U.S. GOVERNMENT PUBLISHING OFFICE

34–496 PDF WASHINGTON : 2019

S. HRG. 115–452 

OPTIONS AND CONSIDERATIONS FOR 

ACHIEVING A 355–SHIP NAVY FROM 

FORMER REAGAN ADMINISTRATION OFFICIALS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON SEAPOWER 

OF THE

COMMITTEE ON ARMED SERVICES 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

JULY 18, 2017 

Printed for the use of the Committee on Armed Services 

( 

Available via the World Wide Web: http://www.govinfo.gov/ 

COMMITTEE ON ARMED SERVICES 

JOHN MCCAIN, Arizona, Chairman 

JAMES M. INHOFE, Oklahoma 

ROGER F. WICKER, Mississippi 

DEB FISCHER, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

JONI ERNST, Iowa 

THOM TILLIS, North Carolina 

DAN SULLIVAN, Alaska 

DAVID PERDUE, Georgia 

TED CRUZ, Texas 

LINDSEY GRAHAM, South Carolina 

BEN SASSE, Nebraska 

LUTHER STRANGE, Alabama 

JACK REED, Rhode Island 

BILL NELSON, Florida 

CLAIRE MCCASKILL, Missouri 

JEANNE SHAHEEN, New Hampshire 

KIRSTEN E. GILLIBRAND, New York 

RICHARD BLUMENTHAL, Connecticut 

JOE DONNELLY, Indiana 

MAZIE K. HIRONO, Hawaii 

TIM KAINE, Virginia 

ANGUS S. KING, JR., Maine 

MARTIN HEINRICH, New Mexico 

ELIZABETH WARREN, Massachusetts 

GARY C. PETERS, Michigan 

CHRISTIAN D. BROSE, Staff Director 

ELIZABETH L. KING, Minority Staff Director 

SUBCOMMITTEE ON SEAPOWER

ROGER F. WICKER, Mississippi, Chairman 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

THOM TILLIS, North Carolina 

DAN SULLIVAN, Alaska 

LUTHER STRANGE, Alabama 

MAZIE K. HIRONO, Hawaii 

JEANNE SHAHEEN, New Hampshire 

RICHARD BLUMENTHAL, Connecticut 

TIM KAINE, Virginia 

ANGUS S. KING, JR., Maine 

(II)

C O N T E N T S 

JULY 18, 2017 

Page 

OPTIONS AND CONSIDERATIONS FOR ACHIEVING A 355–SHIP NAVY FROM

FORMER REAGAN ADMINISTRATION OFFICIALS .................................................... 1 

Lehman, Honorable John F., Jr., Former Secretary of the Navy ........................ 3 

Pyatt, Honorable Everett, Former Assistant Secretary of the Navy for Shipbuilding and Logistics .......................................................................................... 8 

Schneider, Honorable William J., Jr., Former Associate Director for National 

Security and International Affairs at the Office of Management and 

Budget ................................................................................................................... 14 

(III)

(1) 

OPTIONS AND CONSIDERATIONS FOR 

ACHIEVING A 355-SHIP NAVY FROM 

FORMER REAGAN ADMINISTRATION OFFICIALS 

TUESDAY, JULY 18, 2017 

U.S. SENATE, 

SUBCOMMITTEE ON SEAPOWER, 

COMMITTEE ON ARMED SERVICES, 

Washington, DC. 

The subcommittee met, pursuant to notice, at 4:01 p.m. in Room 

SR–222, Russell Senate Office Building, Senator Roger Wicker 

(chairman of the subcommittee) presiding. 

Committee members present: Senators Wicker, Rounds, Tillis, 

Strange, Hirono, Shaheen, Blumenthal, Kaine, and King. 

OPENING STATEMENT OF SENATOR ROGER WICKER 

Senator WICKER. Thank you very much. This Senate Armed 

Services Subcommittee hearing on Seapower will come to order. 

We convene this afternoon to receive testimony on achieving the 

355-ship Navy, and we receive testimony today from former 

Reagan Administration officials. We welcome our three distinguished witnesses: the Honorable John F. Lehman, Jr., former Secretary of the Navy; the Honorable Everett Pyatt, former Assistant 

Secretary of the Navy for Shipbuilding and Logistics; and the Honorable William J. Schneider, Jr., former Associate Director for National Security and International Affairs at the Office of Management and Budget. 

Welcome, gentlemen. 

Our subcommittee is grateful for your decades of service and 

your willingness to appear before us. Your experience and counsel 

will be invaluable as we consider options for increasing the size of 

our Navy and protecting our nation’s security. 

Today’s hearing represents another step in this subcommittee’s 

effort to examine the Navy’s 355-ship requirement. We have received a classified briefing on the basis for the requirement. We 

have heard from shipbuilders and suppliers, held a shipbuilding 

hearing with Navy officials, and will meet with naval analysts next 

week. Our actions this year will set a firm foundation for an intelligent and responsible expansion of the fleet in the future. To that 

end, I would note that all members of the subcommittee have cosponsored the SHIPS Act, legislation which would codify the Navy’s 

requirement for 355 ships as U.S. policy. The full committee has 

adopted the SHIPS Act into the Fiscal Year 2018 NDAA, and our 

House counterparts have done the same. 

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The Seapower title also authorizes additional funding for five 

ships above the Administration’s budget request while maintaining 

effective cost control measures on existing programs. 

The Navy’s 355-ship requirement has received plenty of attention 

on Capitol Hill and in the press. It is important to put the desire 

to grow the fleet into proper historical context. The United States 

has embarked on naval buildups roughly every 30 years over the 

past century—in the 1910s, then in the 1940s and 1950s, and most 

recently in the 1980s—in response to emerging threats, technological development, and the condition of the fleet. This is now our 

time to lead. 

Our task is to increase the fleet’s size from 276 ships today to 

355 ships as soon as practicable, an increase of 79 ships. In comparison, during the 1980s’ buildup, the Navy added 75 ships to the 

fleet in eight years, from fiscal year 1981 to fiscal year 1988, according to the Congressional Research Service. 

I would stress that we need the optimal mix of ships. Tomorrow’s 

Navy should not replicate the one we had in the past or the one 

we have today. In other words, this subcommittee has no intention 

of funding shipbuilding only for the sake of shipbuilding. Our witnesses took the 1980s buildup from a vision to reality, proving the 

naysayers wrong all the way. The 1980s’ buildup was based on a 

comprehensive naval strategy, thorough analysis, and sound acquisition practices. Our witnesses thought outside the box. Thank you. 

For example, they supported outfitting our ships with cuttingedge technology, but also brought battleships out of mothballs. Perhaps most important, once the Navy established the famous 600- 

ship requirement, the senior leadership, uniformed and civilian, 

rallied around it. 

The subcommittee is interested in lessons learned and insights 

for how best to proceed with the task at hand today. Specifically, 

I hope our witnesses will discuss the importance of strategy for embarking on a buildup and the necessity of getting buy-in from the 

White House, Secretary of Defense, the Congressional defense committees, and industry; clear lines of authority and accountability 

for executing the shipbuilding program; fixed-price contracts and 

competition; delivering ships at or below cost, on schedule, with the 

promised capability; evaluating options related to existing ships, 

including extending service lives and reactivating decommissioned 

ships; and maximizing the use of the commercial industrial base. 

It should be an interesting discussion, gentlemen. We’re delighted to have you. I look forward to your testimony. 

Now I recognize my dear friend, the Ranking Member, Senator 

Hirono. 

STATEMENT OF SENATOR MAZIE HIRONO 

Senator HIRONO. Thank you, Mr. Chairman. 

I join the Chairman in welcoming our witnesses to the hearing 

this afternoon. 

Last week we had a tragic loss of life for the Marine Corps and 

the Navy family with the crash of the KC–130 tanker in Mississippi. My thoughts, our thoughts, are with the families of the 15 

Marines and one sailor who lost their lives in service to our country. 

3 

The investigation into this tragedy should guide our decisions 

going forward to prevent these kinds of tragedies and to provide 

support for our sailors and Marines. 

Over the past weeks we have held hearings on the future of a 

number of Navy and Marine Corps programs. A major subject in 

these hearings has been the Chief of Naval Operations’ new force 

structure assessment that points to having a fleet of some 355 

ships. That would amount to an increase of some 80 ships from the 

current fleet inventory. Today’s witnesses will tell us about President Reagan’s expansion of the Navy that increased the fleet by 

roughly 70 ships by the end of the 1980s decade. 

We hope to gain some insight from our witnesses today on what 

happened during the 1980s to increase the Navy’s fleet. Reviewing 

that history may help us deal more effectively with the challenges 

facing us today. Our task before us is daunting enough, but we 

have to recognize that the Budget Control Act is looming in the 

background and will have to be dealt with. While that will not necessarily raise the debt ceiling, it also imposed Draconian caps on 

defense and non-defense programs and included sequestration. Sequestration or automatic, across-the-board cuts was included as a 

worst-case scenario to motivate Congress. The mindless cuts to defense and non-defense programs were meant to be so bad that Congress would be forced to find an alternative way forward. We all 

learned a lesson in 2013 when sequester was allowed to take effect. 

In fact, some in our industrial base are still working through the 

aftermath of that fiasco. Yet here we are, six years later, living 

with sequestration still not eliminated. 

Funding for critical programs, both defense and non-defense, is 

not an either/or proposition. One thing is clear: if we do not deal 

with the Budget Control Act, we will end up cutting, not increasing, the size of the Navy. We all know the ongoing negative impact 

of sequestration and yet have not mustered the political will to do 

something about it. My hope is that at some point, sooner at this 

point rather than later, we will come together to pay more than lip 

service to the need to end sequestration. 

So I look forward to working with the Chairman and other committee members to balance the needs of our military with critical 

domestic programs. The Navy has not submitted a plan for 

ramping up to meet this new 355-ship goal. Presumably, we will 

begin to see that plan with the submission of the fiscal year 2019 

budget. I look forward to hearing your testimony this afternoon and 

learning from your out-of-the-box experiences in the 1980s. 

Thank you very much, Mr. Chairman. 

Senator WICKER. Thank you, Senator Hirono. 

Dr. Lehman, we begin with you. You are recognized. 

STATEMENT OF HONORABLE JOHN F. LEHMAN, JR., FORMER 

SECRETARY OF THE NAVY 

Dr. LEHMAN. Well, thank you very much. It’s a real pleasure, an 

honor to be back in these precincts. I once did an analysis—or I 

didn’t, but my office did an analysis of my calendar for the six 

years I was Secretary, and I spent a third of my time up here on 

the Hill, and much of that in this very room; and, of course, a lot 

4 

of other private time with members and staff. It’s really a pleasure 

to be back. 

It’s not just remembering my schedule and the amount of time 

we spent up here, but it’s often said that history doesn’t repeat 

itself, but it sure rhymes. Those days when we started the quest 

for the 600-ship Navy have many close parallels to today. 

Then we were at the end of a period of what was called then the 

‘‘peace dividend’’ after Vietnam. Budgets were cut. The Navy was 

really in serious condition. The shipbuilding program was moribund, and everything was over running. As a result, as a nation 

we were losing our ability to deter the disturbers of the peace. 

The same situation with very different actors is true today. Our 

diplomacy is weak around the world because our deterrence is 

weak. Diplomacy is the shadow cast by military power and naval 

power, and our adversaries and our allies perceive today that we 

cannot always be counted on. As a result, those who wish us ill are 

taking advantage of that and pressing the envelope of risk in North 

Korea, in the South China Sea, in the Arabian Gulf, the Persian 

Gulf. 

So it’s time to rebuild the Navy and restore the credibility of our 

diplomacy around the world by deterrence. It’s my wish today that 

the three of us can help persuade you that not only is the time urgently here and now, but that it can be done, and it can be done 

affordably, and it can be done quickly. 

But before I talk about that, I’d like to request, Mr. Chairman, 

if my full statement could be submitted for the record? 

Senator WICKER. Without objection, it will be submitted. 

Dr. LEHMAN. Well, thank you. 

So, it all starts, as I think this subcommittee recognizes, with 

strategy. We have, as a nation, been ad-hocing our strategy. We’ve 

not really had a strategy for the last two decades, and it’s time to 

restore a strategy. One of the strengths we had back in the 1980s 

was that starting around 1977–1978, there was a bipartisan effort 

to really reach agreement on a strategy. It was led by the great 

Scoop Jackson and the great John Tower and former chairman of 

this subcommittee and committee, full committee, John Warner, 

who I was honored to see just left the room, and Chairman Stennis. 

This was a true bipartisan effort to really see if there was a clear 

consensus on what should be done to rebuild our Navy, and to 

what size, and to what makeup, and under what strategy. 

As a result there was a coherent, well-thought-through and, indeed, budgeted strategy that drove actually the election debate, 

and it was truly bipartisan. At the time, the Republicans were the 

minority, and it was led, as I say, by Senator Stennis and Senator 

Jackson. But with the help of the Navy Department and other outside thinkers, there was a truly fully-thought-through and budgeted strategy to pursue to rebuild the Navy. 

My distinguished colleague to my left, Bill Schneider, was responsible for the work in putting that budget together in the two 

years before the Reagan Administration and oversaw its execution 

in the years after, and he was a very tough comptroller of our currency in the Navy. It was Ev Pyatt—these were two of the greatest 

leaders of that time that really carried out this strategy. Ev was 

responsible for executing and for putting the discipline into the acVerDate Nov 24 2008 07:55 Feb 04, 2019 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6633 C:\USERS\WR47328\DESKTOP\34496.TXT WILDA
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quisition process and the procurement and the building of the 

ships, and the reactivating of the ships, which was a very important part of the strategy. 

From the way we put together the strategy—again, I keep emphasizing it was a bipartisan strategy that started with our vital 

interests. We’re not going to be the world’s policemen. We’re not 

going to go looking for dragons to destroy. We are going to defend 

our vital interests, the vital chokepoints, the Malacca Straits, the 

Sunda Straits, our ability to maintain deterrence in Europe, our 

ability to keep hostile forces from getting control of the oil in the 

Persian Gulf, et cetera. From that, we derived the size and makeup 

of the force that would be necessary to prevail, and hence to deter, 

in each of those geographic areas. 

