Introduction
Thank you for the introduction and thank you for the chance to once again speak to you.
As usual, I need to issue the standard disclaimer that these remarks are my own and do not necessarily reflect the views of CRS or the Congress.
The pin on my lapel
I want to start today by noting the pin here on my lapel. It’s a pin for the New Horizons spacecraft, which is NASA’s mission to Pluto and the Kuiper Belt. APL put the New Horizons spacecraft together, and is running the mission from one of the other buildings here on the APL campus.
The project office was kind enough to give me a briefing on the mission three years ago, and it was at that briefing that they gave me this pin. I’ve been wearing it to work every day since the start of this month, because after more than 9 years of flying toward Pluto at about 30,000 miles an hour, it’s now show time— the spacecraft is now close enough to image Pluto and its largest moon as something more than dots, and the actual flyby, when all kinds of discoveries will be made, will be on July 14.
I’m pointing this out not only because the mission is being run right here at APL, but because when the mission was launched in 2006, the flyby in 2015 seemed a long way off. And yet here we are, just a few weeks away from that event.
It’s a reminder that things that seem to be far in the future will get here before we know it, which is a point I’ll return to later in my talk.
June 2014 HASC on DOD acquisition finding what works
But I want to start now by talking for a few moments about a House Armed Services Committee hearing that was held last June, just after my talk with you last year.
The hearing was entitled Case Studies in DOD Acquisition: Finding What Works, and it was focused on showcasing acquisition programs that have done well, and on identifying the reasons why they went well.
I thought it was important to hold this hearing for at least two reasons. First, you can’t always identify what works in acquisition by focusing solely on programs that don’t perform well, because doing well in acquisition doesn’t always involve doing the opposite of what was done in poorly performing programs. It sometimes involves doing things differently at some kind of right angle to what was done in a poorly performing program—and it can be hard to identify that different-but-not opposite course of action by focusing only on programs that go bad.
Second, I thought it was important to hold a hearing focusing on success stories because there are lots of hearings that focus on poorly performing programs. Holding those kinds of hearings, of course, is an important aspect of congressional oversight and it can develop some insight into how to do things better the next time.
But holding hearings that focus on poorly performing programs without ever looking at any counter examples of programs that have performed well can encourage an attitude of pessimism and cynicism toward defense procurement a sense that DOD just can’t do things right, and that the acquisition system is not only broken, but that there’s little that can be done to fix it. I’ve encountered that attitude a fair amount in recent years, and in terms of actually trying to do better in acquisition, I don’t think it’s very helpful.
So when I was asked to be one of the witnesses at this hearing, for the purpose of talking about Navy shipbuilding acquisition success stories, I welcomed the opportunity.
My testimony presented seven acquisition success stories in Navy ship acquisition, and three of them were naval nuclear propulsion in general, the Virginia-class program, and the Acoustic Rapid COTS Insertion program.
As those of you who have heard my talks here in past years might recall, I’ve long felt that the ARCI program has not received the attention it deserves. But at that hearing, the ARCI program had a moment in the sun.
When I put together that list of 7 cases, I was very conscious that 3 of them were about submarines or, in the case of nuclear propulsion, closely related to submarines. I was a little concerned that the submarine community was over represented in the 7 case studies. But in the end, I felt that I had called it as I see it, and that all three examples were important in terms of finding what works in acquisition, and why. So I went ahead with the list as it stood.
So, if the submarine community wants to bask in the glow of accounting for 3 of the 7 examples, I say go right ahead, because the community has earned it.
And if you’re curious to see the testimony, I can send you a copy, or you can download it by going to the House Armed Services Committee web site.
But this isn’t simply about basking in the glow of accounting for 3 of the 7 case studies, because there’s a connection between those 3 success stories and the next thing I want to talk about, which is the Ohio Replacement program.
Ohio Replacement Program—a potential new approach to shipbuilding
There were a couple of notable developments concerning the Ohio replacement program on the Hill last year, and one of them was the creation of the National Sea-Based Deterrence Fund.
At the time the fund was created, a principal logic for doing so was the belief that it will help preserve funding in the Navy’s regular shipbuilding account for the Navy’s other shipbuilding programs, and perhaps encourage DOD to source the funding for the Ohio replacement program from across the DOD budget, rather than primarily from the Navy’s budget.
