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Admiral Reynolds, thank you for that kind introduction. VADM Donnelly, RADM Mauney, RADM Hilarides, active duty and retired Flag Officers, Corporate Benefactors, industry partners, ladies, and gentlemen.

Good afternoon. It is indeed an honor for me to stand before you today, representing the Assistant Secretary of the Navy for Research, Development and Acquisition, Dr. Delores Etter. Dr. Etter wished she could be here with the great folks of the Naval Submarine League on this important occasion, but other duties would not permit her to attend.

I’ve structured my remarks today so that there is time for questions and answers. I always find an interactive session more rewarding than me talking for 30 minutes.

The Navy/Industry shipbuilding team accomplished a great deal in the last year: we christened four ships, commissioned nine, and returned two to service. My office led the acquisition team’s input to the Navy’s 30-year shipbuilding plan and examined its associated Industrial Base impacts. We have also continued to spend consider-able time dealing with the impacts from Hurricane Katrina and the ships being designed and constructed on the Gulf Coast. Our acquisition programs saw great progress as well. The DOG 1000 class dual lead ship acquisition strategy was approved by OSD. LPDs 22-24 were put under contract. The LHA(R) program successfully completed Milestone B. Both CG(X) and the Ship-to-Shore Connector have commenced Analyses of Alternatives. LCS (Littoral Combat Ship) 3 and 4 and TAKE 9 were placed on contract. So, you are probably thinking … enough about targets, let’s talk about submarines.

Specifically within the submarine programs, the Navy has seen tremendous progress. The final SSGN, USS GEORGIA (SSGN 729), was placed under contract for its conversion. The second and third SSGNs, USS FLORIDA (SSGN 728) and USS MICHIGAN (SSGN 727), were both Returned to the Fleet following their conversions and overhauls at Norfolk Naval Shipyard and Puget Sound Naval Shipyards, respectively. And USS TEXAS (SSN 775) and USS HAWAII (SSN 776) were both delivered to the U. S. Navy. The Navy presented the Meritorious Unit Commendation to both the PEO Sub’s SEA WOLF Class Submarine Program Office and the Supervisor of Shipbuilding in Groton, for their meritorious service between February 1999 and January 2005. The on-time design and delivery of USS JIMMY CARTER (SSN 23) and its unique Multi-mission Platform in December 2004 contributed to this commendation.

Another notable achievement is the Atmospheric Dive Suit (ADS) completed certification and has already accomplished a successful rescue of the pilot of its French counterpart.

But there have been challenges. The Submarine Rescue Diving and Recompression System (SRDRS) continues to make slow progress. RADM Hilarides and I hold regular Executive level reviews on this program. It has been a struggle, but I believe the end is in sight.

Unfortunately, during this past year we also saw the cancellation of the Advanced Seal Delivery System (ASDS) program. However, the Navy, SOCOM, and OSD are working to develop draft Analysis of Alternative guidance for the ASDS follow-on acquisition program. And the Reliability Improvement Program for ASDS-1 continues its testing evolution.

This year promises to be just as busy. USS VIRGINIA (SSN 774) will be Returned to the Fleet from its Post Shakedown Availability period. The return part is notable because rarely do we deploy a ship before PSA. VIRGINIA certainly proved herself and the PSA will only continue to enhance her capabilities. USS TEXAS (SSN 775) just entered its one-year Post Shakedown Availability period at Electric Boat. NORTH CAROLINA (SSN 777) will be christened in April, and USS GEORGIA (SSGN 729) (the final SSGN of a total of four) is expected to be Returned to the Fleet in September. The remaining submarines of the VIRGINIA Class, which are currently under contract, will be in various stages of construction by both General Dynamics and Northrop Grumman. We must continue to demonstrate learning and convince folks we understand the costs for these follow submarines.

Now you may be wondering-why has the Navy been waiting so long to get to a point where we can start procuring 2 submarines per year? My office led efforts to develop the Long Range Shipbuilding Plan, which, in part, evaluated the impact of accelerating the VIRGINIA Class submarines within the FYDP and examined the capability risk incurred if we stayed with the program of record. The option to accelerate the procurement of two SSNs per year to 2009 instead of2012 was considered. This option, however, was rejected since it would add three submarines at a cost of $7 to $8 billon across the FYDP at the expense of other Navy shipbuilding acquisition programs, which also have fragile industrial bases.

As you know, the Navy, however, does plan to enter a follow-on multi-year contract for VIRGINIA-class submarines and government-furnished equipment beginning in Fiscal Year 2009. Budget estimates for VIRGINIA-class submarines for Fiscal Year 2009 and beyond are predicated on Multi-Year Procurement authorization. The current multi-year procurement for five ships (FY 2004-2008) saved $400 million, or an average of $80 million per ship. The second Multi-Year Procurement for the next seven ships (FY 2009-2013) is anticipated to save in excess of$ l billion for the shipbuilders’ effort, plus more than $250 million for the government-furnished combat systems, resulting in an average savings of over $190 million per ship. We are trending in the right direction.

