U.S. Department of Defense
Office of the Assistant Secretary of Defense (Public Affairs)
|Presenter: Rear Admiral Joseph P. Mulloy (U.S. Navy), Deputy Assistant Secretary of the Navy for Budget||February 14, 2011|
Go here to view briefing slides associated with this transcript.
LT. COURTNEY HOLSEN: Good afternoon. I'm Lieutenant Courtney Holsen, public affairs officer for Rear Admiral Joe Mulloy, deputy assistant secretary of the Navy for budget. He will be briefing the fiscal year 2012 budget for the Department of the Navy. Following the briefing, if you have any questions, please let me know.
With that, I'd like to introduce Rear Admiral Joe Mulloy.
ADM. MULLOY: Thank you, Courtney.
Good afternoon, ladies and gentlemen. And it's good to see you all again. It's amazing how fast the year goes by when you're having fun as the Department of Navy budget officer.
Today I'm here to talk about how we mesh within the strategy Secretary Gates and Hale laid out for the FY '12 and the five-year expense plan after that. You heard in great detail about how they view the emphasis from the secretary and the president on focus. And I want to relay that into how the Marine Corps, Navy and the Secretariat see that.
In addition to the leadership points, the secretary of the Navy has given us four imperatives as we develop this budget and support our joint force and global forces. The first one was to take care of our sailors, Marines, our civilians and their families. First -- or secondly was to treat energy as a strategic national resource. Third was to create acquisition excellence. And I think you see -- I think you'll see a lot of that, as we talked about efficiencies in our investment programs. And last is to heat-optimize our unmanned systems. And once again, a significant investment made in unmanned systems across the board. And you can see in the pictures, a snapshot around our Navy-Marine Corps chain.
So where is your Navy and Marine Corps today? They're out and about. We are engaged in winning our current wars we're in. We're currently involved in maintaining peace and involved in peacekeeping and training around the world. And we are currently enabling commerce to the tune of -- the domestic product of the United States greatly depends upon commerce around the world; your Navy and Marine Corps team ensures safety and security of that around the world.
There are over 50,000 Navy personnel deployed or forward-based, and over 30,000 Marines. We currently have eight aircraft carriers -- and I -- I'll correct that with eight; as of yesterday, the George Washington pulled in. But to put that in context. There's only 10 aircraft carriers currently in the Navy. Two are in major maintenance. One is in a three-year refueling overhaul. One we are -- one we are dry-docking. And all other eight were underway. So this idea of our ships are busy and underway, training, and many of them were forward-deployed; others were getting ready to go or come back from deployments.
So we currently have, once again, 57 percent of our ships underway from homeport and 40 percent deployed. So maintain the same op tempo with those 50,000 sailors that we have since 2001.
Our Marines also are actively engaged, with over 24,000 -- correction: 22,000 in Afghanistan. That number fluctuates subtly up and down. But we maintain that presence through up into approximately 2014. And I'll factor that later on for some discussion of our Marine Corps manpower. And the Marines are also further engaged around the world.
And the two snapshots you see are F-18s operating in the Arabian Sea and then the Marines are launching in the Gulf of Thailand, once again focusing where Secretary of Defense said the Marines maintain key amphibious capabilities using the equipment and the techniques developed with our Navy as they launch from the USS Denver off the -- in the Gulf of Thailand.
A budget brief wouldn't be complete without a bar graph in dollars. FY '12 is $161.4 billion, and there's $15 billion of OCO [overseas contingency operations] on top of that. You heard the discussion about what is this budget and what do the numbers mean. And for the Navy, this has surely been a time where we have been able to purchase more than what we had last year with dollars that are the same. This is actually a .9-percent decrease in real terms from '11 to '12 and the Navy stays flatter with the FYDP, it is a negative-point-one percent real over the FYDP.
So we have been able to churn through our $35 billion in efficiencies and find the things we need and do our part to be able to maintain the Department of Defense's part within this whole architecture you heard about, savings for the country.
The other thing I'd like to highlight before I move on to the other slides is the continuing resolution. You heard about the impact of the department. This slide is the build. We'll show you where we stand in the Navy. We're down $5.7 billion. The largest single piece of that is in Navy operation and maintenance, at 4.6 (billion dollars). But significant impacts on our procurement, both Navy and Marine Corps accounts.
I'll have individual slides in the major areas of budget, but to step you around to the big parts and what we call our moneybags slide, these five sections: first is multi-personnel in the upper left. And I'll rotate counter-clockwise. This account continues to support the 325,000 Navy, 202,000 Marines. There's a 1.6-percent pay raise. We'll appropriate adjustments of 3.6 percent for BAH, or housing allowances for the Navy, and 4.2 percent for the Marine Corps, in addition to the funds of retirement accrual with an increase of 4.9 percent.
Matter of fact, this is 2.7 percent growth after adjusting for -- I'll talk about in OCO -- or our individual account moved in. So this is the second year at the lowest it's been in over 6 years in terms of growth. We are, you know, working with the group to try to maintain and pay our people appropriately; at the same time, try to realize we have to use every dollar wisely.
O&M is $37.9 billion. I'll have a detailed slide. That fully funds the operations of the Navy and Marine Corps, our maintenance and our bases.
