U.S. Department of Defense
Office of the Assistant Secretary of Defense (Public Affairs)
|Presenter: Rear Admiral Joseph P. Mulloy, Deputy Assistant Secretary of the Navy for Budget||February 13, 2012|
Go to here to view briefing slides associated with this transcript.
LIEUTENANT COURTNEY HILLSON [Press Officer, Navy Public Affairs]: Good afternoon. I'm Lieutenant Courtney Hillson, public affairs officer for Rear Admiral Joe Mulloy, deputy assistant secretary of the Navy for Budget. He'll be briefing the fiscal year 2013 submission for the Department of Navy. Following the briefing, if you have any questions, please let me know.
With that, I'd like to introduce Rear Admiral Joe Mulloy.
REAR ADMIRAL JOSEPH MULLOY: Thank you, Courtney.
Good afternoon, ladies and gentlemen. As she said, I'm Joe Mulloy, the Department of the Navy budget officer. I'm here to present PB [president’s budget] '13.
Next slide -- first slide, slide two.
I'm not going to spend a lot of time on strategy. I think you've already heard the secretary of defense and the chairman over the last month rolling out their view of that, and Mr. Hale this morning. But I just did want to encompass that it came out of the strategic review. The bottom line is the Department of the Navy, made up of the Navy and Marine Corps, is well positioned to be part of the Joint Force 2020. And under our Navy and Marine Corps roles and capabilities and the funding provided in this budget, we can accomplish our portions of all these missions here that require sea power or maneuver from the sea.
Beyond the guidance from the secretary of defense and the president, there are six areas where the secretary of the Navy challenged us, as we did this review, to also support: First is taking care of our people; second is maintaining our war fighter readiness in an era of reduced budgets; third was our involvement with sustainable energy, and also just reducing energy use; fourth, and important, was promoting acquisition excellence and integrity in how we conduct our business; fifth was dominating in unmanned systems; and last was to drive innovative enterprise solutions.
Next slide, slide four.
Around the world: your Navy and Marine Corps team. Right now the Navy is currently deployed -- or under way and deployed 156 ships -- 55 percent of our fleet -- involving four aircraft carriers and five large-deck amphibs. And paired with them are a significant number of Marines, including 16,000 in Afghanistan and 3,000 other forward, and various other ships around.
As you can see, the emphasis is the -- on what they call two hubs are the two areas for the Department of Defense, the Navy-Marine Corps already there with 29 ships deployed to the Middle East and 52 deployed and under way in the Pacific. We are where we need to be, and we'll continue to operate in these areas around the world.
So the first in terms of dollars: This gives you 16 years of data and the growth of the Navy-Marine Corps over time.
And I want to emphasize, starting there at '13 you can see is that the budget is for $155.9 billion in the base and approximately $14 billion in OCO [overseas contingency operations]. I'll talk more as we go, but those red squares delineate what was the adjustments going from PB '12, '13 through '17, to PB '13, '13 through '17 -- in terms of the total. And I'll reflect more of that and discuss it as we go along through.
But you can see there's actually a quantitative reduction in '13 and '14 actually, in nominal as well as I'll talk about real terms, but at the same time as we're still able to carry out our missions.
Net effect over this is that, from FY '12 to '13, this is a 0.9 percent reduction in nominal growth, 2.7 percent in real growth. And it continues on with 2 percent real negative growth in '15, whereas across the FYDP [Future Years Defense Program] it ends up being 0.7 percent across the FYDP in real growth. So there is a contraction here. But the bottom line -- I think you'll see where -- what we buy, where we position our forces, we are well-served.
Next slide. And this will be my last in terms of strategy, unless there's some questions on that. But I really want to emphasize, what started in the spring -- and I've been budget officer now for three years, my third time briefing all of you -- we've seen '11 was -- there was no FYDP in '10; '12 was efficiencies; '13 has been what we call an inflection point. It really has been a dramatic change. We're out of Iraq, focusing on the world going ahead, the fiscal pressures on the United States -- we were already looking at what kind of contractions had happened in '14. And then with the Budget Control Act, and then what is happening with deficits around the country, the emphasis came on as: What can the Department of Defense do, but still have -- what do we have to -- what do we have to be able to do for -- what can we do with the money we have?
And so there's two arrows of economic realities out there. And the Budget Control Act, along with the desire for strategic review, basically involved the department at the levels of the secretary, the commandant and the CNO at a higher level of discussions along with the combatant commanders, the National Security Council and the leaders in the JCS and OSD -- as well as at a lower level, played out almost every day in October -- two- and three-star meetings of what does the strategy mean on top of what many of you know is called the Three-Star Programmers.
This was a very iterative process of what does each service bring to bear, what can the Joint Force do, how can we do capabilities with each other. And the bottom line is that circle in the middle was, as we looked at the new strategy; how would we reshape what we have, how do we control growth; the reductions in terminations -- which would each service do that would allow the backdrop to somebody else or where do we have to have the supremacy we bring to bear. And the bottom line was the restructured forces, and I'll show you, slide by slide, what that means.
