376
(B) discuss the advantages and disadvan-
tages of each approach identified pursuant to 
subparagraph (A); and 
(C) identify the Secretary’s preferred ap-
proach among the alternative identified pursu-
ant to subparagraph (A) and provide the Sec-
retary’s rationale for preferring that approach. 
(3) IDENTIFICATION
OF
ALTERNATIVE
AP-
PROACHES.—In identifying alternative approaches 
pursuant to paragraph (2)(A), the Secretary shall 
examine—
(A) approaches used by other Federal de-
partments and agencies; and 
(B) the feasibility of using private eco-
nomic forecasting. 
(b) COMPTROLLER GENERAL REVIEW
AND RE-
PORT.—The Comptroller General shall review the report 
under subsection (a), including the basis for the Sec-
retary’s conclusions stated in the report, and shall submit, 
not later than March 15, 2007, to the Committee on 
Armed Services of the Senate and the Committee on 
Armed Services of the House of Representatives a report 
containing the results of that review.
377
SEC. 1006. REDUCTION IN AUTHORIZATIONS DUE TO SAV-
INGS 
RESULTING 
FROM 
LOWER-THAN-EX-
PECTED INFLATION. 
(a) REDUCTION.—The total amount authorized to be 
appropriated by titles I, II, and III is the amount equal 
to the sum of the separate amounts authorized to be ap-
propriated by those titles reduced by $1,583,000,000. 
(b) SOURCE
OF SAVINGS.—Reduction required in 
order to comply with subsection (a) shall be derived from 
savings resulting from lower-than-expected inflation. 
(c) ALLOCATION OF REDUCTION.—The Secretary of 
Defense shall allocate the reduction required by subsection 
(a) among the amounts authorized to be appropriated for 
accounts in title I, II, and III to reflect the extent to which 
net savings from lower-than-expected inflation are allo-
cable to amounts authorized to be appropriated to those 
accounts. 
Subtitle B—Policy Relating to 
Vessels and Shipyards 
SEC. 1011. TRANSFER OF NAVAL VESSELS TO FOREIGN NA-
TIONS BASED UPON VESSEL CLASS. 
Section 7307(a) of title 10, United States Code, is 
amended—
(1) by striking ‘‘disposition of that vessel is ap-
proved’’ and inserting ‘‘disposal of that vessel, or of
378
a vessel of the class of that vessel, is authorized’’; 
and 
(2) by adding at the end the following new sen-
tences: ‘‘In the case of an authorization by law for 
the disposal of such a vessel that names a specific 
vessel as being authorized for such disposal, the Sec-
retary of Defense may substitute another vessel of 
the same class, if the vessel substituted has virtually 
identical capabilites as the named vessel. In the case 
of an authorization by law for the disposal of vessels 
of a specified class, the Secretary may dispose of 
vessels of that class pursuant to that authorization 
only in the number of such vessels specified in that 
law as being authorized for disposal.’’. 
SEC. 1012. OVERHAUL, REPAIR, AND MAINTENANCE OF VES-
SELS IN FOREIGN SHIPYARDS. 
(a) IN GENERAL.—Section 7310 of title 10, United 
States Code, is amended to read as follows: 
‘‘§ 7310. Overhaul, repair, etc. of vessels in foreign 
shipyards 
‘‘(a) IN GENERAL.—A vessel covered by this section 
the homeport of which is in the United States may not 
be overhauled, repaired, or maintained in a shipyard out-
side the United States, other than in the case of emer-
gency voyage repairs.
379
‘‘(b) COVERED VESSELS.—(1) Vessels covered by this 
section are the following: 
‘‘(A) Any naval vessel. 
‘‘(B) Any other vessel under the jurisdiction of 
the Secretary of the Navy, including any vessel 
under the jurisdiction of the Military Sealift Com-
mand that is owned or chartered by the United 
States. 
‘‘(2)(A) Notwithstanding paragraph (1), a naval ves-
sel or other vessel certified by the Secretary of the Navy 
that is deployed conducting special mission operations is 
not subject to this section. 
