley. You can't wait until then to prop your
numbers back up. So the one boat that you are looking at in the
2014 year is of concern from both cost and force structure.
Now, the way we end up there, this goes back to the impact
of the Budget Control Act. Two boats per year was a priority
and remains a priority for the Navy as it built the budget, but
when the top line came down the impact was felt greatest in the
2014 year and we lost the second Virginia in 2014 along with a
second destroyer in 2014 in that regard.
Now, we are using the multiyear--the 5-year multiyear to
try to mitigate the impact in terms of the industrial base, in
terms of the cost impact, but in fact, there is an unavoidable
impact through every element of cost, whether it is material
procurement and economic order quantities, whether it is
learning across both of the shipyards that are involved in
producing the Virginia, whether it is the business base rates
impact at both yards, impact to the second-tier suppliers. So
there is a cost impact that--while we retain nine boats across
the multiyear there is a cost impact by having that single boat
in 2014.
Mr. Akin. So part of what is going on here, you could maybe
make a parallel to we were talking about building some ships
out in San Diego and you had a place where you have a demand
for a whole lot of welders, then there is a year where you
don't need any welders, then you need a whole lot more welders.
And the fact is it is hard to, you know, turn things on and
off.
And from a logic point of view you would say you want to
try to smooth that demand and we have got the same problem. We
have got to burp financially 2014 and because of the numbers
you had to plane off two ships. Which, from a more practical
point of view, if you weren't just exactly to the line of the
numbers, would make a whole lot of sense to keep them in the
budget and under different budget circumstances would be a
priority. Is that correct?
Secretary Stackley. Yes, sir. And along those lines, the
reality is that if you take the nine-boat Virginia multiyear,
and if we had the top line to add that 10th boat in 2014 that
would not just save the cost of that 10th boat but throughout
the follow ships all their costs would come down. So what we
stare at is an upfront investment cost to get the boat but
downstream savings that offset the upfront investment.
Mr. Akin. So in a way, if you could build the boat the
first thing you get an extra submarine----
Secretary Stackley. Yes, sir.
Mr. Akin [continuing]. Which is desirable, particularly in
the 2020s. The second thing is it keeps the cost of additional
boats somewhat lower as well, because you have smoothed the
demand over that time period.
Secretary Stackley. Yes, sir.
Mr. Akin. I am at least open-minded to looking at this, see
if there is something that we can do that perhaps DOD
[Department of Defense] can't do to take a look at that
problem. Unless you have a strong or rigorous objection I am
going to ask our staff people to take a look at that.
Anybody want to jump in on this particular point or
subject? Would you like to----
Mr. Courtney. Sure, Mr. Chairman.
Again, just as Mr. Stackley said, the two-a-year was pulled
up from 2012 to 2011, which was partly because of, again, the
great work in terms of bringing costs down; but it was also
because Congress intervened. Again, we, in fact, pushed the
advanced procurement add-on in the 2007-2008 budget cycle,
which provided that opportunity to get to two in 2011.
And as you said, Mr. Chairman, you know, hopefully we can
facilitate a solution to this problem that we just discussed
here today, again, using, hopefully, this subcommittee as sort
of the tip of the plane, which is, again, exactly what happened
in 2007.
And I guess, you know, the--well, I am sure your office
would be able to give us information in terms of, you know,
what the costs would be in--for 2013 in terms of trying to fix
this problem as well as maybe other strategies to, again, get
to that 10 in the Block IV contract.
Secretary Stackley. Yes, sir. As you well know, the
submarine is procured over multiple years, so 2013 would be an
advance procurement year for a second boat in 2014.
Now, one of the challenges that the Department needs to
guard against is basically getting partial funding for an
additional boat and leaving the Department with a significant
bill in 2014, recognizing that that is the difficult year for
us. So we will provide additional information to your staff so
you can see what we see across the FYDP for the Virginia
multiyear--the nine-boat versus the 10-boat and the challenges
that we faced with the budget.
Mr. Courtney. And just one other quick follow up, is this--
you will also give us the impact in terms of the fleet size
over the next couple decades, which should, I think, show some
pretty dramatic benefit if we are able to really fill that
hole. The ripple effect lasts for years, and I know you have
already worked on some of those----
Secretary Stackley. Yes, sir.
Mr. Courtney [continuing]. Metrics.
Secretary Stackley. Yes, sir. In fact, that information is
included in our long-range shipbuilding report, but we can lay
it out graphically for you, as well.
[The information referred to can be found in the Appendix
on page 113.]
Mr. Akin. Thank you. I think I have used up my time all
fair and square.
Let's see. Who is going to be next? Is it Mr. Courtney,
or----
Mr. MacKenzie. It was going to be Mr. Courtney.
Mr. Akin. Okay, so you are okay? Okay.
Somebody has got to have a question here.
Mr. Hunter.
Mr. Hunter. Thanks, Mr. Chairman.
Gentlemen, thank you all for your service. Of course, you
guys get that a lot. I think you are serving in a very tough
position right now due to what is happening--not a fun time to
be doing what you are doing. There have probably been better
times where you like to be in the position that you are in. So
thanks for doing what you are doing.
First question, General Mills, on amphibs [Amphibious
Assault Ship]--you probably saw this one coming--what is the
Marine Corps' bottom line number on amphibs?
General Mills. Sir, we have been I think clear and
consistent on our requirement, which is the assault echelons
for two MEBs [Marine Expeditionary Brigade] to be delivered by
amphibious warships to the point where they are needed. Over
the years we have accepted more and more risk to the number of
ships who actually deliver that force. And in partnership with
the Navy we have arrived at a figure of 30 operationally ready
ships at the time that we need them at the place that we need
them ready to sail.
Mr. Hunter. So to have 30 operational ships how many total
ships is that? How many ships would you have being in dock and
getting fixed up? Four or five?
General Mills. Sir, the plan that we have right now calls
for, I believe, 32 over the course of the 30-year shipbuilding
plan. It chases a slightly larger number in the out years. But
again, our requirement has been 30 operational ships at the
point of need.
Mr. Hunter. With that, I would just--I am just curious--
they are not getting 30 operational ships. The strategy
shifted, you can argue that there is more need for amphibs now
than there was even--unless we think there aren't going to be
anymore humanitarian crises or bad people in places that we
would have to ship marines to. So I am just curious about that,
because we are below that by two ships at some points, one in--
right now, I believe, so----
Admiral Blake. So let me sort of widen the aperture on that
and as we looked at it, the Navy and the Marine Corps sat down
and we came to the conclusion that it was 38 ships fiscally
constrained to 33. Currently in the inventory we have 29 ships
and we are going to build to 31 by 2013, and then that number
will drop back down to 30.
When we had to apply the strategy and we had to understand
for the two MCO [Major Contingency Operation] requirement, we
looked at it and we said what do we need in order to hit the
requirement? And the position taken was that we needed to have
30 operationally available.
So what you are looking at is if, in fact, you need to
address it from that perspective then what we want to do is we
want to say, all right, we know we are going to have to build
to that number. We want to get to that number and that is our
goal. And so what we ended up having to, if you will, look at
was how were we going to mitigate that?
So when we are at 31 ships we are--we would have to, if you
will, push out the door 30 in order to hit the number--
operationally ready. So we have taken risk and we recognize we
have taken risk, but our eventual goal is to get us back to
around 33 ships in order to be able to push out 30
operationally ready.
Mr. Hunter. Let me ask you this: Do you agree with the two
MEB requirement and the--do you--would you validate the process
by which the Marine Corps came up with their numbers?
Admiral Blake. You mean the two MCO requirement? That is a
valid requirement.
Mr. Hunter. No, the two MEB requirement.
Secretary Stackley. No. Two MEB--he----
Mr. Hunter. The way that he got to his numbers--the way
that General Mills got to his numbers--would you validate the
process that the Marine Corps used to analyze what they need
and the risk assessment that they did to say, here is the
number of ships that we need, or did the Navy do a different
type of analysis?
Admiral Blake. No. The Navy and Marine Corps sat down and
it was not done separately; it was done--we did it in
conjunction with each other.
Mr. Hunter. If you were to build the amphibs where would
you prioritize? I mean, where would you take money out of to be
able to get the Marine Corps to where they need to be?
Admiral Blake. Here is the issue we deal with: I don't have
the luxury of dealing with any single issue in isolation; I
have to deal with it across the entire----
Mr. Hunter. Well, we can. That is why I am asking.
Admiral Blake. Well, we have to deal with it, though,
across the entire portfolio.
Mr. Hunter. Sure.
Admiral Blake. And so what we have to do is we have to
balance the requirement for amphibs, the requirement for
surface combatants, the requirement for the carriers, the
submarines--every category of ships that we have. And so when
we do that we then have to say, all right, as we balance across
that where are we going to be able to assume more risk? And
that is how we--that is how we end up where we are.
Mr. Hunter. So you are saying there is less risk but still
risk in the Marine Corps being short on amphibs than there are
in the other--the rest of the picture?
Admiral Blake. No. I am saying that we have assumed risk in
all areas. The best example I can give you: It was only a short
time ago, if we tried to fill all the COCOM [Combatant Command]
needs we said the number was around 400 ships we would need in
the fleet. Today--and we see no abatement in that commitment or
the----
Mr. Hunter. No--signal.
Admiral Blake. Today we look at it and we see that we
would--if we wanted to hit 100 percent of all the COCOM
requirements we would need in excess of 500 ships. So what we
end up having to do is we go through the global management
process and we look at it and we say, here are our highest
priorities, these are how we are going to address them, and
then we have those units available and we push that----
Mr. Hunter. I understand.
I am going to yield back in just 1 second.
So I would take from your statement, then, that you did go
through a prioritization process and the amphibs are not at the
top of that list. And second, when you say that you assume risk
all the way around I would argue that when you do your risk
assessment and you prioritize your needs the fact that the
COCOMs wanted more ships and needed more ships due to the
international environment and where we find ourselves with the
world today, going down is probably--it is going the wrong way.
We all know that, but I would argue that your
prioritization--I would like to see that, if you don't mind,
the way that you analyzed this and the way that you said, hey,
we are going to keep them there to make sure that we have this
over here. That is all I am asking for.
Admiral Blake. Okay. When we put it together we do it
across the entire spectrum; we don't--and by that I mean, as we
look at the entire requirement we say, this is what we need to
do in order to be able to meet the COCOM demand signal.
And, for example, we not only took out, as you are aware,
for decommissioning, looked at two amphibs, we also looked at
seven cruisers additionally. As Mr. Stackley just mentioned, we
knew 2014 was our hardest year and we had to go in there and,
if you will, rephase or shift to the right a destroyer and a
submarine. So in addition to that we had to look at our small
surface combatants and we had to mitigate those numbers.
So we have to do it across the entire portfolio. We can't
just go and focus on one single area. We have to balance it
across the entire system for ourselves.
Mr. Hunter. Thank you.
I yield back.
Mr. Akin. Yes, I am going to allow a little piggybacking
here.
Originally, General, what you needed in the MEB was 18
ships. Is that correct? A couple years ago that is what we
thought was the right number.
General Mills. Sir, I believe it was 17 was----
Mr. Akin. Seventeen?
General Mills [continuing]. For MEB----
Mr. Akin. Okay, and that left, what is it, about four for
getting repaired or whatever it is?
General Mills. Yes, sir.
Mr. Akin. Okay. And so we have gone from 17 down to what is
it now--not quite 15? You are going to be 14 or 15, somewhere
in there?
General Mills. Sir, it is 15. It is 15. And that is an
assumption of more risk, obviously, and an understanding that
the MAGTF [Marine Air-Ground Task Force] commander would have
to scrub his equipment list prior to embarkation, but we feel
that 15 is acceptable at this point.
Mr. Akin. What would be scrubbed from that list?
General Mills. Sir, that would depend, I think, on the--
where he was going, what his mission was. He would take a look
at his entire equipment list, decide what was specifically
needed forward initially for what his mission was, and then he
would reduce those things--perhaps logistics, maybe some of his
heavy armor, for instance. Again, depending on what that
mission set was going to be when he arrived, what he actually
needed on the ground.
It is not unusual to do that. MAGTF commanders who go
forward routinely leave things back that they can call forward
if they need them. So I would say it would depend on what his
mission was, where he was going, what the threat was when he
arrived.
Mr. Akin. Thank you.
Okay, Mr. Langevin.
Mr. Langevin. Thank you, Mr. Chairman.
Gentlemen, thank you for being here this morning and for
your great service to our country. I would like to turn back,
if I could, to talking about the Virginia class submarine and
the possibility of adding the second boat--one of the--one boat
that is left outside the FYDP and talking about alternative
funding.
So obviously we have previously seen alternative funding
mechanisms in ship programs such as the LHDs, LHAs, the Nimitz
class carriers, and the DDG 1000, as well as the USS Jimmy
Carter. And I know we have talked a little bit about the
alternative funding this morning, but with a little more
specificity with that in mind, and knowing that the most unmet
demand signal from our combatant commanders is for submarines,
what alternative funding options have you considered for
procuring the fiscal year 2014 boat?
Secretary Stackley. Yes, sir. The principal alternative
funding mechanism that we took a look at was incremental
funding. And so we do use incremental funding today for
aircraft carriers, large-deck amphibs, and when we looked at
the funding constraint we had with the top line and moved the
2014 boat out of the FYDP, that is a constraint in the near
term that gives away savings in the longer term, okay, so not
only did we move the boat out and we moved the funding for that
boat out, but we also lost the savings or the efficiencies that
we would have been able to hold on to through continuous
learning, through EOQ [Economic Order Quantity] material, et
cetera.
So that is a top line constraint. The reality is in
shipbuilding your--what we refer to as your outlay rates are
stretched out over time. So in a full funding policy, where you
put all the money up front in the year of procurement, a lot of
that money sits idle waiting for the expenditures in the course
of building submarine over 5 to 6 years. So if you unlock full
funding then all of a sudden--and you get closer to cash flows,
which is more in tune with incremental funding, what it says is
there is asset in the budget that we submitted for nine boats
to fund that second boat in 2014 on a cash flow basis, and then
there are savings downstream that you get by adding that 10th
boat that offsets the upfront cost that we would have
incurred----
Mr. Langevin. And that goes to the heart of my second
question. Yesterday the subcommittee was told that should a
fiscal year 2014 boat be added into the block buy it would
effectively 25 percent self-fund through efficiencies gained in
the future year of boats. So how does the Navy weigh these
efficiencies in the budgeting process?
Secretary Stackley. Yes, sir. Now this goes back to the
funding policy. So in a full funding policy we have to put 100
percent of that boat up across the fiscal year 2013 year, which
is the advance procurement year, and the fiscal year 2014 year,
which is the full funding year. So while we have those
potential savings by adding that boat we didn't have the top
line to make room for that boat within full funding so we could
not--complying with full funding policy, we did not have
adequate top line to get to that second boat in fiscal year
2014.
Mr. Langevin. So did you complete your answer on the
alternative funding?
Secretary Stackley. I think I covered that. The way the
math works, if you were relieved from full funding policy, in
fact, we would not be requesting additional funding across 2013
and 2014; we would have downstream savings and that would make
the boat affordable. But within the constraints of full funding
it is not affordable in 2013 and 2014.
Mr. Langevin. Well, I know that we are all anxious to work
with you to see what we can do to get that fiscal year 2014
boat added within the FYDP if possible.
Last question I had is, I am following with great interest
the ongoing development of the AMDR [Air and Missile Defense
Radar]. Can you share with us how development is going and how
you plan to integrate this capability into the existing naval
force structure?
