# CNO Conducts State of the Navy Interview with Defense One

### 14 Sep 2022

*Below is a transcript of the remarks as delivered:*

BRADLEY PENISTON:  Hello, everyone, and welcome.  Thank you for joining us today.  I’m Brad Peniston, deputy editor of Defense One, and it is my pleasure to welcome you to the second event of our State of Defense Series.  It’s our service-by-service look ahead, and today we’ve got “State of the Navy.”  So we’ll kick it off by talking with the Chief of Naval Operations, Adm. Mike Gilday, and then we’ll hear from naval experts and members of Congress.

A couple notes before we start.  To the right of your screen, you can see a chat box.  You can use that to talk with your fellow attendees or to request technical assistance.  And the session is being recorded and will be available shortly for you to share with your colleagues on demand.

So, with that, without further ado, Adm. Gilday, thank you so much for joining us again.  How are you doing?

ADMIRAL MICHAEL M. GILDAY:  Mr. Peniston, great.  Thanks for asking.  I’m doing great.  It’s good to be with you this morning and I appreciate Defense One inviting us to have this session for 30 minutes or so.

MR. PENISTON:  Absolutely.  I understand you have a few words to talk about.  You just came back from a West Coast swing and, of course, you’ve got many other things on your mind.

ADM. GILDAY:  Thanks.  I’ll just make three points upfront.

The first, I did just come back from a West Coast swing, primarily an aviation focus in Fallon, Nevada, and Lemoore – or, Naval Air Station Lemoore.  I also spent some time at Tailhook and spoke at the Tailhook banquet.  So it was a deep dive into carrier aviation for the past few days.

Three points I’d make.

First of all, is that the Navy is forward in numbers.  And so we’ve got about 100 ships – a little over 100 ships deployed right now, and about 65-70 of those are actually at sea today.  And that includes two carrier strike groups, one in the Mediterranean and another one in the Western Pacific, as well as two amphibious ready groups, submarines.  We’re flying/sailing across the world right now, including in the Middle East, and are fairly busy.

The second point I’d make is that on a day-to-day basis we find ourselves deeply involved with allies and partners.  So we just wrapped up a big [Rim of the Pacific] RIMPAC exercise this summer.  Last week, we just [edit: started] up UNITAS down in the SOUTHCOM area of responsibility.  We’re ramping up for another big unmanned exercise in the Middle East as we continue to hone our unmanned skills with our allies and partners.  And the USNS Mercy just finished a very successful Pacific Partnership, where she treated almost 17,000 patients, and of those more than 6,000 were in Palau – I mean, the Solomons, excuse me, her last stop in the Solomon Islands.

The final point I’d make is just our priorities remain the same:  readiness, modernization, and capacity, in that order.  We have a new Master Chief Petty Officer of the Navy who just took over week before last.  He is fairly busy on his first trip down in Norfolk, Virginia.  His focus is on Sailors and their families and readiness.  So it’s great to have him aboard.

So with that, Mr. Peniston, I’ll turn it over to you and your team for any questions that you might have.

MR. PENISTON:  Absolutely.  Well, thank you for that.

And let’s just start with readiness and let’s start with aviation readiness.  You know, the [Congressional Budget Office/Government Accountability Office] CBO/GAO, they’ve noted declines in readiness, in mission-capable rates and in availability, you know, over the past years.  And you know, what have you seen?  Does it concern you?  And what’s the Navy doing about it?

ADM. GILDAY:  So in terms of our carrier air wings, our readiness is actually in very good shape.  And in particular, we’re taking a page out of the framework that we use to sustain Super Hornet readiness at 80%.  It hasn’t gone below 80% since the fall of 2019.  So that’s been a real success story for us.