‘‘(B) The Secretary of the Navy shall submit to the 
congressional defense committees each year a written cer-
tification of those vessels that are excluded from this sec-
tion. The certification shall be submitted each year with 
the annual submission of the Navy budget justification 
materials. 
‘‘(c) CERTAIN VESSELS TO BE CONSIDERED TO BE 
HOMEPORTED IN UNITED STATES.—In the case of a ves-
sel that does not have a designated homeport, the vessel 
shall be considered to have a homeport in the United 
States for the purposes of this section if any of the fol-
lowing applies to the vessel during the preceding 12-month 
period:
380
‘‘(1) The vessel has operated within 1,400 nau-
tical miles of the United States. 
‘‘(2) The vessel has returned to the United 
States more than two times. 
‘‘(3) The vessel has made a port call or return 
to the United States that exceeded seven days. 
‘‘(d) VESSEL CHANGING HOMEPORTS.—(1) In the 
case of a vessel covered by this section the homeport of 
which is not in the United States, the Secretary of the 
Navy may not during the 15-month period preceding the 
planned reassignment of the vessel to a homeport in the 
United States begin any work for the overhaul, repair, or 
maintenance of the vessel that is scheduled to be for a 
period of more than six months 
‘‘(2) In the case of a vessel covered by this section 
the homeport of which is in the United States, the Sec-
retary of the Navy shall—
‘‘(A) not less than 60 days before designating 
a homeport for that vessel at a location outside the 
United States, submit to Congress notification in 
writing of the intent to designate a homeport for 
that vessel outside the United States, together with 
the reasons for that designation; and 
‘‘(B) during the 15-month period preceding the 
planned reassignment of the vessel to a homeport
381
not in the United States, perform in the United 
States any work for the overhaul, repair, or mainte-
nance of the vessel that is scheduled—
‘‘(i) to begin during the 15-month period; 
and 
‘‘(ii) to be for a period of more than six 
months. 
‘‘(e) DEFINITIONS.—In this section: 
‘‘(1)(A) The term ‘emergency voyage repair’ 
means the following: 
‘‘(i) Repairs on mission-essential or safety-
essential items that are needed for a vessel to 
deploy, to continue on a deployment, or to com-
ply with regulatory requirements. 
‘‘(ii) Standard maintenance, but only to 
the extent that such maintenance is absolutely 
necessary to ensure machinery and equipment 
operational reliability or to comply with regu-
latory requirements. 
‘‘(iii) Repair or maintenance that is not ex-
ecuted with a contract request for proposal. 
‘‘(B) Such term does not include corrective 
maintenance actions that may be deferred until the 
next scheduled regular overhaul and dry docking 
availability at a shipyard in the Unites States with-
382
out degrading operational readiness, habitability 
standards, or personnel safety or adversely affecting 
regulatory compliance. 
‘‘(2) The term ‘United States’, when used in a 
geographic sense, includes the Commonwealth of 
Puerto Rico, the Commonwealth of the Northern 
Mariana Islands, Guam, and the Virgin Islands.’’. 
(b) EFFECTIVE DATE.—Subsection (c) of section 
7310 of title 10, United States Code, as amended by sub-
section (a), shall take effect on October 1, 2006, or the 
date of the enactment of this Act, whichever is later, and 
shall apply only with respect to events specified in para-
graphs (1), (2), and (3) of that subsection occurring on 
or after that effective date. 
(c) LIMITATION ON APPLICATION TO VESSEL OPER-
ATING UNDER EXISTING CHARTER.—This section does 
not affect the application of section 7310 of title 10, 
United States Code, to a vessel operating under a charter 
to the United States in effect on the date of the enactment 
of this Act, unless such charter is terminated or renewed 
after such date of enactment. 
SEC. 1013. REPORT ON OPTIONS FOR FUTURE LEASE AR-
RANGEMENT FOR GUAM SHIPYARD. 