From that came the number 600. The number 600 was not just 

pulled out of a hat. It was logically deduced from our vital interests, and that’s what must be done today, and is done and 

underlies the 355-ship Navy. It’s a different era. It’s different technology. The adversaries are much different. It was a bipolar world. 

It’s a multi-polar world today, but the same principles apply. 

It’s important that that number, 355, be solidified and understood. It wasn’t just we picked it out of a hat, rolled the dice, came 

up with that number. This number has been developed by a lot of 

hard work by real operators who have had to deal and look across 

the waters at their adversaries just a few hundred yards away and 

see the tasks that they have. So this should not be treated lightly. 

It has to be incorporated in all of the actions taken here in this 

committee. 

It also, if the number is solid and agreed by this committee, then 

it can be bid out competitively with the assurance in the shipbuilders world that, yes, this is a serious commitment, and so we 

will put the capital into tooling up to build these additional ships. 

If that number wanders around or it’s not logically based, then you 

will not have that economic payoff. 

So this was what underlay our strategy when we launched it. It 

depended on the clear consensus on the nature of the strategy. 

That strategy understood and supported in a bipartisan basis in 

Congress, in the White House, in the Office of Management and 

Budget, in the Pentagon, and, of course, in the uniformed Navy and 

Marine Corps as well, and that we had. 

As a result, the choices made in ships tradeoffs, we would not 

sacrifice readiness and sustainability. These have to be done simultaneously. You can’t say—it’s a nostrum to say that first we’ve got 

to take care of the readiness, then we’ll worry about expanding the 

fleet. It can’t be done that way. It’s got to be done simultaneously. 

In fact, each reinforces the other. So that allows sensible tradeoffs 

to be made. 

I hope that you do have time to deal with the procurement side 

of this because one of the reasons we succeeded in building the 

600-ship Navy—we got to 594—was because we put discipline in 

from the beginning. No contract could be let for production or ship 

construction without the design being complete, and then once it is 

let, it’s in production, that you protect the contractors from the constant change orders and changing of minds and requirements that 

6 

goes on, particularly in the post-Goldwater/Nichols bureaucracy, 

impinging on those contracts. 

You’ve got to freeze the design once it’s complete. When the technology changes, you introduce it in block upgrades. That allows you 

to compete on a firm fixed-price basis without the contractors worrying that they’re going to be constantly pulled around in every different direction by change orders. It requires a continuing discipline and oversight by this committee to see that the disciplines 

of fixed price, of competition and production are met. 

Well, I think we ought to—I can’t wait for your questions. Thank 

you. 

[The prepared statement of Mr. Lehman follows:] 

PREPARED STATEMENT BY JOHN F. LEHMAN, JR. 

Good afternoon Mr. Chairman, Ranking Member and members of the Committee. 

It is a pleasure to be here to describe the events that made the 1980s Navy buildup possible, both in planning and execution. My purpose here today is to recommend 

to you that it is time for another such naval buildup and to try to convince you that 

it can be done affordably and rapidly. 

To begin with, the successful building of the 600 Ship Navy of the ‘80s was based 

on a coherent global National Strategy and its integral naval component; something 

that has been absent for the last twenty-five years. 

Since World War II it has been rare to find major changes of direction in American national security policy. The first of these changes took place in the years after 

the war when optimism for world peace was replaced by the Iron Curtain, NATO, 

and the policy of Containment of a militant Soviet Union. 

Another sea-change took place in 1981, when a bi-partisan majority emerged to 

adopt a more activist pushback against Soviet aggression and Iranian terror. The 

new strategy was backed up by a major expansion of American military power. 

At the center of the new strategy was the U.S. Navy. To carry out this global forward strategy the Navy and Marine force structure had to be expanded rapidly to 

600 ships including 15 carrier battle groups with 14 Active and 2 Reserve carrier 

air wings, four surface action groups built around four battleships, Marine amphibious shipping sufficient for 50,000 marines, 100 attack submarines, 100 frigates, 137 

cruisers and destroyers and more than 30 ballistic missile submarines. Of equal importance was a massive program of global forward naval exercises to demonstrate 

the power of NATO to command the seas and surround, attack and defeat any attempt by the Soviet Forces to attack NATO in central Europe. 

We believed at the time that 90% of the deterrent power of this buildup could be 

achieved in the first year. This was done by publicly declaring and explaining the 

strategy, especially its naval component, and taking actions that left no doubt 

among friend and foe that it would be achieved. Those actions were to submit a revised Defense budget to Congress that fully funded the buildup; a program to reactivate four battleships and modernize frigates and destroyers, commission into the 

USN, four ultra-modern destroyers built in Mississippi ordered and paid for by Iran, 

extend the lives of four carriers through a SLEP program, re-open two aircraft production lines and increase the procurement of others. 

Implementation was the next step. It was clear that long term success of the plan 

depended on controlling cost and building the fleet on schedule. At that time, full 

acquisition authority and responsibility rested with the Secretary of the Navy, the 

CNO and the Commandant. 

We knew that affordability was the major challenge. Others believed that the task 

was impossible within the time frame. Yet the 600 ship Navy was nearly complete 

when the Soviet Union collapsed. Key to achieving this end was a clear focus on 

ship affordability recognizing that budgets were limited and a high/low, new/old mix 

of ships was necessary to satisfy military needs and required force levels. 

Even with the substantially increased budget we knew that success depended 

upon maximum use of fixed price competition which required design stability, firm 

control of design changes and planned block upgrades over system life. These principles were implemented in a competitive procurement environment giving maximum incentive to contractors to lower costs rather than justify the highest costs 

possible in a negotiated procurement. If real competition had not used, (as it is not 

commonly used today,) then program completion would have been impossible. Reliance on competition also preserved and expanded the industrial base. 

7 

My first procurement action as secretary was to recruit George Sawyer, a very 

successful engineering CEO with extensive experienced in the private sector and the 

Navy as a former nuclear qualified submarine officer. We then recruited Ev Pyatt, 

a career civil servant with top level experience in R&D, force planning and acquisition policy. He had been Principal Deputy assistant secretary for logistics in the 

prior administration overseeing production and logistics. The two combined to provide the leadership necessary to get the system moving. George concentrated on activating battleships, invented the two carrier acquisition strategy and dual source 

annual competition in submarines and surface ships. Ev developed a plan to acquire 

12 prepositioning ships for the Marines and 5 tankers. These were built with commercial specifications rather than military specifications at one fifth the cost of producing them under Defense Acquisition Regulations. Funds saved in that program 

were used to build additional combatant ships. They developed the plan to bring 

competition into the sole source cruiser program, accelerating completion and saving 

hundreds of millions. This also provided shipyard capacity to start the DDG–51 program originally planned for 23 ships, but the success has raised total production to 

over 60 ships. 

Equally important in immediately improving deterrence was sending a NATO 

fleet of 83 ships including three carriers north to exercise in the Norwegian and 

Barents Seas adjacent to the Soviet Union only 7 months after the new administration was inaugurated. These exercises were then carried out annually in the Atlantic, Pacific, Mediterranean and Arctic theaters with tactics and numbers increased 

and improved with lessons learned each year. 

At first, the Soviets were aghast at this new United States Navy and NATO strategy, and then soon tried to react with increasing vigor. But as more and more ships, 

aircraft and technology joined the American fleet it became clear to the Soviet Navy 

that they could not cope. After NATO’s Ocean Safari exercises in 1986, confounded 

and humiliated the Soviet air and naval defenses with United States carriers now 

able to operate with impunity inside Norwegian fjords, the Soviet General Staff informed the Politburo that the budget of the Northern Fleet and Air Force must be 

trebled if they were to be able to defend the homeland. Many have seen this as the 

point of collapse of Soviet will. After beggaring their economy to achieve the dream 

of military superiority they now found themselves worse off than ever. 

The forward strategy and maritime supremacy that had been asserted and built 

since 1981, led by the President and supported by a bi-partisan Congress had been 

vindicated. Along with the modernization and increase in NATO land and air forces, 

ten years of aggressive global forward naval operations had convinced the Soviet 

leadership that they could not defend their strategic assets and their homeland 

without impossibly large increases in spending. That fact had removed the political 

power of the Soviet military, and created the political opportunity for strong leaders 

like Gorbachev and Yeltsin to pursue Perestroika and Glasnost and to seize the opportunity to negotiate an end to the Cold War with President George Bush and his 

Secretary of State Jim Baker. 

On December 8, 1991, The Soviet Union was dissolved and the Cold War was 

over. There were many factors that brought about this momentous threshold in History; the reforms and leadership of President Ronald Reagan, Margaret Thatcher 

and Mikhail Gorbachev, were major factors. But the fundamental shift in the naval 

balance and re-assertion of the power of geography was decisive and created the environment in which Western diplomacy could prevail and bring an end to the Cold 

War. 

LESSONS FROM THE 1980S THAT APPLY TODAY

One of the consequences of the U.S. maritime program in the 1980s was it gave 

the President (and his successors) many more options to respond to intense security 

crises than would have been the case if Reagan tried to conduct his foreign policy 

(that was aimed at upending six decades of murderous Soviet rule rather than containing it) with his two predecessors’ flaccid defense program and budget. 

The consequences of a quarter century of the bipartisan neglect of our defense 

posture had deeply eroded our ability to deter disturbers of the peace. The situation 

today is similar. Our adversaries actively seek to take advantage of our weakness. 

We are for instance currently being held at bay by one of the poorest nations on 

earth. The President’s diplomatic power is deeply diminished by a navy stretched 

too thin and woefully underfunded. The President should have the option to prevent 

North Korea from launching any ballistic missiles that don’t return to earth on its 

territory. He should have the option to maintain a carrier Battle Group in the Yellow Sea and Sea of Japan with a suitable number Aegis ships that could prevent 

North Korean ballistic missile launches in the boost/ascent phase. 

8 

To move rapidly to restore that essential capability to deter our enemies: 

1. We must have a strategy with a strong naval component. 

2. Attack the enormous bureaucratic bloat that can streamline processes and save 

tens of billions of dollars. 

3. The procurement reforms enacted in the last two NDAAs must be implemented 

4. The SecNav , CNO and Commandant must be given the authority and held accountable for Procurement execution 

5. They must have firm control of all design changes in production. 

6. No program should be put into production until the design is completed. 

7. Fixed-price competition for production programs should be the rule. 

8. Early retired frigates, cruisers and logistic ships should be re-activated with 

essential upgrades 

9. The 1980s program for build/convert and charter for non-combatant logistics 

ships should be re-started. 

There are of course other very important issues that need to be addressed including readiness, personnel policies, zero-tolerance, political correctness, compensation, 

and reserves. All of them however can be resolved by good leadership. 

The experience of the 1980s demonstrated that 90 percent of the benefits from a 

program to restore American command of the seas and naval supremacy can be 

reaped immediately. Our adversaries will be forced to trim their sails. As John 

McCain famously said ‘‘Russia is a gas-station with an economy the size of Denmark.’’ They know that they cannot challenge a rebuilt U.S. Fleet with their professional but very small one-carrier Navy. The Chinese are at least a decade away 

from matching American naval and air capabilities, and more likely, can never do 

so. American diplomacy, again backed with naval and military superiority will instantly regain credibility. 

Senator WICKER. Well, thank you very much for your testimony. 

I think, Mr. Pyatt, Mr. Secretary, we have you next. So proceed 

in your own fashion, sir. 

STATEMENT OF HONORABLE EVERETT PYATT, FORMER ASSISTANT SECRETARY OF THE NAVY FOR SHIPBUILDING AND 

LOGISTICS 

Mr. PYATT. I guess, in kind of relating here, he was the architect 

and I was the garage mechanic. 

But I’d like to talk to you about some of the details that caused 

success and caused failure. 

He’s right on discipline in the system. It loves to make changes, 

loves to award a cost-plus contract to get going, even though the 

design is not done, and invariably it’s a disaster, and you’ve seen 

that on what you’ve done on the CVN–78 and the way you followed 

it and tried to lead it and corral it into something that has a long 

way to go. 

One of the fundamental things that I see is that over the last period of time you’re talking about until now, the average cost of 

ships and cost of dollars, the program has increased from $1.6 billion per ship to $2.3 billion. This is caused by technological things. 

It’s caused by business activity being a very low rate, so overhead 

doesn’t get amortized over such a large basis. This is what the 

management has to work on to make an affordable program to 

bring to the Congress. 

It’s a lot of details involved, but one of the ones that you have 

to worry about is incremental funding, invariably a disaster. Incremental funding was abolished in the 1950s or 1960s because it was 

impossible to control the cost of ships. It’s been basically adhered 

to since then, with the exception of the CVN–78, the DDG–1000, 

and the LCS, which have all gotten into serious trouble. It takes 

away the discipline needed to manage. 

9 

Senator SHAHEEN. Mr. Chairman, may we ask the witness to define incremental funding? 

Mr. PYATT. Yes. Incremental funding—full funding, let’s start 

there. Full funding means that when you authorize and appropriate a ship, you give them all the money necessary to complete 

that ship. There may be and usually is a small amount of long lead 

money that buys engines and things like that. But when you authorize and appropriate a ship, it should be full funded. That’s been 

a successful program. Every ship we built was full funded, including two carriers and Tridents. It’s not an impossible task. What it 

really says is, executive department, this is all the money you’re 

getting, you’d better live with it. I think that’s a very important 

thing to control the cost of the Navy. 

But it also allowed us to make some savings and, as I mentioned 

in the testimony, which I’d like to be included in the record, if I 

may, sir—— 

Senator WICKER. Your testimony will be included. 

Mr. PYATT. Thank you. 

It allowed us to set up the competition. The contractors knew 

what was there, and it just—it’s important. 

I put in here a little side commentary that ships aren’t the only 

thing having the disease of excessive cost growth. Airplanes—in 

fact, one of the four studies recommended not building more carriers until you get enough airplanes to put on them. It’s not quite 

that bad, but not far off. So it’s something to think about. 

But the most important aspect of what we did was our people. 

