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Good afternoon, and thank you for this opportunity to speak with you today.
Given that the budget, the QDR, and the 30 year shipbuilding plan are all released this week, the timing for this event is particularly conspicuous.

Today, we’re a 285-ship Navy, and on any given day, about half of our battle-force is underway; supporting operations in Iraq and Afghanistan, providing Maritime Security in the western IO, Building Partnerships with nations on both African coasts, conducting multi-nation exercises with allies in the Pacific, and with neighbors in the Americas, standing, as a shield, against the threat of ballistic missiles while on watch in the Sea of Japan, testing and training off our coasts, to relieve the watch, and, of course, providing humanitarian assistance- today in Haiti- and tomorrow, wherever disaster may strike.

And while these very evident displays of what has been called, “A global force for good” dominate the media; quietly, our Submarine Force maintains persistent surveillance in regions of interest, conducts special operations un-detected, trains and operates at the chokepoints of the world, to assure access in the event our freedoms, or the freedom of our friends and allies, are threatened, stands poised to conduct conventional strike missions a thousand miles inland from wherever the waters may reach, and serves as the enduring, reliable deterrent that has underpinned our national security strategy for near half a century.

Today, we’re a 285-ship Navy, arguably, with greater reach, greater command of the seas, than any Navy at any point in history.

Our primacy as a naval power is virtually unchallenged, due to the skill, dedication, and resourcefulness of our Sailors and Marines who are called to perform the Nation’s business under the most stressing conditions imaginable. And it is given to us to place in the hands of these young men and women the weapons and systems that they need to win the fight we’re in and to return home safely. And too, it is our responsibility to provide the capabilities and capacities to win the next fight; wherever, whenever our freedoms are met with violence. This is our call, our common ground- to protect the Nation and to take care of our men and women in uniform. And looking back-over this past year- how have we- Navy and industry, together- How have we done?



Well and truly laid the keels for
And cut steel on

Together, these ships would represent the second most powerful Navy in the world. Meanwhile, MV-22 went to sea on BATAAN, the Joint Strike Fighter arrived at Pax River for testing by the Navy and Marine Corps, FireScout deployed on McINERNEY, standard Missile opened up the battle space in testing out at White Sands, BENFOLD demonstrated Aegis’ ability to detect and engage a short range ballistic missile and a low altitude cruise missile, simultaneously.

And perhaps most significantly, the Mine Resistant Ambush Protected All Terrain Vehicle, the MRAP ATV, arrived in Afghanistan. Of particular interest to this group, VIRGINIA is writing a new chapter in naval warfare during her maiden deployment, SSGNs are, today, providing continuous two-theater coverage; we demonstrated a submarine’s ability to communicate and potentially control a UA V, exploring a new role in support of strike and irregular warfare missions.

Meanwhile, Common Missile Compartment design work for the OHIO and VANGUARD replacements is underway; Navy and industry teams continue to capitalize on lessons learned, with NEW MEXICO four months early, OHIO Class refuelings proceed on schedule; and we look forward to commissioning NEW MEXICO and MISSOURI, christening CALIFORNIA, laying the keels for MISSISSIPPI and MINNESOTA, and, in what promises to be a very special occasion, starting fabrication of the JOHN WARNER.

And, as an important historical note, we decommissioned USS LOS ANGELES following 33 years of honorable service and 18 deployments in the defense of our Nation. These are tremendous accomplishments that the community can be very proud of.

The bar is high. Now, we need to talk about raising the bar. I noted earlier that we delivered the 30 year shipbuilding report to Congress this week. Of ALL the annual reports to Congress, none generates greater debate in the building, interest in the press, or consternation on the Hill than this report, more formally titled, The Annual Long Range Plan for Construction of Naval Vessels.

In the building, we fight over every word, every dollar, and every number in the report. It is at once an important and an imperfect document, important because it provides today’s best insights to the force the Navy intends to build to meet operational requirements for the foreseeable future. Imperfect, because these requirements can, and do, change rapidly in response to emerging threats, emerging technologies, and elusive budgets. When asked the value of a 30 year plan that tends to change annually, I offer a few observations.

First, 30 years is about the average service life of a warship which suggests that that’s about how long it takes to build a Navy. In fact, our naval superiority today, in large part, is due to decisions made by our predecessors some 30, and even 50 years ago.