Secretary Stackley. Yes, sir. The development is going
great. We have got three industry competitors that are working
on the development. They have each been able to leverage other
systems that have been developed using the technology
associated with the AMDR radar, and so when we kicked off the
competition they were well out in front in terms of level of
maturity of the technology.
We are going through--I will call it a small scale
prototype development to demonstrate, you know, proficiency of
the respective designs that will be leading to a downselect. I
am very upbeat on the progress we are making on AMDR and I am
highly confident that that program is right on step to support
introduction on 2016 DDG 51.
Mr. Langevin. Very good.
Thank you, gentleman.
And I yield back, Mr. Chairman.
Mr. Akin. Thank you.
Mr. Wittman.
Mr. Wittman. Thank you, Mr. Chairman.
Admiral Blake, Secretary Stackley, General Mills, thank you
so much for joining us. We appreciate the opportunity.
Secretary Stackley, I want to begin with you. In reviewing
the long-range plan for construction for naval vessels for
fiscal year 2013 it seems like to me we continue to push the
difficult decisions, the more expensive decisions outside of
the FYDP. And in looking at the FYDP from 2013 to 2017 we are
going to construct 41 ships, 16 of which--that is 39 percent--
are the relatively inexpensive LCS [Littoral Combat Ships]
ships. Also within that, there is no funding for the weapons
modules, which we know in order for there to be capable
warships we have to have those weapons modules onboard.
In the next 5 years, from 2018 to 2022, we are building 52
ships, 15 of which--that is 29 percent--are also LCSs.
Additionally, those 52 ships include the Ohio class replacement
and we are going from building 9 SSNs [Nuclear Propulsion
Attack Submarine] to building 12 SSNs in addition to some
large-deck amphibs. So as you can see, we are still
constructing a relatively large number of the less expensive
LCS ships.
In short, from 2013 to 2017 we buy 11 fewer warships than
from 2018 to 2022 and we also buy a much higher percentage of
the less expensive warships in the immediate years, and then in
the out years we are buying the more expensive ships. I
understand this makes the math looks better; I understand the
budget restraints that we are in right now.
But I think we have to be asking ourselves the broader
perspective picture, and that is this: Is this in the best
interest of national security, not just based on today's needs
but what we project out into the future? Is it right for the
Navy? And is it right for the industrial base? I am concerned
at all those different levels--our capabilities both on the
defensive side and our industrial base capabilities.
So I would like to get your reflection on this trend that
we are seeing in the shipbuilding plan.
Secretary Stackley. Yes, sir. I am going to share this
response with Admiral Blake, but let me first start by
describing balanced force. It is a combination of what your
force structure requirement is driven by several factors. One
is the capability, another is the capacity, it is global
presence requirements, it is response to major combat
operations, as well as lesser scale operations. And a balanced
force is necessary to meet that full range of missions that are
called for within affordability top line, you know,
constraints.
So today, in fact, what we have are we have DDG 51s, for
example, performing operations and responding to issues and
concerns that an LCS in theater would be quite suited for if
not better suited for. So we have a high-end, 300-plus--roughly
300-man crew on a $1.5 billion warship responding to an issue
that we would really prefer a $500 million ship with a 75-man
embarked crew taking care of.
We can't go all high-end when we look forward in terms of
the force structure we need across the full range of missions.
So that is one of the reasons why LCS is firmly placed in terms
of our long-term shipbuilding plan.
The concern regarding pushing the difficult decisions
outside the FYDP, that is--there are some tough decisions that
we made. We talked about the Virginia; we talked about the
movement of the destroyer, which stays inside the FYDP but we
moved it outside of the budget year.
Two key decisions that I didn't touch on directly but I
think are on point: One is the decision to delay the
introduction of the Ohio replacement, which was in 2019; we
have moved that to 2021. That was a tough decision. There were
trades that were associated with that.
In making that decision, what we did was we moved $8.5
billion of investment beyond this next decade.
Mr. Wittman. Right.
Secretary Stackley. That goes towards investment in other
areas of shipbuilding or other priorities within the Department
of the Navy. In doing that and in moving that boat 2 years to
the right we can't simply mark time; we have got to take
advantage of the additional time to work on technology
development, design maturity, retiring risk so when the time
comes we award that boat. We are staring at a much more mature,
more complete design so we can execute on schedule.
The downside is, what we just did was we pushed out the
introduction of the Ohio replacement by 2 years and that
introduces a degree of operational risk out into the 2030s when
the Ohio replacement is replacing the Ohio strategic deterrent.
And so we have got to manage that operationally.
When we look across the balance and we say to ourselves, we
have got $8.5 billion worth of asset we can create, we have 2
years of additional time to manage the risk for the
introduction of the Ohio replacement, and we have got
operational risk we have got to manage on the back end in the
2030s, we concluded that that operational risk was manageable
and that upfront time and investment opportunity was important
to take advantage of. And that drove that specific decision.
Similarly, when you march program by program looking at the
trades that were being forced by the top line, we did our best
to strike that balance looking at what is the capability we
need? What is the capacity we need? How do we stay within
affordability limits and not create undue risk?
Mr. Wittman. Okay. Very good.
Let me ask--go ahead.
Admiral Blake. If I can just add, sir, as we looked at
this, I mean, we all knew, if you will, the elephant in the
room was the 2011 Budget Act. It came in and what it
essentially did is, for the Department we had to address a bill
of $58 billion--approximately $58 billion inside the FYDP. And
as Mr. Stackley already mentioned, 2014 was our hardest year;
2013 was our next hardest year.
And then what we had to do is we had to look at, as you
referred to, the high-end low-end mix, if you will. So when we
looked at it we said--we went down, if you will, the list, and
we said, all right, we are going to take out 11 JHSVs [Joint
High Speed Vessel], we are going to take out one T-AGOS
[Tactical Auxiliary General Ocean Surveillance], we are going
to take out one DDG, we are going to take out one SSN, and we
are going to take out--or we are going to take out, if you
will, inside the FYDP, two LCSs.
So as you look at that you can see our focus was the
recognition that there is a high-end issue that we have to deal
with, so we, as best we could, had to stay--tried to stay away
from going against that high-end requirement. However, because
2014 was our hardest year we looked at it and said, there is no
other way we can do this and still hit the numbers that we had
to hit in each of the years, and we had to hit our numbers in
each year.
We couldn't have that give and take to give back--you know,
we couldn't move between years. We had to hit the numbers in
every one of them. So that drove us to what we did. So our
approach was to mitigate as much as possible and apply it as
best we could to the strategy that we were given.
Mr. Wittman. That is very good.
Secretary Stackley, and following up on that I want to ask,
looking back historically, in 1983 and 1988 the Nimitz class
carriers were purchased in block--two in 1983 in a block buy,
two in 1988 in a block buy. Understanding that CVN [Ford Class
Supercarrier] 79 [USS John F. Kennedy] is partially paid for,
is there the possibility that CVN 79 and CVN 80 could be done
in a partial block buy? It looks like to me there would be a
significant amount of savings there, upwards of $500 million.
With our challenges elsewhere in shipbuilding it seems like
those resources could go into trying to plug some of these
gaps, whether it is the SSN build in 2014 or some of the other
areas where we know we are struggling to try to fix those gaps.
So I would like to get your perspective on the historical
elements of block buys and savings that can occur with CVNs.
Secretary Stackley. Yes, sir. Let me focus on affordability
of the CVN 78 class. We are right now about 40 percent complete
construction of the CVN 78 [USS Gerald R. Ford] and we are
running into some very difficult cost growth issues across the
full span--design, material procurement, and production--
material procurement on both contractor and government side.
So our first focus right now is to stabilize the lead ship.
Let's get cost under control so we can complete this ship as
close to schedule at the lowest cost possible.
But in parallel, the Navy is working very closely with the
shipbuilder to take a step back and say, one, what are all the
lessons we just learned on CVN 78? Two, CVN 78 is a very
different ship from the Nimitz; we cannot expect to build the
78 the way we built the 68 [CVN 68 USS Nimitz] and get to an
affordable ship construction plan. So we are pressing on the
way the carrier is built--the build plan for the carrier--to
arrive at a more affordable CVN 79.
Now, in the process of doing that we will take a hard look
at what opportunity there is across 79 and 80, recognizing that
we are going to be limited, again, by top line. But there are
going to be some opportunities that jump out at us. We don't
want to have to re-plan each carrier. We have a vendor base
that is stretched out with the carrier build cycle that for
some components that are carrier-unique, that vendor base is
just struggling to hold on between the 5-year gaps.
So we have to take a hard look at where does it make sense
after we have gotten to what I am calling an optimal build plan
for CVN 79 and then be able to come back and say, okay, here--
on CVN 79 here are some opportunities that if we could, in
fact, reach out to CVN 80 we can either avoid a gap in a
production line or avoid unnecessary cost growth on that follow
ship.
Mr. Wittman. Thank you, Mr. Chairman. I yield back.
Ms. Pingree. Thank you, Mr. Chair.
Secretary Stackley, Vice Admiral Blake, and Lieutenant
General Mills, thank you very much for being here this morning
and for your service to our country. I am going to continue on
a little bit about scheduling and the shipbuilding.
In highlighting the Navy's shipbuilding plans, particularly
about the importance of maintaining the stability for the
future and the Navy's capability and capacity, I really
appreciate your previous testimony. As you discussed, a budget
includes a request for two Arleigh Burke destroyers for fiscal
year 2013 in addition to reauthorizing a 5-year multiyear
procurement through 2017.
It is great for us to hear that this 9-year ship
procurement will help support the need to provide BMD
[Ballistic Missile Defense] capabilities to the fleet and is
also projected to save $1.5 billion. That is wonderful.
However, previous multiyear procurements of DDG 51s have
occurred at an average rate of three ships a year instead of
two. Given that the steps need to be taken to mitigate the
significant projected shortfall in cruisers and destroyers do
you believe a sustained annual procurement rate of more than
two DDG 51s annually is required long-term to fully provide for
our sea-based BMD missions?
And let me just ask one other part of that question:
Additionally, the FYDP shifted the second DDG 51 in fiscal year
2014 to fiscal year 2016. Won't reducing the procurement rate
by half, from two to one, in fiscal year 2014 disrupt the
supply chain and potentially increase the cost?
Admiral Blake. So I think, ma'am, what you are asking about
is you are looking at the requirements saying, these are the
requirements. How are you going to address them as you are
dealing with, if you will, the current fiscal environment we
are in?
Ms. Pingree. Yes.
Admiral Blake. As we look at it, I am required to balance
across the entire portfolio, and I have to look at the top line
I am given in each year and then apply those dollars as
efficiently as possible within it. So if someone were to say to
me, we want you to buy, say, a third DDG, I understand the
investment there and taken in isolation I can do that. The
question becomes, where do you want me to divest, all right? Do
you want me to build one less submarine? Do you want me to
build one less amphibious ship? Do you want me to build one
less aircraft carrier?
Well, no one ever tells me to build one less of anything,
and so that is--what I end up having to do, as we work through
SCN [Ship Construction, Navy] plan I say these are--this is how
I am going to balance within the top line that I am given and
these, I think, are the most efficient ways I can get there.
And it is simple math.
Ms. Pingree. And I understand. I just want to interject a
little bit. Since Mr. Courtney is not sitting here I can
certainly say, well, if you have to build one less submarine
that is the way things go.
But also I would say, just sort of the supply chain
economics, I mean, one of the things that we have consistently
seen is that the more ships that are being built the more
consistently we plan. You know, we talk a lot in here about our
industrial base, of the economies of scale. I understand the
big numbers and I certainly understand the constraints you are
under, but looking at it from the other side, those are some of
the concerns I am looking at.
Admiral Blake. Let me just focus for a second on the
industrial base, because that is an excellent question. When we
are determining what and how we are going to build and where we
are going to build we have to take a look at the industrial
base, and one of the concerns we have is if we make a decision
can that--and it adversely affects a piece of the industrial
base, does that decision allow us to, if you will, at some
future date, reconstitute that capability?
If the answer is yes then we would say, all right, we will
go down that path. If the answer is no then we have to present
to our leadership the fact that this may be an irreversible
decision. You may go down this path and if you do, you may not
be able to recover in the future.
And that is the dialogue we have with the leadership when
we bring those forward and we propose the plan. I can assure
you, they are lively meetings when we sit in there and we put
this forward to them because when they realize the--not only
the effect--the primary effect, but then the second and third
order ramifications to the industrial base and the fact that we
may not be able to reconstitute that at some future date then
the question takes on an even more serious tone.
Secretary Stackley. I would like to address the question
regarding the second destroyer in 2014. A couple of important
facts: First, the--we restarted DDG 51 construction in 2010 and
we have got four ships under contract, and a result of the four
ships that we have placed under contract is we have prior year
savings in this program that are--work in our favor when we
consider future procurement for the 51s.
We also have a unique situation where we have got
competition on this program--two builders building the 51s, and
the competition has been healthy with both builders. We also
have a very significant cost associated with government-
furnished equipment, so not only did we restart construction at
the shipyards; we also restarted manufacturing lines at our
weapon systems providers.
So in this process we were able to restart 51s virtually
without skipping a beat and we are seeing the continued
learning curve that we left off on back with the 2005
procurement. So when we march into this third multiyear for the
51s we are looking to capitalize on the same types of savings
that we saw prior, and our top line, again, allowed for 9 ships
to be budgeted, but when we go out with this procurement we are
going to go out with a procurement that enables the procurement
of 10 ships, where that 10th ship would be the second--
potentially the second ship in 2014 if we are able to achieve
the savings that we are targeting across this multiyear between
the shipbuilders in competition as well as the combat systems
providers as well as all of the other support and engineering
associated with this program.
So we want to leverage the strong learning, we want to
leverage the strong industrial base, we want to leverage the
competition to get to what we need in terms of both
affordability and force structure, and I think we have a pretty
good shot at it.
Ms. Pingree. That is good----
Mr. Akin. Thank you. We are out of time.
I think if we do it just right we may be able to get all
the questions in. If you can keep it--if you could keep it
shorter that is good because we have got votes coming in about
10 minutes, or so.
Mr. Palazzo is next.
Mr. Palazzo. Thank you, Mr. Chairman.
And I would like to thank our distinguished guests for
being here and the services that you provide to our country.
Thank you very much.
I will keep my questions kind of short. I mean, it is
always good to talk about, you know, the things, the decades of
financial mismanagement that have actually led us here today to
talk about our 30-year shipbuilding plan and that we are
actually taking ships out of it and we are not going to be able
to meet our targets, which does--I think is going to impair us
to be able to meet our emerging threats in the future. So I
will keep my question kind of short.
You know, the Navy has made some wonderful progress in
controlling costs in their shipbuilding programs over the
years, and it is a shame that we have gotten so far to the edge
of the financial cliff in this country that those successes
aren't able to be touted in the increase in our shipbuilding
targets. And, you know, such things as the use of multiyear
procurements, keeping the production lines hot, keeping costs
down while producing a better product for the Navy at a better
cost to the taxpayer,extremely--two things that are extremely
important.
So, Secretary Stackley, my question for you is the next
amphib, the LHA 8, is scheduled to have a well deck, which is a
big change from both the LHA 6 and the LHA 7. Obviously a major
change like this requires a great deal of planning and pre-
engineering.
Can you give us any insight about the best ways to save
money on this ship, and especially the savings that could be
seen if we dedicate funds to begin the engineering process
ahead of schedule?