And then you see again that $58 billion. That is the Department of Navy change going from '13 through '17 in PB '12 to '13 through '17 in PB '13.
So this is a busy slide here. This is actually the five-year snapshot. So these numbers you see here are deltas. I mean, the total is -- we have is across the FYDP -- it would have been 862 billion [dollars], but it's 804 billion [dollars]. Once again, you'd see the $58 billion.
And walking around the circle here, going counterclockwise, up in MILPERS [Military Personnel], that's a significant change. But it's not -- I don't know how to put this; this is a classic DC -- it's not a reduction, it's a change in rate.
As Mr. Hale talked about, you have savings expected by -- there are still pay raises, but they're not at the same level in the out years. There are still increases for medical, but not as much as before. Across the board, you can actually see as each of the years it was. And actually housing allowances, there's an expectation that will actually grow more than what we had before and a few other areas -- subsistence, the cost of food.
But the bottom line is, no one is losing a dollar. There is not a sailor or a Marine losing a dollar from their current paycheck in this. It's merely an adjustment of what is the ramp-up over time.
In operations and maintenance, as Mr. Hale indicated, was -- this is a step across the FYDP where it didn't go down, because we are seeing the price of doing operations are there and not having a hollow force -- the amount of ship maintenance required in the Navy, the cost to operate, and also OCO to base.
This is one area where you can see in ship ops and base ops, we are driving at bringing the Navy back to 5124. Many of you remember before 2007, the Navy had been at that metric; went to 45 and 20 because of so much OCO. And I'll talk more on the slides later on about O&M [Operations & Maintenance]. But we're driving more of that ship -- the ship ops back into base, because that's the strategy. We will be out and about around the world with deployed days, independent of where we are, very obviously focused in the Middle East and Pacific, but we want to have that not off on the (inaudible).
And then base ops, an enduring presence in Djibouti. It's over a billion dollars of dollars funded to the Navy and the base so that we'll maintain the presence of the commanding officer of the base. It will be a joint force. In fact, probably you saw it was an Army general that was just named as the next head of it. But it will still be inside the Navy to actually run that camp as a base over there.
Infrastructure. MILCON [military construction] is two things: grow the force for the Marines is done, and the services are accepting a little bit of risk in terms of how much they can be able to put in there. Research and development is only down slightly. The Navy maintained a robust science and technology.
And then procurement: Once again, where do you take the cuts, especially in the near term when you can't come off O&M right away, you can't reduce people as -- that fast. And we don't want a rift, because you cut some procurement, some of it which is just gone, another which -- are items which we'll talk about, are either deferred.
So real quick around for what's '12 to '13. MILPERS is still a robust account of 44 billion [dollars]. O&M has actually gone up, as we indicated, with trying to be able to support our forces around the world here at 49 billion [dollars]. Infrastructure is down almost half a billion dollars, once again, completing grow the force. And then R&D (research & development) is a very minor change. And then procurement would drop. And I will show you the individual amounts.
Military personnel. Two different services, two different messages here. The Navy is -- as I discussed last year, is finishing a slight decline. The Navy's come down almost 60,000 people over the last 10 years.
This adjustment you see here -- the blue was last year's budget; the red is this year's. And the one change in '12 was the loss of the IAs and OCO drove the Navy to make an adjustment in our base account. That's been accomplished through the Enlisted Review Board, where people were separated. We also did a continuation board for chiefs and a serv board for some officers.
The bottom line, the Navy's got end strength flat going through these years. Those adjustments reflect some of the decommissionings and other changes on the ships. You decommission some and start to bring other ships on line.
The Marines -- the kite graph here is -- the blue was last year's plan; the red is the plan, as Mr. Hale talked about. The idea is that from this point on, the Marines in their base, or the 182.1 [thousand Marines], are the final force. The green line is the -- is the line that determines what are they -- what are they going to have in terms of OCO dollars. And so the end strength for '13 will be 197.3 [thousands].
Those other lines are -- as he said, it's just a placeholder -- but that's the anticipation of some of that OCO dollars, each of those years, will allow the Marines to draw down, maintain faith, maintain the forces ready, and then reorganize the Marines into the future -- their future support group, the plan by the commandant of what exact MOS [Military Occupation Specialties] is, how many E-8s would they have, how many young captains, what's the mix of majors. That's all part of this process going on as the Marines downsize, bring people back, form the units of readiness for the future.
Civilian personnel -- relatively flat, a slight change, just going from '12 to '13, of 2,500 people; 1,400 of it is just transfers; 1,100 people are going from the Navy Medical to the TRICARE management office, so it's really a change -- a change; 1,100 are reductions in the workload.
I'd call this a bit of a lagging indicator. Our civilian workforce is largely integrated into the airplane depots, the ship depots, our naval surface warfare centers, research labs. And so largely, our civilian personnel is sized to the work. Nothing's changed in terms of the number of ships out there operating, and for the next couple of years, all of our equipment coming back and our people are there.
