The Congress eventually provided an additional $90 million above the budget request in 2003 to advance "potentially transformation technologies" for the CVN–77. What are your plans for the expenditure of these funds?

Answer. As noted in the CVN-77 fiscal year 2003 Report to Congress dated February 15, 2003, the Navy held meetings with industry and government participating acquisition managers to investigate the following potential technology candidates: Full Service Integrated Networks-Wireless ICAN applications;

• Integrated Advanced Strike And Mission Planning Capabilities-SESS Information Operations Center (SIOC) Integration;

Full Service Integrated Networks-Radio Room Automation;

• Common Flexible Island-Mast Clamp Current Probe;

• Common Flexible Island-Composite Mast;

• Multi-Modal Display Workstation & Integrated Advanced Strike And Mission Planning Capabilities-CV-TSC Technologies;

Integrated Advanced Strike And Mission Planning Capabilities-Naval Strike Warfare Planning Center (NSWPC) Ready Room Technologies; and

Integrated Advanced Strike And Mission Planning Capabilities Joint Fires Network (JFN) and Naval Strike Warfare Planning Center (NSWPC) Integration.

The Navy has further evaluated the specified technologies based on refined cost estimates, execution plans, risk plans, and a more detailed assessment of ship construction schedule impact. The following technologies are being pursued for implementation on CVN-77:

• Full Service Integrated Networks-Radio Room Automation;

• Common Flexible Island-Mast Clamp Current Probe;

• Common Flexible Island-Composite Mast;

Multi-Modal Display Workstation & Integrated Advanced Strike And Mission Planning Capabilities-CV-TSC Technologies;

• Integrated Advanced Strike And Mission Planning Capabilities—NSWPC Ready Room Technologies; and

• Integrated Advanced Strike And Mission Planning Capabilities-JFN and NSWPC Integration.

Question. Will these be technologies that could be transitioned to the CVN-21? Answer. Any transformational technologies incorporated into CVN-77 will be included in the CVN-21 concept.

DD(X) DESTROYER PROGRAM

Question. The Navy is continuing its development of the DD(X), the transformational destroyer program.

Please provide a brief description of the capabilities you envision for this new destroyer.

Answer. DD(X) is the centerpiece of a family of ships that will deliver a broad range of core capabilities to the Fleet. DD(X) will provide a baseline for spiral technology and engineering development to support a range of future surface ships including the Littoral Combat Ship (LCS) and the next generation cruiser, CG (X). DD(X) is a multi-mission surface combatant tailored to be the primary family of ships provider for volume fires and precision strike. Armed with an array of landattack weapons including the Long Range Land Attack Projectile fired from the Advanced Gun System (AGS) and Tactical Tomahawk, DD(X) will provide persistent, distributed, long-range, precision attack needed in support of Marine Corps' future expeditionary operations in the littorals and for our joint forces operating deep inland. DD(X) is a critical enabler for the Navy's Sea Strike vision, which includes the Marine Corps' Expeditionary Maneuver Warfare, Ship-to-Objective Maneuver, and Operational Maneuver From the Sea concepts.

DD(X) will take advantage of advanced stealth technologies to be less detectable and less vulnerable to enemy attacks than the ships it will replace. A tumblehome hull form combined with an integrated deckhouse and apertures will significantly reduce radar cross-section and infrared signatures. An enhanced soft kill capability, including the latest in countermeasure technology, such as NULKA and TORCH enhanced by precise infrared and radar detection capabilities, will improve survivability in any combat environment. DD(X)'s active and passive sensors and countermeasures will force foes to close to much closer ranges allowing the robust combat systems more time to engage and kill targets.

An open architecture, distributed combat system will support a "plug and play" environment in which to operate AGS, an Advanced Vertical Launching System (VLS) and a Multi-Function Radar/Volume Search Radar (MFR/VSR) suite. With counter-fire target acquisition capability, MFR/VSR will significantly enhance the

survivability of maneuver forces and indirect fire assets operating ashore. In addition to anti-air weapons, such as the Evolved Sea Sparrow Missile and Standard Missile, the Advanced VLS will house land attack missiles and will have the capability to carry and launch missiles to support a Ballistic Missile Defense mission. With a fully netted command, control, communications, computers, and intelligence (C41) capability including Cooperative Engagement Capability, the remote launch of DD(X) missiles by another unit will be possible.

DD (X) will have an Integrated Undersea Warfare (IUSW) Suite. This bifocal sonar system, coupled with an embarked air detachment will make DD(X) the most capable blue water USW platform afloat. Augmented by an integrated organic mineavoidance system, DD(X) will be able to operate in any battlespace. Advanced hull materials coupled with rafting of main engineering components and the latest in hull treatments will ensure DD(X) is the quietest and most magnetically stealthy combatant afloat.

