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i

37–655 2008

[H.A.S.C. No. 110–30]

SUBMARINE FORCE STRUCTURE AND

ACQUISITION POLICY

HEARING

BEFORE THE

SEAPOWER AND EXPEDITIONARY FORCES

SUBCOMMITTEE

OF THE

COMMITTEE ON ARMED SERVICES

HOUSE OF REPRESENTATIVES

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

HEARING HELD

MARCH 8, 2007

(II)

SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE

GENE TAYLOR, Mississippi, Chairman

NEIL ABERCROMBIE, Hawaii

JAMES R. LANGEVIN, Rhode Island

RICK LARSEN, Washington

MADELEINE Z. BORDALLO, Guam

BRAD ELLSWORTH, Indiana

JOE COURTNEY, Connecticut

JOE SESTAK, Pennsylvania

ROSCOE G. BARTLETT, Maryland

KEN CALVERT, California

TERRY EVERETT, Alabama

JO ANN DAVIS, Virginia

J. RANDY FORBES, Virginia

JOE WILSON, South Carolina

WILL EBBS, Professional Staff Member

HEATH BOPE, Professional Staff Member

JENNESS SIMLER, Professional Staff Member

JASON HAGADORN, Staff Assistant

(III)

C O N T E N T S

CHRONOLOGICAL LIST OF HEARINGS

2007

Page

HEARING:

Thursday, March 8, 2007, SUBMARINE FORCE STRUCTURE AND ACQUISITION POLICY .................................................................................................. 1

APPENDIX:

Thursday, March 8, 2007 ........................................................................................ 49

THURSDAY, MARCH 8, 2007

SUBMARINE FORCE STRUCTURE AND ACQUISITION POLICY

STATEMENTS PRESENTED BY MEMBERS OF CONGRESS

Bartlett, Hon. Roscoe G., a Representative from Maryland, Ranking Member,

Seapower and Expeditionary Forces Subcommittee .......................................... 1

Taylor, Hon. Gene, a Representative from Mississippi, Chairman, Seapower

and Expeditionary Forces Subcommittee ........................................................... 1

WITNESSES

Casey, John P., President, Electric Boat Corporation .......................................... 24

Courtney, Hon. Joseph D., a Representative from Connecticut ........................... 2

Donnelly, Vice Adm. John J., Commander Naval Submarine Forces, U.S.

Navy; Rear Adm. Carl V. Mauney, Director of Submarine Warfare, U.S.

Navy; Rear Adm. William H. Hilarides, Program Executive Officer for Submarines, U.S. Navy; and Allison Stiller, Deputy Assistant Secretary of

the Navy (Ship Programs), U.S. Navy ................................................................ 3

Nash, Winfred, President, BWXT, Nuclear Operation Division .......................... 31

O’Rourke, Ronald, Specialist in National Defense, Congressional Research

Service ................................................................................................................... 32

Petters, C. Michael, Corporate Vice President and President, Northrop Grumman Newport News .............................................................................................. 28

APPENDIX

PREPARED STATEMENTS:

Bartlett, Hon. Roscoe G. .................................................................................. 53

Casey, John P. .................................................................................................. 103

Courtney, Hon. Joseph D. ................................................................................ 143

Davis, Hon. Jo Ann, a Representative from Virginia .................................... 56

Donnelly, Vice Adm. John J. joint with Rear Adm. Carl V. Mauney ........... 65

Nash, Winfred ................................................................................................... 137

O’Rourke, Ronald .............................................................................................. 78

Petters, C. Michael ........................................................................................... 123

Rell, Hon. M. Jodi, Governor, State of Connecticut ....................................... 141

Stiller, Allison joint with Rear Adm. William Hilarides ............................... 58

Page

IV

DOCUMENTS SUBMITTED FOR THE RECORD:

Letter submitted by John P. Casey, President, General Dynamics, dated

March 30, 2007 .............................................................................................. 149

Letter submitted by Winfred D. Nash, President, BWXT, dated March

22, 2007 .......................................................................................................... 150

QUESTIONS AND ANSWERS SUBMITTED FOR THE RECORD:

Mr. Taylor ......................................................................................................... 153

(1)

SUBMARINE FORCE STRUCTURE AND ACQUISITION

POLICY

HOUSE OF REPRESENTATIVES, COMMITTEE ON ARMED SERVICES, SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE, Washington, DC, Thursday, March 8, 2007.

The subcommittee met, pursuant to call, at 3 p.m., in room 2212,

Rayburn House Office Building, Hon. Gene Taylor (chairman of the

subcommittee) presiding.

OPENING STATEMENT OF HON. GENE TAYLOR, A REPRESENTATIVE FROM MISSISSIPPI, CHAIRMAN, SEAPOWER AND EXPEDITIONARY FORCES SUBCOMMITTEE

Mr. TAYLOR. The committee will come to order.

We are very fortunate today to be joined by Vice Admiral John

Donnelly, Commander of Submarine Forces; Commander Carl

Mauney, Director of the Submarine Warfare Division; Rear Admiral William Hilarides, United States Navy, Program Executive Officer of Submarines; and Ms. Allison Stiller, Deputy Assistant Secretary of the Navy for Ship Programs.

This committee over the past few years has expressed concerns

that our Nation has not kept pace with our submarine requests,

with our submarine building to meet current and future needs. The

committee hopes to address that this year and in the years to

come. We note that there have been a number of submarine studies

that show the submarine force shrinking in future years to what

I think most of us would agree is an unacceptable level, but we are

laymen. We come from all parts of the country, and we are not experts in the field. You people are. So we would welcome your testimony today. Hopefully, all of our concerns are your concerns and

we can find common ground, and where we can do some good for

our Navy, we hope to do so. We are honored to have you here.

I now turn to my ranking member, the gentleman from Maryland, Mr. Bartlett.

STATEMENT OF HON. ROSCOE G. BARTLETT, A REPRESENTATIVE FROM MARYLAND, RANKING MEMBER, SEAPOWER AND

EXPEDITIONARY FORCES SUBCOMMITTEE

Mr. BARTLETT. Mr. Chairman, before I forget, I would like to ask

unanimous consent to place in the record a statement from our colleague, Jo Ann Davis, who cannot be here today.

Mr. TAYLOR. Without objection.

[The prepared statement of Mrs. Davis can be found in the Appendix on page 56.]

Mr. BARTLETT. Thank you.

2

In the interest of time let me submit my opening statement for

the record, too, so we can get right to the testimony.

[The prepared statement of Mr. Bartlett can be found in the Appendix on page 53.]

Mr. TAYLOR. I thank you very much.

The Chair now recognizes the gentleman from Connecticut, Mr.

Courtney, for an opening statement.

STATEMENT OF HON. JOSEPH D. COURTNEY, A

REPRESENTATIVE FROM CONNECTICUT

Mr. COURTNEY. Thank you, Mr. Chairman.

With that presentation, I am going to keep my remarks very

brief to get us moving along here, but I want to thank you and the

staff of the subcommittee and the ranking member for responding

to my requests for this hearing. Myself and Congressman

Langevin, and I know members from Virginia, Mrs. Davis and Mr.

Forbes, come from a part of the country where the industrial base

exists for building nuclear submarines, and I think we have got a

great story to tell about the progress that has been made over the

last few years in terms of the production of Virginia-class submarines. I personally saw the latest submarine, the USS Hawaii, which was delivered ahead of schedule and, according to Admiral

Haney of the Groton sub base, was in almost perfect condition,

which, again, is the result of a lot of hard work that both the Navy

and both companies that produce nuclear submarines have put in

over the last few years to make the production more efficient and

to reassure the taxpayers of that as we consider this decision that

they are going to have a program, a shipbuilding program, that

they can have confidence in, and again, as you have said on many

occasions, the decision we are making here this year is really not

about the sub fleet today; it is about the sub fleet 10 years and 15

and 20 years down the road, and I am looking forward to the testimony to help us make good decisions as we move forward in this

session of Congress.

[The prepared statement of Mr. Courtney can be found in the Appendix on page 143.]

Mr. TAYLOR. Thank you.

I would ask the witnesses—there are a couple of things that I

would hope you would address, and to you, it is going to sound almost simplistic, but for the American people who are going to pay

for these submarines, I would hope that you would walk them

through the time it takes from the day that Congress authorizes

a submarine to the time that you actually purchase the power

plant for the submarine before that submarine becomes an operational part of your fleet. I would hope you would walk us through

the decline in the submarine production and the decline in the size

of the fleet, at what point the Nation would bottom out, what kind

of concerns you have about that timeline. I am told it is somewhere

around 2020 when we would reach an unacceptable number of submarines, but also how long it would take us to respond to that if

we do not start responding right now, and even if we do respond

right now, if we were to put an additional submarine in the budget

this year and next year, how soon we can start turning this

around, and also the need to maintain the industrial base. I think

3

it is fairly obvious to everyone at this podium that there are not

too many other things that a submarine designer can do in his off

time to make a living. He is either designing submarines and building submarines or he is going on and finding another job, but he

is not going to be dropping back and forth between the two.

So, with that in mind, Mr. Forbes, do you have an opening statement?

Mr. FORBES. No.

Mr. TAYLOR. Ms. Bordallo, do you have an opening statement?

Ms. BORDALLO. I do not have an opening statement, but I do

have some questions.

Mr. TAYLOR. Great.

With that in mind, who would prefer to begin?

Admiral DONNELLY. I will begin, sir.

Mr. TAYLOR. Okay. Vice Admiral Donnelly, thank you.

Vice Admiral, because the committee has a five-minute rule, this

subcommittee does not, so within the bounds of fairness, if you

could keep it to ten minutes or less, we would certainly welcome

it if you can get your point across in that time.

Admiral DONNELLY. Yes, sir. Certainly, I can do that, sir. Chairman Taylor and Representative Bartlett——

Mr. TAYLOR. Admiral, would you hold it for one second? The

other gentleman from Connecticut is going to join us—I am sorry—

Rhode Island, somewhere a long ways from the shores of the Gulf

of Mexico.

I would ask unanimous consent that the gentleman from Rhode

Island would join the subcommittee for the day without objection.

STATEMENT OF VICE ADM. JOHN J. DONNELLY, COMMANDER

NAVAL SUBMARINE FORCES, U.S. NAVY; REAR ADM. CARL V.

MAUNEY, DIRECTOR OF SUBMARINE WARFARE, U.S. NAVY;

REAR ADM. WILLIAM H. HILARIDES, PROGRAM EXECUTIVE

OFFICER, SUBMARINES, U.S. NAVY; AND ALLISON STILLER,

DEPUTY ASSISTANT SECRETARY OF THE NAVY (SHIP PROGRAMS), U.S. NAVY

STATEMENT OF VICE ADM. JOHN J. DONNELLY

Admiral DONNELLY. Chairman Taylor, Representative Bartlett,

distinguished members of the Subcommittee for Seapower and Expeditionary Forces, Rear Admiral Van Mauney and I thank you for

your continued support for our men and women in uniform and for

the opportunity to appear before you today. I am honored to join

Deputy Assistant Secretary Stiller, Rear Admiral Mauney, and

Rear Admiral Hilarides, and I thank you for the opportunity to represent the men and women of your Navy and of your submarine

force.

As you have requested today, we will discuss the Navy’s required

attack submarine force level, how we developed it and the impacts

of altering the Navy’s future shipbuilding plan. We will also address the submarine force’s current operational tempo and fleet requirements and relate them to the future force structure. Our remarks will be unclassified. However, we are prepared to provide

classified details to the committee, if desired.

4

First, let me say something about the cornerstone of our force,

our people. I have always been proud to be a submariner. My father was a submariner. My son is a submariner, and in my first

month as a submarine force commander, I have been repeatedly reminded of the caliber and of the quality of my fellow submarine

sailors. They are talented and motivated. They have chosen to

serve their Nation on the world’s finest submarines.

As an example, I recently visited sailors of the USS Hampton

just before she departed Norfolk on her way to the Pacific for deployment. They were well-trained, enthusiastic and eager to go do

what they have been trained to do. At the end of her deployment,

Hampton will pull into her new home at the Port of San Diego,

California as part of the Quadrennial Defense Review.

Moving back to the topic of operations, today’s submariners make

up a small portion of our Navy, approximately seven percent of our

personnel who operate 24 percent of our ships. They are out in

front, around the globe every day, providing our national security.

Even while serving in a capacity outside the Undersea Enterprise,

such as on Joint Staffs or in Iraq and in Afghanistan, these sailors

use their unique talents and submarine force experiences to make

valuable contributions to joint operations and the Nation’s defense.

Currently, our 14 nuclear powered ballistic missile submarines

remain ready and vigilant, submerged in a secure and survivable

posture, able to rapidly respond to national tasking. We have also

brought on line the nuclear powered guided missile submarine with

the first one, USS Ohio, deploying later this year.

Now let me turn from current operations to our future force

structure. The Chief of Naval Operations has developed a shipbuilding plan that builds a Navy the Nation needs—a Navy that

is both affordable and that meets with acceptable risk the future

national security requirements outlined in the 2006 Quadrennial

Defense Review. Force structure requirements were developed and

validated through detailed joint campaign and mission level analysis and optimized through innovative sourcing initiatives.

In 2005, the Chief of Naval Operations (CNO) directed an effort

to examine existing force structure studies, including the 1999

Chairman of the Joint Chiefs of Staff Attack Submarine Study and

the 2005 Decision Memorandum III Study as well as a number of

other submarine studies, to support his decisions regarding the

right SSN force structure mix with the Navy’s long-term shipbuilding plan. To maximize return on investment, the focus was for a

Navy that was able to fight the Global War on Terror, execute maritime security operations and win in any major combat operation

(MCO). The SSN force structure was examined using a capabilitiesbased assessment, which included peacetime demand and deterrents and warfighting requirements. The analysis found that 48

was the minimum number of SSNs that presented an acceptable

risk and still allowed for an affordable plan for long-range shipbuilding.

There will be some increased risk during the 2020 to 2034 time

frame when the shipbuilding plan results in an SSN force structure

below 48 to a minimum of 40 SSNs, and the Navy is looking to

mitigate this shortfall by fully funding cost reduction measures and

fully implementing cost reduction measures for the Virginia-class

5

SSN, which met this week. It is anticipated that the shipbuilders

will also reduce construction time, thereby accelerating ships to the

front lines.

Another option, Los Angeles-class and Seawolf-class submarines.

Together, these initiatives could mitigate the current 14-year requirement gap to as few as six years.

Finally, let me emphasize how important it is to sustain the submarine force of 48 SSNs, 14 SSBNs and 4 SSGNs. That is the right

size and shape for our Navy and for our Nation, and to sustain that

force we need an effective and stable shipbuilding plan presented

by the Navy, including that program that builds two Virginia-class

submarines per year starting in 2012.

I am certain that our submarines will continue to be in high demand, and I assure you that they will be forward-deployed and

ready for any task. Day in and day out, your submariners gather

intelligence. They shape the environment, and they help avert the

next conflict. Yet, they stand ready to act quickly and decisively if

needed.

Again, on behalf of your sailors, Navy civilians and families of

the submarine force, I thank you for the opportunity to appear before you, and I stand ready to answer your questions.

[The joint prepared statement of Admiral Donnelly and Admiral

Mauney can be found in the Appendix on page 65.]

Mr. TAYLOR. Thank you, Admiral.

Secretary Stiller.

STATEMENT OF ALLISON STILLER

Secretary STILLER. Mr. Chairman, Congressman Bartlett, members of the subcommittee, it is a privilege for Admiral Hilarides

and me to appear before you to discuss the Navy submarine industrial base issues. I request that our written testimony be submitted

for the record.

Mr. TAYLOR. Without objection.