Secretary Stackley. Yes, sir. Let me start with the
decision to go back to a well deck was made in the course of
the last 1 to 2 years. But once you have made the decision now
you have to--what is the best material way to get there, and so
we conducted what I would call a mini analysis of alternatives,
looking at different alternatives to not just restore the well
deck to LHA 8 but then look at all the new capabilities that
that ship was going to be--basically have to handle with
regards to introduction on Joint Strike Fighter, the horizontal
lift capabilities, and do that all within an affordability
target.
So the AOA [Analyses of Alternatives] is wrapping up, and
in this year's budget request we have some funding to start the
R&D [Research and Development] side of LHA 8 design, and that
continues through the FYDP. We did move the LHA 9 to the right
1 year--that ties in with all the previous discussion regarding
the effects of the Budget Control Act. But that remains a very
high priority inside of our shipbuilding program, and what is
critical to ensure that when we go back to a well deck we keep
a handle on affordability, and that means getting that design
matured so when we go into procurement we are dealing with a
very high level of completion of design and not a high level of
risk in construction.
Admiral Blake. Sir, if I can just add to that, it was about
2 years ago when the Commandant and the CNO [Chief of Naval
Operations] sat down and had a discussion about adding a well
deck into that particular ship, and then I sat down with
General Mills' predecessor, General Flynn, and we looked at
where--how we were going to deal with the issue because we
needed to consider cost and we also needed to consider
tradeoffs. So because of the fact that you are going to put a
well deck back in as well as a reduced island on this ship
there has to be some level of tradeoff, and that is what we are
currently looking at right now--where do we make the tradeoffs,
because the requirement is going to be that the Marine Corps
needs a well deck?
And the CNO was attuned to that. He said, I understand; we
will do it, but we have to also look at the cost and keeping it
within the constraints we have, so where do we make the
tradeoffs? And that is what we are dealing with right now.
Mr. Palazzo. Well, I agree, and that is why I think, you
know, making those funds available for pre-engineering is
extremely important because it is going to provide the product
that the Navy and the Marine Corps wants and needs and it is
going to be at the best cost to the taxpayer.
Thank you all for your time.
Chairman, I yield back.
Mr. Akin. Thank you. You redeemed a minute-and-a-half. You
get the prize for the morning.
Okay. Mrs. Davis.
Mrs. Davis. Okay, I will try and do the same.
Admiral Blake, I wanted to ask you about the early
retirement of ships, because there is some confusion about
that. I think a statement was made yesterday that in the 30-
year plan that there would be a commitment not to retire them
early, and yet we know that in the plan now there is a plan to
do that, and--before their service life is completed.
So what can you tell us about that? What confidence can you
give us that when we make that upfront investment in new ships
that the Navy will continue to maintain them and modernize them
in order to make their expected----
Admiral Blake. Ma'am, we would have preferred not to have
decommissioned any ships at all, but given the current fiscal
environment we had to make some very hard decisions, and they--
we arrived at those decisions after a number of deliberations.
So in the case of the cruisers, we had to, if you will, look at
each one of those and say, where can we recoup the greatest
savings as we are going forward? So we looked at the seven
cruisers in particular. One of them has had significant issues
because of a grounding that occurred earlier in its career.
And then we looked at the others and we said we have a
requirement for ballistic missile defense. We have not updated
these other six units with the ballistic missile defense. We
have also not given them the significant HM&E [Hull,
Mechanical, and Electrical] upgrades that are required. And so
when we chose those seven units we said, this is what we are
going to have to do in order to be able to get it.
I will tell you, to give you an idea of the magnitude, just
for those cruisers alone it would require in excess of $4.1
billion if we were to put them back in the system, if you will,
so--and that just is not possible in the current fiscal
environment. And I think if you decided that--if we were
directed to put those back in I can only go to so many, if you
will, pots of money. I would have to go and find something that
would probably be equally egregious as I went forward in order
to hit the balanced numbers, or in order to balance my numbers.
Mrs. Davis. It might be helpful to really be able to look
at that issue in the whole context. If we can do that, and
perhaps you have been trying to provide that information,
because I do think there is a lot of concern about that. I
mean, we have obviously spent a lot in that development and I
think--would you suggest that the--on balance--I understand
what you are saying, but what else could we do? What else would
be--if people are uncomfortable with that decision?
Admiral Blake. Well, actually, I would----
Mrs. Davis. Where do we go from there?
Admiral Blake [continuing]. I would open the aperture even
wider because I think it is not only the cruisers; it is the
amphibs we had to take; it is the fact that we are not going to
be able to build that SSN in 2014 and the DDG in 2014 that we
have already put in. And you look, there is little to no wiggle
room. We are where we are. There is little to no wiggle room at
this point if you want to hit those--if you are expected to hit
those numbers. And we were told we would hit those numbers and
we did.
Mrs. Davis. Could you address, as well, I know the concerns
when we spread out the construction we obviously are unable to
reap some savings that would be done if ships were built closer
together or in some other fashion, you know, grouping. What
kind of dollars are we really losing because we are having to
spread those out? I understand the budgetary constraints, but I
think just in terms of, again, that larger picture and where
those costs are going to be lost.
Admiral Blake. Well, I may be wrong but I think you are
referring to, like, doing multiyears, for example. That is an
efficiency.
Whenever we do a multiyear it is a double-edged sword, and
by that I mean we do recoup savings but at the same time,
when--given the current fiscal environment, it limits me in
what I am able to do because once you put a multiyear in place
if you want to go back and break that multiyear the penalty is
going to be so egregious that it is going to be unacceptable.
So while I do want to achieve multiyears and I want to get
them there, I also have to look at it and say, okay, because of
that I then have to go to a limited number of accounts in order
to come up with those assets to pay a bill.
Secretary Stackley. Let me join in, if I could. We, in
fact, have come across with three multiyear requests with this
budget--the 51s, the Virginias, as well as a multiyear request
for MV 22s [Osprey Tiltrotor Aircraft], and we place a lot of
care and consideration into looking at, is it a firm, solid
requirement? Are there, in fact, substantial savings? Do we
know we are going to buy this thing?
Then let's buy it with a multiyear because that is the best
way to achieve savings and provide stability that the
industrial base needs. So we do leverage multiyears where we
can.
The other side, though, what you are describing is, well,
how about those programs where, in fact, you have got a
sawtooth effect, or peaks and valleys, that impacts not just
the prime contractor but also the vendor base below them? We
are struggling in a couple of areas, and frankly, none more so
than the auxiliary shipbuilding sector today.
And today the last of our auxiliary ships under
construction, T-AKE, followed by the four-ship MLP [Mobile
Landing Platform] class, where we have got three authorized and
appropriated and we are coming forward with a request for the
fourth. We are fighting that sawtooth effect in the auxiliary
sector, and that is near the top of our list of concerns
because of the impact that is associated with the industrial
base, both at the prime contractor and the sublevel.
So on PB13 [President's Budget FY 2013] what you are seeing
is a first line of defense against that. We do not have a long-
term solution in that particular case at this point in time.
Admiral Blake. Yes, ma'am. The only thing I would add is,
while we are--we have our eye firmly focused on the
requirements we also have our focus on that industrial base
because of the concerns we have that it is fragile and we don't
want to, if you will, go back to a position that we can't
recover from.
Mrs. Davis. No. I agree. I think, obviously, coming from an
area like San Diego, we know how critical those issues are, and
so if, as you say, you don't have a solution we--I think we
would love to work with you to try and find one.
Secretary Stackley. Well in fact, if we can talk San Diego
for a second, okay, so the shipbuilder NASSCO has a history of
commercial and military shipbuilding, and at no point in time
can we suggest that we are going to be able to carry NASSCO's
future on the back of Navy ship construction. Their success has
been the combination of commercial and military.
So what we have tried to do over the last couple of budget
subnets is address our requirements for auxiliary shipbuilding,
keep in mind their requirements to be a viable shipbuilder, and
try to build a base that allows them to be more competitive for
commercial shipbuilding as well as fill our need for auxiliary
shipbuilding on a program-by-program basis. So we can't provide
the whole solution but we do look to try to provide a base,
just like we would for our other shipbuilders, but in this case
so they can also be competitive in commercial.
Mrs. Davis. Right. Thank you, sir.
Thank you, Mr. Chairman.
Mr. Akin. Thank you.
And, Mr. Platts.
Mr. Platts. Thank you, Mr. Chairman. I will try to be
quick.
Certainly thank each of you for your testimony and most
importantly for your service. We are grateful for what you have
done for all of us fellow citizens.
Mr. Secretary, a really quick follow-up on Mr. Wittman's
questions about the CVN 79 and the carrier plans: It is my
understanding that you are extending CVN 79 by a year, what the
rationale is there, and won't that have a negative impact on
cost, and what, if any, impact on the vendor and the industrial
base would you anticipate?
Secretary Stackley. Yes, sir. First, we held the year
procurement into 2013, so the 78 was a 2008 ship; the 79--we
are requesting the 79 to be authorized and appropriated in
2013. This is in addition to the years of advanced procurement.
In the case of CVN 79, she is the replacement for the CVN
68, which does not retire today until--the long-range
shipbuilding plan describes that CVN 68 goes out of service in
2023. So what that means is there is an extra 2 years of I will
call it margin for the build span for CVN 79.
Now, in regards to what does that mean for cost, discussing
earlier that first focus on carrier construction is to get CVN
78 right. We have got to right that ship. And in the course of
doing so we are working closely with the shipbuilder to come up
with a better build plan for CVN 79, and in doing that we have
got to get the front end fixed.
A lot of the issues that we are dealing with on CVN 78 are
front end issues associated with design planning and material--
not just the procurement of the material but the arrival of the
material to support the production and build plan. We have got
to get that front end fixed, so that is going to be our first
focus.
And when we are done that build plan then we get to take a
look at what is the proper build span for CVN 79 to arrive at
the best cost? It does not necessarily mean--more time does not
necessarily mean more cost. If you set out with a build plan
that is not proper then you are going to end up using that
additional time just doing more work later when it is more
costly in the construction process. That is what happened on
CVN 77; that is what we are fighting against on CVN 78; and
that is the plan I want to correct for CVN 79.
When we are done, if that arrives at a different delivery
date than what is projected today then the Department of the
Navy will have a discussion about, okay, what is the optimal
now, in terms of introducing that ship, because there is more
than just the ship construction costs that are--that come into
play. We have all the costs associated with the crew, the
operations, and support costs when the ship enters service. So
we have to look at total cost, both construction, operating,
and support; recognizing that we have the added flexibility
associated with the CVN 68s----
Mr. Platts. So the year extension, though, is more
uncertain at this point, until you get 78 right? Am I
understanding that correctly?
Secretary Stackley. I would say that the year extension is
not on the books. In terms of planning, we plan on CVN 79 to
deliver on time, in time to support CVN 68's decommissioning. I
am looking to work with the shipbuilder to--let's relieve
ourselves of a scheduled delivery date. Let's look at how we
can best build that carrier reliably----
Mr. Platts. Based on what you are learning from 78 and
going forward?
Secretary Stackley. Yes, sir. And that I expect to occur in
the--we will go through this in the course of the next year and
then I will be able to bring that information back to POM-14
[Program Objective Memorandum]. It may or may not affect our
planning dates today, but at least in making that decision it
will be better informed than it is today. Because today the
only information we have to go on is CVN 78 experience and that
does not drive any decision to deliver 79 earlier.
Mr. Platts. Thank you, Mr. Secretary.
Yield back, Mr. Chairman.
Mr. Akin. Thank you.
Unfortunately, we have just got 8 minutes left in the vote.
We have two 15-minute votes. I would assume we could resume
sort of in the 12 o'clock range, so we are going to call an
adjournment here for just a moment.
[Recess.]
Mr. Akin. I believe Mr. Larsen is going to be next, but I
am taking the chairman's prerogative in asking one simple
question, Admiral, and a cup of coffee is riding on the answer
to your question, okay, so just make sure you answer it the
right way, okay? I am going to read it just the way the
question is written.
Admiral Blake. Is it with cream and sugar, sir, or black?
Mr. Akin. If I win I will get it the way I want it.
I don't envy the task you had in trying to balance
requirements and resources. Knowing it is your job to protect
the President's Budget, what is the one or two things that you
would have preferred to see stay in the budget request if you
had more resources--one or two things?
Admiral Blake. If I had to choose one or two things I would
probably choose the DDG and the SSN that we had to give up in
2014.
Mr. Akin. Go to the head of the class. I just won my
coffee. The bet was you wouldn't answer the question, so I came
out okay.
I thought you were going to do it. Thanks. I owe you half a
cup of coffee.
Mr. Larsen.
Mr. Larsen. Thank you, Mr. Chairman.
Based on what the value of the prize was--coffee for
getting a--I was concerned that you had to answer a question
and you were going to be the winner. You are very fortunate,
based on the coffee that we have here, that----
[Laughter.]
That you only had to provide an answer but was not--were
not tied to the prize.
Question for Mr. Stackley, regarding the SSBNs, and the
tears slip on this--in your written testimony it is not quite
clear to me so if you can be more clear in response to this
question--was--did you make the decision on SSBN 2-year delay
in conjunction with STRATCOM [U.S. Strategic Command]?
Secretary Stackley. STRATCOM was fully involved in the
decision to come forward with the 2-year delay. We all
recognize the STRATCOM requirements and that by going down from
today's force structure down to a 10-boat force structure for a
period of time it places greater stress on meeting their
requirements, but given that, if you take a look at the 12-boat
plan for the Ohio replacement, in fact, in the 2050s, when that
class is going through its extended refit period, we are back
to 10 boats again.
We believe that operating--meeting their requirements does
increase the risk, but at the front end of a new ship class
unplanned maintenance and overhauls and extended refits that
aren't a part of that schedule, that it is acceptable risk. So
they were party to the discussion; they understand the decision
process that went forward.
Admiral Blake. Sir, if I can just----
Mr. Larsen. Yes, sure, Admiral.
Admiral Blake. So when we looked--when we looked at the
SSBN(X) [Ohio Replacement Ballistic Missile Submarine] and the
2-year delay, what we did was we sat down with all the parties
involved and we went to the 2030 to 2040 timeframe and we--and
that is the period when you would drop down to 10 boats. But
one of the ways you are able to mitigate that is because as you
are bringing those 10 boats online they are all new we don't
have to start their refit periods until later on in the period,
around the 2040 timeframe.
So to answer your question, yes, we think we can take on
that risk in that timeframe, but we still think, given the
current state of the criteria for the requirement, that we
would eventually we would have to go back to the 12 boats,
because when those 10 boats start going through their refit
periods that is when we need them to go--the number has to go
back up to 12 in order to maintain the requirement for the
continuous number of boats at sea.
Mr. Larsen. That is fine. I understand that. If that is the
case then why wasn't this the plan in the first place, if it is
a risk you can take now? Maybe it is sort of revisiting that
question.
Admiral Blake. Well, I think it was based on the economic
or the fiscal realities that we faced as we had to, if you
will--we were concerned with how many--what areas were we going
to be able to take additional risk in and still meet our
requirements? That is what it came down to. It was just the
overall fiscal situation that we ended up in.
Mr. Larsen. All right. I would imagine that--we also have a
Strategic Forces Subcommittee and this might be a question we
are going to explore there, as well. Does this have any impact
on--thanks for starting the clock; I am going to have to speak
quickly--does this have any impact on the 16-tube versus 20-
tube discussion that we are having on the design?
Secretary Stackley. We did take a look at--in doing the
analysis of alternatives for the Ohio replacement we looked at
24-, 20-, and 16-tube, and STRATCOM was very central to those
discussions----
Mr. Larsen. Right.
Secretary Stackley [continuing]. And that decision, as
well. And the other alternative that, frankly, we looked at was
can we afford to go down to a 10-boat class for the long term?
