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News Transcript

Presenter: John Young, Secretary of The Navy For Research, Development and Acquisitions; Rear Admiral Charles Hamilton, Program Executive Officer for Ships
Friday, May 28, 2004 5:01 p.m. EDT

Special Department of Defense Briefing

STAFF: In just a few minutes, Assistant Secretary of the Navy for Research, Development and Acquisition Mr. John Young will make brief remarks on the next step in the Navy's Littoral Combat Ship Program. After those comments, Secretary Young and Rear Admiral Hamilton, the program executive officer for ships, will be available to answer your questions.

The briefing today is on the record. Biographical information on Secretary Young and Admiral Hamilton is included in your press packages. A complete transcript of the press availability will be available on the Department of Defense's website.

We should have plenty of time for you to get all the information that you need this evening. If you have additional questions following the formal portion of this briefing, we will have several Navy officials available on background to address your questions. Any further follow-up questions should be directed to the Navy Public Affairs Office at 703-697-5342.

Mr. Secretary.

MR. YOUNG: Well, thank you all for taking the time to join us here today. I'll make a brief statement, kind of stick to that, and then we'll field your questions.

We're here to mark a very important event for the Department of the Navy as it moves forward to build a family of surface combatants designed to face the challenges of the new century. The Littoral Combat Ship is the second of three new surface combatant classes that represent the very best our nation can deliver, both technologically and conceptually. This program exemplifies our efforts to shrewdly introduce war-fighting concepts and affordable warfare systems to counter the pervasive maritime threats and balance our force structure for both blue water and littoral operations.

In the competition for the Littoral Combat Ship Flight Zero final system design and detail design and construction, we had participation from three highly qualified industry teams, each of which included a wide range of capable domestic and foreign companies that brought innovative technical solutions and expertise in the area of high-speed vessels. They should each be commended for their efforts.

Contract options for Flight Zero final system design are being awarded to Lockheed Martin Corporation, Maritime Systems & Sensors, and General Dynamics - Bath Iron Works, based on overall best value to the government. The three proposals were evaluated on various criteria, including management approach, technical approach, past performance, and cost. Best value determination involved an assessment of the greatest technical value to the government at a reasonable price.

The contract option awards are valued at approximately $47 million for final system design for Lockheed Martin Corporation, and $79 million for General Dynamics - Bath Iron Works. Each contract covers final system design and includes options for detail design and construction of up to two ships of each type.

Awardees will conduct engineering analysis and related technical assessments, provide recommendations on associated technologies, develop a modular architecture approach and incorporate into that design. They will make recommendations to maximize the life-cycle flexibility and mission system re-configurability and to facilitate the separate production and platform integration of modular mission systems. And they will conduct costs as an independent variable analyses to manage sea frame costs within our defined parameters and deliver a final system design.

The Littoral Combat Ship is an entirely new breed of U.S. Navy warship, with versatile war-fighting capabilities optimized for littoral or coastal missions. Fast, agile and networked into the joint force, the LCS will operate with interchangeable, focused mission packages employing manned and unmanned vehicles against surface, mine and submarine threats.

LCS's groundbreaking work on the use of modularity to deliver highly capable sea frames with potent mission modules integrated into a completely functional weapon system promises to deliver a warship class that will be very effective, relevant, and affordable over its entire service life.

Together with our next generation destroyers and cruisers, DD(X) and CG(X), LCS is providing the technological and conceptual foundations for the Navy's future fleet. The complementary capabilities of these advanced warships will satisfy the full spectrum of operational requirements demanded of our surface force well into the 21st century.

Joining me today, as mentioned by Amy, is Rear Admiral Charlie Hamilton, the PEO for ships, program executive officer. I'd like to thank very much Admiral Hamilton and his capable team for their diligent work. I'm very pleased to make this contract award announcement on the original planned schedule, as we did with DD(X), and continue our efforts to demonstrate that we can confidently plan and lay out and execute our shipbuilding programs.

