prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 1.

Report 1: The Navy currently has 51 attack submarines—comprising 33 Los Angeles class, 3 Seawolf class, and 15 Virginia class submarines (see fig  1)  Attack submarines are homeported at bases in the United States: in New London, Connecticut; Pearl Harbor, Hawaii; Norfolk, Virginia; San Diego, California; and Bangor, Washington; 4 are homeported overseas, in the U S  territory of Guam  Submarine Safety Controls and Culture On April 10, 1963, the USS Thresher (SSN 593) sank during deep submergence tests off the coast of New England  One hundred and twelve officers and enlisted sailors and 17 civilians perished in the tragedy  The accident investigation concluded that the Navy did not have adequate procedures in place to prevent and respond to a catastrophic flooding incident  time, and that maintenance delays reduce the amount of time during which ships and submarines are available for training and operations  Submarine fleet and squadron officials emphasized the strict safety culture that permeates the submarine community  This emphasis on meeting safety certification criteria means that the Navy operates a supply-based submarine force that does not compromise on adherence to training and maintenance standards to meet combatant commander demands, according to these officials (see sidebar)  Officials added that the Navy will delay deployment dates if necessary to ensure that these standards are met  As a result, deployed readiness is high and attack submarines are in excellent materiel condition as compared with the rest of the Navy fleet  The loss of the USS Thresher and its crew spurred the Navy to establish stringent safety requirements for submarines to prevent another loss at sea  Following the accident, the Navy established submarine safety certification criteria to provide maximum reasonable assurance that critical systems would protect the crew from flooding and allow the submarine to conduct an emergency surfacing should flooding occur  This program, known as SUBSAFE, is still in use today, to ensure that these critical systems receive a high quality of work and that all work is properly documented  According to the Navy, the SUBSAFE certification status of a submarine is fundamental to its mission capability, as it provides a thorough and systematic approach to quality, and to a culture that permeates the entire submarine community  According to Navy officials, since the SUBSAFE program was established in 1963, no SUBSAFE-certified submarine has ever been lost  The Navy has been unable to begin or complete the vast majority of its attack submarine maintenance periods on time resulting in significant maintenance delays and operating and support cost expenditures  Our analysis of Navy maintenance data shows that between fiscal year 2008 and the end of fiscal year 2018, attack submarines will have incurred 10,363 days of idle time and maintenance delays as a result of delays in getting into and out of the shipyards  Our analysis found that the primary driver affecting attack submarines are delays in completing depot maintenance  For example, of the 10,363 total days of lost time since fiscal year 2008, 8,472 (82 percent) were due to depot maintenance delays  As we previously reported, completing ship and submarine maintenance on time is essential to Navy readiness, as maintenance periods lasting longer than planned could reduce the number of days during which ships and crews are available for training or operations  Attack submarines also face delays in beginning maintenance when the public shipyards have no available capacity, in some cases forcing submarines to idle pierside because they are no longer certified to conduct normal operations  According to Navy officials, the SUBSAFE program—its program to ensure and certify submarine safety—requires submarines to adhere to strict maintenance schedules and pass materiel condition assessments before they are allowed to submerge  Attack submarines that go too long without receiving required maintenance are at risk of having their materiel certification expire  Should this certification expire, these submarines are restricted to sitting idle, pierside, while they wait until a shipyard has the capacity to begin their maintenance period (see fig  2)  We found that since fiscal year 2008, 14 attack submarines have spent a combined 61 months (1,891 days) idling while waiting to enter shipyards for maintenance  Idle time incurred while waiting to begin a maintenance period is often coupled with maintenance delays while at the shipyards, thus compounding total delays  We also found that the Navy incurs significant costs in operating and supporting submarines that are experiencing maintenance delays and idle time  We analyzed the operating and support costs the Navy incurs on average to estimate the costs of crewing, maintaining, and supporting attack submarines that are delayed in getting into and out of the shipyards  Using historical daily cost data the Navy adjusted for inflation, we estimated that since fiscal year 2008 the Navy has spent more than $1 5 billion in fiscal year 2018 constant dollars on attack submarines sitting idle while waiting to enter the shipyards, and on those delayed in completing their maintenance at the shipyards (see table 1)  While the Navy would incur these costs regardless of whether the submarine was delayed, idled, or deployed, our estimate of $1 5 billion represents costs incurred from fiscal year 2008 through fiscal year 2018 for attack submarines without receiving any operational capability in return  While acknowledging the magnitude of these costs, Navy officials stated that there may be some benefits that could be realized from these operating and support costs since crews on idle attack submarines can conduct some limited training  Operating and support costs include payment of crew salaries, purchasing of spare parts, and conducting of maintenance, among other things, but they do not represent the full operational impact incurred by the Navy from the idle time and maintenance delays  For example, attack submarine depot-level maintenance requires the use of a drydock, and officials from the three public shipyards we visited told us that their drydock capacity was limited  A delayed attack submarine maintenance period can restrict the use of a drydock for much longer than originally anticipated, thereby preventing the shipyard from using that drydock to maintain other vessels, including other types of ships, or to conduct necessary repairs on the facilities  The Navy has started to address workforce shortages and facilities needs at the public shipyards  These efforts to address the Navy’s maintenance challenges are important steps, but they will require several years of sustained management attention to reach fruition  As we reported in September 2017, maintenance on ships and submarines may be delayed for numerous reasons, including workforce gaps and inexperience, the poor condition of facilities and equipment, parts shortages, changes in planned maintenance work, and weather  According to Navy officials, all of these issues continue to affect the Navy’s ability to complete attack submarine maintenance on time  According to officials, the Navy has begun to address some of these challenges  For example: The public shipyards have been hiring to address workforce shortages  The number of civilian full-time employees at the shipyards increased from 25,087 in 2007 to 34,160 in 2017, with a goal to reach 36,100 by 2020  Navy officials cautioned that this newly hired workforce is largely inexperienced and will require time to attain full proficiency  The Navy has released a plan to guide public shipyard capital investments  In September 2017 we reported that the Navy projected an inability to support 50 planned submarine maintenance periods over the ensuing 23 years, due to capacity and capability shortfalls at the public shipyards  We recommended that the Navy develop a comprehensive plan for shipyard capital investment  In February 2018 the Navy published its shipyard optimization plan, outlining an estimated $21 billion investment needed to address shipyard facility and equipment needs over 20 years to meet the operational needs of the current Navy fleet, but not the larger fleet size planned for the future  While the public shipyards have operated above capacity for the past several years, attack submarine maintenance delays are getting longer and idle time is increasing  The Navy expects the maintenance backlogs at the public shipyards to continue  We estimate that, as a result of these backlogs, the Navy will incur approximately $266 million in operating and support costs in fiscal year 2018 constant dollars for idle submarines from fiscal year 2018 through fiscal year 2023, as well as additional depot maintenance delays  The Navy may have options to mitigate idle time and maintenance delays  For example, officials at the private shipyards—General Dynamics Electric Boat and Huntington Ingalls Industries-Newport News Shipbuilding—told us that they will have available capacity for repair work for at least the next 5 years  Although the Navy has shifted about 8 million man-hours in attack submarine maintenance to private shipyards over the past 5 years, it has done so sporadically, having decided to do so in some cases only after experiencing lengthy periods of idle time  According to private shipyard officials, the sporadic shifts in workload have resulted in repair workload gaps that have disrupted private shipyard workforce, performance, and capital investment—creating costs that are ultimately borne in part by the Navy  We believe that the Navy has not fully mitigated this challenge because it has not completed a comprehensive business case analysis to inform maintenance workload allocation across public and private shipyards, and to proactively minimize attack submarine idle time and maintenance delays  Such an analysis would help the Navy better assess private shipyard capacity to perform attack submarine maintenance and would help it incorporate a complete accounting of all costs, benefits, and risks, including: the large operating and support costs of having attack submarines sitting idle; the qualitative benefits associated with providing additional availability to the combatant commanders; and the potential for additional work at private shipyards to reduce schedule risk to submarine construction programs by allowing the yards to build and maintain a stable shipyard workforce  The April 2011 DOD Product Support Business Case Analysis Guidebook provides standards for DOD’s process for conducting analyses of costs, benefits, and risks  It states that data sources used to conduct a business case analysis should be comprehensive and should include both quantitative and qualitative values  It notes that benefits, such as the availability of a weapon system, may be qualitative in nature, and that DOD should evaluate all possible support options, to include government- and contractor-provided maintenance  Navy leadership has acknowledged that they need to be more proactive in leveraging private shipyard repair capacity, but officials cautioned that maintenance could cost more at a private shipyard than at a public shipyard  However, without a complete accounting of all costs, benefits, and risks, the Navy will remain unable to determine whether the cost of performing a maintenance period at a private shipyard would outweigh the mission benefits of having reduced idle time, additional operational availability, and the potential for reduced risk to submarine construction programs  The nation’s investment in attack submarines provides the United States an asymmetric advantage to gather intelligence undetected, attack enemy targets, and insert special forces, among other capabilities  However, the Navy’s attack submarine fleet has suffered from persistent and costly maintenance delays  Although the Navy has several activities underway to reduce maintenance delays for the attack submarine fleet, it has not yet taken additional steps to maximize attack submarine readiness that fully address challenges such as the allocation of maintenance periods between public and private shipyards  Without addressing this challenge, the Navy will not achieve the full benefit of the nation’s investment in its attack submarines, and it risks continued expenditure of operating and support funding to crew, maintain, and support attack submarines that provide no operational capability because they are delayed in getting into and out of maintenance  The Secretary of the Navy should ensure that the Chief of Naval Operations conducts a business case analysis to inform maintenance workload allocation across public and private shipyards; this analysis should include an assessment of private shipyard capacity to perform attack submarine maintenance, and should incorporate a complete accounting of both (a) the costs and risks associated with attack submarines sitting idle, and (b) the qualitative benefits associated with having the potential to both mitigate risk in new submarine construction and provide additional availability to the combatant commanders  We provided a draft of the classified version of the report to DOD for review and comment  That draft contained the same recommendation as this unclassified version as well as three additional recommendations DOD deemed sensitive  In written comments provided by DOD (reprinted in appendix II), DOD concurred with our recommendation stating that it has taken the first steps to take a more holistic view of submarine maintenance requirements and impacts across both the public and private shipyards  The Navy also provided technical comments, which we incorporated as appropriate  We are sending copies of this report to congressional committees; the Secretary of Defense; the Secretary of the Navy, and other interested parties  In addition, the report is available at no charge on the GAO website at http://www gao gov  If you or your staff have any questions about this report, please contact me at (202) 512-3489 or pendletonj@gao gov  Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report  GAO staff who made key contributions to this report are listed in appendix IV  To assess the extent to which the Navy has experienced maintenance delays in its attack submarine fleet, we analyzed attack submarine maintenance delay and idle time data from Naval Sea Systems Command, and we reviewed prior GAO work on shipyard maintenance delays  The Navy determines depot maintenance delays by counting each day in which a submarine maintenance period extends beyond the planned completion date  Two Navy offices within Naval Sea Systems Command—that is, the Logistics, Maintenance, and Industrial Operations office and Program Executive Office Submarines—track days incurred from depot-level maintenance delays and idle time  To determine the total number of days of maintenance delays for each fiscal year within our scope, we subtracted the planned completion date from the actual completion date to produce the number of days of maintenance delays for each maintenance period for each submarine  We added together the days of maintenance delays across all attack submarines for each fiscal year, and then added the fiscal year totals to produce the overall total  Although the data included some maintenance periods that began before fiscal year 2008, we counted days of maintenance delays only from periods that were incurred in fiscal years 2008 through 2018  We also tracked the total number of days that the Navy completed maintenance periods ahead of schedule—that is, 153—but we noted these separately instead of subtracting them from the total number of days of maintenance delays  To estimate costs associated with these delays, we analyzed annual data from fiscal years 2011 through 2017 (the most current data available at the time of our review) from the Navy’s Visibility and Management of Operating and Support Costs system  We also reviewed prior work on determining the operating and support costs of Navy ships  The Navy calculates total operating and support expenditures for each attack submarine on an annual basis, as well as the yearly average expenditure for each attack submarine class, including Los Angeles class, Seawolf class, and Virginia class blocks one and two  For each class, we converted the Navy’s annual class averages into daily average costs by adding the annual class averages together for each year that data were available, fiscal years 2011 through 2017, then dividing that number by the total number of days  We then multiplied the daily class average by the total number of days of maintenance delays and idle time incurred by submarines within that class, according to our calculations outlined above, between fiscal year 2008 and fiscal year 2018, and we added these totals together to produce the total estimated operating and support cost for days of maintenance delays and idle time incurred during this period  The data did not include annual class average costs for fiscal years 2008, 2009, 2010, or 2018  However, the annual class averages for fiscal years 2011 through 2017 did not show significant variation, so we applied these averages to 2008, 2009, 2010, and 2018  To assess the extent to which the Navy has addressed any challenges and developed mitigation plans for any maintenance delays, we reviewed the Navy’s plans to address attack submarine maintenance delays and interviewed Navy headquarters, fleet, and squadron officials, attack submarine crews, and public and private shipyard officials to understand any plans to address attack submarine maintenance delays and idle time  We analyzed data on factors contributing to attack submarine maintenance delays, such as cannibalization rates  We visited three of the four public shipyards, including Pearl Harbor Naval Shipyard and Intermediate Maintenance Facility, Portsmouth Naval Shipyard, and Norfolk Naval Shipyard, to observe operations, training, and the condition of the facilities and equipment, and to interview officials about challenges affecting operational efficiency and performance  We also met with Navy maintainers at Naval Station Norfolk and Naval Submarine Base New London, and with the crew of the submarine tenders USS Frank Cable (AS-40) and USS Emory S  Land (AS-39) in Guam  We toured the two private shipyards that conduct attack submarine repair work—General Dynamics Electric Boat and Huntington Ingalls Industries-Newport News Shipbuilding—and interviewed executives at both locations  We also toured attack submarines and met with crew leadership, selected according to which submarines and crews were available for tours at each of the sites we visited  We visited the USS Boise (SSN 764) at Naval Station Norfolk and four attack submarines in depot-level maintenance: the USS Albany (SSN 753), the USS Jefferson City (SSN 759), the USS New Mexico (SSN 779), and the USS Springfield (SSN 761)  We met with the crews of two attack submarines assigned to the operating forces at the time of our visit, the USS Missouri (SSN 780) and the USS North Dakota (SSN 784)  We evaluated the Navy’s plans to address any challenges against criteria in federal standards for internal control, which state that agencies should evaluate performance in achieving key objectives and addressing risks; the Department of Defense’s business case analysis guidebook, which provides standards for the process used to conduct analyses of costs, benefits, and risks; the Project Management Book of Knowledge, which provides best practices for project management; and the Secretary of the Navy’s December 2017 Strategic Readiness Review, which calls for the early identification of systemic risks before problems occur  To assess the reliability of the data sources for conducting analyses to address all of the objectives in this report, we reviewed systems documentation and interviewed officials to understand system operating procedures, organizational roles and responsibilities, and error-checking mechanisms  We selected the time frames for each of the data series above after assessing their availability and reliability, to maximize the amount of data available for us to make meaningful comparisons  We assessed the reliability of each of the data sources  The Navy provided information based on our questions regarding data reliability, including information on an overview of the data, data-collection processes and procedures, data quality controls, and overall perceptions of data quality  The Navy provided documentation of how the systems are structured and what written procedures are in place to help ensure that the appropriate information is collected and properly categorized  Additionally, we interviewed Navy officials to obtain further clarification on data reliability, discuss how the data were collected and reported, and explain how we planned to use the data  We also conducted our own error checks to look for inaccurate or questionable data, and we discussed with officials any data irregularities we found  We conducted these assessments on the following data for attack submarines: Navy deployed and surge-ready submarines from fiscal years 2011 through 2018; maintenance timeliness from fiscal years 2000 through 2018; idle time from fiscal years 2008 through 2018; operating and support costs from fiscal years 2011 through 2017; and cannibalization rates from 2012 through 2017  Some of these data were used in prior reports, and their reliability had previously been assessed  After further assessing any data that we had not recently used, we determined that they were sufficiently reliable for the purposes of summarizing attack submarine readiness trends and related information  We interviewed officials, and where appropriate obtained documentation, at the following locations: Office of the Chief of Naval Operations Undersea Warfare Division (N97) Warfare Integration Division (N83) U S  Fleet Forces Command Commander, Submarine Force, U S  Atlantic Fleet Commander, Submarine Squadron 4 Commander, Regional Support Group Groton Commander, Submarine Force, U S  Pacific Fleet Commander, Submarine Squadron 1 Commander, Submarine Squadron 7 Commander, Submarine Squadron 15 Naval Sea Systems Command (NAVSEA) Logistics, Maintenance, and Industrial Operations (NAVSEA 04) Program Executive Office, Submarines Attack Submarine Program Office (PMS 392) Submarine Maintenance Engineering, Planning, and Procurement (SUBMEPP) Supervisor of Shipbuilding, Conversion, and Repair (SUPSHIP) Newport News, Virginia Navy Education and Training Command Submarine Learning Facility Norfolk Navy Board of Inspection and Survey Norfolk Naval Shipyard, Norfolk, Virginia Pearl Harbor Naval Shipyard and Intermediate Maintenance Facility, Pearl Harbor, Hawaii Portsmouth Naval Shipyard, Kittery, Maine Newport News Shipbuilding, Virginia, operated by Huntington Ingalls Industries Electric Boat, Groton, Connecticut, operated by General Dynamics The performance audit upon which this report is based was conducted from August 2017 to October 2018 in accordance with generally accepted government auditing standards  Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives  We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives  We worked with DOD to prepare this unclassified version of the report for public release  This public version was also prepared in accordance with these standards  Report numbers with a C or RC suffix are Classified  Classified reports are available to personnel with the proper clearances and need to know, upon request  Columbia Class Submarine: Immature Technologies Present Risks to Achieving Cost Schedule and Performance Goals  GAO-18-158  Washington, D C : Dec  21, 2017  Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Affecting the Fleet  GAO-17-809T  Washington, D C : Sept  19, 2017  Naval Shipyards: Actions Needed to Improve Poor Conditions that Affect Operations  GAO-17-548  Washington, D C : Sept  12, 2017  Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet  GAO-17-798T  Washington, D C : Sept  7, 2017  Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk without a Comprehensive Plan  GAO-16-841  Washington, D C : Sept  7, 2016  Navy and Marine Corps: Services Face Challenges to Rebuilding Readiness  GAO-16-481RC  Washington, D C : May 25, 2016  (SECRET//NOFORN) Military Readiness: Progress and Challenges in Implementing the Navy’s Optimized Fleet Response Plan  GAO-16-466R  Washington, D C : May 2, 2016  Navy Force Structure: Sustainable Plan and Comprehensive Assessment Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas Homeports  GAO-15-329  Washington, D C : May 29, 2015  In addition to the contact named above, Suzanne Wren, Assistant Director; Chris Watson, Analyst in Charge; Herb Bowsher; Chris Cronin; Ally Gonzalez; Cynthia Grant; Carol Petersen; Amber Sinclair; and Cheryl Weissman made key contributions to this report 


