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Admiral Mies, thank you for that warm introduction. Admirals, Submarine League’s Board of Directors, and friends of the Submarine Force-it is a pleasure to share this evening with you. To the Corporate Benefactors, thank you for your ongoing support of the Submarine Force, Naval Submarine League, and this event. I look forward to this night each year as it helps all of us evaluate where we have been, and plot the course for where we arc going, and align our messages.

We all saw many good things happen in 2008. Our ships and crews continue to perform to the standards of excellence which we have come to expect. All four SSGNs arc operational and USS OHIO has completed her first operational cycle with great success. USS RHODE ISLAND-Gold Crew-is nearing completion of the 1OOOth strategic deterrent patrol with the D-5 missile. Our nuclear strategic deterrent forces further demonstrated excellence in the course of two external reviews following significant failures in the Air Force nuclear stewardship. Our SSNs have ranged the globe and delivered the goods. Our attack submarines and carriers are in demand as evidenced by Combatant Commander requirements and compressed operational schedules. The Virginia Class Submarine Program has set the standard in shipbuilding. From 774 to 778 the delivery span has gone from 86 months to 71 months. 779-USS NEW MEXICO-is on track to achieve a 66 month span. We are on track to meet our cost reduction goals and as a result the Navy was able to award a 5-year multi-year procurement contract, totaling more than $14 billion dollars, for eight more submarines to the Electric Boat-Northrop Grumman Shipbuilding team. While approval to move on with eight more hulls was based on proven success in the planning and execution of construction to date, this achievement is a strong indication that our combined investment to educate and inform our Navy and civilian decision makers has yielded a solid return.

The final NIMITZ Class aircraft carrier-GEORGE H. W. BUSH-was commissioned last month in a moving ceremony in Norfolk. The first nuclear powered aircraft carrier-ENTERPRISE-will de-commission in November 2012. Subsequently, NIMITZ is planned to de-commission in 2025. In response to that reality, last September we signed the construction contract for GERALD R. FORD (CVN 78), the first new design of aircraft carrier ordered in more than 40 years. Shifting to strategic deterrence and replacement for the OHIO Class submarine, support within the Navy and The Office of the Secretary of Defense has been noteworthy. The Navy has been conducting an Analysis of Alternatives and supporting studies to evaluate options for replacing the OHIO Class submarines when they start coming out of service in 2027. R&D funding for concept studies, design work, and planning is starting to flow now to ensure this vital capability is not gapped.

We recently awarded a contract for design of the common missile compartment and are finalizing details of cost sharing with the Royal Navy. The FY IO DoD Program supports necessary funding for concept studies, design work and planning. A Nuclear Posture Review will commence shortly and we expect validation in that process for the ongoing need of our SSBN fleet and the OHIO Replacement Program.

While we celebrated these successes, 2008 also saw the deactivation of NR-1. Many of you in this room were involved in the design, building or operations of that unique ship and she stands as a shining example of how our technology can be used for missions associated with our national interests beyond warfighting.

It goes without saying that both the international and domestic fronts have been and will continue to be tumultuous for the foreseeable future. Clearly, Afghanistan will be the focus of the Department of Defense as we strive to reverse the tide of the revitalized insurgency and to return some semblance of stability to the region. Troop numbers in Afghanistan will increase and with that will come a call for more non-traditional support from the Navy in the form of individual augmentccs. Currently, there are eleven-thousand Navy personnel serving in this capacity in support of the wars in Iraq and Afghanistan, and that number will not go down for several years. The Fleet’s presence in the region will be undiminished but will remain in a supporting role to the ground war. In the rest of the world, the demand for the Navy centers around readiness for the unforeseen crisis, demonstrating strength and resolve in support of regional stability, and developing new and reinforcing old partnerships with nations that share our common interests.

Domestically, we have a change in administration under the specter of an economic downturn. The transition from the Bush to the Obama Administration has been about as smooth as anyone could hope, certainly aided in DoD by the retention of Secretary Gates as Secretary of Defense. The engagements with the transition teams were remarkably comprehensive and professional. Particu-larly on the Department of Energy side, the reputation of the Naval Nuclear Power Program and the nuclear shipbuilding community has put us in a good position with the new administration and that will be important as we work to solidify our budgets to support key programs like OHIO replacement. Work to continue building relationships with our new civilian leadership must continue on a ll fronts, as many have had little experience with the Navy and, more specifically, nuclear powered warships.