To some degree, this value in creating the fund relies on what is essentially psychological mechanism—that by putting funding for the Ohio Replacement in its own separate account, people might be a little less inclined to add up the total amount of funding for all of Navy shipbuilding and manage the situation using that single combined number.
This year, however, it has become clear that creating the fund might have a second effect an effect that has to do with how the Ohio Replacement boats will be built.
In a previous talk here, I mentioned the possibility of reducing the cost of the Ohio Replacement boats by using a joint, cross- class block buy contract with the Virginia class program. That possibility is still being studied.
But somewhat independent of that possibility, the Navy is also now looking at a build strategy for the Ohio Replacement boats that approaches the 12 boats as a group, rather than as a series of 12 individual efforts. Under this approach, instead of building the boats in a strictly serial fashion, the boats would be built partly in a batch fashion, a bit like the way that a parent with several kids might make sandwiches for the kids’ lunch bags. The boats would still be completed and enter service at a rate of one per year, but some aspects of their construction would be done on a batch basis.
This partially batch-oriented approach to building the boats is something that could be done under either a joint, cross-class, block buy contract or a stand-alone contract for the Ohio replacement program, though doing it under a mechanism that permits joint material and component buys for both the Ohio Replacement and Virginia-class programs, and perhaps also the Ford-class carrier program, could reduce costs further.
Now, it so happens that the National Sea-Based Deterrence Fund could facilitate this partially batch-oriented approach to building the Ohio Replacement Boats.
If the National Sea-Based Deterrence Fund, like the National Defense Sealift Fund, is located in a part of the DOD budget that is outside the procurement title of the annual DOD appropriations act, then the Navy might be able to use the money in the Deterrence Fund with the same flexibility that it has employed to build sealift and auxiliary ships acquired through the Sealift Fund.
In the Sealift Fund, this flexibility has allowed the Navy, without the use of a multiyear procurement contract and associated EOQ authority, to reduce the cost of the Lewis and Clark class dry cargo ships by batch ordering components for multiple hulls in the class and cash flowing the program’s funding across hulls instead of managing the funding appropriated for each hull as a separate pot of money. Partially batch building the Ohio Replacement boats could involve doing something similar with the money in the Sea- Based Deterrence Fund.
Now, in acquisition terms, this is all pretty heady stuff. I mean, think about it: Cross-class contracts, joint material buys, and partial batch building of submarines. Any part of this would constitute a major change in Navy shipbuilding a revolution, some might say. And the question will rise: Will this work? Is it too risky? Can we trust the Navy to pull this off, or would it create a big mess?
These are all fair questions, and we’ll have to see how people at the corporate Navy level, at OSD, and in Congress feel about all this. There are important considerations to take into account concerning program execution risk, the full funding policy, budgetary discipline, congressional control over annually appropriated funds, and tying the hands of future Congresses. So we’ll have to see whether ideas like these will gain approval in the executive branch and in Congress.
But as policymakers consider these issues, one possible argument that might be thrown into the mix could be, well, if you’re going to try something this ambitious, it might make sense to try it in the part of the Navy that successfully implemented joint production of submarines across two shipyards, and the 2-for-4-in- 12 cost reduction program, and the ARCI program, which was an early example of walking the walk on open architecture.
So you see, in terms of those acquisition success stories that I presented in my testimony last year, that’s not just something that can bask in the glow of, because it might also help form part of the argument for why, if you are going to undertake a revolution of this kind in Navy shipbuilding, submarine acquisition might not be a bad place to start.
Ohio Replacement Program—putting resiliency back into a brittle schedule
But as I mentioned a few minutes ago, the creation of the National Sea-Based Deterrence Fund was one of two notable developments on the Hill last year concerning the Ohio Replacement program.
The other was the $11-million shortfall in FY14 funding on the DOE side of the budget for Naval Reactors, and the risk of a 6 -month delay this shortfall created in the design of the fuel core for the boat’s reactor plant. The issue was dealt with, but it was a reminder of how, as I pointed out last year, the Ohio Replacement program, while being the Navy’s top program priority, has also, due to its lack of schedule slack, paradoxically become a brittle program, with little resiliency for absorbing instances of funding instability or shortfalls, or other unplanned events.