Report 2: This report presents background information and issues for Congress concerning the Navy's force structure and shipbuilding plans  The current and planned size and composition of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy's shipbuilding plans have been oversight matters for the congressional defense committees for many years  The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R  Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships  The issue for Congress is whether to approve, reject, or modify the Navy's proposed FY2020 shipbuilding program and the Navy's longer-term shipbuilding plans  Decisions that Congress makes on this issue can substantially affect Navy capabilities and funding requirements, and the U S  shipbuilding industrial base  Detailed coverage of certain individual Navy shipbuilding programs can be found in the following CRS reports: CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke  CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by Ronald O'Rourke  CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by Ronald O'Rourke  (This report also covers the issue of the Administration's FY2020 budget proposal, which the Administration withdrew on April 30, to not fund a mid-life refueling overhaul [called a refueling complex overhaul, or RCOH] for the aircraft carrier Harry S  Truman [CVN-75], and to retire CVN-75 around FY2024 ) CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress , by Ronald O'Rourke  CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke  CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress , by Ronald O'Rourke  CRS Report R43543, Navy LPD-17 Flight II Amphibious Ship Program: Background and Issues for Congress , by Ronald O'Rourke  (This report also covers the issue of funding for the procurement of an amphibious assault ship called LHA-9 ) CRS Report R43546, Navy John Lewis (TAO-205) Class Oiler Shipbuilding Program: Background and Issues for Congress , by Ronald O'Rourke  For a discussion of the strategic and budgetary context in which U S  Navy force structure and shipbuilding plans may be considered, see Appendix A   On December 15, 2016, the Navy released a force-structure goal that calls for achieving and maintaining a fleet of 355 ships of certain types and numbers  The 355-ship force-level goal replaced a 308-ship force-level goal that the Navy released in March 2015  The 355-ship force-level goal is the largest force-level goal that the Navy has released since a 375-ship force-level goal that was in place in 2002-2004  In the years between that 375-ship goal and the 355-ship goal, Navy force-level goals were generally in the low 300s (see Appendix B )  The force level of 355 ships is a goal to be attained in the future; the actual size of the Navy in recent years has generally been between 270 and 290 ships  Table 1 shows the composition of the 355-ship force-level objective  The 355-ship force-level goal is the result of a Force Structure Assessment (FSA) conducted by the Navy in 2016  An FSA is an analysis in which the Navy solicits inputs from U S  regional combatant commanders (CCDRs) regarding the types and amounts of Navy capabilities that CCDRs deem necessary for implementing the Navy's portion of the national military strategy and then translates those CCDR inputs into required numbers of ships, using current and projected Navy ship types  The analysis takes into account Navy capabilities for both warfighting and day-to-day forward-deployed presence  Although the result of the FSA is often reduced for convenience to single number (e g , 355 ships), FSAs take into account a number of factors, including types and capabilities of Navy ships, aircraft, unmanned vehicles, and weapons, as well as ship homeporting arrangements and operational cycles  The Navy conducts a new FSA or an update to the existing FSA every few years, as circumstances require, to determine its force-structure goal  Section 1025 of the FY2018 National Defense Authorization Act, or NDAA ( H R  2810 / P L  115-91 of December 12, 2017), states the following: SEC  1025  Policy of the United States on minimum number of battle force ships  (a) Policy —It shall be the policy of the United States to have available, as soon as practicable, not fewer than 355 battle force ships, comprised of the optimal mix of platforms, with funding subject to the availability of appropriations or other funds  (b) Battle force ships defined —In this section, the term "battle force ship" has the meaning given the term in Secretary of the Navy Instruction 5030 8C  The term battle force ships in the above provision refers to the ships that count toward the quoted size of the Navy in public policy discussions about the Navy  The Navy states that a new FSA is now underway as the successor to the 2016 FSA, and that this new FSA is to be completed by the end of 2019  The new FSA, Navy officials state, will take into account the Trump Administration's December 2017 National Security Strategy document and its January 2018 National Defense Strategy document, both of which put an emphasis on renewed great power competition with China and Russia, as well as updated information on Chinese and Russian naval and other military capabilities and recent developments in new technologies, including those related to unmanned vehicles (UVs)  Navy officials have suggested in their public remarks that this new FSA could change the 355-ship figure, the planned mix of ships, or both  Some observers, viewing statements by Navy officials, believe the new FSA in particular might shift the Navy's surface force to a more distributed architecture that includes a reduced proportion of large surface combatants (i e , cruisers and destroyers), an increased proportion of small surface combatants (i e , frigates and LCSs), and a newly created third tier of unmanned surface vehicles (USVs)  Some observers believe the new FSA might also change the Navy's undersea force to a more distributed architecture that includes, in addition to attack submarines (SSNs) and bottom-based sensors, a new element of extremely large unmanned underwater vehicles (XLUUVs), which might be thought of as unmanned submarines  In presenting its proposed FY2020 budget, the Navy highlighted its plans for developing and procuring USVs and UUVs in coming years  Shifting to a more distributed force architecture, Navy officials have suggested, could be appropriate for implementing the Navy's new overarching operational concept, called Distributed Maritime Operations (DMO)  Observers view DMO as a response to both China's improving maritime anti-access/area denial capabilities (which include advanced weapons for attacking Navy surface ships) and opportunities created by new technologies, including technologies for UVs and for networking Navy ships, aircraft, unmanned vehicles, and sensors into distributed battle networks  Figure 1 shows a Navy briefing slide depicting the Navy's potential new surface force architecture, with each sphere representing a manned ship or a USV  Consistent with Figure 1 , the Navy's 355-ship goal, reflecting the current force architecture, calls for a Navy with twice as many large surface combatants as small surface combatants  Figure 1 suggests that the potential new surface force architecture could lead to the obverse—a planned force mix that calls for twice as many small surface combatants than large surface combatants—along with a new third tier of numerous USVs  Observers believe the new FSA might additionally change the top-level metric used to express the Navy's force-level goal or the method used to count the size of the Navy, or both, to include large USVs and large UUVs  Table 2 shows the Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan  The table also shows, for reference purposes, the ships funded for procurement in FY2019  The figures in the table reflect a Navy decision to show the aircraft carrier CVN-81 as a ship to be procured in FY2020 rather than a ship that was procured in FY2019  Congress, as part of its action on the Navy's proposed FY2019 budget, authorized the procurement of CVN-81 in FY2019  As shown in Table 2 , the Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R  Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships  If the Navy had listed CVN-81 as a ship procured in FY2019 rather than a ship to be procured in FY2020, then the total numbers of ships in FY2019 and FY2020 would be 14 and 11, respectively  As also shown Table 2 , the Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan includes 55 new ships, or an average of 11 new ships per year  The Navy's FY2019 budget submission also included a total of 55 ships in the period FY2020-FY2024, but the mix of ships making up the total of 55 for these years has been changed under the FY2020 budget submission to include one additional attack submarine, one additional FFG(X) frigate, and two (rather than four) LPD-17 Flight II amphibious ships over the five-year period  The FY2020 submission also makes some changes within the five-year period to annual procurement quantities for DDG-51 destroyers, ESBs, and TAO-205s without changing the five-year totals for these programs  Compared to what was projected for FY2020 itself under the FY2019 budget submission, the FY2020 request accelerates from FY2023 to FY2020 the aircraft carrier CVN-81 (as a result of Congress's action to authorize the ship in FY2019), adds a third attack submarine, accelerates from FY2021 into FY2020 a third DDG-51, defers from FY2020 to FY2021 an LPD-17 Flight II amphibious ship to FY2021, defers from FY2020 to FY2023 an ESB ship, and accelerates from FY2021 to FY2020 a second TAO-205 class oiler  Table 3 shows the Navy's FY2020-FY2049 30-year shipbuilding plan  In devising a 30-year shipbuilding plan to move the Navy toward its ship force-structure goal, key assumptions and planning factors include but are not limited to ship construction times and service lives, estimated ship procurement costs, projected shipbuilding funding levels, and industrial-base considerations  As shown in Table 3 , the Navy's FY2020 30-year shipbuilding plan includes 304 new ships, or an average of about 10 per year  Table 4 shows the Navy's projection of ship force levels for FY2020-FY2049 that would result from implementing the FY2020 30-year (FY2020-FY2049) 30-year shipbuilding plan shown in Table 3   As shown in Table 4 , if the FY2020 30-year shipbuilding plan is implemented, the Navy projects that it will achieve a total of 355 ships by FY2034  This is about 20 years sooner than projected under the Navy's FY2019 30-year shipbuilding plan  This is not primarily because the FY2020 30-year plan includes more ships than did the FY2019 plan: The total of 304 ships in the FY2020 plan is only three ships higher than the total of 301 ships in the FY2019 plan  Instead, it is primarily due to a decision announced by the Navy in April 2018, after the FY2019 budget was submitted, to increase the service lives of all DDG-51 destroyers—both those existing and those to be built in the future—to 45 years  Prior to this decision, the Navy had planned to keep older DDG-51s (referred to as the Flight I/II DDG-51s) in service for 35 years and newer DDG-51s (the Flight II/III DDG-51s) for 40 years  Figure 2 shows the Navy's projections for the total number of ships in the Navy under the Navy's FY2019 and FY2020 budget submissions  As can be seen in the figure, the Navy projected under the FY2019 plan that the fleet would not reach a total of 355 ships any time during the 30-year period  The projected number of aircraft carriers in Table 4 , the projected total number of all ships in Table 4 , and the line showing the total number of ships under the Navy's FY2020 budget submission in Figure 2 all reflect the Navy's proposal, under its FY2020 budget submission, to not fund the mid-life nuclear refueling overhaul (called a refueling complex overhaul, or RCOH) of the aircraft carrier Harry S  Truman (CVN-75), and to instead retire CVN-75 around FY2024  On April 30, 2019, however, the Administration announced that it was withdrawing this proposal from the Navy's FY2020 budget submission  The Administration now supports funding the CVN-75 RCOH and keeping CVN-75 in service past FY2024  As a result of the withdrawal of its proposal regarding the CVN-75 RCOH, the projected number of aircraft carriers and consequently the projected total number of all ships are now one ship higher for the period FY2022-FY2047 than what is shown in Table 4 , and the line in Figure 2 would be adjusted upward by one ship for those years  (The figures in Table 4 are left unchanged from what is shown in the FY2020 budget submission so as to accurately reflect what is shown in that budget submission ) As shown in Table 4 , although the Navy projects that the fleet will reach a total of 355 ships in FY2034, the Navy in that year and subsequent years will not match the composition called for in the FY2016 FSA  Among other things, the Navy will have more than the required number of large surface combatants (i e , cruisers and destroyers) from FY2030 through FY2040 (a consequence of the decision to extend the service lives of DDG-51s to 45 years), fewer than the required number of aircraft carriers through the end of the 30-year period, fewer than the required number of attack submarines through FY2047, and fewer than the required number of amphibious ships through the end of the 30-year period  The Navy acknowledges that the mix of ships will not match that called for by the 2016 FSA but states that if the Navy is going to have too many ships of a certain kind, DDG-51s are not a bad type of ship to have too many of, because they are very capable multi-mission ships  One issue for Congress is whether the new FSA that the Navy is conducting will change the 355-ship force-level objective established by the 2016 FSA and, if so, in what ways  As discussed earlier, Navy officials have suggested in their public remarks that this new FSA could shift the Navy toward a more distributed force architecture, which could change the 355-ship figure, the planned mix of ships, or both  The issue for Congress is how to assess the appropriateness of the Navy's FY2020 shipbuilding plans when a key measuring stick for conducting that assessment—the Navy's force-level goal and planned force mix—might soon change  Another oversight issue for Congress concerns the prospective affordability of the Navy's 30-year shipbuilding plan  This issue has been a matter of oversight focus for several years, and particularly since the enactment in 2011 of the Budget Control Act, or BCA ( S  365 / P L  112-25 of August 2, 2011)  Observers have been particularly concerned about the plan's prospective affordability during the decade or so from the mid-2020s through the mid-2030s, when the plan calls for procuring Columbia-class ballistic missile submarines as well as replacements for large numbers of retiring attack submarines, cruisers, and destroyers  Figure 3 shows, in a graphic form, the Navy's estimate of the annual amounts of funding that would be needed to implement the Navy's FY2020 30-year shipbuilding plan  The figure shows that during the period from the mid-2020s through the mid-2030s, the Navy estimates that implementing the FY2020 30-year shipbuilding plan would require roughly $24 billion per year in shipbuilding funds  As discussed in the CRS report on the Columbia-class program, the Navy since 2013 has identified the Columbia-class program as its top program priority, meaning that it is the Navy's intention to fully fund this program, if necessary at the expense of other Navy programs, including other Navy shipbuilding programs  This led to concerns that in a situation of finite Navy shipbuilding budgets, funding requirements for the Columbia-class program could crowd out funding for procuring other types of Navy ships  These concerns in turn led to the creation by Congress of the National Sea-Based Deterrence Fund (NSBDF), a fund in the DOD budget that is intended in part to encourage policymakers to identify funding for the Columbia-class program from sources across the entire DOD budget rather than from inside the Navy's budget alone  Several years ago, when concerns arose about the potential impact of the Columbia-class program on funding available for other Navy shipbuilding programs, the Navy's shipbuilding budget was roughly $14 billion per year, and the roughly $7 billion per year that the Columbia-class program is projected to require from the mid-2020s to the mid-2030s (see Figure 3 ) represented roughly one-half of that total  With the Navy's shipbuilding budget having grown in more recent years to a total of roughly $24 billion per year, the $7 billion per year projected to be required by the Columbia-class program during those years does not loom proportionately as large as it once did in the Navy's shipbuilding budget picture  Even so, some concerns remain regarding the potential impact of the Columbia-class program on funding available for other Navy shipbuilding programs  If one or more Navy ship designs turn out to be more expensive to build than the Navy estimates, then the projected funding levels shown in Figure 3 would not be sufficient to procure all the ships shown in the 30-year shipbuilding plan  As detailed by CBO and GAO, lead ships in Navy shipbuilding programs in many cases have turned out to be more expensive to build than the Navy had estimated  Ship designs that can be viewed as posing a risk of being more expensive to build than the Navy estimates include Gerald R  Ford (CVN-78) class aircraft carriers, Columbia-class ballistic missile submarines, Virginia-class attack submarines equipped with the Virginia Payload Module (VPM), Flight III versions of the DDG-51 destroyer, FFG(X) frigates, LPD-17 Flight II amphibious ships, and John Lewis (TAO-205) class oilers, as well as other new classes of ships that the Navy wants to begin procuring years from now  The statute that requires the Navy to submit a 30-year shipbuilding plan each year (10 U S C  231) also requires CBO to submit its own independent analysis of the potential cost of the 30-year plan (10 U S C  231[d])  CBO is now preparing its estimate of the cost of the Navy's FY2020 30-year shipbuilding plan  In the meantime, Figure 4 shows, in a graphic form, CBO's estimate of the annual amounts of funding that would be needed to implement the Navy's FY2019 30-year shipbuilding plan  This figure might be compared to the Navy's estimate of its FY2020 30-year plan as shown in Figure 3 , although doing so poses some apples-vs -oranges issues, as the Navy's FY2019 and FY2020 30-year plans do not cover exactly the same 30-year periods, and for the years they do have in common, there are some differences in types and numbers of ships to be procured in certain years  CBO analyses of past Navy 30-year shipbuilding plans have generally estimated the cost of implementing those plans to be higher than what the Navy estimated  Consistent with that past pattern, as shown in Table 5 , CBO's estimate of the cost to implement the Navy's FY2019 30-year (FY2019-FY2048) shipbuilding plan is about 27% higher than the Navy's estimated cost for the FY2019 plan  ( Table 5 does not pose an apples-vs -oranges issue, because both the Navy and CBO estimates in this table are for the Navy's FY2019 30-year plan ) More specifically, as shown in the table, CBO estimated that the cost of the first 10 years of the FY2019 30-year plan would be about 2% higher than the Navy's estimate; that the cost of the middle 10 years of the plan would be about 13% higher than the Navy's estimate; and that the cost of the final 10 years of