Secretary STILLER. We thank you for this opportunity to discuss

the acquisition side of the submarine business, and specifically, we

will address the submarine construction and design industrial base,

the Navy’s plan to reduce the average per unit cost of Virginiaclass to $2 billion, the fiscal year 2005 baseline, by fiscal year 2012,

and the procurement strategies to increase the build rate of submarines.

The submarine industrial base is composed of two major components, the construction base and the design base. As you know, the

Navy is currently procuring one Virginia-class nuclear attack submarine per year. Nine of the Virginia-class submarines are under

contract with three ships delivered and another six under construction. The tenth will start construction in early fiscal year 2008. The

Navy’s 2013 shipbuilding plan calls for procuring two Virginia-class

submarines per year starting in fiscal year 2012. The submarine

construction base will remain stable until then, when we will see

an increase due to the two submarines per year.

Though the submarine construction base is at a sustained and

constant level, this does not imply that the submarine construction

base is at its optimal level. Instead, while far from robust, it is at

6

a sustaining and constant level, two attributes that could not have

been said ten years ago.

The submarine design industrial base has more challenges. The

Navy has recognized the potential impact of losing a national submarine design capability and is taking active steps to mitigate this

risk. We commissioned RAND to study this unique portion of the

industrial base. They evaluated strategies for managing submarine

design resources, including shipyards, critical component suppliers

and the Navy itself. They concluded that extending the period of

the design of the next submarine class would alleviate the concern

over the erosion of critical design skills.

RAND recommended that the Navy consider accelerating the

next submarine design to mitigate excess cost delays and risks that

a design gap would cause. They also said sustaining workers in excess of current demand was found to be the least expensive. The

shipyards would be able to more efficiently accomplish the next design by retaining a minimum range of 800 to 1,050 designers and

engineers to perform design work during the design gap. The shipyards are addressing specifics of the critical skills problem, so

RAND did not repeat that effort. However, RAND described the

recommended sustained workforces by general skill category. The

Navy has elected to preserve the critical engineering skills in two

ways, first by investing approximately $300 million in Research,

Development, Training & Evaluation (RDT&E) across the Five

Year Defense Plan (FYDP) and cost design.

Next, I would like to discuss the Virginia-class cost reduction

plans. Cost reductions will be achieved by implementing a threepart approach. The first part will be realized by ordering two Virginia-class submarines a year starting in fiscal year 2012 as part

of the seven ships multi-year procurement contract with Economic

Order Quantity. This effort will reduce the per-unit cost by $200

million in fiscal year 2005 dollars.

The second part of the cost reduction initiatives estimated to save an additional $100 million per boat include realigning work

between the two shipbuilders to increase production efficiencies,

full utilization of the capital expenditure initiative, reducing the

construction span from seven to five years, and modifying how we

install and test nonpropulsion electronic systems.

The third part of the initiative is designed for cost reduction and

is intended to lower costs by an additional $100 million per boat.

These redesign efforts will not impact the ship’s capabilities and

will include simplifying systems, using lower cost components and

implementing the use of technologies to improve construction techniques. Together, these three initiatives will help us reach our goal

of $2 billion a copy in fiscal year 2012.

Finally, I will discuss potential procurement strategies to increase the build rate of submarines. One option for increasing the

build rate of submarines is to fully fund nine SSNs, starting at two

a year in fiscal year 2010. This would require the next contract to

cover nine instead of seven hulls and require an additional $5.1 billion in FCN funding in the FYDP. We also considered alternative

financing strategies spanning three years that utilize either incremental funding or advance appropriations. For this approach, nine

SSNs procured between fiscal years 2009 and 2013 would still reVerDate 22-MAR-2001 13:23 Oct 09, 2008 Jkt 037655 PO 00000 Frm 00010 Fmt 6633 Sfmt 6633 C:\DOCS\110-30\067280.000 HAS2 PsN: HAS2
7

quire an additional $1.7 billion of shipbuilding conversion (SCN)

funding within the FYDP and an additional $3.4 billion beyond the

FYDP. Any alternative funding strategy that requires additional

SCN funding without top-line relief would cause significant deviation from the Navy’s 313 shipbuilding plan, significantly increasing the risk of destabilizing the plan and negatively impacting

other shipbuilding programs and the associated industrial facilities

and suppliers.

In summary, the Navy and industry are working together to reduce the cost and deliver these critical platforms. We have established a solid foundation to meet our goal of two ships for $4 billion

in fiscal year 2012. We have addressed the RAND conclusions in

the near and far term, and we have concluded that alternative financing strategies cause significant downstream builds which negatively affect other aspects of the shipbuilding account.

Mr. Chairman, we would like to thank you for this opportunity

to discuss the Navy’s submarine industrial base and look forward

to answering your questions.

[The joint prepared statement of Secretary Stiller and Admiral

Hilarides can be found in the Appendix on page 58.]

Mr. TAYLOR. Thank you, Ms. Stiller.

Any additional opening statements?

Admiral HILARIDES. No, sir.

Admiral MAUNEY. No, sir.

Mr. TAYLOR. Secretary Stiller, I hear you talking of the advantages of multi-year procurement, the advantages of buying two a

year. What I did not hear you say is, if all of these things make

sense to do in 2009, 2010, why don’t they make sense to do now.

Since we know we are going to have a shortfall of submarines in

the future, if we know that even if we start now we still have a

shortfall but we can lessen that shortfall, why doesn’t the Administration that has grown the defense budget by approximately $150

billion since they took office request those submarines now?

Secretary STILLER. As I mentioned, there is the three-prong approach. The multi-year is part of it, and we have a multi-year right

now for the block, the first block, and what we are talking about

is requesting authority for the next block of ships that we would

also like to buy in a multi-year. We do see that providing savings,

and that is about $200 million per boat.

The other part of it, to get to the $2 billion a year, requires the

investment in R&D dollars that we have talked about. That is $300

million that goes through the FYDP. In order to reduce those, simplify the systems and to introduce the cost reduction initiatives, it

is going to take us until we get to 2012 before we can realize that

additional $200 million per boat in savings, and so that is why the

Department is focused on fiscal year 2012 to getting to $2 billion

a year.

Mr. TAYLOR. You keep speaking of 2012. Now, is that to order

the ship, to fund the ship or to have the ship delivered?

Secretary STILLER. It is to order and fund the ship. The ships

will go——

Mr. TAYLOR. So, by your admission, it is going to take five to

seven years after that?

8

Secretary STILLER. Yes, sir. One of the initiatives is to reduce the

construction cycle time from seven to five years. Yes, sir.

Mr. TAYLOR. I think we have an opportunity because of the leadership of Chairman Skelton, because of the leadership of Chairman

Murtha to begin that process this year and the cooperation of some

other committee chairmen who are working with us to move some

funds around. I wish the Administration had been a bit more aggressive on this, but that is neither here nor there. The opportunity

is there. I believe the need is there. So my question for you is:

It is my understanding that the longest lead time for procurements will be for the nuclear propulsion plant.

Secretary STILLER. Yes, sir.

Mr. TAYLOR. What type of funding would you need should this

committee, should the House, should the Senate see fit to get this

program going sooner rather than later? What kind of funding

would you need from that vendor to initiate this process?

Secretary STILLER. Typically in submarine procurement, we have

two years of advance procurement that comes before you buy the

submarine. So, realistically, looking at this, you really could not

start construction on the submarine until fiscal year 2010 because

you do require two years of advance procurement money. Advance

procurement money in the first year is usually on the order of

about $400 million. I will defer to Admiral Hilarides in case I have

missed something there.

Admiral HILARIDES. No. That is correct.

Mr. TAYLOR. I would hope what I have just told you is not a surprise to you.

Secretary STILLER. No, sir.

Mr. TAYLOR. I would also hope that given what I think is the

move again of those important players to see this happen that you

would begin initial conversations with those suppliers so that we

could know exactly what that dollar amount is and so that, since

there is a need that everyone agrees to, that we can start filling

that need now rather than later, but we will need your help and

guidance on that.

Secretary STILLER. Yes, sir.

Mr. TAYLOR. Is that a reasonable request?

Secretary STILLER. Yes, sir, and as I mentioned in my opening

statement, the multi-year procurement authority that we have sent

over as a legislative proposal covers seven boats. If there are additional boats that would need to be added, that has to be included

in the multi-year authority as well.

Mr. TAYLOR. Is there any hope of additional savings with those

additional boats? Has anyone in your office calculated that scenario?

Secretary STILLER. Well, for the fiscal year 2010 boat, we know

we will not be able to achieve $2 billion a year because we will not

have invested the time and the resources that we need to get to

the $2 billion goal. So a fiscal year 2010 submarine—as I said, if

we look at that alternative, it causes us to add $5.1 billion to the

FYDP that we do not have, and if we do that, it is going to be part

of other critical shipbuilding programs that are in the account. As

for the Economic Order Quantity, I will defer to Admiral Hilarides.

9

Admiral HILARIDES. Sir, the two additional boats would cause

more learning. Again, with every boat you build the shipbuilders

learn. The costs come down as a result of that learning. So there

would be a benefit to the follow-on ships. It is not exactly calculable, but in the learning curves that are used to project our

shipbuilding costs, that is part of it. Economic Order Quantity—

buying nine ship sets worth, over seven ship sets worth does lower

the costs in basic economic principles. Yes, it would lower the cost

in things that you bought, that the Economic Order Quantity buys,

and the number of years from when you buy it in the Economic

Order Quantity to when you use it determines the total amount of

savings that accrues to Economic Order Quantity. So, since they

are closer to 2009, there is less than there would be for the 2011

and 2012 ships, but there is a savings that would accrue in that.

Yes, sir.

Mr. TAYLOR. Admiral, I want to give you the opportunity to play

the devil’s advocate because I would rather hear it from you than

from anybody else, but I think we did have, to the best of my recollection, the Secretary of the Navy on record last week saying that

if additional funds were made available that would be one of his

priorities.

Is there anything in your overall pipeline that would keep this

from happening? For example, do you have enough sailors to man

it? Are there enough young people processing through the school of

Charleston to man it? Is there anything that this committee has

missed that would tell us that this is not a good idea?

Admiral HILARIDES. Sir, we have not gone all the way into the

vendor base and looked at every supplier to say, ‘‘In this year,

could that supplier ramp up to two per year?’’ the CNO shipbuilding plan has brought stability to shipbuilding, and we have continued to stand by that plan because that stability is what really lets

the shipbuilders make the right investments and get the things

lined up for the most efficient production. In that vendor base, I

know there are some pretty fragile suppliers. Generally, giving

them additional business earlier is better. I do not know of any of

those vendors that would have a problem, but I have not done the

analysis to tell you that they would all be able to provide their

equipment.

Mr. TAYLOR. Would anyone else on the panel like to comment on

that?

Admiral DONNELLY. Sir, we have 52 SSNs today, and if you were

to authorize additional submarines in 2010 and 2011 which would

not be delivered until 2015 and 2016, manning would not be an

issue.

Mr. TAYLOR. What if they were authorized in 2008?

Admiral DONNELLY. Well, I mean the construction would begin

in 2010. We have enough people or we could adjust our recruiting

and our personnel programs to accommodate it.

Mr. TAYLOR. And are you in agreement?

Admiral MAUNEY. I know of no other consideration that we have

looked at to limit this particular approach.

Mr. TAYLOR. The Chair recognizes the ranking member, the gentleman from Maryland.

Mr. BARTLETT. Thank you very much.

10

One of the biggest challenges that we face in the designing and

the building of submarines is maintaining our industrial design

base. Clearly, if, as our chairman and I both wish, we could move

up the calendar our commitment to two submarines a year, that

makes it easier, but absent that, what is your plan to make sure

that we have designers available in the future to design the submarines, because we are not doing that now?

Admiral HILARIDES. Yes, sir.

The two per year really affects mostly the construction base. It

does not do a lot for the design base. What the RAND study told

us is that, as we come off the designs for Virginia and the SSGN

that, as the designers drop below a critical minimum—and the

RAND study does make an attempt to define that critical minimum—it says that we should do something to sustain those designers. Again, construction will not do it. It has got to be a design. By

the CNO shipbuilding plan, we logically would start the next design in about 2012, and that provides a couple of years of gap between when the designers would go away and when they would

have to come back up for that.

The RAND study also did a series of sort of ‘‘what if’’ drills about

what we might do. We are assessing those options and the other

options that are in front of us, and we will be coming forward with

a plan that ensures we keep those critical designers on the books

so that they are ready to design that next submarine for the Nation, sir.

Mr. BARTLETT. How do we do that? If we do not have a submarine for them to design, how do we keep them on the books?

Admiral HILARIDES. The RAND study specifically recommended

accelerating the design of the next SSBN and designing it in a different way than we have designed ships before—instead of a dramatic ramp-up just before you start construction, doing it in a more

measured fashion over a longer period of time—and we are assessing that option. We just have not had a chance to fully vet that to

see if that makes sense, sir.

Mr. BARTLETT. Do our authorizations and appropriations bills

need to reflect that or do you have the option of doing that within

the gross amount of money we give you?

Admiral HILARIDES. Sir, for now, we have the resources required.

This issue really comes up in 2010, in fiscal year 2010, and so the

follow-on budgets, I would suspect, would reflect the results of our

study of those plans and of our putting in a plan that will sustain

that base.

Mr. BARTLETT. But if we moved up the procurement two years

for two submarines a year, then the problem goes away?

Admiral HILARIDES. No, sir. Again, that is not principally a design effort; it is a construction effort. The design effort is pretty

much unrelated to the Virginia-class. The Virginia cost-reduction

efforts do help. That is, we are hiring designers to figure out how

to change the design such that it can be produced more effectively,

but when that work completes, there will still be a gap between

then and when we logically would start the next submarine design.

Mr. BARTLETT. But if we are building these more quickly,

wouldn’t we get to the next ones quicker?

11

Admiral HILARIDES. Sir, the requirement for the follow-on SSBN

is determined by the end of life of the SSBNs that are currently

in the fleet, and so that number is not affected by the Virginia- class. It is affected by the Ohio-class SSBNs.

Mr. BARTLETT. So this program is independent of whether we

ramp up the design or not?

Admiral HILARIDES. The design base is independent in a very

large measure, and I would defer to Ms. Stiller to tell you there are

probably some interlinkings but not in the main sense of the design

base.

Mr. BARTLETT. So tell me, what will they be doing absent a design challenge? See, the problem I have is I know you can keep

some people on board. I suspect that if they do not have meaningful things to do, you will not keep the best people on board.

Admiral HILARIDES. That is correct, sir.

My opinion is that the best use of their time is to design that

next SSBN, but again the Navy has not come through with the results of the RAND study to lay that plan in place.

Mr. BARTLETT. Is there anything you need from us to expedite

that?

Admiral HILARIDES. Sir, I do not believe there is anything we

need this year.

Mr. BARTLETT. Thank you.

Thank you, Mr. Chairman.

Mr. TAYLOR. I thank the gentleman.

The Chair now recognizes the gentlewoman from Guam, Ms.

Bordallo.

Ms. BORDALLO. Thank you very much, Mr. Chairman.

Admiral Donnelly and the other gentlemen and, of course, our

Secretary Stiller, thank you very much for your testimony today.

I am interested in receiving an update on the progress being

made on the Trident submarine conversion program, and I respectfully request that you discuss with the subcommittee today your

level of satisfaction with the progress being made to date on this

effort, and also I would appreciate your discussing today your level

of satisfaction with the two converted submarines that I believe rejoined the fleet last year.

Last, Admiral, I am interested in knowing more about the role,

if any, that Guam can play or will play in supporting the missions

carried out by the submarines.

Admiral DONNELLY. Yes, ma’am.