So it's minor changes. There is some workload reduction, but you know, as I said, a tune of 1,100 coming down there. Next slide.
Readiness -- how do we fund it here? First off, ship operations. You can see the big change from '12 to '13. That big step up there is that OCO-to-base I talked about, putting the steaming days back in the base, which follows along with the strategy that the Navy will be out and about.
Flying hours are relatively flat, but there's also some OCO-to-base in there, but in terms of how do we maintain the squadrons ready. And then the decrease in OCO is actually adjustments in how much flying there is going on.
Marine Corps ground equipment reflects just the level of maintaining the equipment they have in their base, and that is also the equipment coming back from overseas.
Ship maintenance continues to be funded a hundred percent -- or maintaining our ships for the full service life. It's important to us. And part of -- a big chunk of the growth is there's been some increase in terms of a -- or an increase back from where Congress had reversed money into base -- or into OCO, and then we also have growth in some of the availabilities about $500 million.
Aircraft depot maintenance is relatively flat, pretty much driven by the level of operations in the past years.
And then base support -- the reflection in the base increase is Djibouti, and then the Navy has about 180 man-hours in terms of family service centers, MWR accounts, children's centers and other items is the growth in base there.
Next slide, Shipbuilding. I'm certain there'll be a lot of question on this one later on. This is probably the one that has the largest number of ships changed, that's loss of 16. Now, to put those in context, we're -- the bottom line was eight of them were JHSVs [Joint High Speed Vessel], which we had planned for a larger force. As we looked at what would the strategy have, what do we have to have for war fighting and support for the COCOMs [combatant commands], analysis was made was 10: five that the Army had built that now were transitioned to the Navy, and the five the Navy would complete in '13 would complete that group of ships. So that's eight of that 16 loss.
One was a T-AGOS ship, a total ray operating ship for the Pacific. Three were oilers that we were trying to get into view, I think, a little bit ahead of need, but we know we wanted to get double bottom oilers. We took three out, but maintained one and 16 to get going on that design of ships.
Two LCS [littoral combat ship] were adjusted at the very end of the FYDP. One submarine was actually moved from 14 to 18, but in terms of procurement, that's still the same nine-ship multiyear buy, 14 to 18. And then one DDG [destroyer] was moved from 14 to 16, still within the same idea of what we're buying for those ships. And last was an LSDX [landing ship dock] which was moved out. The idea is we're going stay with the big-deck amphibs, and funded the one big-deck amphib at 17. The LSDX moved outside the FYDP.
So it's a big change in number of ships; total dollars are a modest amount of savings. But the real driver here was: What do we have to have? We are still buying DDGs. We are still buying submarines. We're still buying the other combatants we need here.
Next slide: Aircraft.
This is a -- an area of significant change, also; certainly been discussing the Joint Strike Fighter earlier. The Navy and Marine Corps: total change is 69 aircraft over the FYDP. Both the airplanes were basically made flat early on and ramped near the end. The money was rolled into -- some into R&D, an increase of about 300 million [dollars] from '12; and the balance was also what we call concurrency. The earlier planes built for the Marines and a couple of Navy are going back to make the fixes that have to be done with the R&D -- the so-called hot spots that Admiral Venlet talked about. So that's all rolled up in the money in this account. And then we'll start ramping the planes later on.
We maintain the F-18 buy. E-2Ds: Reduction of nine over the FYDP, but still maintain that class. And P-8s were adjusted; 10 aircraft removed from the FYDP, near the end of the FYDP, adjusted to 18 at the end of that buy. And the other ones are: The V-22 comes out of a multiyear, and there's been adjustment down. The bottom line, this was adjustments for affordability, except for the Joint Strike Fighter, which really was concurrency and availability of the aircraft.
Next slide, weapons. Not as much change as you might expect. There've been some ramping here. We basically have weapons at MSR or going to MSR. The SM6 ramp was adjusted slightly. The RAM ESM are the same. We bought more -- we bought some more torpedoes, and then JSOW and ARGM are up.
So the bottom line is across the board of weapons, trying to maintain a pace where we have to be, which goes back to the CNO's goal of war fighting, that we need to buy the weapons we need to have. And in this case, the only other big change you see is JAGM [Joint Air to Ground Missile], is that was zeroed out under the idea of this -- the small-diameter bomb is crucial to the Navy and Marine Corps and Joint Strike Fighter and Air Force.
The JAGM is -- we've got great interest in terms of the booster and trimode seeker. But in terms of affordability, one of the two was needed to be retained, and one of them was going to be terminated for us -- and then a small amount of money in the Army to maintain some R&D.
Next slide, Marine Corps procurement. The Marines' goal was to modernize their command and control equipment and the logistics capabilities to keep up with the joint force and continued evolution of their current and future threats.