In terms of the framework or the process that we’ve set up in order to maintain those mission-capable aircraft at above 341 consistently, we are also applying that same model to our other type/model/series aircraft as well, and having success there.  We’re flying every day.  And I would say that in terms of funding for flight hours from the Congress, we’ve been very happy with the amount of funding we received.  And although we have been making a big push on live virtual constructive training, big investment in simulators – I was just out to see a new integrated training facility out at Lemoore – I will also say that it’s a priority to keep young aviators flying.  They need to be in the air, and so that’s been a focus for us.

MR. PENISTON:  Have you been able to increase flight hours recently?  I know there was some concern a little while ago that people weren’t flying enough.

ADM. GILDAY:  So, actually, just talking to the fleet over the last few days, the aviators are satisfied.  Fleet aviators were satisfied with the number of hours that aircrews are getting on a monthly basis.

MR. PENISTON:  Okay.  All right.

So let’s talk ships now and let’s talk about the size of the fleet.  Obviously, there’s been, you know, intense scrutiny of this, you know, over the past few years, and then this year the Navy sent over its 2023 budget request and offered something of a menu – three options, anyway; three ways that the fleet could go in the out years.  And then, in July, the Navy sent over a classified Battle Force Ship Assessment and Requirement that called for a battle force of 373 ships.  That’s up some 75 ships from today and it’s also a higher total than in any of the three options laid out in the February budget request.  So the Navy told USNI News at the time that there is another version of this coming this year.  So my question is, you know – when’s it coming?  And then what’s in it, as far as you can say?

ADM. GILDAY:  So if I could just talk about the size of the fleet for a moment, our focus continues to be to maintain a ready, capable, lethal fleet today.  And so the friction is maintaining that – a fleet that’s ready to fight tonight, and it’s certified and ready to go tonight, and the friction is balancing that against investments in a future fleet, of course.  So priority one has been readiness of the fleet that we have and modernizing it at the same time because 60%-70% of that fleet we’re going to have a decade from now, so it has to be ready to go.

Investments – and when we talk about readiness, to quantify that a bit or to draw it out a bit, so we’re talking about filling billets at sea so that ships are properly manned, talking about ensuring that supply storerooms onboard our ships have the adequate capacity and the right parts so that ships can self-sustain out there during long deployments.  It also involves weapons and magazines.  And so although it’s nice to talk about the number of VLS cells one navy or another might have, unless they’re filled with weapons... they’re irrelevant.  So that’s been, obviously, a priority for us to make sure that we’re focused on the state of the fleet today.

I also think that – I know that – there’s a second-order effect there in terms of retention, in terms of retaining Sailors in the fleet.  They want to serve in a Navy that’s ready to fight.

In terms of the fleet of the future, what I’ve tried to do or what we’ve tried to do as a Navy is we’re trying to turn the corner here in terms of giving the shipbuilding industry a steady and predictable demand signal in terms of ship numbers.  So right now, in terms of our budget proposal as an example, you see two across the board for the next five years for DDGs.  For FFGs, you see a bit of a sawtooth pattern – one, two, one, two, one – over five years.  But again, we expect that to settle out to at least two to three a year once that production line gets rolling.  The first ship comes off that production line in ’26.  Supply ships are coming off the production line in San Diego at [General Dynamics] NASSCO.  We have two shipyards that are now producing DDGs.  Amphibs are still coming off the line down in Pascagoula, Mississippi.  We have the highest shipbuilding budget right now proposed that we’ve ever had, at 27 billion [dollars].

So we need to sustain that steady demand signal, I think, to the defense industrial base in order to grow a fleet.  You mentioned we’re 75 short of where we need to be.  We need to grow that fleet to at least 350 manned ships.  It’s important to recognize that we have five companies – five shipbuilders – in the United States right now that actually build warships.  So that’s a 20-year problem set in order to get those numbers where you want them, and so our focus is maintaining, you know, predictable, steady funding if – as long as – the Congress will support us in that. And they seem to be very supportive – so we can actually hit that glide slope and make those numbers go into the late 2030s, early 2040s.

And I’ll pause there, Mr. Peniston, for any follow-ups.