We are very satisfied with the SSGN program. We have actually

had three ships delivered to date. The Ohio was the first, and she

will deploy later this year in the fall time frame. Behind Ohio is

USS Florida and then USS Michigan, and all three of those ships

have been delivered to the Navy. They are in various stages of sea

trial, of final outfitting and evaluation and testing. The USS Georgia is the fourth and final SSGN, and we expect she will deliver

in the September 2007 time frame. Those ships will be on a slightly

different patrol cycle. They will have two crews, and the plan is

that one crew will operate the ship, once it is forward-deployed, for

about 75 days, and then the ship will pull into port and do a crew

swap, and then the next crew will do about a 21-day voyage, repair,

maintenance period, and then we will take the ship out for 75 days.

12

We will do three of those cycles, and then the ship will return to

its home port of either Bangor, Washington or Kings Bay, Georgia—we plan to put two SSGNs in Bangor and two in Kings Bay—

and then we go through about a 100-day maintenance period where

more extensive maintenance would be performed, and then the

cycle would repeat. We do plan, as you know, to use Guam as one

of those forward-staging bases where the crew swaps and voyage

repairs will occur. We do have some dredging projects in the harbor

to enable that much larger submarine to get into the pier in Guam,

and we are very excited about the capability that these ships bring

to the Navy, and we look forward to the first deployment of Ohio

this year.

Ms. BORDALLO. Thank you. Thank you very much, Admiral, and

we want to thank you all for discussing it with me prior to this

meeting and giving me the date of the arrival of the nuclear sub,

the USS Buffalo. Thank you.

Thank you, Mr. Chairman. I yield back.

Mr. TAYLOR. Thank you.

The Chair recognizes the gentleman from Virginia, Mr. Forbes.

Mr. FORBES. Thank you, Mr. Chairman. Thank you for holding

this hearing.

I want to thank all of our witnesses for their patience in working

with us to educate us on these matters.

The first question I have is just the timeline. I am trying to go

through the sequencing and make sure I understand it. If Chairman Taylor had it within his power to write you a check today and

say ‘‘we want to bring on line a new sub or a new carrier,’’ give

me the timeline before it would be deployed from today, if he presented the check to you today.

Admiral HILARIDES. Sir, if I may, the basic timeline is this: two

years prior to authorization, we need two years advance procurement (AP) to buy long lead materials. In the propulsion plant,

there is a small tranche of one year advance procurement that gets

the rest of the government furnished equipment in place, and then

the year of authorization starts the clock on the construction, but

really your two years on the clock that you asked. By the tenth

ship of the Virginia-class, we believe will be at a five-year construction span, somewhere close to that. So about five years from that

authorization that ship would go out to sea on its trials.

We also intend to change the construction such that that ship

does not require a shipyard period after that, but what we call the

‘‘post shakedown availability.’’ Our intent would be to reduce that

to the smallest possible. So, about a year after that delivery, so the

sixth year after authorization, she would start her pre-overseas

movement workup and about six months after that she would deploy.

So, from today, from the AP, it is 7 plus about 2, and from the

authorization, it is the 5 plus 2.

Mr. FORBES. So, doing your math, if you would tell me exactly

how many years of the years you have just told me from today—

if Mr. Taylor presents you with a check, tell me what the total

number of years would be before it would be deployed.

Admiral HILARIDES. That would be 11, sir.

Mr. FORBES. That is 11 years.

13

So, if today he could say we need a new sub, we would be looking

at 11 years before we could have it deployed?

Admiral HILARIDES. Yes, sir.

Mr. FORBES. Any idea on the carrier?

Secretary STILLER. The carrier has four years of advance procurement funding required. The construction cycle of the carrier—

Mr. Petters can best answer this on the second panel, too—is

longer than the submarine. It has got a seven-year construction

cycle, and then it has a similar on the back end of how long you

have to do your workups and your trials before you deploy. So I

would add about four more years to your number from the submarine.

Mr. FORBES. So, from 11, you would give me 15?

Secretary STILLER. Yes, sir.

Mr. FORBES. So, if Mr. Taylor were to authorize that today and

he had it in his power, that would be 15 years?

Mr. TAYLOR. Mr. Forbes, I understand my limitations. ‘‘if this

committee.’’

Mr. FORBES. ‘‘if this committee.’’

Fifteen years. If whoever would come in here and we had 11

years for a sub, it would be 15 years from today. Now——

Admiral DONNELLY. Mr. Forbes, if I may, I am not sure that Admiral Hilarides has got the math exactly right.

As I understand it for a submarine, it is two years advance procurement, five years construction. That is seven years. Then with

the PSA and the POM workup, it would be nine years.

Mr. FORBES. So your total would be nine years?

Admiral DONNELLY. Nine years for a submarine.

Mr. FORBES. So 9 years for a sub, 15 years for a carrier.

Is my time about up?

Can you tell me—we hear all the time the words ‘‘acceptable

level of risk.’’ can you tell us what that means, anybody?

Admiral DONNELLY. I assume you are talking about the

period——

Mr. FORBES. When we are told how many subs we need, we are

always told 48 subs is an acceptable level of risk, and that is kind

of like giving a symbol of this is the certification. That is okay. You

know if you have it.

So what is an ‘‘acceptable level of risk’’? How do we define that?

Admiral DONNELLY. That is a tough question, sir.

I look at this as a shortfall. Under the current 30-year civilian

plan, in 2020 we will dip below 48 submarines, and we will remain

below 48 fast attack submarines until 2033, so that is a 14-year period when our force levels will be below the minimum required

force level of this most recent 2005 study. So there is risk associated with that. Quantifying that risk is a function of your assumptions about what that future from 2020 to 2033 will look like. So

we are undertaking a number of steps to mitigate that risk such

as if those shipbuilders can deliver the ship in 60 months as opposed to 72 months. That will accelerate two ships to the front line,

and that will help fill that shortfall period.

As I mentioned in my oral statement, we have identified 19

hulls, by hull number, and that we could extend their service lives

based on their fuel remaining. Now, that would require some addiVerDate 22-MAR-2001 13:23 Oct 09, 2008 Jkt 037655 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 C:\DOCS\110-30\067280.000 HAS2 PsN: HAS2
14

tional maintenance periods for those ships, but we think we could

get 10 additional 6-month deployments from those 19 ships, and

that would further mitigate that shortfall period but not completely.

Mr. FORBES. My time is up, but let me just state my concern and

maybe you could get back to me either privately after this or in

writing.

I look at our Quadrennial Defense Review (QDRs), and I recognize that just a few years ago, when we looked at a country like

China, for example, we felt they were not going to be involved in

carriers. You know, that was the wording we were getting. That

was what we were hearing. Then many of us thought, oh, yes, they

are going to be involved in carriers. We wrote about that. We

talked about it. Then, all of a sudden, we get the satellite imagery

of their retrofitting the carrier that they are doing. We find them

at the Moscow air show, looking at planes that would only fly on

the Super Carrier. We now have, you know, the generals coming

out and saying they will have carriers on line or could have in

about 2010.

We also had the same problem looking at subs. You know, we

had language that indicated they were not concerned about their

having a sub program. We then find out they have got underwater

docking bases and what they are doing with the Kilos and the production of subs that are there.

My concern is, when we are looking at an acceptable level of risk,

we better be calculating some of that and factoring it in because

we cannot afford 9-year windows and 15-year windows if we find

out it is different 2 years from now or 3 years from now, and I

think that is one of the things this subcommittee is very much concerned about. Are we allocating those risks?

My time is up. The Chairman has been very lenient with me, but

at some point in time I would love to have that discussion with you

or maybe it is something we can get our hands around and look

at what we are projecting on that.

Mr. Chairman, thank you.

Mr. TAYLOR. Thank you, Mr. Forbes.

The Chair recognizes the gentleman from Connecticut, Mr.

Courtney.

Mr. COURTNEY. Thank you, Mr. Chairman.

Before I forget, there is a statement, actually, from the Governor

of Connecticut, which I wanted to submit to the record.

Mr. TAYLOR. Without objection, it will be added to the record.

[The prepared statement of Mr. Rell can be found in the Appendix on page 141.]

Mr. COURTNEY. Thank you, Mr. Chairman.

As a new member up here talking to other new members about

this issue, obviously coming from where I come from, it is obvious

why this issue, the question of the size of our sub fleet, is an important one for the national security of this country, but frankly

some folks who are not from my region or perhaps from Virginia

sometimes are a little confused about why in the sort of post-Cold

War era this is a need for our Nation’s national defense, and I

thought maybe we could just step back from the prior discussion

about production schedules and ask you, Admiral Donnelly, if you

15

could sort of comment on what you see the need is for submarines

so that, as we deliberate on this question of the size of the fleet,

people clearly understand why it is important.

Admiral DONNELLY. Yes, sir.

The submarine force has been active around the world in the

past year. We have provided submarine deployments for each of

the regional combatant commanders and for U.S. Strategic Command (USSTRATCOM), of course, and for Special Operations Command. Submarines are not a Cold War relic. They are a highly

modern sensor suite, strike platform that utilizes stealth, endurance, mobility, persistence to gather intelligence, to be forward in

what we call ‘‘intelligence preparation’’ of the battlefield. You could

think of a submarine as a scout that is out every day, walking the

ground and providing valuable information about the environment.

There is a deterrent value in the submarine because of its stealth.

It is never seen. It may be there. It may not be there. We are using

submarines extensively in the global war on terror. Using their

stealth capability and their impressive intelligence-gathering capabilities, we can and have been gathering intelligence that is briefed

at the very highest levels of our government and of our military.

We are monitoring the activities and the plans of the enemy, and

our submarines are very heavily employed throughout the world. I

would be happy to provide classified details in an off-line session.

Mr. COURTNEY. Admiral Mauney, do you want to comment on

that?

Admiral MAUNEY. Yes.

I would add that we also participate in a number of other activities. We are working with our allies to build a coalition of nations

that respect national interests and global security. We have an active program in the Pacific and in fact in all of the geographic

areas.

Additionally, we are cooperating with our own forces to maintain

our dominance of the areas in which we need to operate to be prepared to gain access if directed by our national leaders, and those

complement the global war on terror with a longer view toward

maintaining our national security.

Mr. COURTNEY. Thank you.

Again, a lot of people may be watching this through webcast or

through the press, and again, members on this committee, I think,

have the benefit of great briefing papers from staff, and just so that

there is some clarity as far as the public who may be listening or

interest in this issue, again, I just want to clarify comments that

have been made earlier about what is going to happen in the future, starting in 2013. I believe that was the year that you mentioned, Admiral Donnelly, when there is going to be a rate of decommission that is going to affect the size of the fleet.

Again, maybe you can state for the record so we can make sure

that that is clearly stated what is actually going to happen starting

around that time frame.

Admiral DONNELLY. Sir, the date is 2020 under the current shipbuilding plan, and at that point, we will be decommissioning large

numbers of our Los Angeles-class submarines that were built at a

rate of about five a year. Although, by that time, we will be building two a year Virginia-class, the two a year increase does not offVerDate 22-MAR-2001 13:23 Oct 09, 2008 Jkt 037655 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 C:\DOCS\110-30\067280.000 HAS2 PsN: HAS2
16

set the five per year decrease because of the end of life. So there

is a 13–14 year period from 2020 to 2033 when our projected force

levels will drop below 48, which is our best estimate of the minimum number we need to meet the combatant command requirements in wartime and peacetime.

Mr. COURTNEY. Again, just to be clear, because the staff has

given us the benefit of this with their materials, there actually will

be a period where it will dip close to 40 within that decade or so.

Admiral DONNELLY. Yes, sir. The year 2027 to 2028. The number

bottoms at 40 and then begins to come back up.

Mr. COURTNEY. So to follow up on Mr. Forbes’ question about acceptable levels of risk, what we have to decide here is really whether or not the decisions we make today which will have an effect on

that number down the road, using our best possible judgment, is

actually an acceptable level of risk for our Nation. I mean that is

pretty much the decision we have before us; isn’t that correct?

Admiral DONNELLY. Yes, sir. I think that is an important consideration in the decision, and as I mentioned before, we are looking

at a number of initiatives that we can use to also mitigate that

risk. Given the number of hulls, it will be what it is, and then

there will be a shortfall, I think, regardless of what action this

committee takes. You know, we will be paying the price of a long

period of time when we did not build submarines in sufficient numbers from about in the 1990’s. So my job and the job of my successors will be to take what we have and to do the best we can

through the various, innovative techniques. We have already begun

that process in the redistribution of attack submarines from the Atlantic to Pacific, which will shorten transit times and which will

provide more presence for the given number. We are also looking

at a number of other alternatives that we might be able to employ

to get us through that period.

Mr. COURTNEY. That kind of involves looking into a crystal ball,

to some degree, as the world changes, and nothing is static in

terms of security challenges.

Admiral DONNELLY. Exactly, sir.

Mr. COURTNEY. Just one other follow-up question if I could, Mr.

Chairman.

Secretary Stiller, when you talked about the design part of our

industrial base—and actually, we have some folks who are here in

the audience, listening very anxiously to your testimony, and I welcome them from my district—there is also the production piece of

the industrial base also, which I believe brings a skillset which

may not be quite as technically trained as maybe the designers and

engineers, but clearly at the production level it is not assembly line

production when you build a submarine, and we are seeing stress

as far as that part of the industrial base.

Would you agree?

Secretary STILLER. Well, sir, I think we are seeing—as I said in

my oral statement, we are seeing a much more steady pace in the

production industrial base than we did, say, ten years ago when we

had a hiatus in submarine construction, and so, looking at the

health of the design of the industrial base versus the production industrial base, yes, sir, there are critical skills there that we need

to maintain, and we look very closely at that and at the one-year

17

ramping to two-year. We feel very confident that the skillsets that

we need there on the production side are there, and yes, we do

value them as well.

Mr. COURTNEY. Again, I would respectfully point out that in the

last 18 months there are about 2,000 jobs that have been eliminated at Electric Boat because of this production schedule, and if

we stay on track to 2012, before we go up to two a year, based on

everything I know, that workforce is going to continue to be under

a lot of pressure because it is just not sustainable without some of

the repair and maintenance work that may not be there at Electric

Boat, and you know, I can just tell you, as someone who stood outside those factory gates at 5:30 in the morning, greeting people, it

is getting older in terms of the people who are there doing the production work, and I really think that—again, I applaud the fact

that the Navy has used the foresight with the RAND study to look

at preserving those design and engineering skills, but there is another piece to this, too, in terms of where the shipbuilding schedule

is sort of leaving the production side of the equation as well, and

you do not have to comment on that. If you would like, you certainly are welcome to, but that is certainly, I think, another of the

challenges that we have as a committee and as a Congress to make

sure that the whole workforce is looked at in terms, again, of these

decisions that we are about to make.

Secretary STILLER. Yes, sir.

Mr. COURTNEY. All right. Thank you, Mr. Chairman.

Mr. TAYLOR. Thank you, Mr. Courtney.

The Chair now recognizes the gentleman from Rhode Island, Mr.

Langevin.

Mr. LANGEVIN. Thank you, Mr. Chairman.

I want to thank you all for your testimony here today.

Mr. Chairman, I want to thank you for allowing me to rejoin the

committee today. I have enjoyed my work on the Intelligence Committee, but I certainly miss the work on the Armed Services Committee, and I welcome the opportunity to return today.

If I could just start with one question with respect to the work

our submarines do in the field, and I believe it was Admiral Mullen

who had testified previously before the Armed Services Committee

that right now our submarines are only able to meet about 60 percent of the mission requests of our combatant commanders in the

field right now.

Do you concur with that number, Admiral Donnelly?

Admiral DONNELLY. Yes, sir. If I could, just to clarify, the combatant commanders submit requests for forces, and those requests

go to the Joint Staff where they are evaluated and validated and

prioritized, and the Joint Staff ranks those as critical, high priority,

priority, and routine, and then it allocates the available forces to

the combatant commanders accordingly, so that becomes my requirement is the Joint Staff validated allocation. I am meeting 95

percent of my requirement in all of the critical mission requests

and about 95 percent of the high priority, but overall, if you go

back to the original requests from the combatant commanders, Admiral Mullen is exactly right. I think it is 62 percent of those original requests that are actually being satisfied after that global force

management process and the allocation.