(a) REPORT REQUIRED.—Not later than December 
15, 2006, the Secretary of the Navy shall submit to the
383
Committee on Armed Services of the Senate and the Com-
mittee on Armed Service of the House of Representatives 
a report describing the options available with respect to 
the Guam Shipyard in Santa Rita, Guam. 
(b) CONTENTS OF REPORT.—The report required 
under subsection (a) shall include the following: 
(1) An evaluation of the performance of the en-
tities that, as of the date of the enactment of this 
Act, are the lessee and operators of the Guam Ship-
yard under the terms of the lease in effect on the 
date of the enactment of this Act. 
(2) An evaluation of each of the following op-
tions with respect to the Guam Shipyard lease: 
(A) Terminating the remaining term of the 
lease and issuing a new 25 year lease with the 
same entity. 
(B) Terminating the remaining term of the 
lease with respect to the approximately 73 acres 
within the Guam Shipyard that are required for 
mission requirements and leaving the remaining 
term of the lease in effect with respect to the 
approximately 27 acres within the Facility that 
are not required for mission requirements. 
(C) Terminating the remaining term of the 
lease and negotiating a new use arrangement
384
with a different lessee or operator. The new use 
arrangement options shall include: 
(i) Government-owned and govern-
ment-operated facility. 
(ii) 
Government-owned 
and 
con-
tractor-operated facility. 
(iii) Government-leased property for 
contractor-owned and contractor-operated 
facility. 
(c) OPTIONS FOR NEW USE ARRANGEMENTS.—In 
evaluating the options under subsection (b)(2)(C), the 
Secretary of the Navy shall include an evaluation of each 
of the following: 
(1) The anticipated future military vessel repair 
and workload on Guam in relation to the 2006 
Quadrennial Defense Review, issued on February 6, 
2006, pursuant to section 118 of title 10, United 
States Code. 
(2) The anticipated military vessel repair and 
workload attributable to vessels comprising the Mar-
itime Prepositioning Ship Squadron Three. 
(3) The anticipated military vessel repair and 
workload due to a change in section 7310 of title 10, 
United States Code, that would designate Guam as 
a United States homeport facility.
385
(4) The expected workload if the submarine 
tender the U.S.S. Frank Cable (AS–40) is decom-
missioned. 
(5) The estimated reacquisition costs of trans-
ferred Government property. 
(6) Costs to improve floating dry dock mooring 
certification and required nuclear certification for 
the floating dry dock designated as AFDB–8 to con-
duct the following maintenance: 
(A) Dry-docking selected restricted avail-
abilities and mid-term availability for attack 
submarines. 
(B) 
Dry-docking 
phased 
maintenance 
availabilities for amphibious vessels, including 
to amphibious assault ships, dock landing ships, 
and amphibious transport dock ships. 
(C) Dry-docking phased maintenance avail-
abilities for surface combatants, including cruis-
ers, destroyers, and frigates. 
(7) Commercial opportunities for development 
to expand commercial ship repair and general indus-
trial services, given anti-terrorism force protection 
requirements at the current facility. 
(8) Estimates from three contractors for the 
maintenance and repair costs associated with exe-
386
cuting a multiship, multioption contract that would 
generate a minimum 60,000 manday commitment 
for the Department of the Navy and Military Sealift 
Command vessels. 
(9) A projection of the maintenance and repair 
costs associated with executing a minimum 60,000 
mandays for the Department of the Navy and Mili-
tary Sealift Command vessels as a Government-
owned and Government-operated Navy ship repair 
facility. 
(d) INPUT FROM CONTRACTORS.—In evaluating the 
options under clauses (ii) and (iii) of subsection (b)(2)(C) 
for the purposes of paragraphs (1), (2), and (3) of sub-
section (c), the Secretary of the Navy shall seek input 
from at least three contractors on the viability of oper-
ations based on the projected workload fiscal years 2008 
through 2013. 
(e) RECOMMENDATIONS.—The Secretary of the Navy 
shall include in the report the following: 
(1) The recommendations of the Secretary with 
respect to continuation of the existing Guam Ship-
yard lease based on evaluations conducted pursuant 
to subsection (b)(1). 