MR. PENISTON:  Sure.  So you’ve said in the past that the biggest bottleneck in getting more ships is industrial capacity, suggesting that industry – whether it’s the big yards and shipways or the smaller suppliers; I’m not quite sure what the limiting factor is there – but that is the limiting factor.  On the other hand, Ingalls, for example, has sunk a lot of money in the past couple years into its yard and it says it’s got excess capacity.  It could build, you know, more destroyers now if it could get the money.  Why not ask for them?

ADM. GILDAY:  So right now the Congress, at least in the current budget that’s up on the Hill, there is a proposal to increase destroyers to three a year if the industrial base can support that.  So, as you know, there are two producers of destroyers, both Ingalls and Bath, Maine.  Right now, we are not at a point where the industrial base is supporting three destroyers a year.  Right now, they’re somewhere between two and two-and-a-half.  And so we want to make sure if we’re going to put that money down against shipbuilding that the capacity’s actually there so that that money is well-spent.  But, again, sending them a clear signal, I think, of two to three DDGs a year, in terms of that example, is an important signal to send, and not to keep on shifting those numbers back and forth from year to year.

The other thing I’d say in terms of what the Navy’s trying to do, you mentioned increasing to three DDGs.  We’re also – our budget proposal also has to recognize or reflect a topline that we’re given by the White House and within the Department of Defense, and so we need to stay within that line as we propose a budget that reflects our true priorities.

MR. PENISTON:  One more question about industrial capacity.  When you say the bottleneck is in that capacity, are you talking about the big yards or are you talking about the smaller suppliers?

ADM. GILDAY:  I think it’s across the board.  And so we’ve seen challenges with the industrial base producing submarines on time, on schedule, and within budget.  Same thing with aircraft carriers.  Destroyers are coming around, but we still have some work to do.

We’re seeing challenges – I think the industrial base – whether it’s shipbuilding, whether it’s aircraft production, the defense industrial base right now is strained, and a lot of that has to do with the workforce as we recover from COVID.  That’s not an excuse; it’s just where we are in this country right now.  And so that skilled manual labor force is something that those companies are laser-focused on so that they can grow that talent and sustain it.  But, again, that also comes down to, you know, we shouldn’t expect them to make that kind of investment in a workforce or in infrastructure, in their facilities, unless we’re providing a steady demand signal.

MR. PENISTON:  All right.

So let’s look forward a little bit to the next destroyer, the one that will follow the Arleigh Burkes.  Some have drawn the lesson from the DDG-1000 program and the LCS program that one should stick to mature designs and, you know, simpler technologies, and beware requirements creep, and that sort of thing.  Are those principles informing the DDG(X) program or is this another attempt to leap into the future?  I know it’s not going to arrive for another decade, but what are the some of the philosophical ideas underpinning the design?

ADM. GILDAY:  So, first of all, we’re learning a lot as we proceed with FFG.  And as you know, we’re just bending metal now and beginning to make progress on that first ship of the – of the Constellation class.

I think it’s important that the Navy maintain the lead on design.  And so what we’ve done with DDG(X) is we brought in the private shipbuilders so that they can help inform the effort.  So it’s a team, but it’s Navy-led.  And so both of the companies that produce DDGs are involved in that initial design.  Our intent is to go and to build with a mature design.  So what that would mean is at more than the 80% complete point, [is] when we actually start bending metal.  We have seen great success of that with Columbia, as an example, when we were more than 80% designed as we began that first hull.

And so that’s going to be something that we’re going to pay close attention to because it actually drives down technical risk.  And technical risk has been a challenge for us, whether it’s Zumwalt, LCS, or Ford in particular.  Those three builds we’ve accepted technical risk and it’s cost us in terms of keeping those ships not only within budget, but also on schedule.

MR. PENISTON:  I understand that right now the thinking is the DDG(X) is going to be larger than the Arleigh Burke.  How does that square with the Distributed Maritime Operations concept, which is talking about, you know, more ships and presumably, you know, lighter/smaller so you can have more ships?