Also joining me here today is Rear Admiral Mark Edwards, the director of surface warfare; and Captain Ray Spicer, the deputy for surface ships. This aspect of the requirements team has worked with us very carefully to lay out the mission modules and the ship requirements and specifications to get us to this point.

Charlie and I will now address whatever questions you may have.


Q Mr. Secretary, I assume that these firms will compete against one another based on milestones, right? And when will the finalists be picked, the winner be picked?

MR. YOUNG: Well, this contract anticipates four Flight 0 ships, two from each company, and then anticipates a Flight 1 program that we still have --

Q All right, I'm sorry. The average person doesn't know what you mean by flight.

MR. YOUNG: I'm sorry. Okay.

Q Like you -- you're talking about four --

MR. YOUNG: Well, we consider the ships that we are -- the ship designs that are being selected today and the options to build those ships will be categorized as our Flight 0, or first-generation ships. So each company will build two Flight 0 ships. We -- the budget -- president's budget includes ships in the '08 and '09 time frame, which we characterize as Flight 1 ships. And we have tentatively assumed that we will compete those Flight 1 ships, but we are going to continue to work through the program and make -- we have opportunities to make those final decisions at a future point.

Q Are these two ships basically different?

MR. YOUNG: They are different designs. They are --

Q And in what basic -- in what ways are they different?

MR. YOUNG: Why don't I give Admiral Hamilton a chance to give you the differences?

ADM. HAMILTON: Well, thanks very much for the question and thanks very much for the opportunity to talk with you folks today. The two designs are quite different, each satisfying the technical requirements in a different fashion. One of the designs, the Lockheed design, is a high-speed semi-planing monohull. The other, the General Dynamics design, is a slender, stabilized monohull, more commonly known as a trimaran. Each of these meet the performance requirements of the top-level requirements documents and achieve objective levels in several key performance parameters.

It's important to note that both designs achieve sprint speeds of over 40 knots as well as long-range transit distances of over 3,500 miles. The sea frames of each design can accommodate the equipment and crews of the focus mission packages and effectively launch and recover and control the vehicles for extended periods of time in required sea states. The methods by which they launch and recover both aircraft and waterborne craft are different in the two designs, and the treatment of re-configurable internal volume in the two ships are quite different.

Q But one of the two ships is going to be the final one? Is that the idea? One or the other?

ADM. HAMILTON: As we gain experience in both designs and the four ships, two of each design, we believe we're going to learn significant lessons in both sea keeping, maintaining the interface for the mission modules, launch and recovery systems. And as we go forward with those four ships, two of each design, we'll gain insight as to what capabilities add value to the war-fighting missions that we need. And we have the opportunity then in the FY '08 Flight 1 ships to determine if these paths are the best way to go or if we need to modify our designs in some fashion.

Q So you might end up with a mixture of the two?

ADM. HAMILTON: It's extremely possible that we would get a mixture of the two.

Q Or an entirely different design.

ADM. HAMILTON: That's also a flexibility we've built in to our thought process.

Q Could you have a Flight 1 and 1-A, 1-B, if you went forward with both?

ADM. HAMILTON: I think it's fair to say that we've left ourselves maximum flexibility for the Flight 1 acquisition strategy and the long-term procurement quantity and style of the out-year ships.

MR. YOUNG: I think we anticipate the potential for a competition for the Flight 1 ships - could be full and open competition -could be a competition between the two hull designs we have. But I also -- we don't have to make that decision yet. We want to see these two Flight 0 designs, and if those designs prove to be highly effective, we will work with the fleet to make a decision that says those ships may be the ships we want to procure, with modest design changes and augmentation.

So the power of this is that we can refine these ship designs or re-compete, if possible. The real power is that we can bring on mission modules, which are the capabilities, as many of you know, today in terms of sensors, air vehicles that carry sensors, and we're going to be able to continually improve those capabilities and bring them aboard as standard modules on these sea frames that LCS provides.