(2) The option under subsection (b)(2) that the 
Secretary recommends for fiscal year 2008.
387
(f) GAO REPORT.—Not later than March 1, 2007, 
the Comptroller General shall submit to the Committee 
on Armed Services of the Senate and the Committee on 
Armed Service of the House of Representatives a report 
evaluating the report submitted by the Secretary of the 
Navy under subsection (a). The report shall include the 
option under subsection (b)(2) that the Secretary rec-
ommends for fiscal year 2008. 
(g) SUPPORT
FOR NATIONAL STRATEGIC OBJEC-
TIVES.—For fiscal year 2007, the Secretary of the Navy, 
under the authority of section 2304(c)(3) of title 10, 
United States Code, and section 6.302–3(a)(2)(i) of the 
Federal Acquisition Regulation, shall award contracts to 
the Guam Shipyard in amounts equal to the average 
amount of the mandays contracts awarded to the Guam 
Shipyard for fiscal years 1998 through 2006 for the pur-
pose of maintaining the industrial base in case of a na-
tional emergency or to achieve industrial mobilization. 
SEC. 1014. SHIPBUILDING INDUSTRIAL BASE IMPROVE-
MENT PROGRAM. 
(a) PROGRAM FOR UNITED STATES PRIVATE SHIP-
YARDS.—The Secretary of the Navy shall establish a pro-
gram, to be known as the Shipbuilding Industrial Base 
Improvement Program, under which the Secretary—
388
(1) shall make grants to qualified applicants to 
facilitate the development of innovative design and 
production technologies and processes for naval ves-
sel construction and the development of modernized 
shipbuilding infrastructure; and 
(2) shall provide loan guarantees for qualifying 
shipyards to facilitate the acquisition by such ship-
yards of technologies, processes, and infrastructure 
to improve their productivity and cost effectiveness. 
(b) PURPOSES OF PROGRAM.—The purposes of the 
program established under subsection (a) are—
(1) to improve the efficiency and cost-effective-
ness of the construction of naval vessels for the 
United States; 
(2) to enhance the quality of naval vessel con-
struction; and 
(3) to promote the international competitiveness 
of United States shipyards for the construction of 
commercial ships and naval ships intended for sale 
to foreign governments. 
(c) SELECTION OF GRANT RECIPIENTS.—
(1) APPLICATION
FOR
DEVELOPMENT
FUND-
ING.—An entity requesting a grant under subsection 
(a)(1) to develop new design or production tech-
nologies or processes for naval vessels or to improve
389
shipbuilding infrastructure shall submit to the Sec-
retary of the Navy an application that describes the 
proposal of the entity and provides evidence of its 
capability to develop one or more of the following: 
(A) Numerically controlled machine tools, 
robots, automated process control equipment, 
computerized flexible manufacturing systems, 
associated computer software, and other tech-
nology designed to improve shipbuilding and re-
lated industrial productivity. 
(B) Novel techniques and processes de-
signed to improve shipbuilding quality, produc-
tivity, and practice on a broad and sustained 
basis, including in such areas as engineering de-
sign, quality assurance, concurrent engineering, 
continuous process production technology, em-
ployee skills enhancement, and management of 
customers and suppliers. 
(C) Technology, techniques, and processes 
appropriate to enhancing the productivity of 
shipyard infrastructure. 
(2) SELECTION .—From applications submitted 
under paragraph (1), the Secretary of the Navy shall 
select entities to receive funds under subsection 
(a)(1) based on their ability to research and develop
390
innovative technologies, processes, and infrastructure 
to alleviate areas of shipyard construction inefficien-
cies as determined through the assessment described 
in subsection (f). 
(d) MATCHING REQUIREMENT FOR GRANTS.—
(1) FEDERAL FUNDING.—Except as provided in 
paragraph (2), Federal funds from a grant under 
subsection (a)(1) for any purpose shall not exceed 
75 percent of the total cost. 