Other significant DD(X) features include an Integrated Power System to allow rapid reconfiguration of power, reduced acoustic noise and a spiral to rail gun and the potential for directed-energy weapons aboard CG(X).

Question. What are the major technological issues that must be resolved with respect to the development of the DD(X) and do you believe you have a plan to successfully address these issues?

Answer. The major technological challenge with respect the development of the DD(X) is the concurrent design, build test of the ten Engineering Development Models (EDMs) listed below:

• Advanced Gun System.

• Integrated Power System.

• Dual Band Radar.

• Total Ship Computing Environment.

• Peripheral Vertical Launching System.

• Integrated Deckhouse & Apertures.

• Autonomic Fire Suppression System.
• Infrared Mockups.

• Hull Form Scale Model.

• Integrated Undersea Warfare System.

There is a plan in place that includes extensive land at-sea testing of the EDMS as part of a comprehensive risk mitigation approach to be performed within the scope of the DD(X) design agent contract (fiscal years 2002–2005). Using the spiral development approach, the test plan will allow the DD(X) program to manage risk through test demonstrations that provide continuous feedback to the DD(X) system design.

Question. What are the major design issues that must be resolved with respect to the development of the DD(X) and do you believe you have a plan to successfully address these issues?

Answer. The major design challenge is associated with integration activities. Signatures, human system integration, electromagnetic interference and compatibility, damage control automation, and Cost As an Independent Variable (CAIV) are examples of interrelated design attributes. The plan being executed is the development of the ship design through a total ship system design process, with iterative baselines established for critical analysis. The process yields a design at pre-established decision points that is balanced to maximize achieving a total ship performance within the CAIV goal. The resulting design can be further iterated through trade studies to analyze a requirements change or to optimize priority performance in a given mission area. The discipline of the process and flexibility allowed by the process tools are key to the successful design cycle process.

The composition of the Design Agent Team is another key to the successful design process. The Team contains both shipbuilders (Northrop Grumman Ship Systems, Pascagoula, MS, and Bath Iron Works, Bath, ME), and a National Team that includes Raytheon, Lockheed Martin, Boeing, United Defense Limited Partnership, and Northrop Grumman Information Technology.

Question. The Navy is proposing a spiral development approach to the DD(X), which in itself is rather "transformational." Is this a spiral development plan that meets the criteria established by Secretary Aldridge? One of the challenges of managing a spiral development program is having a solid test and evaluation plan that allows sufficient testing at the end of each spiral based on a approved set of criteria. Do you have a test and evaluation plan?

Answer. The DD(X) spiral development approach was approved by Secretary Aldridge when the DD21 Program was restructured to DD(X) in November 2001.

The DD(X) Test and Evaluation Master Plan is under development and being engineered to specifically address evaluation of the DD(X) Flight I baseline. There is

an extensive series of lower level engineering systems tests that are pre-cursors to land and at-sea tests planned to demonstrate ship system performance. These risk mitigation activities will precede equipment production and ship construction. This includes testing of the Dual Band Radar, Integrated Power System and Total Ship Computing Environment on the EX-RADFORD.

Question. One controversial aspect of the DD(X) is the funding of the first ship through the RDT&E appropriation in fiscal year 2005, rather than the traditional approach of funding the lead ship of any class in the Shipbuilding and Conversion appropriation.

What is the rationale for this funding proposal?

Answer. The rationale for funding the first DD(X) Class ship with RDT&E funding is that it allows the program to more easily address the inherent technical and integration challenges of a lead ship through the use of annual funding while maximizing technology benefits in the shortest time period. In addition, the use of RDT&E funding minimizes prior year shipbuilding bills, which has been a Navy and Congressional concern in recent years.

Question. Considering this is a spiral development approach, it is possible that the design and weapons capabilities will not be solid by fiscal year 2006 when you anticipate procurement of the second ship.

Will you have sufficient information on the design and capabilities to go forward with procurement just one year after initiating the R&D ship?

Answer. The design and capabilities of the first Flight will be solid before construction begins on the first ship. The second ship is planned to succeed the first ship by one year. The engineering data package that supports the first ship construction is the same engineering data package that supports the construction of the second ship. Both shipbuilders will be involved in the ship design and will utilize the same 3-D CAD/CAM system to minimize design issues and the transfer of manufacturing data.