An ailing economy coupled with an ambitious domestic agenda outlined by the new administration will, no doubt, put downward pressure on defense budgets and procurement accounts in particular. Secretary Gales has made it clear as recently as last week in his congressional testimony that some tough choices will have to be made on what equipment we buy. I have no insight into the specifics of those tough choices, but the signal is clear that you had better be able to show relevant warfighting capability and cost stability in your programs-or you’re in trouble. We have a good story to tell with the VIRGINIA Program, the NIMITZ Class, and SSGN. I think we will fare well if we “stick to our knitting” building capable, versatile warships and equipment with a watchful eye on affordability. We know how to do that.

2009 will present a new set of opportunities for us a ll. Keep in mind the successes in shipbuilding and funding resulted from decades of hard work to ensure all stakeholders understood the need for, and economics behind, nuclear shipbuilding. The new administration and a rapidly changing Congress, including 54 new House members, represent a new set of bosses we need to under-stand and collaborate with, to support our national defense needs. Forming these new relationships, and strengthening existing ones, will be critical in achieving our shipbuilding goals through this economic downturn.

Success in this area will require the Navy and the shipbuilding community to make and reinforce the point of the importance of shipbuilding to national defense and economic security. National security encompasses both of these first order responsibilities of our government and we can show that investment in our nuclear powered platforms reaps rewards economically, militarily, strategically and diplomatically.

The Maritime Strategy effectively establishes the Navy’s role in the larger national security context. Soon we will release a Naval Operating Concept that will provide the much needed link between the strategy and the force structure requirements and shipbuilding plan, answering the questions of why we need ships and aircraft that we do. From the economic perspective, investment in ship-building will speed recapitalization of our fleet that has been in decline since the end of the Cold War, providing immediate economic stimulation-by creating high paying jobs for skilled workers. There is precedent for using shipbuilding as an economic stimulator. During the Great Depression, the National Industry Recovery Act and the Vinson-Trammel Act provided President Roosevelt both the Authorization and the Appropriation authority to build ships at a rate not to exceed treaty limitations. In fact, those ships placed under contract as a result of economic stimulus efforts were the foundation of the fleet that responded so valiantly in the early days of World War II.

Today the funding in the shipbuilding industry directly supports more than 250,000 working men and women in 49 states and the District of Columbia. Shipbuilding creates jobs-high paying, skilled manufacturing jobs that also help maintain production capability that has eroded significantly in the United States. These jobs are created at companies both large and small from the six major private shipyards to more than 3,000 manufacturers of components that support ship construction.

As l look forward to the year ahead, l see an array of tactical challenges and one significant strategic challenge. First, the tactical: Gain support of fiscal year 2010 funding for the OHIO Replacement Program to maintain a glide slope toward procurement of the first replacement in 2019.

We have some significant infrastructure issues that must be addressed to ensure the Naval Nuclear Power Program adequately supports the fleet to include moored training ship replacement, refueling and technology insertion in the S8G Prototype and recapitalization of the Expended Core Facility in Idaho to handle our spent fuel.

Finally, properly manage our most valuable resource, our people. It is expected that over the next decade cost of personnel will increase about 8% per year even if end strength is held constant. There will be pressure to hold and even decrease end strength. The economic downturn is already resulting in rapidly increasing retention outside the nuclear field which is triggering action to be more selective in who is allowed to stay in the Navy. At the same time, we are seeing continued indication of a strong civilian market for nuclear trained operators, and, consequently, we are not enjoying the same bounce in retention. Many of you in this audience arc feeling the same competition of talent. Retaining our great people requires bold action across the spectrum of compensation, quality of life, and rewarding work, if we arc to remain strong and effective.

And our strategic challenge: Secretary of Defense Gates recently published an article in Foreign Affairs magazine entitled “A Balanced Strategy” where, and I don’t think I a m overstating, he outlines the de facto National Defense Strategy. In summary, he states that the Pentagon has to do more than modernize its conventional forces; it must also focus on today’s unconventional conflicts -and tomorrow’s. While I believe this strategy holds great opportunity for the Navy, we will be challenged to articulate our relevance. Despite significant contributions to ongoing conflicts across a wide spectrum of capabilities as well as providing a strategic hedge against major unrest in the rest of the world, the Navy is still, in the minds of many, a conventional force designed for major conflict on the seas and of diminished relevance in the asymmetric wars we find ourselves in today.