Q So it's fair to say this is a dual approach?

MR. YOUNG: Well, we're awarding two ship designs, and I think that's fair to say. We're taking the opportunity to see both designs function. Both designs have some different attributes, as Admiral Hamilton pointed out. They both deliver the speed, the draft, the ride quality. The designs have different attributes that are worthwhile to the Navy to evaluate.

Q How many ships do you envision buying in the Flight 1?

MR. YOUNG: Well, included in the president's budget there are 13 ships. And I think the requirements community and the resource sponsor continue to do analytical work to inform what the objective inventory might be. So I'm not ready to answer that question. I would tell you those analyses that they've made us privy to show great power for the littoral combat ship in certain warfighting scenarios or tactical situations, which is part of why you hear the chief of naval operations, Admiral Clark, say he needs those ships yesterday. They have great power in guaranteeing us access to the coastal regions where they might encounter mines or submarines or surface craft, small boats -- and Littoral Combat Ship has increasingly become a vital part of that early-entry force.

Q Why were these two designs preferable over the third one that you didn't choose?

MR. YOUNG: (To Admiral Hamilton.) Charlie, do you want --

ADM. HAMILTON: You bet. As we did the best value selection, again we looked at both technical, management and cost factors. Within the technical category, we looked at the ability to meet the performance requirements, the ability to produce a class and certifiable design, the ability to provide core-mission systems, and the ability to support modular mission packages.

In management we looked specifically at program management, the ability to produce, the rights to technical data and past performance. So as you weigh all those factors and compare that to the cost and the assessment of cost-risk, two of the teams made us a very attractive offer, and the third team was a very interesting design but did not measure as well against some of those criteria I mentioned.

Q Mr. Young, can you flesh out the total value or potential failure for both ships? Apparently, we're talking like $400 million potentially for Lockheed -- another $400 million. Could you just flesh that out please?

MR. YOUNG: The contracts that we're awarding today provide $46.5 million for Lockheed Martin for final system design and includes two options -- the option for detailed design in the lead ship and the option for a second ship to be built with procurement funds. If all options were exercised, including -- the value provided today for final systems design is $423 million. Similarly for General Dynamics, finalsystem design is $78.8 million, and the two options, together with the finalsystem design, total $536 million.

Q (Off mike) -- $951 million potential that you're putting on award today. Is that accurate?

MR. YOUNG: Potentially. Over the -- through the '08 -- '07 period.

ADM. HAMILTON: '07 period, yes, sir.

Q Could you explain to the great unwashed out there what you mean by modular? These are -- I assume these are plug-and-play systems for different missions.

MR. YOUNG: Right.

Q What might these missions be? I mean, would you haul one engine out and put a different type of engine in --

MR. YOUNG: No, I think --

Q -- a different kind of gun? I mean, what --

MR. YOUNG: A lot of this -- Secretary England's brought this perspective from some of his business experience and talks about the ship as like this room, where there are outlets for power and plugs for fiber, and in the ship, of course, there's cooling and other attributes.

And so within this payload volume we've sought in the littoral combat ship -- and Admiral Hamilton and the team worked with the industry to design -- we envision being able to bring in modules. Sometimes they are in a standard size container. Some may come in other forms, on pallets. But they can be brought into the ship and connected to the ship's network and be able to provide data that the ship can then communicate to other surface ships or aircraft in the area.

But the modules themselves are tailored to do certain missions, and we want to be able to change out those missions. I believe the requirement levied is to be able to change modules in a day. The modules are a mine warfare package, and these early modules rely on systems that in many cases we had in development, like the mine warfare module uses a system called AQS-20, which is a sonar vehicle that's deployed in the water and can search for mines. The anti- submarine warfare module -- one aspect of it includes a system called the Advanced Deployable System. That lets you lay sensors in an ocean environment and detect submarines. And then the anti-surface warfare module includes a gun system and the tools you would need to combat these small surface craft.