Navy was blessed with a strong technological and business group 

at that time. It was partially destroyed in the 1990s and is slowly 

being rebuilt. So one of the things that whoever does this has to 

worry about is developing and maintaining, both in uniform and in 

civilians, the skill of a knowledgeable buyer. Everybody can turn 

out 600-page respect for a handgun, but it takes somebody to realize there’s an essential way to buy a handgun. 

So that’s what I would say, and I would also add on to that, 

there’s a person called a contracting officer. Most people don’t have 

any idea who that is, but it is the only person who can obligate the 

government. We can talk all we want to, but until that person 

signs on the line, it’s not an obligation. You need to develop him 

and support him. This is, again, from the garage mechanic’s point 

of view. 

From this committee in particular, the program could use a little 

positive support. You’ve had some successes, the P–8 program, the 

DDG–51 program, which I’d note that the GAO still calls it an 

overrun. I call it a success because they started out with 23 and 

wound up with 63. That’s a successful program, and that’s what 

this committee should reinforce and encourage. 

So again, I’d summarize it and say that all programs are not 

typified by the LCS and CVN–78. You know a lot about the CVN– 

78, and while I was waiting today I just discovered there’s another 

$700 million buried in the post-delivery costs for reasons I don’t 

understand. But the R&D shouldn’t be that much. It’s $400 million 

in R&D for a ship that’s been delivered. 

There’s another issue on carriers that’s coming up. I’m talking 

about the future now. These are the things I think you will need 

10 

to consider in the future. Another issue is coming up regarding the 

use of a small carrier. That’s been a long-time issue, and there’s 

lots of reasons for a smaller carrier, but the study that was done, 

to me, ignored the most obvious answer, which is a stripped down, 

basic Ford, get rid of a lot of the excessive stuff that’s not necessary, because when you go to a carrier, the place that really determines what you need is the maintenance deck. There you see 

the airplanes that are being worked on, and particularly now, with 

many types and models, and probably expanded, the fellows who 

run that deck are going to need space, and I’m not sure a small 

carrier provides it. It’s a worthwhile study, and I hope it gets continued. 

The SSBN, early in its design phases, plenty of time for things 

to go wrong, also get corrected. I think it’s probably the most competent technical team in the government, and I would expect success, but things are never easy. 

The attack submarine program, running very smoothly right 

now. The risks coming up involve the addition of the Virginia module and what turbulence it may bring. 

Another problem with the submarine that I only talked about a 

little bit, and I’m sure this is heresy amongst many, is something 

smaller than the Virginia class. They’re now at $2.5 to $2.7 billion, 

and I’m not really sure that all those capabilities are really needed 

for the missions of the future, since many of the missions require 

much less capability. 

You might want to look at what I call a submarine frigate, a 

smaller ship, a little less money, but I don’t think we’re going to 

get to the force levels and within the budget you’re talking about 

with a submarine. 

Senator WICKER. Where can we look at one? 

Mr. PYATT. You can’t. Look at the idea is what I said, should 

have said. I misspoke. 

Senator WICKER. No. No, you didn’t misspeak. I just wondered if 

that concept existed anywhere on the face of the earth. 

Mr. PYATT. Right here. 

Senator WICKER. Okay. 

Mr. PYATT. This is a small part of the face of the earth. 

[Laughter.] 

Mr. PYATT. DDG–51 Phase III, that’s a scary program to me. I 

think the idea of doing it as a change order based on the basic ship 

was a good idea, but there’s a lot of places where it could still go 

wrong, and I’m particularly worried about the radar, and it’s the 

plan to deliver it on time for a radar that hasn’t been developed 

yet. There are some problems built in there. 

This committee has been very supportive and very imaginative 

in pushing a new frigate. We need a real frigate in the Navy. We 

need an ASW frigate. The Navy just started in the evolution of a 

design. It’s got a long way to go yet. The last version of it, even 

though it’s an ASW ship, did not include ASW weapons, so there’s 

some work to be done. It didn’t include VLS, a vertical launch system, which is kind of mandatory for any future weapon system. 

So, there are problems the next managers have to worry about. 

We talked about the tanker, the new tanker. I don’t know why it 

11 

cost so much. It has more than doubled in price since the ones we 

bought, and I don’t understand why. 

Now there’s a new concept of icebreakers in the defense budget. 

This is a perfect candidate for a build and charter program like we 

did on the TAKs. Build and charter rules are a little different now, 

but I don’t see why you want to spend scarce defense dollars and 

displace a destroyer or two destroyers and a submarine for building 

icebreakers. They’re necessary, I understand that. There’s got to be 

an alternative way to achieve it, and I’d like to leave that as an 

idea. 

So that concludes. We did it, and we did 17 ships that way. I did 

them. It can be done, and I think it’s a good use. 

The other thing that happened to us and building the TAKs, 

even at that time I think the Navy estimate was $400 million for 

militarized ship. We built in the commercial standards. They survived and have been used for 30 years or so, and they’ve done quite 

well for the Marines, I understand. So there’s no reason to go 

through all the defense bureaucracy to build an icebreaker. There 

are plenty of icebreakers around and, first of all, you need to involve Defense. They’re the experts in the world, and they built all 

the Russian ones. So I encourage that line of thought. 

Sir, that concludes my summary of my testimony, which was not 

much of a summary, I think. Appreciate your time, sir. 

[The prepared statement of Mr. Pyatt follows:] 

PREPARED STATEMENT BY EVERETT PYATT

ACQUIRING THE FUTURE NAVY

Good afternoon, Mr. Chairman, Ranking Member and members of the Committee. 

It is my pleasure to relate some of my experiences in rebuilding the Navy and review future opportunities. 

Both Armed Services Committee markups contain resolute support for an enlarged Navy consisting of 355 ships. Based upon the experiences described by Secretary Lehman, this is reasonable task, well within existing industrial capabilities. 

Some assurance will be needed to support limited expansion at the supplier level, 

but these can be handled within existing authorities. The current NDAA will be a 

very important part of providing necessary assurances for supplier firms. 

However, there are many risks that could destroy this posture. The most obvious 

is cost growth. As Secretary Lehman described, we placed great emphasis on controlling cost, knowing that overruns would be destructive. The same applies now, 

and even to a greater extent due to the current budget deficit issues. The expansion 

is likely to extend over a decade and involve changes in the military balance, new 

technology and production issues. Risks must be anticipated and eliminated where 

possible. 

The Navy Secretary Lehman described involved the addition of 73 ships from the 

FY 1981 fleet to reach 594 by the end of FY 1987. The plan for the future calls for 

80 ships to be added to the current 275 ship fleet. This can be achieved if funds 

are available. There is not likely to be a technical problem if current risks are managed. I will discuss these later. 

The fundamental financial problem is that the average cost of the shipbuilding 

program in FY 2017 dollars has increased from $1.6 billion in the 1980s to $2.3 billion now. Both packages include high-end carriers and ballistic missile submarines 

and are generally comparable packages. Reasons include military performance improvements, lack of competition, low facilities utilization rates, overhead growth and 

likely others. All need to be challenged as part of the program. 

Funding will determine the pace of any fleet increase. Current budget plans support a 275 ship navy. Building ten additional ships a year will add $23 billion to 

SCN funding annually, funding the 355 ship Navy in approximately 8 years. The 

exact number depends on deactivation rates and the number of ships now under 

construction. 

12 

Average funding requirement can be changed through reactivations and service 

life extension renewals. These have to be a part of any plan as it was in the 1980s. 

Reactivation should start with several of the retired FFG–7 class and outfitted to 

support current operations. 

Cost of ships has lead to more incremental funding instead of full funding. Incremental funding was eliminated in the early 1960s because it did not provide adequate cost control. That conclusion has been proved right again in the Ford-class 

and DDG 1000 programs. It is now planned for the SSBN. 

During the 1980s, there was no incremental funding except for limited long lead 

funding. Tridents were full funded, as were the two-ship carrier procurements. 

In the interest of cost control, all shipbuilding budgets should resume the policy 

of full funding. This eliminates budget caused manufacturing disruptions and allows 

smoothly running programs to proceed quickly and reduce costs. 

Production profiles must be considered to maximize production efficiency. Too 

often profiles are determined without considering production impact resulting in excessive ship cost. 

Competition is the most effective means to control cost. It brings at least a 10% 

reduction in cost and a much faster learning process. We achieved these savings. 

Each year, I would bring the savings list to the HASC Seapower Subcommittee and 

ask for another ship in the plan to be authorized. It always happened. 

The bottom line is the planned program, if completed in 8 years, will require 10 

ships above the current program, effectively doubling the funding. These 10 ships 

will cost $23 B a year more given current management attitudes. If management 

adopted a more aggressive cost control approach as outlined by Secretary Lehman, 

these costs would fall by 10–20% a year, making the program more affordable. This 

committee has defined the need for cost control with actions regarding carrier funding in FORD and now in following carriers. Cost control emphasis needs to be extended to all ship classes by demanding results from Navy leadership. Otherwise 

I fear the necessary buildup will die on the budgetary table. 

Ships are not the only category of systems with this disease. Aircraft costs have 

grown so rapidly that there are not enough aircraft to fill all air-wings. As a point 

of departure, the Navy and Marines have about 4000 aircraft. Since aircraft have 

roughly 20-year lives, annual procurement should be 200 aircraft. That has not happened for years. Consequently the force has aged much beyond the optimal 10-year 

average age. In fact, one of the studies suggested not building more carriers until 

sufficient aircraft were available to fill the decks. Major efforts need to be concentrated on aircraft cost reduction. 

People make success happen. We pay too little attention to the process of developing professional skills and rewarding success. Secretary Lehman approved and we 

implemented the Navy Materiel Professional program for military hoping to provide 

a good career path for the future. It was copied and integrated into a DoD wide program and now appears to be dead. Hopefully this concept will be restarted as a way 

to include military experience more into the acquisition process. 

He eliminated a layer of bureaucracy, the Navy Materiel Command, not needed 

for effective management. It has not returned. 

We need to be more supportive of the folks trying to make these programs happen. It is often a thankless task, but many successes happen. These are program 

managers, technical professional, business managers and an increasing number of 

lawyers needed to negotiate the procurement law quagmire. And then there are the 

people we forget who are the only ones authorized to obligate the government to a 

contract. They are contracting officers holding warrants for contracting. They must 

make the determination that the prices are ‘‘fair and reasonable’’. They deserve our 

full support in the quest for cost control. 

Acquisition could use some positive support. We know the problem programs, but 

the successes should also get prominent recognition. Results are not all bad as some 

proclaim. The P–8 program is being completed within the original estimates. The 

submarine program is within the multiyear budget. The DDG–51 program has expanded to include more than 40 ships above the original plan. For some reason, the 

GAO continues to insist this is an overrun. I call it a success. Hopefully the DDG– 

51 phase 3 will not ruin this record. 

In summary, all programs are not typified by LCS and CVN results. 

Each ship class will have its own challenges. 

This Committee knows about the CVN problems and has been the leader in focusing attention to the problem areas, starting with cost, continuing with the Navy’s 

decision to skip component shock testing and deferring ship shock testing several 

years. Given the number of weapons being designed to attack carriers, this attitude 

is unfathomable. For some reason, the Navy thinks the delay that might be caused 

if there are bad test results is unacceptable, but it is fine to hold the KENNEDY 

13 

two years awaiting a radar development that is not necessary for ship operation. 

I simply do not understand. 

Carrier costs have re-raised the issue of a smaller carrier to provide more fleet 

options. This is a worthwhile effort, but the RAND study left out an obvious alternative of a conventionally powered Ford-class ship. If the full range of air wing aircraft is envisioned, then hanger space will be very important for maintenance operations. The America-class LHA solves this problem by limiting aircraft types. The 

current NDAA plan probably does not meet the analytic requirements for a new 

start defined in last year’s NDAA. The idea should not die for procedural reasons. 

Controlling carrier cost will be a basic challenge to the whole 355 ship navy. We 

did it by building a frozen design in two ship packages, fully funded at the start. 

The Columbia-class SSBN is following a sound risk reduction process, but cost 

growth risk remains. A significant increase in the cost of this program could derail 

the whole Navy growth plan. Each description of the cost status by the program office seems to show less assurance of cost control. This program should be full funded 

after long lead items are purchased. Each Trident ship was full funded successfully. 

The attack submarine program is under a multiyear contract and proceeding 

smoothly. The addition of the Virginia payload module introduces additional risk. 

If the program is expanded to 3–4 ships a year, that expansion should be done competitively and allow each shipbuilder to build the complete ship rather than portions 

if justified by cost. 

Increasing submarine cost and tight budget suggest it is appropriate to look at 

a less costly submarine. The fleet studies suggested air independent ships, but this 

concept is being rejected. Another approach could be a smaller SSN, designed to be 

more special purpose, in other words a submarine frigate. This may be the only way 

to get to the desired submarine force level. 

The DDG–51 phase 3 program shows early signs of problems. The current program plans an on time delivery of a radar that has not completed development and 

is on a very optimistic schedule. As shown in the carrier program, the radar program office often has delays and has been an advocate of two-phase ship completion 

to mask these delays. Refusal of the designing shipyard to accept a fixed price incentive contract is a very clear indication of risk problems due to design problems 

and late government furnished equipment. Agreement by the second shipyard may 

simply be a bid low and get even on changes ploy. However, the concept of building 

a lead ship in two yards is a good one because there will be many ships built. This 

step enhances the possibility of competitive production. 

The new frigate program is in the early stages of requirement definition. Hopefully it evolves as a significant anti-submarine warfare platform, and very much 

interconnected with the distributed lethality concept. It may evolve that foreign designs can provide the basic ship to be outfitted with current U.S. combat systems. 

We did a foreign ship transfer with a mine countermeasures ship. Even though the 

design was frozen, it was not an easy task. 

A meaningful frigate is a necessity. The program will require significant leadership attention to make it happen. It is off to a good start. However it does not include a ceiling price, or provision for anti submarine weapons including ASROC and 

ship launched torpedoes and precludes the use of vertical launchers. As soon as industrial interest determined, the process should change to include funded competitive concept studies. This would allow contractors to include ideas and systems not 

in the current list. The Navy program office would then evaluate realism. Contractor teams would include a second source and must demonstrate capability to 

produce pre-outfitted modular designs. The conclusion of these studies would be 

competitive proposals to design and build a lead ship with priced options for follow 

ships. This process is a copy of the original concept formulation/contract definition 

process defined by DepSecDef Packard. 