Some highlights in here is radar systems. You can see at the middle of the slide there's a jump from 40 [million dollars] to 128 million [dollars]. That's buying two more G/ATORs, radars that -- 3-D advanced electronic search radar, as well as refurbishing the ADM model so they can get going on that.
The power equipment increases there also, from 27 [million dollars] to 56 [million dollars], is lessening. That's some of their tactical and energy investments, lessening their need for power to be brought and fuel to be transported forward.
And the LVSR [Logistics Vehicle System Replacement] at the bottom of the slide, going down and back up again, that completes the buy of those, but now they're going into safety improvements on the LVSR.
Next slide, research and development -- basically, pretty much flat; a slight decrease. But if you remember, '11 and '12 were also buoyed up by about 4 [hundred million dollars] to $500 million in congressional adds. You can see from the slide, Joint Strike Fighter is still up a little bit. PH are dropping by almost $200 million as we transition to production.
The Ohio replacement is going to be a phase-through of the two years. There was a two-year slide in developing that. So the bottom line is that will ramp back up again across the FYDP, but being able to use the two years of dollars there will allow us to continue an even ramp.
LCS increases for trainers for the two different hulls that we've elected to buy. The Virginia class growth reflects the Virginia plug module, or the -- you know, the enhanced strike version of Virginia. That's the beginning of the R&D, 800 million [dollars] over the FYDP. The first down payment is that increase in '13 to allow us for that Virginia plug.
N-UCAS and UCLASS. You can see the transition of N-UCAS ramping down from that test, UCLASS ramping up. The first two and the other are important programs for the commandant. You can see the amphibious combat vehicle going from 37 to 95. That's part of an increase to allow to bring the best attributes of the Expeditionary Fighting Vehicle forward as fast as possible to a vehicle for the Marines. And the Joint Light Tactical Vehicle is maintained in concert with the Army. This will be the replacement for humvees, but trying to find a lightweight, highly capable vehicle for the Marines, they'll be paired with the Army on that program.
And the last one, AMDR [Air and Missile Defense Radar], the cycle there going back up from 166 to 224 ramps into getting the Flight III Burkes. As we move from tech maturation and tech demonstration, they will be leading ourselves to -- in the -- on the ship profile, one of the DDGs in '16 was a Flight III, and both of the DDGs in '17 are Flight III, and that is a change from last year. It looks like the same numbers because they're -- you know, in terms of the hulls there. But the robust idea was at the end FYDP we had the dollars, we wanted to get to the Flight III with enhanced BMD capability.
Military construction and family housing. Significant drop over time. You can see -- the biggest change, I will tell you, is the Marines coming out of grow the force. They had built a robust program to be able to take care of their Marines on all their bases around the country. You see us reaching more of what I call a steady state at the end, and probably even a fairly lean steady state for MILCON.
The FY '13 account has 65 military construction programs -- some overseas, largely around the United States, largely focused on military needs -- B-22 hangars like the one you see on the bottom-left down there at various points, as well as F-35 information.
On the right is family housing. That's a picture of some housing in Key West that's just been -- been through PPV [public-private venture] projects. There is one PPV project in '13. It's up in the Northwest, in what's called Jackson Park. It'll serve Bremerton and Bangor. And the $102 million in construction is not new houses, but that maintains largely overseas -- in Guam, Japan and - (inaudible) -- homes.
Energy, a key component driven by the secretary of the Navy, who has made that one of our -- as you saw, one of our opening six items -- but also supported by the CNO and commandant for what I'd call tremendous tactical reasons. The lessening the amount of fuel that you have to provide a remote base for a Marine is a significant tactical advantage.
Every day that you could defer an UNREP [underway replenishment] of a ship -- because even our aircraft carriers have to UNREP for airplanes, so tactical aviation improvements drive fuel refueling of aircraft carriers. Tactical improvements like stern flaps require fewer -- whether it's an UNREP or an INREP [in-port replenishment], wherever you can go to get fuel on our ship. So each one of those things extends the range for the fuel you have on board or extends the time till you have to UNREP.
And when you UNREP, you take a lower state of readiness because you have to pair up. You adjust your portfolio of not -- being lesser combat-ready, or taking a risk. So everything you can do to affect energy use and drive the same tactical output for less energy use is important. So that's really where the CNO and commandant come down, is we're doing this for a reason, and we're doing it for the tremendous reason of safety for personnel and efficiency of our forces.
And you see some of the examples around here -- the Green Hornet -- but it also is a significant investment in trainers. The Marine Corps is saving time in terms of being able to get pilots and NFOs trained with high-fidelity trainers. Obviously, the photovoltaic panels, Truxtun modification, lighting on board, stern flaps -- a wide variety, all across the area.
Next slide, OCO funding. Navy and Marine Corps continue come down from the peak in '11. Couple of big drivers here you see in terms of Navy operations going from 8 billion [dollars] to 5 billion [dollars]. Two big items there was the sheer amount of what I'd call carrier presence. We are still maintaining a robust presence, but as the carriers are going to maintenance, we're not flying as much as we were. So there's some saving in flying and also total steaming. But we're still maintaining 58 days deployed. It's the mix of ships there. Another big portion that was Lemonier going to the base, also drives Navy ops down.