the plan would be about 27% higher than the Navy's estimate  The growing divergence between CBO's estimate and the Navy's estimate as one moves from the first 10 years of the 30-year plan to the final 10 years of the plan is due in part to a technical difference between CBO and the Navy regarding the treatment of inflation  This difference compounds over time, making it increasingly important as a factor in the difference between CBO's estimates and the Navy's estimates the further one goes into the 30-year period  In other words, other things held equal, this factor tends to push the CBO and Navy estimates further apart as one proceeds from the earlier years of the plan to the later years of the plan  The growing divergence between CBO's estimate and the Navy's estimate as one moves from the first 10 years of the 30-year plan to the final 10 years of the plan is also due to differences between CBO and the Navy about the costs of certain ship classes, particularly classes that are projected to be procured starting years from now  The designs of these future ship classes are not yet determined, creating more potential for CBO and the Navy to come to differing conclusions regarding their potential cost  For the FY2019 30-year plan, the largest source of difference between CBO and the Navy regarding the costs of individual ship classes was a new class of SSNs that the Navy wants to begin procuring in FY2034 as the successor to the Virginia-class SSN design  This new class of SSN, CBO says, accounted for 42% of the difference between the CBO and Navy estimates for the FY2019 30-year plan, in part because there were a substantial number of these SSNs in the plan, and because those ships occur in the latter years of the plan, where the effects of the technical difference between CBO and the Navy regarding the treatment of inflation show more strongly  The second-largest source of difference between CBO and the Navy regarding the costs of individual ship classes was a new class of large surface combatant (i e , cruiser or destroyer) that the Navy wants to begin procuring in the future, which accounted for 20% of the difference, for reasons that are similar to those mentioned above for the new class of SSNs  The third-largest source of difference was the new class of frigates (FFG[X]s) that the Navy wants to begin procuring in FY2020, which accounts for 9% of the difference  The remaining 29% of difference between the CBO and Navy estimates was accounted for collectively by several other shipbuilding programs, each of which individually accounts for between 1% and 4% of the difference  The Columbia-class program, which accounted for 4%, is one of the programs in this final group  Detailed coverage of legislative activity on certain Navy shipbuilding programs (including funding levels, legislative provisions, and report language) can be found in the following CRS reports: CRS Report R41129, Navy Columbia (SSBN-826) Class Ballistic Missile Submarine Program: Background and Issues for Congress , by Ronald O'Rourke  CRS Report RL32418, Navy Virginia (SSN-774) Class Attack Submarine Procurement: Background and Issues for Congress , by Ronald O'Rourke  CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program: Background and Issues for Congress , by Ronald O'Rourke  (This report also covers the issue of the Administration's FY2020 budget proposal, which the Administration withdrew on April 30, to not fund a mid-life refueling overhaul [called a refueling complex overhaul, or RCOH] for the aircraft carrier Harry S  Truman [CVN-75], and to retire CVN-75 around FY2024 ) CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress , by Ronald O'Rourke  CRS Report R44972, Navy Frigate (FFG[X]) Program: Background and Issues for Congress , by Ronald O'Rourke  CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress , by Ronald O'Rourke  CRS Report R43543, Navy LPD-17 Flight II Amphibious Ship Program: Background and Issues for Congress , by Ronald O'Rourke  (This report also covers the issue of funding for the procurement of an amphibious assault ship called LHA-9 ) CRS Report R43546, Navy John Lewis (TAO-205) Class Oiler Shipbuilding Program: Background and Issues for Congress , by Ronald O'Rourke  Legislative activity on individual Navy shipbuilding programs that are not covered in detail in the above reports is covered below  The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships: 1 Gerald R  Ford (CVN-78) class aircraft carrier; 3 Virginia-class attack submarines; 3 DDG-51 class Aegis destroyers; 1 FFG(X) frigate; 2 John Lewis (TAO-205) class oilers; and 2 TATS towing, salvage, and rescue ships  As noted earlier, the above list of 12 ships reflects a Navy decision to show the aircraft carrier CVN-81 as a ship to be procured in FY2020 rather than a ship that was procured in FY2019  Congress, as part of its action on the Navy's proposed FY2019 budget, authorized the procurement of CVN-81 in FY2019  The Navy's proposed FY2020 shipbuilding budget also requests funding for ships that have been procured in prior fiscal years, and ships that are to be procured in future fiscal years, as well as funding for activities other than the building of new Navy ships  Table 6 summarizes congressional action on the Navy's FY2020 funding request for Navy shipbuilding  The table shows the amounts requested and congressional changes to those requested amounts  A blank cell in a filled-in column showing congressional changes to requested amounts indicates no change from the requested amount  Appendix A  Strategic and Budgetary Context This appendix presents some brief comments on elements of the strategic and budgetary context in which U S  Navy force structure and shipbuilding plans may be considered  Shift in International Security Environment World events have led some observers, starting in late 2013, to conclude that the international security environment has undergone a shift over the past several years from the familiar post-Cold War era of the past 20-25 years, also sometimes known as the unipolar moment (with the United States as the unipolar power), to a new and different strategic situation that features, among other things, renewed great power competition with China and Russia, and challenges to elements of the U S -led international order that has operated since World War II  This situation is discussed further in another CRS report  World Geography and U S  Grand Strategy Discussion of the above-mentioned shift in the international security environment has led to a renewed emphasis in discussions of U S  security and foreign policy on grand strategy and geopolitics  From a U S  perspective on grand strategy and geopolitics, it can be noted that most of the world's people, resources, and economic activity are located not in the Western Hemisphere, but in the other hemisphere, particularly Eurasia  In response to this basic feature of world geography, U S  policymakers for the past several decades have chosen to pursue, as a key element of U S  national strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, on the grounds that such a hegemon could represent a concentration of power strong enough to threaten core U S  interests by, for example, denying the United States access to some of the other hemisphere's resources and economic activity  Although U S  policymakers have not often stated this key national strategic goal explicitly in public, U S  military (and diplomatic) operations in recent decades—both wartime operations and day-to-day operations—can be viewed as having been carried out in no small part in support of this key goal  U S  Grand Strategy and U S  Naval Forces As noted above, in response to basic world geography, U S  policymakers for the past several decades have chosen to pursue, as a key element of U S  national strategy, a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another  The traditional U S  goal of preventing the emergence of a regional hegemon in one part of Eurasia or another has been a major reason why the U S  military is structured with force elements that enable it to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival  Force elements associated with this goal include, among other things, an Air Force with significant numbers of long-range bombers, long-range surveillance aircraft, long-range airlift aircraft, and aerial refueling tankers, and a Navy with significant numbers of aircraft carriers, nuclear-powered attack submarines, large surface combatants, large amphibious ships, and underway replenishment ships  The United States is the only country in the world that has designed its military to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival  The other countries in the Western Hemisphere do not design their forces to do this because they cannot afford to, and because the United States has been, in effect, doing it for them  Countries in the other hemisphere do not design their forces to do this for the very basic reason that they are already in the other hemisphere, and consequently instead spend their defense money on forces that are tailored largely for influencing events in their own local region  The fact that the United States has designed its military to do something that other countries do not design their forces to do—cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival—can be important to keep in mind when comparing the U S  military to the militaries of other nations  For example, in observing that the U S  Navy has 11 aircraft carriers while other countries have no more than one or two, it can be noted other countries do not need a significant number of aircraft carriers because, unlike the United States, they are not designing their forces to cross broad expanses of ocean and air space and then conduct sustained, large-scale military operations upon arrival  As another example, it is sometimes noted, in assessing the adequacy of U S  naval forces, that U S  naval forces are equal in tonnage to the next dozen or more navies combined, and that most of those next dozen or more navies are the navies of U S  allies  Those other fleets, however, are mostly of Eurasian countries, which do not design their forces to cross to the other side of the world and then conduct sustained, large-scale military operations upon arrival  The fact that the U S  Navy is much bigger than allied navies does not necessarily prove that U S  naval forces are either sufficient or excessive; it simply reflects the differing and generally more limited needs that U S  allies have for naval forces  (It might also reflect an underinvestment by some of those allies to meet even their more limited naval needs ) Countries have differing needs for naval and other military forces  The United States, as a country located in the Western Hemisphere that has adopted a goal of preventing the emergence of a regional hegemon in one part of Eurasia or another, has defined a need for naval and other military forces that is quite different from the needs of allies that are located in Eurasia  The sufficiency of U S  naval and other military forces consequently is best assessed not through comparison to the militaries of other countries, but against U S  strategic goals  More generally, from a geopolitical perspective, it can be noted that that U S  naval forces, while not inexpensive, give the United States the ability to convert the world's oceans—a global commons that covers more than two-thirds of the planet's surface—into a medium of maneuver and operations for projecting U S  power ashore and otherwise defending U S  interests around the world  The ability to use the world's oceans in this manner—and to deny other countries the use of the world's oceans for taking actions against U S  interests—constitutes an immense asymmetric advantage for the United States  This point would be less important if less of the world were covered by water, or if the oceans were carved into territorial blocks, like the land  Most of the world, however, is covered by water, and most of those waters are international waters, where naval forces can operate freely  The point, consequently, is not that U S  naval forces are intrinsically special or privileged—it is that they have a certain value simply as a consequence of the physical and legal organization of the planet  Uncertainty Regarding Future U S  Role in the World The overall U S  role in the world since the end of World War II in 1945 (i e , over the past 70 years) is generally described as one of global leadership and significant engagement in international affairs  A key aim of that role has been to promote and defend the open international order that the United States, with the support of its allies, created in the years after World War II  In addition to promoting and defending the open international order, the overall U S  role is generally described as having been one of promoting freedom, democracy, and human rights, while criticizing and resisting authoritarianism where possible, and opposing the emergence of regional hegemons in Eurasia or a spheres-of-influence world  Certain statements and actions from the Trump Administration have led to uncertainty about the Administration's intentions regarding the U S  role in the world  Based on those statements and actions, some observers have speculated that the Trump Administration may want to change the U S  role in one or more ways  A change in the overall U S  role could have profound implications for DOD strategy, budgets, plans, and programs, including the planned size and structure of the Navy  Declining U S  Technological and Qualitative Edge DOD officials have expressed concern that the technological and qualitative edge that U S  military forces have had relative to the military forces of other countries is being narrowed by improving military capabilities in other countries  China's improving military capabilities are a primary contributor to that concern  Russia's rejuvenated military capabilities are an additional contributor  DOD in recent years has taken a number of actions to arrest and reverse the decline in the U S  technological and qualitative edge  Challenge to U S  Sea Control and U S  Position in Western Pacific Observers of Chinese and U S  military forces view China's improving naval capabilities as posing a potential challenge in the Western Pacific to the U S  Navy's ability to achieve and maintain control of blue-water ocean areas in wartime—the first such challenge the U S  Navy has faced since the end of the Cold War  More broadly, these observers view China's naval capabilities as a key element of an emerging broader Chinese military challenge to the long-standing status of the United States as the leading military power in the Western Pacific  Longer Ship Deployments U S  Navy officials have testified that fully meeting requests from U S  regional combatant commanders (CCDRs) for forward-deployed U S  naval forces would require a Navy much larger than today's fleet  For example, Navy officials testified in March 2014 that a Navy of 450 ships would be required to fully meet CCDR requests for forward-deployed Navy forces  CCDR requests for forward-deployed U S  Navy forces are adjudicated by DOD through a process called the Global Force Management Allocation Plan  The process essentially makes choices about how best to apportion a finite number forward-deployed U S  Navy ships among competing CCDR requests for those ships  Even with this process, the Navy has lengthened the deployments of some ships in an attempt to meet policymaker demands for forward-deployed U S  Navy ships  Although Navy officials are aiming to limit ship deployments to seven months, Navy ships in recent years have frequently been deployed for periods of eight months or more  Limits on Defense Spending in Budget Control Act of 2011 as Amended Limits on the "base" portion of the U S  defense budget established by Budget Control Act of 2011, or BCA ( S  365 / P L  112-25 of August 2, 2011), as amended, combined with some of the considerations above, have led to discussions among observers about how to balance competing demands for finite U S  defense funds, and about whether programs for responding to China's military modernization effort can be adequately funded while also adequately funding other defense-spending priorities, such as initiatives for responding to Russia's actions in Ukraine and elsewhere in Europe and U S  operations for countering the Islamic State organization in the Middle East  Appendix B  Earlier Navy Force-Structure Goals Dating Back to 2001 The table below shows earlier Navy force-structure goals dating back to 2001  The 308-ship force-level goal of March 2015, shown in the first column of the table, is the goal that was replaced by the 355-ship force-level goal released in December 2016  Appendix C  Comparing Past Ship Force Levels to Current or Potential Future Ship Force Levels In assessing the appropriateness of the current or potential future number of ships in the Navy, observers sometimes compare that number to historical figures for total Navy fleet size  Historical figures for total fleet size, however, can be a problematic yardstick for assessing the appropriateness of the current or potential future number of ships in the Navy, particularly if the historical figures are more than a few years old, because the missions to be performed by the Navy, the mix of ships that make up the Navy, and the technologies that are available to Navy ships for performing missions all change over time; and the number of ships in the fleet in an earlier year might itself have been inappropriate (i e , not enough or more than enough) for meeting the Navy's mission requirements in that year  Regarding the first bullet point above, the Navy, for example, reached a late-Cold War peak of 568 battle force ships at the end of FY1987, and as of May 7, 2019, included a total of 289 battle force ships  The FY1987 fleet, however, was intended to meet a set of mission requirements that focused on countering Soviet naval forces at sea during a potential multitheater NATO-Warsaw Pact conflict, while the May 2019 fleet is intended to meet a considerably different set of mission requirements centered on influencing events ashore by countering both land- and sea-based military forces of China, Russia, North Korea, and Iran, as well as nonstate terrorist organizations  In addition, the Navy of FY1987 differed substantially from the May 2019 fleet in areas such as profusion of precision-guided air-delivered weapons, numbers of Tomahawk-capable ships, and the sophistication of C4ISR systems and networking capabilities  In coming years, Navy missions may shift again, and the capabilities of Navy ships will likely have changed further by that time due to developments such as more comprehensive implementation of networking technology, increased use of ship-based unmanned vehicles, and the potential fielding of new types of weapons such as lasers or electromagnetic rail guns  The 568-ship fleet of FY1987 may or may not have been capable of performing its stated missions; the 289-ship fleet of May 2019 may or may not be capable of performing its stated missions; and a fleet years from now with a certain number of ships may or may not be capable of performing its stated missions  Given changes over time in mission requirements, ship mixes, and technologies, however, these three issues are to a substantial degree independent of one another  For similar reasons, trends over time in the total number of ships in the Navy are not necessarily a reliable indicator of the direction of change in the fleet's ability to perform its stated missions  An increasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform its stated missions is increasing, because the fleet's mission requirements might be increasing more rapidly than ship numbers and average ship capability  Similarly, a decreasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform stated missions is decreasing, because the fleet's mission requirements might be declining more rapidly than numbers of ships, or because average ship capability and the percentage of time that ships are in deployed locations might be increasing quickly enough to more than offset reductions in total ship numbers  Regarding the second of the two bullet points above, it can be noted that comparisons of the size of the fleet today with the size of the fleet in earlier years rarely appear to consider whether the fleet was appropriately sized in those earlier years (and therefore potentially suitable as a yardstick of comparison), even though it is quite possible that the fleet in those earlier years might not have been appropriately sized, and even though there might have been differences of opinion among observers at that time regarding that question  Just as it might not be prudent for observers years from now to tacitly assume that the 286-ship Navy of September 2018 was appropriately sized for meeting the mission requirements of 2018, even though there were differences of opinion among observers on that question, simply because a figure of 286 ships appears in the historical records for 2016, so, too, might it not be prudent for observers today to tacitly assume that the number of ships of the Navy in an earlier year was appropriate for meeting the Navy's mission requirements that year, even though there might have been differences of opinion among observers at that time regarding that question, simply because the size of the Navy in that year appears in a table like Table H-1   Previous Navy force structure plans, such as those shown in Table B-1 , might provide some insight into the potential adequacy of a proposed new force-structure plan, but changes over time in mission requirements, technologies available to ships for performing missions, and other force-planning factors, as well as the possibility that earlier force-structure plans might not have been appropriate for meeting the mission demands of their times, suggest that some caution should be applied in using past force structure plans for this purpose, particularly if those past force structure plans are more than a few years old  The Reagan-era goal for a 600-ship Navy, for example, was designed for a Cold War set of missions focusing on countering Soviet naval forces at sea, which is not an