In my opinion, this Committee deserves accolades for getting a new frigate program underway. 

An example of failure to achieve cost control is the new replenishment ship. It 

is claimed to have the same performance as the current tankers, yet costs almost 

twice as much in constant dollars. I have no idea why this is. 

The NDAA includes Coast Guard icebreakers as part of the Navy program for the 

first time. This will eliminate 2–3 destroyers or submarines from the program, given 

the budget constraints. They will not count as part of the 355 ship navy. This program is an excellent candidate for a build and charter program similar to the one 

we did for the prepositioning ships and tankers. They can be either bare boat and 

crewed by Coast Guard personnel or a mixed crew as the Navy did it. 

This concludes my testimony based on my experiences of acquiring nearly 200 

ships for the Navy in an executive role and providing staff support to several other 

ship acquisition decisions. 

14 

Thank you for your time. 

Senator WICKER. Well, we appreciate your participation. If Mr. 

Lehman was the inspirational leader and you were the garage mechanic, was Mr. Schneider the banker? 

Mr. PYATT. Yes. 

[Laughter.] 

Senator WICKER. Okay. Well, Mr. Schneider, you are recognized. 

STATEMENT OF HONORABLE WILLIAM J. SCHNEIDER, JR., 

FORMER ASSOCIATE DIRECTOR FOR NATIONAL SECURITY 

AND INTERNATIONAL AFFAIRS AT THE OFFICE OF MANAGEMENT AND BUDGET 

Mr. SCHNEIDER. Thank you very much, Mr. Chairman and distinguished members of the committee. I do also have a prepared statement. With your permission, I’d like to submit it for the record. 

Senator WICKER. Without objection, all three statements are admitted to the record. 

Mr. SCHNEIDER. Thank you again, Mr. Chairman. 

I served as Associate Director of OMB for National Security and 

International Affairs, which was the budgets of the Department of 

Defense, the intelligence community, and the Department of State. 

The function of the Office of Management and Budget, which is, as 

you know, an office of the Executive Office of the President, was 

to assure that the President’s intent was reflected in both the programs and budgets that were submitted for the President’s approval. 

As Secretary Lehman noted, there was a good deal of preparation 

that took place before the election so that the staff, including myself, had a very clear idea of the strategy that then-President 

Reagan would pursue as President. 

Second, the President was very well aware of the intersection of 

a sound economy and the ability to produce a strong national defense. At the time, although it’s hard to remember now, one of the 

most frequently used statistics was the misery index, which was 

the sum of inflation and the prevailing short-term interest rate, 

and it was over 20 percent at the time. The economy was in a chaotic state at this point, but the President recognized that you could 

not fix the economy first and work on the defense program later. 

He recognized the congruence of the two. He had a very affable 

personality that could work very well with the opposition, and he 

was very successful in working a deal with then-Speaker O’Neill 

that produced a combination of tax cuts and defense program increases that kept those forces united in the Congress. So it was a 

very effective collaboration on bringing the economy together so 

that the resources would be available for a very substantial increase in defense. 

The President recognized the centrality of maritime power in 

American national security policy, and his success in building a 

600-ship Navy was a remarkable story of a committed executive 

and legislative branch leadership. 

The rebuilding of American military power as a maritime nation 

was one of the major themes of his presidency and perhaps is 

among the most enduring legacies of his tenure. Naval power and 

presence was a primary enabler of President Reagan’s policy focus 

15 

1Senior Fellow, Hudson Institute; he formerly served as Associate Director, National Security 

and International Affairs, Office of Management and Budget, Executive Office of the President, 

and Under Secretary of State during the administration of President Ronald Reagan. 2Following the Soviet invasion of Czechoslovakia in August 1968, Soviet Communist Party 

General Secretary, Leonid Brezhnev declared at the Fifth Congress of the Polish United Workers’ Party on November 13, 1968 a doctrine to justify future intervention in States subordinate 

Continued 

of inflicting costs on the Soviet Union as they attempted to maintain their grip on Europe while projecting their power in the Western Hemisphere, Africa, and the Middle East. 

The strategy that Secretary Lehman mentioned walked away 

from the previous administration’s strategy of defense of sea control, which was mainly for protecting sea lanes, to a strategy of 

maritime supremacy, a term he often used, and delineated a defense program that was explicitly in support of those activities, and 

he had a very sharp focus on programs that should be supported 

in the defense budget to achieve that strategic aim and those that 

should be jettisoned. I was pleased to have an opportunity to be 

ruthless in getting rid of the programs that did not support the 

strategy. 

I’ll just reinforce the point that Secretary Pyatt made about 

using the discipline of full funding. That was a very important dimension of the success because it assured that the program funding was going to be there when the ships were built and that the 

leadership in the Department had the ability to enforce discipline 

on the acquisition process, and that was very valuable. 

Nevertheless, because of the efficient way in which the Department managed the contractor base, the Reagan Administration had 

32 multi-year programs in the defense program to be able to take 

advantage of the economies of scale. Looking at the 355-ship goal, 

I believe it is achievable. The acquisition discipline that Secretary 

Lehman and Secretary Pyatt referred to is certainly there and will 

help deliver the program, and there is adequate excess capacity in 

the industry to be able to make good on what is a congressional 

commitment, as well as a presidential commitment. 

So I think the opportunity is here to recover our maritime 

strength, and I would be pleased to do anything I can to contribute 

to the ability of this committee to be helpful. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Schneider follows:] 

PREPARED STATEMENT BY WILLIAM SCHNEIDER, JR. 1

FINANCING THE REAGAN 600-SHIP NAVAL MODERNIZATION PROGRAM, 1981–89

Mr. Chairman and distinguished Members of the Seapower Subcommittee: 

President Reagan recognized the centrality of maritime power in American national security policy. His successful effort in creating a 600-ship Navy to support 

it is a remarkable story of committed national Executive and Legislative branch 

leadership. More than three decades later, it is important to recall the policy context 

within which those decisions were made and how that policy context shaped his effort to rebuild U.S. military to support American diplomacy based on a policy of 

‘‘peace through strength’’. 

President Reagan was elected to office in November 1980 at an extraordinary 

juncture in our modern history. Soviet dominance of Central and Eastern Europe, 

in place since 1945, was solidified by the ruthless Soviet enforcement of the Brezhnev Doctrine. This doctrine was imposed following the invasion and suppression of 

the Prague Spring movement in 1968. Regrettably, Western resignation and acceptance of the invasion’s permanence reinforced and amplified Soviet dominance. 2 By 

16 

to the Soviet Union. He said, ‘‘When forces that are hostile to socialism try to turn the development of some socialist country towards capitalism, it becomes not only a problem of the country 

concerned, but a common problem and concern of all socialist countries.’’ The Department of 

State counseled acceptance of the Brezhnev Doctrine. For example, ‘‘Because the United States 

interpreted the Brezhnev Doctrine and the history of Soviet interventions in Europe as defending established territory, not expanding Soviet power, the aftermath of the Czech crisis also lent 

support to voices in the United States Congress calling for a reduction in United States military 

forces in Europe’’. United States Department of State, Milestones in the History of Foreign Relations, ‘‘Soviet Invasion of Czechoslovakia, 1968’’; https://history.state.gov/milestones/1961– 

1968/soviet-invasion-czechoslavkia 

1980, the Soviet Union had invaded Afghanistan and projected its military power 

through surrogate movements in the Western Hemisphere, Africa, South Asia, and 

the Middle East. The Soviet Union’s nuclear modernization surge, enabled by the 

unenforced arms control agreements of the early 1970s jeopardized the credibility 

of the U.S. nuclear deterrent, and the extended deterrent. Moreover, the hollowedout United States military force was unable to impose a credible deterrent to arrest 

the global Soviet advance. The failure of the Desert One mission to rescue United 

States diplomats taken hostage by Iranian authorities in 1979 was both a tragedy 

and a metaphor for the failed policies President Reagan ultimately reversed. 

National policy paralysis in 1980 was twinned with the consequences of extraordinarily damaging sequence of economic and financial policy choices made by the 

prior administration. When President Reagan took office, the rate of inflation was 

over 12 percent, while the prime interest rate was over 15 percent; ruinous to both 

the economy and national defense. This was not a promising fiscal environment to 

initiate a major defense recapitalization and modernization effort. 

President Reagan recognized that a vibrant economy was a precondition to being 

able to conduct an effective national security policy, but—perhaps uniquely—he also 

recognized their mutual interdependence. In 1981, rather than ‘‘fixing’’ the ailing 

economy he inherited first, he, in collaboration with House Speaker Tip O’Neill, put 

aside their considerable policy differences and converged on a policy course of action 

that permitted both economic and national security aims to be harmonized and implemented. The outcome produced by their collaboration resulted in an 18 year-long 

economic expansion, and the collapse of the former Soviet Union. 

THE REAGAN NAVAL MODERNIZATION PROGRAM IN ITS FOREIGN POLICY CONTEXT

U.S. defense modernization needs were extensive. After a prolonged period of neglect—as Secretary Weinberger put it at the outset of the Reagan administration, 

‘‘there was nothing we did not need’’. However, the President’s national security 

strategy drove the defense budget toward a narrow range of priorities that would 

underpin his specific diplomatic objectives. President Reagan reversed the policy of 

containment that had been in place since 1950.He adopted instead a United States 

national security policy to undermine the legitimacy of the Soviet State and its capacity to dominate the nations of Central and Eastern Europe while mounting a 

global threat to United States vital interests. 

The rebuilding of American military power as a maritime nation was one of the 

major themes of the Reagan Presidency, and among the most enduring legacies of 

his tenure. Naval power and presence was a primary enabler of President Reagan’s 

policy focus of inflicting costs on the Soviet Union as they attempted to maintain 

their grip on Europe while projecting their power into the Western Hemisphere, Africa, the Middle East and South Asia. The implementation of the policy was not 

simply a question of the number of ships; instead the mix of types of ships and their 

capabilities were decisive. 

The Reagan administration rejected the maritime doctrine of the Carter administration—‘‘defensive sea control’’—which focused on keeping major sea lanes open. 

Instead, the Reagan administration implemented its ‘‘maritime supremacy’’ strategy 

as President Reagan often referred to it, which shaped the characteristics and sizing 

of its associated naval recapitalization and modernization program. The Reagan administration’s maritime strategy was designed to contribute to deterrence of Soviet 

efforts to coercively threaten or use its military power against United States or allied nations’ interests. It was also designed to be global in reach based on the forward deployment of naval forces. Typically, over 100 naval combatant vessels were 

forward deployed at any given time on a world-wide basis. The maritime strategy 

was also coupled to collaborative operations with allied naval forces. 

The three-phase approach to the implementation of the maritime strategy (‘‘deterrence or the transition to war; seizing the initiative, and carrying the fight to the 

enemy’’) meant that aircraft carrier battle group expansion would be the most significant driver of President Reagan’s modernization initiative. Each carrier battle 

17 

group was composed of a tactical air wing (80–90 aircraft), 2–3 cruisers, 2–4 destroyers, 2–6 frigates, 2 fast-attack nuclear submarines, and one combat support 

ship (fleet oiler or ammunition ship). 

The capacity to project United States military power world-wide was the centerpiece of the Reagan administration’s policy objective of blocking the expansion of Soviet military power. It enabled attacking the extremities of its global reach in areas 

such as Central America, Africa, the Middle East, and South Asia while holding Soviet military power in Europe at risk. The Naval modernization program was also 

able to leverage technology developments, particularly the technologies of precision 

strike and persistent surveillance that was responsible for the eclipse of Soviet military power in Europe. The U.S. Navy’s forward presence amplified the parallel investments made in the U.S. Army’s Air-Land Battle program and the U.S. Air Force 

‘‘Follow-on-Force-Attack’’ initiative. Taken together these efforts created a powerful 

combined arms force to support the President’s national defense strategy that in 

turn underpinned his national security strategy of delegitimizing and rolling-back 

the Soviet Union’s dominance of Central and Eastern Europe while blocking the outward thrust of Soviet military power elsewhere in the world. 

THE REAGAN ADMINISTRATION’S NAVAL MODERNIZATION PROGRAM

Figure 1 below summarizes the impact on both the number and capabilities mix 

of naval combatant vessels of the Reagan naval modernization program during his 

term of office. 

Figure 1: Naval Modernization During the Reagan Administration, 

1981–89 

DATE 9/30/1981 9/30/1989 

BATTLESHIPS 0 4 

CARRIERS 12 14 

CRUISERS 27 40 

DESTROYERS 91 68 

FRIGATES 78 100 

SUBMARINES 87 99 

SSBNS 34 36 

COMMAND SHIPS 4 4 

MINE WARFARE 25 23 

PATROL 1 6 

AMPHIBIOUS 61 61 

AUXILIARY 101 137 

SURFACE WARSHIPS 196 212 

TOTAL ACTIVE 521 592 

Source: U.S. Ship Force Levels, 1986–Present 

https://www.history.navy.mil/research/histories/ship-histories/us-ship-force-levels.html 

During its eight-year term, the Reagan administration added 71 ships led by two 

additional aircraft carrier battle groups to the Fleet. The shift in the nation’s naval 

strategy from the Carter administration’s ‘‘defensive sea control’’ to the Reagan administration’s ‘‘maritime supremacy’’ transformed the contribution of the Navy to 

support for the President’s national security strategy and the administration’s core 

foreign policy objectives. 

HOW THE REAGAN NAVAL MODERNIZATION PROGRAM WAS FINANCED

In President Reagan’s first defense budget (fiscal year 1983), the U.S. Navy budget grew by 35 percent over the last Carter Administration-proposed budget (fiscal 

18 

year 1982). During the Reagan administration’s term of office, $268 billion was appropriated for the U.S. Navy procurement accounts including $100.4 billion for the 

shipbuilding account (SCN). An additional $75.7 billion was appropriated for naval 

aircraft procurement. The administration’s advocacy for its naval modernization initiative was well-received by the Congress including some additional funding provided by the Congress in fiscal year 1981, fiscal year 1982, fiscal year 1988, and 

fiscal year 1989. 