Infrastructure, a significant drop. You'll see two factors -- we talked about that -- is grow the force, which is the Marine Corps buildup on to -- not only for the 20,000-troop growth, but also the infrastructure age in the Marine Corps is rapidly dropping back down to levels where the Marines are maintaining future development of forces. And there's also a rephasing of Guam for about $3(00) or $400 million. And I'll talk more about that later.
There's research and development. This account is actually up. Last year was a nadir for us in the Navy. Two -- once again, two countervailing positions. We have growth of research and development in new areas, and I'll talk about that in terms of U-class and some other areas. We also have transitional procurement. But this has really been a slight increase from last year, based upon these new things coming.
And last is procurement. This is down from last year about $800 million. Really two factors. A significant one is modifications in aircraft, with the Joint Strike Fighter, and the other one our savings from the efficiencies. You will actually see with aircraft, except for the Joint Strike Fighter, and even total number of (inaudible) in the Marine Corps go up in '12, number of ships go up, but our dollars spent go down. And it's really basing upon price and saving in a number of areas and then also the reduction to the Joint Strike Fighter.
So how did we get here? The Navy in this process, which was started back in May with a speech from the secretary of Defense in 8 May -- in 8 May out in the Eisenhower Library. He then came and gave leadership briefs on 24 May, and 4 June there was a letter to the services: "You will find efficiencies." So as many realize, we were already well into the program budgeting. But as the secretary of Defense and Secretary Hale indicated, we were already on a second year of trying to find efficiencies, trying to use wisely. He just more focused us on that.
So we had already done a lot of programming to find plans to be able to purchase the things you wanted to buy. The understanding of keeping that 50 ships, perhaps grow more, keep airplanes -- this was even greater just to go across the board.
In both services the secretariat teams were established. And internally, the Navy generated over 1,600 individual efficiencies; some as small as $200,000 for cutting contract in one area, some as large as $2.9 billion in LCS pricing. So across the board, we're 1,600 issues in over 2,000 lines in the Navy budget.
And then we -- as we plotted them and assembled them through leadership meetings throughout June into July as we developed the budget, we would put them in what we call the -- (inaudible) -- process lines of operation. So first it was buying smarter. Those were areas where we saved money. Clearly, the F-18 multiyear was $852 million. Once again, procurement comes down, but the reason is we're not paying as much for the same airplanes.
E-2D. With the permission of Congress, we're going to have a multiyear starting out in '13 to -- as we ramp into production of that important electronic aircraft.
The DDG-51s. Once we get up to two a year, we're planning in '13 for a multiyear.
We have reduced total ownership cost through strategic sourcing. Many Navy people buy around. By sourcing through Admiral Mike Lyden at Navy Supply Command, what we're able to find is if people can find a better price locally they can, but there's a step to go all-Navy general purchasing. We think we can save over $257 million with strategic sourcing.
Marine Corps looked at Marine Corps equipment and saved over $900 million with various efficiencies.
So the bottom line, buying smarter is dollars -- to terminate some items, but largely buy smarter.
Streamlining organization, there's been a lot of discussion of that. That gets to the emotional part of, hey, we eliminated Submarine Squadron 8 in Norfolk, but we're keeping the submarines there; we eliminated Second Fleet, but we're merging half of the personnel and the leadership team within FF -- the Fleet Forces Command down there. Taking a little bit of a risk in how we manage training day to day, but realizing it's a different world out there in the post-Cold world era for that.
Other areas we're smaller on. But a couple other bigger ones in there. A significant one for Navy and Marine Corps team was reorganizing our maritime pre-positioned squadrons. Currently we have three pre-position squadrons: Guam, Diego Garcia and the Mediterranean. We pay full operating status to the tune of hundreds of millions of dollars a year to have these ships ready to go. They were developed to have equipment ready for Marines to meet up back in the period of the Cold War.
We have made modifications over time to them for use and use them some for theater -- pardon me, theater security cooperation, but we'd never actually studied a true business case of what supports our combatant commanders and what could actually go forward in supporting war. Well, we're going to shift it to two full operating squadrons, but we're also merging with three of the Bob Hope LMRS, large, medium-speed roll-on/roll-off ships as a center point beyond the TAKRs. We'll have two full operating squadrons and one in what's called reduced operating status back in the United States. That last squadron will be ready to be broken out for exercises or for wartime needs. So we have demonstrated, working with TRANSCOM and the Joint Staff, that we can get all the equipment forward in the time necessary for all the time-phased deployments -- the TPFFDs -- but we can still save over $300 million over the FYDP once again by our streamlining organizations and operations.
And last is energy. As you know, Secretary Mabus is leading the charge for the secretary of Defense on energy, and the Navy's out and about. I'll show you where we saved over $2.3 billion and reinvesting it. Once again, it's a key strategic point for us, and through a number of areas we found savings.
Military personnel. The Navy is just about done with its drawdown. We've drawn down over 60,000 personnel since 2001, and we're finally hitting a position now at about 325(,000) plus or minus a thousand personnel, and the Navy will stay stabilized.