Concluded that we needed 12 boats for the long term--16 tubes
with 12 boats meets--meets 85 percent of the New START
[Strategic Arms Reduction] Treaty warhead allowance.
Mr. Larsen. Right.
Secretary Stackley. What we give up in going from 20 down
to 16 is some flexibility on loadouts. So we give up some
flexibility, we get the affordability that comes with a 16-tube
boat, and we maintain the total force structure 12 boats for
operational availability, and that seems to be the sweet spot
in terms of balancing----
Mr. Larsen. But with this period of time where you are at
10 boats, is that a problem?
Secretary Stackley. No, sir. No, sir.
Mr. Larsen. Why not?
Secretary Stackley. Why not?
Mr. Larsen. Yes. Because if 12 boats and 16 tubes is, you
know, great flexibility at some point for a period of time----
Secretary Stackley. You don't have the missile inventory to
load out 12 boats, so your missile inventory doesn't go to that
point.
Mr. Larsen. Okay.
Finally, we had some discussion about this question with
regard to CVNs and trying to find a way to squeeze some costs
out and one of the ideas was to do some--do block buy of
certain components of CVN components. And have you considered
that, and what is your thought on that on block buy on
components from 79 to 80, or whatever, 79, 79 to 80, and so on?
Secretary Stackley. Yes, sir. At this point in time the
Navy and the shipbuilder are sitting side by side putting
together a build plan for CVN 79. We are 40 percent complete
construction of the 78; we have got a lot that we have got to,
I will say, do different on the 79 and follow from the lead
ship. It is a very different ship class.
So we are taking a hard look at the build plan. We need to
get that locked down. And associated with that is the complete
bill of materials for the Ford class.
At that point in time we will be able to take a look at----
On this, call it bill of materials, what does it make
sense--what makes sense in terms of looking long term, beyond
the immediate ship?
Mr. Larsen. Right.
Secretary Stackley. Are there areas of the industrial base
that are stressed to the point that it does make sense to look
at coupling the CVN 79 and CVN 80 buy?
We are not at that point yet. I described earlier that I
think after we get through this build plan review then we will
be able to come back in 2014 and identify potential critical
items that warrant a block buy approach.
Mr. Larsen. Yes. Okay. Thank you.
Thank you, Mr. Chairman.
Mr. Hunter. [Presiding.] Mr. Coffman.
Mr. Coffman. Thank you, Mr. Chairman.
First, thank you all for your service.
Lieutenant General Mills, would you say that it is--that
the forced--forcible entry requirement is--to satisfy that
requirement is two Marine Expeditionary Brigades?
General Mills. Yes, sir. That is the requirement that we
are planning to.
Mr. Coffman. Okay. And then ideally, would you say for that
requirement that we would have 38 ships out with 4 probably
down for maintenance, so ideally the requirement would be 42
amphibs?
General Mills. Sir, we would assume risk to take 15
amphibious warships--15 per MEB in the assault echelon, that
is--for a total of 30 operationally ready ships to deliver
that--those two MEBs to the right place at the right time. That
is the number that we are currently--is acceptable to us.
Regarding the inventory, we--you know, we support the--what
the Navy is looking at, which is 32 ships under the current
plan to deliver to us 30 operational ships at the time and
place in which we need them.
Mr. Coffman. Now, how much risk would that take? I guess
you would have noncombatants for--on the follow-on carrying
equipment, marines?
General Mills. Yes, sir, that is correct. And, you know,
the follow-on echelons could--would be made up of the MPS
[Maritime Prepositioning Ships] ships that we have. We have 14
ships in those two squadrons that carrying equipment designed
to support two additional MEBs as they would flow in after the
assault echelon has made its entry.
There is risk in what would go out with the initial assault
force. Again, it is the MAGTF Commander who would have to make
some decisions as to what he loaded out depending on what the
mission was, what the threat was. That would be made at the
time, I think, and place of his assignment.
Mr. Coffman. Okay. So if now we have revised and revised
that number down we are accepting greater risk.
But what is the--Mr. Stackley, what is the date, then, that
we will be actually at 32 ships?
Secretary Stackley. Sir, I am not going to do this all from
memory, but basically, at the end of this decade we basically
start to build back up. Today we are at 29. We will be
delivering--we have five LPD 17 class ships that are in some
stage of construction that we will be delivering serially over
the course of this decade, as well as the LHA 6. So somewhere
towards the end of this decade we get up to the 32, 33 ship
level. And then the long-term plan has us sustaining that level
with the introduction of the LSD [Landing Ship, Dock] 41 class
replacement, the LSD(X), and continued construction of the big-
deck amphibs.
Mr. Coffman. So then out of the 29 ships that are currently
in service how many of those ships are in service life
extension programs?
Secretary Stackley. LSD 41/49 class is the only ongoing
service life extension program for the amphibs. The LPD 17
class obviously is a new ship class, and the big decks don't
have a specific midlife extension but they do go through, in
their class maintenance plan, continued series of modernization
as well as maintenance and repair through their overhaul cycle.
Mr. Coffman. So out of the 29 ships how many of them are
deployable right now?
Admiral Blake. Sir, I would have to take that question for
the record and get back to you. I don't have that number right
in front of me.
[The information referred to can be found in the Appendix
on page 113.]
Admiral Blake. But I would tell you that as we look at the
delivery of ships, such as America, we go back and we say, all
right, if the delivery is delayed then we look at the large-
deck amphibs we have in order to--and extend them beyond what
we were going to do for their initial decom date and push them
out. So we recognize that we want to keep that capacity around.
Mr. Coffman. Okay.
Thank you, Mr. Chairman. I yield back.
Mr. Hunter. Does anybody have any secondary questions? If
you do now is the time.
Otherwise, thank you all very much for your service and
time and we are going to change out panels.
Okay. We are going to restart the hearing here, and some
other folks are going to come in. I don't have an opening
statement, so--nor do I have your introductions, I don't think.
Let's see, biographies. I will tell you what, why don't you
introduce yourselves in your opening statements?
STATEMENT OF PHEBE N. NOVAKOVIC, EXECUTIVE VICE PRESIDENT,
MARINE GROUP, GENERAL DYNAMICS CORPORATION
Ms. Novakovic. --executive V.P. at General Dynamics for
marine systems--that is all of our shipyards. And I appreciate
the committee's invitation to testify. In the interest of time
I have some very short oral remarks. My written statement
further amplifies these themes.
First, our shipyards: We have got four shipyards with
approximately 21,000 employees. Bath Iron Works, in Maine,
designs and builds destroyers. Electric Boat, in Groton,
Connecticut, and Quonset Point, Rhode Island, designs, builds
and repairs nuclear submarines. And NASSCO, in San Diego,
designs, builds, and repairs Navy auxiliary ships and ships for
the Jones-Act market. NASSCO also has a repair yard in Norfolk.
I would like to extend an invitation to each of you to come
visit our yards and see firsthand the kinds of ships we build
and the capabilities of our workers, of whom we are very proud.
You asked for our view of the Navy's long-range
shipbuilding plan. Let me answer that by focusing on the fiscal
year 2013 FYDP programs that affect our businesses.
First, the Navy's destroyer plan: We strongly support the
Navy's plan to execute a multiyear procurement for nine more
DDG 51 submarines. We are grateful for the committee's support
of prior DDG 51 multiyears. Your support on this one will
ensure that Bath can continue to reduce costs of these ships.
We also appreciate the increased clarity and stability of
the Navy's plan. A stable plan provides the predictability
necessary for us to manage our workforce and make informed
decisions about future facilities investments.
That said, as we have talked about this morning at some
length, the FYDP shifts the second DDG 51 from fiscal year 2014
to 2016. We intend to work closely with you and the Navy to
ensure that any risk from this disruption is mitigated.
While not part of the 2013 plan, I want to thank this
committee for your support of the DDG 1000. Construction on the
first ship is 60 percent complete and going very well.
Construction on the second ship is more than 25 percent
complete. And Bath begins work on the third and final ship in
April.
Next I will address the Virginia class submarine program.
For years these boats have been under multiyear contracts,
which allowed Electric Boat to reduce costs and reduce
production cycle times. These successes would have been
impossible in the absence of multiyear authority, which
provides greater predictability and stability, and we thank
this committee for your constant support.
The Navy has requested your approval to contract for at
least nine more submarines in Block IV in a multiyear. We urge
the committee to continue supporting multiyears for this
program.
I am sure that I speak for our teammate, Newport News, when
I congratulate this committee for accelerating the Virginia
class procurement from one to two submarines a year. This
increased rate ensures that we can do our part to build these
ships faster and at a significantly reduced cost to the Navy.
As we talked about earlier today, the budget shifts the
second Virginia class in fiscal year 2014 to fiscal year 2018.
While we are pleased that the Navy remains committed to Block
IV, the delay of the second fiscal year 2014 submarine is not
without consequence. The shift interrupts the two-a-year
production plan, impacting the costs of Block IV and the
stability of the supplier base. We will work hard to support
all efforts to find cost effective solutions to address this
delay.
Turning to the Ohio replacement program, over the last two
decades Electric Boat has made great strides in designing ships
to optimize construction and reduce costs; and I believe, can
design, build, and construct the new ballistic missile
submarines on time and on cost. Imperative to this, however,
are two factors: first, stability in design and construction
funding; and second, clear, cost-sensitive requirements that,
once established, do not change. Regarding the recently revised
Ohio replacement plan, we ask that the Navy and the Congress
provide predictable, level loaded R&D funding to support the
most efficient design profile.
Finally, I will address the Navy's auxiliary ship program.
We appreciate the acceleration of the final T-AKEs and mobile
landing platform ships, enabling NASSCO to provide significant
cost savings to the Navy. MLP is a capable, flexible platform
and the President's Budget seeks a fourth MLP ship in fiscal
year 2014. We would also ask your support for that platform.
In the interest of time--you had asked about shipyards--
preserving shipyard critical skills--I would refer to you my
written testimony that has a quite extensive section on that. I
do, however, want to talk about cost efficiency and risk
reduction.
You had asked about initiatives to drive low-cost and
lower-risk Navy ships. Cost efficiency and risk reduction are
central to General Dynamics. We have a culture of continuous
improvement, which means that every process is subject to
rigorous cost analysis and process improvement.
In addition, we believe in investing in our proven
businesses when there is sufficient volume and stability to
justify the deployment of shareholders' capital. These
investments help our businesses reduce costs and improve
quality.
At E.B. [Electric Boat] we use a disciplined, cost-driven
approach, called design for affordability, that optimizes the
Virginia design for production. As a result, we eliminated 3
million hours of E.B. labor and contributed to a unit cost
reduction of about $400 million per ship.
On Ohio replacement, Electric Boat is attacking design,
construction, and lifecycle costs concurrently in the outset of
the program. Already our engineers have instituted 510 cost
reduction initiatives and we are reviewing another 1,200 for
implementation.
At Bath we are cutting overhead through initiatives such as
consolidating leased facilities and dramatically reducing our
energy and water consumptions. Thousands of lower-level process
improvements using lean manufacturing principles and Lean Six
Sigma resulted in $58 million in savings in the last 2 years
alone.
At NASSCO the T-AKE, the last of the class, will deliver
for 38 percent of the hours on the lead ship, and rework is
less than 1 percent. This was achieved through comprehensive
process improvements. We modified the design to make it more
producible, increased throughput, and focused the entire
organization on changes that improve efficiency.
In short, the unit cost of all of our platforms that we
build are lower, not higher, from each unit to the next.
Finally--and we have talked about it quite a bit this
morning, but let me address the health of the shipbuilding
industrial base. As prime contractors each of our shipyards is
healthy, highly productive, and well facilitized. As primes,
however, we have a responsibility to our suppliers.
Our submarine industrial base consists of highly
specialized suppliers with unique skills and capabilities,
which, if allowed to atrophy or disappear, cannot be
reconstituted quickly or affordably. The base is stable but it
is limited. Multiyear procurements with economic order buys and
advanced procurement allow suppliers to invest in human capital
and facilities. However, we have a number of one-of-a-kind
suppliers who possess designs, facilities, and people not
replicated elsewhere.
The recent revisions to the Virginia and Ohio replacement
programs have troubled the community. Many suppliers had
accelerated production based on expectations of higher
workload. They now face a workload valley with the attendant
loss of learning.
At BIW [Bath Iron Works] we have roughly 3,000 suppliers in
47 states, most of whom remain healthy. However, the supply
chain is increasingly consolidated. Today, roughly 29 percent
of the value of materials and components is committed to single
or sole-source suppliers.
The auxiliary ships delivered by NASSCO are built to
commercial standards, which allow for a more diverse supplier
base. That said, the auxiliary ship markets require stability
to ensure lower cost solutions.
This concludes my oral remarks, and thank you for the
opportunity to testify, and I look forward to answering any of
your questions.
[The prepared statement of Ms. Novakovic can be found in
the Appendix on page 65.]
Mr. Coffman. [Presiding.] Mr. Mulherin.
STATEMENT OF MATTHEW J. MULHERIN, PRESIDENT, NEWPORT NEWS
SHIPBUILDING, AND CORPORATE VICE PRESIDENT, HUNTINGTON INGALLS
INDUSTRIES
Mr. Mulherin. My name is Matt Mulherin. I am corporate vice
president of Huntington Ingalls Industries and the President of
Newport News Shipbuilding.
Distinguished members of the Seapower and Projection Forces
Subcommittee, thank you for this opportunity to share what we
at Huntington Ingalls Industries believes are the issues facing
our U.S. military shipbuilding. I want to limit my oral remarks
to a brief summary of my written testimony, which I
respectfully request be submitted for the record.
Today I would like to discuss the health of the industry,
the cost of ships, and what we believe are obstacles to more
affordable ships. I would characterize shipbuilding and its
associated industrial base as healthy but fragile, and one
critical to our Nation and economic security.
We live in an era where freedom of global commerce on the
seas is taken for--as a given. We have been and still remain a
maritime nation and the sea is our conduit to the rest of the
world.
Our Navy is the only force capable of maintaining that
conduit. Clearly, then, it is essential for the Nation to
maintain a healthy shipbuilding and industrial base.
At Huntington Ingalls Industries we defined a healthy
industry as one that attracts talent, capital, and the
technologies necessary to meet its commitments to maintain and
grow the business. We compete with other industries for
critical skills and we must make a career in shipbuilding
attractive to the next-generation workforce.
We must also have the access to capital by demonstrating
the viability and return on investments while offering an
acceptable balance of both risk and reward. But building
America's most complex ships reaches far beyond our shipyard's
gates. We have a highly skilled industrial base made up of
4,000 suppliers across all 50 states.
Some of our suppliers have chosen to leave shipbuilding to
focus on more steady business. As they leave we lose critical
manufacturing skills across our Nation.
A stable shipbuilding plan is crucial. We are sizing
ourselves today to support the Navy's plan, but the potential
for sequestration could have a devastating impact to our
healthy but fragile industrial base.
Much has been said and published concerning the rising cost
of military ships. The reasons for these increases are quite
complex with many variables, and I will try to discuss
specifically how the estimating and budgeting process impacts
cost.
The current methods do not factor in the increased
complexity of warships or how new technologies have altered the
way we build them. For example, new ship designs incorporate
many more miles of cable to monitor ship conditions and to
operate systems.
From an operational standpoint, these innovations provide
great benefit and cost savings over the life of the ship. From
a design and construction standpoint, it makes today's ships
vastly more complex to construct, integrate, test, and deliver.
The current estimating and budgeting processes do not
reflect these factors. Until they do we will significantly
underestimate and incorrectly budget for today's complex ships.