As you know, the Fiscal Year 2012 procurement of two submarines a year has a requirement that the unit cost per submarine be less than 2 billion dollars. To achieve this, the Virginia Class submarine program has undertaken Design Cost Reduction initiatives. A secondary effect of these efforts will in part sustain many of the submarine designers and engineers. The Navy also examined the projected savings associated with procuring two Virginia Class submarines per year in Fiscal Year 2012. We’ve determined the savings to be about 1 Billion dollars, necessitating additional savings elsewhere.

The Navy identified five areas that must be addressed to achieve the remaining cost savings. First, the shipbuilding team must continue to work to maximize efficiencies. Second, the Navy must refrain from making requirements changes to the Virginia Class design. Requirements creep can add significantly to the cost of a submarine. Third, the Navy and the shipbuilders must continue investing in reproducibility improvements through the capital expenditure funds set aside in the current Multi-Year Procurement contract. Fourth, the Navy is investing in design changes that will make the submarines more producible, and therefore less costly to build. These must have measurable returns on investment. Finally, the Navy is exploring the option of purchasing materials on a portfolio basis, rather than separately for each acquisition program. This area is broader than submarines. Potential savings come in the form of economic order quantity purchases, regional savings, and commercial leverage. This would potentially allow the Navy to reduce the SCN costs associated with material, which accounts for $38 Billion or 57% of the SCN budget (FY07 dollars). These actions will help the Navy achieve the $2B (in FYOS dollars) per boat target planned for in Fiscal Year 2012. And one more interesting tidbit – while folks normally think that Hurricane Katrina impacted construction of surface combatants and amphibs, subs are going to benefit from the Hurricane Katrina Supplemental. The Navy recently announced the intent to negotiate with several shipyards on the Gulf Coast for infrastructure improvements. One shipyard is Seeman Composites of Gulfport, Mississippi. This shipyard manufactures the fiber-optics for the Light Weight Wide Aperture Array components for the Virginia class. The facility improvements proposed will help production efficiencies and should lead to price reductions on the LWWAA. Every little bit helps!

I would also like to highlight some of the submarine initiatives that are allowing the Navy to be better positioned for the future. First, the TANGO BRA VO initiative is a Joint DARPA/Navy technology development program that we are using to demonstrate the feasibility of technology concepts that reduce costs while maintaining the current capability of the Virginia Class submarines. Three concepts currently being evaluated are shaftless propulsion, external weapons, and a broader use of electric actuators. These evaluations are on track to produce measurable results and future savings once implemented.

Lest you think we are only concerned with new construction, I did want to briefly mention submarine repair and modernization. As you may be aware, the Naval Sea Systems Command introduced the One Shipyard concept in 2001 to achieve more efficient ship maintenance. One Shipyard focuses on cost, schedule and quality through standardizing processes, sharing resources among public yards, and partnering with private yards. Other vital elements are a corporate approach to resolving critical skill shortages. This is done through loaning and borrowing skilled workers rather than having each yard hire, train, and employ capacity to execute peak workload. The industrial base today has adequate worker capacity, but the workers must be carefully managed and moved to where the work is geographically. This facet of ship maintenance is unique in the depot industry – all other depot repairs are conducted by moving the units to be repaired to where the workers are employed. We value our industry partners in this relationship and strive to continue to make the One Shipyard team more efficient.

It is a dynamic time in Navy shipbuilding. We have a lot of new designs on the drawing board or in the conceptual stage. We’ve been through the lead ship pain on the Virginia Class, so I’m sure you have sympathy for what the LCS program is going through right now. We are applying the lessons learned from VIRGINIA to other ship classes. While VIRGINIA isn’t in the limelight right now, the sub community must continue to press forthe 2 for4 in 12 goal. I’m sure V ADM Greenert will stress this as well. The Navy needs 313 ships in 2020 to meet our warfighting needs. Our job is to help procure and deliver these ships in the most cost effective manner. If there are good ideas that you haven’ t heard discussed, I’ d love to hear from you.

You will continue to hear the Department stress the need for program stability. As you well know, the Navy is the only buyer of complex warships. We understand that many companies exist solely as suppliers for the U.S. military, due to the unique requirements of what we buy and how we buy it. We recognize the need for predictability in our plan so that corporate investments can be made accordingly. We are committed to the 313 Shipbuilding Plan and the $13.4B annual investment required to achieve this plan. We understand the impact of our actions on our industrial base through-out the Department and we are continuing to press for program stability across the shipbuilding portfolio. We recognize that predictability drives efficiency and effectiveness in the industrial base. We get it -stability is key!

I commend your commitment and support for all our shipbuilding and repair programs, especially the submarine portfolio.

Thank you again for inviting me to speak to you today. I welcome your comments and questions.

Naval Submarine League

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