The Marine Corps is finishing and continuing out (inaudible). And I think it's pretty clear that on a conditions-based plan, that if the drawdown in Afghanistan stays on track, the Marines will commence a drawdown and to a recently just-announced number of 186,800. That is the planned end strength under their future -- the Future Force Structure Review Group plan. Now, that still has to be greatly delineated with all the equipment and other portions, but there's been a discussion about that. The plan number, once again, conditions-based.
Civilian personnel. The secretary asked us to take a hard look to freeze growth, and we have complied with that. However, on follow-up, he has agreed with certain areas where the Navy and the Marine Corps have some necessary growth.
Forces in our acquisition workforce: Working carefully with Dr. [Ashton] Carter [Under Secretary of Defense for AT&L], numbers are delineated to where we could actually have the people. Once again, these are all co-dependent. The buying smarter, all those multi-years, all those savings are dependent upon some of this. We need to use our various insourcing tools. The Department of the Navy throughout various rounds of efficiencies have reduced contractor savings to about $3 billion. There are some cases that we've shown where we need to insource some people to make that happen.
We are staffing our revolving funds to maintain equipment. Joint basing looks like a growth to the Navy of 479 people, but in reality it's transfers from the Army and the Air Force. We pick up a number of large bases. That was authorized by the secretary. And lastly was our cyber initiatives for 10th Fleet and NextGen when the Navy and the Marine Corps take ownership of our computer system. So each one of those ended up being a very slight growth. About 2 1/2 percent on our total civilian personnel.
Readiness -- talk about O&M. This is a key operation for us. Once again, it is leverage between our OCO, as we talked about operations, and then our base dollars. On the top, we're operating at 4520. This'll be the last year at 4520. Next year, the Navy and the base will be 5124. That was part of an '11 OCO-to-base decision. This is the last year 4520, but this brings us up to 5824 to support the full level of operations around the world. Flying hours: We're 2520 in the base, and then we're 2320 with flying hours forward. There is a slight reduction in here in terms of -- you'll see some efficiencies later on in terms of operations, and also the OCO is down with fewer Marine hours actually estimated flying forward.
Marine Corps once again is a little down OCO. The level of troops are the same, but the amount of shipping going on -- because largely they've completed their shipments to Afghanistan, now we're rotating people. The Marines continue to maintain most of their equipment forward, and very little comes back. That's how they do it to save money and keep the troops engaged. There's also a reflected drawdown in -- slightly for Iraq, because they're largely out.
Ship depot maintenance, aircraft and base support, we've maintained with a balance at a risk down there: ship maintenance at 94 percent; aircraft, 94 (percent); and the base models are split between Navy and Marine Corps.
Okay, shipbuilding. This is a good-news story. Last year, when we rolled out 50 ships in 10 years, people said very good. The secretary, the commandant and the CNO went to the appropriations committees, both of them, and they were both told -- all three were told: We're very impressed with this, but the proof is in keeping it maintained for another year, as I was sitting there behind them. And I'll come back and say is, given the efficiencies and then what the CNO did with that money and what the secretary did was enhancement to the ships.
We've bought a total of five more ships across that could have made some structurally important changes. We've slowly embraced and did -- dual-bought buying the LCS, and I told you we generate significant savings from that. We also brought the MLP in '15 up to be able to balance the workload and complete one MLP for each of the (inaudible). We then also then brought forward a TAGOS ship, which is important for antisubmarine warfare, for the secretary of the Navy, Defense and Pacific Area Commander. We filled in another DDG, which is important for BMD and fleet operations. We then also brought forward the TOX from '17, brought it forward, put in research and development money, and can commence on recapitalizing our fleet. Two purposes: One of them is we're aging; and two is, it'll also double bottom construction, which gets us going on -- compliant with long-term maritime laws. So, across the board, an impressive change for our shipbuilding command.
Aviation. Aviation is a series of pluses and minus. The big change, obviously, is Joint Strike Fighter. The Marine variant was put on a two-year probation period. The Navy variant -- or actually, that was Naval variant, the Charlie, only was affected by two aircraft, and that was more by the sequencing at the plant, to maintain the build rate that Dr. Carter, secretary of Defense and Admiral Venlet had laid out. So a total change of 67 aircraft to the Charlie; 65 of the B variant. However, we laid in 41 more F-18s, to be able to continue to fill those important carrier decks. We also added an E-2D and we added two more P-8s at the beginning and seven more at the end of the FYDP and another -- other aircraft.
Significant changes were also made in the unmanned areas. We added 26 of the VTUAV Fire Scout and Fire Scout Plus, an enhanced version of it, as we once again try to embrace -- or continue to embrace the unmanned vehicles.
Weapons. This overall continues to be a balanced investment of Navy and Marine Corps weapons. All the weapons are being bought at MSR or achieve MSR by the end of the future year defense plan. Big change in the standard missile. SM-2 was terminated as an efficiency. We had what we needed there. We wanted to focus on the SM-6, which is built in a similar part of the Raytheon plant. There was a rephasing due to completing where we stood in contracting, the money in the program as -- and also as reviewed by Defense Acquisition Board and validated. We're now on a ramp to complete the SM-6 and we'll quickly get above -- we don't have an MSR yet, but we'll quickly buy up and rate. And this is an important step ahead for us.