The funding for the program did not require any unique statutory concessions or 

changes in existing appropriation disciplines. U.S. Navy management changes in its 

acquisition practices in the shipbuilding program (compared to the previous practice) proved to be constructive in controlling cost. These managerial initiatives included: 

• Aligning the Navy’s modernization priorities to the administration’s national security strategy; 

• Building ships based on standard designs with limited opportunities for design 

and engineering changes; and 

• An increased focus on competitive procurement. 

The administration’s long-lead funding for pacing subsystems for naval combatant 

vessels of (e.g. nuclear reactors for aircraft carriers and submarines) stabilized naval 

shipbuilding and enabled programs to adhere to a well-defined production schedule. 

This enabled the administration to avoid the persistent cost-growth growth that adversely affected the Carter administration’s naval shipbuilding program. 

The Navy took advantage of a broader defense-wide practice of multi-year procurement. During the Reagan administration, 32 multi-year procurements (MYP) 

were initiated across all Military Departments. In some cases, the cost-reducing 

property of MYPs were magnified by integrating DOD procurements with those of 

foreign buyers to reap further economies of scale and reduce the cost of national defense. 

The success of the Reagan naval modernization program using the acquisition 

practices available at the time offers a useful basis for comparison with the experience of a subsequent administration. The administration of President George W. 

Bush faced a need to rapidly accelerate the procurement of a widely-supported special-purpose armored combat vehicle based on a South African developed ‘‘V-hull, 

the Mine-Resistant Armor Protected (MRAP) vehicle. The MRAP vehicles were urgently needed to reduce the exposure of United States and allied forces to improvised explosive devices in Afghanistan and Iraq. 

While this program was a remarkable defense-industrial success in tactical and 

operational terms (12,000 vehicles procured between 2007 and 2012), it was only 

possible with an extraordinary effort to ‘‘bend’’ to the breaking point, DOD acquisition regulations. It necessitated intense personal involvement by the Secretary of 

Defense to surmount the baroque accumulation of financial, managerial, statutory, 

and cultural barriers to the rapid acquisition of urgently needed systems in the 

DOD. It was not a model for future rapid procurement efforts. The intense regulatory barriers are well known and have been identified by several studies by the 

Defense Science Board as well as other entities. Nevertheless, they persist despite 

for an accumulation of cultural, political, and institutional reasons despite the determined effort of several Secretaries of Defense to change them. 

IMPLICATIONS FOR THE TRUMP ADMINISTRATION’S ‘‘355-SHIP’’ NAVAL MODERNIZATION

PROGRAM

The U.S. Navy’s 2016 Force Structure Assessment added 47 ships to its 2014 FSA 

for a total of 355 active ships in the Fleet. The scale of the increase compares favorably with the increase in naval vessels in the Reagan naval modernization program 

in the 1980s. The Reagan program increased the number of ships in the Fleet from 

521 in 1981 to 592 in 1989. 

The current Fleet, at the end of a slow recessional that has been underway since 

1989, has been reduced to 275 ships. This is the lowest figure in a century (245 in 

1916). There is significant excess capacity in the industrial base for surface shipbuilding—a circumstance which closely paralleled those of the 1980s. Management 

changes using precedents set during the Reagan administration shipbuilding initiative would support the delivery of the additional 80 ships to reach the desired 355 

ship Fleet. This recapitalization and modernization is within the existing industrial 

capacity of the industry. 

The submarine production capacity is more stressed, but it seems likely that the 

industry will be able to deliver one of the Columbia SSBNs (Ohio-class) and two of 

the Virginia-class fast attack submarines per year. 

19 

The administration’s 355-ship Navy goal is achievable based on modern fiscal and 

industrial experience during the Reagan administration, and an evaluation of the 

capacity of the industrial base to produce the desired number of ships and submarines. 

Perhaps the most significant unresolved issue is whether the DOD and U.S. Navy 

leadership will be able to overcome the bureaucratic, managerial, contractual, and 

oversight encumbrances that have accumulated since the 1981–89 period. These encumbrances pose the most significant risk to the ability of the administration to 

achieve its naval modernization and recapitalization objectives. 

Senator WICKER. Well, thank you very much for that interesting 

testimony, and let me just make a comment or two, and then we’re 

going to do 5-minute rounds. 

Secretary Pyatt, you said that you needed a little help back in 

the day. Well, that’s why we’re here as a subcommittee, and we’re 

unanimous on the SHIPS Act in putting this requirement as U.S. 

policy. We’re here to provide help to industry, we’re here to provide 

help to the administration and to the military in actually getting 

this done. 

Thank you, Secretary Lehman, for emphasizing bipartisanship. 

Yes, that’s a distinguished list of names you mentioned—Scoop 

Jackson, John Tower, John Warner, John Stennis. We could only 

aspire in this year, 2017 and going forward, to stand on the shoulders of those leaders. So, thank you for mentioning that. 

I would stress to you that this SHIPS Act is a bipartisan bill 

unanimously endorsed by every member of the Seapower Subcommittee. This morning we had a hearing, as a matter of fact. 

This has been our day to have hearings. This is my third Armed 

Services hearing, and there are not that many hours in the day. 

We did break for lunch at one point. 

But Senator Ernst brought up a point, and that was enlarged on 

by Senator Heinrich, and I followed him by agreeing with him 

about the seriousness of what the Russians are up to. They will do 

what they can get away with, and they target our threshold of tolerance and try to get just below what they think we’ll tolerate or 

what the end of our patience is, and they try to stay there. I was 

so gratified to hear that Senator Blumenthal picked right up on 

that. 

So really, at the subcommittee level, and at the full committee 

level, there is a great degree of bipartisanship. Yes, we were delighted to hear John Warner today come and introduce some distinguished nominees, so I would emphasize that. 

Secretary Lehman, I’ve mentioned the SHIPS Act. It’s part of 

both bills, House and Senate, and in my opinion it is a critical 

statement for laying the foundation for what we need to do over 

the next few years. Do you believe this action is necessary, Dr. 

Lehman? 

Dr. LEHMAN. Yes, I do believe it’s necessary. I believe it’s essential. I do believe it’s quite necessary. It gives the yardstick for this 

subcommittee, which we always in the Navy Department have 

viewed as our Board of Directors. We report to you, and certainly 

for the use of the troops and the ships that we build and train, the 

President is the Commander in Chief, but you are the Board of Directors. So we take the relationship very seriously. 

We also—I would hope that you would keep in mind the CEO of 

the Navy Department, the Secretary of the Navy, when he is conVerDate Nov 24 2008 07:55 Feb 04, 2019 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6602 C:\USERS\WR47328\DESKTOP\34496.TXT WILDA
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firmed by the Senate, and the CNO [Chief of Naval Operations] 

and Commandant who have been, thanks to this committee and 

the tremendous innovative reforms that have been put in place in 

the last two NDAAs [National Defense Authorization Acts] and the 

current one that you are working on, have really given back to the 

management team the responsibility, the authority, and the accountability. They know that you are going to hold them accountable and that cost overruns are not somebody else’s problem. Even 

though I had to deal, we all had to deal with a much smaller bureaucracy in the Department of Defense, and it has grown to a 

bloated extent, nevertheless you have to protect the authority that 

you are going to hold these people accountable to execute, because 

now with 40 different joint requirement committees in this vast bureaucracy, there are constant pressures on execution. 

This office wants this change, this one wants two or three more 

knots on the LCS [Litoral Combat Ship], the other joint requirements committee wants greater length, more missiles, et cetera. It 

is essential that you do hold the Secretary and the CNO and the 

Commandant responsible for this execution. If there is a 20 percent 

cost overrun that they come in and ask you for, you should be asking them, ‘‘Why the hell should we give you that extra money’’ Hold 

them accountable the way a private-sector CEO is held accountable, and that means you have to protect them from the intrusions 

of all azimuths against their ability to run the Navy Department. 

Senator WICKER. Thank you. 

Dr. Lehman, you mentioned our vital interests, and you also 

mentioned that you came up with a strategy and suggested that 

there have been decades where we didn’t really have a strategy. 

When I think of our vital interests today, I think of Russia, I think 

of Iran, I think of the Asia Pacific and China’s invigorated objective 

to dominate that area, and I think of North Korea. Am I missing 

anything in terms of our vital interests? 

Dr. LEHMAN. There are other areas that also have to be worried 

about as well. But the point that you make is a good one because, 

in fact, what President Reagan found, and all of his senior subordinates, that he reaped 90 percent of the benefits of his rebuilding 

program and his forward strategy in the first year, because as soon 

as it became clear that this was not just a passing fancy, that Congress was passing the bills, that the ships were being contracted, 

that reactivations were coming into the fleet, that readiness was 

going up, that shadow of power reinvigorated American democracy 

and gave great pause, which we now know because we have a lot 

of the intelligence from that era. Don’t think you have to wait 10 

years to get the benefit of building a 355-ship Navy. I guarantee 

you that 90 percent of it will adhere to the U.S. Government and 

to our national security by the first year after it has committed to 

it and funded it. 

So that is an important consideration, because the strategy we 

had was very simple. It was a bipolar world, and the Soviet Union 

kept a discipline on the Warsaw Pact and potential troublemakers 

like Iraq and North Korea, and today it’s a multi-polar world with 

lots of troublemakers, each requiring deterrence. We have to deter 

the North Koreans from proceeding with the course they’re on, and 

we have to deter the Russians. We don’t have to worry about the 

21 

Russians becoming the Soviet Union again. That will never happen. The fleet that they’re building today is a formidable fleet, but 

it’s tiny compared to what it was, and they do not have the economy. As your committee Chairman, John McCain, has often said, 

Russia is a gas station with a real economy the size of Denmark’s. 

So we can’t paint them as this vast potential threat. 

Senator WICKER. There go the Danes. 

[Laughter.] 

Dr. LEHMAN. But the fact is the Russians—— 

Senator WICKER. We love our Danish friends. 

Dr. LEHMAN. The northern flag of NATO would be lost without 

Denmark. They’re reliable, they modernized, and they’re essential. 

But my point is that Russia is using a much smaller economy 

than they had in the Soviet Union, so they focused it. They had at 

the end of the Cold War, they had over 1,000 ships, the Soviet 

Union, and they were building a 100,000-ton aircraft carrier. Today 

they can’t even keep one aircraft carrier, which doesn’t even have 

catapults. But they have spent their money wisely from their point 

of view, and that is in submarine warfare. They learned their lessons, what we could do to them, which brought about the end of 

the Cold War, and so they are building submarines that are formidable threats. It’s a focused threat. To deter that, we need more capability. 

The threat that we face, for instance, in the South China Sea is 

a very different one. We’re not going to go to war over the South 

China Sea at this point, but we want to be able to deter the Chinese from using their increasing naval power, which is directed at 

our naval power, to close down vital shipping lanes. 

So every one of the vital interests we have is different, but you 

don’t have to have a different Navy to deal with each of these different threats. You have to have a Navy that’s big enough to deploy 

and deal with flexibility and agility with each of these different 

kinds of geographic and military threats, and that 355-ship Navy 

is derived from that analysis. So toying with that number and saying, well, if we just build more capable ships we don’t have to build 

nearly as many, that’s baloney. The world is a big place, and if you 

don’t have the presence, you’re not going to deter. So I think your 

path is clear. 

Senator WICKER. Thank you. 

We’ll move on now to Senator Hirono. 

Senator HIRONO. Thank you, Mr. Chairman. 

Dr. Lehman, you chatted a little bit about the importance of accountability so that ships can be delivered on time and on budget, 

but accountability is often quite elusive for this committee, and the 

SAS [Senate Armed Services] Committee, to hold the appropriate 

people accountable, which is one of the reasons that Chairman 

McCain, as far as I can see, has spent so much time and focus on 

acquisition reform, so that we can build in better accountability. 

Having said that, it would appear that one of the major differences between the early 1980s’ buildup and the situation we face 

now is that the President back then could propose any top line for 

the Defense Department that he wanted without regard to the deficit, and that was true until the passage of the Gramm-RudmanVerDate Nov 24 2008 07:55 Feb 04, 2019 Jkt 000000 PO 00000 Frm 00025 Fmt 6633 Sfmt 6602 C:\USERS\WR47328\DESKTOP\34496.TXT WILDA
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Hollings Balanced Budget and Emergency Deficit Control Act of 

1985. 

For example, in 1983, when the administration added two aircraft carriers to the Navy budget, the administration increased the 

Navy top line unilaterally to account for that with no offset anywhere in DOD [Department of Defense] or to other domestic programs. 

Is it safe to infer or to say that each of you would support eliminating the budget caps in the Budget Control Act in order for the 

administration to ask for ships and other defense programs it believes are needed? 

Dr. LEHMAN. I can answer for myself. 

Senator HIRONO. We’ll start with you, Dr. Lehman. 

Dr. LEHMAN. Yes, those caps have to be increased. 

Mr. PYATT. I’ll add one yes to that. 

Mr. SCHNEIDER. I’ll also agree that the caps should be eliminated. The problem is economic growth and not caps. 

Senator HIRONO. Can you explain a little more? What do you 

mean the problem is economic growth? 

Mr. SCHNEIDER. One of the enablers for President Reagan’s decision to increase naval expenditure in fiscal year 1983 was the performance of the economy. The turn-around was remarkable. The 

tax cuts had a very profound effect on economic activity, which in 

turn generated tax revenues which enabled the President to have 

confidence that our economy was able to produce the resources necessary to sustain the modernization that had been proposed when 

he became president. 

Senator HIRONO. Thank you for that explanation. So not only— 

I think there are a lot of economists who are saying that our economy is slowing and there are indications along those lines, and at 

the same time we have the sequester to deal with. 

The Navy has raised concerns about how quickly we should ramp 

up production, and in a recent report to Congress on the possibility 

of producing additional attack submarines during the 2017 to 2030 

period the Navy said, and I’m quoting, ‘‘Producing seven additional 

VCS (Virginia Class Submarines), during the fiscal year 2017 to 

2030 timeframe, will be a challenge to the submarine industrial 

base that can be solved only if the shipyards are given sufficient 

time to address facility plans, develop their workforces, and expand 

the vendor base’’. The seven extra boats mentioned in the Navy report amounts to the equivalent of one half of a boat per year. 