And the modules -- and again, the objective is to change them out in a day. And I don't want to lose sight, too, that the ship has a core set of capabilities to defend itself. We left some of that to be proposed by the bidders. But it has a core capability for communications. It provides this network. It provides these standardized interfaces for the modules to connect themselves to, and self-defense capability, a surveillance capability, to surveil its own environment. And I believe we consider it increasingly core to the vehicles to have a Fire Scout unmanned air vehicle that will provide some of the eyes for the ship, in addition to its own radar and undersea eyes, if you will.

Q And these ships will be radar -- I mean, the shape of them shows that they are radar vision -- the designs. Are they not?

ADM. HAMILTON: Let me help you, take that one.

As we are going to a new speed regime in surface craft for the U.S. Navy, 40 to 50 knots, the mechanism by which we get to 40 to 50 knots requires, in some cases, an alternative hull form and some shaping and coding. And what that does in both designs is try to lift the body of the hull out of the water as much as possible. The semi-planing monohull lifts the body of the hull out. The trimaran takes two outriggers, essentially, and again moves the displacement up and a smaller wetted surface. So as you go to these alternative hull forms and you try to get to the speed regime, 40 to 50 knots, the shaping of the hull, by definition, gives you a certain amount of signature reduction.

Q Who's going to build the '05, '06 and '07 ships?

MR. YOUNG: I'm sorry?

Q Who will build the '05, '06 and '07 ships?

MR. YOUNG: Well, the award today provides for Lockheed Martin to do the final system design and construct the '05 ship, if it's authorized and appropriated by the Congress. And the award assumes that General Dynamics, their option is for the '06 ship that, again, is subject to congressional approval.

Q Speaking of congressional approval, you've gotten a lot of criticism up there, and I think the HASC, they have cut you a little bit this year, claiming again that a lot of the key technologies are not as mature as you'd like, while you move toward production. Can you address those criticisms a little bit, please?

MR. YOUNG: Why don't you go ahead, Charlie, and then I'll follow.

ADM. HAMILTON: We've had a robust conversation with the authorization committees, both House and Senate. We've arrayed the sea frame and mission module acquisition strategy and timelines. We've shown on the mission module side the system readiness and the times that those module packages come together as it relates to when the sea frame is available to accept them. I anticipate that that conversation will continue.

Based on our experience with other experimental craft, like HSV- X1 and 2, and the work ONR has done on X-Craft, and some work we've done with foreign ships, such as the Triton U.S.-United Kingdom tri-maran, over a period of time, that we understand the integration challenges and have a risk management plan to address those opportunities, and we're very comfortable with that. I think as the conversation with the Congress goes, they will gain additional comfort with that as we provide them additional information.

MR. YOUNG: If I could add to that, we -- a few weeks ago, HSV-X1 or X2 --


MR. YOUNG: -- the Swift was here. And aboard that ship we had several of the systems that are basically the components of the mission modules for LCS. So there's an AQS-20 aboard. There was a mock-up, I think, of a Fire Scout. There was a Spartan Unmanned Surface Vehicle, which is an unmanned rib boat that we can place sensors or other systems on. So we are experimenting now and demonstrating that on these hull forms you can bring aboard these mission modules, operate them from the hull form, and tie that hull to the other surface ships in the area and bring that data back.

So those are steps that are I think increasing our confidence, and things that we've been able to show the Congress and increase their confidence. We've consciously worked with industry on these hulls. Both of these hull designs, as we've mentioned, have a lineage. There is a version of the trimaran in construction now. The semi-planing monohull has lineage to an existing ship that has a -- is in the water sailing. And so I think those confidence factors -- the source selection's going to help us go and address any of those confidence factors.

Q Is any of the performance of these HSV vehicle vessels in the Gulf, in the recent Gulf conflict, have they -- their performance has been lauded by the Army. Is that helping you at all sell the LCS concept on the Hill?