appropriate basis for planning the Navy today, and there was considerable debate during those years as to the appropriateness of the 600-ship goal  Appendix D  Industrial Base Ability for, and Employment Impact of, Additional Shipbuilding Work This appendix presents background information on the ability of the industrial base to take on the additional shipbuilding work associated with achieving and maintaining the Navy's 355-ship force-level goal and on the employment impact of additional shipbuilding work  Industrial Base Ability The U S  shipbuilding industrial base has some unused capacity to take on increased Navy shipbuilding work, particularly for certain kinds of surface ships, and its capacity could be increased further over time to support higher Navy shipbuilding rates  Navy shipbuilding rates could not be increased steeply across the board overnight—time (and investment) would be needed to hire and train additional workers and increase production facilities at shipyards and supplier firms, particularly for supporting higher rates of submarine production  Depending on their specialties, newly hired workers could be initially less productive per unit of time worked than more experienced workers  Some parts of the shipbuilding industrial base, such as the submarine construction industrial base, could face more challenges than others in ramping up to the higher production rates required to build the various parts of the 355-ship fleet  Over a period of a few to several years, with investment and management attention, Navy shipbuilding could ramp up to higher rates for achieving a 355-ship fleet over a period of 20-30 years  An April 2017 CBO report stated that all seven shipyards [currently involved in building the Navy's major ships] would need to increase their workforces and several would need to make improvements to their infrastructure in order to build ships at a faster rate  However, certain sectors face greater obstacles in constructing ships at faster rates than others: Building more submarines to meet the goals of the 2016 force structure assessment would pose the greatest challenge to the shipbuilding industry  Increasing the number of aircraft carriers and surface combatants would pose a small to moderate challenge to builders of those vessels  Finally, building more amphibious ships and combat logistics and support ships would be the least problematic for the shipyards  The workforces across those yards would need to increase by about 40 percent over the next 5 to 10 years  Managing the growth and training of those new workforces while maintaining the current standard of quality and efficiency would represent the most significant industrywide challenge  In addition, industry and Navy sources indicate that as much as $4 billion would need to be invested in the physical infrastructure of the shipyards to achieve the higher production rates required under the [notional] 15-year and 20-year [buildup scenarios examined by CBO]  Less investment would be needed for the [notional] 25-year or 30-year [buildup scenarios examined by CBO]  A January 13, 2017, press report states the following: The Navy's production lines are hot and the work to prepare them for the possibility of building out a much larger fleet would be manageable, the service's head of acquisition said Thursday  From a logistics perspective, building the fleet from its current 274 ships to 355, as recommended in the Navy's newest force structure assessment in December, would be straightforward, Assistant Secretary of the Navy for Research, Development and Acquisition Sean Stackley told reporters at the Surface Navy Association's annual symposium  "By virtue of maintaining these hot production lines, frankly, over the last eight years, our facilities are in pretty good shape," Stackley said  "In fact, if you talked to industry, they would say we're underutilizing the facilities that we have " The areas where the Navy would likely have to adjust "tooling" to answer demand for a larger fleet would likely be in Virginia-class attack submarines and large surface combatants, the DDG-51 guided missile destroyers—two ship classes likely to surge if the Navy gets funding to build to 355 ships, he said  "Industry's going to have to go out and procure special tooling associated with going from current production rates to a higher rate, but I would say that's easily done," he said  Another key, Stackley said, is maintaining skilled workers—both the builders in the yards and the critical supply-chain vendors who provide major equipment needed for ship construction  And, he suggested, it would help to avoid budget cuts and other events that would force workforce layoffs  "We're already prepared to ramp up," he said  "In certain cases, that means not laying off the skilled workforce we want to retain " A January 17, 2017, press report states the following: Building stable designs with active production lines is central to the Navy's plan to grow to 355 ships  "if you look at the 355-ship number, and you study the ship classes (desired), the big surge is in attack submarines and large surface combatants, which today are DDG-51 (destroyers)," the Assistant Secretary of the Navy, Sean Stackley, told reporters at last week's Surface Navy Association conference  Those programs have proven themselves reliable performers both at sea and in the shipyards  From today's fleet of 274 ships, "we're on an irreversible path to 308 by 2021  Those ships are already in construction," said Stackley  "To go from there to 355, virtually all those ships are currently in production, with some exceptions: Ohio Replacement, (we) just got done the Milestone B there (to move from R&D into detailed design); and then upgrades to existing platforms  So we have hot production lines that will take us to that 355-ship Navy " A January 24, 2017, press report states the following: Navy officials say a recently determined plan to increase its fleet size by adding more new submarines, carriers and destroyers is "executable" and that early conceptual work toward this end is already underway     Although various benchmarks will need to be reached in order for this new plan to come to fruition, such as Congressional budget allocations, Navy officials do tell Scout Warrior that the service is already working—at least in concept—on plans to vastly enlarge the fleet  Findings from this study are expected to inform an upcoming 2018 Navy Shipbuilding Plan, service officials said  A January 12, 2017, press report states the following: Brian Cuccias, president of Ingalls Shipbuilding [a shipyard owned by Huntington Ingalls Industries (HII) that builds Navy destroyers and amphibious ships as well as Coast Guard cutters], said Ingalls, which is currently building 10 ships for four Navy and Coast Guard programs at its 800-acre facility in Pascagoula, Miss , could build more because it is using only 70 to 75 percent of its capacity  A March 2017 press report states the following: As the Navy calls for a larger fleet, shipbuilders are looking toward new contracts and ramping up their yards to full capacity     The Navy is confident that U S  shipbuilders will be able to meet an increased demand, said Ray Mabus, then-secretary of the Navy, during a speech at the Surface Navy Association's annual conference in Arlington, Virginia  They have the capacity to "get there because of the ships we are building today," Mabus said  "I don't think we could have seven years ago " Shipbuilders around the United States have "hot" production lines and are manufacturing vessels on multi-year or block buy contracts, he added  The yards have made investments in infrastructure and in the training of their workers  "We now have the basis     [to] get to that much larger fleet," he said     Shipbuilders have said they are prepared for more work  At Ingalls Shipbuilding—a subsidiary of Huntington Ingalls Industries—10 ships are under construction at its Pascagoula, Mississippi, yard, but it is under capacity, said Brian Cuccias, the company's president  The shipbuilder is currently constructing five guided-missile destroyers, the latest San Antonio-class amphibious transport dock ship, and two national security cutters for the Coast Guard  "Ingalls is a very successful production line right now, but it has the ability to actually produce a lot more in the future," he said during a briefing with reporters in January  The company's facility is currently operating at 75 percent capacity, he noted     Austal USA—the builder of the Independence-variant of the littoral combat ship and the expeditionary fast transport vessel—is also ready to increase its capacity should the Navy require it, said Craig Perciavalle, the company's president  The latest discussions are "certainly something that a shipbuilder wants to hear," he said  "We do have the capability of increasing throughput if the need and demand were to arise, and then we also have the ability with the present workforce and facility to meet a different mix that could arise as well " Austal could build fewer expeditionary fast transport vessels and more littoral combat ships, or vice versa, he added  "The key thing for us is to keep the manufacturing lines hot and really leverage the momentum that we've gained on both of the programs," he said  The company—which has a 164-acre yard in Mobile, Alabama—is focused on the extension of the LCS and expeditionary fast transport ship program, but Perciavalle noted that it could look into manufacturing other types of vessels  "We do have excess capacity to even build smaller vessels … if that opportunity were to arise and we're pursuing that," he said  Bryan Clark, a naval analyst at the Center for Strategic and Budgetary Assessments, a Washington, D C -based think tank, said shipbuilders are on average running between 70 and 80 percent capacity  While they may be ready to meet an increased demand for ships, it would take time to ramp up their workforces  However, the bigger challenge is the supplier industrial base, he said  "Shipyards may be able to build ships but the supplier base that builds the pumps … and the radars and the radios and all those other things, they don't necessarily have that ability to ramp up," he said  "You would need to put some money into building up their capacity " That has to happen now, he added  Rear Adm  William Gallinis, program manager for program executive office ships, said what the Navy must be "mindful of is probably our vendor base that support the shipyards " Smaller companies that supply power electronics and switchboards could be challenged, he said  "Do we need to re-sequence some of the funding to provide some of the facility improvements for some of the vendors that may be challenged? My sense is that the industrial base will size to the demand signal  We just need to be mindful of how we transition to that increased demand signal," he said  The acquisition workforce may also see an increased amount of stress, Gallinis noted  "It takes a fair amount of experience and training to get a good contracting officer to the point to be [able to] manage contracts or procure contracts " "But I don't see anything that is insurmountable," he added  At a May 24, 2017, hearing before the Seapower subcommittee of the Senate Armed Services Committee on the industrial-base aspects of the Navy's 355-ship goal, John P  Casey, executive vice president–marine systems, General Dynamics Corporation (one of the country's two principal builders of Navy ships) stated the following: It is our belief that the Nation's shipbuilding industrial base can scale-up hot production lines for existing ships and mobilize additional resources to accomplish the significant challenge of achieving the 355-ship Navy as quickly as possible     Supporting a plan to achieve a 355-ship Navy will be the most challenging for the nuclear submarine enterprise  Much of the shipyard and industrial base capacity was eliminated following the steep drop-off in submarine production that occurred with the cancellation of the Seawolf Program in 1992  The entire submarine industrial base at all levels of the supply chain will likely need to recapitalize some portion of its facilities, workforce, and supply chain just to support the current plan to build the Columbia Class SSBN program, while concurrently building Virginia Class SSNs  Additional SSN procurement will require industry to expand its plans and associated investment beyond the level today     Shipyard labor resources include the skilled trades needed to fabricate, build and outfit major modules, perform assembly, test and launch of submarines, and associated support organizations that include planning, material procurement, inspection, quality assurance, and ship certification  Since there is no commercial equivalency for Naval nuclear submarine shipbuilding, these trade resources cannot be easily acquired in large numbers from other industries  Rather, these shipyard resources must be acquired and developed over time to ensure the unique knowledge and know-how associated with nuclear submarine shipbuilding is passed on to the next generation of shipbuilders  The mechanisms of knowledge transfer require sufficient lead time to create the proficient, skilled craftsmen in each key trade including welding, electrical, machining, shipfitting, pipe welding, painting, and carpentry, which are among the largest trades that would need to grow to support increased demand  These trades will need to be hired in the numbers required to support the increased workload  Both shipyards have scalable processes in place to acquire, train, and develop the skilled workforce they need to build nuclear ships  These processes and associated training facilities need to be expanded to support the increased demand  As with the shipyards, the same limiting factors associated with facilities, workforce, and supply chain also limit the submarine unique first tier suppliers and sub-tiers in the industrial base for which there is no commercial equivalency     The supply base is the third resource that will need to be expanded to meet the increased demand over the next 20 years  During the OHIO, 688 and SEAWOLF construction programs, there were over 17,000 suppliers supporting submarine construction programs  That resource base was "rationalized" during submarine low rate production over the last 20 years  The current submarine industrial base reflects about 5,000 suppliers, of which about 3,000 are currently active (i e , orders placed within the last 5 years), 80% of which are single or sole source (based on $)  It will take roughly 20 years to build the 12 Columbia Class submarines that starts construction in FY21  The shipyards are expanding strategic sourcing of appropriate non-core products (e g , decks, tanks, etc ) in order to focus on core work at each shipyard facility (e g , module outfitting and assembly)  Strategic sourcing will move demand into the supply base where capacity may exist or where it can be developed more easily  This approach could offer the potential for cost savings by competition or shifting work to lower cost work centers throughout the country  Each shipyard has a process to assess their current supply base capacity and capability and to determine where it would be most advantageous to perform work in the supply base     Achieving the increased rate of production and reducing the cost of submarines will require the Shipbuilders to rely on the supply base for more non-core products such as structural fabrication, sheet metal, machining, electrical, and standard parts  The supply base must be made ready to execute work with submarine-specific requirements at a rate and volume that they are not currently prepared to perform  Preparing the supply base to execute increased demand requires early non-recurring funding to support cross-program construction readiness and EOQ funding to procure material in a manner that does not hold up existing ship construction schedules should problems arise in supplier qualification programs  This requires longer lead times (estimates of three years to create a new qualified, critical supplier) than the current funding profile supports     We need to rely on market principles to allow suppliers, the shipyards and GFE material providers to sort through the complicated demand equation across the multiple ship programs  Supplier development funding previously mentioned would support non-recurring efforts which are needed to place increased orders for material in multiple market spaces  Examples would include valves, build-to-print fabrication work, commodities, specialty material, engineering components, etc  We are engaging our marine industry associations to help foster innovative approaches that could reduce costs and gain efficiency for this increased volume     Supporting the 355-ship Navy will require Industry to add capability and capacity across the entire Navy Shipbuilding value chain  Industry will need to make investment decisions for additional capital spend starting now in order to meet a step change in demand that would begin in FY19 or FY20  For the submarine enterprise, the step change was already envisioned and investment plans that embraced a growth trajectory were already being formulated  Increasing demand by adding additional submarines will require scaling facility and workforce development plans to operate at a higher rate of production  The nuclear shipyards would also look to increase material procurement proportionally to the increased demand  In some cases, the shipyard facilities may be constrained with existing capacity and may look to source additional work in the supply base where capacity exists or where there are competitive business advantages to be realized  Creating additional capacity in the supply base will require non-recurring investment in supplier qualification, facilities, capital equipment and workforce training and development  Industry is more likely to increase investment in new capability and capacity if there is certainty that the Navy will proceed with a stable shipbuilding plan  Positive signals of commitment from the Government must go beyond a published 30-year Navy Shipbuilding Plan and line items in the Future Years Defense Plan (FYDP) and should include: Multi-year contracting for Block procurement which provides stability in the industrial base and encourages investment in facilities and workforce development Funding for supplier development to support training, qualification, and facilitization efforts—Electric Boat and Newport News have recommended to the Navy funding of $400M over a three-year period starting in 2018 to support supplier development for the Submarine Industrial Base as part of an Integrated Enterprise Plan Extended Enterprise initiative Acceleration of Advance Procurement and/or Economic Order Quantities (EOQ) procurement from FY19 to FY18 for Virginia Block V Government incentives for construction readiness and facilities / special tooling for shipyard and supplier facilities, which help cash flow capital investment ahead of construction contract awards Procurement of additional production back-up (PBU) material to help ensure a ready supply of material to mitigate construction schedule risk     So far, this testimony has focused on the Submarine Industrial Base, but the General Dynamics Marine Systems portfolio also includes surface ship construction  Unlike Electric Boat, Bath Iron Works and NASSCO are able to support increased demand without a significant increase in resources      Bath Iron Works is well positioned to support the Administration's announced goal of increasing the size of the Navy fleet to 355 ships  For BIW that would mean increasing the total current procurement rate of two DDG 51s per year to as many as four DDGs per year, allocated equally between BIW and HII  This is the same rate that the surface combatant industrial base sustained over the first decade of full rate production of the DDG 51 Class (1989-1999)     No significant capital investment in new facilities is required to accommodate delivering two DDGs per year  However, additional funding will be required to train future shipbuilders and maintain equipment  Current hiring and training processes support the projected need, and have proven to be successful in the recent past  BIW has invested significantly in its training programs since 2014 with the restart of the DDG 51 program and given these investments and the current market in Maine, there is little concern of meeting the increase in resources required under the projected plans  A predictable and sustainable Navy workload is essential to justify expanding hiring/training programs  BIW would need the Navy's commitment that the Navy's plan will not change before it would proceed with additional hiring and training to support increased production  BIW's supply chain is prepared to support a procurement rate increase of up to four DDG 51s per year for the DDG 51 Program  BIW has long-term purchasing agreements in place for all major equipment and material for the DDG 51 Program  These agreements provide for material lead time and pricing, and are not constrained by the number of ships ordered in a year  BIW confirmed with all of its critical suppliers that they can support this increased procurement rate     The Navy's Force Structure Assessment calls for three additional ESBs  Additionally, NASSCO has been asked by the Navy and the Congressional Budget Office (CBO) to evaluate its ability to increase the production rate of T-AOs to two ships per year  NASSCO has the capacity to build three more ESBs at a rate of one ship per year while building two T-AOs per year  The most cost effective funding profile requires funding ESB 6 in FY18 and the following ships in subsequent fiscal years to avoid increased cost resulting from a break in the production line  The most cost effective funding profile to enable a production rate of two T-AO ships per year requires funding an additional long lead time equipment set beginning in FY19 and an additional ship each year beginning in FY20  NASSCO must now reduce its employment levels due to completion of a series of commercial programs which resulted in the delivery of six ships in 2016  The proposed increase in Navy shipbuilding stabilizes NASSCO's workload and workforce to levels