Secretary Pyatt, do you believe that we could add 10 ships to the 

fiscal year 2018 budget without overwhelming the industrial base? 

Mr. PYATT. Yes. Yes, you can add 10 ships. I don’t know where 

the Navy got those numbers. They must have been controlled by 

the budget office. But that industrial base in submarines is flexible, 

it’s knowledgeable, and with the two building facilities they were 

kept there, and they could easily build three ships a year before. 

I think we got up to five one year, along with Trident being built. 

So I don’t know why the Navy said that, but I certainly do not 

agree with it. 

Dr. LEHMAN. What we found when we ramped up in both destroyers and cruisers and the submarines, that the mobilization 

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ward fund and fully fund a multi-year for the subs at three a year 

and compete them. That’s what we did with the 688s, with General 

Dynamics competing against Newport News every year for the production. Low bid, which was a real low bid because they were firm 

fixed price, because they were mature designs, low bid got two, 

high bid got one. But if they went above a certain percentage, as 

GD [General Dynamics] did once, and they bid to get rich on the 

one, we took it away from them and gave it to Newport News. 

So it’s easy to control if you have the benefit—and this was why 

it was such a wise thing to keep both sub manufacturers in business, because they could, each of them could build the Virginia 

class, and it makes a lot of sense to make them compete for that, 

and I don’t mean a beauty contest for the next 10 years. I mean 

competing every year for the two versus the one, and you can do 

the same thing with the new destroyers. You can get the benefits 

of multi-yearing if you keep competition in those five years of 

multi-yearing. That’s the way to do it. 

Senator HIRONO. I have to say that I am astounded that the 

Navy, upon whose assessments we rely in making decisions as to 

whether or not our industrial base has adequate resources, manpower, et cetera, to move us faster toward a 355-ship goal, and 

here you are saying that, from what I gather, not a problem. 

There’s such a disparity there between your position as articulated 

today and what the Navy itself is saying that I think, Mr. Chairman, I personally would need a much better understanding of what 

really realistically we can move towards. 

Thank you for that very different opinion. Did you want to add 

something? 

I am running out of time. But, Mr. Chairman, if you don’t mind? 

Mr. PYATT. I’d like to add not a problem, it’s a little too easy. It’s 

a problem, but it doesn’t stop anything. They can build up. They 

have the facilities. They’ll need to train some manpower. But any 

number you have below five a year is achievable. 

Senator HIRONO. Thank you. 

Thank you, Mr. Chairman. 

Senator WICKER. Thank you. 

Senator Strange? 

Senator STRANGE. Thank you very much, Mr. Chairman. 

It’s great to have you here today. I appreciate your service to our 

nation and the work you did to achieve an almost 600-ship Navy 

during your time. More than anyone else, I believe, you gentlemen 

understand that our industrial base is not a spigot you turn on and 

off but something that needs to be maintained and nurtured and 

thought about strategically. 

I have a couple of questions related to that, Secretary Lehman, 

maybe for you, but I would be interested in any views here. Do you 

agree that we should build ships at a rate most efficient to the taxpayer, the industrial base, the war fighters, or do you think we 

should merely keep a program on life support of procuring ships at 

a higher cost per ship, ignoring the Navy’s stated need for the 52 

small surface combatants on its way to a 355-ship fleet? I think 

you can probably tell from my question the concern that we stop 

and start and we don’t keep the hot lines going to achieve our 

goals. 

24 

Dr. LEHMAN. No, that’s true. But again, it’s not a black and 

white issue. The most important thing in the industrial base is the 

facilities that can deal with shipbuilding. The other is the human 

resources, the men and women that do the welding and the shipfitting and all of the other skills required. That is why you have 

to look at a balanced program and why many of us have been advocating reactivating ships, because there are a lot of ships that during the last 20 years have been retired very early, some of them 

with less than half of their service life. So the hulls and the HM&E 

and the propulsion systems are good. The weapon systems and sensors have to be upgraded, but this is the kind of work that can be 

dispersed, and quickly, out to the industrial base that are not 

building ships now. It doesn’t just go to the primes that have the 

huge graving docks and so forth. It can be done rapidly and can 

be done very cost efficiently, and maintain the mobilization base. 

The FIG–7s, I think there are eight or nine of those that clearly 

have that possibility. You’ve got the first flights of the Aegis cruisers that were retired at 14, 15 years of a 30-year life. They’re sitting there in the Philadelphia Navy Yard. You have Reefers that 

were retired early as the fleet shrank. They’re available for reactivation. That’s the kind of work that can be bid out competitively 

and spread and maintained, the skill base and workers and facilities. 

Senator STRANGE. Well, we have a magnificent shipyard that I’m 

familiar with, Austal, in my home state of Alabama, in Mobile. 

Mr. SCHNEIDER. Yes. 

Senator STRANGE. They do an excellent job consistently, and it’s 

part of my background way before politics, workforce development. 

I’m really proud of that group. 

Let me quickly ask you a question, and maybe it’s for you, Mr. 

Secretary, because I understand you have a little bit of helicopter 

background in your past, as well as all the other accomplishments. 

But as we progress towards this 355-ship Navy, we also have to 

look at the procurement of helicopters, the Seahawks and so forth, 

to meet the needs of the sea presence. 

So I wonder if you and perhaps others could share briefly your 

experience in dealing with that issue as you built up the Navy capabilities during your service. 

Dr. LEHMAN. Yes. We always pursued a high/low mix in helo’s 

because we never felt comfortable being reduced to one supplier, 

because no matter how much goodwill they may have, and patriotism, the effects of monopoly are inevitable, and we’ve seen that. 

We had the Sea Hawk–2 . We put that back in production for the 

frigates. Then, of course, we had the Sea Hawk–60, which is a 

great airplane. That’s got to be a major part of it. 

But the same rules apply for airplanes as for ships. They’re constant. In my civilian capacity I built the Hawaii Super Ferry, of 

great fame, right next to the first aluminum ship built by Austal 

down in Mobile, and Austal is a great shipyard. They have a very, 

very quality force. But because of the bureaucracy, the Navy averaged 75 change orders a week in that first ship because the design 

had not been finalized when the contract was let, and right next 

to it, same size ship, two hulls instead of three, we built the first 

Hawaii Super Ferry, an 800-passenger ferry, with two change orVerDate Nov 24 2008 07:55 Feb 04, 2019 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6602 C:\USERS\WR47328\DESKTOP\34496.TXT WILDA
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ders for two ships, the whole life of it. Once you sign a contract in 

the commercial world you can’t say, ‘‘Oh, we’ve got another 75 

changes we’d like to make. 

So the discipline has to be there, and it’s even worse and more 

opportunity for change—— 

Senator WICKER. Where does this have to be? Where does that 

discipline have to originate? 

Dr. LEHMAN. It’s got to originate and be held accountable with 

the Secretary of the Navy, the CNO, and the Commandant. The 

trouble today is there are 22 offices in the Office of the Secretary 

of Defense, assistant secretaries, under secretaries, deputy under 

secretaries, all who have access to his autopen. So there are change 

orders coming in from the combatant commands, from all the different joint requirements committees, and there’s only one way to 

stop that, and that is to put the chief executive in charge. If he approves a change order, he’s got to worry about where the money is 

going to come from. He can’t just say, oh, well, we’ll cost-plus it 

later. 

So I think that having absorbed the hearing and what you put 

the current nominee for the Secretary of the Navy through, rightly, 

you’ve got the kind of chief executive that is needed to carry this 

program out. So I think you have to hold him to it, because who 

else are you going to? You know, the F–35 went through 17 project 

managers. Which one are you going to fire? For what? The same 

with the carrier. 

There should be one person where the buck stops, and that’s got 

to be the service secretary. 

Senator WICKER. Thank you. 

Senator Shaheen? 

Senator SHAHEEN. Thank you, Mr. Chairman. 

Gentlemen, thank you for being here. 

I would argue, Dr. Lehman, that the problem is not our industrial capacity. It’s our commitment. This Congress could, today or 

tomorrow, this week, get rid of the sequestration caps, except 

there’s no commitment to do that. There’s no incentive. There’s no 

outcry from the public that we should do this. There is not the 

same perceived threat from nation-states that we had at the time 

of the Cold War, and that has been challenging the threat that my 

constituents perceive is from ISIS [Islamic State of Iraq and Syria], 

from terrorist attacks. They’re not worried about China and the 

fact that they’re going to have a 350-ship Navy by 2020 and the 

second biggest economy. They’re not worried about Russia and the 

fact that they’re buzzing our ships in the Black Sea and the Baltic. 

So I think the question is where is the commitment to address 

this challenge, and I don’t think we’ve seen it yet. Maybe if people, 

if the country feels threatened, we will then decide this is something that we’re going to achieve, but I don’t think we’ve got it yet. 

We can all talk about Senator Wicker’s legislation, which I signed 

on to. I think everybody on this committee signed on to it. This is 

a goal we want to accomplish. But the fundamental commitment to 

say we’re going to do this because we are a nation that’s threatened is not there, and until it gets there, we’re not going to do it. 

So I appreciate what everyone is saying, and I think you’re talking about things that we ought to try and incorporate. But I think 

26 

fundamentally, that’s the problem. So, I don’t know what your view 

is. 

Dr. LEHMAN. Well, I agree with you, Senator, on the industrial 

base. We have plenty of industrial base. That’s not the primary 

worry. The commitment is the worry. But that is the role of this 

subcommittee. Historically, the Chairman talked about the 30-year 

cycles, and he’s absolutely correct. But in the years leading up to 

those cycles, it was the subcommittees, the Seapower Subcommittee and, I guess up until the ?60s, the Naval Affairs Subcommittee, that even though they didn’t have the commitment from 

the political base, there were other things that were taking priority. If it weren’t for what Congress and the two Seapower Subcommittees did in 1936, we would have lost the war in the Pacific, 

because even though ‘‘America First’’ was ruling the political base, 

there wasn’t a constituency for mobilizing. Nevertheless, the committees that were responsible understood the absolute need for the 

threat that was coming. So they undertook the 1936 and the 1938 

shipbuilding programs in which every major capital ship that 

fought in World War II was the funding, at least the design was 

done. 

I’ve seen the same thing in my tenure on a bipartisan basis. It 

was when there was no constituency, after Vietnam, to rebuild the 

Navy. Far-seeing people like Harold Brown in both Republican and 

Democratic administrations saw that the funding was protected for 

the innovation, the new technologies that were necessary. So, in a 

sense, we reaped the benefit of that. When Reagan came in and 

said we’ve got to do it, here’s the funding, the programmatics were 

there because they’d been done by the committees, working with 

the people who understood it in the executive branch. 

So that is what you’ve got to do now. This committee, this subcommittee, has to lead. 

Senator SHAHEEN. Well, I certainly agree that there’s no strategy 

and that we need to develop one. 

Let me ask, to follow up on Senator Hirono’s question about the 

capacity of the industry to do the shipbuilding, one of the things 

we have heard from them is that they have the capacity, but the 

suppliers often can’t meet their needs. Do you have any thoughts, 

any of you have any thoughts about what we can do? 

My guess is that that has a lot to do with certainty, with the belief that if they have a contract for so many ships and they’re certain that those are going to get funded, that then the suppliers will 

come up with what they need to meet industry’s need to get those 

ships done. But right now that’s an issue, and I think it’s because 

of the uncertainty. 

Dr. LEHMAN. I’d like to hear from my colleagues here, but since 

I left the Navy, I went into the private equity business and acquiring aerospace and Marine contractors, suppliers, second-tier and 

third-tier subcontractors. We have owned about 100 of them in the 

25 years that I’ve been in this business. I can guarantee you, if we 

had the opportunity to bid on a double production, we would have 

been able to, in virtually every company that I was involved with. 

I think that’s a red herring. I think that the supplier base will respond. That’s the magic of our industrial base and our free enterVerDate Nov 24 2008 07:55 Feb 04, 2019 Jkt 000000 PO 00000 Frm 00030 Fmt 6633 Sfmt 6602 C:\USERS\WR47328\DESKTOP\34496.TXT WILDA
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prise system. So I don’t buy the argument that they’re holding everything back. 

Senator SHAHEEN. But you’re saying if the contracts are there. 

Dr. LEHMAN. Yes, if the contracts are there, sure. I mean, they’re 

not going to tool up and start hiring programmers and so forth if 

there’s no budgetary projection past the next six months. 

Senator SHAHEEN. So one of the challenges is the uncertainty 

around the budgeting process. 

Dr. LEHMAN. Absolutely. 

Mr. PYATT. May I add a couple of words? 

Senator WICKER. Yes, sir. 

Mr. PYATT. The commitment from the Congress comes first, and 

these are the things that John just described. But the budgets 

show that’s reality. The contracting process takes some time for the 

prime. They will go to their suppliers and they say, hey, we’re bidding this, it’s going to happen. The competitive enterprise will 

work, and I’d rely on it. We did, and it worked. 

Thank you. 

Mr. SCHNEIDER. Senator, if I just may add a footnote to this, one 

of the things that’s worth keeping in mind since the 1980s has 

been the military applications of information technology. While 

we’ve mostly been discussing shipbuilding, in most combatant platforms more than half the value is in things other than the structure. 

The industry here is much more accessible in terms of being able 

to get product out that’s very competitive. I think we can do very 

well with this. I’ve had the privilege for a number of years of serving on the Defense Science Board, including eight years as chairman, and the technology is remarkable that can respond much 

more rapidly than was the case in the 1980s. 

So I think with the leadership of this committee and reinforced 

by the executive branch, I think these problems can be readily 

overcome. 

Senator WICKER. Senator Tillis? 

Senator TILLIS. Thank you, Mr. Chair. 

Gentlemen, thank you for your service and for being here today. 

Mr. Pyatt, I do agree with you. You said something I think is important. As we’re trying to crack this nut and figure out how to actually get the capabilities we need, I think the icebreaker is a classic example of something that you don’t need to put $100 saddle 

on a $10 horse. You go find a good shipbuilder, probably in Finland, you figure out an economic way to create that capability. I’m 

the one that always harps on—you mentioned the 600-page RFP 

[Request for Proposal] for the next-generation handguns. Actually, 

680 pages in 10 years. 