Such is the nature of shipbuilding – that we must take the longer view. Of course, then we were building a Cold War Navy, and no one could precisely envision today’s era of naval dominance, the role of networks and information, the advent of unmanned systems, sea based missile defense, or the specter of irregular warfare; however, the fundamental roles and missions and therefore, architecture, of our Navy have proven enduring:

Global Presence
Sea Control
Carrier Strike
Air Defense
Maritime Security
Strategic Deterrence
Amphibious Lift
Humanitarian Assistance

A second observation is that the report has great value if for no other reason than it forces the Department to size itself up each year, anew and confirm that we have drawn the right balance across the numbers and mix of ships that make up our Navy, and as well, across our budget, our requirements, and uniquely in shipbuilding, our industrial base.

A final observation is that it is ultimately the responsibility of the Congress “to provide and maintain a navy”, the role of industry to build that navy, and the burden of the taxpayer to pay for that navy, and so it is only right that we should provide our vision for our future fleet to explain it, to debate it, and when all other options have been exhausted, finally, to build it. And despite the change of times, many of the issues we confront today as we consider the challenges in building our future Navy, were similarly confronted by our predecessors.

Consider this memorandum, written by the Assistant Secretary for Shipbuilding & Logistics 3 decades ago:

Subj: Navy Acquisition Policy in the 1980s Secretary Lehman and I are fully committed to insure the Navy has the ability to fund and man the Navy’s expansion program in the 1980’s. We are equally concerned with our ability to manage our industrial base and assure production in an affordable, timely manner for those programs now being authorized by Congress.

Certainly, the more glamorous issues of acquisition are those such as how many CVN’s and F/A-18’s should be built, but it is the detailed negotiation and actual production through fair and equitable contracts with our multitude of prime and sub-tier producers that will ultimately provide a more capable Navy.

Accordingly, I want to share with you some of the primary management principles that I believe must mutually guide us in our quest to achieve an equitable sharing of responsibility and risk between the Navy and its suppliers. Most of these principles are 1101 new, but it is important that they not be treated as terms of past rhetoric, but as future commitments, if indeed we are to realize a 600 ship Navy.

Specifically, our improvement principles should include:

  • Judicious use of Taxpayers’ Dollars.
  • Management Accountability.
  • Competition.
  • Fair Share Contracts.
  • We need to place greater emphasis and commitment to long range planning to create mature, stable programs.
  • We must give the highest priority to both the quality and quantity of our civilian and military contracting and program management personnel.

With very few edits, this memo has served as preamble to policy and 30 year shipbuilding reports in the decades since. And the 600-ship Navy that resulted has served our Nation well. The decade of the 80s gave us Nimitz, Los Angeles, Ohio, and Aegis- in numbers that would assure our naval superiority to this day.

The challenge before us now- as these ship classes approach retirement- is that we cannot replicate the rate of construction of that era, and yet we must increase our build rate of the past decades in order to realize a 300 ship Navy.

So, what does that portend in the FYDP?

Over past years, the CNO has outlined his requirement for a 313-ship Navy. That is not 313 in 2013, but it’s forward-looking, it considers today’s missions and anticipates the capabilities and developments of potential adversaries ten and twenty years ahead. To this end, we plan to procure 50 ships across the 5 years of the FYDP, perhaps most significantly, regarding the Submarine Force, we’ve requested funding to increase VIRGINIA class construction to 2 boats per year in 2011 … and, across the new attack and strategic programs … we intend to sustain submarine construction at this rate for the next quarter century.

To ensure our readiness to begin construction of the OHIO Class replacement- in 2019, we are investing significantly in Research and Development inside the FYDP to bring the needed design and technologies to bear that will ensure the survivability and effectiveness of this platform for the next generation, and the generation after. Arguably, submarine construction dominates the plan for the next 20 years; we do this with deliberation. This is the need of the Navy and the Nation, and it’s a damned good thing that the Submarine Community- the Program Executive Office, the SYSCOM, the Shipbuilders, and the Vendor Base are sufficiently strong and in stride, and eager to answer the call. Because the need is great. Despite this planned investment, the far-term points towards a gradual decline in Submarine Force structure driven by the rate of retirement of today’s 688 fleet.

That reality drives emphasis towards availability, readiness, and combat effectiveness. Clearly, today’s VIRGINIA submarines bring capability that outmatches the submarines she replaces, and more importantly, those she opposes. Her life of hull and core effectively serves as a force multiplier.

Her technology insertion strategy is key to ensuring that we maintain our tactical advantage in the decades ahead, and frankly, we are only beginning to understand the contribution that unmanned vehicles bring to the submarine mission as we develop these capabilities in concert with fielding VIRGINIA.