DDG-51 DESTROYER PROGRAM

Question. During discussions last year, the Navy stated its intent to procure one, and the last, DDG-51 in fiscal year 2006. The fiscal year 2004 budget request now shows no DDG-51 acquisition in fiscal year 2006.

Please tell us why this additional DDG-51 vessel is not going to be procured in fiscal year 2006.

Answer. In order to transform to meet future threats, the Navy must move toward DD(X) as soon as feasible. By concluding the procurement of DDG-51 Class ships in fiscal year 2005 and reallocating funding to DD(X), Navy was able to add a DD (X) in fiscal year 2006 and fiscal year 2007 in its fiscal year 2004 budget request, two more than the fiscal year 2003 request.

Question. Since the follow-on to the DDG-51 is the DD(X), do you anticipate that should the DD(X) schedule slip, you would seek an additional DDG-51 in the 2006 budget?

Answer. The DD(X) program is on schedule to begin procurement in fiscal year 2005, no slippage is anticipated. Navy is committed to maintaining a robust shipbuilding program. Recapitalization requirements and industrial base health will be taken into consideration in the formulation of future shipbuilding program budgets as necessary.

Question. Without this additional one ship in 2006, what is the anticipated impact on shipyard workload?

Answer. Loss of the fiscal year 2006 DDG-51 Class ship has an adverse impact on the Surface Combatant industrial base workload. Surface combatant procurements have averaged three ships per year since the mid-1990s. The fiscal year 2004 President's Budget shipbuilding plan sustains surface combatant production at a minimum of one ship per year during the transition from the DDG-51 Class to the DD(X) class. However, this will result in a surface combatant production gap in fiscal year 2006 or fiscal year 2007 at both General Dynamics Bath Iron Works and Northrop Grumman Ship Systems (NGSS). Specific shipyard impacts will vary, depending on workload projections at each yard. A critical variable is award of the DD(X) lead-ship production contract in fiscal year 2005, and ramp up of continuous, follow ship DD(X) production in fiscal year 2006 and out. Regardless, additional work will be needed to sustain each yard during the fiscal year 2006-07 transition period.

NGSS has ongoing, concurrent production for LPD 17 Class ships, LHD 8, and startup of the LHA(R) shipbuilding program during the DDG-DD(X) transition_period. NGSS will also be initiating production for the Coast Guard Deepwater Program during this same time frame. The lack of the fiscal year 2006 DDG will have

an adverse impact at this shipyard, potentially increasing costs due to higher overhead rates, production inefficiencies, and cost increases to sustain critical second tier vendors.

Bath Iron Works (BIW) has no other concurrent shipbuilding work beyond their existing DDG-51 production workload during the planned transition from DDG to DD(X) production. Should BIW not be awarded the lead DD(X) production contract, the lack of the fiscal year 2006 DDG will make the transition to DD(X) follow-on construction more costly to the Navy.

As a part of the DDG-LPD workload swap, the first three of four ships were "swapped" as a part of the award process for the fiscal year 2002 DDG multiyear procurement. This was in accordance with the LPD/DDG workload realignment Memorandum of Understanding (MOU) signed in June 2002. Per the MOU, BIW is entitled to the equivalent workload of one DDG at some future date, pending award of LPD-28 to NGSS. Loss of the fiscal year 2006 DDG may transition this workload swap agreement to the DD(X) program and could affect the Navy's future production planning for DD(X).

VIRGINIA CLASS SUBMARINE-MULTIYEAR PROCUREMENT

Question. The fiscal year 2004 budget request includes approximately $2.6 billion for the VIRGINIA Class submarine program. Of this amount, $2.5 billion is for procurement and $106 million is for R&D. The budget request also includes a request for a 7-ship multi-year procurement for fiscal years 2004 through 2008.

Does this program meet all the criteria for a multi-year procurement decision? Answer. The VIRGINIA Program meets all United States Code Title 10 conditions for multi-year procurement (MYP).

a. Substantial savings: $805 million for seven ships ($115 million per ship).

b. Stability of Requirement: VIRGINIA Class is necessary to achieve and maintain required SSN force level, ensure continuous US undersea superiority, and provide a highly capable and flexible SSN for the future. The Program is planned for 30 ships.

c. Stability of Funding: The Navy gives VIRGINIA Class program high priority, and the Department is committed to fund this MYP throughout the contract period. d. Stability of Configuration/Design: VIRGINIA design is essentially complete; design changes are the lowest in submarine construction history; major key events have been met; and early testing, including evaluation by Commander, Operational Test and Evaluation Force (COMOPTEVFOR) during ŎT-IIB, provides high confidence that the ship and systems will perform as required.

e. Realistic cost estimates: VIRGINIA cost estimates are realistic as they are based on actual returns from the first four ships. The first ship is 82% complete. f. National Security need: VIRGINIA Class', role in national security is documented in Quadrennial Defense Review and Joint Chiefs of Staff studies.