that were readily demonstrated over the last several years  Some moderate investment in the NASSCO shipyard will be needed to reach this level of production  The recent CBO report on the costs of building a 355-ship Navy accurately summarized NASSCO's ability to reach the above production rate stating, "building more … combat logistics and support ships would be the least problematic for the shipyards " At the same hearing, Brian Cuccias, president, Ingalls Shipbuilding, Huntington Ingalls Industries (the country's other principal builder of Navy ships) stated the following: Qualifying to be a supplier is a difficult process  Depending on the commodity, it may take up to 36 months  That is a big burden on some of these small businesses  This is why creating sufficient volume and exercising early contractual authorization and advance procurement funding is necessary to grow the supplier base, and not just for traditional long-lead time components; that effort needs to expand to critical components and commodities that today are controlling the build rate of submarines and carriers alike  Many of our suppliers are small businesses and can only make decisions to invest in people, plant and tooling when they are awarded a purchase order  We need to consider how we can make commitments to suppliers early enough to ensure material readiness and availability when construction schedules demand it  With questions about the industry's ability to support an increase in shipbuilding, both Newport News and Ingalls have undertaken an extensive inventory of our suppliers and assessed their ability to ramp up their capacity  We have engaged many of our key suppliers to assess their ability to respond to an increase in production  The fortunes of related industries also impact our suppliers, and an increase in demand from the oil and gas industry may stretch our supply base  Although some low to moderate risk remains, I am convinced that our suppliers will be able to meet the forecasted Navy demand     I strongly believe that the fastest results can come from leveraging successful platforms on current hot production lines  We commend the Navy's decision in 2014 to use the existing LPD 17 hull form for the LX(R), which will replace the LSD-class amphibious dock landing ships scheduled to retire in the coming years  However, we also recommend that the concept of commonality be taken even further to best optimize efficiency, affordability and capability  Specifically, rather than continuing with a new design for LX(R) within the "walls" of the LPD hull, we can leverage our hot production line and supply chain and offer the Navy a variant of the existing LPD design that satisfies the aggressive cost targets of the LX(R) program while delivering more capability and survivability to the fleet at a significantly faster pace than the current program  As much as 10-15 percent material savings can be realized across the LX(R) program by purchasing respective blocks of at least five ships each under a multi-year procurement (MYP) approach  In the aggregate, continuing production with LPD 30 in FY18, coupled with successive MYP contracts for the balance of ships, may yield savings greater than $1 billion across an 11-ship LX(R) program  Additionally, we can deliver five LX(R)s to the Navy and Marine Corps in the same timeframe that the current plan would deliver two, helping to reduce the shortfall in amphibious warships against the stated force requirement of 38 ships  Multi-ship procurements, whether a formal MYP or a block-buy, are a proven way to reduce the price of ships  The Navy took advantage of these tools on both Virginia-class submarines and Arleigh Burke-class destroyers  In addition to the LX(R) program mentioned above, expanding multi-ship procurements to other ship classes makes sense     The most efficient approach to lower the cost of the Ford class and meet the goal of an increased CVN fleet size is also to employ a multi-ship procurement strategy and construct these ships at three-year intervals  This approach would maximize the material procurement savings benefit through economic order quantities procurement and provide labor efficiencies to enable rapid acquisition of a 12-ship CVN fleet  This three-ship approach would save at least $1 5 billion, not including additional savings that could be achieved from government-furnished equipment  As part of its Integrated Enterprise Plan, we commend the Navy's efforts to explore the prospect of material economic order quantity purchasing across carrier and submarine programs  At the same hearing, Matthew O  Paxton, president, Shipbuilders Council of America (SCA)—a trade association representing shipbuilders, suppliers, and associated firms—stated the following: To increase the Navy's Fleet to 355 ships, a substantial and sustained investment is required in both procurement and readiness  However, let me be clear: building and sustaining the larger required Fleet is achievable and our industry stands ready to help achieve that important national security objective  To meet the demand for increased vessel construction while sustaining the vessels we currently have will require U S  shipyards to expand their work forces and improve their infrastructure in varying degrees depending on ship type and ship mix – a requirement our Nation's shipyards are eager to meet  But first, in order to build these ships in as timely and affordable manner as possible, stable and robust funding is necessary to sustain those industrial capabilities which support Navy shipbuilding and ship maintenance and modernization     Beyond providing for the building of a 355-ship Navy, there must also be provision to fund the "tail," the maintenance of the current and new ships entering the fleet  Target fleet size cannot be reached if existing ships are not maintained to their full service lives, while building those new ships  Maintenance has been deferred in the last few years because of across-the-board budget cuts     The domestic shipyard industry certainly has the capability and know-how to build and maintain a 355-ship Navy  The Maritime Administration determined in a recent study on the Economic Benefits of the U S  Shipyard Industry that there are nearly 110,000 skilled men and women in the Nation's private shipyards building, repairing and maintaining America's military and commercial fleets 1 The report found the U S  shipbuilding industry supports nearly 400,000 jobs across the country and generates $25 1 billion in income and $37 3 billion worth of goods and services each year  In fact, the MARAD report found that the shipyard industry creates direct and induced employment in every State and Congressional District and each job in the private shipbuilding and repairing industry supports another 2 6 jobs nationally  This data confirms the significant economic impact of this manufacturing sector, but also that the skilled workforce and industrial base exists domestically to build these ships  Long-term, there needs to be a workforce expansion and some shipyards will need to reconfigure or expand production lines  This can and will be done as required to meet the need if adequate, stable budgets and procurement plans are established and sustained for the long-term  Funding predictability and sustainability will allow industry to invest in facilities and more effectively grow its skilled workforce  The development of that critical workforce will take time and a concerted effort in a partnership between industry and the federal government  U S  shipyards pride themselves on implementing state of the art training and apprenticeship programs to develop skilled men and women that can cut, weld, and bend steel and aluminum and who can design, build and maintain the best Navy in the world  However, the shipbuilding industry, like so many other manufacturing sectors, faces an aging workforce  Attracting and retaining the next generation shipyard worker for an industry career is critical  Working together with the Navy, and local and state resources, our association is committed to building a robust training and development pipeline for skilled shipyard workers  In addition to repealing sequestration and stabilizing funding the continued development of a skilled workforce also needs to be included in our national maritime strategy     In conclusion, the U S  shipyard industry is certainly up to the task of building a 355-ship Navy and has the expertise, the capability, the critical capacity and the unmatched skilled workforce to build these national assets  Meeting the Navy's goal of a 355-ship fleet and securing America's naval dominance for the decades ahead will require sustained investment by Congress and Navy's partnership with a defense industrial base that can further attract and retain a highly-skilled workforce with critical skill sets  Again, I would like to thank this Subcommittee for inviting me to testify alongside such distinguished witnesses  As a representative of our nation's private shipyards, I can say, with confidence and certainty, that our domestic shipyards and skilled workers are ready, willing and able to build and maintain the Navy's 355-ship Fleet  Employment Impact Building the additional ships that would be needed to achieve and maintain the 355-ship fleet could create many additional manufacturing and other jobs at shipyards, associated supplier firms, and elsewhere in the U S  economy  A 2015 Maritime Administration (MARAD) report states, Considering the indirect and induced impacts, each direct job in the shipbuilding and repairing industry is associated with another 2 6 jobs in other parts of the US economy; each dollar of direct labor income and GDP in the shipbuilding and repairing industry is associated with another $1 74 in labor income and $2 49 in GDP, respectively, in other parts of the US economy  A March 2017 press report states, "Based on a 2015 economic impact study, the Shipbuilders Council of America [a trade association for U S  shipbuilders and associated supplier firms] believes that a 355-ship Navy could add more than 50,000 jobs nationwide " The 2015 economic impact study referred to in that quote might be the 2015 MARAD study discussed in the previous paragraph  An estimate of more than 50,000 additional jobs nationwide might be viewed as a higher-end estimate; other estimates might be lower  A June 14, 2017, press report states the following: "The shipbuilding industry will need to add between 18,000 and 25,000 jobs to build to a 350-ship Navy, according to Matthew Paxton, president of the Shipbuilders Council of America, a trade association representing the shipbuilding industrial base  Including indirect jobs like suppliers, the ramp-up may require a boost of 50,000 workers " Appendix E  A Summary of Some Acquisition Lessons Learned for Navy Shipbuilding This appendix presents a general summary of lessons learned in Navy shipbuilding, reflecting comments made repeatedly by various sources over the years  These lessons learned include the following: At the outset, get the operational requirements for the program right  Properly identify the program's operational requirements at the outset  Manage risk by not trying to do too much in terms of the program's operational requirements, and perhaps seek a so-called 70%-to-80% solution (i e , a design that is intended to provide 70%-80% of desired or ideal capabilities)  Achieve a realistic balance up front between operational requirements, risks, and estimated costs  Impose cost discipline up front  Use realistic price estimates, and consider not only development and procurement costs, but life-cycle operation and support (O&S) costs  Employ competition where possible in the awarding of design and construction contracts  Use a contract type that is appropriate for the amount of risk involved , and structure its terms to align incentives with desired outcomes  Minimize design/construction concurrency by developing the design to a high level of completion before starting construction and by resisting changes in requirements (and consequent design changes) during construction  Properly supervise construction work  Maintain an adequate number of properly trained Supervisor of Shipbuilding (SUPSHIP) personnel  Provide stability for industry , in part by using, where possible, multiyear procurement (MYP) or block buy contracting  Maintain a capable government acquisition workforce that understands what it is buying, as well as the above points  Identifying these lessons is arguably not the hard part—most if not all these points have been cited for years  The hard part, arguably, is living up to them without letting circumstances lead program-execution efforts away from these guidelines  Appendix F  Some Considerations Relating to Warranties in Shipbuilding and Other Defense Acquisition This appendix presents some considerations relating to warranties in shipbuilding and other defense acquisition  In discussions of Navy (and also Coast Guard) shipbuilding, one question that sometimes arises is whether including a warranty in a shipbuilding contract is preferable to not including one  The question can arise, for example, in connection with a GAO finding that "the Navy structures shipbuilding contracts so that it pays shipbuilders to build ships as part of the construction process and then pays the same shipbuilders a second time to repair the ship when construction defects are discovered " Including a warranty in a shipbuilding contract (or a contract for building some other kind of defense end item), while potentially valuable, might not always be preferable to not including one—it depends on the circumstances of the acquisition, and it is not necessarily a valid criticism of an acquisition program to state that it is using a contract that does not include a warranty (or a weaker form of a warranty rather than a stronger one)  Including a warranty generally shifts to the contractor the risk of having to pay for fixing problems with earlier work  Although that in itself could be deemed desirable from the government's standpoint, a contractor negotiating a contract that will have a warranty will incorporate that risk into its price, and depending on how much the contractor might charge for doing that, it is possible that the government could wind up paying more in total for acquiring the item (including fixing problems with earlier work on that item) than it would have under a contract without a warranty  When a warranty is not included in the contract and the government pays later on to fix problems with earlier work, those payments can be very visible, which can invite critical comments from observers  But that does not mean that including a warranty in the contract somehow frees the government from paying to fix problems with earlier work  In a contract that includes a warranty, the government will indeed pay something to fix problems with earlier work—but it will make the payment in the less-visible (but still very real) form of the up-front charge for including the warranty, and that charge might be more than what it would have cost the government, under a contract without a warranty, to pay later on for fixing those problems  From a cost standpoint, including a warranty in the contract might or might not be preferable, depending on the risk that there will be problems with earlier work that need fixing, the potential cost of fixing such problems, and the cost of including the warranty in the contract  The point is that the goal of avoiding highly visible payments for fixing problems with earlier work and the goal of minimizing the cost to the government of fixing problems with earlier work are separate and different goals, and that pursuing the first goal can sometimes work against achieving the second goal  The Department of Defense's guide on the use of warranties states the following: Federal Acquisition Regulation (FAR) 46 7 states that "the use of warranties is not mandatory " However, if the benefits to be derived from the warranty are commensurate with the cost of the warranty, the CO [contracting officer] should consider placing it in the contract  In determining whether a warranty is appropriate for a specific acquisition, FAR Subpart 46 703 requires the CO to consider the nature and use of the supplies and services, the cost, the administration and enforcement, trade practices, and reduced requirements  The rationale for using a warranty should be documented in the contract file     In determining the value of a warranty, a CBA [cost-benefit analysis] is used to measure the life cycle costs of the system with and without the warranty  A CBA is required to determine if the warranty will be cost beneficial  CBA is an economic analysis, which basically compares the Life Cycle Costs (LCC) of the system with and without the warranty to determine if warranty coverage will improve the LCCs  In general, five key factors will drive the results of the CBA: cost of the warranty + cost of warranty administration + compatibility with total program efforts + cost of overlap with Contractor support + intangible savings  Effective warranties integrate reliability, maintainability, supportability, availability, and life-cycle costs  Decision factors that must be evaluated include the state of the weapon system technology, the size of the warranted population, the likelihood that field performance requirements can be achieved, and the warranty period of performance  Appendix G  Some Considerations Relating to Avoiding Procurement Cost Growth vs  Minimizing Procurement Costs This appendix presents some considerations relating to avoiding procurement cost growth vs  minimizing procurement costs in shipbuilding and other defense acquisition  The affordability challenge posed by the Navy's shipbuilding plans can reinforce the strong oversight focus on preventing or minimizing procurement cost growth in Navy shipbuilding programs, which is one expression of a strong oversight focus on preventing or minimizing cost growth in DOD acquisition programs in general  This oversight focus may reflect in part an assumption that avoiding or minimizing procurement cost growth is always synonymous with minimizing procurement cost  It is important to note, however, that as paradoxical as it may seem, avoiding or minimizing procurement cost growth is not always synonymous with minimizing procurement cost, and that a sustained, singular focus on avoiding or minimizing procurement cost growth might sometimes lead to higher procurement costs for the government  How could this be? Consider the example of a design for the lead ship of a new class of Navy ships  The construction cost of this new design is uncertain, but is estimated to be likely somewhere between Point A (a minimum possible figure) and Point D (a maximum possible figure)  (Point D, in other words, would represent a cost estimate with a 100% confidence factor, meaning there is a 100% chance that the cost would come in at or below that level ) If the Navy wanted to avoid cost growth on this ship, it could simply set the ship's procurement cost at Point D  Industry would likely be happy with this arrangement, and there likely would be no cost growth on the ship  The alternative strategy open to the Navy is to set the ship's target procurement cost at some figure between Points A and D—call it Point B—and then use that more challenging target cost to place pressure on industry to sharpen its pencils so as to find ways to produce the ship at that lower cost  (Navy officials sometimes refer to this as "pressurizing" industry ) In this example, it might turn out that industry efforts to reduce production costs are not successful enough to build the ship at the Point B cost  As a result, the ship experiences one or more rounds of procurement cost growth, and the ship's procurement cost rises over time from Point B to some higher figure—call it Point C  Here is the rub: Point C, in spite of incorporating one or more rounds of cost growth, might nevertheless turn out to be lower than Point D, because Point C reflected efforts by the shipbuilder to find ways to reduce production costs that the shipbuilder might have put less energy into pursuing if the Navy had simply set the ship's procurement cost initially at Point D  Setting the ship's cost at Point D, in other words, may eliminate the risk of cost growth on the ship, but does so at the expense of creating a risk of the government paying more for the ship than was actually necessary  DOD could avoid cost growth on new procurement programs starting tomorrow by simply setting costs for those programs at each program's equivalent of Point D  But as a result of this strategy, DOD could well wind up leaving money on the table in some instances—of not, in other words, minimizing procurement costs  DOD does not have to set a cost precisely at Point D to create a potential risk in this regard  A risk of leaving money on the table, for example, is a possible downside of requiring DOD to budget for its acquisition programs at something like an 80% confidence factor—an approach that some observers have recommended—because a cost at the 80% confidence factor is a cost that is likely fairly close to Point D  Procurement cost growth is often embarrassing for DOD and industry, and can damage their credibility in connection with future procurement efforts  Procurement cost growth can also disrupt congressional budgeting by requiring additional appropriations to pay for something Congress thought it had fully funded in a prior year  For this reason, there is a legitimate public policy value to pursuing a goal of having less rather than more procurement cost growth  Procurement cost growth, however, can sometimes be in part the result of DOD efforts to use lower initial cost targets as a means of pressuring industry to reduce production costs—efforts that, notwithstanding the cost growth, might be partially successful  A sustained, singular focus on avoiding or minimizing cost growth, and of punishing DOD for all instances of cost growth, could discourage DOD from using lower initial cost targets as a means of pressurizing industry, which could deprive DOD of a tool for controlling procurement costs  The point here is not to excuse away cost growth, because cost growth can occur in a program for reasons other than