The Issue-before us all, however, is affordability. In the most pragmatic terms, in balancing requirements, risk, and realistic budgets, affordability controls our numbers. The fact is that acquisition costs have increased faster than our top-line, and that drives very difficult choices within the budget process, which over the long term, takes a measure from our hands as we shape the future force … over the long term, takes capability from the hands of our Sailors and Marines.

This requires that we closely examine the way we do business with a clear eye on controlling cost. There are no quick fixes and the principles are well understood, but it’s worth a moment to outline a few of those principles we ‘re working on. It all starts with requirements, and so our first priority is on tightening the standards for our technical assessments and improving the quality of our cost and schedule estimates that inform our requirements decisions at the front end in order to reduce the risk of broken programs at the back end. VIRGINIA cleared that hurdle.

As we move forward with the Sea Based Strategic Deterrent AoA, we must ensure that the OHIO Class replacement does likewise. We are drawing a distinction between what systems could cost and what they should cost, and addressing risk in the budget while driving to a greater understanding of how we need to construct our acquisition strategies to meet a should cost objective. To quote Secretary Mabus, “nothing is sacred.” Across the Department, we’re placing greater emphasis on competition and, too, on the use of fixed price contracts. We are intent upon opening up competition on programs and subcontracts that have traditionally been sole-sourced, but have priced themselves out of the range for justification of continued sole-sourcing.

This is a particular challenge for the submarine community, where unique requirements across a highly specialized industrial base provides limited opportunity for competition.

Then-CNO Mullen addressed this challenge, however, by creating a different competition-competition for resources in the budget process. Much to the credit of folks in this room to meet CNO Mullen’s mandate for affordability, “2 for 4 in 12” has become “2 for 4 in 11” this year. As industry is well aware, and quick to remind us, stability is key to affordability. Within the bounds of the budget, we seek to provide stable procurement rates across the 30 year shipbuilding plan. At the individual program level, authority to change requirements and to change contracts is being reined in. At the Department level, we have emphasized stable procurement rates in the 2011 budget and the authority to change that program in POM 12 is likewise being reined in.

Our goals for modernizing today’s force and recapitalizing the fleet affordably cannot be accomplished without sustaining the health of the industrial base and likewise, cannot be accomplished without strong performance by our industry partners.

The defense industrial base is a strategic asset, fundamental to our national security, and it’s essential that we have a clear understanding of the issues affecting industry’s performance. To this end, with particular regard for the unique characteristics of the shipbuilding industrial base, we will be building upon past studies this spring to assess our shipyards, the vendor base, and the design industrial base with an eye towards capability, capacity, and productivity requirements needed by our Navy near-term and far-term. As well, to provide a government-industry forum for open discussion and debate, and advise on acquisition policy and broad industry trends and matters-outside of the confines of a contract – we are establishing an Industrial Base Council with participation by Navy, other services, and industry, and I’ll be looking for engagement in the near future.

In the end, industry must perform. We will work to benchmark performance, to identify where improvements are necessary, to provide the proper incentives for capital investments where warranted, and to reward sustained strong performance with more favorable terms and conditions. As I’ve stated before, my goal is for the defense corporation to spend less time describing the concerns of the Street to me and more time describing the concerns of the waterfront to the Street.

To meet our objectives, we must be smart buyers. We have gone far in the course of the past year to reverse the downsizing trend in the acquisition workforce. From supervisors of shipbuilding, to the warfare centers, to the SysComs and program executive offices; we’ve filled vacancies and have added more than 2000 professionals in the fields of systems engineering, manufacturing, program management, contracts, and T &E. Of course, we have much farther to go. The objective is not merely to increase the workforce, but to restore core competencies that have slipped loose over the course of a decade and a half of downsizing.

Admiral Rickover once offered, that

“Good ideas are not adopted automatically. They must be driven into practice with courageous impatience. Once implemented they can be easily overturned or subverted through apathy or lack of follow-up, so a continuous effort is required. ”

We serve today in a Navy that Admiral Rickover began to shape a half century ago. And though today’s is a very different world, complicated by different challenges and new dangers, what we learned through the SKIP JACK and PERMIT and STURGEON and “41 for Freedom”, brought us LOS ANGELES and OHIO; and as we move forward from SEA WOLF to VIRGINIA and the next BOOMER, we need be careful to heed Rickover’s wisdom, and drive into practice with courageous impatience those good ideas needed to ensure our continued naval dominance for the next half century.

Thank you for your support of our Navy and this opportunity to join with you today.

Naval Submarine League

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