In terms of the Marine Corps changes, you can see a big step up there, kind of like some what people would recognize with the Army. That's the moving of the Marine Corps, that 197 [million dollars], that extra 15,000 personnel going into OCO here is what drives that up. And in terms of Marine Corps operations, going from 3.5 [billion dollars] to $4 billion, that normally would be going down as our level of ops are going down.
But two items I would call transfers. One is in Afghanistan, in the past Army had budgeted for fuel; the other services drew on it. In this case for, I guess, fidelity in terms of as they closed down the accounts, the Marines have had to budget for the fuel that they use and the MRAP [mine resistant ambush protected vehicle] repairs, which previous had been in Army for fuel and Defense-wide for MRAPs. So it's not really an increase in the Marines or increase the DOD, it's just a transfer in terms of display.
So as I try to wrap up and shift to questions, we think all of our investments here are aligned with the strategic priorities and goals as set out by the president through an intense period of meetings with department leadership, including the CNO commandant, SECNAV. As a result, we have a leaner, smaller force, but we are still rapidly deployable and expeditionary. And we are manned and led with the highest quality of individuals.
So for further information, here's the website. And I think you have all the material. I'd like to go ahead and turn over to your questions.
Q: Yes. Does the changes in the ship account -- you said 50 ships are being moved.
What does that mean for the long-term size of the fleet? Are you forecasting a smaller fleet for the future?
ADM. MULLOY: Well, actually, it's interesting. Right now we have -- we're actually forecasting that in '17 we'll have the same number of ships, 285, we have right now. There's a slight dip as we decommission some of the cruisers, two LSDs, but the production we have going on will actually drive us back up. We will actually go up above 300 in the -- outside this FYDP in what the secretary of the Navy calls the second FYDP, which is really important, of what are we going to continue to build for war fighting. So we actually see some growth up there.
The actual force structure assessment that'll define another number for the Navy is not done. The CNO has committed to do it in the spring and brief the secretary of the Navy and then the secretary of defense. So I expect to have numbers in the April or May time frame for total fleet size.
But I wouldn't want to point out, as you look at that, is, you know, right now we have 37 ships under construction around the various shipyards right now. So remember, shipbuilding is a program that -- we have an LPD still being built that was funded in '05. The SCN comes out -- it's five-year money -- can be extended. So we use -- typically can spend money on 10 years on a ship. So we have a very large amount of backlog. So in all these yards where you may see low numbers, there's an extensive amount of work, and it takes a couple years to get them on contract. And we have -- we have nine more ships to award this year.
So we view that that backlog of work out there, and those ships deliver over this FYDP. And we're tightening them up. And the Virginia class, you remember, had been, like, up to six years to deliver a ship. It's down to almost five. But there's two a year, and we have nine submarines under contract right now that'll still come out no matter what we did here.
STAFF: Yes, ma'am, in the black, second row.
Q: Thank you. Two questions for you. One is do you have a five-year figure for SSBN-X [ballistic missile submarine] research and development? And I can do the second one after you answer that if you'd like.
ADM. MULLOY: I don't, but I can get it with Lieutenant Hillson right after that. But I mean, largely, the $4.2 billion removed from that program was the construction of it.
So that was the -- we had advanced planning in '15, '16, '17. We also had advance -- you know, the procurement of the beginning of the hull, the advanced procurement of various components. That was largely the money. So we'll give you the number, but I don't remember exactly, but it's on the order of more than a billion -- more than -- I think of more than $2 billion.
Q: And then my second question was, on the new conventional prompt global strike capability that you're looking to design aboard the Virginia-class submarines, do you have any funding for that in FY '13?
ADM. MULLOY: Not in the Department of Navy budget. Part of the prompt global strike is within DOD. The actual Virginia plug was a transfer from that account. So the Navy's money was a -- that was one of the -- if you think about, I have a prompt global strike account that OSD had, they made an investment: Hey Navy, you go forth, design this ship, build the ship, come up with a plan. Right now, we are still looking at weapons we currently have. But you know, that's still the art of the possible to come. But there is no Navy money right now for prompt global strike in our budget.
Q: (Inaudible) -- figure for that in the coming year?
ADM. MULLOY: Not right now. No, ma'am.
Yes, ma'am, in the front.
Q: A few questions about your aviation program.
ADM. MULLOY: Yes, ma'am.
Q: First of all, with the release of the STOVL [short takeoff and vertical landing plane] from probation, it looked like from your slide, if I recall correctly, you hold steady at six and then go up to nine and fifteen. Is there a reason --
ADM. MULLOY: Sixteen.
Q: Was it sixteen?
ADM. MULLOY: Sixteen.
Q: Is there a reason why you're still holding off and holding that procurement low? Is it until you get past a concurrency that you want to bump it up?
