Good morning( It is, as always, a pleasure to be invited to speak in this forum. As you know, my association goes back a great many years with the Naval Submarine League and it is gratifying to be sharing the podium with such a distinguished group of speakers.
I believe that forums such as this are vital to the exchange of ideas to further the professionalism and to look to the future of the Submarine community. This morning I would like to give you my perspective, from the acquisition side of the house, on how we are doing and what we need to emphasize when defining the submarine mission in the nineties, and then talk about the new submarine in light of a shrinking defense bud gel .
I noticed that following my presentation, you will be hearing about the Capitol Hill perspective. I’ve been over to the Hill a dozen times this year… What I have learned is that there are 435 different perspectives in the House and 100 in the Senate … The last hearing I testified at was Senator Kennedy’s subcommittee of the Senate Armed Setvices Committee. The topic was submarines and ASW programs.
The interest of the Committee centered on what changes the Navy has made in budget priorities in light of the new, post Cold War international environment. The standard response to that question seems to be a rehash of Soviet capabilities, especially in their submarine construction program, with a short discourse on the third world diesel threat.
Something that became apparent to me as the Senators listened to what Admiral Williams, Admiral Jones and I had to say, was that in so far as the Congress is concerned, the Cold War is over, the Soviet threat has already been dealt with, and the battle of the budget is in full swing.
Historically things have really not changed very much. I suppose that the tone was set by the first Commander in Chief of the Continental Navy, Esek Hopkins of Rhode Island,who was suspended from duty after cursing Congress and stating that be would not obey its orders. His outburst was the result of a Congressional investigation. Although things have improved somewhat since then, the Navy’s relationship with Congress has never been as good as it could be.
During the days of the American Revolution, Congress authorized the construction of 13 frigates. Of these 13 frigates authorized in 1775, none were completed on time! Not a very auspicious start for Naval acquisition!
One problem was that the contracts were spread out over seven different cities in order to spread the work out among as many states as possible – an early example of pork barrel influences on the military acquisition system. None of the frigates originally scheduled to be completed by March 1776 were in service until the winter of 1777. By the end of winter, 8 of the 13 frigates were ready for sea. Unfortunately, an early attempt at standardizing what we now call their “combat systems suites” failed. Their cannons were to be made to the same specifications by four different Pennsylvania iron works, thus the ammunition and parts support would be common to all the ships. As it turned out, only 2 of the foundries produced any naval cannons and production was sufficient to arm only two of the frigates. The foundries were too busy building Army cannons, which no doubt were built to completely different specifications.
Fewer than half of these frigates were completed and put in service. In part due to the loss of the shipyards in New York and Philadelphia to the British.
Despite these early misadventures in Naval acquisition, the next year (1776) Congress authorized the construction of ten ships, three 74-gun ships of the line, five 36-gun frigates, a brig and a packet boat. These contracts were spread out among 5 states who had not received any of the 1775 contracts.
In 1778 all three ships in the 74-gun ship program were canceled due to affordability problems. During this time frame the Navy shipbuilding program was run by a Congressional committee. Some might argue that it still is! This arrangement was replaced in 1779 by an executive committee consisting of 3 commissioners and two members of Congress. In 1781 Congress voted to replace this administrative body with a Secretary of Marine. Unfortunately no one could be found who was willing to take this post, and believe me, after being in this job for over a year, I am beginning to understand why! In any case, the responsibility for Naval affairs was delegated to the Superintendent of Finance where it remained for the rest of the revolution, and under his f1Scal management, the entire Navy had been sunk, lost or sold off by 1785.
It was not until January 1794 that Congress started discussion of a Naval construction bill to counter the depredations of the Barbary Pirates. A proposal to build six ships, four 44-gun frigates and two 24-gun ships for $800,000 was met with objections that “there would be no end to it, we would have to have a Secretary of the Navy and a swarm of other people in office at monstrous expense,” and fears that the Government could not hope to build a fleet and pay off the national debt at the same time. Looking at our situation today, things really have not changed too much… I get the same argument when I go over to Congress to testify on the budget!