18

Mr. LANGEVIN. I just said we recognize that as a significant number that are going unfulfilled, and again, these are from combatant

commanders in the field.

Going to Mr. Forbes’ question, does the Navy’s future submarine

force structure plan to provide adequate capability against emerging threats? Mr. Forbes mentioned China. How does the plan address China’s growing submarine fleet?

Admiral MAUNEY. Yes, sir.

Our analysis and Admiral Donnelly’s opening statement briefly

covered the three more recent—the Joint Staff in 1999, the program decision in 2003 and 2005—and the Navy’s force structure

analysis considers the range of what our Intelligence Community

sees, and using their best analysis, it provides an estimate. That

estimate has risk associated with it. There are unknowns. We use

those estimates in parallel with detailed analysis of potential situations in which our submarines and, in fact, all of our forces would

be employed to determine how they perform given the design criteria that we use in building submarines and surface ships and aircraft.

From that performance, we look at how many we would need.

Generally, you come up with a range of submarines—48 being what

we call the ‘‘sweet spot’’—in the range of 45 to 50, which is the

minimum number several studies have come up with. Those allow

us to perform the critical missions in warfighting as we would postulate them. That warfighting consideration is then done in additional analysis, in parallel, using peacetime forward presence. As

Admiral Donnelly mentioned, we have been providing about 10

submarines a year forward presence to the combatant commanders

to accomplish the missions that we have been required by the Joint

Staff to accomplish.

One of the assumptions that you make is how much is that going

to change over time, and the assumption that was made was that

this force structure, or this forward presence number, is about

right given what our Intelligence Community forecasts for the future, and that is the force structure of about 45 to 50 will meet

both the 10 submarines of forward presence per year as well as our

warfighting needs as we have analyzed it.

Mr. LANGEVIN. But even given that, you recognize, according to

Admiral Donnelly’s testimony, that in the outyears, 2028 and 2029,

our force structure, our submarine force structure, drops below or

to about the level of 40. We are going to be at a significant disadvantage, and that troubles all of us.

Because I know my time is limited, if I could, I would like to go

back to the issue of the multi-year contract and getting two subs

per year. As to the multi-year procurement plan, I guess estimates

are it saves us about $80 million per ship. Going back to the chairman’s question, if we were to add more ships into the mix, adding

an eighth or a ninth, what does that do in terms of bringing costs

down using multi-year contracts? What do we expect to save?

Secretary STILLER. Right now, for the second multi-year contract

that we have been talking about in fiscal year 2009 through fiscal

year 2013, we assess the savings to be about $200 million per boat,

and we have not—and as Admiral Hilarides said earlier, there

would be some if you added an additional submarine, one or two.

19

There would be additional savings that we have not yet calculated

because of the learning that you would see with two boats a year.

Would it be significantly more? No. I mean it is not going to be another $200 million, but there would be some savings, but we have

not calculated that.

Admiral HILARIDES. We just have not run those numbers, sir.

Mr. LANGEVIN. Okay. If I could ask one last question.

We talked about and you mentioned here today the fact that we can get the build cost down to about $2 billion per ship. Could you

discuss in more detail the design changes you deem most important

for the cost reduction, obviously, and design and describe the elements in your budget request to support those efforts?

Admiral HILARIDES. Sir, there are about 300 different initiatives

that we are working on, and they have, some of them, a relatively

small cost effect on a per hull basis, but additively, they will get

us to the target that we need. We are shooting for more than $100

million out of these cost reduction initiatives, but in order to do

that, we have these, and many of them are small ones, simple

things like taking out hydraulic pipes and valves and putting in

electric actuators, changing the way we buy government furnished

equipment, and some big ones that would involve major changes to

the structure of the ship. They are all under evaluation in terms

of how well we can execute them, how much cost they take out and

their impact on the capability of the ship. That analysis is going

on this year, and our shipbuilders have been very, very helpful in

helping us sort all of that out. They have been the source of many

of those ideas. We will put that hull package together, and it will

form the basis of the cost reduction, and again there are about 300

that are under assessment, and as we decide to incorporate them,

then we and the shipbuilders agree on the amount of savings that

accrue, and then we put those in play, and again the goal will be

to have the predominance of the savings in place by the fall, and

we have just started that process with the shipbuilders.

Mr. LANGEVIN. How much weight are you giving to the government’s investing in the capital equipment up front? Sometimes the

SSR is reticent to invest in that equipment, particularly if we do

not know if ships are going to be built, so it will not necessarily

make the investment. If it is not used, it is a big waste of money.

What about the government’s funding some of the upfront costs

of investing in the capital equipment? Could you comment on that

and what degree that would achieve a significant savings?

Admiral HILARIDES. Yes, sir.

The current contract has some contract incentives that the shipbuilders have made great use of. It is called Capex. Ms. Stiller referred to it in her opening statement. That incentivizes and helps

the shipbuilder get the capital investment required to improve the

shipyards. Both of our shipbuilders have made good use of that,

continue to propose projects under that contract’s capital expenditure that are helping us bring the cost of those ships down. We

would intend in the next multi-year to work to have those incentives be in place as well, and of course, that would be part of the

negotiations that would go in, but it has been so successful for us

that we would intend to continue that as a going-in plan to those

negotiations, sir.

20

Mr. LANGEVIN. That is good to hear.

I want to thank the panel for your testimony here today and for

answering our questions, and thanks for the job you do.

Thank you, Mr. Chairman. I yield back.

Mr. TAYLOR. Thank you, Mr. Langevin.

It would be the Chair’s intention to now recognize those members

who came after the gavel, so that would be Mr. Ellsworth, Mr. Wilson should he return, and Mr. Sestak.

The gentleman from Indiana, Mr. Ellsworth.

Mr. ELLSWORTH. Thank you, Mr. Chairman.

Thank you all for your testimony. I apologize for being late, so

I may have missed something. You know, I think a lot of my questions got answered in some of the other questions, but I would

ask—you know, Mr. Courtney sounded out about how many job

losses when we cannot estimate it in the shipyard and cannot estimate how much they need when they are waiting for our Federal

Government to decide how many ships we need, but how does that

trickle down? If you will, tell me how that trickles down.

Also, I do not want to assume that everything that goes into a

sub is made there at the shipyard. There are outside contractors,

and I guess I would ask how difficult that is to find the people who

are making the equipment that is not the hull or in the ship, keeping them out there hanging, and then, in turn, is it a concern that

it goes—and I do not know this—to foreign companies, and if that

is the case, is there the concern for either foreign companies that

make that equipment and foreign materials that go into our equipment, and would that be a concern if that is the case?

Secretary STILLER. I am going to start and then turn to Admiral

Hilarides for the specifics on the submarine vendor base.

One of the goals of the SSN 313 plan has been to introduce stability into the ship so that the shipyards can plan, and we have

made no changes as we submitted the budget from fiscal year 2007

to fiscal year 2008 to the shipbuilding plans so that the industry

can plan and understand the industry even at the sub vendor level

to know what the Navy’s plans are for construction not only in submarines but across the board in carriers, amphibious ships, auxiliary ships, and SARC combatants. We do have a monitor on critical

vendors, and I am going to turn that over to Admiral Hilarides,

who is a specialist on the submarine side. We are in a soul search

situation in a lot of cases there.

Admiral HILARIDES. Yes. The vendor base is fragile, and I think,

in Ms. Stiller’s testimony, she said it is sustainable but not optimal, and I think that is true of our vendor base as well. We do not

have foreign vendors producing things for the submarine. We have

U.S. suppliers for the things that go into the ship, and we see some

stress on those suppliers, but we do not see anything that makes

us say we have to go look at alternate suppliers or develop foreign

suppliers for the ship, so it is not optimal but stable.

Mr. ELLSWORTH. Mr. Chairman, thank you. Like I said, most of

my questions were answered, so I yield back.

Mr. TAYLOR. I thank the gentleman.

The gentleman from Pennsylvania, Mr. Sestak.

Mr. SESTAK. I apologize for being late.

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Admiral, if you put some submarines in Guam, if you had a dry

dock there to do the maintenance, rather than how you have been

doing it by bringing them back to Hawaii or when they have been

brought all the way back to California, and you put the training

facilities in Guam, what is the difference in the operational availability with the investment of those submarines in Guam?

Admiral DONNELLY. It would clearly improve the operational

availability. I do not have the exact number. The limiting factor,

of course, is when we send the ship out of Guam for maintenance,

the PERSTEMPO rules then require us when the ship gets back

to Guam to stay in home port for as long as she was gone.

Mr. SESTAK. So, if you had the training facilities and the dry

dock there, this would probably cost $1 billion, I would imagine—

I just pulled that out of the air—but whatever it is, my limited understanding is the operational availability would be quite significantly changed. Is that wrong? You would not have to worry about

the PERSTEMPO.

Admiral DONNELLY. I think it would improve. Clearly, we are

getting about 48 days of mission time per year above—for the

Guam boats, 48 mission days above what a rotational deployment

submarine would provide.

Mr. SESTAK. Is it possible to get that figure, Admiral?

Admiral DONNELLY. I can provide that to you, sir.

Mr. SESTAK. Okay. Admiral, also, why not put more out there if,

really, the only remaining force of import as far as the submarine

fleet might be is, let us just say, China, and if time is of essence

in getting there, why don’t we put more out there?

Admiral DONNELLY. Well, there are certainly some infrastructure

challenges with doing that—family housing, enlisted bachelor quarters, all of the MWR hospitals, schools.

Mr. SESTAK. Is there anything being done to say how much more

it would cost with the difference of, let us say, 11 submarines out

there?

Admiral DONNELLY. Something is being done.

Mr. SESTAK. Could I see that?

Admiral DONNELLY. I do not have that with me, but we will provide it to you, sir.

Mr. SESTAK. The other one I was curious about—and I only bring

that up because there are scenarios when time matters as we all

know. I mean China is so different from the Soviet Union.

Admiral, the Joint Staff attack submarine study, the number of

oppressants was 68; is that correct?

Admiral MAUNEY. Yes, that is correct.

Mr. SESTAK. And that is kind of the joint, non-naval kind of

study?

Admiral MAUNEY. It was conducted by the Joint Staff, relatively

independent of the Navy, but it included Navy personnel, and certainly I think Admiral Donnelly’s predecessor contributed when

questions were asked.

Mr. SESTAK. The reason I bring it up is do you remember what

the wartime scenarios were and what the number of submarines

were based upon.

Admiral MAUNEY. We have reviewed those. Yes, sir.

22

Mr. SESTAK. The launch of China to Korea and Russia into Poland, should we update that study for wartime requirements since

it is such a major part of the testimony and for the analysis, potentially, of the different wartime scenarios?

Admiral MAUNEY. The details of the study, of course, as you

know, are classified, sir, and we can certainly discuss those in a

different forum if you would desire.

As to whether the study should be invaded, as you know, also,

other studies—PDM–3 and then the Navy’s force structure study—

did review the assumptions, conclusions and used a more recent

campaign analysis to determine their conclusions.

Mr. SESTAK. The last question is of the distributed Anti-Submarine Warfare (ASW) task force. The ASW, how does that dovetail well? I guess this is yours, Admiral. How does that work?

Admiral MAUNEY. The current Navy’s ASW doctrine is a total

force doctrine. It envisions a number of different elements of the

concept of operations, which includes distributed forces, aviation,

submarines, surface ships, and a layered approach to the problem.

So I think submarines are an important part of ASW. They are

capable and continue to be part of this total picture.

Mr. SESTAK. Is there still the effort to pursue this distributed

ASW concept, the one with, for instance, the advanced deployable

system, which I gather has just been canceled; is that right?

Admiral MAUNEY. There is an effort. Admiral Mullen has reiterated in the last six to eight months on a number of occasions that

ASW is a priority of his in terms of the Navy and the Navy’s capabilities. We continue to look at these distributed approaches and

have several projects in the works that were funded by Task Force

AFW and continue under the resource sponsors today and will deliver in due course, or we will continue to learn if they are not effective, if that turns out to be the case.

Mr. SESTAK. But that system is canceled?

Admiral MAUNEY. Yes, sir. The advanced deployable system concept of operations was examined by the fleet. And for reasons

which included the tethering of specific ships to the communications from those systems at a pretty short leash, Fleet Forces Command determined that was not a viable concept considering the

other concepts in ASW. We will complete that program in the near

future with a test of the system, and we will carry those lessons

into additional examinations and projects of the future for ASW.

Mr. SESTAK. So it is the tethering that was the challenge?

Admiral MAUNEY. Yes, sir. That is my understanding.

Mr. SESTAK. So technologically it could work, but it is that short

tether that they can’t roam once they leave and run away.

Admiral MAUNEY. The tether that was the issue that was identified to me, and the system, as I understand it, has not yet been

fully tested. That is scheduled for later this year, but did meet the

general attributes that were attributed to the system in the initial

documentation.

Mr. SESTAK. Thank you.

Mr. TAYLOR. We have been pretty lenient with the five-minute

rule with your questions.

Mr. SESTAK. The Navy has, by and large, by my understanding,

has been justified for structure on presence. And so the reason I

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was curious on the warfighting scenario is that is important to

what you are using today. In particular, as you have worked at

Guam and other places, what is the most efficient way to achieve

that? That is what I am most interested in, because the study did

say, the GS Study, 68. I think it was 55, and I think it came in

at 68 at the end. Is that correct, Admiral?

Admiral MAUNEY. Yes. That is correct. It wasn’t 100. I think it

was 55 to 68.

Mr. SESTAK. It actually went to 68 and 155, but the select came

in with 68. So the present number, I understand, was what the

war-time scenario, which I gather was subsumed within that,

which we look at for it, which I think might be the same or is the

smaller number.

Admiral MAUNEY. The studies considered both warfighting and

presence, and they are both presented to decision-makers who end

up measuring and assessing the risk. In this case it was the Navy

leadership, and the number of 48 was the balance that they selected from a number of considerations. I would say that it is not

only for force presence, but it is concepts from the analysis based

on different warfighting scenarios as well.

Mr. SESTAK. I don’t think there is a more versatile platform than

the submarine for presence or warfare.

Just how you take those warfare scenarios and do what you just

said, take the presence and bring them together and look at some

operational base in a strategic operation of ours, and how much

you want to put there to help meld those two to a less efficient way

was the reason for my questions.

Thanks very much, Mr. Chairman.

Mr. TAYLOR. Thank you, Mr. Sestak.

Admiral Donnelly, for the record, since on several occasions Congress has been accused of building and buying platforms that the

Nation didn’t need or the military didn’t want, for the record,

should Chairman Skelton, should Chairman Murtha, both of our

Senate counterparts, show their willingness to build this additional

platform for this year? Would you prefer to have it this year or

wait for the Administration here to build the program?

Admiral DONNELLY. Sir, that is an excellent question.

Mr. TAYLOR. That is why you make the big bucks.

Admiral DONNELLY. No. I am the submarine force commander,

but I am also a naval officer, and I would say I am a naval officer

first and submariner second.

Of course, I would love to have two additional submarines, as

you suggest. We could use them. They would greatly mitigate the

problem that we will have between 2020 and 2033.

But—and I would have to qualify this—the CNO has built a

shipbuilding plan, a 30-year shipbuilding plan, that balances across

the Navy for surface ships, logistic ships, amphibious ships and

submarines, and takes into account the industrial base across the

entire Nation, not just the submarine shipbuilders. And as a naval

officer, I honestly support the CNO’s 30-year shipbuilding plan because it has balance across it. There are periods when our aircraft

carriers dipped below the minimum number that we would like, as

the submarines did, too. But in balance, that is the right plan for

the Nation.