What this suggests is that, as the program continues to explore possibilities for things like cross-class contracts, joint material buys, and batch-building strategies, it might also be prudent to explore possibilities for creating some new slack in the schedule, so as to make the program more resilient in terms of being able to absorb unplanned events. It’s risky for the program to be in a position where everything has to go right for the next 15 years in terms of funding stability and sufficiency, and unplanned events, because disturbances like these are often not within the submarine community’s ability to prevent. The idea would be to look for opportunities for creating slack at various points in the 15-year schedule, so that schedule disturbances that occur later in the 15- year period, and not just earlier in the 15-year period, could be absorbed.
Addressing the projected SSN shortfall
I want to shift now from the Ohio replacement program to attack submarines, and here I want to focus on the SSN shortfall that is projected to start in the mid-20s and extend through the mid-30s. I first warned about this shortfall 20 years ago, in testimony I gave to the House Armed Services Committee, and I’ve been reporting, testifying, and speaking about it every year since.
We’re a lot closer to this shortfall now than we were when I first testified about it in 1995, but there’s still time to do things to mitigate it. And mitigating it might be desirable not just for force- management purposes—it might also be important from the standpoint of conventional deterrence, because the shortfall is projected to reach its greatest depth around 2029, which might also be about when China concludes that that its window of opportunity for achieving its goals in its near-seas area will start to close down.
So, what are some options to consider for mitigating the shortfall? One, of course, is to move maintenance away from that period where possible, to the years before and after, so as to maximize the faction of the force that is available for presence and contingency response during those years. That wouldn’t reduce the total volume of the shortfall; it would instead spread it out to the shoulder years. But by reducing the maximum depth of the shortfall, it could reduce the chances that China or some other potential adversary might see the bottom as a particularly promising time to do something aggressive.
Another option is to homeport additional attack boats at Guam and perhaps also Hawaii, again so as to maximize the fraction of the force that is available for presence and contingency response in the Western Pacific during those years. This might require additional MilCon. That wouldn’t be cheap but it could be less expensive than building additional boats, and a lot less expensive than fighting a major conflict that occurs through a failure of deterrence. And a third option, as I’ve mentioned before, would be to refuel a few 688Is and extend their lives for several years, so as to help fill in the shortfall. That would be very expensive, and not very cost effective in terms of dollars spent per years of additional service, but again, one might argue that it would be less expensive than building entirely new boats, or fighting a major conflict that occurs through a failure of deterrence.
You’ve heard all these options before, and I imagine the Navy is already examining options for moving maintenance to other years.
Japan’s Submarine Force
So now I want to talk about four additional potential options for addressing the shortfall options that I haven’t focused on before, at least not very much. One of them involves an ally, namely, Japan.
Japan’s current government has been working to broaden the country’s role in security affairs, and Japan and the United States have recently agreed on an updated set of guidelines for defense cooperation. Developments such as these raise a question as to whether it would make sense from a U.S. perspective to encourage Japan to help offset the U.S. attack boat shortfall by temporarily expanding the size of Japan’s submarine force during the shortfall years.
Whether this would be advisable from a U.S. or Japanese perspective is not at all clear, given the political, Japanese constitutional, and operational issues involved. But it might be worth looking into, because Japan might actually be able to expand the size of its force during those years without increasing its submarine procurement rate, for reasons we can talk about in the Q &A, if you want. Japan’s submarines are conventionally powered, so additional Japanese boats wouldn’t represent anything like a one-for one backfill for U.S. attack submarines. But that doesn’t mean they’d be of no value.
Three potential options for the next administration
The three remaining options for addressing the shortfall are options for the next administration. Like the New Horizons flyby of Pluto, the next administration is no longer far in the future. The campaign, in fact, has already begun, as you can see in the news every day.
I spoke last year about how world events have led a number of observers to conclude that the international security environment is shifting from the familiar post-Cold War era of the last 20 or 25 years also known as the unipolar moment, with the United States as the uni polar power to a new and different international security situation featuring a renewal of great power competition and challenges to elements of the U.S.-led international order that has operated since World War II.