I would also like to mention ``should cost'' analysis.
These estimates differ from traditional evaluation methods
because they do not assume that a contractor's historical cost
reflects efficient and economical operation.
``Should cost'' estimates do provide value and may identify
areas for improvements that can yield real savings. The
difficulty of such analysis is that it may also quantify a
theoretically possible yet realistically improbably outcome,
potentially resulting in unrealistic estimates, budgets, and
ultimately, unachievable targets.
There are two other significant factors that affect cost
and I would like to discuss each briefly. They are changes to
the current ship programs, and procurement strategies.
Currently we are facing a build-rate reduction on Virginia
class submarines and DDG 51 class destroyers in fiscal year
2014. While delaying construction starts or changing the
quantity of vessels in a class may result in decreased funding
demands for any given fiscal year, overall they will have
detrimental impacts to a shipbuilder and the industrial base.
The realities of budgeting and funding to an optimal plan may
not always be achievable, but the effects of stretching or
gapping programs are also realities that cannot be ignored in
assessing cost growth.
Regarding procurement strategies, in recent years we have
seen greater use of multiyear procurements for submarines and
destroyers, and most recently, the block buy contracts for the
Littoral Combat Ship. These types of contracts enable greater
economic efficiency to provide the shipbuilder and industrial
base with a stable, relatively long-term business base that
helps us justify process investment and infrastructure
improvements. We encourage the Congress to make broadest use of
multiyear contracts and block buy contracts, and we believe
they result in overall lower cost to the taxpayer.
In closing, I would like to report that today American
manufacturing is alive and well in our shipyards and in our
supplier companies across the Nation. Together we are building
the finest ships the Navy has every sailed.
Thank you, and I look forward to answering any questions
you may have.
[The prepared statement of Mr. Mulherin can be found in the
Appendix on page 91.]
Mr. Coffman. Let me ask a couple.
First of all, I think to both of you, as you look to the
future, what is your biggest concern for the shipbuilding
industrial base, if you were to identify one as being your top
concern?
Ms. Novakovic. For us it is stability and predictability of
funding. We can adjust to lower volumes of new ship
constructions--construction, to a point. I mean, there becomes
a critical mass that you need. But the single largest thing
that we have to have is consistency and stability, because that
allows us, then, to work with the industrial base and our
suppliers to craft their support of us and our--and frankly,
our entire build strategy and our entire shipyard, to meet the
requirements of the Navy.
So right now would we all wish that we had more volume?
Sure. But within today's volume I think it is manageable as
long as these plans stay in place and they get funding that we
can rely on.
There is nothing that perturbs the work plan of a shipyard
more than changes in a longstanding program. It is costly and
ultimately ends up costing--we have learning issues, but
ultimately it ends up costing the Navy a considerable amount of
money.
Mr. Coffman. Mr. Mulherin.
Mr. Mulherin. I would have to agree that says that
stability is a very big issue. Big issues facing Huntington
Ingalls Industries have to do with amphibious ships, both the
timing of LHD 8 and the timing of LSD(X) that drives workload
valleys at Ingalls Shipbuild, and that we--that would be--that
drive costs in the programs.
Mr. Coffman. Let me just ask you one--given this
shipbuilding plan that is being presented by the
Administration, by the Department of Defense, is it such that
it is inefficient to keep--is it enough to sustain the number
of shipbuilding yards that we have in the United States today,
or do we--given the workflow from--the reduced workflow from
this plan, what is the net effect in terms of being able to
keep alive the number of shipbuilding yards that we have?
Mr. Mulherin. As you may be aware, at--within H.--
Huntington Ingalls Industries we are right-sizing our footprint
in the shipbuilding business, so we are in the process of
winding down military ship construction at Avondale Industries,
in New Orleans, and that shipyard will cease being part of that
military shipbuilding industrial base after delivery of the
second LPD that we are building there. So I think at least
within our realm that that will size the industry will have
about the right footprint.
Ms. Novakovic. I think that, again, thinking about our
three major shipyards, the FYDP adequately supports the capital
footprint that we have got at each of those shipyards. I think
it is contractors' responsibilities to size their business to
meet the demand. So when the demand slows we have got to take
costs out of our business and out of programs in order to
effectively and efficiently meet those lower volumes.
That said, the movement of the--and the delay on Virginia
in 2014 and of the DDG 51 is troubling, not so much for the
footprint of the--or the capital structure of the shipyards,
but because of the efficiency of which we can build these
ships. It is just going to cost more.
Mr. Coffman. Mr. Larsen.
Mr. Larsen. Mr. Chairman, I will yield my time to Mr.
Courtney.
Mr. Coffman. Okay.
Mr. Courtney.
Mr. Courtney. Thank you, Mr. Chairman.
You know, obviously you have out very well sort of a
challenge we have got in terms of maintaining the momentum in
your programs that you have been working on. And again, looking
back, when we--when this subcommittee actually sort of put a
bet down in 2007 that advanced procurement above what the
administration gave was hopefully going to pan out in terms of,
you know, getting all that momentum in terms of a more
efficient, cost effective program.
I mean, clearly the numbers speak for themselves. I mean,
that was a bet that did pay off. A fixed-price approach also
sort of challenged both yards to sort of hit, again, budget
constraints from the government.
So in terms of trying to look at what we can do as a
subcommittee to try and avoid the damage that you have laid out
here--again, there are other ideas that are floating around
about possibly using some form of flexibility in the
contracting process to, again, avoid the problems that you have
described. And I guess the question is, you know, are we at a
point in both programs--the DDG and the Virginia class--where
we should feel confidence that if that opportunity was given
that it is something that, you know, within even the budget
constraints that we are all dealing with would really work? And
I just wonder if you could comment on that.
Ms. Novakovic. As a predicate to what I am going to say, I
wanted to share with the committee that I used to run the
national security division at OMB [Office of Management and
Budget] so I understand the catechism around the bad words of
incremental funding. But that said, it is, in my view,
appropriate with long-term national security programs that have
been performing well. We are well into 15 years of excellent
performance on Virginia class. If there was a program that met
the test of incremental funding I think this is it.
And frankly, we have crossed that Rubicon already, and
while precedence isn't in some people's mind as positive, it is
in mine. It is a way--it is, frankly, the only way to get the
velocity into that--those shipyards, because you are putting
more work on a yearly basis just funded in a more rational
profile.
We haven't talked about it, but I suspect that if the
sequencing of the money is right this can be a very effective
tool to buy more submarines for the amount of appropriated
dollars that we have over that period. So that is on the
Virginia class.
With respect to the 51s, I think Sean mentioned that we are
looking to work with the Navy and then we will ultimately need
this committee's help. Because of the savings that were accrued
to the Navy--to the Navy's benefit from the competition that
Ingalls and Bath participated in, those funds may be available
to again resequence the available monies and appropriated
dollars over the period that we--and perhaps even throw in
another ship.
So I think we are premature in that. I have yet--and I
don't know if you all have, but I have yet to see what that
sequencing would look like, what funds are available. I think
the Navy is beginning to look at that but that is something
that--be all back up here once we have got some clarity to talk
to you about.
Mr. Mulherin. I would agree. I think split funding that
kind of aligns how the Navy outlays funds with what my
obligations are in any year does make sense.
Obviously you have to look at it and make sure that it
doesn't impede the program as you go through the years of that
construction. So as long as it doesn't, I think it makes sense.
Mr. Courtney. Well, it sure seems like we are--again, we
are not talking about programs that are in their infancy. We
are talking about mature programs that are well along, again,
and that have really, I think, should give the Government a lot
more confidence that, you know, stepping outside the catechism
may be, you know really justified, because clearly with the
Budget Control Act caps minus sequestration, I mean, we are all
going to have to put our thinking caps on to come up with
creative ways to stretch the dollars out farther, and really
under almost any scenario.
So we look forward to working with you if, again, there are
some ideas in terms of accomplishing that goal.
The other sort of question--quick question I just wanted to
ask was that, you know, you sort of talked a little bit about
sort of the carryover from Virginia to the Ohio replacement
program. I mean, that is sort of another dividend to sort of,
you know, getting--keeping that momentum going, because clearly
there are going to be lessons learned as far as getting the
cost of the Ohio replacement down from what you have done in
the Virginia class. And just thought maybe you could just sort
of underline that point.
Ms. Novakovic. Yes, in two respects. We are using the
lessons learned in the design of Virginia on--in the design of
Ohio. And we have a new tool in place, so between our lessons
learned and the design tool that we are very, very familiar
with, we are getting some astounding efficiencies on the design
side.
We also, though, to test the design and our ability to
accurately use all of the tools and the lessons learned we have
built some prototypes. And they have been perfect.
So this early into a program we are retiring construction
risk years before construction starts. I consider that a major
accomplishment. And we will continue to do that iteration
throughout the design and engineering of the Ohio, but it is
why we appeal for--we need that funding level loaded. It is
pushing that ship out 2 years, if we don't get that design done
and all the risks retired in the design and all--and do
considerably more of this kind of prototyping we are talking
about--all bets can be off on the construction.
Mr. Coffman. Mr. Wittman.
Mr. Wittman. Thank you, Mr. Chairman.
Mr. Mulherin, Ms. Novakovic, thank you so much for joining
us today.
Mr. Mulherin, I want to begin with you and follow up on a
question that I asked with our previous panel, and that is with
the current state of CVN--we heard Secretary Stackley talk
about the cost with 78--I would like to ask you your thoughts
about the idea of a block buy. We have seen historically where
block buys create some certainty, they create some cost
assurance, they also create some significant cost savings,
which these days we are all looking at ways to attain.
Give me your thoughts on a block buy scenario for the
remaining portion of purchase on CVN 79 and CVN 80 and then
subsequent scenarios for block buys.
Mr. Mulherin. Yes, sir. You know, historically you go back,
you were exactly right, if you look at the contracts that
bought the CVN 72 and 73 there was huge savings that flowed to
the second ship, both in the ability to go buy materials, a
block buy and get discounts there, but also that you did the
engineering up front the first time for both hulls so the
second ship you really just had the answer, problem, paper and
some of those kind of things the--kind of the normal course of
business to support the waterfront.
So I wouldn't see any different. I think if we were able to
do it both for material, for the engineering to be able to go
pump out drawings that had two-ship applicability--plus, I
think it brings the--CVN--if we were to do a two-ship buy for
79 and 80 it would ensure CVN 80 was a copy of CVN 79, no
change into the contract or very minimal, you are not having
a--on the material side you get economic order savings, you
don't have to deal with obsolescence.
So absolutely. I think there is huge opportunity to go do
that. You know, you talk to the vendor base. They would love to
see it. It gives them the ability to go look at what
investments they need, what work is out in front of them, and
go invest in training and tools to be able to go support that.
Mr. Wittman. Well, thank you. I know as I have heard from
suppliers, their big concern is in the 79 and 80 build
structure to look at spreading those build cycles out,
spreading those centers out. For them, many times spreading
that out takes them out of the availability of being able to
survive those longer periods of time as suppliers, and we all
know that our supplier base is absolutely critical.
I want to ask both of you a question about DDG 51. As you
know, the--I want to ask this: Do we know the estimated cost
per unit on the DDG 51 Flight IIIs? And I understand that there
are going to be 33 ships in this class as they are being
developed, and I understand, too, as we are making decisions
about how to, again, block buy those ships there is also the
air missile defense radar upgrades there.
We are looking at, you know, what the cost structure are
associated with them. And how much will that cost be integrated
into this future cost structure for the Flight III DDG 51? And
how will efficiencies in Flight IIA be utilized to streamline
construction on Flight III?
And do you see this--as we get into Flight III do you see
this developing into an entirely new class of ship? Because as
you know, we are doing the three DDG 1000s. The decision has
been made to stick with it, at least for the time being, and at
least with the next bid for the next nine ships to be DDG 51.
But the question is, with Flight III, you know, where are
we going with modernized systems, with the hull type itself? Is
all of that going to integrate as the years go down the road?
So I would like to hear both of your comments about that.
Ms. Novakovic. We are approaching this multiyear, should we
get that authority, and certainly this block of ships in the
same way that we have approached each competition that we are
in. I don't see any particular additional uncertainty as we
think about these ships.
We do not understand that radar. We are going to have to
understand it better and its interfaces with the ship. We have
got a long way to go until we are at that point where we need
to go bid and size. That we work with the Navy customer and,
frankly, the other industry partners who have been very, very
helpful.
I will give you an example. We are doing the combat systems
integration with Raytheon. We have a tiger team with Raytheon
because we are not electronics guys, right? So the extent--they
have been very useful in teaching us a lot about how their
systems work so we could optimize the integration of that
system into the ship hull.
It is that kind of process that we will apply to a--
whatever the changes are in the--and even if they are
substantial changes--in the configuration of the 51s. So we can
bid as long as we understand we can--and understand that--the
risk areas and that you are properly protected around those
risk areas, and everybody is reasonable about understanding
what they are I think is----
Mr. Coffman. Thank you, Mr. Wittman.
Mr. Wittman. Thank you, Mr. Chairman.
Mr. Coffman. Ms. Pingree.
Ms. Pingree. Thank you very much.
Thank you two for both--for testifying today and really for
doing a good job of talking about the efficiencies that both
yards are working on and the importance of a healthy
shipbuilding base. I know my colleagues are going to want to go
vote so I will try to be brief here.
I am very fortunate to represent the 1st Congressional
District of Maine, which has Bath Iron Works, and the 5,500
wonderful workers and the great shipbuilders at that yard and
the long tradition of producing incredible ships under budget
and on time.
And I appreciate your testimony, Ms. Novakovic. It is great
to hear you talk more about the efficiencies that have been
achieved and how the multiyear funding really can be helpful,
and I know my colleagues are thinking a lot about that.
But I just wanted to give you an opportunity to talk for a
minute or two about the DDG 1000. It is nice to know that it is
60 percent complete, and I know we have two more along the way,
and if you want to just talk a little bit about the progress of
them and how----
Ms. Novakovic. Yes. For those of you who haven't visited
the shipyard I would recommend it, and in particular, Bath,
because while we all can intellectually understand the
constructs of these--and sizing of this ship it is really quite
remarkable when you see it. It is a large ship with enormous
capacity to carry very sophisticated equipment. This is going
to be quite a warfighting ship. I am outside my lane to talk
about, you know, what the Navy is going to love and not love,
but I have a feeling, in fact, betting a cup of coffee, that
this is going to be a game-changer for the Navy once we get it
delivered to them.
So we are 60 percent complete. The deckhouse that Ingalls
is building, is on track. We have got the--BAE is providing the
magazines; we have installed several of those. We have yet to
hit any design-construction discontinuity.
And we have these fully outfitted, as well. When we say
complete they are complete with full outfitting.
So we are very pleased with where we are at this juncture.
Now, the risk in shipbuilding, and as we--those of us who have
lived and watched this--tends to be at the back end of the
ships, and we are very mindful of that. So we have risk
mitigation plans A through Z to address whichever one of these
variables can affect us.
The work on the second DDG 1000 is progressing extremely
well and I believe it is, I think, next week that we start on
the third. So they are on schedule. We are on cost.
The first ship, by the way, is a cost-plus; the second two
are fixed-price. I personally am an advocate of fixed price,
assuming that you can get the risk properly identified and
fenced off and understood.
So I think that there is a real possibility that these
ships are going to be done exactly the way the Navy wants them
in a very affordable price. So we are actually excited about
this program. Thank you.
Ms. Pingree. Well, thank you very much for your testimony.