DOD's attempt to pressurize industry  Nor is the point to abandon the goal of seeking lower rather than higher procurement cost growth, because, as noted above, there is a legitimate public policy value in pursuing this goal  The point, rather, is to recognize that this goal is not always synonymous with minimizing procurement cost, and that a possibility of some amount of cost growth might be expected as part of an optimal government strategy for minimizing procurement cost  Recognizing that the goals of seeking lower rather than higher cost growth and of minimizing procurement cost can sometimes be in tension with one another can lead to an approach that takes both goals into consideration  In contrast, an approach that is instead characterized by a sustained, singular focus on avoiding and minimizing cost growth may appear virtuous, but in the end may wind up costing the government more  Appendix H  Size of the Navy and Navy Shipbuilding Rate Size of the Navy Table H-1 shows the size of the Navy in terms of total number of ships since FY1948; the numbers shown in the table reflect changes over time in the rules specifying which ships count toward the total  Differing counting rules result in differing totals, and for certain years, figures reflecting more than one set of counting rules are available  Figures in the table for FY1978 and subsequent years reflect the battle force ships counting method, which is the set of counting rules established in the early 1980s for public policy discussions of the size of the Navy  As shown in the table, the total number of battle force ships in the Navy reached a late-Cold War peak of 568 at the end of FY1987 and began declining thereafter  The Navy fell below 300 battle force ships in August 2003 and as of April 26, 2019, included 289 battle force ships  As discussed in Appendix C , historical figures for total fleet size might not be a reliable yardstick for assessing the appropriateness of proposals for the future size and structure of the Navy, particularly if the historical figures are more than a few years old, because the missions to be performed by the Navy, the mix of ships that make up the Navy, and the technologies that are available to Navy ships for performing missions all change over time, and because the number of ships in the fleet in an earlier year might itself have been inappropriate (i e , not enough or more than enough) for meeting the Navy's mission requirements in that year  For similar reasons, trends over time in the total number of ships in the Navy are not necessarily a reliable indicator of the direction of change in the fleet's ability to perform its stated missions  An increasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform its stated missions is increasing, because the fleet's mission requirements might be increasing more rapidly than ship numbers and average ship capability  Similarly, a decreasing number of ships in the fleet might not necessarily mean that the fleet's ability to perform stated missions is decreasing, because the fleet's mission requirements might be declining more rapidly than numbers of ships, or because average ship capability and the percentage of time that ships are in deployed locations might be increasing quickly enough to more than offset reductions in total ship numbers  Shipbuilding Rate Table H-2 shows past (FY1982-FY2019) and requested or programmed (FY2020-FY2024) rates of Navy ship procurement 

ground_truth: According to the Navy, its 51 attack submarines provide the United States an asymmetric advantage to gather intelligence undetected, attack enemy targets, and insert special forces, among others. These capabilities make attack submarines some of the most–requested assets by the global combatant commanders. GAO was asked to review the readiness of the Navy's attack submarine force. This report discusses the extent to which the Navy (1) has experienced maintenance delays in its attack submarine fleet and costs associated with any delays; and (2) has addressed any challenges and developed mitigation plans for any maintenance delays. GAO analyzed readiness information from fiscal years 2008-2018, operating and support costs, maintenance performance, and other data; visited attack submarines and squadrons; and interviewed public and private shipyard and fleet officials. This is a public version of a classified report issued in October 2018. Information the Department of Defense deemed classified or sensitive, such as attack submarine force structure requirements and detailed data on attack submarine maintenance delays, has been omitted. The Navy has been unable to begin or complete the vast majority of its attack submarine maintenance periods on time resulting in significant maintenance delays and operating and support cost expenditures. GAO's analysis of Navy maintenance data shows that between fiscal year 2008 and 2018, attack submarines have incurred 10,363 days of idle time and maintenance delays as a result of delays in getting into and out of the shipyards. For example, the Navy originally scheduled the USS Boise to enter a shipyard for an extended maintenance period in 2013 but, due to heavy shipyard workload, the Navy delayed the start of the maintenance period. In June 2016, the USS Boise could no longer conduct normal operations and the boat has remained idle, pierside for over two years since then waiting to enter a shipyard (see figure). GAO estimated that since fiscal year 2008 the Navy has spent more than $1.5 billion in fiscal year 2018 constant dollars to support attack submarines that provide no operational capability—those sitting idle while waiting to enter the shipyards, and those delayed in completing their maintenance at the shipyards. The Navy has started to address challenges related to workforce shortages and facilities needs at the public shipyards. However, it has not effectively allocated maintenance periods among public shipyards and private shipyards that may also be available to help minimize attack submarine idle time. GAO's analysis found that while the public shipyards have operated above capacity for the past several years, attack submarine maintenance delays are getting longer and idle time is increasing. The Navy may have options to mitigate this idle time and maintenance delays by leveraging private shipyard capacity for repair work. But the Navy has not completed a comprehensive business case analysis as recommended by Department of Defense guidelines to inform maintenance workload allocation across public and private shipyards. Navy leadership has acknowledged that they need to be more proactive in leveraging potential private shipyard repair capacity. Without addressing this challenge, the Navy risks continued expenditure of operating and support funding to crew, maintain, and support attack submarines that provide no operational capability because they are delayed in getting into and out of maintenance. GAO recommends that the Navy conduct a business case analysis to inform maintenance workload allocation across public and private shipyards. The Department of Defense concurred with GAO's recommendation.

prompt_front: You are given two reports by the government agency.



Question: Write a one-page summary of the report 2.

Report 1: B anks play a critical role in the United States economy, channeling money from savers to borrowers and facilitating productive investment  Among other things, banks provide loans to businesses, help individuals finance purchases of cars and homes, and offer services such as checking and savings accounts, debit cards, and ATMs  In addition to occupying a central role in the American economy, the banking industry is a perennial subject of political interest  While the nature of lawmakers' interest in bank regulation has shifted over time, most bank regulations fall into one of three general categories  First, banks must abide by a variety of safety-and-soundness requirements designed to minimize the risk of their failure and maintain macroeconomic stability  Second, banks must comply with consumer protection rules intended to deter abusive practices and provide consumers with complete information about financial products and services  Third, banks are subject to various reporting , recordkeeping , and anti-money laundering requirements designed to assist law enforcement in investigating criminal activity  The substantive content of these requirements remains the subject of intense debate  However, the division of regulatory authority over banks between the federal government and the states plays a key role in shaping that content  In some cases, federal law displaces (or "preempts") state bank regulations  In other cases, states are permitted to supplement federal regulations with different, sometimes stricter requirements  Because of its substantive implications, federal preemption has recently become a "flashpoint" in debates surrounding bank regulation, with one commentator observing that preemption is "[t]he issue at the center of most disputes between state and federal banking regulators " This report provides an overview of banking preemption  First, the report discusses general principles of federal preemption  Second, the report provides a brief history of the American "dual banking system " Third, the report discusses the Supreme Court's decision in Barnett Bank of Marion County, N A  v  Nelson , where the Court held that federal law preempts state laws that "significantly interfere" with the powers of national banks  Fourth, the report reviews two Supreme Court decisions concerning the extent to which states may exercise "visitorial powers" over national banks  Fifth, the report discusses the Office of the Comptroller of the Currency's (OCC's) preemption rules and provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act concerning the preemption of state consumer protection laws  Finally, the report outlines a number of current issues in banking preemption, including (1) the extent to which non-banks can benefit from federal preemption of state usury laws, (2) the OCC's decision to grant special purpose national bank charters to financial technology (FinTech) companies, and (3) proposals to provide legal protections to banks serving marijuana businesses that comply with state law  The doctrine of federal preemption is grounded in the Supremacy Clause of Article VI of the Constitution, which provides that "the Laws of the United States       shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding " The Supreme Court has explained that "under the Supremacy Clause       any state law, however clearly within a State's acknowledged power, which interferes with or is contrary to federal law, must yield " The Court has identified two general ways in which federal law can preempt state law  Federal law can expressly preempt state law when a federal statute or regulation contains explicit preemptive language—that is, where a clause in the relevant federal statute or regulation explicitly provides that federal law displaces certain categories of state law  The Employee Retirement Income Security Act, for example, contains a preemption clause providing that some of the Act's provisions "shall supersede any and all State laws insofar as they may now or hereafter relate to any [regulated] employee benefit plan " Federal law can also impliedly preempt state law "when Congress' command is       implicitly contained in" the relevant federal law's "structure and purpose " The Supreme Court has identified two subcategories of implied preemption  First, "field preemption" occurs "where [a] scheme of federal regulation is so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it " Second, "conflict preemption" occurs where "compliance with both federal and state regulations is a physical impossibility," or where state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress " In Crosby v  National Foreign Trade Council , for example, the Court held that a federal law imposing sanctions on Burma impliedly preempted a Massachusetts law that prohibited state entities from doing business with Burma  The Court reached this conclusion after determining that the state statute posed an obstacle to the federal statute's purposes of (1) providing the President with "flexible" authority over sanctions policy, (2) limiting economic pressure against the Burmese government to the specific range reflected in the federal statute, and (3) granting the President the ability to speak for the country "with one voice " Some federal banking laws expressly preempt state law  Section 521 of the Depository Institutions Deregulation and Monetary Control Act of 1980, for example, expressly grants federally insured state banks the right to charge the highest interest rate allowed by the states in which they are located, even when lending to borrowers in other states with stricter usury laws  Other federal banking laws impliedly preempt state law  Specifically, the Supreme Court has held that the National Bank Act impliedly preempts state laws that "significantly interfere" with the powers of national banks  However, all banking preemption issues are heavily influenced by the regulatory architecture surrounding the banking system  The following section of the report accordingly outlines the development of the American "dual banking system " Disputes over the federal government's role in regulating the financial system have been a feature of American politics since the country's inception  In 1791, Congress approved the creation of the First Bank of the United States over fierce opposition from many of the nation's leaders, including James Madison and Thomas Jefferson  In addition to accepting deposits and making loans to the public, the First Bank acted as the federal government's fiscal agent by collecting tax revenues, securing the government's funds, and paying the government's bills  The First Bank's proponents argued that the Bank would facilitate economic growth by extending credit to private businesses and establishing a uniform national currency in the form of the Bank's notes  By contrast, the First Bank's critics argued that the concentration of financial power in a single federal institution threatened state sovereignty and undermined the operations of state-chartered banks  This debate culminated in a victory for the First Bank's critics when Congress refused to renew the Bank's charter by a single vote in 1811  But disputes over the federal government's role in the banking system did not end with the demise of the First Bank  After the War of 1812 generated significant economic turmoil, Congress chartered the Second Bank of the United States for a twenty-year term in 1816  The Second Bank performed many of the same functions as the First Bank and attracted similar criticism, eventually becoming the target of populist fury led by President Andrew Jackson  In 1832, President Jackson vetoed legislation to extend the Second Bank's charter, leading to its demise in 1836  After the Second Bank's charter expired, bank regulation was wholly entrusted to the states  Inspired by the Jacksonian attack on concentrated economic power, a number of states dispensed with the requirement that banks obtain a charter via a special act of the state legislature  Instead, banks in these states could obtain charters from state banking authorities as long as they met certain general conditions  During this "Free Banking era," the country lacked a uniform national currency and relied instead on notes issued by state banks, which circulated at a discount from their face value that reflected the issuing bank's location and credit quality  In some states, so-called "wildcat banks" in remote areas issued notes back by minimal specie (gold or silver), assuming that noteholders would be unlikely to travel long distances to redeem them  These wildcat banks failed at a far higher rate than their urban rivals  Economic historians continue to debate the merits and drawbacks of the Free Banking era  According to the standard narrative, Free Banking was largely a failure, resulting in a large number of bank failures, financial instability, and inefficiencies that accompanied a heterogeneous currency  However, a number of revisionist scholars have questioned this assessment, arguing that despite the high rate of bank failures during the Free Banking Era, total losses to bank noteholders during the period were in fact relatively small  Whatever its virtues and vices, the Free Banking Era came to an end during the Civil War  After the Treasury Department's efforts to finance the war by borrowing from Northern banks led to a shortage in specie, Congress enacted the National Currency Act in 1863 and the National Bank Act (NBA) in 1864  Under the Acts, banks were offered the opportunity to apply for a national charter from the newly created OCC, creating a "dual banking system" in which both the federal government and the states chartered and regulated banks  As a condition of obtaining a national charter, the Acts required banks to purchase United States government bonds, giving the federal government a new source of revenue to fight the war  Once national banks deposited those bonds with the federal government, they were allowed to issue national banknotes up to 90 percent of the market value of their bonds  These national banknotes functioned as a uniform national currency and gave the federal government significant control over the nation's money supply  The creation of a dual banking system was not intended by the proponents of the NBA, who assumed that all state-chartered banks would convert to national charters  In order to incentivize state-chartered banks to make this switch, Congress enacted a ten percent tax on state banknotes in 1865  But the tax did not accomplish its intended purpose  While the number of state-chartered banks fell significantly after the enactment of the NBA, state banks eventually skirted this tax by issuing paper checks in lieu of banknotes  And in the late 19th century, state banking authorities contributed to this regulatory arbitrage by offering their banks laxer regulations than the OCC  As a result, state-chartered banks have outnumbered national banks since 1895, and the dual banking system has survived to this day  Under the contemporary dual banking system, the OCC serves as the primary regulator of national banks and has broad powers to regulate their organization, examination, and operations  Section 24 of the NBA grants national banks a number of powers, including: (1) "discounting and negotiating promissory notes, drafts, bills of exchange, and other evidences of debt," (2) "receiving deposits," (3) "buying and selling exchange, coin, and bullion," (4) "loaning money on personal security," and (5) "obtaining, issuing, and circulating notes " Section 24 also grants national banks "all such incidental powers as shall be necessary to carry on the business of banking " Federal court and OCC decisions have identified roughly 80 activities that fall within the "incidental powers" of national banks, including the ability to broker annuities charge customers non-interest fees  By contrast, state banking authorities are the primary regulators of state-chartered banks  While state banking laws are by no means uniform, they typically provide state-chartered banks with the power to engage in activities similar to those listed in the NBA and activities that are "incidental to the business of banking " While the OCC and state banking authorities figure prominently in the dual banking system, the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) also play important roles in the bank regulatory regime  Congress created the Federal Reserve in 1913 in response to a 1907 banking panic that highlighted the need for a "lender of last resort" to replenish banks' reserves when they experience liquidity shortfalls  Today, the Federal Reserve also conducts the nation's monetary policy, manages certain elements of the country's payment systems, and regulates bank holding companies, financial market utilities, and banks that join the Federal Reserve System (FRS)  The Federal Reserve Act requires all national banks to join the FRS and gives state banks the option of joining  The Federal Reserve accordingly serves as the principal federal regulator of state-chartered banks that become members of the FRS  The FDIC serves as the principal federal regulator of state-chartered banks that do not join the FRS  Congress created the FDIC in 1933 after a wave of bank failures generated a self-reinforcing cycle of "contagion," leading depositors to "run" from other banks and cause additional failures  In order to minimize the risk of these types of bank runs, the FDIC insures deposits at regulated institutions up to certain limits and regulates those institutions to ensure their safety and soundness  Because federal law requires national banks to obtain FDIC insurance and all states impose that same requirement on the banks they charter, the FDIC plays a key role in regulating the banking system  This complex regulatory architecture has resulted in "symbiotic system" with both state regulation of national banks and federal regulation of state banks  In the modern dual banking system, national banks are not wholly immune from generally applicable state laws, and state banks are not wholly immune from generally applicable federal laws  The Supreme Court has explained that "general state laws" concerning "the dealings and contracts of national banks" are valid as long as they do not "expressly conflict" with federal law, "frustrate the purpose for which national banks were created," or impair the ability of national banks to "discharge the duties imposed upon them" by federal law  National banks are accordingly "governed in their daily course of business far more by the laws of the State than of the nation" because their contracts, ability to acquire and transfer property, rights to collect debts, and liability to be sued for debts "are all based on State law " The OCC has attempted to synthesize the relevant case law as establishing a general principle that state regulations of national banks are valid as long as they "do not regulate the manner, content or extent of the activities authorized for national banks under federal law, but rather establish