The last time the international security environment underwent such a shift—from the Cold War to the post-Cold War era—it led to a broad reassessment of U.S. defense plans and programs that was articulated in the 1993 Bottom-Up Review (BUR). On that basis, it is reasonable to wonder whether a new shift in the international security environment—from the post-Cold War era to an as-yet unnamed new era of renewed great power competition—would prompt a similar reassessment of the overall terms of debate on U.S. defense plans, programs, and budgets. Whether this will happen remains to be seen. It can be noted however, that defense and foreign policy have been fairly prominent topics of discussion in the early stages of the presidential campaign.
In light of this, it might make sense for the submarine community to have some options ready for responding to a request from the next president—whoever is elected, of either political party for options for bolstering our security posture. Here are three possible options.
The first would be for increased funding for the ARCI program and other programs to improve the capability of existing attack boats, so that the boats we’ll have in coming years, including the shortfall years, will be as robustly modernized as possible. Due to budget constraints, the pace of ARCI installations has been reduced somewhat. Adding funding back into that program could increase the rate back to where it was before. The second option would be to program funding for building all Virginia-class boats procured in FY19 and beyond, and not just some of them, with the Virginia Payload Module. There already appears to be interest in that option on the Hill.
And the third option—and the final thing I’ll mention in my talk here today—would be to put some additional Virginia-class boats into the shipbuilding plan in FY23 and prior years, so that they’d enter service in time to offset the deepest part of the shortfall. Imagine the signal of resolve and deterrence that might be generated by an announcement from the next administration that as many as five or six additional Virginia-class boats were being inserted into the shipbuilding plan.
I understand that executing such a plan, or even a plan involving a smaller number of additional boats, would raise industrial base challenges and stress the ability of the Virginia – class program to continue meeting its marks and delivering boats ahead of schedule. But I imagine that it’s a challenge the industrial base might welcome.
Now, whether the next administration will ask for options for bolstering our security posture, and whether the Budget Control Act will be amended or replaced in a way that makes more funding available for defense, is not at all clear. I’m not predicting that these things will come to pass. They might very well not come to pass. I’m only saying that world events and remarks on the campaign trail suggest that they might, and that in light of this possibility, it might make sense to have the programmatic for this scenario ready to go, so that, if the request for options is sent out at the beginning of the next administration, you can say, “here they are, these things can be started right away.”
Conclusion
I thought I’d finish with that option about putting extra boats into the shipbuilding plan just to get your juices flowing a little. And so, returning to this pin on my lapel, I can observe that in the 20 or so minutes that I’ve been talking to you, the New Horizons spacecraft has traveled about 10,000 miles. Imagine that—10,000 miles, in just 20 minutes. And by comparison, what have I accomplished in those 20 minutes? Well, maybe not a whole lot I mean, I’ve barely moved an inch the entire time I’ve stood here. It’s enough to make me feel, you know, a little inadequate. But hopefully I’ve given you some ideas to think about.
When younger people ask me for advice- which is never I tell them—well, I imagine telling them—that as you get older, time seems to move more quickly, and dates that look far in the future really aren’t, because you’ll get there before you know it. So the key is use the time you have now, so you’ll be ready for that future date when you find yourself, quite suddenly, there.
And it’s in that spirit that I have offered my remarks today. I hope you found them of value. I’ll be happy to respond to any questions you might have, and again, I thank you for the chance to spend these few minutes with you, as we speed into the future.
ENDNOTE
Statement of Ronald O’Rourke, Specialist in Naval Affairs, Congressional Research Service, Before the House Armed Services Committee on Case Studies in DOD Acquisition: Finding What Works, 17 pp. The four acquisition success stories presented in the testimony that are not related to submarines (at least not primarily) are the Aegis Ballistic Missile Defense (BMD) program, the Mobile Landing Platform (MLP) ship program, the use of Profit Related to Offers (PRO) bidding in the DDG-51 program, and the Navy’s extensive use of multiyear procurement (MYP) and block buy contracting. The testimony noted that the seven case studies “are by no means the only examples that might be cited, and lists compiled by other observers would likely include different examples.” The testimony is posted at: http://docs.house.gov/meetings/AS/AS00/20140624/102377/HHRG-113-AS00- Wstate-ORourkeR-20140624.pdf .