I wanted to just thank Mr. Wittman for coming to visit the
yard, and I know he was impressed, as everyone is, to see the
incredible systems that have been developed for shipbuilding
today. It is really a phenomenal use of technology and great
workers' skills. So thank you very much.
Mr. Coffman. Thank you.
With that, the committee hearing is--oh, I am sorry.
Mr. Palazzo? Mr. Palazzo.
Mr. Palazzo. Sorry about that. Thank you, Mr. Chairman.
And thank our guests for being here today. It is great to
actually get an industry perspective. I was particularly
impressed with Mr. Mulherin's, you know, comments about the
efficiencies of multiship buys.
Is there anything else you or Ms. Novakovic would like to
add to help us do our job--help us understand what you, the
industry, is doing to provide the customer and the taxpayer
with the best ships and the best possible price for America?
Mr. Mulherin. I guess I will just go real quick. I want to
tell you, in building ships it is a full-contact sport. There
is no stone not turned over looking for ways to take out cost.
The Navy has stood up a--under Admiral Eccles' review team that
looks at ship specifications for how can we change those ship
specifications to make them more producible and still maintain
the warfighting capabilities of the ship? That has been
helpful.
Our supply base leans into it. You know, we have just spent
yesterday and today with our aircraft carrier industrial base
council, and part of that was a panel to ask suppliers for
their ideas on how we can take out costs. So we are trying to
lean on everybody and we have got a great bunch of shipbuilders
who spend every day trying to figure out how do they go, you
know, work safer, work with higher quality, take out costs, and
meet schedule.
So I think we are doing all that we can and I think--but
again, we need to do more. So I have nothing more to add.
Ms. Novakovic. I just quickly, to your point about
multiyears, two subset examples: At the shipyard it allows us
to level load the workforce, and that preserves--improves their
efficiency and preserves their skill sets. So that is critical
for us, and then we have some predictability that we can man at
that level, and that is the best way to build ships
efficiently.
Looking from the--at the supplier base, the block material
buys that can be done in sufficient economic order quantities
give you an enormous leverage in driving down the price of your
suppliers. You cannot do that on one-off ships; you can do it
in block buys of many ships--classes of material.
It just is the basic law of economics. Volume reduces their
cost, just as it does in our--for us. So that is really the
beauty of--those are two--if I think about it, those are the
two simplest metrics.
Mr. Palazzo. Well, thank you all both so much, again, for
what you all are bringing, helping the Navy and helping the
taxpayers understand that you are out there trying to control
costs. And congratulations. I think you all are participants in
the last great American industry in our country and we need to
do everything we can to preserve it, promote it, and protect
it.
Thank you.
Mr. Coffman. Thank you.
[Whereupon, at 1:03 p.m., the subcommittee was adjourned.]
=======================================================================
A P P E N D I X
March 29, 2012
=======================================================================
PREPARED STATEMENTS SUBMITTED FOR THE RECORD
March 29, 2012
=======================================================================
Statement of Hon. W. Todd Akin
Chairman, House Subcommittee on Seapower and Projection Forces
Hearing on
Oversight of U.S. Naval Vessel Acquisition Programs and
Force Structure of the Department of the Navy in the
Fiscal Year 2013 National Defense Authorization
Budget Request
March 29, 2012
This morning the Seapower and Projection Forces
Subcommittee meets to discuss naval shipbuilding as presented
in the fiscal year 2013 budget request and the force structure
it supports. The Constitution states that Congress shall
``maintain a Navy.'' To do this we must ensure the Navy has the
resources required to build ships that will sail in harm's way,
operated by America's sons and daughters. Today's Navy is by
far the most capable in the world. Our job is to make sure it
stays that way.
There are some worrisome indicators in the fiscal year 2013
budget request delivered to Congress last month. There are
significant changes in this request from that anticipated for
the same period just last year. The Shipbuilding and Conversion
Account is 20% lower, at $13.7 billion, with the procurement of
10 ships instead of 13. The account is 8% lower in the next 5
years than it was in the last 5 years, with 16 fewer ships,
going from 57 to 41. In many ways, it makes little sense to be
shrinking our Navy just months after the announcement of a
strategy that would shift emphasis to Asia, the Pacific, and
the Mideast--areas where a strong naval presence is an
imperative.
To address these and other issues we have two panels. I
want to thank all of our witnesses today for taking valuable
time out of their schedules to be here with us. The first panel
represents the acquisition and requirements leadership in the
Department of the Navy, and for the second panel we have two
executives from some of our largest shipyards to discuss
impacts of the budget on their industrial base, and
particularly on their talented and unique workforce. They are:
Panel 1
LHon. Sean Stackley, Assistant Secretary of
the Navy for Research, Development and Acquisition;
LVice Admiral Terry Blake, USN, Deputy Chief
of Naval Operations for Integration of Capabilities and
Resources (N-8); and
LLieutenant General Richard Mills, USMC,
Deputy Commandant for Combat Development and
Integration and Commanding General, Marine Corps Combat
Development Command.
Panel 2
LMs. Phebe Novakovic, Executive Vice
President, Marine Group, General Dynamics Corporation,
and
LMr. Matt Mulherin, President, Newport News
Shipbuilding, and Corporate Vice President, Huntington
Ingalls Industries.
Thank you again and we look forward to your testimony.
Statement of Hon. Susan A. Davis
House Subcommittee on Seapower and Projection Forces
Hearing on
Oversight of U.S. Naval Vessel Acquisition Programs and
Force Structure of the Department of the Navy in the
Fiscal Year 2013 National Defense Authorization
Budget Request
March 29, 2012
I would like to thank all of the witnesses for appearing
here today and for their service to the country.
Both the Department of the Navy's FY13 budget and the
recently received 30-year shipbuilding plan highlight the
challenges the Navy and Marine Corps team are currently facing
and will continue to face long-term.
The short-term implications of the budget constraints
imposed by the Budget Control Act, forced the Navy to make
difficult choices such as moving a Virginia class submarine
from FY14 to FY18. This single move only further exacerbates
the capability gap the Navy will be facing beginning in the
mid-2020's with regard to fast attack submarines. Other
difficult choices included the early retirement of cruisers and
amphibious ships and the move of one DDG-51 from FY14 to FY16.
I look forward to hearing from the witnesses about any
potential ways we as Congress can help mitigate any shortfalls
those moves have caused.
I am concerned about the cost growth with regard to the USS
Gerald R. Ford (CVN 78). I understand that this is the lead
ship in a new class of aircraft carriers and several systems
that had been planned to be incrementally fielded were pulled
forward causing additional challenges. I would appreciate
hearing from our witnesses about what lessons learned we have
gained from CVN 78 and how they can be applied to the follow-on
CVN 79.
As I review the 30-year shipbuilding plan, I see that the
challenges continue as we move into the out-years. Today, the
FY13 new ship construction budget stands at $13.7 billion. The
30-year plan clearly points out that the budget required to
meet future demands is simply not attainable under current
budget levels. The plan states that the required average annual
spending on new ship construction in the near-term planning
period will be $15.1 billion per year and during the mid-term
planning period between FY2023 and FY2032, average yearly
spending will climb to $19.5 billion per year. This growth is
due in large part to the recapitalization of its Fleet
Ballistic Missile Submarine (SSBN) force. In order to meet this
plan, added resources in the Navy shipbuilding account will be
necessary. I hope the Department of the Navy will continue to
work with Congress and try to find a solution given the tight
budget environments we are facing.
Recent world events have further proven why it is necessary
to have a Navy and Marine Corps that is capable of quickly
responding when needed. Whether that means reacting to flashes
of unpredicted violence, as we saw in Libya, or responding to a
natural disaster and the subsequent humanitarian crisis like
the situation that occurred in Japan after the earthquake.
This subcommittee remains committed to ensuring our Navy
and Marine Corps are prepared to meet the challenges of today
and the future. I want to thank the witnesses again for being
here today and their service to our country.
I also want to thank the industrial base panel witnesses
for being here today. I look forward to hearing your estimates
on how the FY13 budget and future budgets will impact not only
your industrial base but the second- and third-tier suppliers
you depend on.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
=======================================================================
WITNESS RESPONSES TO QUESTIONS ASKED DURING
THE HEARING
March 29, 2012
=======================================================================
RESPONSE TO QUESTION SUBMITTED BY MR. COFFMAN
Admiral Blake. Of the 29 amphibious ships, 19 are deployable right
now. Of the ten ships that are non-deployable, two are finishing their
year-long LSD Mid-Life availabilities, seven are in scheduled
maintenance availabilities, and one LPD has been redesignated to an
AFSB (I). [See page 26.]
______
RESPONSE TO QUESTION SUBMITTED BY MR. COURTNEY
Secretary Stackley. The Navy briefed Professional Staff Members Mr.
Tom MacKenzie and Mr. Phil MacNaughton of the House Armed Services
Committee on April 5, 2012, concerning the VIRGINIA Class multiyear
procurement, specifically, the nine-boat verses ten-boat, and the
challenges the Navy faced with the budget.
The FY 2013 President's Budget Submarine Force Structure is
attached on page 114. [See page 7.]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
=======================================================================
QUESTIONS SUBMITTED BY MEMBERS POST HEARING
March 29, 2012
=======================================================================
QUESTIONS SUBMITTED BY MR. LANGEVIN
Mr. Langevin. Could you both please comment on the impact of the
potential Virginia class boat shift from FY14 to FY18 on the
efficiencies that we have gained by shifting to a two-per-year
procurement rate?
Ms. Novakovic. A critical component to achieving the $2B (FY05$)
unit cost goal for the Virginia class submarine involved increasing the
production rate to two ships per year and maintaining that rate. Navy
studies completed in the 2005-2006 timeframe concluded the combination
of maintaining the two-ships-per-year production rate along with
multiyear procurement provided a unit cost reduction to subsequent
procurements of about $200M per ship (FY05$). This increased production
rate provides increased efficiencies by allowing fixed cost to be
spread over a greater volume of work and enables a more stable and
efficient drumbeat for manufacturing, assembly and delivery of ships
from each builder. Removing the second ship in FY14 and adding it to
FY18 interrupts the cadence of the production plan and program learning
curve and decreases the efficiencies gained through the greater
production volume. Continued stable and predictable two-ships-per-year
procurement is the most efficient way to improve production and
manufacturing efficiencies at the shipyards and across the industrial
base.
Mr. Langevin. What effect might such a move have on both your
workforces and your supplier base, particularly lower-tier suppliers?
Conversely, could you describe for this subcommittee why such great
efficiencies are gained from a steady two-per-year procurement rate?
Ms. Novakovic. Moving the second FY14 ship to FY18 impacts the
workforces at the shipyards and in the industrial base as follows:
-- Reduces staffing levels at shipbuilders in Connecticut,
Rhode Island and Virginia over the period 2014 to 2018 by 800
to 1,000 jobs. This work would be accomplished later in Block
IV (i.e., 2018-2022).
-- In a similar fashion, it reduces staffing levels at other
major suppliers in Virginia, Ohio, Indiana, New York and Rhode
Island by approximately 350 jobs. This work would be
accomplished later in the block as well.
-- In addition, highly skilled manufacturing jobs from the
direct suppliers to the prime contractors, as well as their
suppliers (i.e., sub-tier suppliers), and the associated
economic impact to local economies where material is bought,
will be moved out by 5 years. Virginia class submarine material
is bought from suppliers in all 50 states, therefore the
economic impact is felt across the entire country to varying
degrees.
Efficiencies are generated from a steady state two-ships-per-year
procurement rate in four key areas:
-- Production efficiency
-- Cost efficiency
-- Supplier efficiency
-- Critical skills retention
Production efficiency
A steady state procurement rate of two ships per year continues, in
an uninterrupted fashion, the series production plan that has been
optimized for efficient production (i.e., shortened cycle time and
build plan). Steady production rates provide the steady demand that
allows the shipyards and industrial base to better plan and execute the
work and to match the work to the required resources (skilled
workforce, shipyard facilities and industrial base capacity). The
ability to maintain a steady plan avoids costly peaks and valleys
associated with the cycles in workload levels. Learning curve
efficiencies are also realized as production units are built in a
repeatable fashion on subsequent units and budgets and cost targets are
more easily understood and flowed down to the shop floor. It is
estimated that removing a ship from FY14 will insert a 6-month
production gap into the series production plan which will incur a
penalty of more than one million labor hours on Block IV submarines due
to interrupted learning and lost efficiencies.
Cost efficiency
Continued efficient multiyear procurement of Virginia class
submarines provides economic order quantity savings and improved
material availability that support more efficient production plans and
reduced construction spans. Efficiencies are derived though volume and
earlier procurement of material avoiding escalation costs that would
result from the later procurement of hardware. The volume afforded by
the two-ships-per-year production rate allows the shipyard and
suppliers to spread fixed costs more efficiently over a larger business
base providing further economic benefit. The shipbuilders are able to
achieve labor savings due to the ability to execute the build plan as
conceived and to drive down labor hours on subsequent units.
Supplier efficiency
The production and cost efficiencies discussed above for the
shipyards are also realized by the suppliers for the equipment they
directly provide. Continued two-ships-per-year procurement encourages
suppliers' sub-tier supply chains and local economies to grow by
providing a stable and predictable workload to meet increased
production demands. This stability bolsters the supply chain with
steady production, to keep suppliers competitive and reduce costs, and
provides the supplier base with the confidence it needs to make capital
investments in equipment and their workforce.
Critical skill retention
The ability of the United States to efficiently manufacture and
deliver nuclear submarines is directly related to our ability to retain
the people who possess the experience and unique skills that are
exercised only during the submarine building process. In order to
retain the current competency, as well as advance the production
process, it is imperative that we keep submarine production at a stable
and efficient rate. This stability allows the shipbuilders to execute
viable workload plans, provide long-term employment opportunities, and
preserve the critical skills needed for production. The production
break caused by the shifting of the second FY14 ship to FY18 adds risk
to the Nation's ability to efficiently and effectively manage the
submarine production workforce that possesses these critical skills.
Mr. Langevin. How does the 2-year push of the Ohio Replacement
program affect your engineering and design workforce?
Ms. Novakovic. In February 2012, PEO Submarines (PMS397) informed
Electric Boat that the start of construction on the lead ship in the
Ohio Replacement Program would slip 2 years, to FY21. This delay will
extend the design effort by 2 years, adding roughly one million labor
hours to the overall design effort. The design reschedule will assure
that the Missile Compartment effort supports the needs of the United
Kingdom, while attempting to maintain concurrency of the design
evolution with the rest of the Ohio Replacement design effort. This
shift poses risk to the resource and infrastructure planning within the
industrial base that supports technology and new component development
during the design phase. The acquisition cost will also escalate due to
the 2-year delay across the 12-ship construction plan. As a result of
this stretch in the design effort, Electric Boat employment increases
planned in FY13 through FY14 will be delayed. Engineering and Design
employment on Ohio Replacement will remain essentially constant in FY13
and FY14. While the Ohio Replacement represents a significant portion
of the engineering and design work across the company, the introduction
of new work on Virginia class and other projects mitigates the impact
of the Ohio Replacement program delay such that the overall engineering
and design workforce remains stable through FY13 and future years.
Mr. Langevin. Could you both please comment on the impact of the
potential Virginia class boat shift from FY14 to FY18 on the
efficiencies that we have gained by shifting to a two-per-year
procurement rate?