24

Mr. TAYLOR. If you had the assurances at the top line so that no

other programs would suffer as a result, what would your answer

be?

Admiral DONNELLY. That we would have to have two additional

shipbuilders. And that is consistent with, I think, Admiral Mullen’s

testimony that I heard as well.

Mr. TAYLOR. As a matter of curiosity, what would the hull capacity of that ship be?

Admiral HILARIDES. Addition is not my strong suit, as I indicated

earlier.

Mr. TAYLOR. I think we have got that.

Admiral HILARIDES. I believe it would be the 786.

Mr. TAYLOR. Seven hundred eighty-six. Would you know a cap

vendor that could possibly have a cap that says USS Missouri ? I

have a very strong feeling that could seal the deal. Just as a suggestion.

And the CNO, the Secretary of the Navy, was also asked the

same question.

We thank our panel very much. We thank you for your service

to the Nation and the men and women that you represent here

today. We will try to get to those ships sooner rather than later.

Any additional questions for this panel?

Okay. This panel is dismissed. Thank you.

The subcommittee now welcomes our second panel: Mr. John

Casey, President of Electric Boat Corporation; Mr. Mike Petters,

Corporate Vice President and President of Northrup Grumman

Newport News Shipyard; Mr. Winfred Nash, President of BWXT

Nuclear Operations Division; and Mr. Ronald O’Rourke, senior

naval analyst, Congressional Research Service. So we welcome you

for your testimony.

It is the tradition of this committee to have the witnesses stay

within five minutes. Without objection, I would be asking to ask

unanimous consent to let them speak up to ten minutes.

Hearing no objection, so ordered.

Who would like to begin?

STATEMENT OF JOHN P. CASEY, PRESIDENT, ELECTRIC BOAT

CORPORATION

Mr. CASEY. I am John Casey, President of Electric Boat Corporation. With me today, along with my personal staff, are the leaders

of the two unions of Electric Boat (EB), Ken Delacruz and John

Wardy, and collectively we speak for the talent and capability that

resides in southeastern Connecticut and Rhode Island.

Mr. Chairman, Ranking Member Bartlett and other members of

the committee, we are really pleased and excited about the fact

that you scheduled this hearing today to talk about submarine procurement rates. I am pleased to be joined on the panel with Mike

Petters, the government’s nuclear vendor from BWXT, and naval

analyst and a great thinker, Ron O’Rourke.

I would like to request my written submittal become part of the

record and just cover the highlights here.

I did ask that some pictures be distributed to you all that really

exemplify some of the recent successes of Virginia. There is a picture of the bow of the USS New Hampshire recently delivered from

25

Newport News, and you can see that is fully one-quarter of the entire ship. You can see a picture of the stern, part of which was built

at Newport News, part of which was built at Quonset Point. Together they were joined there, and they were recently shipped up,

as recently as yesterday afternoon. In fact, I was on the phone with

the admiral when that barged shipment went by with the stern of

that vessel.

We have also got the midsection there of 777, and I believe you

have got the USS Hawaii at sea with the beautiful sunset in the

background from this past December, a ship that was delivered

ahead of its schedule, created over a decade ago. You all talked

about the time frame for these vessels. That ship was delivered

ahead of its schedule. It was delivered a decade ago.

You have requested our view on five topics related to the most

complex weapons system known to man. These five topics are the

Virginia-class Acquisition Strategy, the CNO’s cost challenge, the

USS Virginia CAPEX program, our ability both in terms of infrastructure and people to up the procurement rate in advance of

2012, and any alternate funding strategies that we might be able

to conceive.

Submarine procurement—in answer to the first question relative

to acquisition strategy, submarine procurement has fluctuated dramatically, as you see in my written testimony. There have been

three significant policy changes in the last ten years. Over a decade

ago, there was a plan to sole-source submarine production. Over a

decade ago there was a plan to start two ships per year, and during

that ensuing decade, there was a six-year period where only one

submarine was delivered to the United States Navy as a result of

a holiday taken from submarine shipbuilding activities.

The current plan, as we discussed, keeps one a year in the budget until fiscal year 2011, and there are two starting in fiscal year

2012. Of that, ships that have been authorized, in Block I there are

four ships, Block II there are six ships. Five of those six were

bought in a multiyear procurement. So when I refer to those

blocks, it is just for reference point of view.

The plan, as you have all discussed already, will create, in essence, a force-level shortfall, and the Navy testified that they are

trying to mitigate that, including using activities we have, accelerate production down to five years as a means of getting more ships

to the fleet sooner.

My primary concern as a shipbuilder is the cyclical demand this

one-per-year production rate or procurement rate will cause to the

people that work on the waterfront in my Groton front shipyard.

The plan needs to be stable. It needs to be increased in terms of

volume in order to achieve the $2 billion ship. They need to be

bought in a multiyear procurement. We need to be a two-year. We

need to use economic quality techniques, and the government vendors need advanced procurement moneys. In fact, we could use advanced procurement moneys in the shipyard to accelerate manufactured items that we build that are very similar to the items that

are bought through the vendor base.

There was a question asked during earlier testimony, I think it

was by Mr. Ellsworth, regarding the national vendor base. I think

it is interesting to point out the approximately $20 billion that

26

have been obligated for submarine procurement to date. Almost $7

billion of that money, not counting me, Mike, or the nuclear vendor, are allocated to vendors across the country. In fact, there are

over 15 States in this country where over $100 million of submarine pieces and parts are manufactured.

We are working very closely with the Navy to reduce the cost.

And the cost has three major constituents: the government-provided material, the contractor-furnished material, and the shipyard

labor we use to build these ships. We are working with the Navy

through a model. We are working on inherent costs, the design;

structural costs, the schedule; systemic costs, the way we acquire

materials; and realized cost, the efficiency of our people in a shipyard. We are not just leaning on the people. We are looking at all

four key elements of cost.

The total cost, of course, on the labor side has two components.

There are the number of hours you spend and how much you

charge per hour.

Dollars we charge per hour include absorption of overhead. Electric Boat has been very aggressive at cutting down on our overhead

expenses. If we took the future procurement rates, pricing rates,

excuse me—the future pricing rates in the early 1990’s, and applied those to the programs for the next decade, we would have had

a certain cost for the products we have produced for the United

States Navy.

Through our aggressive re-engineering, we have reduced those costs by $2.7 billion, and 95 percent of those savings have been accrued for the United States Government.

Meeting the $2 billion challenge will require support from all of

us, all of the stakeholders, including the ones at the table, but the

Navy as well. And it also presumes that there aren’t any significant perturbations for the global economy, including major commodity pricing changes. Working together, we can make it happen.

It cannot be done if we only buy one ship per year.

There was also a question on the Capital Expenditure program,

in particular on our Virginia class. This Capital Expenditure

(CAPEX) program is one where a portion of the profit that we

would ordinarily receive is allocated to CAPEX, tied to the CAPEX

process.

CAPEX incentive payments equal the invested costs; 50 percent

of that profit or of that cost can be applied when a project is authorized, including Navy authorization, 50 percent when it is implemented.

There are three recent very successful examples: light metal fabrication facility, a coatings facility, and a transportation project.

The total investment was about $30 million. The total savings are

about $270 million over the life of the program, approximately an

8-to-1 return. There is a significant balance of money remaining.

My teammate will talk about some of the items he has done at his

yard. It is a good method to incentivize shipbuilders to make investments they might not otherwise make.

The next question they asked was about increasing production

prior to 2012, And I love this question. I love it because, as an example, at 5 o’clock this morning, I am at the gym—in fact, it happens to be in your district, Mr. Langevin—practicing Ashtanga

27

yoga. Somebody comes over to me and says, ‘‘John, can I ask you

a personal question?’’

I said, ‘‘Certainly.’’ ‘‘Will there be any more layoffs this year?’’

I have answered that question almost every day, every day for

the last ten years of my life. EB has the infrastructure in place to

build up to three SSNs per year. Minimal investment will be required in tools and equipment to accelerate this production. Our

workforce can grow. We grew—in fact, we were so small, we were

1,500 people until 1998. We doubled the size of that workforce in

the Groton waterfront to support the Navy’s maintenance requirements. But we have sustained this low-submarine-production-rate

environment because we had the Jimmy Carter multimission platform being built, because we had an SSGN program, and because

the Navy asked us to participate in maintenance work. Those

things, I am told, two are gone, and the third one is going away.

All those are now happening at the same time.

There is no new submarine design for the first time in the history of naval nuclear power. Continued rollout for Electric Boat at

current levels and maintenance work could actually save $65 million on Virginia-class procurement rates during the next ten years.

As far as alternative funding strategies are concerned, 20 of 30

planned Virginia ships have, in fact, been contracted or authorized.

There are, in fact, in my opinion, more options through acquisition

processes and strategies to acquire those remaining 20 ships more

efficiently than the first 10. The traditional approach, multiyear

procurement, using advanced procurement moneys like the $70

million we recommended be put into the advance procurement line

this year to get us going early, that isn’t to get to two a year necessarily, that is to make sure we reduce the cost of the ones we are

building in Block II, to allow the shipyards themselves to use advanced procurement money for the parts we manufacture. We don’t

all just assemble. There are some things that can’t be bought that

we manufacture. And to expand the use of economic or quantity of

moneys. And one last item would be to authorize the Navy to procure one set of main machinery as a spare. Every program would

have a main machinery spare. That would avoid any potential for

that particular piece of equipment of hindering our ability for delivering that next ship as soon as possible.

A more difficult option that hasn’t been considered would be to—

think about this for a second. There have been on Block II ships

about $7 billion obligated already. Because of the time it takes to

build ships, we will not use all of those funds until we deliver the

last ship of that block. So in my mind, there is an opportunity to

look at Virginia-class procurement from a programmatic point of

view rather than looking at it from a ship-by-ship point of view. I

am not an expert in that area. Clearly you are going to have to ask

people in the Office of Management and Budget (OMB) and the

Treasury whether or not those alternatives are acceptable.

Let me wrap up, and I probably have taken more than the allotted time.

The Virginia program metrics are outstanding, in my opinion.

The cost is under control. It is predictable. We are achieving the

schedules that we sent many, many years ago, and the Navy has

testified to the performance of these vessels, including testimony

28

that the first ship reached initial operational capability this past

Monday.

Three of the first ten ships have been delivered. Seven remain.

The submarine cost reduction plan is under way. We can, in fact,

meet the challenge if, in fact, we are given the opportunity to do

so. We have two ships per year. Your support is absolutely critical

to our success here.

So I have talked about product, I have talked about the performance, and as the leader of the organization, I have to close with the

people. That is what makes the difference in these vessels going to

a place that cannot otherwise sustain human life. Many of us go

on these initial sea trials. There are thousands of people that participate in the creation of these vessels. When you put yourself inside of one, you have to be satisfied that the people who are participating in that process have their heads in the game. And they do,

and I am proud of them, and we have got to make sure we preserve

that.

Thank you. I would be glad to take your questions.

Mr. TAYLOR. Thank you.

[The prepared statement of Mr. Casey can be found in the Appendix on page 103.]

Mr. TAYLOR. Who would like to go next?

The Chair recognizes Mr. Petters.

STATEMENT OF C. MICHAEL PETTERS, CORPORATE VICE

PRESIDENT AND PRESIDENT, NORTHROP GRUMMAN NEWPORT NEWS

Mr. PETTERS. Thank you, Mr. Chairman.

Mr. Chairman, Ranking Member Bartlett, and distinguished

members of the Seapower and Expeditionary Forces Subcommittee.

I would like to thank you again for this opportunity to appear before you to discuss Virginia-class submarine program and the acquisition policy for the submarines.

In your invitation, Mr. Chairman, you asked me to address several questions, and I believe Mr. Casey has sort of highlighted

those. I responded to all of your questions in my written testimony,

and I request that that be accepted into the record.

For my statement, I would like to discuss just two of those questions, if I might. First, you asked if the Electric Boat Newport

News team could meet the Navy’s challenge of two submarines for

$4 billion in 2012 in 2005 dollars, and my response to that is a

solid yes.

You also asked if we have the ability to accelerate production to

two submarines a year before 2012. If the question is can we do

it, the answer to that is another solid yes. If the question is should

we do it, that response is obviously more complicated, and you have

heard some testimony already on that today. That answer is clearly

a function of stability of the entire shipbuilding base and the shipbuilding plan, as the CNO has already testified, and I will talk a

little bit more about that in a minute.

First, let me tell you why I have so much confidence in the Virginia-class program. This confidence comes from our experiences in

the past year and on the continuing strength of the team relationship. As partners, we have struggled together, learned together,

29

and today we are succeeding together. And together the team accomplished much in 2006.

In June, Newport News delivered USS Texas, the second submarine to the Virginia class and importantly our first submarine

delivery in 10 years, and I can tell you I rode that initial sea trial,

and I agree 100 percent with Mr. Casey, you rely on everybody to

have their head in the game when you go out on that first dock.

We are all very proud of the way we have reentered the submarine business at Newport News, and we recognize the important

role that the Congress played in making this happen, and we are

very grateful. The Nation is very well served by having two great

shipyards in the submarine business.

In August, we closed a pressure hull on the fourth ship, USS

North Carolina, well ahead of this milestone for USS Texas. This

came as a result of applying lessons learned from USS Texas as

well as the third ship in the class, USS Hawaii, which our partners

delivered in December. And we are now marching toward an April

21st christening for USS North Carolina, followed by the launch on

May 5th with sea trials, and delivery at the end of this year.

Importantly, USS North Carolina is the first of our ships with

a shortened construction schedule, and we have been able to do

this because of the innovation, sharing lessons learned, and significant movement down the construction learning curve. Reduced

schedules will result in lower costs, and this is one of the ways we

will achieve the Navy’s cost target.

We also finished our work on USS New Hampshire and shipped

our final module to our partners at Electric Boat, as Mr. Casey

pointed out. USS New Hampshire was the first of the class to have

a 1,600-ton bow supermodule. This unit included the sail for the

first time, a production change that will save the program many

manhours. Newport News will install this sail on this unit for

every ship regardless of which yard is to deliver the ship to the

Navy. Also important is the fact that we delivered this module with

greater work content than any previous module while achieving an

18 percent reduction in manhours from our work on USS Hawaii.

So I am confident in our ability because of the strength and creativity of this team, that the team continues to show, and because

of what we have accomplished this past year in terms of manhours

and schedule reductions.

Now, I am also confident because of the progress we are making

in reducing the cost and construction. As shipbuilders, we are focused on reducing the 40 percent of costs attributable to labor and

the 25 percent of the cost of material we provide for construction.

We have made tremendous progress in both areas, and we will only

get better.

We are seeing the benefits of learning on each ship we work. We

are implementing design and process changes to make each ship

more produceable and more affordable. These changes provide

manufacturing, schedule and material savings with input coming

from a submarine industrial base and actual cost returns on completed production efforts ensuring we are attacking true costs.

And we are working on value streams to cut across the entire

shipyard through our Progress Excellence Initiative. As you know,

the remaining third of the costs of each submarine is governmentVerDate 22-MAR-2001 13:23 Oct 09, 2008 Jkt 037655 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 C:\DOCS\110-30\067280.000 HAS2 PsN: HAS2
30

furnished equipment, or GFE, and I know the Navy is working to

vigorously to reduce these costs as well. By combining the savings

shipbuilders are working to achieve and savings the Navy plans to

achieve, I know we can meet the $2 billion price per ship goal, and

the last element of those savings will come from volume. The sooner we start producing two submarines per year, the sooner we will

see the benefits of being able to order material in larger quantities,

and the sooner we will be able to reduce the time between similar

construction jobs, which will increase our learning. And learning

translates to lower labor costs.