ADM. MULLOY: Yes, ma'am. This -- the production is really related to what I call as a -- there's not -- there's like -- many of you have visited the factory -- there's a -- there's a very large MSR for that factory floor, but there's an MSR for what they have currently. When you go down and you see the two lines they have open, there's an MSR for what they could put through right now. Pretty much we've been -- if you look at our numbers, you'll see is that we stayed STOVL at six. The seven and twelve will be adjusted in here. But the bottom line: If you do '11, '12, '13, '14, the Navy side, you're at four or five airplanes. And so we don't want to build more until you finish the design. So that's essentially the point was, that taking off for probation is really related to we're going to recover, we're going to do the concurrency fix on all the passenger planes; that's where the money's going.
The idea is, the Marines want to have the planes. We want get them fixed as soon -- but taking off probation does not affect this ramp. But it's in the backdrop.
Q: And then another question on the aviation program: In three major programs, all of which I thought were performing at least better than most in DOD -- V-22, P-8, E-2D -- the Navy made strategic decisions to trim the buys, I presume to keep the programs alive. How did you make that choice? And are you worried about the effect on the per-unit cost, if it might trigger a Nunn-McCurdy, that sort of thing?
ADM. MULLOY: Well, a couple different ones. They're all different here.
You're always worried about -- always worried about cost. One thing about P-8 we're finding is, one is, it's on -- you know, the per-unit cost is one thing, but remember, it's on a buy of 3,000, you know, 737s going on. So in terms of what we do to the cost on Boeing, the actual cost is still coming down. Even though we may have moved 10 outside the FYDP, we're seeing pretty good cost returns on that. So it's more of an adjustment of one year going to the 20, rather than 30, to move the 10 out to 18.
So yeah, we're looking at small amounts of dollars that had to be in airplanes that weren't in multi-years. And we couldn't cut ships more. We didn't want to take tactical. But you still have to come up with a $58 billion reduction, which was about $32 billion for procurement. Where are the larger accounts? APN for the Navy and Marine Corps is about $3 [billion] to $4 billion above SCN. So as you look on the max, the multiyear on the V-22 was coming out of 30, which was designed to be doing two and a half squadrons a year. Now they're done. All these airplanes are follow-on for maintenance and squadrons. The transition's done. So the Marines are looking at affordability and what could I put back in a multiyear to keep building at reasonable number within the dollars you have.
There is no requirement tied to turning over the squadrons, and the E-2 is just trying to basically maintain them, and we're not putting that in a multi-year. There was talk about last year.
Q: I'm sorry. I'm not sure if I understood your point on the multi-year for the V-22.
ADM. MULLOY: Right.
Q: Are you saying that the per-unit price is not going to go up, even though --
ADM. MULLOY: The per-unit price may change, but we'll have a new multi-year -- there will still be a savings of 10 percent over single- unit buy, but the cost for each one will probably go up some.
But there's also a tremendous learning curve. And I'll have to defer for an actual flyaway cost in the actual budget book. But it is not as much as just immediate cut of half, and so therefore must double, because there's tremendous learning out of Bell and Textron.
Yes, sir. In the front.
Q: Follow-up to hers about the F-35, both variants. You're going to build seven F-35Cs and six F-35Bs in fiscal year 2012, yet both of them need major work before they're actually an aircraft that can be used in an operational sense. We've already been told by Comptroller Hale that by stretching these programs out a little longer, that the per-unit cost is going to go up. One of the problems with both of these is that the per-unit cost has already gone up. How can you reassure the taxpayers that this is not going to become some monumentally expensive -- that it's not worth the money to spend on any of them?
ADM. MULLOY: Two points. One is, the assurances through this whole process, it's more than just Joseph Mulloy as the Navy budget officer looking at this. But I take this job very seriously, and my time looking at it and meeting with Admiral Venlet, going to the factory floor.
There are some things that have to be fixed on this airplane. The estimation early on prior to Admiral Venlet coming as program manager was that the modeling would model better. And in some cases, they didn't.
I would say, as -- remember, any plane that we put on contract in '12 will not deliver till '14 or '14 1/2. So a lot of what they want to put in there, the idea of controlling them is to be able to fix as much, and they will not -- these airplanes you see in '13 and '14 will not require the same concurrency fix. But the money we'll be able to do is that the line can bring planes back and do the repairs.
So we're not producing more -- I believe they're actually trying to reduce the number and also make sure these planes roll off without these concurrency issues.
But I have a backlog of at least 50 or more Marine Corps aircraft that are going to have to come back in for some level of repair that need to be done in this process too.
So I think -- I'd say is that having seen the airplanes down there, having seen one that got launched from an EMALS [Electromagnetic Aircraft Launch System] at Lakehurst -- the F-35B landed out there, and the commandant watched it on a big-deck amphib --and the use of it is that I think we're at that -- at a point to where I don't think the taxpayers have to worry about -- you know, they have to worry about good use of these dollars. But Admiral Venlet was picked to drive this program further ahead and the engagement of General Amos is -- just also amazing, as an aviator, is what has to be done.