The rolling airframe missile, the quantities drop, but that really reflects us shifting a little bit of money to RDT&E and then procuring the Block II which is a significant upgrade for us.
The other changes are all just adjustment for price -- slight adjustment for price and maintained, similar to some of the earlier one where I had the Marine Corps helicopters as buying to budget on some of these. But largely across the board, we've added weapons or just trimmed minor amounts.
Marine Corps procurement. This is a new slide for all of you from in the past. The real purpose of developing this with the Marines was to focus on PMC, procurement Marine Corps is not just wheeled and tracked vehicles. And in fact, a significant part of the money as in many other areas and a significant part of the enhancement that the Marines bought with their efficiency money was in this -- two things. One, their dwell home station equipment, the portions that maintain better -- for their radars, better computer gear. Some of the logistics and maintenance and some of the transport of equipment, some of the gear that you lose to onload and offload, not particularly sexy, but really important. The Marines spend an incredible amount of time developing very detailed budgets for small items because they're experts at detailed planning and pulling this together.
But I really want to highlight there's a lot more to this budget. And the big thing is electronics and their distributed operation, they're investing a significant amount to be able to maintain the same ability they have forward as they engage -- as they come out of Iraq and Afghanistan, to be able to maintain that ability for a young company captain, you know, a young officer to be able to run 138 people. He's gone from several radios and a truck to 242 radios and computers and two trucks, to be able to have a span that jumps from his one mile, if his battalion leads three miles, to now 70 miles on the 210 miles that a battalion commander leads the Marine Corps.
To be able to do that, he's got to be able to connect all those platoons together. Significant change, and you can see the kind of money the Marine Corps is putting into that, to be able to emphasize their world and their importance as that middleweight fighter the secretary of Defense and the commandant and the SECNAV want out there.
R&D. Modified this slide also to kind of break things and turn it around. You can see the drop, I said '07 -- '11 was the low year. It appears even lower based upon '10 has a large amount of congressional adds, '11 is the PB '11 so there aren't any. And very likely we'll see where '11 goes. Once again, I'll talk more on the CR as we get the closure. But in '12, we actually start a slight growth and what's happening here is joint strike fighter's flat. We have investments in the NextGen jammer and the 53 going up; we have P8 coming down.
In the shipbuilding, Ohio replacement ramps up dramatically as we start to close in on that ship, and I think it was an earlier question. It's a little over $1 billion, stepping up over 400 million (dollars) from 600 million (dollars) in '11. LCS, we're maintaining RDT&E to continue testing. DDG-1000 will continue some dollars for testing and development software. And then the Virginia class is also maintained there.
Unmanned -- significant step. We have the BAMs (ph) continues to be building aircraft and supporting development of that. And UCAS is out flying. That was at 47, that picture we had, took off a week and a half ago and that ramps up, though, into UCLASS. And so you can see the first dollars for that. That was a POM '13 when I spoke last year. Navy with efficiency went from '13 and put $120 million in efficiency dollars into '12 so we can get to a squadron or on a carrier by '18 and actually be deploying with a squadron of the follow-on UCLASS.
And then all our other miscellaneous projects right here, you can see, as once again we're stepping up in various areas.
Military construction of family housing. Significant changes here as we've completed -- largely, we'll complete BRAC this year. The Navy's on – Navy and Marine Corps are on track to complete our BRAC portion of it. What is really see here is a drop of about a -- 1 billion, $100 million in grow the force for the Marine Corps as we complete a large amount of that, and about a $300 million rephasing to later in the FYDP. As we continue analyzing, as the State Department and the Department of Defense work with the government of Japan, we really see is that the money we have invested already appropriated for Guam and the Japanese dollars are required -- not dollars now, but a phasing later in the FYDP as we finalize what will happen as we move through EIS and completion, what will the plans be.
So it's not really a walking away from Guam so much as phasing the dollars away to where we think we really need it later.
Family housing. We have completed extensive PPV. There are no PPV projects in this budget, but we include 110 -- $1 million for overseas improvements to houses and the family housing operations budget maintains 15,000 quarters for Navy and Marines around the world.
Energy investment. Once again, the secretary of the Navy has made this a hallmark for the second year and we've now invested another $2 1/2 billion to bring over $4 billion from when we started this path last year in this budget.
Significant steps ahead as we've tested and operated various vehicles. What you have there is the Green Hornet. You have a -- an NECC combat vessel driving 40 -- greater than 40 knots on an algae fuel basis. The Marine Corps at Twentynine Palms down here, basically, making the base almost self-sufficient and Makin Island, which is a gas turbine electropulsion-sailing ship.
But that's just simple -- those are simple examples of the things going on across the board in terms of advanced metering, better steam plants, cleaning engines, larger propulsion designs, stern flaps on ships.
We invested 2.3 million -- billion (dollars). We've already taken out 2.3 billion (dollars). Typically, you have to wait years to get dollars back. In this case, we're already aggressively taking the savings out from that. And those -- these are minimal, based upon the price of fuel. Everyone knows fuel's going up at potentially 3 to 6 percent in the last six months. So these savings really understate what we think we may get. But you know, that's the point we have for the fuel we took right now.