Mr. Mulherin. Maintaining a stable and predictable two-per-year
procurement and subsequent production rate is the most efficient way to
gain production and manufacturing efficiencies at the shipyards and
across the industrial base. Increasing the procurement rate to two
ships per year, and maintaining that rate, was a critical component to
achieving the two for $4 billion (FY05$) cost goal for the Virginia
class submarines. Newport News Shipbuilding and Electric Boat began
two-per-year production in FY11, with the volume of work peaking in
2015. This rate provides efficiencies in both workforce and facilities
utilization for both companies and allows fixed costs to be spread over
a greater volume of work. Repetitive work teams can move from one
module or unit to the next ship's module/unit on 6-month intervals
verses 12 months at the one-per-year rate. This allows for continuous
learning and improved skill retention during the manufacturing,
outfitting and delivery phases of construction. Shifting the second
ship from FY14 to FY18 will reduce these efficiencies, increase non-
value-added costs such as escalation, and significantly increase
overall program cost by as much as $600 million based on joint NNS/EB
estimates. The shift of the FY14-2 boat to FY18 will also result in a
submarine workforce reduction. This reduction follows significant
investment we have already made in our workforce as we ramp up to the
two-per-year production rate, and will require us to rehire, retrain
and reinvest in a new workforce as production returns to the two-per-
year rate.
Mr. Langevin. What effect might such a move have on both your
workforces and your supplier base, particularly lower-tier suppliers?
Conversely, could you describe for this subcommittee why such great
efficiencies are gained from a steady two-per-year procurement rate?
Mr. Mulherin. A break in the Virginia class submarine series
production plan results in an estimated loss of 800-1,000 jobs at the
shipyards and 350 jobs at our prime suppliers during FY14 through FY18.
This immediately follows the completion of the manning ramp-up to
support earlier two-per-year construction. At NNS, an average of 500
submarine construction jobs will move from FY14 through FY18 to FY19
through FY23, creating a workforce gap that will be difficult to
recover in certain critical skills. An estimated average of 350 prime
contractor jobs that supply equipment for the Government (VA, OH, IN,
NY, RI) will also move from FY14 through FY18 to FY19 through FY23.
Although an exact number cannot be determined, based on previous
industrial base studies, the impact to all Virginia class suppliers is
expected to be at least within the same order of magnitude as the
impact to the shipyards, with the potential to be even 3 to 5 times
higher given that material is bought from thousands of suppliers in 46
states. Reconstitution following job losses at the shipyards and
supplier companies will be problematic, adding risk and cost associated
with rehiring and retraining personnel.
Two-per-year production provides benefits in efficiencies and
economies of scale, including opportunities to lock-in lower material
costs for multiple ships. It also provides opportunities to move work
teams from one module or ship to the next on 6-month intervals verses
12 months at the one-per-year rate. A steady two-per-year procurement
rate provides gains in production and cost efficiency for the
shipbuilders and suppliers (both Contractor Furnished Equipment and
Government Furnished Equipment) as well as improved retention of
critically-skilled workers. The following provides a brief description
of the efficiencies associated with steady two-per-year procurement.
Production efficiency
A steady state procurement rate of two-per-year, in an
uninterrupted fashion, supports the series production plan in place
today, which has been optimized for efficient production (i.e.,
shortened cycle time and build plan). The ability to maintain a steady
plan avoids costly peaks and valleys associated with the cycles in
workload levels. Learning curve efficiencies are also realized as
production units are built in a repeatable fashion on subsequent units.
Cost efficiency
Continued multiyear procurement of Virginia class submarines
provides economic order quantity savings and improved material
availability. Both of which support more efficient production plans and
reduced construction spans. Efficiencies are derived through volume and
earlier procurement of material, avoiding escalation costs that would
result from the later procurement of hardware. The volume afforded by
the two-per-year production rate allows the shipyard and suppliers to
spread fixed costs more efficiently over a larger business base
providing further economic benefit.
Supplier efficiency
The production and cost efficiencies discussed above for the
shipyards are also realized by the suppliers for the equipment they
directly provide. Continued two-per-year procurement encourages our
suppliers' sub-tier supply chains to grow by providing a stable and
predictable workload to meet increased production demands. This
stability bolsters the supply chain with steady production to keep
suppliers competitive and reduce costs. It also provides the supplier
base with the confidence it needs to make capital investments in
equipment and in their workforce.
Critical skill retention
The ability of the United States to manufacture and deliver nuclear
submarines is directly related to the shipbuilders' ability to retain a
few thousand people who possess the experience and unique skills that
are exercised only during the submarine building process. In order to
retain the current competency, as well as advance the production
process, it is imperative that we keep submarine production at a stable
and efficient rate. This stability allows the shipbuilders to execute
viable workload plans, provide long-term employment opportunities, and
preserve the critical skills needed for production. The production
break caused by shifting the FY14-2 ship adds risk to the Nation's
ability to efficiently and effectively manage the submarine production
workforce who possesses these critical skills.
Mr. Langevin. How does the 2-year push of the Ohio Replacement
program affect your engineering and design workforce?
Mr. Mulherin. Current projections are that our existing Ohio
Replacement Program (ORP) engineering and design workforce is expected
to remain essentially flat through FY13, as opposed to a slight
increase in demand during this period. However, the ORP subcontracted
effort represents less than 10 percent of the overall design and
engineering workforce at our shipyard. From a volume perspective, we do
not expect any adverse effect to our engineering and design workforce
as a result of the two-year shift. From a critical skills perspective,
the shift does place additional pressure on retention of a number of
critical engineering and design capabilities that will require
mitigating actions to avoid.
______
QUESTIONS SUBMITTED BY MR. WITTMAN
Mr. Wittman. Mr. Stackley, I would like to focus on the near-term
planning period of the Long-Range Naval Vessel Construction Plan and
the Naval Battle Force Inventory. In the next 5 years we are
decommissioning 22 Oliver Hazard Perry class frigates, essentially
ending that class's active service to the Navy. During this same time
period the Navy is procuring 16 LCS. My question is how many LCS will
be delivered to the Navy and be fully mission capable and deployable
between FY13-FY17?
Secretary Stackley. The Navy will take delivery of 17 Littoral
Combat Ships (LCS) and 21 Mission Packages by the end of Fiscal Year
(FY) 2017. The Navy currently has two LCS available for Fleet tasking.
USS FREEDOM (LCS 1) is scheduled to deploy for a second time in 2013,
this time to Singapore, and USS INDEPENDENCE (LCS 2) is currently
sailing to her homeport of San Diego, Calif. FORT WORTH (LCS 3) will
deliver to the Navy in June 2012. CORONADO (LCS 4) will deliver to the
Navy in FY 2013. The ships of the block buy contracts will begin to
deliver in FY 2014 starting with MILWAUKEE (LCS 5) and JACKSON (LCS 6).
Deliveries then ramp up with DETROIT (LCS 7), MONTGOMERY (LCS 8), and
LITTLE ROCK (LCS 9) in FY 2015 and GABRIELLE GIFFORDS (LCS 10), SIOUX
CITY (LCS 11), OMAHA (LCS 12) and LCS 13 in FY 2016. LCS 14, LCS 15,
LCS 16 and LCS 17 are scheduled to deliver in FY 2017. Currently, the
Navy plans for each ship to undergo approximately 12 months of post
delivery tests and trials.
The LCS Mission Package program is on track to deliver a mix of
Mine Countermeasures (MCM), Surface Warfare (SUW) and Anti-Submarine
Warfare (ASW) Mission Packages to support the Fleet's warfighting
missions for the Littoral Combat Ship. LCS employment will be in
response to the global demand signals of the combatant commanders to
support timely joint force access to critical littoral regions. LCS
will be configured with the mission package required by the operational
commander. LCS also has inherent characteristics and capabilities to
enable missions such as Maritime Law Enforcement operations, Maritime
Anti-Terrorism/Force Protection, Search and Rescue, and Freedom of
Navigation (FON) operations. The table below shows the cumulative
number of LCS and Mission Packages that are planned to deliver to the
Navy by the end of FY 2017.
Mr. Wittman. Mr. Stackley and VADM Blake, in reviewing the Long
Range Plan for Construction for Naval Vessels for FY2013, it seems to
me that we continue to push hard decisions outside the Future Years
Defense Program (FYDP).
a. Within this FYDP, from 2013 to 2017, we are planning to
construct 41 ships, 16 of which (39%) are the relatively inexpensive
LCS small combatants. Additionally, the LCS cost from shipbuilding
budget does not even include the LCS Mission Modules, which are
required for these ships to be viable warships.
b. In the following 5 years, 2018 to 2022, we are building 52
ships, 15 of which (29%) are LCSs. Additionally, the 52 ships include a
first in class Ohio Replacement, a total of 12 Virginia class SSNs vice
the 9 Virginia class SSNs within the current FYDP, and some large deck
amphibs. Obviously, these will be relatively expensive ships to
construct; especially relative to the LCS.
c. From 2013 to 2017, we buy 11 fewer warships than from 2018 to
2022; and we also buy a higher percentage of less expensive ships in
the FYDP than the next 5 years.
d. I understand this makes the math look better, but is this right
for the National Security of this country, is this right for the Navy,
is this right for the Industrial Base? Is it realistic to believe that
we will have the required funding from 2018 to 2022 to support this
dramatic ramp-up in shipbuilding?
Secretary Stackley. The Department of the Navy shipbuilding plans
are based on three central principles: (1) maintain required battle
force capability to meet the national defense strategy; (2) balance
needs against expected resources; and (3) maintain an adequate
shipbuilding industrial base.
After accounting for the funding limits of the 2011 Budget Control
Act (BCA) and the specific resourcing decisions made in the recently
completed strategic review, and considering the full range of
supporting capabilities, capacities, and enablers found in the combined
Navy-Marine Corps Team, going forward the 21st Century Battle Force
will have about 300 warships. This battle force is fully capable of
meeting the strategic guidance found in Sustaining U.S. Global
Leadership: Priorities for 21st Century Defense, and as importantly,
the construction plan that builds it sustains the national shipbuilding
design and industrial base. The Navy's Long Range Plan for Construction
of Naval Vessels carefully balances construction of all classes of
ships including small surface combatants such as Littoral Combat Ships.
The FY2013 President's Budget and the Future Years Defense Plan
fully funds the construction of naval vessels in the plan through
FY2017. Beyond the FYDP, however, the need to recapitalize our Fleet
Ballistic Missile Submarine force will put pressure on the Navy's
overall shipbuilding plan. Annual spending on Navy shipbuilding must
increase during this 10-year period, before returning to historical
averages in the last decade.
To procure the needed ships during the middle decade, yearly
shipbuilding expenditures will need to average about $19.5B/year. This
is greater than $4B more per year than in the first decade, and nearly
$3B more per year than the steady-state, 30-year average requirement of
$16.8B/year. The Department is taking strong measures to try to reduce
projected yearly shipbuilding costs during this period, such as trying
to reduce the recurring and non-recurring costs for OHIO Replacement
and other ship programs.
If the DON is unable to sustain average annual shipbuilding budgets
of $19.5B during the second decade, plans to recapitalize the Nation's
secure second-strike nuclear deterrent and the Navy's conventional
battle force will have to be re-examined. The overall size of the
battle force will drop below the levels needed to meet all naval
presence and warfighting requirements.
The Department recognizes that its 30-year shipbuilding plan
represents a significant demand on fiscal resources, and is committed
to maintaining stability in planned requirements, funding and
shipbuilding profiles in order to tightly control the demands on these
precious resources.
Mr. Wittman. Mr. Stackley, the industrial base has routinely and
consistently stressed the importance to maintain a steady ship
construction rate vice ebbs and flows in construction to help to drive
down unit costs. The current plan does not appear to stress this
consistently. Does this plan, in an effort to make the FYDP look good,
actually open up taxpayers to paying more in the long run for the same
number of ships?
a. A specific example of this is the shifting of one Virginia class
submarine from FY 2014 to FY 2018. This move effectively increases the
total cost to the American taxpayer for 10 Block IV Virginia class
submarines by approximately $600 million. Why would we pay an
additional $600 million dollars to have the same number of submarines
delivered?
Secretary Stackley. The Navy recognizes that shifting one ship from
FY2014 to FY2018 is not the most cost efficient way of procuring the 9
Block IV VIRGINIA class submarines; however, this is one of many
difficult choices that the Navy had to make in developing the PB13
budget in order to reduce spending in FY2013 and FY2014 in compliance
with the Budget Control Act. However, with an eye on providing much-
needed stability to the shipbuilding industrial base, the Navy has
maintained the total number of submarines planned for the Block IV
multi-year (nine) and plans to leverage advance procurement and
economic order quantity buys to mitigate the impact of this shift.
Mr. Wittman. Mr. Stackley and VADM Blake, in 1983 and 1988 the U.S.
Navy entered into block buys for Nimitz class carriers, buying 2 in '83
and 2 in '88. Understanding that some of CVN 79 has already been paid
for, are there benefits to the taxpayer to enter into a partial block
buy for CVN 79 and CVN 80? It is my understanding that some experts
estimate this could save the Navy and the taxpayer close to $500
million? That is a decent amount of money to put towards an SSN, DDG,
Amphib, or LCS.
Secretary Stackley. The Department recognizes that building the
required force structure depends on controlling shipbuilding costs. In
the case of aircraft carriers, the Navy is focused on stabilizing the
lead ship (CVN 78), getting cost under control and completing the ship
as close to schedule at the lowest cost possible. The Navy is
experiencing cost growth in the design, material procurement, and
production associated with CVN 78.
CVN 78 is a very different ship from the Nimitz-class and the Navy
cannot expect to build the CVN 78 the way it built the CVN 68 and get
to an affordable ship construction plan. The Navy is working closely
with the shipbuilder to incorporate lessons learned from CVN 78
construction which will result in a more affordable build plan for CVN
79.
It is too late to implement a complete block buy on CVN 79 and CVN
80, as some of CVN 79, particularly its propulsion plant, has already
been purchased. Pending results of the ongoing Navy-Industry `optimal
build plan' review, the Navy would have an option to implement a
partial block buy for CVN 79 and CVN 80 to the extent substantial
savings are generated.
Mr. Wittman. Mr. Stackley, do we know the estimated per-unit cost
of the DDG-51 Flight III? I understand from the plan that there will be
33 of these ships and they will replace the capabilities and mission
set of the CG-47 cruisers and improve integrated air and missile
defense for the battle forces. Do we know the estimated cost of the Air
and Missile Defense Radar (AMDR) and how much the integration on to a
DDG-51 hull will cost? What efficiencies from DDG-51 Flight IIA will be
utilized to streamline this construction? Do you see this developing in
to a completely new class of ship?
Secretary Stackley. The unit cost for DDG 51 FLT III ships as
submitted in PB13 is approximately $2,151M (TY$). This represents the
first three FLT III ships (one ship in FY 2016 and two ships in FY
2017) and includes installation/integration of AMDR onto the DDG 51
hull, associated ship changes, and non-recurring design costs. This
estimate will continue to be refined as the AMDR technology matures and
the AMDR down select occurs. AMDR is currently in a competitive
Technology Demonstration phase. A draft Engineering Manufacturing
Development Request for Proposal was recently released for industry
comment. The Navy's estimate for the AMDR is included in the total ship
price presented above. Releasing the estimate for the radar alone at
this time would adversely impact the ongoing competition. The estimate
for all 33 ships has not yet been finalized.
The Navy intends to compete the FY 2013 through FY 2017 DDG 51 MYP
using Profit Related to Offer, similar to previous DDG 51 competitions.
As with previous DDG 51 MYPs, these contracts will be fixed price
incentive contracts. The shipbuilders will compete to the stable DDG 51
Flight IIA baseline (nominal configuration of the DDG 113-116 restart
ships) for all nine ships planned for procurement between FYs 2013-
2017. In addition, the Navy will use MYP authority to contract for the
Vertical Launch Systems, AEGIS Weapon Systems, and Commercial Broadband
Satellite Systems to support these ships.