What really saved the ship building program was the proposal that one ship be built in each of 6 seaports: Portsmouth, NH, Boston, New York, Baltimore, Philadelphia and Norfolk, with the materials and supplies coming from nearly every state… Politics are not too different today.
Following the signature of a peace treaty with Algiers in 1795, three of the six ships in the program were canceled. The three others were completed in large part due to industrial base considerations, or in the words of President Washington “the loss which the public would incur might be considerable, from the dissipation of workmen, from certain works or operations suddenly being dropped or left unfinished, and from derangement of the whole system.” He concluded that this might not “comport with the public interest.” Some people might point out that a similar situation exists today with the recent cuts in the submarine construction program which is causing a “derangement of the whole system” and which also might not “comport with the public interest.”
Half of the frigates initially envisioned, the UNITED STATES, the CONSTITUTION, and the CONSTELLATION were completed at a cost of $300,000 apiece. That totals $900,000. I guess that cost growth in shipbuilding programs is nothing new.
As the United States started flexing her maritime muscle, the Naval construction budget rose from $16,400 in 1794, to nearly $3 million in 1799. But budget cuts are nothing new to the Navy either-by 1802 the Navy’s budget had plummeted by two thirds to just over $900 thousand.
As you can see, things have not changed radically over the last 200 years.
If you look back at the period following every major war that the United States has participated in, the military has gone through a significant downsizing. It is only common sense to demobilize an Army, and a Navy and Air Force, once the battle is won. The end of the Cold War, especially when combined with the problem of a massive national debt is viewed by many as just such an occasion.
We are a maritime nation, virtually all of our allies, our trading partners, as well as our potential adversaries are on the other side of one ocean or another. For a maritime nation, there is no substitute for sea power. There is no more optimum force for third world contingencies and managing crises below and across the threshold of war, than the same Navy and Marine Corps team that has responded to over 50 crises since 1980. In addition to responding to crises, we need to maintain a credible and robust sea control capability. A highly credible submarine force is essential to this mission.
In fact, there is no more potent individual platform to protect or deny the use of the sea lines of communication than the attack submarine. Just as there is no more effective and survivable platform to maintain strategic deterrence than our SSBN force.
SEA WOLF must stand on its own as the premier submarine for the premier Navy in the world. Inherent in the ability to meet the front line Soviet threat, the multi-mission capability of the SEA WOLF allows it to go anywhere and meet all threats. With the advent of TOMAHAWK the SSN entered a new era. In addition to the traditional ASW, ASUW, intelligence, special forces insertion, and mining missions, the TOMAHAWK gives the SSN force a potent, stealthy strike capability. We should not forget that while there is a lot of activity in the aviation community on becoming stealthy, stealth is not a new concept. The Submarine Force has been doing it for years.
The SEA WOLF has set the benchmark in capability, but with the reduction in building schedule it is clear that we need to move on.
As you know, in an effort to seek a more affordable complement to the SEA WOLF, the Navy has begun the “Centurion” study to define a new class of attack submarine. Along with SEA WOLF, this submarine will carry the attack submarine force into the multi-mission environment of the next century, entering service around the time that the first 688 class submarines reach the end of their service lives.
There are a wide range of design characteristics under consideration to make the new submarine both cost effective and capable. A major goal is to reduce the submarine’s cost to the point where more than one submarine could be funded each year. For the new submarine we must attack affordability with the same sense of mission that we have attacked the Soviet threat Put simply, technology must be adapted and channeled into producing affordable capability.
I am firmly convinced that we are capable of designing value and quality into the new submarine without compromising essential mission capabilities. In order to do this we will have to leave our preconceptions at the door and find a way to refine our hardware to make it simpler and more affordable, both to build and maintain.