Overseas contingency. This is down to $15 billion for a number of reasons. It still supports our troops forward. We're very happy with this ability to support the Marines and Navy forward. It does reflect over $700 million of OCO to base. So it looks -- we asked for less in there, so it's OCO to base.
We have about $400 million in terms of shipment, that we no longer have to ship quite as much, because not as much people are in Iraq. We have 4,000 Navy, 98 Marines.
We have less in terms of combat support in Iraq. About $600 million of Marine Corps surge that was done, necessary for moving to Iraq, is gone. There's $300 million less in ammo use, in terms of actual expenditure. We're still flying and supporting. And there's about $200 million less in Marine Corps flying.
So across the board, we are still supporting forward. It's just the actual cost this year reflects a little bit less across the board in all those areas.
Continuing resolution. As Mr. Hale said, it's a crisis on the secretary's doorstep, and it's a crisis for the Navy, really in two parts.
I mentioned $4.6 billion in operation and maintenance. A number of you have seen we've have already gone out with letters from our fleet commanders to cancel five ship evals if we don't have the money. We're cancelling up to -- through into April 19 base projects. We've already cancelled nine mil con projects for the Navy or Marine Corps, and that number will be 14 by the end of February. By -- it'll be up to 19 by 4 March, at the end of the CR. So across the board, we're cancelling items.
The O&M is significant for us. It's a significant chunk of money.
The procurement accounts -- it looks like it's less of an impact, but in reality, the difficulties are -- one example is ship construction, Navy. We're down by $1.8 billion. I can't buy everything. But since ship construction is all line item-controlled, I'm really $6 billion out of aligned. I have money to buy an LPD I'm not going to buy. I don't have authority or money to buy other ships. I'm capped off on paying for the refueling of an aircraft carrier. I'm capped off on buying the final installment of the CVN, you know, -78.
So there's a number of items. The Marine Corps in procurement -- they have $536 million short, but they're really almost $900 million out of line items to buy the right items. So a significant issue -- if this continues, the problems I have in O&M are tremendous, and pain and pressure on sailors, family and Marines. The pressure on my investment accounts will become almost mind-boggling in terms of putting the money in the right holes. That will continue to then swamp us in terms of the workload of -- we're going to try to have to get by in O&M, and then we're going to have to -- to move the pieces around will be amazing. That's really where I'm at on that one.
And lastly, I said in mil con, we can't do anything. It's all an authority-based item. It's in a different part of the law. There's 89 projects. None of them will start until we get some kind of relief from Congress.
So I'll be moving to questions in a moment, but I have some -- three key take-aways I want you take from this is that we have four imperatives the secretary of the Navy has charged us with, and we feel we've embraced all them in terms of our sailors, our energy, our acquisition excellence, and our unmanned systems.
Your maritime forces, your Navy/Marine Corps team, are out and about, as I indicated, at incredible levels, not just in the combat zone, around the world.
And then in reform, the Navy came up with $35 billion, the single largest chunk, in terms of efficiency, so the Department of Defense were able to invest most of that money to buy the things you saw here.
So for further information, I'll have the site here, but I'd like to go ahead and open up to questions.
Yes, sir, right here, in the blue shirt.
Q: What is -- what is the JSF STOVL program going to have to do to get off probation, exactly?
ADM. MULLOY: You know, I don't -- I -- there has not been an established set of metrics. It's going to have to produce and test, and we're already seeing is -- that it's flying at Pax River. So I'm going to have to go back to Admiral Venlet, probably, and his public affairs office, to get you a criteria. We've been told -- is that it's going to have to demonstrate the producibility and the operability to be able to finish the ones you're building, test-fly them and get back on a test plan. So that's really the structure of it. Any --
Q: One follow-up. (Off mic) -- involved? I mean, does it have to lower the cost of --
ADM. MULLOY: There are no other price changes. The budget supports the number of aircraft we bought. The assumption, I guess, in that would be -- is, if it kept going up, that would be a negative. We have laid in the best estimated cost, and those are the adjustments in terms of the Navy losing aircraft in '11 and then in '10 adjustments. I told you the '12 was a significant part with the Joint Strike Fighter. So the money's gone. They're not getting like $500 million an airplane to build them. They've been brought down to what the expected buy rate is. But I anticipate there's bound to be a -- there's bound to be a weight issue, a price issue and a performance issue, and the actual criteria I don't have.
Yes, ma'am, in the back.
Q: Yes. Can you explain the different shipbuilding procurement amounts that we see in different charts? We have 15.5 in one chart, 14.1 in another chart, and the DOD press release has 19.9 billion (dollars) for shipbuilding. So can you explain why there's -- what are you counting under those three different charts?
ADM. MULLOY: Okay. On my slide number 10, this is the actual shipbuilding account. So that's what I'm talking about. There are components that have --
Q: (Off mic) -- says 15.5 for ships.
ADM. MULLOY: Well, that's the actual total. What's above -- this is shipbuilding, and then we have what's called below the line, which pays for refueling and oceanographic ships. And then there's also an Army ship that they may be clumping in there. I believe OSD has a different number because they clump other items, either maintenance or other things we're doing. I'm just talking total shipbuilding account.
Q: Then the DOD release is not accurate, 19.9 billion (dollars) for ships.