MR. YOUNG: Well, I think the Army has -- I probably want to be careful speaking for them, but they've used them to a high extent for some logistics purposes, and I think these ships will have that capability. But the -- you know, the uses we envision early on are this early entry access mission for mine warfare, surface warfare.

I think Secretary England mentioned recently he just came back from a visit to Iraq, and in high demand in the theater were the coastal patrol boats; and so boats to do maritime interdiction, potentially go and inspect dhows and others, other small ships that could be carrying explosives. And so I anticipate these ships doing their core missions and many other missions such as maritime interdiction because of their speed, the ability to not tie up the time on a DD(X) or a CG(X) in the future, a DDG today, which is a billion-dollar warship and has several other core missions, such as strike and air defense. So the demand for this ship is clear today in what's going on in Operation Iraqi Freedom, and this ship opens the opportunity to do that and apply our assets where their strengths are best used.

Q Well, aren't these --

Q You talk about proven demonstration in the two that you chose -- the Raytheon SES design, Surface Effect Ship design -- also, did the Norwegian Orkla SUW fire have any impact on that? The Norwegians have had that kind of ship in service for quite a while, but they had a fire and lost a ship a couple years ago.

ADM. HAMILTON: Well, our experience with that fire and the resulting analysis that came from that fire informed the preliminary design phase for all three of our industry teams. The surface effects ship of the third design team was a descendant of the Skjold, another ship that came up the Potomac about a year ago now, I guess. And that's a very interesting hull form and a different way to bring payload to theater at speed.

Q Aren't these ships especially important in areas like the Gulf where you have shallow water? And more countries are getting diesel submarines, like the Iranians -- isn't this --

MR. YOUNG: The key factors that I think are driving the CNO is urgency for the ship, especially the submarines and the potential growing numbers of diesel submarines, and then the small draft that's useful in accessing those coastal regions. Can I take a minute? This lady, we haven't given her a chance.

Q Thank you. With respect to the HASC cut -- what is the contingency plan if that does go through Congress?

MR. YOUNG: Well, it's hard to have a contingency plan without money, right? I think our contingency plan is what I said. Having made this source selection, we need to go finish telling a story that was a little harder to tell when you're in a competitive environment. We were going to be able to tell them the hull designs, the maturity, which is pretty strong given that they both have lineage, and continue to show them that we've got experience, if you will, with the mission module concept and what we're doing on the HSV's and the catamarans. And I hope that's going to be persuasive to them.

Also the warfighting analysis Admiral Edwards and his team are doing, again, really do increasingly put weight behind the CNO's conviction that he needs these ships yesterday. They tell you what they do for you in a theater and give you the flexibility to deploy your destroyers in an appropriate way, your combat ship in an appropriate way, and use Littoral Combat Ship to open up access for our Marine forces that need to go ashore in early-entry operations. It's really an increasingly powerful story and we need to keep telling them them that.

Q Okay. What is the duration of the contracts? Lockheed Martin's versus General Dynamics' -- are they different because their ships are being built different years?

ADM. HAMILTON: The contract execution for detail design and construction, final-systems design and then detail design and constructionis essentially a two-year contract per hull; so the '05 ship delivers in '07, the '06 ship would deliver in '08. Similarly for the General Dynamics design, the '06 ship would deliver in '08, and the '07 ship would deliver in '09. So over that four-year period, two contracts play out.

Q Is the war on terrorism making littoral waters more important, and if so, in what way?

MR. YOUNG: I think we're not the best people -- you know, the requirements team -- I can only speak from the -- what we see and then, again, what Secretary England saw when he visited the Gulf, and that is increasingly you see the waterways being used to transit people, potentially terrorists -- increasingly having the opportunity to employ explosives on boats. And as you know, freedom of the seas and the ability to conduct commerce and trade are essential assets, even in a peacetime world, and there is encroaching threat in that area because of this global war on terrorism.