Even our self-talk is sometimes myopic. I recently attended a Navy conference featuring a discussion of strategy for the upcoming QDR and a slide appeared with the statement, “The Navy is a conventional force”-as opposed to suited for irregular warfare. Simply, that is wrong. The Navy is survivable, flexible, adaptable, and agile while remaining lethal and dominant in our spheres of influence.

When Secretary Gates speaks of hybrid warfare encompassing irregular warfare tactics utilizing the lethality and sophistication of conventional systems, the Navy’s ability to contribute is limited only by the size of our fleet, imagination and innovativeness. When we design our ships there are warfighting attributes considered that likely reflect what we know about current adversaries and their intentions, to be sure. However, designs are just as much about building in flexibility and growth margin such that our ships remain relevant over their 30, 40, even 50 year lifetimes.

W c have reaped the benefit of that strategy as we sec jets from our nuclear powered aircraft carriers providing close air support for soldiers in Iraq while at the same time USS ABRAHAM LINCOLN provided the critical staging base for disaster relief following the tsunami in Southeast Asia. We sec the benefit as our submarines stand ready to strike ashore while, at the same time, at sea to support irregular warfare with surveillance operations, Special Forces, and information operations. Plus we enjoy the advantage of near unlimited access through our endurance and stealth. But I suspect this crowd doesn’t need convincing. What we need to do, however, is to better inform our leadership on these facts; make the case that a strong Navy represents the model for success in hybrid warfare; that we are ready to answer the call across the spectrum of conflict with dispatch and without the logistical encumbrances of land based forces and land based aviation.

It is also appropriate to take criticism onboard and honestly assess where we fall short in meeting the vision inherent in our National Security Strategy; how can we better range the spectrum of hybrid warfare with our ships, weapons, sensors, and our people?
A couple of thoughts:

ASW-This is an inherently Navy mission and you won’t hear much about it outside the Navy until the capability is needed. I will concede there has been more focus on this area of late; however, we still have not adequately addressed large area search, cueing, surface ship torpedo defense, and, closer to home, towed array performance.

W capons-Submarine torpedo development and performance is healthy, but the same can’t be said of surface and aviation borne weapons. With respect to strike: What’s next? TLAM has been with us for a long time and it is still a superb weapon. But where do we want to be in I 0 years or more? Ground forces will tell you that responsiveness is vital in the types of wars we are fighting today. TLAM is hampered by relatively lengthy planning cycles, flight time, and, consequently, challenging deconfliction in the air domain. Can we do better?

Unmanned Undersea Vehicles-It’s time to get real. We have vacillated around this business for years and driven down a couple of blind alleys. I think we arc at the point where we can declare large diameter UUVs deployed from SSGNs or VIRGINIA CLASS with large diameter vertical tubes as our objective and start getting capability to sea.

We will have an opportunity to tell our Navy story in the upcoming QDR, but we are going to have to be ready with it since my sources tell me this QDR will move more quickly than in previous years. Secretary Gates has expressed a desire to shape the FY I 0 budget with significant QDR findings and certainly PR-11 development will be influenced. Rear Admiral Bill Burke is leading our QDR cell in the Navy as well as the discussion among senior leaders.

To our corporate benefactors, many representing our industrial base, you will play a key role in this strategic effort. First we must maintain our credibility as competent operators and shipbuilding stewards of the public trust. Do your work on time, on budget, with quality. Your craftsmanship continues to be the envy of the world.

Foster innovation in your workplaces and don’t be shy about telling us about your new ideas. Be persistent-there will be a tendency to jealously guard the status quo in times of declining budgets at the expense of new ideas. Look at the example of Advanced Rapid COTS Insertion as a case where a bold step away from legacy systems proved to be both revolutionary and afford-able.

I am also calling on you to partner with us in reminding and informing our national leaders of the unique and significant contribution of the Navy to our national security and the importance of our shipbuilding industrial base with respect to our national defense and economic security. Much like binding energy which holds the nucleus of an atom together, our collaboration in maintaining and promoting our Navy requires all stakeholders to stay together in making this case.

I will close by thanking you for allowing me to be part of this great event. I look out and sec the faces of many who stood the watch and held the standard for many years. Our nuclear navy is strong today with a bright future. I know that with your help we will continue down a path of safety and mission accomplishment from the design and construction of ships to the execution of our mission. Thank you for your contribution to the Program and our Nation.

With that – I will be happy to take questions.

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