ADM. GILDAY:  So the trends that we’ve seen as we take a look at Distributed Maritime Operations and we take a look at a number of force-structure assessments – this is going back to 2016 – the trends that we’re seeing are more submarines, definitely more supply ships.  In terms of the surface force, we’re seeing a rebalancing.  And so the demand, as we wargame, as we exercise, as we do more analysis, is the trend for surface ships is less larger surface combatants and more smaller surface combatants.

DDG(X) would be a new hull, and we’ve done this before.  An example might be the ship from the Ticonderoga cruiser to the Arleigh Burke destroyer, where we essentially used the same combat system, the same weapons system, but the hull is different.  And so our intention with DDG(X) would be much the same, that we use a proven combat system on that ship.

But we need a ship that has more space and allows for more weight and for capability growth over time.  An example might be hypersonic missiles, where just based on the size of those missiles we couldn’t fit those in a current Arleigh Burke destroyer, even a Flight III.  So it’s a deeper ship, if you will, from that standpoint, as well as leveraging technologies like electric drive.

I’ll pause here, Brad.

MR. PENISTON:  Got it.  Thank you.

Let’s shift from manned to unmanned.  I know you love to talk about unmanned systems and all the experiments the Navy is doing and the task force over in the Middle East that’s, you know, doing it in the real world, so to speak.  But in the Middle East, just in the past couple weeks we saw something that, you know, at least opened, you know, a couple eyes around here, which was the Iranians actually picked up some of these drones and tried to make off with them. And so, you know, strange things happen and the adversary’s going to come up with something that, you know, maybe one didn’t expect.  Are you going to have to put, like, roving, you know, gangs of sailors with, you know, .50-cals on these purportedly unmanned vessels?

ADM. GILDAY:  Well, we did have a response plan.  We actually put it into effect when the Iranians grabbed two of those Saildrones.  It is a – that is going to be a challenge for us, though, I will say, in the future, and we have to pay attention to – you know, we’re a learning organization and we’re learning from what happened over the past month in the Middle East, and we’ll be applying that as we design and grow the unmanned surface force.  What we’re trying – the unmanned fleet, excuse me – to do is we’re trying to move fairly quickly and to learn in this – in this critical decade so that we can apply what we learn very quickly, and take technologies that work and double down on them, and those technologies that don’t work, to sundown them.

The work we’re doing with the task force in the Middle East is also informing how we’re going to move forward with larger unmanned efforts.  Large unmanned surface vessel would be an example, where that potentially would be a missile truck in the future.  Medium USV would potentially have electronic warfare or some type of command-and-control features to it.  But we’re learning things with respect to command and control in particular with the effort in the Middle East right now that’s helping us understand how we would apply those same principles to these larger vessels.

Security is another aspect of this – whether these vessels would initially be minimally manned; whether they would be part of a surface action group, a carrier strike group, or an ARG, so they wouldn’t be out there alone and unafraid, if you will.  And so, at the same time that we are driving down technical risk and we’re learning a lot with respect to platforms, command and control, software, and AI integration, we’re also refining our concepts of operation.  It’s not perfect, but we’re trying to move here fairly quickly in a difficult decade.

MR. PENISTON:  So how does that learning get from, you know, the task force in Bahrain and distributed through the fleet?  Does it come up to you and then you send out a memo?  You know, how does that work?

ADM. GILDAY:  So we have an Unmanned Task Force in the Pentagon, and the Unmanned Task Force is actually driving technical experimentation, if you will.  And so you see that being done – carried out by Task Force 59 under Admiral Cooper and Fifth Fleet.  We also integrated it into RIMPAC, where we had four unmanned vessels out there that are actually facilitating long-range fires, so missile shots, as an example.  And so it’s the group in the Pentagon that’s actually trying to drive experimentation and make those – and conduct that analysis in terms of what’s working and what’s not working, and ensuring that the experimentation is linked; so that it’s not just a flash in the pan, but there’s actually outcomes/data that are going to matter and inform the path that we’re on.