And so yes, we feel this ship and those coastal regions are even more important. Before Operation Iraqi Freedom, there were several thousand maritime interdiction operations to board vessels, to determine their intent, determine what their cargoes were. That burden is a substantial burden upon the Navy, and a relatively small fleet today of destroyers and cruisers that have, again, other very important missions in support of the carrier battle group and the expeditionary strike group with the Marines -- and we need to be conscious of how we deploy our assets. And the Littoral Combat Ship is an important force multiplier in that, especially because of what you said -- the importance of the coastal regions and the growing opportunities to threaten those coastal regions with mines, submarines or small boats.

Q Can you explain why one contract is so much bigger than the other, I mean, in terms of the money?

MR. YOUNG: It's what they bid.

Q Almost twice as much, right?

ADM. HAMILTON: Each team --

Q Is there a reason, an underlying reason why one would cost so much more than the other?

ADM. HAMILTON: The ships are slightly different sizes. The complexity of the design is a little bit different in each case. The treatment of how the team is organized and structured is a part of that equation. And the driver, to us, was the ability to meet the cost criteria for the hulls as they came through the design and construction process. Each team met that. We were willing to be flexible in how the teams bid to that, and they did.

Q Is this --

MR. YOUNG: Go ahead.

Q Is this something that the Coast Guard is looking at as well for use around the U.S.?

MR. YOUNG: I'll let Admiral Hamilton expand on this, and he'll do very well. We -- I personally have had several meetings with the Coast Guard. He's had many more. They are very interested in what we're doing. We are watching what they're doing. There may be interest to the hull level. There is definitely interest to the mission module level and the common ship systems level in -- between the LCS sea frames we've chosen and the vessels that they're choosing in the Deepwater Program. So we're working to exploit, wherever we mutually can agree, those opportunities.

And I'll let Admiral Hamilton add to that.

ADM. HAMILTON: Admiral Pat Stillman, PEO for Deepwater, and I signed an MOU about two years ago specifically to tie the technology and the opportunities that come from the technology between Deepwater and the Littoral Combat Ship. Since we signed that MOU, we have, I would characterize it as, inextricably entwined ourselves to work on this source selection as well as how this might affect the deep water recapitalization of the Coast Guard and what systems we could exploit from one to the other, and gained a synergy there that has played out not only in the national arena but the international arena.

Q As far as the fact that you're building two ships, each company builds two ships, since we've already seen some changes in the design proposals -- Lockheed moved to an exposed pole mast, it went from aluminum to steel -- could we see further changes as you go along? And is it possible that, for instance, the first Lockheed ship might not be the same as the second one -- first General Dynamics ship might not be the same as the second one because, you know, they learned something?

ADM. HAMILTON: My insight into that would be, as they play through the cost as an independent variable trades, through final system design and then production, there may be some things that, as they design, they find in a producibility sense didn't work in their final construction. And they may modify that accordingly. My sense is between ship one and ship two, they're likely not to migrate too far from the design based on the construction timeline.

MR. YOUNG: Maybe I could add a comment to that. That is, it's useful and important in LCS, it's even more important in DD(X), and that is the concept where in this case both of the lead ships are being funded with research, development and test evaluation funds. That's a different approach for the Navy. It gives us a chance to make an annual adjustment in the budget so that we can properly price the ships and choose to capitalize on opportunities, I think as Admiral Hamilton has mentioned, to set up a production process that lets you build the class of ships affordably. The process where you appropriate the full cost of a lead ship and, on that day Admiral Hamilton and his team are carefully trying to manage money that's got to last for three to five to seven years or longer, leads people not to make in some cases producibility decisions that have a good business case over the class, because they've got to deliver that single ship with that single block of money.

So RDT&E gives us a chance to be comfortable that we can make modest adjustments in the funding in order to set up a production process and build the ship efficiently and effectively. We can make limited trades to achieve greater mission capability.