the legal infrastructure around the conduct of that business " Similarly, state-chartered banks are not wholly immune from federal law  Rather, state banks are subject to certain federal consumer protection, tax, and antidiscrimination laws, in addition to a range of Federal Reserve and FDIC regulations  A number of other legal developments have caused the regulatory treatment of national banks and state banks to converge  Beginning in the 1960s, many states passed so-called "wild card" statutes granting their banks the power to engage in any activities permitted for national banks  Statutes extending the powers of the Federal Reserve and the FDIC have also ensured competitive equality in the opposite direction  In 1980, Congress enacted legislation requiring all state-chartered banks—including those that do not join the FRS—to abide by reserve requirements set by the Federal Reserve, eliminating the competitive advantage conferred by lower state-law reserve requirements  Similarly, in 1991, Congress enacted legislation prohibiting FDIC-insured state banks from engaging as a principal in activities that are not permitted for national banks absent permission from the FDIC  Because all states require the banks they charter to obtain FDIC insurance, the legislation "had the ultimate effect of unifying the state and the federal banking systems " Finally, some federal statutes either explicitly or implicitly preempt state laws in ways that eliminate unequal regulatory treatment for national and state banks  In Marquette National Bank of Minneapolis v  First Omaha Services Corporation , the Supreme Court held that the NBA grants national banks the power to "export" the maximum interest rates allowed by their "home" states, even when lending to borrowers in other states with stricter usury laws  In that decision, the Court considered whether a national bank headquartered in Nebraska—which permitted banks to charge credit-card holders up to 18 percent interest per year on certain unpaid balances—could charge its Minnesota customers more than the 12 percent maximum interest allowable under Minnesota law  Specifically, the Court evaluated whether an NBA provision allowing national banks to charge interest rates allowed by the states "where the bank[s] [are] located" applies even when national banks extend credit to customers in other states with stricter usury laws  The Court held that the NBA provision indeed afforded national banks this power, concluding that the national bank was permitted to charge the maximum interest rate allowable under Nebraska law even when lending to Minnesota customers  Two years after the Marquette decision, Congress enacted legislation to extend the same power to federally insured state banks, preempting contrary state law and equalizing the regulatory treatment of national and state banks vis-à-vis "interest rate exportation " While the regulatory treatment of national and state banks has accordingly converged, federal preemption nevertheless confers certain unique benefits on national banks  Under the Supreme Court's decision in Barnett Bank of Marion County, N A  v  Nelson , federal laws that grant national banks the power to engage in specific activities impliedly preempt state laws that "significantly interfere" with the ability of national banks to engage in those activities  In Barnett Bank , the Court held that a federal law granting national banks the authority to sell insurance impliedly preempted a state law that prohibited banks from selling insurance, subject to certain exceptions  In reaching this conclusion, the Court explained that the state law posed an obstacle to the federal statute's purpose of granting national banks the authority to sell insurance "whether or not a State grants       similar approval " The Court inferred this purpose from the principle that "normally Congress would not want States to forbid, or to impair significantly, the exercise of a power that Congress explicitly granted " Lower courts have followed Barnett Bank 's rule that absent indications to the contrary, federal statutes and regulations that grant national banks the power to engage in specific activities preempt state laws that prohibit or "significantly interfere" with those activities  In Wells Fargo Bank of Texas N A  v  James , for example, the Fifth Circuit held that an OCC rule granting national banks the power to "charge [their] customers non-interest charges and fees" preempted a state statute prohibiting banks from charging a fee for cashing checks in certain circumstances  Similarly, in Monroe Retail, Inc  v  RBS Citizens, N A  , the Sixth Circuit held that this rule preempted state law conversion claims brought against a class of national banks based on fees they charged for processing garnishment orders  Specifically, the Sixth Circuit reasoned that under Barnett Bank , "the level of 'interference' that gives rise to preemption under the NBA is not very high," and that the relevant conversion claims "significantly interfere[d]" with national banks' ability to collect fees  Finally, the Ninth Circuit employed similar reasoning in Rose v  Chase Bank USA, N A  , where it held that an NBA provision granting national banks the power to "loan money on personal security" preempted a state statute imposing various disclosure requirements on credit card issuers  In arriving at this conclusion, the Ninth Circuit reasoned that "[w]here       Congress has explicitly granted a power to a national bank without any indication that Congress intended for that power to be subject to local restriction, Congress is presumed to have intended to preempt state laws " Federal courts have also adopted broad interpretations of an NBA provision authorizing national banks to dismiss officers "at pleasure " In Schweikert v  Bank of America , N A  , the Fourth Circuit held that this provision preempted a state law claim for wrongful discharge brought by a former officer of a national bank  Similarly, the Ninth Circuit has held that this provision preempted a claim brought by a former officer of a national bank for breach of an employment agreement, reasoning that "[a]n agreement which attempts to circumvent the complete discretion of a national bank's board of directors to terminate an officer at will is void as against [federal] public policy " Finally, in Wiersum v  U S  Bank, N A  , the Eleventh Circuit relied on Barnett Bank and the Fourth Circuit's reasoning in Schweikert to conclude that this "at pleasure" provision preempted a wrongful-termination claim brought by a former officer of a national bank under a state whistleblower statute  While federal courts have accordingly adopted expansive views of the circumstances in which state laws "significantly interfere" with national banks' powers, they have also recognized certain general limits on the preemptive scope of federal banking statutes and regulations  In Gutierrez v  Wells Fargo Bank, NA , for example, the Ninth Circuit held that federal banking regulations did not preempt a generally applicable state law prohibiting certain types of fraud  The Gutierrez litigation involved a national bank's use of a bookkeeping method known as "high-to-low" posting for debit-card transactions, whereby the bank posted large transactions to customers' accounts before small transactions  In Gutierrez , customers of the bank brought a variety of state law claims based on the theory that the bank adopted high-to-low posting for the sole purpose of maximizing the overdraft fees it could charge customers  In response, the bank argued that OCC regulations preempted the state law claims  The Ninth Circuit held that the OCC regulations preempted some, but not all, of the customers' claims  Specifically, the court held that an OCC regulation authorizing national banks to establish the method of calculating noninterest charges and fees "in [their] discretion" preempted claims premised on the theory that high-to-low posting was an unfair business practice  The court also held an OCC regulation providing that national banks may exercise their deposit-taking powers "without regard to state law limitations concerning       disclosure requirements" preempted the customers' claims that the bank failed to affirmatively disclose its use of high-to-low posting  However, the court held that federal law did not preempt claims that the bank defrauded its customers by making misleading statements about its posting method  Specifically, the court reasoned that these claims survived preemption because they were based on "a non-discriminating state law of general applicability that does not conflict with federal law, frustrate the purposes of the [NBA], or impair the efficiency of national banks to discharge their duties " In reaching this conclusion, the court rejected the argument that federal law preempted the customers' fraud claims because those claims "necessarily touche[d] on" national banks' authority to provide checking accounts  The court rejected this argument on the grounds that such an expansive preemption standard "would swallow all laws " The Ninth Circuit accordingly allowed the customers' fraud claims to proceed because they did not "significantly interfere" with national banks' ability to offer checking accounts  While the implications of Barnett Bank have been fleshed out most thoroughly in the lower federal courts, the Supreme Court has also applied that decision's reasoning in two cases concerning an NBA provision prohibiting states from exercising "visitorial powers" over national banks  In Watters v  Wachovia Bank, N A  , the Court held that this provision—together with an OCC regulation providing that national banks may conduct authorized activities through operating subsidiaries—preempted state licensing, reporting, and visitation requirements for the operating subsidiaries of national banks  Specifically, the Court reasoned that the proper inquiry in analyzing whether state law interferes with federally permitted bank activities "focuse[s] on the exercise of a national bank's powers , not on its corporate structure " The Court accordingly concluded that the operating subsidiaries of national banks should be treated "as equivalent to national banks with respect to powers exercised under federal law " And because "duplicative state examination, supervision, and regulation would significantly burden" national banks' ability to engage in authorized activities, the Court held that those same regulatory burdens also unacceptably interfere with the ability of national bank subsidiaries to engage in those activities


Report 2:  However, as discussed later in this report, Congress has abrogated Watters 's holding that states may not examine or regulate the activities of national bank subsidiaries  While the Court adopted a broad view of preemption in Watters , it cabined the preemptive effect of the relevant NBA provision two years later in Cuomo v  C learing House Association, LLC  In that decision, the Court held that this NBA provision did not preempt an information request that the New York Attorney General (NYAG) sent to several national banks  Specifically, the NYAG had sent letters to several national banks requesting nonpublic information about their lending practices in order to determine whether the banks had violated state fair lending laws  In response, a banking trade group and the OCC argued that the relevant NBA provision—together with an OCC regulation interpreting that provision to mean that "[s]tate officials may not       prosecut[e] enforcement actions" against national banks, "except in limited circumstances authorized by federal law"—preempted the information request  The Supreme Court rejected this interpretation of the NBA's visitorial powers provision, drawing a distinction between (1) "supervision," or "the right to oversee corporate affairs," which qualify as "visitorial powers," and (2) "law enforcement " Because the Court concluded that the NYAG had issued the information requests in his "law enforcement" capacity—as opposed to "acting in the role of sovereign-as-supervisor"—it held that the NBA did not preempt the requests  As the above discussion makes clear, OCC regulations have figured prominently in litigation over the preemptive scope of federal banking law  While some commentators have contended that the NBA's text and legislature history implicitly provides the OCC with the authority to promulgate preemption rules, Congress formally recognized that the OCC has such authority in the Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994 (Riegle-Neal Act)  Specifically, Section 114 of the Riegle-Neal Act provides that "[b]efore issuing any opinion letter or interpretive rule       that concludes that Federal law preempts the application to a national bank of any State law" concerning certain specified subjects, the OCC must give the public notice and an opportunity submit written comments  In the 1990s and early 2000s, the OCC exercised this authority in a number of interpretive letters and legal opinions  In these documents, the OCC took the position that federal law preempted state laws that limited the ability of national banks to: advertise; operate offices within a certain distance from state-chartered bank home offices; operate ATM machines; engage in fiduciary activities; finance automobile purchases; sell annuities; sell repossessed automobiles without an automobile dealer license; and conduct Internet auctions of certificates of deposit  In 2004, the OCC expanded upon these interpretive letters and legal opinions by issuing what one commentator has described as "sweeping" preemption rules  The OCC's 2004 preemption rules articulated a general preemption standard according to which "state laws that obstruct, impair, or condition a national bank's ability to fully exercise" its federally authorized powers "are not applicable to national banks" except "where made applicable by Federal law " This general standard accordingly expanded on Barnett Bank 's "significant interference" test in two ways  First, the OCC's 2004 standard omitted the intensifying phrase "significantly" from the Barnett Bank test  Second, the 2004 standard by its terms required that national banks be able to "fully" exercise their authorized powers—a phrase that does not appear in Barnett Bank   However, despite these facial differences with the Barnett Bank test, the OCC explained that it intended the phrase "obstruct, impair, or condition" to function "as the distillation of the various preemption constructs articulated by the Supreme Court, as recognized in Hines [ v  Davidowitz ] and Barnett Bank , and not as a replacement construct that is in any way inconsistent with those standards " Beyond this general preemption standard, the OCC's 2004 rules concluded that the NBA preempted certain categories of state laws  First, the rules provided that national banks "may make real estate loans       without regard to state law limitations concerning": licensing and registration (except for purposes of service of process); "[t]he ability of a creditor to require or obtain private mortgage insurance, insurance for other collateral, or other credit enhancements or risk mitigants, in furtherance of safe and sound banking practices"; loan-to-value ratios; terms of credit; "[t]he aggregate amount of funds that may be loaned upon the security of real estate"; escrow accounts; security property; access to and use of credit reports; disclosure and advertising; processing, origination, servicing, sale or purchase of, or investment or participation in, mortgages; disbursements and repayments; rates of interest on loans; due-on-sale clauses, with certain exceptions; and "[c]ovenants and restrictions that must be contained in a lease to qualify the leasehold as acceptable security for a real estate loan " Second, the rules provided that national banks "may make non-real estate loans without regard to state law limitations concerning" many of the same matters identified in the regulation concerning real estate lending  Finally, the rules provided that national banks "may exercise [their] deposit-taking powers without regard to state law limitations concerning": (1) abandoned and dormant accounts, (2) checking accounts, (3) disclosure requirements, (3) funds availability, (4) savings account orders of withdrawal, (5) state licensing or registration requirements (except for purposes of service of process), and (6) special purpose savings services  The OCC's 2004 rules also identified general categories of state law that the agency interpreted as surviving preemption  Specifically, the rules provided that the NBA does not preempt state laws that are consistent with federal law and involve (1) contracts, (2) torts, (3) criminal law, (4) rights to collect debts, (5) the acquisition and transfer of property, (5) taxation, (6) zoning, and, with respect to real estate lending, (7) certain homestead laws  According to the OCC's 2004 rules, such laws survive preemption so long as they "do not regulate the manner, content or extent of the activities authorized for national banks under federal law " The OCC's 2004 preemption rules proved controversial  In 2008, the United States experienced a financial crisis caused in part by reckless subprime mortgage lending and a collapse in the real estate market  In the wake of the crisis, commentators debated the role that federal preemption of state predatory lending laws played in generating the pre-2008 housing bubble  Some commentators contended that national banks played a significant role in the predatory lending that preceded the crisis, and that federal preemption "effectively gut[ted] states' ability to legislate against predatory lending practices " By contrast, others rejected the contention that preemption played a significant role in causing the crisis, arguing that national banks and their subsidiaries accounted for only a small share of subprime mortgage lending  In 2010, Congress responded to concerns over federal preemption of state consumer protection laws in Section 1044 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank)  Section 1044 provides that federal law preempts such laws only if: (A) application of a State consumer financial law would have a discriminatory effect on national banks, in comparison with the effect of the law on a bank chartered by that State; (B) in accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in [ Barnett Bank ], the State consumer financial law prevents or significantly interferes with the exercise by the national bank of its powers; and any preemption determination under this subparagraph may be made by a court, or by regulation or order of the Comptroller of the Currency on a case-by-case basis, in accordance with applicable law; or (C) the State consumer financial law is preempted by a provision of Federal law other than title 62 of the Revised Statutes  Beyond this general preemption standard, Section 1044 contains a number of other provisions narrowing the OCC's preemption authority  First, Section 1044 provides that courts reviewing OCC preemption determinations should accord those determinations only Skidmore deference, under which courts assess an agency's interpretation of a statute "depending upon the thoroughness evident in the consideration of the agency, the validity of the reasoning of the agency, the consistency with other valid determinations made by the agency, and other factors which the court finds persuasive and relevant to its decision " Before the enactment of Dodd-Frank, certain courts had afforded OCC preemption determinations a more permissive form of deference known as Chevron deference, according to which courts defer to agency interpretations as long as they are reasonable  Section 1044 accordingly requires that courts take a less deferential posture toward OCC preemption determinations  Second, Section 1044 provides that no OCC preemption determination "shall be interpreted or applied so as to invalidate, or otherwise declare inapplicable to a national bank, the provision of the State consumer financial law, unless substantial evidence, made on the record of the proceeding, supports the specific finding regarding the preemption of such provision in accordance with the legal standard" established by Barnett Bank   This "substantial evidence" standard is often used in cases involving the Administrative Procedure Act, which provides that courts shall hold unlawful an agency's formal rules and other determinations made on the basis of a formal hearing when they are "unsupported by substantial evidence " The Supreme Court has explained that "substantial evidence" entails "more than a mere scintilla" of evidence, and requires "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion " Third, Section 1044 provides that the OCC shall (1) "periodically conduct a review, through public notice and comment, of each determination that a provision of Federal law preempts a State consumer financial law," (2) "conduct such review within the 5-year period after prescribing or otherwise issuing such determination, and at least once during each 5-year period thereafter," and (3) "[a]fter conducting the review of, and inspecting the comments made on, the determination,       publish a notice in the Federal Register announcing the decision to continue or rescind the determination or a proposal to amend the determination " Fourth, Section 1044 provides that the OCC must submit to Congress a report addressing its decision to continue, rescind, or propose an amendment to any preemption determination  Finally, Section 1044 abrogated the Supreme Court's decision in Watters , providing that "State consumer financial laws" apply to the subsidiaries and affiliates of national banks "to the same extent" that they apply "to any person, corporation, or other entity subject to such State law " After Dodd-Frank's enactment, commentators debated the meaning of Section 1044's general preemption standard  As discussed, Section 1044's preemption standard provides that federal law preempts "State consumer financial laws" that "prevent[] or significantly interfere[]" with the powers of national banks "in accordance with the legal standard for preemption in the decision of the Supreme Court of the United States in [ Barnett Bank ] " Some commentators have argued