Independent of the MYP contract action, the Navy's Air and Missile
Defense Radar (AMDR) program is in development to address gaps in
Ballistic Missile Defense. Currently, this S-band radar program has
demonstrated prototype technology in a relevant environment. As noted
above, the Navy's current plan calls for the final three ships of the
DDG 51 MYP to be modified via an Engineering Change Proposal (ECP) to
the Flight III configuration which incorporates the AMDR-S band radar
in place of SPY-1D(V). This ECP approach provides the Navy the ability
to field a critical advancement in Ballistic Missile Defense, the AMDR-
S radar, at the earliest opportunity, while preserving the increased
savings that a 5 year DDG 51 MYP provides to the Navy's shipbuilding
program. But the proposed MYP contracting strategy provides the
flexibility to continue to procure Flight IIA DDGs if the technology
critical to Flight III does not mature on schedule. It should be noted
that the Navy has successfully used ECPs to enhance DDG 51's during
previous MYPs. Examples of technology incorporated during MYPs via ECPs
include: SPY-1D(V); NULKA; CIWS Block 1B; Cooperative Engagement
Capability (CEC); and enhanced 3000kW (vice 2500kW) Gas Turbine
Generators.
Mr. Wittman. Mr. Stackley, per this plan it seems that the Navy is
being realistic in understanding that we have some pretty expensive
ships being procured, especially once we get in to FY18-FY32. My
question is with 33 DDG Flt IIIs planned, 24 SSNs that cost around
$2.6B a copy, 12 SSBNs that will cost $5-6B a copy, and multiple
amphibious ships in the ``out-years.'' I would argue that it is safe to
say that we need to see a robust SCN account that should hover around
$20B a year sooner, rather than later. The luxury we have here is that
it is highly unlikely that any of us in this room will be authorizing,
appropriating, or executing this plan in 2032. My argument is why wait,
there is nothing like building ships for a fleet that needs them to
ignite the industrial base and the creative spirit of our engineers and
shipbuilders.
Secretary Stackley. The FY2013-FY2017 Future Years Defense Program
(FYDP) reflects the budgetary constraints associated with the 2011
Budget Control Act (BCA). The Plan's long-range projections focus first
on battle force inventory requirements, and then outline the resources
necessary to build to and maintain those requirements. Your assessment
of the SCN investment required to support the long-range shipbuilding
plan is exactly correct.
Over the next 30 years, the DON plans to procure a total of 268
ships of all types, for an average of about nine ships per year.
However, executing even this relatively modest build plan within
expected future resource limitations will present a stiff planning and
resource challenge.
The Department recognizes that its 30-year shipbuilding plan
represents an enormous demand on national resources. Our ability to
maintain stability in planned requirements, funding and shipbuilding
profiles is critical in order to control the demands on these
resources. The Department will work closely with Congress and the
shipbuilding and combat systems industries with each successive year of
implementation as we move forward with the plan and proceed from
projected funding to programmed funding.
With specific regards to increasing the funding `sooner, rather
than later', two principles are in action; (i) we must preserve
wholeness of the current force, i.e., we need to first fully fund our
readiness accounts to ensure the force `in being' readiness is not
diminished as a result of the reduced topline, and (ii) we must drive
affordability into our programs to the extent possible within our SCN
budget to ensure we are acquiring these new construction ships at the
best possible price to the taxpayer. To this end, our efforts to
procure an additional DDG 51 and an additional VIRGINIA SSN within the
requested multi-year procurements are solid examples reflecting the
right balance between requirements, budget, affordability, and the
industrial base.
We will continue to work with Congress and industry to pursue these
and further initiatives to address the Navy's critical shipbuilding
needs.
Mr. Wittman. Mr. Stackley, is it no longer the goal of the U.S.
Navy to attain a 313-ship Navy?
Secretary Stackley. After accounting for the funding limits of the
2011 Budget Control Act (BCA) and the specific resourcing decisions
made in the recently completed strategic review, and considering the
full range of supporting capabilities, capacities, and enablers found
in the combined Navy-Marine Corps Team, the Department of the Navy's
most current shipbuilding plan assumes the 21st Century Battle Force
will have about 300 warships.
This battle force is fully capable of meeting the strategic
guidance found in Sustaining U.S. Global Leadership: Priorities for
21st Century Defense, and as importantly, the construction plan that
builds it sustains the national shipbuilding design and industrial
base.
This projection will be informed by the completion of a formal
Force Structure Assessment (FSA) and the ongoing Department of Defense
review of its operational plans for potential regional contingencies.
Mr. Wittman. VADM Blake, Arleigh Burke class destroyers will start
decommissioning in the mid-late 2020s. In the plan it states that
Flight IIA DDG 51s (starting with DDG 79) service lives will be
extended to 40 years in an effort to reduce the impact of the DDG 51
retirement schedule on overall LSC force structure. We have a
documented history of retiring surface combatants early.
In the last 14 years we have seen an entire destroyer
class, 31 ships, decommissioned in the Spruance class.
Their average service life was 23.5 years (per the Naval
Vessel Register website http://www.nvr.navy.mil/nvrships/S_TYPE.HTM).
The Spruance, DD 963 served the longest at 29.5 years.
We decommissioned 7 of these ships prior to their 20
years of service point.
In the last 8 years we have already decommissioned 5 CG-
47 class ships well before their end of service life instead of
upgrading them and modernizing them.
Of the prior DDG class ships, the Farragut class had an
average service of roughly 30 years, with the USS Mahan (DDG 42)
serving the longest at 32.8 years.
The USS Arleigh Burke (DDG 51) is now almost 21 years
old.
The USS Oscar Austin (DDG 79) the first of the Flt IIA
DDGs is now 12 years old and per this plan she will serve until 2040?
Admiral, you are a career surface warfare officer, you have served
on multiple large surface combatants. My question is when you factor in
operation and maintenance shortfalls and the fact that over the last 10
years we have punted on numerous routine maintenance issues. Coupled
with the fact these ships are the workhorses of the surface fleet and
they have conducted cyclic deployments since 9/11, along with the fact
that these ships will be on a rotation to deploy for 7 months and be
home for 14 months; can we logically assume that 32 Flight IIA DDGs
will be serving for 40 years?
Admiral Blake. The 30-year shipbuilding plan is based on several
key assumptions including: All battle force ships--particularly Large
Surface Combatants--will serve to the end of their planned or extended
service lives. The total FY 2013 President's Budget request for Ship
Maintenance fully funds the FY2013 ship maintenance requirement for our
remaining ships and submarines to reach their expected service life. On
average, ships and submarines are reaching their expected service life,
and the Navy is working to reverse the negative trend in Surface Ship
readiness by investing in mid-life availabilities to work off the
identified surface ship maintenance backlog.
The Navy has implemented a DDG Modernization Program to upgrade
each ship's systems and extend service life to 40 years. The Navy will
closely monitor the material condition of these ships during the
various maintenance and modernization periods as they progress through
their service lives to enable them to reach a 40 year ESL. The Navy
will also utilize spiral upgrades to existing ships to maximize ship
operational availability, enable learning curve efficiencies, and
perform continuous and emergent maintenance. Lessons learned from the
other ship classes have already been incorporated into ship design,
such as using all-steel construction vice aluminum. The Navy will
endeavor to operate every ship procured to the very end of its expected
service life.
All of these measures will help maintain the size of the battle
force inventory during the heavy ship retirement period expected in the
2020s and 2030s. However, even after all of these measures are taken,
executing even the relatively modest build plan within expected future
resource limitations will present a significant planning and resource
challenge.
Mr. Wittman. Mr. Stackley and VADM Blake, in 1983 and 1988 the U.S.
Navy entered into block buys for Nimitz class carriers, buying 2 in '83
and 2 in '88. Understanding that some of CVN 79 has already been paid
for, are there benefits to the taxpayer to enter into a partial block
buy for CVN 79 and CVN 80? It is my understanding that some experts
estimate this could save the Navy and the taxpayer close to $500
million? That is a decent amount of money to put towards an SSN, DDG,
Amphib, or LCS.
Admiral Blake. The Department recognizes that building the required
force structure depends on controlling shipbuilding costs. In the case
of aircraft carriers, the Navy is focused on stabilizing the lead ship
(CVN 78), getting cost under control and completing the ship as close
to schedule at the lowest cost possible. The Navy is experiencing cost
growth in the design, material procurement, and production associated
with CVN 78.
CVN 78 is a very different ship from the Nimitz-class and the Navy
cannot expect to build the CVN 78 the way it built the CVN 68 and get
to an affordable ship construction plan. The Navy is working closely
with the shipbuilder to incorporate lessons learned from CVN 78
construction which will result in a more affordable build plan for CVN
79.
It is too late to implement a complete block buy on CVN 79 and CVN
80, as some of CVN 79, particularly its propulsion plant, has already
been purchased. Pending results of the ongoing Navy-Industry `optimal
build plan' review, the Navy would have an option to implement a
partial block buy for CVN 79 and CVN 80 to the extent substantial
savings are generated.
Mr. Wittman. Admiral Blake, over the FYDP we are decommissioning
five amphibious ships, and I am including the reclassified USS Ponce,
because for all intents and purposes, that is still an L-class ship. We
are procuring 1 amphibious ship in the FYDP and only 3 between FY18-
FY22. What is the service life plan for LSD 41 and LSD 49 class? I have
been told the ballpark figure per-unit cost of the LPD-17 is $2B . . .
What do you expect LSD(X) to cost and when do you see this ship being
delivered? Is there a plan in place to utilize the hull design of the
LPD to make this a more efficient and affordable design and procurement
process?
Admiral Blake. The estimated service life (ESL) for the LSD 41/49
class is 40 years.
The cost of the LSD 41/49 replacement will be informed during the
Analysis of Alternatives (AoA) phase that will complete in late fiscal
year 2013. Cost will be an important consideration in the construction
of this ship class. The Navy plans for the lead ship delivery in FY
2026, in time to support the end of service life decommissioning of LSD
42.
Use of the LPD 17 design will be studied as part of the AoA.
Mr. Wittman. Admiral Blake, you're one of the most experienced
surface warfare officers in the Navy, if not the most experienced. You
have served and commanded at every level at sea . . . In your 37 years
of service have you ever seen more capable and combat ready surface
combatants that we have in the fleet today? Some up here like to argue
that we have the smallest Navy since WWI. In reality we now have highly
trained, all-volunteer crews that operate the most technologically
advanced ships in the world . . . multi-mission capable platforms that
can operate in a variety of environments. Can we get your professional
opinion on this? You served and sailed through the Cold War, the 600-
ship Navy plan, the Gulf War, and the combat operations since 9/11. You
have seen every threat out there for the past 37 years. Based on the
threat and the risks at sea and our desire to project power and answer
the call to execute the core missions of the Navy, is this the fleet
that we want, the fleet that we need, or the fleet we can afford? What
risks are we assuming by not having a larger fleet that multiplies
capabilities that we have now? Is this the most capable fleet we could
have at this point in time?
Admiral Blake. The Navy would need in excess of 500 ships to meet
all validated Combatant Commander (COCOM) requirements. Although the
near-term force structure does not fulfill all those demands, it is
sufficient to meet warfighting needs--including Major Combat Operations
and execution of COCOM's Theater Campaign Plans--while still meeting
high-priority presence and partnership requirements, with some level of
acceptable risk. Today's battle force numbers 282 warships of all
types. After accounting for the funding limits of the 2011 Budget
Control Act (BCA) and the specific resourcing decisions made in the
recently completed strategic review, and considering the full range of
supporting capabilities, capacities, and enablers found in the combined
Navy-Marine Corps Team, going forward the 21st Century Battle Force
will have about 300 warships.
This battle force is fully capable of meeting the strategic
guidance found in Sustaining U.S. Global Leadership: Priorities for
21st Century Defense, and as importantly, the construction plan that
builds it sustains the national shipbuilding design and industrial
base.
Since every naval force or platform should be able to draw from the
combined capabilities, capacities, and enablers found in the wider
Navy-Marine Corps Team, counting platforms and forces gives only a
partial picture of the aggregate combat power of the combined Team.
Indeed, a more thoroughly inter-connected Navy and Marine Corps allows
a smaller naval force to achieve greater awareness in all operating
domains--space, air, sea, undersea, land, and cyberspace--and to
effectively and efficiently execute integrated, coordinated actions
even when the force is conducting widely distributed naval maneuver
within and across theaters, or when in disaggregated, geographically
fixed sea, air, and land control missions.
The current shipbuilding program builds and maintains a battle
force inventory of approximately 300 ships, which will be refined with
the completion of an ongoing Force Structure Assessment. This battle
force is part of a broader Navy-Marine Corps Team that is built and
ready for war, and operated forward to preserve the peace. The battle
force represents an integrated and balanced fleet with the necessary
capabilities and capacities to meet anticipated future demands for
forward presence, deterrence, and war-fighting missions.
The major risk beyond the Fiscal Year Defense Plan (FYDP) is the
need to recapitalize our Fleet Ballistic Missile Submarine force which
will cause noteworthy risks to the Navy's overall shipbuilding plan. If
the DON is unable to sustain average annual shipbuilding budgets of
$19.5B over the course of the mid-term planning period, plans to
recapitalize the Nation's secure second-strike nuclear deterrent and
the Navy's conventional battle force will have to be dramatically
changed, and the overall size of the battle force could drop below the
levels needed to meet all naval presence and warfighting requirements.
Mr. Wittman. General Mills, how does decommissioning 5 L-class
ships over the FYDP while only procuring 1 affect the USMC's ability to
man, train, and equip the 2 MEB requirement?
General Mills. One Marine Expeditionary Brigade (MEB) assault
echelon requires 17 operationally available amphibious warships. In
working with the Navy to balance operational risk with fiscal
challenges we have agreed to a minimum of 15 ships to support a MEB/
Amphibious Task Force. Combatant commanders require a minimum of two
MEBs to meet Operation Plan requirements. Amphibious warships, along
with the requisite number of ship-to-shore connectors, represent an
operational capability with the minimum number of vessels required to
provide the Nation with a flexible, persistent, sea-based, power
projection capability that is capable of full spectrum amphibious
operations in an anti access area denial environment. Fiscal
constraints have reduced operational availability below 30 ships,
requiring the assumption of additional risk, not only in terms of
capacity and operational capabilities, but also the speed with which we
can respond. More importantly, it is becoming more common for forces to
deploy without the benefit of training as a complete Amphibious Ready
Group with a Marine Expeditionary Unit. As of May 2012, there were 28
ships in the Navy's amphibious fleet, with three scheduled for
decommissioning in FY14 and one ship decommissioning in FY15. Four new
ships are under construction in the yards and scheduled for delivery
between FY14 and 15. Within the coming FYDP, the inventory will decline
in FY14 before rising to an average of 31.9 amphibious warships over
the next 30 years. The key to meeting amphibious operational
requirements with acceptable risk is maintaining a fleet which provides
30 operationally available warships.
An amphibious warship inventory that does not maintain 30
operationally available ships adversely affects our ability to conduct
day-to-day deployments, meet necessary training standards and surge
forward in response to crises with a balanced combat capability.
Shortfalls in amphibious lift remain a concern as we work with the
Chief of Naval Operations and his staff to mitigate risk in meeting the
amphibious lift requirement. We are aggressively reviewing our
amphibious concepts, doctrine, and plans; and recently stood up the
Ellis Group, which is partnered with the Navy to develop innovative
solutions to overcome these challenges and look for new methods to
operate given amphibious ship shortfalls.
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