I'd say limited, because I think -- I'll go out on a limb and hopefully speak for Admiral Edwards and ourselves -- we are anxious to control the cost of our ships going forward, and LCS, as we mentioned -- affordability of this design is very important to us. And so we are not seeking to let requirements creep and churn, you know, continually escalate the prices of ships. We are anxious to get a sea frame and expect that over time mission modules will bring significantly enhanced capability into the sea frame. But the sea frame itself -- we want to be very careful to control the cost, get capabilities where they make sense, but not continually evolve that ship into a price range that's not affordable for the Navy in quantity.

Q Admiral, could you go over the delivery date and time for the first Lockheed and the first GD vessel?

ADM. HAMILTON: The FY '05 ship would deliver in fiscal '07.

Q Fiscal '07.

ADM. HAMILTON: Fiscal '07.

Q Okay. And then --

ADM. HAMILTON: And the FY '06 ship would deliver in fiscal '08.

The second Lockheed ship in SCN, if appropriated and authorized '06, deliver in '08.

Q And --

ADM. HAMILTON: And the second GD ship, '07, deliver in '09.

Q Can you take one more crack at the competition question? Is today -- are you launching the great ship war, the equivalent of that, or is it two or three years down the line before you are going to come to that conclusion whether you're going to down-select to one or just keep both designs?

ADM. HAMILTON: My sense is that across the shipbuilding spectrum we're trying to maximize the capabilities of the industrial base to satisfy warfighting needs. And pieces of the industrial base are positioned to do that for different classes of ships in different ways.

My sense is, as you take a ship that the integrated combat system is decoupled from the hull -- in this case, mission modules -- you've changed the dynamic of shipbuilding in a fairly significant way. And I think we're going to see that play out here over the next three or four years.

And so do I think that's going to spawn the next great ship war? No. I think the industrial base and the Navy together are going to learn how to produce affordable ships on a schedule that is aggressive.

MR. YOUNG: And if I could add, I think the quality of the two designs is very attractive to the Navy. The urgency that the Secretary England and Admiral Clark have attached to getting this gap-filling capability into the fleet leads us to want to pick two designs. And then it is very attractive, from an acquisition point of view, to have two companies conscious of each other and giving us the potential for competitive opportunities in the future.

Q It will either follow like the AMRAAM missile or some various engines, like GE versus Pratt engines, where one -- they would alternate basically and compete each year?

MR. YOUNG: We'll see. I mean, we may find one ship has attributes that we would like to have -- assuming these two ships are very successful, we might find that one ship within that has attributes we like better, and we might seek to buy greater quantities of it and lesser quantities of the other one. Or we can clearly, to Admiral Hamilton's point, encourage people to be conscious of which features we like best and create a competitive -- stimulate competitive competition for adding good but affordable features to their ships. There are a lot of opportunities in this space.

Q Bottom line, it looks like under your current plan both shipbuilders, both these companies will be competing with each other for the next four or five years on this program.

MR. YOUNG: Well, they'll certainly be well postured to be competitors for the Flight 1 ships, and we'll decide a mix or what degree of competition is appropriate there.

ADM. HAMILTON: And I think over the next -- I think over the next four years, those two teams will be working real hard to produce the ships. Don't discount the work that will go on in that process.

Q Is your cost target still about 220 million (dollars) for the hull and about 150 million (dollars) for the modules? Because you mentioned some flexibility that you allowed for in the way the companies --

MR. YOUNG: We have set an objective cost for the sea frame of 150 (million dollars), a threshold cost of 220 (million dollars). And then we are targeting over a mix of mission modules -- it gets a little more complicated, but we'd like on the whole a number of ships and the appropriate mix of mission modules to be, average, $250 million.

But that -- you know, that gets a little more complicated. That's also the important piece of this strategy. Decoupling the mission modules from the ships lets us buy them at the appropriate time, buy them in the appropriate number and buy them with the latest technology. We don't have to benchmark today exactly what that mission module will be and project its cost. We can let it come to that ship with the latest in computer processing technology and appropriate upgrades in the software and budget them at the right time to get that best capability in the hands of the Sailors.