ADM. MULLOY: Well, OSD has got different numbers, and we'll have to go back and try to figure that one out. I'm looking at my actual SCN account, which is, in '12, is 15.516 billion (dollars). And that's made of two parts: 14.1, which we call above the line, which is warfighting ships; and then below the line, you have -- I pay for the LCACs, the Marines that drive ashore in the little turbo-lift ship. We pay for outfitting and delivery. We're paying for ship-to-shore connectors, buying new ones, oceanographic ships and refueling overhauls. So that's the difference between 14.1 and 15.5. The Navy shipbuilding is $15 billion, $516 million -- $516 million.
Q: Thank you.
ADM. MULLOY: Yes, sir.
Q: Next Generation Jammer. Are you actually putting more money into Next Generation Jammer, or is that just because you move into the procurement phase and --
ADM. MULLOY: We're actually in R&D throughout most of the FYDP. It ramps down to procurement at the end. We actually moved money to do it. We're into, I believe, four AMD contracts. So we actually move money into that as part of the efficiency enhancements to accelerate it forward in the FYDP, to go from four to two to one by the end of the FYDP.
Q: Alright now, does the fact of the -- either the EA-18 and F/A-18 purchases going up or the F-35 purchases going down affect NGJ?
ADM. MULLOY: No, because the Next -- well, first off, the F-18s -- the Gs did not change. We're procuring Gs for the 10 airwings plus the four ground squadrons. So the number of Gs that will get the replacement for the ALQ-99 are just there. And the EA-6Bs that have them now, the F-18s who carry ALQ-99s, they'll be replaced by jammers. So there's no change. And right now the F-35 is proposed as possibly a jamming variant, but that has not been developed. So they're really on two different tracks. The jammer is just you produce something for the Navy's Gs and for the EA-86Bs that are left by the time it gets produced. Because remember, the Marines operate EA-6Bs (out till '19 ?).
Yes, sir. Yes, ma'am.
Q: Two questions. One is on the Navy piece of Conventional Prompt Global Strike. I'm wondering at what level CTM is funded -- (off mic) -- if you have a request for that piece of it FY '12. And then on a different program, SSBN(X) the Ohio class replacement - is that program now in Milestone A, and if so, when we will hear about -- (off mic)?
ADM. MULLOY: Oh, for the SSBN(X)? Okay.
First off, your first question was on CTM?
ADM. MULLOY: Yeah. There's zero dollars in the '12 budget. It was 10 in '11, and it was just marked in the recent House version of the bill that came out that was on Friday night, they marked the 10 million (dollars) out. So there's zero in '12 and out for conventional Trident.
There is one 1 billion -- I think it was 16 million -- for SSBN(X). It went through a DAB in December. It is authorized to proceed on in -- I guess it was pre-Milestone-A activities. So I'm not sure when the next DAB is for a while, but it is now authorized to start spending up to that.
The initial plan is for -- as indicated, was for 16 tubes, a new design reactor plant, similar antennas and design to the Trident and the Virginia class submarine, same -- no advanced torpedo room. Basically it would be an SSBN version improved, using Virginia-class technology, but -- (inaudible) -- improve in terms of stealth.
So I think you'll see more of it coming out, but the bottom line is we're going to rapidly develop on three lines here also, is you have the naval reactors portion develop the engine room, you'll have the weapons position under SP, where they're already starting to build tubes out in -- I was out in California about a month ago at the Northrop Grumman plant, and there was one of the four tubes.
There -- four contractors are building tubes that will be shipped to Electric Boat and assembled into a tube pack. They will not go on the first submarine, but the idea is how do you build and weld, because it's a different design submarine. We're not going to -- to save money to build the construction of it -- remember, the idea is -- the -- there's actually $50 million for design affordability in this budget starting in '12, '13, '14 to be able to -- (inaudible) -- Virginia.
So this submarine will not have -- build the missile compartment, cut holes and drop tubes in. You're going to build tubes in four-packs that are fitted to hull pieces that will then be added into the cylinders that are assembled.
So the idea is I can assemble in pieces and build -- once again, there's -- it's -- Electric Boat, I think it's 821 or -- they have a place where they save money in Quonset versus the yard, versus in the water. It's a -- dramatic savings happen when you build at Quonset. And then there's even more savings on land level. This ship will have the same idea but even more so than a Virginia class to take that correction.
So these dollars now are building all these places for the future plant, the future thing. And then the last one is what we call HME, Hull Mechanical Electrical. There will be money over in PO Subs to finish out the design in terms of how to be wired, how to be designed, what option generators. There's a lot of things like that that have not actually come in. We know general specs. It must be able to take care of a crew and have oxygen, but the specifics of the power and weight and layout of all that will now happen as a result of this money being in the '12 budget. We can rapidly move down that path.
Q: Just a follow up on PTM -- are you saying the PTM is dead, that that is not part of -- (inaudible) -- right now or --
ADM. MULLOY: It is -- it is not funded in this budget.
Q: That's --
ADM. MULLOY: That's all -- that's all I'll say right now.
ADM. MULLOY: You'll have to talk to OSD policy about any future plans for it.
Q: Thank you.
ADM. MULLOY: Sir, in the middle right there.
Q: Yeah, the terminations cost -- I'm not -- don't find any money for the new amphibious vehicle, R&D -- anything in this?