Now, this leads me to your question of supporting accelerated

production of two submarines per year. Over the last couple of

years, we have invested in our facilities to reduce construction

costs. These investments are also integral to the protection of two

ships per year. We have invested our capital carefully in facilities

and equipment that are multiuse to benefit all of the Navy programs we work at Newport News. We have used the capital incentives in the Block II contract to make changes that are reducing

costs and schedules, and I provide some very specific examples of

that in my written testimony.

We can successfully start early production as long as we are able

to procure from the submarine industrial base material components

we need. Acceleration will require all of us to adjust existing work

plans and schedules and to take the necessary steps to ensure we

have skilled craftsman with the required certifications to do this

expanded work.

This careful and detailed planning cannot, however, be accomplished overnight. Authorization and funding must be received in

sufficient time for the industrial base in our shipyards to proceed.

I promise you that we at Newport News will respond to the decision to accelerate production enthusiastically and energetically. Yet

a decision to accelerate production must not come at the price of

destabilizing the entire shipbuilding plan. There must be balance.

I remain mindful of the painful lessons about stability that all of

us in the shipbuilding industry have learned. We all welcome the

stability inherent in the CNO’s 30-year shipbuilding plan, and it is

important to all of us that accelerating the production of submarines does not destabilize the entire plan.

In the year that has elapsed since my last appearance before you,

the Electric Boat Newport News team has accomplished a great

deal. We are proud of what our people have achieved with their

hard work. To ensure our Navy has the number of ships it needs

when it needs them, we must continue to take weeks and months

out of our production schedules. We are doing just that today, and

we are committed to doing more.

I welcome the attention of Congress and this subcommittee in

particular to the submarine needs of our Navy.

Shipbuilders are skilled men and women who choose this difficult

occupation because of their strong belief in America and a desire

to contribute to our Nation’s security. All of us on the Electric Boat

Newport News team are working hard to build the most cost-efficient and highly capable nuclear-powered submarines for the

world’s greatest Navy. It is work we are very privileged to perform.

Thank you, and I look forward to your questions.

31

Mr. TAYLOR. Thank you.

[The prepared statement of Mr. Petters can be found in the Appendix on page 123.]

Mr. TAYLOR. The Chair recognizes Mr. Nash.

STATEMENT OF WINFRED NASH, PRESIDENT, BWXT, NUCLEAR

OPERATIONS DIVISION

Mr. NASH. Chairman Taylor, Congressman Bartlett, and members of the committee, my name is Winfred Nash, President of

BWXT’s Nuclear Operation Division.

As a long-term supplier of heavy components, including nuclear

power units, I believe I bring a unique perspective on the critical

issues before you today. BWXT could support a procurement rate

of two Virginia-class shipsets per year in 2008 and beyond. The additional volume would produce a nine percent savings over current

prices and would also yield an eight percent savings in the next

Ford-class carrier shipset.

Mr. TAYLOR. May I interrupt? Just for the record, I presume you

would be willing to make that commitment in writing?

Mr. NASH. Yes, sir.

Mr. TAYLOR. Thank you.

Mr. NASH. An option to drive down costs and to protect schedules, short of authorizing a second Virginia-class submarine before

2012, is to fund advance procurement for a second shipset in 2008

at $400 million, which would not only—would not be designated for

a specific submarine, but would roll forward for future use. A revolving inventory captures the savings associated with a second

submarine shipset without impacting the Navy’s planned shipbuilding budget in 50 years. It also provides Congress flexibility in

funding future submarine procurements.

Another critical reason for rolling—for having a rolling shipset is

the systemic stress that will result from the commercial nuclear

renaissance. Nuclear power has become an attractive option for a

number of nations. Higher commercial demands could significantly

affect price and the availability of raw materials, labor, and facilities. A revolving shipset would substantially alleviate these problems.

Expanding nuclear propulsion to a new class of surface combatant would also have a cost benefit to existing programs.

Fluctuations in the Ford-class shipset production schedule would

allow BWXT to support an additional near-term procurement beyond a second Virginia-class submarine. Depending on the Navy’s

requirements, this could reduce shipset costs an additional five percent.

In conclusion, BWXT can support a second Virginia-class shipset

in 2008 and beyond, which would yield production cost savings

across the entire Navy program—nuclear program. Additionally,

we can support a new class of nuclear-powered surface combatants.

Thank you for the opportunity to testify. I would like to submit

a more detailed written statement for the record.

Mr. TAYLOR. Without objection. Thank you.

[The prepared statement of Mr. Nash can be found in the Appendix on page 137.]

Mr. TAYLOR. The Chair now recognizes Mr. O’Rourke.

32

STATEMENT OF RONALD O’ROURKE, SPECIALIST IN

NATIONAL DEFENSE, CONGRESSIONAL RESEARCH SERVICE

Mr. O’ROURKE. Thank you for the opportunity to appear today.

With your permission, I would like to submit my statement for the

record.

When the Virginia-class began procurement in the mid–1990’s,

the Navy anticipated going to two per year in fiscal year 2002.

That was pushed back to fiscal year 2012. If the Navy had begun

to procure in 2004, we wouldn’t be talking today about the projected attack submarine shortfall.

One option for mitigating the shortfall is to take steps that a

force of less than 48 subs can, for a time at least, look more like

a force of 48. These steps are possible, but they could have some

potential disadvantages such as using a submarine line more

quickly. That could eventually force boats to retire before age 33,

which could reduce the size of force in the long run below what it

otherwise might be.

A second option for mitigating the shortfall is to extend submarine life beyond 33 years. A 1- to 3-year extension could reduce

the shortfall, while a 4-year extension could eliminate it. The feasibility and cost of extending service life would need to be examined.

The third option for mitigating the shortfall is to procure one to

four additional submarines between fiscal year 2008 and fiscal year

2011. My statement shows a number of options that mitigate the

shortfall or eliminate it by combining surface life extension with

procurement of one to four additional boats between fiscal year

2008 and fiscal year 2011. Those additional boats could be funded

using either traditional funding with advanced procurement, single-year funding with no advanced procurement, incremental funding, or advanced appropriations. These options would permit funding for the boats to be placed in various fiscal years, but they

would not substantially change the true amount of funding that

would ultimately be needed to procure the boats.

Some testimony to the full committee last week suggested that

two years of advanced procurement funding are required to fund

the procurement of the submarine, and consequently that no additional submarines could be procured until fiscal year 2010. That is

not really the case. Although submarines are normally procured

with two years of advanced procurement, a submarine can be procured without advanced procurement funding or with only one year

of advanced procurement funding. And, Mr. Chairman, if you don’t

mind, I want to say that again. Although subs are normally procured with two years advanced procurement, a submarine can be

procured without advanced procurement funding or with only one

year of advanced procurement funding.

Congress in the past has procured nuclear-powered ships for

which no prior-year advanced procurement funding had been provided. Congress did it in fiscal year 1988 with two nuclear-powered

aircraft carriers and could do it today with submarines. Congress

thus has the option of procuring additional submarines in fiscal

year 2008 and 2009 if it wants to. Doing so wouldn’t materially

change the way the subs would be built. The process would still include about two years of advance work on components and an addiVerDate 22-MAR-2001 13:23 Oct 09, 2008 Jkt 037655 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 C:\DOCS\110-30\067280.000 HAS2 PsN: HAS2
33

tional six weeks of constructional work on the ship itself. The outlay rate would be slower, and the interval between the official year

of procurement and the boats entering into service would be longer.

Some other testimony to the full committee last week suggested

that if you procured two boats in a certain year, it wouldn’t be good

to go down to one boat the following year then back up to two boats

the next because it would stress the workforce. I am not sure I

agree with that either. If you procure two boats in a certain year

followed by one boat the next, in other words, a total of three boats

in 24 months, the schedule for producing them could be phased

such that you could start one boat every eight months. That might

actually help the workforce and the rest of the industrial base transition from the current rate of one boat every 12 months to the

planned eventual rate for one boat every six months. The Navy’s

own 30-year shipbuilding plan anticipates going to a two-one-two

pattern.

The Navy’s goal to reduce the cost of each Virginia-class boat to

two billion in constant 2005 dollars as a condition for two per year

in fiscal year 2012 is the goal that the Navy has set for itself. Congress can take that goal into account, but it doesn’t have to control

congressional action. Congress can decide to fund two per year in

fiscal year 2012 or some other year even if the 2 billion goal isn’t

met.

My statement includes several schedules and funding approaches

for procuring one to four additional submarines between fiscal year

2008 and fiscal year 2011, and in connection with that, there were

questions from two of the Members about the cost effects of increasing the number of boats under the next multiyear from a total

of seven to a total of nine and what effect that might have on further reducing the costs to the boats.

In response, I can tell you that the current MYP includes five

boats, and the Navy at the time of that MYP being approved estimated it would reduce the cost of each boat by about $80 million.

But the Navy actually proposed seven boats, and the Navy at the

time estimated that if seven boats had been included in that MYP,

the savings would have been $115 million per boat, or about 35

million more per boat if you had seven boats in that MYP instead

of five.

So if you take the new MYP that the Navy is proposing and increase it from seven to nine, you might see an increase in average

savings per boat something along the lines of $35 million per boat.

It might be something less because the economies of scale are not

as tremendously increased going from seven to nine as they are

from five to seven. But I think it is something in that neighborhood

that we might be looking at.

The statement also discusses the attack submarine force-level

goal and options preserving submarine design and engineering

base.

Mr. Chairman, this concludes my statement, and I will be happy

to respond to any questions the subcommittee might have.

[The prepared statement of Mr. O’Rourke can be found in the Appendix on page 78.]

Mr. TAYLOR. I am going to briefly follow up your statement and

direct your observation to the gentleman from the private sector.

34

How accurate do you think Mr. O’Rourke is in reflecting those

additional savings? Should we have the two ships? Mr. Nash is already on record.

Mr. CASEY. I believe he is entirely accurate.

Mr. PETTERS. I agree with that, too, sir. Our effort is to get to $2 billion by 2012. If you increase the volume between now and

then, you start to move that price in sooner than 2012. Whether

you—I don’t believe you can get there in 2010, but I think that it

does bring it in closer. In terms of the multiyear procurement, the $80 million for five

ships going to—I believe he said 115- for seven ships, whether you

can get another 35- for two more ships or not, I am not sure that

that is exactly right. I think it is a good ballpark to go check.

Mr. TAYLOR. The Chair would request of you gentlemen on your

official letterhead a statement to that extent.

[The information referred to can be found in the Appendix on

page 149 and 150.]

Mr. TAYLOR. Now, this is just the first of four steps that we have

to take to make this happen. We are going to have to speak to our

Senate colleagues, the appropriators. I think we all want to see this

happen. But it is one thing to say something in passing; it is another thing to have something in your official capacity on your company letterheads, and I would ask that be done.

And now I yield to the gentleman from Maryland.

Mr. BARTLETT. Mr. O’Rourke, the appropriators had told us that

they would like to increase shipbuilding by five next year. The

Navy has told us that a submarine couldn’t be one of those because

we have a two-year lead time for procuring some of the lead-time

items. You have just testified that we have, in the past, avoided

that. Would you tell us how we accommodate what we have been

led to believe is an obligatory two-year delay because of these longlead-time items?

Mr. O’ROURKE. Submarines are typically, normally or traditionally procured with two years of advanced procurement funding. It

doesn’t have to be done that way. You can fund the entire cost of

the ship right up front or some major portion of the cost of the ship

up front and declare that to be the year of procurement, and move

on the next year and put another submarine in that next year if

you want. These are all options for Congress. It does not have to

be done the way that it usually is done. And Congress did it with

a couple of aircraft carriers in fiscal year 1988, and that is a much

bigger issue than doing one additional submarine in this year’s

budget. That was a $6 billion addition that Congress put in that

year.

Mr. BARTLETT. Mr. Casey and Mr. Petters, do you agree with

that statement?

Mr. CASEY. Mr. Bartlett, it is clear to me that if we can find a

way to commence the activities that lead to two ships per year in

the next one or two years, we can accelerate the production of the

costs closer to the $2 billion level.

There is no need that we have as a shipbuilder to wait for the

advance procurement (AP) moneys or for that money for the nuclear components to be built before we start building a ship. We

just have to make sure we work together with the government who

35

manages the vendor and make sure the parts are available to put

in the ship when it is time to put them in the ship so we don’t extend the total scheduled time to construct the vessel.

So what I understand Mr. O’Rourke to say is you can eliminate

and award AP altogether and authorize the ship’s construction

right now, work together in a collective fashion on an integrated

schedule, which would have the net effect of reducing the overall

time to construct the vessel. We did that very successfully on the

USS Jimmy Carter recently when the Navy engaged Electric Boat

to manage the entire vendor-based things that they would ordinarily manage themselves.

I am not suggesting that for the nuclear material. What I am

suggesting is an opportunity to integrate the schedules together to

make sure we get the pieces and parts when we need them, whether you define them as advanced procurement or part of the initial

procurement process.

Mr. BARTLETT. So if we move forward to 12 years from now, we

would have an additional submarine if we authorized and funded

that procurement this year.

Mr. CASEY. I think the number was more like nine years.

Mr. BARTLETT. We are going to be building some others, too. But

in 12 years, we would have more.

Mr. CASEY. Yes.

Mr. BARTLETT. And in nine years, we would have an extra.

Mr. CASEY. Yes, sir.

Mr. PETTERS. I think I agree with everything Mr. Casey said,

and I think I would amplify that there has been a lot of testimony

today that a significant part of our savings is driving the schedule

down to a five-year construction schedule, and we are trying to

drive the seven-year plan down to five years.

Whether you can do that and integrate the procurement of the

what we call long lead today and still be able to make it in five

years or not I think would be something we would have to go spend

some time and look at.

But, in general, I think that working things in parallel rather

than working them in series could be, and would be, seen as a

great way to reduce risk, and you may actually have a net positive

effect there instead of a negative.

But I think we have to look at what the impact on the schedule

would be.

Mr. O’ROURKE. When I say that Congress has the option of procuring these additional ships now rather than in fiscal year 2010

or fiscal year 2011 or fiscal year 2012, my statement does not depend on any change in the way that the ships are built. You can

still build them the normal way with two years of advanced work

and six years of construction time. Over time, eventually you have

stacked up a lot of boats up front, and over time the shipyards

would catch up with that even if they continue to build boats at

the normal rate and they would eventually enter service.

So the shipyards are right that there is a potential for changing

the way the boats are built that may compress the construction

time, but my own testimony about Congress’s options for funding

additional ships now rather than later does not depend on it. You

don’t have to assume that to believe that Congress has the option.

36

Mr. BARTLETT. I was privileged to travel with our Chairman to

shipyards all over the world. The last leg of those visits was to

shipyards in our country, and we had the privilege of visiting Electric Boat. And I was impressed that you were really working very

hard to be more efficient and reduce costs.

We were scheduled to go to Newport News, but a hurricane was

also scheduled to go there, and we decided not to compete with the

hurricane for a reception at Newport News. And so we now are

planning in the very near future to make that visit, too. And I will

be pleased if I can find at Newport News the same commitment to

cutting costs and achieving greater efficiency than we saw—that

we saw at Electric Boat.

Mr. O’Rourke, there is a suspicion that when we designate a risk

as being acceptable, that that is an accommodation to the reality

imposed by budgets that we can’t have any more resources. One of

our Members Mr. Forbes asked, how do you characterize that as

acceptable? If that is all you can get, that obviously has to be acceptable. As you look over their shoulders, how would you characterize the risk that we will have if we drop from 48 attack subs

to 40?

Mr. O’ROURKE. I guess what I would say is I think it raises the

question if 48 is acceptable, and you go below 48, are you now at

a level of risk that is less than acceptable?

Mr. BARTLETT. But they are telling us that 40 is an acceptable

risk. We have some suspicion that we characterize risk to be acceptable when it is unavoidable.

