can you be certain we will not be surprised with yet another cost growth in this program?

Answer. The VIRGINIA Class Program Office and Navy acquisition officials are aggressively challenging any cost increases while pursuing strategies to achieve the lowest possible future costs. Shortfall areas associated with designing a new class of submarine will not affect future contracts since this effort is essentially complete. The Navy is structuring the follow-on construction contract (for the next five to seven submarines) as a fixed-price incentive contract to incentivize construction savings. Additionally, the Navy has requested authority to transition to a multi-year contract with economic order quantity (EOQ) provisions in fiscal year 2004, which will reduce costs through greater shipyard efficiency and authority to purchase material in larger quantities. Finally, the fiscal year 2004 President's Budget request plans to increase the submarine build rate in fiscal year 2007 and beyond to preserve the submarine force structure necessary for continuing U.S. undersea dominance. The increased build rate will contribute significantly toward reducing perunit costs by reducing overhead costs.

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

What are the Navy's options for controlling cost of this program? One option the Navy may be pursuing is to buy more submarines and therefore reduce the cost per vessel; another option is to reduce the total buy, thereby reducing the total cost of the program. What would be the impact on the Navy's force structure if it built fewer VIRGINIA Class submarines?

Answer. Current SSN force level is 54. The 2001 Quadrennial Defense Review (QDR) sets the moderate risk level SSN force level at 55. The 1999 Chairman, Joint Chiefs of Staff (CJCS) Study reached the conclusion that fewer than 55 attack submarines in 2015 and fewer than 62 in 2025 would leave Combatant Commanders with insufficient capability to respond to urgent crucial demand without gapping other requirements of high national interest. Additional Navy studies since 1999 have identified the minimum warfighting requirement of SSNs as 55.

Current SSN force level is inadequate to meet current Combatant Commander demands. For calendar year 2003, Combatant Commanders have requested between 14 and 15 deployed SSNs for National and Combatant Commander ISR, Tomahawk strike, Carrier Battle Group support, and Special Operations Force-equipped SSN missions. Considering sustainability and training requirements, the Navy is able to sustain 10 SSNs deployed with the current force level.

If the VIRGINIA build rate were to remain at 1 per year, (considered the minimum rate to maintain supplier and industrial base) and the Program of Record plan to refuel five LOS ANGELES Class SSNs is maintained, SSN force level would reach 55 in 2008, but decrease to 54 by 2015, 46 by 2017, and 36 by 2025. The rapid decrease is due to the retirement of the LOS ANGELES Class SSNs as they reach the end of hull life.

Question. Have you explored the option of terminating this program after construction of submarines currently under contract and pursuing other submarine construction options?

Answer. Termination of the VIRGINIA Class program after the current contract and investigation of other submarine construction options has not been pursued. There are no "off the-shelf" submarine designs that would satisfy U.S. submarine mission requirements that could be built at a lower cost than the VIRGINIA Class. The VIRGINIA Class submarine was designed to meet the security requirements of the post-Cold War era while minimizing submarine procurement and life-cycle costs. With a focus on the littoral battlespace, VIRGINIA Class is designed for flexibility in responding to changing missions and threats. Its modular design, which allows for affordable insertion of new technologies, ensures it will continue to be the right submarine well into the 21st century.

Question. What would be the cost of the program termination after construction of SSN 777, which is scheduled for a December 2007 delivery?

Answer. There have been no estimates made of the cost to terminate the VIRGINIA Class program. In 1994, following the termination of the SEAWOLF program, RAND published "The U.S. Submarine Production Base: An Analysis of Cost, Schedule, and Risk for Selected Force Structures". The 1994 RAND report estimated the indirect costs of stopping and later restarting submarine production at nearly $3B (FY1992 dollars). This figure included shutdown, cumulative maintenance, shipyard restart and vendor restart costs.

Question. What is the total life cycle cost of a VIRGINIA Class submarine and how does that compare to other classes of submarines in the Fleet?

Answer. For the 30-ship VIRGINIA Class, using fiscal year 1995 (base year) dollars, Total Acquisition Cost of $64,747.5 million (per APB Change 3, 4/02/03) plus

Operating and Support Cost of $31,343.0 million (per Selected Acquisition Report, 12/31/02) yields Total Life Cycle Cost $96,090 million. Total life cycle cost for one VIRGINIA Class submarine is $3,203 million.

Because of the significant differences in submarine class sizes, direct comparisons of life cycle costs are tenuous. For example, the 62 LOS ANGELÉS Class SSNs have lower support costs per ship because support costs are spread over twice as many submarines as the VIRGINIA Class. Additionally, the VIRGINIA Class estimate accounts for the addition of significant new systems and capabilities (such as Vertical Missile Launch, Advanced SEAL Delivery Vehicle and Dry Deck Shelter, Under-Ice Capability, and Special Hull Treatment) that are not accounted for in the LOS ANGELES estimate. Given these significant differences, the best available estimates of average annual operating and support costs (per ship, in fiscal year 1995 base, year dollars) for the VIRGINIA Class and the LOS ANGELES class are $35 million and $26 million, respectively.