So it’s fundamentally driven out of the Pentagon.  But you know, there are a lot of good ideas that are happening out there at the tactical edge and we don’t want to quash that.

MR. PENISTON:  So I know that one part of using more unmanned – more and more unmanned, and eventually, you know, dozens or hundreds, you know, in a given task force – is using AI tools to deal with all of the information these things are collecting.  How does that work?  Is that, again, somebody comes up with an AI tool in the States or in Silicon Valley and says, you know, why don’t we stick it out on the task force and see if it works?  Or how do you get from here to there?

ADM. GILDAY:  A little bit of both.  And so we’ve had no trouble attracting high-end small software firms and also unmanned platform companies to come forward and to offer their capabilities to test from.  And so what we’ve tried to do is we’ve tried to pair software developers for that integration with unmanned platforms that we think have the most potential.  Those companies remain separate, so what we’re trying to do is not to have one company basically have a monopoly on both platform and software AI integration that’ll actually drive the machine, but to keep them separately.  And what we want to do is create some competition here across that marketplace, if you will.

MR. PENISTON:  Got it.

ADM. GILDAY:  It’s been very successful so far.  We’ve learned a lot from industry.  Their best practices are becoming our best practices; in terms of how we manage software updates might be an example.  And so I’m very optimistic about the path that we’re on and that we’ll continue to follow.

MR. PENISTON:  Well, speaking of acquisition, the Biden administration has – finally – nominated the person who will be its first permanent assistant Navy secretary for research, development, and acquisition.  How much is that going to help you?

ADM. GILDAY:  It’s going to be very, very important.  Our hope is that, of course, when you get stability in a very important assistant secretary position like that one, in a big Navy it makes a big difference.  And so the sooner we can have him confirmed and in place, the better off we’ll be, as he leads the effort across the Navy and also makes sure that we’re connected very closely with OSD and the initiatives that the deputy secretary of defense and the secretary of defense are driving right now in the budget.

MR. PENISTON:  Got it.

So let’s widen our aperture a little bit to the strategic.  You said China is, obviously, the driver of many if not most decisions that the Navy is making about future force design and concepts of operations and that sort of stuff.  But you’ve also said that the United States has something of an asymmetric advantage in the Pacific in its allies and partners.  And I think one of the biggest things over the past year has been the new AUKUS agreement, one that’s going to eventually give Australia a submarine.

So I want to ask you two questions.  One is:  Has it been decided what kind of sub the Aussies are going to get?  And, two, what are the other big things about AUKUS from where you sit?

ADM. GILDAY:  So, to answer your first question about the type of submarine, we’re still working through that.  And so it’s important that the outcomes here – the main outcome is to ensure that Australia gets a submarine capability and eventually the capability to design and build their own – design and build their own submarines.  That’s a long-term effort.

There’s also a lot of capability sharing across the three partners.  And so one of the benefits that I see in the near term with AUKUS is that it’s helped us focus on what barriers we can knock down with respect to sharing technology and sharing information that we may not have been as agile in doing so before we had this agreement.

As you’re probably aware, we’re in a consultive period right now.  We’re out until the end of March of ’23.  We’ll finally present a recommendation to the secretary of defense and the president that’ll answer those questions with respect to discrete capabilities.  But right now, there’s a number of working groups – there’s double-digit working groups – that are involved right now taking a look at different aspects of the whole ecosystem that has to be in place in order to sustain, operate, maintain, and produce submarines.

MR. PENISTON:  Let’s talk about another one of your big priorities:  Project Overmatch, the effort to get Navy ships and every other asset hooked into a big grid that can share information like – you know, like never before.  You’ve said earlier that – I believe that a carrier group would be moving out with the first iteration of Overmatch, with the Navy tactical grid, early next year.  Is that right?  Can you give us an update on that?