that this language simply codifies the Barnett Bank standard and was not intended to significantly modify pre-existing law  However, others have argued that Section 1044 was intended to pare back the OCC's 2004 preemption rules, which interpreted the NBA as preempting state laws that "obstruct, impair, or condition" the powers of national banks  According to this latter group of commentators, the OCC's "obstruct, impair, or condition" standard was more expansive than Barnett Bank 's "significant interference" test, meaning that a codification of that test would modify pre-existing law  In 2011, the OCC responded to the enactment of Section 1044 by issuing a notice of proposed rulemaking that reaffirmed its pre-Dodd-Frank preemption decisions while deleting the "obstruct, impair, or condition" language from its preemption rules  While the OCC acknowledged that this language "created ambiguities and misunderstandings regarding the preemption standard that it was intended to convey," it maintained that the specific preemption determinations reflected in its 2004 rules were nevertheless consistent with Barnett Bank   The OCC accordingly proposed reaffirming the specific preemption determinations in its 2004 rules while removing the "obstruct, impair, or condition" standard  The OCC's proposal quickly generated controversy  After the OCC issued the notice, the Treasury Department's General Counsel wrote a letter to the Comptroller of the Currency arguing that the OCC's proposed rule was "inconsistent with the plain language of [Dodd-Frank] and its legislative history " Specifically, the Treasury Department argued that interpreting Section 1044 as making no significant changes to existing preemption law conflicted with "basic canons of statutory construction" and legislative history indicating that the provision was intended to "revise[]" the OCC's preemption standard  Senator Carl Levin also expressed disagreement with the proposed rules in a letter to the Comptroller, arguing that "[i]f [Congress] had wanted to leave the OCC's purported federal preemptive powers unchanged, [it] could have engaged in a very simple exercise—do nothing " Other Senators expressed support for the OCC's proposed rules  Senators Tom Carper and Mark Warner criticized the Treasury Department's letter for "ignor[ing] the clear legislative history indicating that [Section 1044] is intended to codify the Barnett case " In responding to the Treasury Department's argument that Section 1044 was intended to "revise" the OCC's preemption standards, Senators Carper and Warner argued that the OCC's proposed rules would effectuate the contemplated revision by removing the potentially troublesome "obstruct, impair, or condition" language from the agency's 2004 rules  The OCC ultimately agreed with Senators Carper and Warner  In July 2011, the OCC published a final regulation revising its preemption rules  In the final rule, the OCC concluded that "the Dodd-Frank Act does not create a new, stand-alone 'prevents or significantly interferes' preemption standard, but, rather, incorporates the conflict preemption legal standard and the reasoning that supports it in the Supreme Court's Barnett decision " The OCC's 2011 rule also deleted the phrase "obstruct, impair, or condition" from the relevant preemption standard, noting that preemption determinations based "exclusively" on that language "would need to be reexamined to ascertain whether the determination is consistent with the Barnett conflict preemption analysis " However, the rule indicated that the OCC had not identified any preemption determinations that in fact relied "exclusively" on the relevant language  The final rule also noted that all future OCC preemption determinations would be subject to Section 1044's requirement concerning "case-by-case" determinations  Since the enactment of Dodd-Frank, a number of courts have interpreted Section 1044 as codifying the Barnett Bank standard  Some courts have accordingly concluded that Barnett Bank demarcates the boundaries of the OCC's 2011 preemption rules, reasoning that those rules do not preempt any state laws that would survive preemption under the Barnett Bank test  One court has also addressed the appropriate level of judicial deference towards the OCC's 2011 preemption determinations  As discussed, Section 1044 provides that courts "shall" assess OCC preemption determinations "depending upon the thoroughness evident in the consideration of the agency, the validity of the reasoning of the agency, the consistency with other valid determinations made by the agency, and other factors which the court finds persuasive and relevant to its decision"—a standard commonly known as " Skidmore deference " In 2018, the Ninth Circuit concluded that the OCC's 2011 preemption determinations are "entitled to little, if any, deference" under Skidmore   Specifically, the Ninth Circuit reasoned that because the OCC's 2011 preemption determinations represent the agency's "articulation of its legal analysis" under Barnett Bank (as opposed to being grounded in expert factual findings), those determinations would not warrant significant deference even in the absence of Section 1044  Whether other federal circuit courts will follow the Ninth Circuit in affording minimal deference to the OCC's 2011 preemption rules remains to be seen  As the debates over Section 1044 of Dodd-Frank make clear, a number of banking preemption issues remain the subject of active debate  This final section of the report discusses three additional current issues involving banking preemption and related federalism questions  A number of recent judicial decisions have generated debate over the circumstances in which non-bank financial companies can benefit from banks' ability to "export" the maximum interest rates of their "home" states  As discussed, the Supreme Court has held that national banks may charge any interest rate allowable under the laws of their home states even when lending to borrowers in other states with stricter usury laws  After this decision, Congress extended the power to export maximum interest rates to federally insured state banks  Recently, courts have grappled with whether this exportation power extends to non-bank financial companies and debt collectors that purchase loans originated by federally insured banks  That is, courts have addressed the circumstances in which loans originated by federally insured banks remain subject to the usury laws of the banks' home states even when the loans are (1) made to borrowers in other states with stricter usury laws, and (2) subsequently purchased by non-banks, which do not possess the exportation power when they originate loans themselves  A number of courts have concluded that in certain contexts, a loan that is non-usurious when originated remains non-usurious irrespective of the identity of its subsequent purchasers—a principle that some commentators have labeled the "valid when made" doctrine  However, in 2015, the Second Circuit rejected the application of this rule in Madden v  Midland Funding , holding that non-bank debt collectors that had purchased debt originated by a national bank could not benefit from the bank's exportation power  In Madden , a New York resident brought a putative class action under New York usury law against debt collectors that had purchased her credit card debt from a Delaware-based national bank  In response, the debt collectors argued that federal law preempted the New York usury claims because the credit card debt had been originated by a Delaware-based national bank and was not usurious under Delaware law  The Second Circuit rejected this argument, reasoning that the application of New York usury law to the debt collectors did not "significantly interfere" with the national bank's powers under Barnett Bank   Specifically, the court reasoned that because the debt collectors were not national banks and were not acting "on behalf of" a national bank, the New York usury claims did not interfere with the national bank's power to export the maximum interest rates of its home state  The Second Circuit's decision in Madden has generated significant debate  In an amicus brief supporting the debt collectors' petition for re-hearing before the Second Circuit, industry groups argued that the decision threatened to seriously disrupt lending markets  Specifically, these groups argued that the court's decision would "significantly impair" banks' ability to manage their risk by selling loans in secondary credit markets—a result that would ultimately inhibit their capacity to originate loans  Similarly, in an amicus brief submitted to the Supreme Court, the OCC and the Office of the Solicitor General (OSG) argued that the Second Circuit's decision was "incorrect," reasoning that "[a] national bank's federal right to charge interest up to the rate allowed by [the NBA] would be significantly impaired if [a] national bank's assignee could not continue to charge that rate " In response, the plaintiff in Madden argued that the Second Circuit's decision is unlikely to significantly affect credit markets  Specifically, the Madden plaintiff argued that the court's decision will not disrupt credit markets because non-banks that purchase loans originated by banks retain the right to collect the balances of those loans within applicable state law usury limits  While the Second Circuit ultimately denied the debt collectors' petition for re-hearing and the Supreme Court denied their petition for a writ of certiorari, the Madden decision has attracted congressional interest  The Financial CHOICE Act—comprehensive regulatory reform legislation that passed the House of Representatives in June 2017 but did not become law—would have codified the "valid when made" doctrine and abrogated Madden   A more limited bill directed solely at codifying the "valid when made" doctrine ( H R  3299 ) also passed the House in February 2018 but did not become law  Echoing the arguments made by industry groups, the bill's sponsor contended that the Second Circuit's decision will harm credit markets and impede financial innovation  By contrast, the bill's critics argued that it would facilitate predatory lending by allowing non-banks to evade state usury laws  These proposals have not been re-introduced in the 116th Congress  In a number of cases involving the scope of the exportation doctrine, non-bank financial companies have played a more active role in the origination process than the debt collectors in Madden   Specifically, a number of these cases have involved arrangements in which a non-bank financial company solicits borrowers, directs a partner bank to originate a high-interest loan, and purchases the loan from the bank shortly after origination in order to benefit from the bank's exportation power  Some courts have held that non-banks employing these so-called "rent-a-charter" schemes are not eligible for federal preemption, reasoning that preemption depends on a transaction's economic realities rather than its formal characteristics  Specifically, these courts have concluded that non-banks do not assume their partner banks' exportation power when the economic realities surrounding a transaction indicate that the non-banks are the "true lenders " According to this "true lender" doctrine, non-banks that have established these types of relationships qualify as the "true lenders" when they possess the "predominant economic interest" in the relevant loans when the loans are originated  In these circumstances, some courts have concluded that the non-banks are not entitled to the benefits of federal preemption  Like the Second Circuit's decision in Madden , these "true lender" decisions have attracted Congress's attention  In the 115th Congress, H R  4439 would have abrogated this line of decisions by making clear that a loan's originator is always the "true lender" for purposes of the exportation doctrine  The bill's supporters argued that the "true lender" decisions threaten to undermine partnerships between banks and FinTech companies —a broad category of businesses offering digital financial products that some commentators have hailed for their innovative potential  The bill's opponents, by contrast, contended that the legislation would allow non-banks to circumvent state usury laws and questioned the value of bank-FinTech partnerships designed with that purpose in mind  H R  4439 was referred to the House Committee on Financial Services during the 115th Congress but has not been re-introduced in the 116th Congress  Congress is not alone in considering whether to extend the benefits of federal preemption to FinTech companies  In July 2018, the OCC issued a Policy Statement announcing that it will begin accepting applications for "special purpose national bank charters" (SPNB charters) from FinTech companies that are engaged in "the business of banking" but do not take deposits  In the Policy Statement, the OCC explained that the NBA provides it "broad authority" to grant national bank charters to institutions that engage in the "business of banking"—a category that includes paying checks and lending money  The OCC accordingly concluded that it has the statutory authority to grant national bank charters to FinTech companies that engage in these core banking activities  According to the OCC, SPNB charters will help foster responsible innovation and promote regulatory consistency between FinTech companies and traditional banks  The OCC further explained that it will use its existing chartering standards and procedures to evaluate applications for SPNB charters, and that FinTech companies that receive such charters "will be supervised like similarly situated national banks, including with respect to capital, liquidity, and risk management " While the OCC touted the ability of SPNB charters to "level the playing field with regulated institutions" without explicitly mentioning federal preemption, commentators have observed that preemption represents "the central benefit" offered by such charters  The OCC's decision to accept applications for national bank charters from FinTech companies has generated debate  Critics of the policy have contended that FinTech companies' interest in such charters "is virtually entirely about avoiding state consumer protection laws," and that "[f]ederal chartering should not be a move to eviscerate" such laws  State regulators have also filed lawsuits challenging the OCC's authority to charter non-depository FinTech companies  In the spring of 2017, the Conference of State Bank Supervisors (CSBS) and the New York Department of Financial Services (NYDFS) responded to an early OCC proposal to charter FinTech companies by filing suits in the U S  District Court for the District of Columbia and the U S  District Court for the Southern District of New York, respectively  The CSBS and NYDFS made substantially similar claims, arguing that (1) the NBA does not give the OCC the authority to charter non-depository institutions, (2) the Administrative Procedure Act requires the OCC to follow notice-and-comment rulemaking procedures before issuing SPNBs, (3) the OCC's decision was arbitrary and capricious, and (4) the OCC's decision violated the Tenth Amendment by invading states' sovereign powers  Both district courts dismissed the lawsuits on jurisdictional grounds, reasoning that the organizations failed to identify any imminent injuries to their members and that the case was not ripe for resolution because the OCC had not issued any SPNBs  However, after the OCC issued its Policy Statement in July 2018, both organizations filed new lawsuits that remain pending  Policymakers have also turned their attention to how federal law affects traditional banks' responses to changes in state law—namely, state-level efforts to legalize marijuana  While a number of states have legalized marijuana for medical or recreational use, federal law criminalizes the drug's sale, distribution, and possession, in addition to the aiding and abetting of such activities  Federal law also criminalizes money laundering, making it unlawful to: conduct a financial transaction involving the proceeds of a specified unlawful activity —a category that includes the sale or distribution of marijuana—"knowing that the transaction is designed       to conceal or disguise the nature, the location, the source, the ownership or the control of the proceeds       or to avoid a transaction reporting requirement under State or Federal law"; or knowingly engage in a monetary transaction in criminally derived property of a value greater than $10,000 that is derived from specified unlawful activity   Finally, the Bank Secrecy Act (BSA) and associated regulations require that financial institutions report illegal and suspicious activities to the Financial Crimes Enforcement Network (FinCEN) and maintain programs designed to prevent money laundering  Federal banking regulators have broad powers to discipline banks for violations of these laws  The Federal Reserve regularly conducts examinations of member banks that include evaluations of BSA compliance, and the FDIC has the authority to terminate a bank's deposit insurance for violations of law  Because of marijuana's status under federal law, many banks have refused to serve marijuana businesses even when those businesses operate in compliance with state law  While some small banks have offered accounts to marijuana businesses, an estimated 70 percent of marijuana businesses remain unbanked  Because of this inability to access the banking system, many marijuana businesses reportedly operate entirely in cash, raising concerns about tax collection and public safety  These perceived problems have attracted congressional interest  In March 2019, the House Committee on Financial Services approved legislation intended to minimize the legal risks associated with banking the marijuana industry  The proposed bill— H R  1595 , the SAFE Banking Act of 2019—would create a "safe harbor" under which federal banking regulators could not take various adverse actions against depository institutions for serving marijuana businesses that comply with applicable state laws ("cannabis-related legitimate businesses")  The legislation would also provide that for purposes of federal anti-money laundering law, the proceeds from transactions conducted by cannabis-related legitimate businesses shall not qualify as the proceeds of unlawful activity "solely because the transaction[s] [were] conducted by a cannabis-related legitimate business " Finally, H R  1595 would require FinCEN to issue guidance concerning the preparation of suspicious activity reports for cannabis-related legitimate businesses that is "consistent with the purpose and intent" of the bill and "does not significantly inhibit the provision of financial services" to cannabis-related legitimate businesses  Variations on some of the SAFE Banking Act's provisions have been incorporated into broader marijuana-related legislation  The Responsibly Addressing Marijuana Policy Gap Act of 2019 ( S  421 and H R  1119 ) would eliminate federal criminal penalties for persons who engage in various marijuana-related activities in compliance with state law and create a "safe harbor" from adverse regulatory action for depository institutions that serve marijuana businesses  Another Senate bill— S  1028 , the STATES Act—would provide that the Controlled Substances Act's (CSA's) marijuana-related provisions do not apply to persons acting in compliance with state marijuana regulation s, subject to certain exceptions  While the bill does not have the type of "safe harbor" for depository institutions in H R  1595 , S  421 , or H R  1119 , it contains a "Rule of Construction" clarifying that conduct in compliance with the legislation shall not serve as the basis for federal money laundering charges or criminal forfeiture under the CSA 

ground_truth: The current and planned size and composition of the Navy, the rate of Navy ship procurement, and the prospective affordability of the Navy's shipbuilding plans have been oversight matters for the congressional defense committees for many years. On December 15, 2016, the Navy released a force-structure goal that calls for achieving and maintaining a fleet of 355 ships of certain types and numbers. The 355-ship force-level goal is the result of a Force Structure Assessment (FSA) conducted by the Navy in 2016. The Navy states that a new FSA is now underway as the successor to the 2016 FSA. This new FSA, Navy officials state, is to be completed by the end of 2019. Navy officials have suggested in their public remarks that this new FSA could change the 355-ship figure, the planned mix of ships, or both. The Navy's proposed FY2020 budget requests funding for the procurement of 12 new ships, including one Gerald R. Ford (CVN-78) class aircraft carrier, three Virginia-class attack submarines, three DDG-51 class Aegis destroyers, one FFG(X) frigate, two John Lewis (TAO-205) class oilers, and two TATS towing, salvage, and rescue ships. The Navy's FY2020 five-year (FY2020-FY2024) shipbuilding plan includes 55 new ships, or an average of 11 new ships per year. The Navy's FY2020 30-year (FY2020-FY2049) shipbuilding plan includes 304 ships, or an average of about 10 per year. If the FY2020 30-year shipbuilding plan is implemented, the Navy projects that it will achieve a total of 355 ships by FY2034. This is about 20 years sooner than projected under the Navy's FY2019 30-year shipbuilding plan—an acceleration primarily due to a decision announced by the Navy in April 2018, after the FY2019 plan was submitted, to increase the service lives of all DDG-51 destroyers to 45 years. Although the Navy projects that the fleet will reach a total of 355 ships in FY2034, the Navy in that year and subsequent years will not match the composition called for in the FY2016 FSA. One issue for Congress is whether the new FSA that the Navy is conducting will change the 355-ship force-level objective established by the 2016 FSA and, if so, in what ways. Another oversight issue for Congress concerns the prospective affordability of the Navy's 30-year shipbuilding plan. Decisions that Congress makes regarding Navy force structure and shipbuilding plans can substantially affect Navy capabilities and funding requirements and the U.S. shipbuilding industrial base.