Question. With a June 2004 delivery date for the first boat, it is not likely that even one of the submarines will be operational before Congress will have to make a determination on proceeding with this multi-year procurement request. If this multi-year procurement is approved, will the Congress be setting a precedent for committing to a multi-year acquisition program prior to fielding the first system? Answer. Authorization for multi-year procurement of VIRGINIA Class submarines would be earlier than in the Navy's other multi-year procurement shipbuilding program, DDG-51. However, the VIRGINIA Class design is 100 percent complete and construction of the lead submarine is more than 82 percent complete. We have enough information to effectively price and evaluate a multi-year contract.

A multi-year procurement is the most cost effective way to buy those submarines. Additionally, it creates industrial base stability, ensuring that efficiencies and saving are optimized.

Question. What are the estimated cost savings of this multi-year procurement proposal?

Answer. The estimated savings are $805 million for seven submarines (at least $115 million per ship) procured in fiscal years 2004-2008. The savings assume continued shipbuilder teaming and use of Economic Ordering Quantity funds for material purchases.

Question. What would be the impact on your fiscal year 2004 request if Congress does not approve the proposal?

Answer. The below table provides the funding changes to the fiscal year 2004 budget request:

Question. Since the plan is a total of 30 submarines of this class, what is the logic of a 7-ship multi-year request?

Answer. Navy's minimum requirement for SSN force structure is 55 submarines. In order to sustain this level, it is essential to increase VIRGINIA SSN build rate to two submarines per year as soon as possible. Due to advance procurement requirements for long lead-time material, the earliest opportunity to increase the build rate to two SSNs/year is FY2007. While a multi-year procurement of five SSNs (i.e., one per year) would still reap savings over annual procurements, SSN force levels could not be maintained at 55 over the long-term. Additionally, while a multiyear contract for five SSNs with options to buy two more would also result in significant savings over annual procurements, the shipbuilder could not procure Economic Order Quantity (EOQ) materials for the option ships, reducing the savings possible for these SSNs.

VIRGINIA CLASS SUBMARINE-COST OVERRUNS

Question. Recent press articles as well as statements from senior DoD officials, point to a serious problem with VIRGINIA Class submarine cost overruns.

What is the current estimate of the total program cost growth and what is the genesis for these overruns?

Answer. The VIRGINIA Class 30-ship program cost estimate is $64,747.5 million (Base Year FY95 Dollars) or $81,792.2 million (Then Year Dollars). This reflects a Procurement Acquisition Unit Cost increase from $1739.4 million to $2158.3 million (Base Year FY95 Dollars) or 24% since the last Acquisition Program Baseline (APB) in December 2000. The major changes reflected in the revised cost baseline include: • Labor and material costs have risen because of higher than expected inflation. DoD inflation projections were in the 1-2% range, whereas actual experience is in the 4.0-4.5% range.

• Pensions and health care costs are increasing contractor overhead costs. This pattern is consistent with what is being experienced in the economy in general.

The continued low rate of submarine production has led to a shrinking vendor base and higher material costs. Vendors are requiring a premium for highly specialized equipment with no other military or commercial applications.

• Changes to cost estimates based on cost returns from the first four ships under construction, which indicated that actual labor hour and material costs are slightly higher than originally estimated.

There are two components of cost growth. First, there is real growth in material, labor, overhead, and worker benefits that has occurred since the December 2000 baseline (~19%). This component is reduced by 7% for multi-year savings for a net cost growth of 12%. Second, there is another component of growth due to different escalation and de-escalation calculations in the 2000 baseline (~12%). This component arises because, in the 2000 baseline, the cost of ships outside the Future Years Defense Program (FYDP) were escalated and de-escalated at OSD-approved indices whereas, in the 2002 APB update, these ships were escalated based on best available labor and material escalation information and de-escalated at OSD-approved indices thus artificially inflating program cost growth. The two components are real bills that DoD must pay. However, it is misleading to characterize the total 24% as new cost growth over the last two years of the program.

The new estimate reflects DoD's current policy to accurately price programs using realistic cost data and realistic inflation assumptions. The four VIRGINIA Class submarines now under contract are progressing according to schedules established eight years ago, and the lead ship is expected to be delivered to the Navy a month early.

Question. Given the history of cost overruns in the Navy shipbuilding program, why should this Committee believe that all the cost growth has been identified