Mr. O’ROURKE. And in last year’s hearing on this topic, we talked

about low, moderate, and high risk, and I think last year the Navy

characterized the risk of that situation as moderate.

Mr. BARTLETT. How would you characterize it?

Mr. O’ROURKE. I would say the same thing as I did last year. If

we dip below the force level, we are running the operational risk

that is something now more than moderate, something closer to

higher risk.

Mr. TAYLOR. The Chair recognizes the gentleman from Connecticut Mr. Courtney.

Mr. COURTNEY. Just to follow up on that last question, Mr.

O’Rourke, the determination that 48 was the right target by the

Navy last year, that is not the first time that we have sort of gone

through that exercise in recent years. I mean, they have actually

had different numbers in the past; isn’t that correct?

Mr. O’ROURKE. That is right. There has been an evolution in the

attack force level goal that affects the outcomes of a number of

studies, some of which became official in terms of being folded into

things like the Quadrennial Defense Review (QDR) for that coming

year.

Mr. COURTNEY. And a number of those have been since the end

of the Cold War; isn’t that correct?

Mr. O’ROURKE. That is right.

Mr. COURTNEY. The Navy has concluded that the Navy needed

a larger number than 48 in the past.

Mr. O’ROURKE. And some of those studies have indicated a need

for 55 or more submarines, and one of those that has been mentioned a number of times already was the 1999 JCS study. But

37

there were others as well. There are some people that believe that

48 is not, in fact, sufficient, that a higher number like 55 or more

is better. There are debates on both sides of the issue.

Mr. COURTNEY. Mr. Casey, you alluded in your testimony to a lot

of the progress that has been made in terms of proficiency in the

recent delivery of the new submarines, and I was wondering if you

could elaborate in terms of quantifying how much savings you have

been able to create.

Mr. CASEY. I think the most recent and best example I could use

was that the USS Hawaii, which was recently delivered to the

Navy this past December, was delivered for 2 million manhours

less than the Virginia, the previous ship delivered from Electric

Boat. We expect to stay on that learning curve. I think we have

about 85 percent of our—this has unionized people as well, which

is not typical in industry, but we have 85 percent of the people in

our shipyard, unionized and not, participating in activities to improve the safety of how we do the work and reduce the cost of the

work that is done and improve the quality of the work that is done.

We are working very closely with the vendors. I think that question was asked relative to accelerating procurement rates. I think

the most important information we could provide them is to make

sure they know that we are going to buy these two ships, and I

think we will have some great response from them.

But let me summarize that and pile it together by stating this:

We are heading into a period of time where we are trying to dramatically reduce the cost, reduce the schedule, at the same time

one ship per year without the maintenance work on our waterfront

causes these eruption cycles. We are going to have to find a way

to change the size of the waterfront workforce by about 1,000 people during the years we deliver a ship compared to the years when

we don’t deliver a ship.

If we get to two a year, that goes away. We can stabilize that

workforce, and we don’t have to be as concerned about finding

something for those people to do in the intervening years.

I believe there are opportunities to look at in the 18 ships that

are home-ported in the Groton area, and where there are availabilities on those vessels that do not require moving of the vessels, the

Navy has, in fact, asked us to participate in maintenance in some

of those vessels. If we can stabilize that workforce and absorb the

shipyard overhead via the maintenance work, that can have the

net effect of reducing the cost of Virginia, as I think the number

I gave was about $65 million over the next 10 years.

So those are some examples to answer your question.

Mr. COURTNEY. Thank you.

When Secretary Stiller was here earlier, she seemed to almost

suggest that accelerating the production levels to two subs a year

would almost put at risk the Navy’s plan for bringing down the

costs, and I just wondered, Mr. Petters, if you want to comment on

that as well.

Mr. CASEY. There are three major constituents in this cost-reduction activity. One is the economic water quality vendor base, about

a third of the cost of the ship is contractor-furnished material,

about a third of the cost of the ship is government-furnished material, and about a third of the cost of the ship is the labor.

38

So on the government-furnished material, that portion of it is, in

some way, impacted, but in a very small way by these design activities.

What she specifically was talking about are the inherent costs

and the design of the ship are part of that cost-reduction package

that gets us to a $2 billion vessel measured in 2005 dollars. Nevertheless, we will reduce the cost of ships by accelerating procurement no matter when it is done. The more ships we build, the less

dollars per ship will be charged. I don’t think there is any question

on it. If we buy one at a time, however, we will not be able to

achieve the cost savings that are designed.

But she is specifically referring, I believe, to the fact that some

of the design activities we are engaged with today, for example,

eliminating sonar sphere, will take a couple, three years to complete. And that particular design modification will not be implemented on that first ship if it is authorized this year. It is still a

good thing to do. Still, the ships get cheaper. They may not get

down to the $2 billion level. I think that was her point.

Mr. PETTERS. I think so, too.

Mr. COURTNEY. And Mr. Ellsworth actually had to leave, and he

wanted me to ask a question of Mr. Nash, and I think he kind of

alluded to when he had the opportunity to speak to the admirals

earlier about decreased workloads on the vendors outside of the

Virginia and Connecticut and the industrial base, which includes

you as well, and he wanted me to ask you to comment on that.

Mr. NASH. Without question, the fact that we are at one Virginia

per year, and we have an aircraft carrier every five years, it is definitely a minimum level that we can operate the industrial base. As

a result of that, a lot of our subvendors that supply a lot of our

materials are our sole source as a result of that, and they have also

had to bring in additional work to make sure they can maintain

critical mass to continue to support the submarine and aircraft program as a result of that.

So if we were to go below that in terms of one Virginia per year

and something less than one aircraft carrier for five years, I think

we are going to be in a situation where we are going to have to

be maintaining resources and not have them a lot—a whole lot to

do. So from that standpoint, I think we really need to look at the

second Virginia as early as we possibly can.

And I would like to make one other point that Congressman

Bartlett had asked earlier. In 1998, the country was interested in

building two carriers per year, and the way they were able to

achieve that is they used a floating set of heavy equipment for that

aircraft carrier to do that. And that is where I think the $4 million

we have, maybe here this year, may be an opportunity to buy a rotating or revolving set of heavy equipment that could expedite the

fabrication of a submarine program.

Mr. COURTNEY. Thank you, Mr. Chairman.

Mr. TAYLOR. The Chair recognizes the gentleman from Virginia.

Mr. FORBES. Thank you, Mr. Chairman.

I want to say to Mr. Casey and Petters both, these pictures are

very impressive, but they still don’t do justice to the real thing.

When you see it, it makes us all proud, and we thank you for the

great job that you both do.

39

Mr. Petters, Mr. Bartlett made the statement that the hurricane

stopped him from coming to Northrup Grumman and Newport

News. I am going to give you my time. If you could tell us today

in a nutshell the changes to the design process, engineering, or construction of subs that Northrup Grumman and Newport News has

implemented in order to reduce costs and make them more efficient. And also if you give us the recommendation of what you

would like to see done that would help create more efficient procedures; what would they be?

Mr. PETTERS. Thank you, sir. That is a loaded question, so I will

try to describe the universe here in 25 words or less.

First of all, Congressman Bartlett, I would invite you again to

come visit us. I know you had the chance to visit us once, and I

invite the whole committee to come at a time of your choosing to

see what we have going on at the shipyards. Our overall scheme

of thinking about business in the shipyard is you combine investment and people with investment in your processes to yield really

great performance.

We have invested significantly in our workforce over the last ten

years from a leadership standpoint as well as from a skilled training perspective to make sure that we have and are able to forecast

the need for the kinds of skills that we will need for the ships of

the future.

We have also invested very heavily in our processes. On my first

day as president, we stood up an organization in the yard known

as Process Excellence, which would facilitate our Lean and Six

Sigma efforts throughout the shipyard. We actually validate the

cost savings that we get out of those programs. We put them in two

buckets, a risk-reduction bucket and a cost-savings bucket, which

is what the Navy sees. Today we have validated $55 million worth of savings there that

goes in those two buckets, and we think that is just the beginning.

That process looks at all of our value streams across the whole waterfront of the shipyard. We look at the pipe value stream as it

goes from one end of the shipyard to the other. We look at the steel

value stream as it goes from one end of the shipyard. We look at

the electrical value stream. We have been investing in our planning

processes and our—and we have been looking hard at our overhead, all of the things that we have to do to drive efficient performance into operation.

We combine that investment and process with some very

thoughtful investments in our facilities. Since the beginning of

2002, we have invested nearly $400 million in our facilities to improve the efficiency of building aircraft carriers and submarines,

and we have already planned for another $300 million of investment to do exactly that.

You know, I said earlier the questions that we were asked, can

we go to two submarines a year; yes, we can do that. Should we?

Yes, if we can keep it—keep the stability in place. I have to emphasize that. I have a chance in this role to see the—I see the submarine base, but I also see the aircraft carrier base. I see the carrier repair base. I see all of those bases, and I see that all of those

bases are fragile, and to find balance has been a very tricky thing

for the Navy to work its way through.

40

I would just ask that we—if we have a plan, let us stick to it,

and let us not disrupt our plan.

My friend here from BWXT Mr. Nash has talked about how

minimal we are at one submarine a year and one carrier every five

years. In fact, the Navy’s plan today has one submarine a year

until 2012, when we go to two, and we have one carrier every four

years. There is a carrier in this year’s budget request, but there is

also one in 2012. In my experience, that is the first time the Navy

has made a commitment to put the next carrier in the budget at

the same time as this carrier is in the budget. Those are signs of

stability that I think we can’t ignore.

And so while I am very hopeful that the committee can lean forward and find a way to move ahead on this program, I encourage

you to do that in a way that is not disruptive to stability, because

that would then have an effect in my yard relative to the people

and the process things and the capital investments that we have

made there. We are on a fine balance, and we need to keep that.

Mr. FORBES. Thank you, Mr. Chairman.

Mr. TAYLOR. The Chair recognizes the gentleman from Rhode Island, Mr. Langevin.

Mr. LANGEVIN. Thank you, Mr. Chairman.

Again, gentlemen, thank you for being here.

Chairman, again, my thanks for allowing me to rejoin the committee today. I have enjoyed my six years on the Armed Services

Committee, and I am so proud of the men and women in uniform

who defend this country every day. We have the finest fighting

force on the face of the planet because of the men and women who

wear the uniform; and I have said this many times, but it is equally important that we have companies like those that are represented here today that build the finest equipment for our men

and women in uniform, that help them to do their jobs effectively

and keep them safe. So thank you all for your patriotism and for

your hard work.

If I could, just so that I am clear on the question of whether to

rebuild the submarines with or without advance procurement.

What is preferable, and are there significant cost savings so that

I am clear whether we build it without advance procurement

money or we do it with it?

Mr. CASEY. I think Mr. O’Rourke is probably the most experienced on the difference between the two of them.

My perspective is as a shipbuilder. If I am authorized to build

a ship and I am funded at the levels I need progressively over the

five-year construction cycle, whether you call it advance procurement, whether you call it initial ship construction authorization, it

does not make a lot of difference to me. As long as I know I have

a contract to go build a ship and I am authorized to start, I will

do that as efficiently as I can. And, in fact, we are not satisfied

with how efficient we are on the last one, trying to make each successive build in less hours, a shorter time than its predecessor. So

I do not have a strong preference.

We have made some recommendations. Assuming the committee

follows the traditional path, the recommendations include $70 million in advance procurement, money to allow our vendors that we

buy material from to avoid a gap, if you will, so they can get the

41

material to us in time to start, assuming the multiyear procurement contract occurs on existing Navy schedule.

We have recommended that the government is authorized to buy

a ship spare main propulsion unit so they can have that main propulsion unit available to us when the first multiyear contract ship

will sign, and it will not interfere with our ability to get the schedule to build the ship down to reduce the cost. We think there are

opportunities in the economic order quantity area for you to go further, and of course, the nuclear vendor, Mr. Nash, testified that he

would like to get going, but I do not have a strong preference on

how it is done.

We have made some recommendations, as I said, using traditional funding approaches. There are alternatives; Mr. O’Rourke

laid out some great ones, and you all probably have some good ones

that we have not even thought of, but as long as you get us going

and can give the Navy the authority they need to contract with us

to start the construction process, we will get it done within the

commitments that we have made.

Mr. LANGEVIN. Can you identify a cost saving element? Are there

more cost savings one way or the other?

Mr. CASEY. Yes. I think that from a cost savings perspective—

and I probably fumbled that a little when Mr. Courtney asked it—

relative to the vendor base, we have to have a sum of money that

authorizes us to buy ships in a multiyear procurement process. We

oftentimes refer to that as ‘‘economic order quantity money.’’ with

the monies that can be saved through that overall process—you

know, about $200 million, in that range, something like that—driving a ship schedule from 7 years down to 5 years and the rest of

the construction improvements that we are forecasting, you know,

it might be in the range of $100 million or something like that.

We have to have the engines available to make that schedule,

and we have to have materials purchased from the vendor base in

order to achieve those reduced schedules. If we take our normal

seven years, the reason it normally takes seven years is, the first

year we are awarded a contract, we are sort of waiting for material

to be built by the vendor base so we can start in a meaningful way.

Last, you know, the cycles that are existing, the labor rates that

we are able to avoid if two per year is accelerated, will yield considerable savings, and I think the number would be about $65 million.

If it is two per year, it is a similar number. If we can find some

way to avoid these wild swings in the requirements for the Groton

warfront personnel, we have the potential to save a significant

amount of money on this program.

Mr. O’ROURKE. Mr. Langevin, also just to answer your question,

whether you do it for a couple of years with AP money up front or

you fully fund it in a single year with no AP money, that single

change, in and of itself, is not going to make any substantial

change in the cost of the ship.

The outlay rate will be slower because you have banked all of the

money for the entire cost of the ship up front, and some of it will

have to wait a little longer to be spent, but the actual cost of the

ship, itself, of that one change, is not going to change very much.

However, if you do this, if you procure a submarine in 2008, for

example, with a single year of full funding, as part of the initiative

42

to get the two per year earlier or to include more than seven boats

in the multiyear that the Navy is looking for, for 2008 through fiscal year 2012, then that would reduce the cost of the submarines.

The one change, in and of itself, of AP or no AP, that is fairly

transparent to the cost of the ship; but if it is part of a broader

strategy to get to two per year or to include a regular number of

folks in the multiyear that the Navy is looking at, then that would

reduce the cost of the ships.

Mr. PETTERS. I would just add that, in my experience, there is

a whole host of different ways that you can create a funding mechanism for, you know, advanced procurement, advanced appropriations, incremental funding, those kinds of things. Most of the time

when we are up here, they are looked at as accounting changes,

and we kind of look at it like the area on the curb is always the

same, you know, in aggregate, but I think that there are opportunities depending on the way that you approach this. I think there are

opportunities when you are out, when you are back at the shipyard, to look at some of these mechanisms as reduction mechanisms, which then translates to some lower cost.

So I think that is another way of saying what Ron has said, that

if you did fund the entire ship in 2008 and you allow not only some

work to go on in advanced procurement, but also at the shipyards

to facilitate and to move ahead and to work slightly in parallel,

maybe we do not get the ‘‘begin procurement to delivery’’ time all

the way down to five years, but maybe we address some of the cycles that John has going on at Groton which drive some significant

costs down, and so the area of the curb would diminish. And I

think that is a real challenge as we look at all of these things, because we tend to look at them here just as if they are accounting

tricks or accounting exercises, but in fact, there are real operations

on the other end of that, that depending on the method that you

choose, could have some impact.

Mr. NASH. In terms of whether you fund the ship all at one time

or whether you have AP funding for like two years in advance of

the funding of the platform itself, we would have to work very

closely with the shipyards to see how that type of funding approach

would work because there is a certain amount of lead time, especially in some of our heavy forgings, that just takes a couple of

years before you can get with the vendors to get it into their cycle

to enable them to produce those, to be able to meet the current

schedules we have with the shipyard today.