ADM. MULLOY: Yeah, this budget has over the FYDP $508 million for the new amphibious vehicle. And a little over a billion dollars of the savings was put in to maintain the double AVs.
Termination costs are expected to come out of the FY '11 money, estimated right now, I think, at about $185 million, but I could follow up -- you know, around $185 million right now. The specifics are still being laid out between the Marine Corps and the company and the land -- the Land Systems. So I really defer you to talk to the PO at Land Systems. But that will be funded out of '11. There is no money in -- (inaudible) – ’12 and out. It's all invested in other areas.
Q: (Off mic) -- R&D, there's a contract issued for doing research on the Long Range Anti-Ship Missile. I don't find any R&D money in here.
ADM. MULLOY: Long Range Anti-Ship Missile -- LRASM, you mean?
ADM. MULLOY: There is -- there is some small money in a program, but there is not actually -- that is still in final testing. There is not a separate program element created for that. But there is money between the Navy and ONR. And I believe -- is DARPA in that? I'm not sure. I'll have to get back to you on that one.
But there is -- there was a LRASM A and B still being studied. But that's more a small amount of money now. But it's not actually crafted over. We still maintain Tomahawk right now as a long-range land attack through the FYDP. But we have not converted to either a ship or a land version yet for a replacement for those.
Yes, sir, in the front.
Q: So much of your future year's defense planning here depends on the efficiency savings coming to fruition.
ADM. MULLOY: Right.
Q: Of the $35 billion, how -- forgive me if you've already said this -- but how much is in '12 versus down the line? Can you give a readout?
ADM. MULLOY: Yeah, let me see here.
Q: And how do you know this is -- and I asked this of the Army -- how do you know this isn't blue smoke and mirrors, really squishy, and it's going to come to fruition?
ADM. MULLOY: Well, part of this is -- I'll try to be a little more -- because I -- Mr. Hale, I think, mentioned earlier was, ask the services. I feel pretty comfortable, having absorbed this process through June, July and the debates back and forth that the Navy and Marine Corps has really wrung out a lot of these items.
Now, as I said, there's 1,600 -- 60 or 79 items in the budget. So we will -- and I was at a meeting with the DCMO for the Navy how between the FM and DCMO we're going to track each one of these, how do they convert over. Some are terminations and cuts. They're fairly straightforward. You asked about what it is. In the Navy budget, our overheard cuts were 4,302,000,000 (dollars) in '12.
Q: (Off mic.)
ADM. MULLOY: Four point three billion dollars in Navy and Marine Corps efficiencies in '12. And additionally, there was another -- some of these also were booked by OSD, which brings us up to 5.2 billion (dollars) efficiencies in the Navy. But some of those were booked by OSD to pay their bills and stuff.
So there's a difference -- why I show what Navy and OSD has, but it's all Navy -- (inaudible). So what does that mean is there are a lot of these I can -- (inaudible) -- on. We know we're going to take the ships out. We already have a plan. These ships -- the TKR, the -- you know, SGT Button is in Guam and will come back. And it will either be -- come in overhaul -- (inaudible) -- or it's going to be one of the guys that's going to be in San Diego.
So a lot of these are pre-positioned and planned and thought through. Now, strategic savings -- a best estimate of our model. But some of these came up -- and I'll give you a good example that was rejected: voice over IP.
That was proposed in June. We're going to save hundreds of millions of dollars doing voice over IP. You hear about it all around the world. Navy's already doing that. I currently speak in voice over IP. If you call me -- I talked to a couple of you on the phone the other day -- it was on VOIP.
So there was an estimate that in San Diego if we did computers and we did it to a thousand people, then therefore we'd save x dollars. So if we did it to 500,000 people in the Navy, therefore we'd save 500 times that thousand, right? Well, it turned out when they calculated the savings it exceeded the entire phone bill for the Department of the Navy.
So needless to say, I didn't book VOIP. So for the 1,600 lines in there, there's hundreds that were either put away as, hey, we'll study it in the future, we can't quantify it. Because a lot of people said, if I can save money on that --
And we said, how would you do it? I don't know, but there's money there. Well, we have to book it now. But some will be, you know, under evaluation. But we have a team set up to go back and do it.
LT. HOLSEN: We have time for one more question.
Q: (Off mic) -- I mean, 3.5 -- 4 point --
ADM. MULLOY: Well, the largest year is '16. I mean, remember, the goals set by the secretary of defense were 2, 3, 5, 8, 10. So there's a -- and a feeling of, as anyone imagines, when you start to ramp something, you have to take longer to get there. But end of the FYDP is 9.8 billion (dollars) for the Navy in '16, 9.8 billion (dollars).
Yes, sir, in the red tie.
Q: How soon do you think you can get the new amphibious vehicle? The Marines have talked about doing it in much -- a much faster time frame than eight to 10 years. What's realistic?
ADM. MULLOY: As a budget officer, I have to tell you, I don't know, because I'm not an expert. I do know that they have spent, you know, 14 years so far developing it. So I expect there would be an -- a real acceleration on that.
I'll ask Carol is there any date right now expected from the Marine Corps?