(2) EXCEPTIONS.—
(A) SMALL
PROJECTS.—Paragraph (1) 
shall not apply to grants under this section for 
stand-alone projects costing not more than 
$25,000. The amount under this subparagraph 
shall be indexed to the consumer price index 
and modified each fiscal year after the annual 
publication of the consumer price index. 
(B) REDUCTION IN MATCHING REQUIRE-
MENT.—If the Secretary of the Navy deter-
mines that a proposed project merits support 
and cannot be undertaken without a higher per-
centage of Federal financial assistance, the Sec-
retary may award a grant for such project with 
a lesser matching requirement than is described 
in paragraph (1).
391
(e) LOAN GUARANTEES FOR SHIPYARD USE OF DE-
VELOPED TECHNOLOGIES, PROCESSES, AND INFRASTRUC-
TURE.—
(1) IN GENERAL.—Upon making a determina-
tion that a technology, a process, or an infrastruc-
ture improvement (whether developed using a grant 
under subsection (a)(1), through the National Ship-
building Research Program, or otherwise) will im-
prove the productivity and cost-effectiveness of naval 
vessel construction, the Secretary of the Navy may 
provide a loan guarantee under subsection (a)(2) for 
a qualifying shipyard to facilitate the purchase by 
such shipyard of such technology, process, or infra-
structure improvement. 
(2) PAYMENT OF COST OF LOAN GUARANTEE.—
The cost of a guarantee under this subsection shall 
be paid for with amounts made available in appro-
priations Acts. 
(3) PERCENTAGE LIMITATION; TERM.—A loan 
guarantee under this subsection may apply—
(A) to up to 87.5 percent of the loan prin-
cipal; and 
(B) for a term of up to 30 years. 
(4) AUTHORITIES, 
PROCEDURES, 
REQUIRE-
MENTS, AND RESTRICTIONS.—The Secretary of the
392
Navy, subject to the other provisions of this sec-
tion—
(A) in implementing this section, may exer-
cise authorities that are similar to the authori-
ties available to the Secretary of Transportation 
under title XI of the Merchant Marine Act, 
1936 (46 App. U.S.C. 1271 et seq.), with re-
spect to loan guarantees under that title; and 
(B) may establish such additional require-
ments for loan guarantees under this section as 
the Secretary determines to be necessary to 
minimize the cost of such guarantees. 
(5) LIMITATION ON TOTAL AMOUNT OF LOAN 
GUARANTEES.—The total amount of loans for which 
guarantees are provided under this subsection may 
not exceed $1,000,000,000. 
(6) DEFINITIONS.—In this subsection: 
(A) QUALIFYING
SHIPYARD.—The term 
‘‘qualifying shipyard’’, with respect to a loan 
guarantee under this section, means a shipyard 
that, over the three years preceding the year in 
which the loan guarantee is made, derived less 
than 40 percent of its revenue either directly or 
indirectly from United States Government con-
tracts.
393
(B) COST.—The term ‘‘cost’’, with respect 
to a loan guarantee under this section, has the 
meaning given that term in section 502 of the 
Congressional Budget and Impoundment Con-
trol Act of 1974 (2 U.S.C. 661a), with cost for 
that purpose calculated assuming that the bor-
rowing entity receives no revenue directly or in-
directly from United States Government con-
tracts. 
(7) TERMINATION
OF
AUTHORITY.—The au-
thority of the Secretary of the Navy to provide loan 
guarantees under this subsection expires at the close 
of September 30, 2011. 
(f) ASSESSMENTS OF NAVAL VESSEL CONSTRUCTION 
INEFFICIENCIES.—
(1) PERIODIC ASSESSMENTS REQUIRED.—The 
Secretary of the Navy shall conduct, in the third 
quarter of each fiscal year or as often as necessary, 
an assessment of the following aspects of naval ves-
sel construction to determine where and to what ex-
tent inefficiencies exist and to what extent innovative 
design and production technologies, processes, and 
infrastructure can be developed to alleviate such in-
efficiencies: