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Thank you for the introduction. It’s great to see you all again, and to have a chance to again share my thoughts with you at this symposium. I very much appreciate your continued
willingness to hear from me, and I always try to repay that willingness with straightforward and, I hope, valuable remarks about
where submarines stand in the larger public policy debate.
There arc a lot of things I could speak to you about this year, but
as you’ll sec in a few minutes, rather than trying to cover the
waterfront, I’ve chosen this year to focus my remarks toward one
culminating issue that I believe to be of increasing urgency for the
submarine community and the Navy as a whole.
Foreshadowing: It’s a cheap trick, but it works.
As always, I should note at the start that these remarks are my
own and do not necessarily reflect the views of my employer.

Submarine Community Accomplishments

I want to begin by noting that, in terms of program management
and execution, submarines arc increasingly recognized as a bright
spot within the overall situation of Navy shipbuilding:

  • Navy shipbuilding has come under considerable critism of
    late, but that criticism has focused on surface ship programs.
    Submarine construction, in contrast, has received more favorable reviews.
  • The Virginia-class cost-reduction effort, which was fairly
    ambitious-sounding to others when it was first announced, now
    appears within reach of achieving its goal.
  • The effort to evolve the Virginia-class design which is part of
    the cost-reduction effort but is valuable in other regards as well
    is achieving impressive results, such as the redesign of the
    bow section
  • And the community appears to have identified a strategy for
    resolving the problem of preserving the submarine design and
    engineering base, which was a concern that I mentioned in my
    past talks here

To varying degrees, observers outside the submarine community have noticed some or all of these things, which has helped to strengthen the community’s reputation within Navy shipbuilding and defense acquisition in general.

Adding Boats to the Shipbuilding Plan

But when it comes to how well these accomplishments translate into administration enthusiasm for adding submarines to the shipbuilding plan, well, as my father used to say, that and two bits will get you a cup of coffee.

This is my 14th year of testifying, reporting, and speaking on the projected attack submarine shortfall, and in terms of addressing that shortfall through the addition of submarines to the shipbuilding plan, the end game is now within view. Since procuring three attack submarines per year is viewed as unlikely from a financial point of view, the primary window of opportunity for adding submarines to the shipbuilding plan was the period when the budgeted rate was one ship per year, and that period will come to a close in another year or two.

The projected size of the attack submarine shortfall has changed somewhat over time, due to changes in the force-level goal and the submarine procurement profile. In recent years, it has been eight boats, or 14th of the force-level goal. And against that shortfall, it now appears that the end result, after at least 14 years of warning
time, will be the addition of one or perhaps two boats back to the shipbuilding plan.

I say perhaps two boats, because the Seapower and Expeditionary Force subcommittee of the House Armed Services Committee, in its markup of the FY09 authorization bill last week, recommended adding $300 million in advance procurement funding to support the acceleration of the second FY I I boat to FY I 0, which would make a space in the FY 11 column for the addition of another boat, should policymakers support that option and the funding becomes available.

In terms of mitigating a shortfall in a force of 40-something boats, each additional submarine has significant value. But even if a second additional boat is funded, most of the projected shortfall will come to pass, and the submarine community will need to implement its plan for mitigating the shortfall through other measures.

Many years ago, I was invited to speak at a breakfast or lunch meeting of the Navy’s submarine admirals, who had come together for one of their periodic meetings in Washington. I can’t remember the year exactly, but it was long enough ago that Admiral Giambastiani, for example, had not yet transitioned to the joint arena. At that meeting, the topic of increasing the planned submarine procurement rate came up, and I said that, based on historical patterns, it was unlikely that Congress could single-handedly turn a I -per-year submarine procurement profile into a sustained 2-peryear profile, because of practical limits to Congress’ ability lo add funds to the defense budget, and the many competing demands for such additional funds.
Based on historical patterns, I said, Congress on its own might be able to add a boat every once in a while, but the result over time might be lo turn an administration-planned rate of I boat per year into something like I. I boats per year, meaning an average of one Congressionally added boat each decade or so. My point at the time was that most of the solution of adding submarines to the shipbuilding plan would have to come from the Executive Branch, because of the limits to what Congress could do on its own.

Many years later, events have unfolded roughly in line with what I said at the meeting, because the roughly 15-year period that began with my first testimony on the projected shortfall in 1995 will sec one or two boats being added to the shipbuilding plan as a result of Congressional initiative. The Executive Branch helped with the first of those two boats by putting it into the shipbuilding plan after Congress last year provided advanced procurement
funding for it. But in terms of adding submarines to the shipbuild-ing plan, that’s pretty much all that the Executive Branch has done in recent years, and you get the sense that the Executive Branch had to be dragged kicking and screaming into doing it. As for accelerating the second FY 11 boat to FY I 0, the administration this year has repeated the argument it made last year about the supposed disadvantages for the industrial base of the resulting 2-1-2 profile for FY I 0, 11, and 12, should a second additional submarine not be added in FY l I. This has required me to repeat, in my testimony this year, the rejoinder to that argument that I had made last year.

Affordability of 30-Year Shipbuilding Plan/

I want to turn now to the issue of submarine procurement in the years ahead, when two boats per year are planned. The question is whether that rate will be achieved. My sense is that if the Navy stays on its current path, it’s very possible that the rate will turn out to be I Yi boats per year, or perhaps something less than that. I believe this for two reasons. The first concerns the prospective affordability and exccutability of the Navy’s 30-year shipbuilding plan, which includes that 2-per-year rate for attack submarines. In its report this year on the 30-year plan, the Navy acknowledged that its new estimate of the average annual cost to implement all 30 years of the plan is substantially higher than its previous estimates. The Navy’s new estimated cost is now a lot closer to CBO’s estimated cost, which the Navy last year had downplayed as worstcase analysis or as an extremely conservative estimate.
Last year, and the year before that, the Navy’s strategy for executing the shipbuilding plan depended on a series of five assumptions concerning the future size and composition of the Navy’s budget and the costs of future Navy ships. All five of these assumptions could be viewed as risk items, because there were grounds for questioning whether each of them would be borne out.

But although the Navy’s strategy depended on these assumptions, the Navy was able to say that it had a strategy for generating the shipbuilding funds needed to implement the plan. The Navy’s new estimated cost for the 30-year plan, however, is so much higher than the Navy’s estimate last year that the Navy no longer appears to have a clearly identifiable announced strategy for raising the shipbuilding funds needed to execute the 30-year plan.

This situation is compounded by the disquieting fact that the Navy’s new estimated cost for the plan, as high as it is, does not include the procurement cost of the 12 replacement SSBNs that are in the plan. The cost of these 12 ships was simply excluded from the Navy’s calculation, with no explanation provided in the report. The Navy later testified that the cost of these 12 boats was excluded because their design has not yet been determined, making their cost too difficult to estimate with any reliability. But that explanation doesn’t hold much water, because the 30-year plan includes other ships in the same time period whose designs also have not yet been determined, such as the replacement for the Aegis destroyers, and the Navy included estimates for the cost of those ships in its
In trying to explain why the cost of these I 2 ships was simply excluded from the overall cost estimate, I surmised in my own testimony this year that the Navy might have been signaling to others that it was reopening, or reserving the right to reopen, the debate about whether a service should be asked to pay, out of its own budget, for the cost of building and operating platforms that perform a national mission rather than a mission more closely related to the service’s own core missions. That’s a rather nice theory, but I wonder whether I was being too clever by
half- whether the real explanation is that the Navy simply didn’t want to make the cost of the 30-year plan seem even more daunting than it appears by adding in the cost of these I 2 ships. Either way, outside the Navy, there’s strong doubt about the Navy’s prospective ability to implement the plan- and that’s probably putting it mildly. Much of this skepticism is rooted in the recent cost growth that has been experienced in shipbuilding, which
has caused the Navy’s credibility in estimating shipbuilding costs to sink to a new low. I used to think that the Navy’s credibility on this measure had hit bottom, but the Navy has continued to find new ways to make it go lower, so now I’m careful to avoid that fonnulation.

At a hearing earlier this year on Navy shipbuilding programs, Representative Taylor, the chairman of the Seapower and Expeditionary Forces subcommittee, characterized the 30-year plan as “pure fantasy,” and said it was “totally unaffordable with the resources the Department of Defense allocates to the Navy for ship construction.” And that’s from one of the strongest supporters of shipbuilding in Congress.

Navy Position In Allocation of Resources Although the Navy, industry, and Congress can take various steps to minimize shipbuilding costs, the magnitude of the Navy’s apparent ship recapitalization financing challenge suggests that implementing the 30-year plan without reducing resources for other Navy priorities would likely require adding billions of dollars per year to the Navy’s budget in coming years. And that gets me to the second reason I believe the planned 2- per-year rate for attack submarine procurement is at risk, which relates to the Navy’s current position in the process for allocating defense resources. In coming years, we may be heading, for a
variety of reasons, to a less open-ended defense budget environment than we’ve had for the last several years. Defense resources relative to various funding needs might become relatively scarcer, and the competition for marginal defense dollars will become more difficult.

Right now, I don’t believe the Navy is well positioned to compete for those marginal dollars, for at least four reasons. The first is the sense among many observers that, in light of the burden they’ve carried in Iraq and Afghanistan, the needs of the ground forces will come first. The second, which I alluded to half-jokingly in my presentation here last year, but which has since become less funny, is that while the Air Force has been publicly asking for more funding, the Navy hasn’t. Air Force officials in public statements have not been reticent about raising the issue of needing more money to fulfill their plans, and until very recently at least, have used a number of public opportunities to stress their service’s need for an additional $20 billion per year for five years.

The Navy, in contrast, has spent much of the past eight years generally refraining from publicly asking for more money and emphasizing instead how new business-efficiency measures and other cost-saving actions will pennit the Navy to implement its program without an increase in its planned budget top line. The Navy has sometimes acknowledged that the executability of its shipbuilding program is at risk, but has not followed such acknowledgments with any requests for additional funding.

The Navy’s approach of not asking for additional funding over the past several years may have been music to the ears of OSD officials who regularly receive pleas for more funding, but it has not created much of a foundation for the Navy to start laying claim to additional resources that might be needed to implement its shipbuilding plan.

The third reason that the Navy is not well positioned to compete for marginal DOD resources is that the Navy’s recent emphasis on international maritime cooperation in security issues (previously referred to as the 1,000-ship Navy concept) can encourage others to believe (or can be used by others as an excuse to argue) that shortfalls in Navy capacities for performing certain missions can be mitigated, at least in part, by relying more heavily on other navies to perform these missions.

And the fourth reason I believe the Navy is not well positioned to compete for marginal DOD resources is that Administration descriptions of U.S. security challenges arc dominated by references to the war on terrorism, while references to China as a potential security challenge arc comparatively rare. In recent months, some Administration officials have begun to speak about China’s military modernization a little more frequently and directly, but the topic remains very much a secondary one in discussions of the future security environment, compared to topics such as terrorism.

This way of describing the international security environment has prepared observers well for understanding arguments for additional spending related to counter-terrorism operations, but it has not prepared them as well for understanding arguments for additional spending prompted by Chinese military modernization. And that poses a particular challenge for the Navy, because a lot of the Navy’s most expensive planned investments arc for capabilities that would be useful or critical in countering improved Chinese maritime military forces in coming years. Of all the services, the Navy might have the most at stake in this issue.

Prospects, Given the Current Path

When you combine the prospective affordability of the Navy’s
shipbuilding plan with the Navy’s current position in the resourceallocation process, the path that emerges is one that may require reductions in the outyears of the shipbuilding plan. Indeed, we ‘ ve already begun to see such reductions. The plan for procuring 2 attack submarines per year is not the only candidate for further such reductions, but it’s certainly one of them.

In light of this situation, 1 would not be surprised if the 2-peryear rate for attack submarines is eventually reduced to I ‘h per
year. Policymakers might find it easy to rationalize the reduction on the grounds that, with a 33-year service life, a rate of I ‘h boats per year is consistent maintaining a 48-boat force over the long run.
The fact that it’s not consistent with maintaining a 48-boat force over the medium run might be acknowledged, but I wouldn’t place money on that acknowledgement being enough to prompt a shift in the rate back up to 2 per year, particularly now that the executive branch has a proven record of acknowledging a projected attack submarine shortfall but not doing too much about it in terms of procurement.

A key dynamic underlying all this, it seems to me, is the fact that while maintaining the Navy is a long-term proposition, there arc very few public officials with executive authority who themselves remain in office for an extended period of time. Ships take years to build, and remain in service for decades. So it takes a long time to build up a Navy, and a long time for the force-structure consequences of underinvestment in recapitalization to become undeniably manifest. But there are very few executive officials who remain in office long enough to confront the longerterm consequences of their decisions. This situation makes it tempting to defer the costs of addressing difficult problems into the future and thereby shift them onto someone else’s watch. It’s happening now at the federal, state, and local level in a number of areas, such as retirement costs, health-care costs, and investment in public infrastructure.

And more and more, it seems to me, this is what is happening with Navy shipbuilding. When you add up the total number of battle force ships (meaning ships that count toward the total size of the Navy) that have been procured since FY93, which was the first budget enacted following the disintegration of the Soviet Union, the figure is 85. That’s an average rate of 5.3 ships per year, for 16 years. That rate, if sustained over the long run, could eventually result in a fleet of less than 200 ships. It’s OK, of course, to fall short of a steady-state replacement rate for a few years, as long as you make it up in other years. But Navy shipbuilding has now been below the steady-state rate for so long that the mathematics of the situation arc becoming fairly daunting. Procuring a total of 313 ships over a 35-year replacement period starting in FY93 will now require an average of 12 ships per year for the next 19 years. And about three-quarters of those 12 ships per year, on average, would need to be larger ships, as opposed to LCSs.

At last week’s meeting to mark up his subcommittee’s portion of the FY09 defense authorization bill, Representative Taylor said that DOD, “continues to submit budget requests which reduce, not grow, the size of the fleet. The solution offered, every year, is that the solution will be delayed to future years.” It’s the frustration with this perceived situation of deferring difficult problems to the future, combined with the Navy’s low credibility on ship cost estimating, that has encouraged Members on the House side this year to, in effect, take matters into their own hands by recommending significant changes to the Navy’s proposed FY09 shipbuilding budget.

A Potential Different Path

So what docs all this mean for the submarine community? To me, it suggests first, that, if the current path is not changed, the submarine community would be wise to begin exploring strategies for meeting requirements with a build rate of I Yi submarines per year, rather than two per year. Whether that would involve exploring the potential for SLEPing and refueling 688s, or building new SSNs with 40- or 45-year lives, or forward-homeporting additional boats, or changing crewing and deployment approaches, I don’t know, but it might include one or more of those things. Second, this situation suggests to me that a solid rate of 2 per year is not something that can be achieved simply by arguing the virtues of submarines and executing submarine acquisition programs efficiently. Doing those things can help, of course, but it seems to me that the challenge facing the submarine community is no longer simply one of improving the community’s position in the Navy’s resource-allocation process. The primary challenge, it now appears, concerns future of the Navy as a whole, and that’s not a challenge that the submarine community can solve by itself. Meeting that challenge, it seems to me, will require strong and sustained Navy leadership regarding requirements and funding levels. I’ve been around long enough to know what that looks like.

The Navy should continue to do all it can to operate more efficiently and save money where it can, including in shipbuilding. But beyond that, Navy leaders need to be direct and forthright about developments in China or elsewhere that arc driving mission demands, and they need to be honest- first with themselves, and then with others- about the capabilities it would take to meet those mission demands, about what those capabilities will realistically cost, about resulting funding requirements, and about the potential consequences of capability shortfalls, even if all these things are inconvenient for others in the Executive Branch to hear. Observers outside the Navy, I believe, would question the Navy’s current level of effort on each part of that sequence.

My position gives me an opportunity to stand back every once in a while and assess broader trends, and while I don’t want to be melodramatic, the more I examine this situation, the more I think we’re heading slowly, perhaps, but steadily toward some kind of moment of truth concerning the future of the Navy. We like to think of ourselves as a superpower, and being a superpower means a lot more than simply having a powerful military. But having a
powerful military is part of it, and having a Navy of a certain size and capability is a part of that.

We can put the issue off, and put it off some more, but at some point, we’re going to have to decide as a nation whether we’re going to have a Navy of a certain size and capability, or not. The strength of Navy leadership in coming years on this issue will influence the outcome of that question, and that dynamic, perhaps more than anything else, will determine what will happen with submarine procurement in the years ahead.

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