ADM. MULLOY: Okay. I (inaudible) 2024 from the financial director from the Marine Corps, and I think that's what you'll have to go with. Now, that's in IOC. I expect they'll have vehicles much sooner than that.
You know, example: the EFV has been in development a long time. The last few versions, we just saw testing. We're actually operating pretty well. But it really ends up being -- the total cost of the program was just too much. The $3 billion is a sunk cost. The secretary of defense understands that. It's econ 101. It doesn't matter what you spent in the past; it's what you're going to spend in the future. And $12 billion was too much money. So I think they're going to find a way there. But there's an awful lot of lessons learned that will be informed for this new vehicle. So I feel confident they can take it and convert much faster to a vehicle they want.
Think we got one more over here. Sir.
Q: I've got a quick question with the energy investment savings. I'm wondering how you can project so far down the road if so much of it would be dependent on the cost of -- (inaudible) --
ADM. MULLOY: Well, what you do is you have to -- (inaudible) -- because there's a -- it's somewhat of an -- (inaudible) -- process. We get a fuel price set by OSD and DLA, and so that's one item. And so all I have is, I base it on that fuel price. So I would save a little bit less if it went down -- I'd save a lot more.
So these are -- these -- I view as minimal. So what they're really based on is 3 percent savings on LPDs because they have stern flaps; 5 percent because I fly more simulator hours. On the bases, I just know on energy use, some cases, compliance with the law, if I have advanced metering, I know what I'm going to get. So it's the price of a kilowatt estimated at that year.
Q: Cost of fuel or alternative fuel is not factored into these?
ADM. MULLOY: Right, well, it's not. But right now none of these depend upon the -- you know, shifts -- none of these depend upon shifting everyone to a cheaper alternative fuel. It is all based upon fuel.
And one of the -- I know there was a RAND study recently, and I'm not going to go into a lot of specifics, but the idea was, alternative fuels are very, very expensive now. But when you looked at where they could be, they could be lower. We'll still operate on the best estimate for the -- for the price of fuel in that year, set by OSD, whatever the mix may be. But we're not paying -- this is not -- budget's not based upon some astronomical amount for alternative fuel. It's really upon getting there.
So these energy ones, I feel very comfortable that those are laid in based upon earmarks of kilowatts we're going to save and fuel savings that we'll achieve through actual quantifiable changes, and for the best estimate of fuel that year.
Yes, ma'am. I think I've got like one more minute.
Q: I have a quick question -- I have a question about the auditing. I know during a recent HASC hearing, committee members were very upset that DOD isn't auditable yet and questioned how you could go forward with efficiencies in the budget. I was wondering, is -- DOD -- is the Navy and Marine Corps going to be audited by 2011? And what sort of funding have you put into the budget to enable you guys to reach that milestone?
ADM. MULLOY: There is FYDP dollars in the tune of -- Mary Kay, what is the FYDP money? It's a couple million dollars a year?
Yeah, about two or three million dollars a year for auditability.
The Marines actually just went through an audit, detailed process, tremendous number of lessons learned. The Navy's going forward. Our E-2D program is an example for ERP , for Secretary Hale, that every part of the E-2D, because it'll be from -- it's currently operating, it just landed on an aircraft carrier. So we're going to do that from AP -- from RDT&E through O&M for an audit and show that we can do it.
I'd really say that there's two different things here. One is to book efficiencies and understand how much we -- we save in what we do. The auditability goes back to being -- is an accountant checking on the receipts. I mean, we really do know -- report back to Treasury what we're spending. There's a different level here that I think we can do the efficiencies independent of that.
But we are supportive. The vice chief of Navy and the FM just sent out a memo to every Navy budget-submitting officer, all our three- and four-stars, on supporting the FYDP program. You know, we are achieving that. The Navy will not be in an auditable shape in FY '11, but the Navy's making steps down that path to proceed there, and we're taking tremendous lessons learned from the Marines who just completed their audit.
Q: (Off mic) -- money next year than you would have in FY '11 to -- (inaudible) -- audit ready?
ADM. MULLOY: No. We are -- we are keeping that program. That was independent of the efficiencies enhancements. We didn't take any money out, so there wasn't a tremendous amount added to it. Because it's really -- it doesn't generate -- it will, hopefully, in the end, make it clearer for decision making. But we couldn't -- that's one of the ones like VOIP. I could trace giving Admiral -- Mr. Dennis Taitano an (inaudible) of a dollar and a savings for that. So we didn't cut it. And we're going to support it as we go ahead. But I couldn't go ahead and put more money in and then take money out. And that's really what we're looking for inclusive.
Q: There were -- there were two 30-year plans that have been sent to Congress in conjunction with the budget, the 30-year shipbuilding plan and, more recently, the 30-year aviation plan.
Do you -- what is the status of those two plans? Are -- is there any report that’s being --
ADM. MULLOY: For the 30-year aviation plan, the Department of the Air Force and Navy provide input. OSD will send that to the Hill. There is no 30-year shipbuilding plan, as required into a law that was committed with the QDR. But it -- so there isn't one this year. All I can say is we added five ships more than we had last year. So it's got to be moving along, and a few just came forward. But there is no 30-year plan or won't be one this year.
I appreciate you all very much. Thank you all very much.
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