So there would have to be some additional integration and discussion with the shipyard on how we would do that to be sure that

we would not end up with long lead items that we produce and

that we end up holding the shipyard up, because once you start

holding the shipyard up, that is a significant amount of cost. We

cannot be caught in that trap.

Mr. PETTERS. Which is why I keep coming back. You cannot assume that we could do it in five years from today. There would

have to be some integration and some sort of schedule put out that

would integrate both of those factors.

Mr. O’ROURKE. And the option, as I presented, does not require

even assuming the achievements of any of that. I presented these

options solely on the basis of proceeding with the construction of

43

boats as we normally would, which is why the outlay would be

slower. As to anything that Mr. Petters has talked about, if you can

achieve it, then you can get some additional savings, but I am not

even going that far in outlining the option in my own statement.

Mr. LANGEVIN. What are the other things that the government

could do to take some of the pressure off of the shipyards with respect to capital outlays/capital improvements that need to be made

at the other shipyards that would make shipyards more efficient?

What are the things that the government could or should do in

helping to purchase that equipment so that the risk is not all on

the shipyard in the event that, you know, we do not get to building

the number of ships that we feel we need to or that new technologies could come on the market that replace the old equipment

that you just invested in? Are there things that the government

could be doing in those areas?

Mr. CASEY. I believe the capital expenditure (CAPEX) program

on the Virginia-class that we have today is a model that could

work across the entire shipbuilding industry. There are a lot of

ways to apply that particular model in the case of Virginia. As I

tried to explain, the process is tied to the fees or to the profit we

are eligible to earn on the contract, but there are other alternatives.

I think the key is to make sure that there is some sort of incentive that is tied to the existing contracts, but there has to be an

understanding of what the purpose of that investment will be in

the long term. So, when the government gets involved and sort of

absorbs what we refer to as the ‘‘cost of money,’’ if you will, it

makes those hurdle rates a lot easier to rationalize from an industrial point of view.

But I think that the model that we have is a good model, and

I think it can be expanded. It happens to be submarine-specific on

this given program. There may be some opportunities to look at

cross-program models.

Maybe, Mike, you will want to comment on that.

Mr. PETTERS. I think John brought up the right point.

The way the shipbuilding industry is structured today, in order

to attract capital, you really have to get the return on the ship you

are working on because of the way the contracts are set up. The

beauty of the CAPEX program and the submarine program is that

the submarine force has recognized that if you actually look at

what the return is over the class of ships, then it makes sense for

the government to invest in that capital improvement in such a

way that the corporations can invest in it as well.

We have done something a little bit different on the carrier program than what we do on the submarine program because we are

not now dealing with a production run of 30 ships. But in that

case, the Carrier Program Office has come back, and they have

looked at some of our major facility improvements, and they have

incentivized some of those as well.

We put up shareholder money for those investments to the tune

of nearly $200 million, but some of the incentives paid to us for

making those investments will get us to the point where we are

close to the hurdle rates that we need to justify those incentives,

and I think that is the principal issue that you need to look at. I

44

would respectfully request that the committee look at how do you

make investments that would be bigger than just a particular contract you are looking at, because the accounting rules that we have,

the financial rules that we have, make it very hard for us to just

go and make investments that we have to capture all——

Mr. TAYLOR. Mr. Langevin, may I interrupt for a minute?

I would like to invite all of the panel to the hearing to address

that, which is on Tuesday, the 20th. We would welcome your input.

Proceed, Mr. Langevin.

Mr. LANGEVIN. Thank you, Mr. Chairman.

Mr. O’Rourke, would you like to comment on that?

Mr. O’ROURKE. No.

Mr. LANGEVIN. Then my final question would be—you know, I

have been one of the biggest proponents, along with many of my

colleagues, in pushing up the build rate to a year sooner than 2012.

It looks like, right now, according to what we have heard from the

appropriators, that we are going to be building five ships this year,

one of which would be an additional submarine.

Does that get us to the point where we have protected our design

base that it protects our industrial base? I mean, it is obviously important from a national security perspective so that we have a submarine force that protects the Nation, that meets the requirements

of the Combatant Commanders, that protects the ability to design

and build these submarines; and I am concerned, as many have

been, that we could lose that capability or degrade it significantly,

and that will get harder and harder to come back from. We do not

want to be in the position of Great Britain, for example, that is just

now trying to reconstitute its submarine building capability.

So how much pressure does that take off of us if we, in fact, do

get to start building——

Mr. CASEY. In and of itself, the authorization of an additional

ship will not preserve the design capability that exists in this country, namely of the submarines. There are other activities that are

required, one of which is related to the Virginia-class program,

which is what is referred to as the design for an affordability study

that the Navy discussed separately, level loading or accelerating

the next strategic platform design, which I believe Admiral

Hilarides has testified to. It would also alleviate that concern to a

large extent.

But as to the authorization of the ship, I cannot answer in the

affirmative that that would, in and of itself, satisfy the requirements to sustain the design capabilities in this country.

Mr. PETTERS. I agree with that answer.

Mr. O’ROURKE. Yes. I, actually, wanted to amplify that a little

bit.

The Navy talked during the first panel about the option of accelerating the start of the design work on the SSBN, and that does

appear to be emerging as the major option or the major element

of the strategy for preserving submarine design and engineering

bases, especially in the wake of the conclusions reached by the

RAND report.

But one other option that is available to Congress, which Mr.

Casey just mentioned, is to expand the scope of the already

planned redesign work on the Virginia-class to include a greater

45

number of projects than what the Navy has funded, and that, too,

is an option for Congress. In fact, it is something that Congress has

added money for in prior year budgets. It could continue to do so

in the fiscal year 2008 and subsequent budgets.

Mr. LANGEVIN. Very good. Good point. Thank you.

Thank you, gentlemen, for your testimony.

Mr. Chairman, I yield back.

Mr. TAYLOR. Thank you.

The Chair recognizes the gentleman from Maryland.

Mr. BARTLETT. I have one quick question. Thank you very much

for your testimony.

I am having a little trouble understanding the concern for instability with the one-ship, two-ship, one-ship procurement. Since it

takes several years to build a ship, if I have nine ships to build and

I have five years to build them, I think I would spread that work

out evenly over the five years rather than having twice as much

work in years one, two, three, and four as I have in year five. Am

I missing something?

Mr. CASEY. I think the way you just explained it is a little different than what I thought I was answering.

If we stick with the existing plan today, we have one ship

planned to be authorized in fiscal year 2009, one in fiscal year

2010, one in fiscal year 2011. Right now, we are building one ship

a year from the block, too, so these ships that we are building

today, the last of which will be funded in this fiscal year we are

in now, fiscal year 2008, are built at a rate of one per year.

There is only one ship in the water, an Electric Boat, every other

year. The other ship is at Newport News in the water. We have

been able to mitigate the fluctuations in those skill-based people,

those skilled craftspeople—for example, the radiological control

people, the people who operate the vessel. We have been able to

mitigate that through our involvement in maintenance and repair

activities.

Now, that is going away. That is going to our naval shipyards,

as I have been told, so that will put us in the position of having

a ship in the water one year when we deliver a ship and then no

ship in the water for a year, a ship in the water for one year and

then no ship in the water; and I hope that helps clarify the issue.

When we get to two ships per year, there will be one in the water

every year, an Electric Boat. That is why the two per year has for

a long time been such an important priority relative to the industrial base view of the world, at least Electric Boat.

Mike can certainly answer a little differently, I think, because of

the——

Mr. BARTLETT. That is a different concern than the one I was addressing.

We have been led to believe that we inject instability into the

shipbuilding base if we procure one ship, two ships, one ship. I am

not having trouble understanding that since it takes, what, five

years to seven years, whatever it is, to build a ship. You know, I

would simply spread that work out so that I would have an even

workload and be thankful for that second ship every other year.

Am I wrong?

46

Mr. PETTERS. Well, sir, I think that—as I see it, I think that

there are two definitions of ‘‘stability.’’ when I think of ‘‘stability,’’

I think of, if you decide to add a second submarine to the plan at

the expense of, say, a surface combatant coming out of the plan or

the carrier being delayed for another year or something like that

which would create some changes in the plan of record because you

had to take the money that was designated for these other things

and put them into the submarine, that sort of instability would be

very detrimental to the entire industry.

If, on the other hand, you are thinking of ‘‘stability’’ as being,

once we go to two submarines per year, we can never go back to

one submarine per year, I think, as long as—I will speak for myself. As long as I know that the plan is one-two-two, one-two, whatever that plan is and we just stick to it, I can accommodate that.

I can make that work as long as we stick to it.

My concern on ‘‘stability’’ is not about whether we go from one

submarine to two and then back to one. My concern on ‘‘stability’’

would be, if you go to two and it causes you to do something to

other types of ships in the plan that would affect the base—you

know, the overall industrial base that is out there. I think that

would be a big problem for me; it would be a big problem for the

industry.

Mr. O’ROURKE. Representative Bartlett, my point along those

lines in my opening statement referred back to some testimony the

Navy gave a week ago where they said that if you did two boats

in a given year, then went back down to one, then back up to two,

that could stress the workforce.

In my own view, I disagree with that because the shipyards can

phase the total volume of work that they will understand that they

are getting, and it can actually represent a way of helping the

workforce transition from a steady rate of one per year to a steady

rate of two per year.

If, in between, Congress finds that it can only give one or two

extra boats during this four-year period, Congress, in my view, can

entertain the option of scheduling them so that it results in two,

one, two, one, so that the average rate of about one-and-a-half

boats per year could actually help make that transition.

I am sure the shipyards would love to go directly from one per

year to two per year, but if Congress decides it can only afford to

get one or two extra boats this period rather than three or four,

then, in my view, Congress should not feel it has to avoid examining options for adding those one or two boats that would have a

one, two, one, two schedule. I do not think that is detrimental. In

fact, it might actually be helpful in transitioning to the eventual

higher rate.

Mr. CASEY. A simple way to think about it, if I understood you

correctly, is three ships every two years is better than two ships

every two years.

Mr. BARTLETT. That is how I would see it, sir. Thank you very

much.

Mr. NASH. Chairman Taylor, I would like to add one thing.

I am not backing off the nine percent, but I want to be sure.

There was one assumption when I said there was a nine percent

savings as a result of the second Virginia-ship set. That is assumVerDate 22-MAR-2001 13:23 Oct 09, 2008 Jkt 037655 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 C:\DOCS\110-30\067280.000 HAS2 PsN: HAS2
47

ing that the projections we have right now for the second aircraft

carrier will be funded on the schedule that is predicted to be scheduled as shown in the contract.

Mr. TAYLOR. Mr. Nash, I am going to ask you an unusual question.

Because of the hurricane in the part of the country where I live,

there is now very fierce competition for labor, and I am a proponent of our next generation of cruisers being in power.

Could we, playing devil’s advocate, get to the point where, if we

were to add the second submarine and continue this and then follow that up with the desire to go—to build the next generation of

cruisers with nuclear power, could we find ourselves in a situation

where the cost of that plant actually goes up? Or is your industrial

base capable of handling that, and does it relate, in your mind, to

continuing the reduction in cost of those power plants?

Mr. NASH. With the hardware that we provide, we could support

that and, also, as a result of that, we believe there would be about

a five percent reduction in the overall cost to the naval reactor program if we could do that.

Mr. TAYLOR. I was hoping that was the answer, but I had to at

least throw the other thing out there.

I will open this up to the panel because you are so knowledgeable. Looking for ways to avoid the bottom of the valley as far as

the number of vessels and knowing that, for example, the block line

cruisers will retire very early, is there anything that we could or

should be doing to the 688s now that could help get the additional

two or three or four years that we would need to avoid that slump?

Mr. CASEY. I guess I will take a shot at that.

You know, I think that the Navy should really be the one answering this, but the questions I would ask them would be: How

could we extend the hull life? One of the limitations on a Los Angeles-class submarine, or any submarine, are the number of cycles on

the hull. Every time you go test it, you cycle the hull, and it is limited to the number of cycles it can see.

Second is the life of the fuel. How much fuel is in the ship? How

much gas is in the tank, so to speak? So one of those two things.

It limits the life of every submarine.

How much is left on each of those 688-class ships that are in the

fleet today? I cannot answer that. I do not have that information,

but I am sure the Navy is in a position to provide details on that.

Mr. PETTERS. Mr. Chairman, I would just add that I think John

has got it right. As far as the end of life of ships go, one of the

things that we have seen at the end of life of these ships is that

the cost of maintenance on an older ship starts to go up more than

linearly, and it is——

Mr. TAYLOR. Can that be avoided with enough preventive maintenance?

Mr. PETTERS. I think there is a tradeoff there about how much

investment you want to make in it, because some of the systems,

for instance, that you put on the ship that were built in the 1980’s

may not—the people who built those systems may not be around,

so you have to go redesign some of those systems.

Now, you are talking about what kind of investment would you

make. My suggestion on this issue is that the way to deal with the

48

force structure issue is not on the back end of the life cycle; it is

on the front end of the life cycle. The build rate on the front end

is what really drives the force structure. I mean, you can do some

things like maybe do another refueling or maybe do a couple of system reengineerings to keep a couple of ships out there, but that is

a Band-Aid fix. I think that dealing with the issue on the front end

is a lot more efficient because you are not dealing with the increased cost of maintenance, and you are making investments in

the right kind of technologies, and you are doing it on the baseline.

So——

Mr. TAYLOR. Mr. O’Rourke, any suggestions?

Mr. O’ROURKE. Among other things, you would have to look at

the operational implications of husbanding electrical cycles and

husbanding core life. If you are going to run the ships slower and

not submerge them as often, what does that do to the utility of the

submarines during the years that you are operating them?

Plus, there are some issues you mentioned that are things we

can do now that can head this off. There is simply the strict aging

of materials and brittlement of materials and so on; and the way

to get at that is to go in there and replace it. But that simply

trades a maintenance cost later for doing a maintenance cost now,

and again, when you look at the economics of that, it may not

make sense. So this strict aging of materials could be a limiting

factor also in addition to the ones that the other witnesses have

mentioned.

Mr. TAYLOR. The last thing I would mention is an observation

that the Shipbuilding Caucus and I had at breakfast this morning,

and I, for one, am pleased about the very helpful work of our Congressman Skelton and Congressman Murtha.

I would certainly encourage all of you to participate to the greatest extent you can in the hearing in a couple of weeks. I would welcome to know, for example, if there is an option of a multiyear procurement for these submarines, two additional ships that we intend

to buy, what savings, if any, does that bring. But again, I see a lot

of things, a lot of hurdles that we have to cross to make these

things happen, getting at least temporarily shorter, and as to all

of those who have a desire to see the Navy build more submarines

now and more ships now, I would certainly encourage those of you

who can work with us to work with us on that.

Mr. Ranking Member.

Mr. Forbes.

Mr. Courtney.

Mr. COURTNEY. Done.

Mr. TAYLOR. Thank you very much for being with us.

The meeting is adjourned.

[Whereupon, at 5:35 p.m., the subcommittee was adjourned.]

A P P E N D I X

MARCH 8, 2007

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DOCUMENTS SUBMITTED FOR THE RECORD

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QUESTIONS AND ANSWERS SUBMITTED FOR THE

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QUESTIONS SUBMITTED BY MR. TAYLOR

Mr. TAYLOR. Is there any hope of additional savings with those additional boats?

Has anyone in your office calculated that scenario?

Mr. CASEY. [The information referred to can be found in the Appendix on page

149.]

Mr. TAYLOR. Is there any hope of additional savings with those additional boats?

Has anyone in your office calculated that scenario?

Mr. NASH. [The information referred to can be found in the Appendix on page

150.]

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