So I think very strongly that this airplane, when you look at the capabilities it brings and the level of stealth and electronic capabilities, whether it's the full-spectrum environment -- that this airplane is the technology we have to have going ahead. If it wasn't this aircraft, there'd be something else, and this one has been pretty well-driven down on their learning curves when you go to the company.
Yes, sir and -- with the red tie.
Q: Yes, on ships, with the retirement of the two landing ship docks and letting slip one of the newer, bigger amphibious vessels, are you going to be below the number of amphibious ships you need to deploy to MEUs? And there's a follow-up: How many -- what will be the size of the amphibious fleet when -- (inaudible)?
ADM. MULLOY: The long term amphibious fleet with be 30. So that's what this is all based on.
And so it's adjustment of what could be done to keep all -- to keep the ships we have to have and then sequence the Peleliu versus the America delivering the LHA 7s down on contract get. So we're working through the interstitials; but along the way, the long-term path right now'll be 30 -- 30 amphibious ships to give us the 10 ARGs and that therefore we'll be able to maintain the presence to move the MEUs we have and to flow .
I mean, there are some cases where they're in maintenance. But the bottom line is, you know, it -- we need 32, 33 ships, but our goal is 30 right now. That's what we're going to have. There's -- you're asking where am I taking risk? This is one area.
You can't take $58 billion and not take some risk. But we maintain the large-deck amphib at the end of the FYDP really for a Marine Corps need and a Navy need. Those ships are tremendously valued to the Navy, around whether it's at other bases or other events going on around the world.
And that was conjoined with the CNO and the commandant saying was, with the money I have at the end of the FYDP, I want a big-deck amphib -- more than I wanted the LSDX, which then slid out.
Yes, sir, over here? The brown suit?
Q: Loose end on the Ohio replacement -- that advance procurement and construction was going to begin in what year?
ADM. MULLOY: (20)15, and now it's in '17. It's the first-year advance procurement for '19. The ship moved from '19 to '21.
Q: And can you say a word about UUVs?
ADM. MULLOY: Oh, yes, sir. Once again, taking out 58 billion [dollars], is hard to not have some adjustments. But the bottom line, we maintain our BAMS [Broad Area Maritime Surveillance]. The MRUAS program was terminated, because as we looked at what we have to provide to ground forces, support to SOF, and naval needs -- the B2AV, as it moves from the B to the C model, and supporting the SOF requirements for that -- was felt that was enough in terms of what we need there.
We added some STUAS. And we keep a robust program of all the various small ones. The UCLASS, we looked at it was because the AOA's not done yet, the program was already sliding some. There is a adjustment in here for about a one-and-a-half- to two-year delay in the UCLASS -- really in terms of be able to define what the requirements are, and then also, what can we get there? And then also observe the N-UCAS demo a little bit longer. So that did slide out. It was going to be '18. The IOSC is now probably going to be very likely early in '20.
Q: There seems to be some confusion on the Hill about the plans for the carrier at Mayport. Does this budget delay the move of the carrier to Mayport, or does it cancel it altogether?
ADM. MULLOY: It effectively delays it, is -- the strategic dispersal is still a strategic need, as recognized by the CNO and the secretary of the Navy about the strategic dispersal of our ships.
But it did take out the MILCON as required for our carrier. And so that has been deferred outside this FYDP.
Q: Any idea when it would be put back in?
ADM. MULLOY: No, ma'am.
STAFF: Yes, sir, in the front.
Q: Yes, sir, I just had a quick clarification on where the Flight III is, on the -- on the progress. Is that construction schedule and design schedule still the same from last year?
ADM. MULLOY: Yes, sir. The first one would be in '16, but rather than having one further out, we have two in '17. So there's one in '16, two in '17. So from '17 on, all the Burkes will be Flight III.
Q: Right. And then also, it says it here that you all are turning the third MLP into an Afloat Forward Staging Base. Does that mean a reduction from the NPS from three to two?
ADM. MULLOY: Well, yeah, one of the other -- one of the other adjustments in here, in terms of risk-taking, was in '12 we were going to do two full -- you know, large, robust MPSRONs, and one would be in ROS status. In this case, the ROS MPSRON is actually going to RRS ships, ready reserve, so basically they'll be laid up. And so we only need two MLPs to be with the two MPSRONs.
And so that was a calculation taken on as we looked at what -- what was -- the risk of having the ships would be as we could break them out and still make some of the plans, as opposed to being ROS. So there's some other savings in there. It's kind of a -- somewhat of an efficiency idea. So when that happened, the question would be, where do you have to go with the third MLP? You could have it as a free rotator. There's been a long-standing need for an afloat staging base to support Fifth Fleet in a wide range of operations, whether it's mine-hunting, anti-piracy, special forces, a large number of items.