Mr. PYATT. I got it from you, sir. 

Senator TILLIS. So I think it makes more sense to come up with 

a competitive procurement strategy to deploy that capability and 

get that out of the DOD and get it into the high C’s. That sort of 

thinking is necessary. 

I wanted to talk more about something, Dr. Lehman, you brought 

up, and it probably is something that all three of you could give 

me some feedback on. But to me, getting to 355 ships, I’m less obsessed with clicking off and high-fiving when we get to 355 than 

28 

I am getting to the capability, the ability to project power and the 

gross capability that, say, 355 ships would give us. 

So a discussion, Mr. Chair, I don’t know if we’ve had it or if it’s 

the subject of possibly a future subcommittee hearing, but one of 

the discussions would be to what extent, through reactivation, can 

you start building some of those capabilities that buy you time. Admittedly, they may be halfway through their lives, and through the 

up-fit you may be able to extend their lives. But they’re not going 

to be 30-year ships. They’re going to live for some period of time, 

but that buys us time to also move into innovations that you all 

didn’t really have the option. 

We’ve heard a number of folks come before the Senate Armed 

Services Committee and say that unmanned smaller vehicles for 

survivability, particularly if they’re not manned vehicles, could 

draw the lower unit rate so that you create more quantity, and as 

Admiral Harris has said more than once before the committee, 

quantity has a quality of its own. 

So if you were instructing us to take the lead on this and I think 

setting that target of 355 and understanding what that means in 

terms of capabilities, lethality, and projection of power, what would 

be the wisest way for us to do it so that we don’t come up and 

think we’ve got the absolute inventory for the next 20 years or 30 

years that we want to get built at the expense of maybe taking a 

leap technologically over that period of time? 

Dr. LEHMAN. Very, very good question. First, I think all of us totally support reactivating the ships that were put away early. 

They’ve got plenty of life left in them. They’re going to have to be 

modernized. They’re going to be upgraded. But you can do that 

very rapidly. 

Senator TILLIS. They’re known quantities. 

Dr. LEHMAN. They’re known quantities. 

Senator TILLIS. Most of the up-fits are relatively known quantities. We probably ought not be planning on reactivating a ship 

that’s got to be filled in two years with a radar that may take four 

years or ten years—— 

Dr. LEHMAN. Exactly. 

Senator TILLIS.—to develop. 

Dr. LEHMAN. That’s right. 

Senator TILLIS. But known quantities. So that’s one tier of capability. 

Dr. LEHMAN. Absolutely. Another tier of capability is getting control. By getting control of the change orders in the design, by ensuring that the design is complete before a production contract is 

let is another way. I always use the example of the Polaris program, which involved a new submarine, a new missile, a new 

launch system, a new guidance system, a new warhead, a new bus, 

done literally from the back of an envelope to the first deployment 

of the George Washington in four years. 

Today, the average for the ACAT 1 [Acquisition Category] and 2 

programs is 22.5 years. The reason was somebody, somebodies 

were put in charge, by name—everybody knew who Admiral Rickover was—and held accountable, given the budget at the beginning, 

held accountable, and it was delivered ahead of time, on budget. 

29 

So that collapses the time that enables you to put those systems 

out there early on. Again, the best is the enemy of the good. That’s 

why, for instance, we had 101 frigates, essential anti-submarine 

weapons for the deploying battle groups. Today we have none, literally none, none. So we’ve got to get frigates out there. We can 

do some with eight or ten of the FIG–7’s. But there are at least 

two first-class, foreign-designed frigates which could be built in this 

country. They could be done—the design can be finalized to American standards, to put American weapons systems, where applicable, on them. It’s that kind of creative thinking which, believe me, 

there are plenty of terrifically creative people in our bureaucracy. 

It’s not just the political appointees or the uniformed people. I 

mean, here we have a bureaucrat who came up with some of the 

most innovative ideas to really get things moving fast in the 

Reagan Administration. 

But again, we were able to do it because we were protected by 

this committee from all of the requirements of the defense acquisition regulations. One of the best and most innovative jobs done 

along this line which you all were part of was in the Obama Administration. They had to come up with the IED [Improvised Explosive Device] or the bomb-proof personnel carriers. The Secretary 

of Defense—Ash Carter was then the Deputy Secretary of Defense 

for Procurement, and he granted waiver after waiver after waiver 

from all this vast bureaucracy, and they were able to get it out to 

the troops. The MRAP [Mine Resistant Ambush Protected] was one 

example. But he did 30 or 40 of them by granting waivers, and 

that’s what makes things go for 22.5 years, because if you actually 

go through every hoop in the current existing defense acquisition 

regulations, it takes 5.5 years just to get approval for a requirement, just the piece of paper. 

But the Secretary of the Navy, with the Secretary of Defense, 

has the power to waive that bureaucracy sensibly, to do what common sense dictates. If you support these people in this committee, 

you can collapse the time. Time is money. So I think it’s very doable. The 355-ship Navy is doable on an affordable basis and a lot 

sooner than the current system and process is projecting. 

Senator WICKER. Dr. Lehman, should we revamp the FAR [Federal Acquisition Regulation], repeal the FAR, or just make sure 

that the leadership of the Navy understands that they have a robust waiver—— 

Dr. LEHMAN. The latter is the essential thing. You know, the 

Brits have a system, a process of legislative reform every ten years, 

so everything is grandfathered, and that’s something going forward 

that you put sunset requirements in all of these new bureaucratic 

expansions. I think in the House there are something like 22 new 

reports that are proposed to be done, which means 22 new offices 

to hire more bureaucrats to slow things down. 

Forget about the FAR. The FAR takes up 141 feet of shelf space. 

It’s not a book, not even a thick telephone book. It’s 141-feet thick. 

So trying to reform that is impossible. 

Do what you just said. Make them come and get waivers from 

the things that drive the time and eliminate the discipline and the 

accountability. 

Senator WICKER. Thank you. 

30 

Senator Kaine? 

Senator KAINE. Thank you, Mr. Chairman. 

Thanks to the witnesses. 

To pay you a compliment, it’s not often that we—like today, we 

have the nominee for the Navy secretary here in the room, and he 

is here because he wanted to hear your testimony, and that’s a 

tribute to him as well. I think it’s a tribute to a good leader to come 

and listen to the expertise of others. So, as you’ve been saying what 

we need to hold this person accountable for, I’ve been looking back 

there. 

[Laughter.] 

Senator KAINE. That’s a tribute to you, and it’s a tribute to him. 

I will associate myself with Mr. Tillis, Senator Tillis. I really like 

the commitment to 355 ships, but I am more interested in capability than the number. I don’t think we should be mechanistic 

about it. One of the things these hearings have been good at, including in Mr. Spencer’s hearing, was trying to say, okay, there’s 

a ship number, but this is about an industrial base, it’s about the 

personnel that go on the ships, it’s about aviation support for the 

ships, it’s about the mix of the ships, what’s the mix between surface and underwater, what’s the mix between manned and unmanned. You could have a 355-ship Navy that would be exactly 

wrong, and that would be worse than a 300-ship Navy that was 

better configured. 

So this is a big question that we’re going to be grappling with 

to get to 355. I think the industrial—I am with you. I think the 

industrial base can respond to this, but I think we have a lot of 

challenging strategic decisions to make in tandem with our military leadership about what the right mix is. 

I also wanted, Dr. Lehman, to just go after one issue that you 

mentioned. You said during the Reagan-era buildup that you guys 

worked on—and I thought this was fascinating—we got 90 percent 

of the gain of the buildup in the first year. I want to just unpack 

that statement. 

I gather that what that means is what we did in the first year 

demonstrated our commitment, and no one doubted our commitment, and thus we got a lot of the gain out of it before it was even 

completed because once we were underway, people didn’t doubt us. 

Dr. LEHMAN. Right. 

Senator KAINE. Now, you probably did not deal with a government shutdown during your tenure, did you? 

Dr. LEHMAN. No, I didn’t, happily. 

Senator KAINE. Were you dealing with CRs [Continuing Resolutions], or were you generally dealing with appropriations bills? 

Dr. LEHMAN. CRs. 

Senator KAINE. So you were dealing with CRs. 

Dr. LEHMAN. Oh, yes. 

Senator KAINE. So that was a reality in the 1980s. 

Mr. SCHNEIDER. It was shorter then, but they were still destructive. 

Senator KAINE. So to go back to your statement we got 90 percent of the gain in the first year, we’re not going to be able to get 

the gain out of a commitment to 355. I mean, it passed unanimously in this committee as an amendment, and then it passed 

31 

unanimously, the mark passed unanimously out of the committee, 

and say it passes unanimously on the Floor, and say it’s in a conference report that passes unanimously. We’re not going to get the 

gain out of that if there’s a lot of budgetary gamesmanship that 

leads not only adversaries and allies but even our own people to 

wonder, well, is this just a brochure thing or is it really going to 

happen? 

Dr. LEHMAN. Your point is well taken. 

Senator KAINE. So the certainty issue, this committee and the 

Armed Services Committee more generally has been a voice for certainty, but the broader budgetary and appropriations processes had 

to be absolutely critical to accomplishing the goal and communicating the certainty of the momentum going forward. 

Dr. LEHMAN. Absolutely, absolutely. 

Senator KAINE. That was bipartisan. This was a time during 

your buildup when this was supported in both parties and nobody 

questioned the commitment of this body in terms of actually carrying forward with the president in doing that build-out. 

Dr. LEHMAN. Right. Then, in those halcyon days, there was a 

very clear distinction between the authorizing and the appropriating. There was no legislation in appropriations bills, and there 

was a very close coupling between the Defense Appropriations Subcommittee and this committee, and that’s got to be really strengthened. 

Senator KAINE. I’m a Budget Committee member who wonders 

whether the budget has any more relevance because it seems like 

it’s all appropriations, and I’m starting to worry about even the authorizers because, for example, we did a mark this year, we didn’t 

have a top line, so we just did the mark to the number that we 

wanted. But we don’t know how that top line, how our mark will 

be treated when it gets into an appropriations process. 

I think part of the answer to really sending that commitment is 

also probably going to be some budget and appropriations reform 

issues, as well as grappling with these strategic decisions about 

how, among the 355, how you allocate between the manned/unmanned surface ship, and then what that means with personnel 

and aviation components as well. 

So having committed to this, I’ll just be blunt and parochial, I 

was all for 355. I’m from Virginia. I mean, I know what this means. 

I want to do shipbuilding. But as we’ve gotten more and more into 

the layers of it, what it means for aviation, what it means for personnel, what it means for the industrial base—and I think Mr. 

Spencer’s testimony was good about this when he was before us— 

this really is a big, big strategic question that we’re going to have 

to grapple with, and maybe the biggest piece of it is going to be 

the budgetary discussion. 

So anyway, I appreciate your being here today and offering the 

perspective about how to do it right, and hopefully we will. This 

has been a helpful hearing and we’ll learn some things from it. 

Thanks, Mr. Chairman. 

Senator WICKER. We are doing our part to the fullest in this subcommittee, and we seek to send a strong signal to everyone else 

that’s listening, including our colleagues. So, a point well taken. 

Senator King is next. 

32 

Senator KING. Thank you. 

Mr. Schneider, I particularly want to greet you because you and 

I served on the staff in this outfit at exactly the same period, in 

the early 1970s. But neither one of us is any older, which is amazing. 

[Laughter.] 

Mr. SCHNEIDER. The land that time forgot. 

[Laughter.] 

Senator KING. Mr. Pyatt and Mr. Lehman, I have probably been 

to 20 hearings in the last five years that have involved—I think 

probably more than that, 30 hearings that have involved procurement, and the same issues keep coming up, and we just talked 

about it in the full committee earlier today, and you’ve mentioned 

it, because if we’re talking about a 355-ship Navy, we’re talking 

about procurement. I mean, that’s where we’re at. 

Fixed requirements, design before you build, finalize design before you build—I think, Mr. Lehman, Secretary Lehman, you said 

that. Off the shelf where possible, foreign designs where possible, 

80 percent solutions that are on time are better than 99 percent 

solutions that are late; and then finally, and I think you mentioned 

this, Secretary Lehman, continuity of staff. One of the problems is 

turnover of project managers so nobody can be held accountable. 

Anyway, I want to bring this down to the very particular. Mr. 

Pyatt, in your prepared testimony you talked about the DDG–51 

flight III. We just authorized a 15-ship multi-year starting next 

year on that ship, which has never been built. I have concerns 

about the ability of our shipyards to bid realistically on a ship 

that’s never been built and that the design isn’t complete. Do you 

share those concerns? 

Mr. PYATT. Absolutely. I mentioned that that can be a recipe for 

disaster. I think something that could be very important that 

you’ve done is authorize a multi-year procurement to tell everybody 

this is a serious program and you’re going to be behind it, but the 

actual procurement of those ships should be on an annual or a biannual basis with options. Then you can have real competition between the two shipbuilders. They’re both fine shipbuilders. You can 

have real competition. If you need to make a change someplace 

along the line, you can, and it’s inevitable that it happens. 

I worry about the delivery of the radar, which hasn’t been developed, or is in the development—— 

Senator KING. That’s the heart of the ship. 

Mr. PYATT. That’s right. 

Senator KING. There are going to be modifications to the ship 

based upon how the radar is—— 

Mr. PYATT. That’s right. It’s bound to happen. So I would not encourage entering into a multi-year contract for that ship. I would 

encourage this committee and the Congress to say, yes, we think 

that’s a good idea, and we’ll give you a multi-year authorization or 

multi-year support because that helps build up the industrial base 

that you’ll need to carry it out. So, we agree. 

Senator KING. Then I want to associate myself with Senator 

Kaine’s comments. It seems to me the real issue is what ships, and 

it’s a strategic issue of what do we need, where do we put our effort, and we have to try to project ourselves. I’ve been in hearings 

33 

in the last few days that have talked a lot about cyber. That’s going 

to be a huge part of the threat of the future, and that has to be 

a consideration not only in shipbuilding but in every other aspect 

of how we defend our country. 