We need to exploit advances in technology in the areas of stealth, materials, new technologies and affordability. There are many promising development efforts underway in the Advanced Submarine Technology Program that have the potential to help keep costs down while enhancing the new submarine’s capabilities. Some of this technology is currently being introduced to the SEA WOLF program, such as a non-penetrating periscope, and others – magnetic bearings for example, are being tested on the R&D submarine, USS MEMPHIS. We have a lot of good technology in hand from the SEA WOLF program and expect to pick up quite a bit more before the submarine resulting from the “Centurion” study is built.
As we approach the tum of the century we are entering a new era. The same type of economies that are being called for in the current budget will continue for the foreseeable future. All of us, both Government and industry, must plan for further reductions. You have all heard that the fleet will downsize by 25 percent over the next five years. This is the new reality of the post Cold War world. As we plan for the Navy of the future we must factor in quality and value in order to offset reductions in numbers.
As the Navy Acquisition Executive, my goal is to ensure all programs are well run, technically achievable and adequately funded. To help achieve these goals I have a number of initiatives to strengthen and improve the acquisition process.
I am increasing my organization’s focus on analysis, both technical and financial, to identify future problems early, before they become major problems …
One of my objectives for this increased analysis capability is to insert a new discipline into the contracting process. We need to make sure that contracts are appropriate to the type of risk involved. That they are realistic and fair to both Government and industry.
We have to know what is reasonable, know how far to stretch our technological advantage and remain within the limits of affordability. I am looking at building flexibility into some contracts to allow evolutionary tradeoffs in capability and cost in order to maximize producibility and affordability.
I am committed to competitively award contracts based on who can provide the “Best Value” to the Government. This includes considerations of proven past performance, management capability, life cycle costs, demonstrated technical competence and quality. These considerations, evaluated in concert with the degree of risk associated with the contract, determine the overall benefit associated with the offer. Unrealistically low offers increase this level of risk and recent events demonstrate that increased risk may be unacceptable.
Price is not the only criteria when considering “best value” to the Government … And quality will become more and more important as the defense marketplace “downsizes” over the next FYDP.
This approach may not be applicable to all contracts, for some non-complex routine requirements that are clearly defined at the outset of the contract, it may be appropriate to award to the lowest price, technically acceptable offeror. But for major weapons systems, major service support, and requirements that dictate complex integration of people, equipment, hardware, innovation and software, a “Best Value” quality approach not only makes sense, but is essential if we are to intelligently allocate increasingly scarce defense resources.
For major programs, I endorse the use of cost reimbursement contracts for development. However, this does not mean abandoning our use of options. What we are currently working on is something innovative – a contract that will harness the competitive forces inherent in the fiXed price contract while containing the risk to the industrial base and to the Government by mitigating the possibility of catastrophic losses, which no company, regardless of size, can absorb. This is how it works:
- The FSD or “Engineering and Manufacturing Development” (EMD) phase is covered under cost plus incentive or award fee contract.
- Initial production phase under “adjustable” options with an initial target cost, target profit and profit adjustments formula.
- Profit adjusted when firm target cost and ceiling established. This occurs at pre-defined milestone event.
- Firm target price and ceiling established after designs are substantially complete and risks are defined.
- Profits are adjusted depending on firm option price compared to target price. Catastrophic losses are avoided.
By using a more “common sense” approach to contracting we hope to avoid the type of problems that we are finding ourselves with today in administering large scale development programs. We are also attempting to make the acquisition simpler. and more “user friendly.” Of course, trying to do this in the framework of current law and regulation is frustrating at times, but I assure you that I am committed to streamlining the system.
The common goal of both industry and Government must be to build systems that are within the limits of affordable technology. I am committed to accomplishing this. I firmly believe that American industry is ready and able to produce quality systems that meet fleet needs and provide the best value for the investment while remaining affordable. I look forward to working with the CNO, our research establishment, and industry to build a new submarine that meets all of these criteria .