So when OSD looked at the shipbuilding and the Navy was trying to wrap up what ships do we need to build in this lean account, it would be plug in one more MLP, but make an AFSB and then putting in R&D that the Navy has in there for '13 and '14 and '15. We're able to come up with plans, design and then build the last MLP. And this MLP will just become an AFSB. So there will be two of each.
STAFF: Yes, sir.
Q: We've heard very little about China, the rebalancing toward Asia and China, the investment impacts. The charts that Hale laid out today had upgrading tactical sensors and electronic warfare -- $1.8 billion. Any Navy programs there?
ADM. MULLOY: Probably woven all through there, there are the Navy's CWIP programs, the electronic sensors, SSEE [Ship's Signals Exploitation Equipment], but I don't have ours broken down that way. Our focus on the Pacific is just interstitial to all of our products that we have, because we have to have the ships to be able to operate in both theaters.
Q: I have a cost growth question. The Navy disclosed today that the Gerald Ford has an $811 million cost growth that you've had to pay for in the FYDP.
ADM. MULLOY: Yes, sir.
Q: Does that concern you as the comptroller, that this is your most expensive vessel, it's only 42 percent through? How worried are you about additional cost growth on the Ford?
ADM. MULLOY: Well, one thing, it goes back to where I've been and what I've done. Actually having been at the shipyard and then toured these going down there, and speaking between PEO carrier, naval reactors and the company, and looking at the construction of the ship, there are a number of items that a large chunk of this cost was already incurred years ago before -- when I was still at the Pacific Fleet and a recognition of where this is -- of where the company has made changes.
In fact, Mr. Peters mentioned an article about two weeks ago, was I can do what I can, but there's other items in the past that have come up, would be is that, you know, as the ship got rolling, you start and stop, some inefficient plans, some of which are due to the Navy, some are due to the company, they're worried about their fee they'll get. So I've seen articles saying, hey, this could be as much as a 1.1. Well, that's not much more than what I put in the ship, so I'm not really concerned about a lot more.
I will tell you, Admiral Moore, Peters , Admiral Donald , are all on what's going on, whether it's on the company or the Navy side, to hold the cost on the ship. We looked at it was, since the ship is now within this window of delivery, I looked at what was the best case of dollars that I want to recognize that I have to pay for cost, but hold the line, was the $811 million.
And that was a long discussion between the budget office, Navy leadership and AT&L. And so we elected to recognize is -- this is where it is, and we want to hold the line to not grow more.
Q: Well, you want to hold the line and not grow more, but that doesn't mean it won't grow more.
ADM. MULLOY: No, it probably won't, but I will tell you, as you start to assemble things, you begin to also realize where you're at on a -- either -- at on other efficiencies or cost growth that's already out there.
I mean, yeah. A lot of things we keep going. But I feel comfortable that this is a big chunk of what's been there, and I'm not expecting a huge growth anymore.
Yes, sir, in the middle.
Q: Clarification on sea basing. Outside from retrofitting the Ponce, is there money in this FYDP for developing those sea basing, is that all in R&D for '13, '14 and '15?
ADM. MULLOY: It's in the NDSF -- part of it's about -- it was --
Q: You don't have much money.
ADM. MULLOY: I mean, the two ships are about 500. So it's about a total 150 [million dollars], 200 million [dollars]. But it's an NDSF design and R&D for the two to modify the one MLP. Each MLP was about 500, and we have now somewhere between 550 and 600 between the two ships to make up the R&D and the design to modify the one that we got that OSD had, and the Navy puts the money on top. So somewhere around 150 [million dollars] to 200 [million dollars] over the multiple lines in NDSF to do that.
Yes, sir, in the striped shirt.
Q: With regard to MILCON for the Okinawa-to-Guam realignment, for FY '12, you requested 159 million [dollars], but for FY '13, you only requested 26 million [dollars]. Why are you -- why are you requesting so much less money this year? Is it related to the deadlock over Futenma or other uncertainty regarding the realignment?
ADM. MULLOY: Well, it's really related -- well, you bring up a lot of different things -- what can be done; what's out there? I will tell you, the actual total is 51 [million dollars]. As Mr. Hale said, it's 26 [million dollars] for a project and 25 million [dollars] for planning and design, because we know we need to plan and integrate going ahead. There is a backlog of money that's already been appropriated. We need to get that plan to the Hill and then execute all of that.
We also need to do an expanded EIS out there. That's going to take time.
That's going to take time. So our case was, if we put up more money than that, that we are going to be able to execute in the next year or two, we very likely would lose it on the Hill. So better to put in the project on the north ramp at Andersen Air Force Base to where I know I'm going to put a footprint there, and then put the planning and design money in to start working the plans. As we go from this two plus two and the -- what I would call the de-linking between the governments, we'll step ahead and design more to the future for Guam. But we have still a backlog of things to build out there, independent of the size of the troops.
So I will need to say thank you all very much. And I appreciate your time. Thank you.
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