So, Secretary Lehman, brainstorm a bit in a minute and 13 seconds on what the shape of this new Navy should be in terms of 

mix. Are we talking about more undersea, more surface combatants, larger, smaller? Give us some thoughts. 

Dr. LEHMAN. Sure. There’s got to be a high/low mix. That’s why 

one of the most urgent needs is for frigates. As I said earlier, we 

had 101 frigates in the 600-ship Navy. They were built and they 

were deployed. We have none now. 

Senator KING. Is there some strategic reason for that, for the demise of the frigate? 

Dr. LEHMAN. The threat was perceived. If you recall, 30 years 

ago it was the end of history. There was no threat anywhere and 

we were the only superpower. As happens in democracies, cuts 

went way too deep. Now we have to rebuild in the most sensible 

way. 

Frigates are essential because the real threat is submarines. 

There are almost twice as many capable, quiet, diesel electric submarines in the world today as there were back in our day. 

Senator KING. The Soviets are—the Russians. Sorry. 

Dr. LEHMAN. Exactly. The Russians—— 

Senator KING. We’re showing our age. 

Dr. LEHMAN. The Russians have concentrated. They’re not a 

global threat the way the Soviet Union was. They’re small, and 

their one carrier is worthless. They may be able to build one smaller effective carrier, but they’re not a global power. What they have 

concentrated their spending on is the ability to sink our ships and 

the ability to use their submarines to make sure it’s got the best 

possible quieting technology to protect theirs. 

Senator KING. So counter-submarines are important. 

Dr. LEHMAN. Counter-submarines, absolutely. So we have to be 

able to be better at submarines, and I think we can. We are. We’re 

staying ahead of it. But we also have to have, first of all—the Navy 

ought to change its nomenclature from calling these strike groups, 

because a full battle group deployed with 25 or 28 ships in the Cold 

War, because you had to cover all azimuths from very substantial 

multiple threats. Today, a carrier deploys with maybe five or six 

ships. If you’re going against the kind of threats that are already 

in existence and are being built by the Russians, by the Iranians, 

by the North Koreans, by the Chinese, you’ve got to go from five 

back to 20 because you’ve got to cover in-depth the defense. You’ve 

got to have lots of tails and lots of active sonar. You need platforms 

for the ASW [Anti Submarine Warfare] helo’s to live on. 

So I agree with you. The mix of what you’re building is just as 

important as the number. But the number 355 came from very 

solid analysis. When you have to have this mix of high/low and defensive capability, you’ve also got to be there. The whole idea of the 

Navy is to deter the disturbers of the peace, not to fight them. Of 

course, to be able to deter, you have to be able to fight them and 

defeat them. 

34 

Senator KING. I characterize our destroyers at Bath Ironworks as 

instruments of peace. 

Dr. LEHMAN. Yes, they are, in a very real way. When Ronald 

Reagan said it in 1977, when he was asked what he thought about 

the Cold War, he said we win, they lose. How do you like that? He 

meant, and he truly believed at the time, that this could be done 

without violence, without fighting, and by ending the war with negotiation, if you built back the strength to deter, to show the Soviets that here we were cruising along with a growing economy with 

one hand tied behind our back and running them into the ground 

financially, and we topped their huge buildup that they had sacrificed so much to build. We were going ahead with Star Wars, and 

we were going ahead—the Navy was up in their backyard and 

front yard and showing that we were going to kick their ass. They 

finally realized that, and they didn’t have the money to keep up 

with us. 

So that’s what we’ve got to do again. We’ve got a different kind 

of threat, but we have to show the disturbers of the peace that if 

they think they can continue in the adventurism that they’re doing 

now, that they can prevail against us and use that political leverage to invade other countries or to close off sea lanes or whatever, 

that they are going to lose that. That requires numbers, a coherent 

number that we should stick with because it was logically derived, 

and not stinting on the quality of what is done, and carrying out 

with the discipline of fixed price. The best is the enemy of the good. 

Make sure we’ve got the capability to prevail, but no more home 

plating. Do it by block upgrades every four years, or whatever. It 

can be done. 

Senator KING. Thank you, Mr. Chairman. 

Senator WICKER. Thank you, Senator King. 

We’ve been a little informal here in this hearing, so before I recognize my friend, Mr. Blumenthal, let me just remind committee 

members, subcommittee members that in testimony about this subject over the last number of weeks, the testimony has been that the 

requirement comes from the experts in the form of a mix. They 

have informed the Navy about what mix is needed in the various 

areas around the globe, and that’s the way that we arrived at the 

355. 

For example, in the mix, it’s fast attack submarines, 66; destroyers, cruisers, 104; carriers, 12. So the 355 ship requirement is derived from the mix. Now, we may need to revisit that and we may 

need to talk about a number of the alternatives that have come 

from the testimony today such as reactivation, but it’s not just a 

number that was grabbed out there. It was a number that was 

boiled down from the absolute requirement we need to make this 

country safe. 

Senator Blumenthal, you are recognized for at least 5 minutes. 

[Laughter.] 

Senator BLUMENTHAL. Thanks, Mr. Chairman. 

Senator WICKER. A minimum of 5 minutes. 

Senator BLUMENTHAL. You are very, very gracious, as always. 

First of all, I want to thank you for reminding us of that famous 

quote from John McCain that Russia’s economy is a gas station, or 

Russia is a gas station with an economy the size of Denmark. I’ve 

35 

heard that it has an economy the size of Mexico, but Denmark is 

even a better—— 

Senator WICKER. We’re now hoping the Danes can go help the 

Finns build those icebreakers, I think. 

Senator BLUMENTHAL. I want to mention a word that I understand has not been raised here today, and that word is ‘‘cyber.’’ 

Going to your comment, the Russians, for example in the undersea 

domain, cannot hope to match us. Their goal is to sink our ships. 

They can’t match us in the capability of the Virginia class attack 

submarines, but they can render at least some of our fleet useless, 

maybe not sink them through cyber but lead to sinking them by, 

in essence, making them inoperative in key respects in defending 

themselves. 

So my question to you is, assuming that Russia’s strategy is, in 

effect, to use cyber, they don’t need huge investments, obviously, 

for cyber capabilities. They’ve used cyber against our democratic institutions. They have been audacious, to say the least, in attacking 

this country in the cyber sphere in the last election. They used it 

against our allies in Europe in a very direct way. They used it in 

Ukraine to disable their defense forces. They are obviously developing that as a strategy. 

Does that change your view of what the United States should be 

doing either on the 355-ship Navy or on the mix of what it should 

be? I’ll just throw out what a lot of laymen should say—you know, 

we’ve invested in the USS Ford; now, because of the $2 billion cost 

overrun, maybe larger, $12 or $13 billion in that one carrier, which 

conceivably could be rendered a sitting duck out there by cyber. 

Does that change your view of how we ought to be investing our 

resources? 

Dr. LEHMAN. Well, it certainly assumes that we have the same 

philosophy in cyber, which you can make a very strong case is the 

greatest threat we face. But you have to assume that offense is the 

best defense. In other words, making clear to our adversaries that 

we can do worse to them than they can do to us, as well as defending and building into our technology weapon systems being able to 

degrade gracefully, which used to be a very important term in the 

military. 

I mean, I flew the A–6 in the olden days, and we had inertial 

navigation. If that failed, we had Doppler navigation. If that failed, 

we had electronic navigation not dependent on satellites, and ultimately we had dead reckoning. So you had the highest technology 

available. But if you lost that or it was jammed or whatever, you 

degraded gracefully. We’ve got to have the same thing. 

If we find that they are able to get into our CQ, our networked 

capability, that we don’t just go dark and ineffective. We have a 

better technology base in this country and in the Atlantic Alliance 

than any other area of the world. So we’ve got to mobilize that. 

We’ve got to build more partnerships, which I know this committee 

has been very strong in advocating with Silicon Valley and the 

other technology centers, so that there’s more interaction, more 

ability. 

I was on the 9/11 Commission. We urged the intelligence communities to have more horizontal hiring and fellowships and internships and so forth with the top technological centers to keep that 

36 

fertilization, because the danger of a bureaucracy that’s over 

900,000 civilians in the Department of Defense, you’re constantly 

fighting against inertia and just entropy. 

So that has to be worked just as hard as every other part of the 

technological equation. But you can’t say because we have some 

vulnerabilities, particularly in aircraft carriers and other systems, 

that therefore we don’t build them or we build fewer of them. 

We’ve got to do it all because we are too small today. The fleet is 

being run into a shambles with less than, as everybody knows, less 

than half of the tactical fighters able to fly, with ships being run 

way past their maintenance schedules and so forth. 

You’ve got to do it all, and it can be done because it’s self-reinforcing. The costs become more containable if you have more ability 

to get the work out there and to compete and to get the cost reductions. But you are absolutely right to put cyber at the very top of 

the priority. 

Senator BLUMENTHAL. Thank you for that excellent answer. 

I have another question related to submarines, and I understand 

Senator Hirono asked a couple of questions about the Navy’s report 

on our defense industrial base. But the idea—I think you said that 

at some point we were producing five submarines a year? 

Dr. LEHMAN. Yes, 688s. 

Senator BLUMENTHAL. That is staggering. I mean, they were different submarines, but—— 

Dr. LEHMAN. You know, people have forgotten the benefits of 

fixed price when you’ve got a solid design and it’s complete and 

won’t be changed. The ability—the amount of money you can save 

by competing every year, that’s what we did. When we had five, the 

low-cost bidder got three and the high-cost bidder got two. When 

you have three, you do two and one. You can do that. You can really provide a challenge to the contractors if you aren’t going to 

change the design in the middle of the contract, and they know 

that, so they can sharpen their pencils. They sign a contract that 

is not going to bring a loss, but then they start innovating and 

finding ways to cut costs and get better prices from their suppliers 

because on a firm fixed-price contract they can make a 40 percent 

margin if they do it the right way. So we’ve got to get back to that, 

and numbers count. 

Senator BLUMENTHAL. Well, I represent the state that is home to 

Electric Boat. We’re very proud of Electric Boat’s capacity to build 

two, and soon it will be three with the Columbia class, submarines 

a year. But the Navy correctly identifies, and we’ve seen it up close 

on the ground, the difficulty of recruiting, retaining, and most importantly, training that defense industrial base, and it’s not just at 

EB [electric boost] at the yard, it’s also the supply chain which is 

often ignored. 

I am told that the numbers of contractors or the numbers of active suppliers was, in the 1980s, around 17,000. There are now 

about 3,000. So we’ve gone from 17,000 to 3,000 suppliers in that 

defense industrial base. I think that’s where, from a production 

standpoint, we need to be investing some of our attention and 

maybe our resources. 

I think you’re right, we can do it, but it will take some training, 

effort, skill education and so forth in our vocational technical skills, 

37 

which is a good thing because we need those welders and pipefitters and electricians and engineers and designers, but it won’t 

happen by magic. 

Dr. LEHMAN. No, you’re absolutely right. It’s a challenge. 

Senator BLUMENTHAL. Thank you. 

Dr. LEHMAN. Thank you. 

Senator WICKER. Thank you, Senator Blumenthal. 

Gentlemen, can you stay another 5 or 10 minutes? 

Dr. LEHMAN. Sure. 

Senator WICKER. Secretary Lehman, when you did your strategy, 

how did you lay it out? What form did it take? 

Dr. LEHMAN. It was laid out in a comprehensive document that 

started with my confirmation hearings. Thanks to the way this 

committee operates, I was nominated, had my hearing, was reported out and confirmed in two weeks after the inauguration. So 

February 5th, I was on the job. 

The statement that I submitted for my confirmation hearings 

was the same—I didn’t think it was so shortened, but it was a comprehensive explanation of what we hoped to achieve, what the intellectual process was, going to each geographic area and the 

threat, and then we really spent so much time communicating, and 

not just public affairs but, more importantly, congressional affairs. 

We spent so much time up here. As I said earlier, throughout my 

tenure of six-plus years, I spent about 30 percent of my time up 

here, sitting down and having breakfasts and lunches and explaining—— 

Senator WICKER. Who signed on to the strategy, sir? 

Dr. LEHMAN. A better point to make, because everybody signed 

on to it. The President ensured that that took place because we had 

to have OMB [Office of Management and Budget], we had to have 

the Defense Department, the Secretary of Defense, we had to have, 

in effect, the entire bureaucracy understand it. They might not all 

agree with it, but the fact is that we ensured that the Defense Logistics Agency, the nuclear agency, all of the 23 independent agencies were all brought into the picture to understand what the 

tradeoffs would be, how it would be executed, that discipline is required, and what we believed the result would be. 

So everybody has to be part of it. There has to be consensus with 

the committees, bipartisan committees and membership of both 

houses of Congress, the White House, the White House staff, OMB, 

and the Defense Department itself in all its many layers. 

Senator WICKER. Okay. Have you looked at our Navy title? Have 

you been able to read the NDAA Seapower title? 

Dr. LEHMAN. I haven’t. 

Senator WICKER. Well, let me just say this. I hope you will agree 

that in terms of getting to this 355 with the right mix and making 

the requirement the policy of the United States Government, we 

funded five ships over and above the administration’s budget request, and they include one destroyer, one amphib, one submarine, 

one float forward staging base, and one cable ship, in addition to 

what the administration had asked for. 

I hope you gentlemen would agree that in terms of getting to our 

stated policy of 355 as soon as practicable, that we’re off to a good 

start in the first year. 

38 

Dr. LEHMAN. I think it’s terrific, and I think also the two NDAAs 

that I have read that preceded this one have laid the groundwork 

to enable it to be accomplished, the headquarters reductions, all of 

the reforms that you’ve done. You are providing the new team the 

foundation to get this thing done, which wasn’t there before. So 

this committee has really broken new ground with the last two 

NDAAs. 

Senator WICKER. Senator Hirono? 

Senator HIRONO. I’m fine. 

Senator WICKER. Are there any other questions? 

[No response.] 

Senator WICKER. Gentlemen, thank you very, very much for your 

lifetime of service and for your helpful testimony today. 

This hearing is concluded. 

[Whereupon, at 5:52 p.m., the subcommittee was adjourned.] 

Æ