ADM. GILDAY:  That’s right.  We’re still on track right now to have a strike group in 2023 that’ll actually go to sea and deploy with that capability.  And so the idea is that we continue to increase the number of networks and the different data sources that we’re transferring on those networks using a communication-as-a-service model.  And so it’s the software that actually decides – that actually, A) prioritizes what data needs to get where; and then [B] prioritizes the path by which it’s going to get to that endpoint.

We’re also making big gains with something that we call the software arsenal.  That software arsenal has applications, if you will, that allow users at the tactical edge to use that data in a way to put us in a position to decide and act faster than an adversary.

I think – in the end, I think the Navy’s in a good place here to, if not produce, to definitely inform the joint tactical grid of the future for the – for the joint force.  And I see us delivering that capability in this decade.

MR. PENISTON:  Well, I guess the Navy and the Army are working together on a hypersonic missile; why not a joint tactical grid?

ADM. GILDAY:  Yes.

MR. PENISTON:  Can you tell me just a little bit more about this software arsenal?  Is it like apps on the Aegis system?  Or is it – how does that work?  What is that?

ADM. GILDAY:  Well, instead of embedding those capabilities inside the weapons system, we actually have them riding on the backbone of these ships.  And so, in that manner, they’re a lot easier to update, and so they’re – they’re a lot easier to update and, actually, it allows Sailors at the tactical edge and tacticians at the tactical edge to actually propose changes.  They could actually code changes themselves.  Then those changes, of course, get tested before they’re distributed force-wide.  But it’s utilizing industry’s best practices so that we turn those updates from a days- or weeks-long process into an hour – into just hours, and hopefully in some cases minutes, so we get the best capabilities as quickly as we can into the hands of warfighters.

MR. PENISTON:  Okay.

One last question, Admiral, and I know you’ve got to go.  Give us an update on your attempt to – your efforts to drive down the number of days that ships spend in maintenance.  I know that that was a big bottleneck in keeping ships out and operating.  How is that going?

ADM. GILDAY:  Still a challenge for us.  So when we started that effort in 2019, we were at 7(,000), almost 8,000 delay days with ships coming out of shipyards.  Now we’re at around 3,000 and we’re trying to drive progress here.  We have to do that hand in glove with not only our public shipyards that do the work for all of our nuclear-powered vessels, but also with private shipyards.

I will say that this also in some respects gets back to a steady, predictable, stable demand signal to those small shipyards.  And so as the Navy’s budget has – as our topline has – essentially remained, our buying power has remained the same since about 2010, and because we’ve said that we’re not going to have a Navy larger than we can sustain, and the fact that 60% of our budget rises above the rate of inflation, we’ve had to reduce the size of the Navy in order to sustain a Navy that’s ready to fight tonight as well as modernize the Navy we have into the future.  And so because we have decommissioned ships, that demand signal to industry has been a bit unpredictable, right?  And so as – they’re trying to understand what port loading is going to be in – at a place like Mayport, Florida; Norfolk, Virginia; San Diego, California; or up in the Pacific Northwest.  And so that’s – again, if we could get to a stable – a stable budget environment where we can have some more predictability and stability, I think that would help the surface repair yards understand what the demand signal’s going to be into the future so that they make the right investments in infrastructure, the right investments in a workforce, and they can sustain that level of loading.

We’re also trying to contract at least 120 days out.  I’d like to be able to contract nearly a year out if we could to, again, give them that demand signal, to rack and stack three and four ships of the same class or same type that are going to a particular vendor so that they can maintain that workforce for a longer period of time.  We’re trying our best to do that and working hand in glove with industry because we rely on them so much, as much as they rely on us for their business.

MR. PENISTON:  All right.  We’ll leave it there.

Admiral Gilday, thank you so much for joining us again on “State of the Navy.”  We really do appreciate your time.

ADM. GILDAY:  Brad, thank you, and thanks to Defense One for supporting us.

MR. PENISTON:  Everybody else, please stay tuned.  Next up is my colleague Jacqueline Feldscher.  She’ll talk with members of Congress and other naval experts.  We’ve got more to come.