Q And the first ship for each company is going to be built with R&D money?


Q How many total ships are you looking -- do you envision on getting eventually?

MR. YOUNG: That's subject to the continuing war-fighting analysis of what the fleet feels they need and how would they employ them in a strategy. We've not set that number formally yet.

Q Do you have a target, though, a ballpark target of how many ships you're envisioning at a minimum might be in the class and what that total cost might be at a minimum for the number of ships you're headed toward?

MR. YOUNG: I think that's just the subject of continuing work. I mean, people talk about -- get focused on numbers of ships, and I don't want to peg that number because I can't do it. I'm not sure Admiral Edwards is ready to do it yet.

The discussion is capability, and in these tactical situations and warfighting scenarios, and we model where we think the Navy is going to have to either preserve freedom of the seas or fight and guarantee access for Marine forces going ashore, and those scenarios tell you different things about different numbers of LCSs, and it tells you different mixes of mission modules. So we are busily working to figure out what the right number of hulls might be, as well as what the right mix -- how many mine warfare modules do you want, how many ASW modules do you want, how many ASUW modules. And over time, we'll be able to tell you more.

Right now the budget has four Flight 0 ships, nine Flight 1 ships budgeted. And in the near term, we've got -- is it nine -- eight? No, seven mission modules budgeted; three mine warfare modules, two ASW modules, and two anti-surface warfare modules. This is FY '05 to FY '07.

Q So when people talk about this being possibly worth $15 billion, what are they -- how do they arrive at that?

MR. YOUNG: I don't know. I'm not sure I'm comfortable with that number.

STAFF: Mr. Secretary, we have time for one more question, sir.

Q Ron O'Rourke of CRS put out a report saying the Navy's talked about up to 60 ships, roughly up to $12 billion. Are those within the ballpark or are those off the wall?

MR. YOUNG: I think those are in the ballpark. I mean, I think there are numbers that have floated around like -- you know, people have fixated on maybe is 375 ships the right size Navy? Within that 375 number, I think there's something like 55 LCSs. But I got to tell you, I think we're doing Admiral Edwards and his team and Admiral Nathman have brought a much more disciplined process to analyzing warfighting scenarios and determining what capabilities we need.

And so those numbers I'm not prepared to say are the numbers. The secretary of the Navy has consistently tried to get away from what are the numbers and talk about capability.

I testified earlier this year, I think 10 years ago an Aegis had a Standard Missile and it potentially could provide air defense for an area that was on the order of 25-plus miles. Today Aegis, with the newer generations as standard, can provide air defense for an area that has a radius of on the order of 75-plus miles. And the Aegis we anticipate in the future and DD(X) with ERAM, the new missile, is going to defend an area that has a radius well over a hundred miles. Those capabilities and how you employ them in expeditionary strike groups and carrier strike groups change the dynamic.

They change it in two ways, the biggest one being they tell you you may need more of certain ships and less of other type ships, they tell you you may or may not need the same numbers of ships, because then you have to factor in presence. Because there's warfighting and tactical scenarios, and then there's the day-to-day mission that a lot of people miss in the Department of the Navy, and that's to guarantee, almost for the global community, freedom of the seas, and everybody has guaranteed access to the seas for trade and commerce. So we have a level of presence we have to provide, and that gives you a number. And then we work those through and determine what we think the optimal fleet size is going to be. You have to do that within an affordability context, too.

Q Okay. Now, you mentioned the ERAM missile.

ADM. HAMILTON: Thanks very much for the opportunity to --

Q Excuse me. I just wanted to ask about weaponry. These ships will carry at least two helicopters each, and one of the pictures shows a deck gun. Do you see any kind of next generation esoteric weaponry on the flight one ships, anything special?

MR. YOUNG: Well, we don't do esoteric weaponry. (Laughter.)

Q All right. New weaponry.

MR. YOUNG: Thank you.

Q Thanks.

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