BALLISTIC MISSILE DEFENSE SYSTEM WEAPONS

Question. One element of the Midcourse Defense Segment of the Ballistic Missile Defense system (BMDS) is the AEGIS BMD program. This system is intended to defend against exo-atmospheric short-range ballistic missiles (SRBMs) and Intermediate Range Ballistic Missiles (IRBMs) in the terminal and midcourse phases. The system uses the AEGIS Weapons System with the Navy Standard Missile serving as the interceptor.

Please explain the program or agreement between the Missile Defense Agency and the Navy under which you provide access to the ship(s) that MDA needs to support the AEGIS BMD program.

Answer. The Navy is in process of assigning USS LAKE ERIE (CG-70) to the Missile Defense Agency (MDA) as a dedicated ballistic missile defense testing platform. This action allows the MDA testing program to avoid the delay and expense that would be involved in modifying an older Aegis-equipped cruiser to accomplish the testing mission and it demonstrates Navy's firm commitment to missile defense as a core mission. OSD concurred and directed this action. OSD also directed MDA to procure Standard Missile-3 missiles and Ballistic Missile Defense (BMD) upgrade ship sets to facilitate an early deployment of Navy missile defense capability. A Memorandum of Understanding is currently in staffing which will stipulate the LAKE ERIE cost sharing arrangement, administrative actions, and other operational details between Navy and the MDA. We expect the actual ship assignment to occur this summer.

Question. The Committee understands that one AEGIS cruiser is under the control of the Missile Defense Agency for purposes of the Ballistic Missile Defense System test bed. Please explain what “control” means in this case.

Answer. MDA control means that the ship's schedule and operations will be dedicated to MDA sponsored ballistic missile defense testing. A Memorandum of Understanding is currently in staffing with MDA and will stipulate the LAKE ERIE cost sharing arrangement, administrative actions, and other operational details between Navy and the MDA.

Question If an AEGIS class ship serves in the AEGIS BMD program, is the ship also available for other surface combatant missions? Please explain why or why not. Answer. Aegis-equipped ships are multi-purpose platforms and are capable of multi-tasking. The extent to which multi-mission tasking would be possible will depend upon the specific geographical position and combat system set-up required by the specific mission. We anticipate that the multi-purpose employment of an Aegisequipped ship will remain unchanged by this new mission.

Question. The Committee understands the Navy is considering deployment of a stand-alone strike group of missile defense ships as early as next year. Please explain the Navy's plans and how they fit into the Missile Defense Agency AEGIS BMD program.

Answer. The concept of a Missile Defense Strike Group is consistent with the President's December 2002 decision to field an initial operating capability for seabased Missile Defense not later than 2005, and with Navy's SEA POWER 21 vision for the future. However, the planning for deployment of such a group remains at an embryonic stage. Commander, Fleet Forces Command has been tasked to undertake this conceptual work and will report the results to me this summer. The requested information will be provided as soon as it becomes available.

Question. Does the Missile Defense Agency budget request for fiscal year 2004 fully fund the AEGIS BMD program? Has the Navy requested funds in the fiscal year 2004 budget to supplement the MDA request? If so what requirements are funded in the Navy budget request.

Answer. It is the Navy's understanding that the Missile Defense Agency has fully funded the Block 04 Initial Defensive Operations Capability of the Aegis BMD program element. As this program is currently technology-paced, Navy does not request funds to supplement the MDA request. Such action should occur, if required, in MDA's area of responsibility.

Question. The Committee understands there are technical issues concerning attitude control on the SM-3 missile. Please explain the technical challenges you face, and whether you believe this will affect the Missile Defense Agency's ability to deploy the AEGIS BMD system.

Answer. The issues involving the Solid Divert and Attitude Control System (SDACS) in the SM-3 missile are related to manufacturing and production, rather than hit-to-kill technology. The current SDACS design utilizes rhenium, an exotic material designed to tolerate the high heat flux involved in operating a rocket motor in space. This material has proved difficult to weld and fabricate into the intricate tubes, ports and passages featured in the current SDACS design. The Navy is pursuing an alternative, more tolerant design featuring a monolithic casting. This alternative SDACS is easier to manufacture, has been successful in ground testing and will be flight-tested in FM-5, slated to occur this summer. While technical risk certainly is extant in the monolithic SDACS design, the current engineering assessment is favorable.

IMPACT OF OPERATING TEMPO ON DEPOT MAINTENANCE

Question. Mr. Secretary, scheduling ship depot maintenance is an art form in the best of times, and it must be a real challenge given the current operating tempo. How has the ongoing deployment surge and combat operating tempo impacted your ability to make ships available for the scheduled maintenance periods in this current fiscal year?

Answer. Based on the Fiscal Year 2004 President's Budget request, there are 86 Chief of Naval Operations scheduled ship availabilities funded for execution in fiscal year 2003. Nine availabilities have been rescheduled to support operations, but they have not been canceled. Based on operational assumptions as of March 20, 2003, 11 more availabilities are expected to change from the original scheduled dates. All but one are expected to execute prior to the end of the fiscal year, but some may be reduced in scope.

Question. The high operating tempo has also increased the need for maintenance as ships and airplanes are experiencing greater than anticipated use when these assets are returned to their homeports, do you expect you will be able to adjust the depot maintenance schedule to accomplish the necessary work?

Answer. Based on the operational schedule as of March 20, 2003, we expect to be able to adjust the ship depot maintenance schedules to accomplish the necessary work. However, we are projecting that one availability scheduled for fiscal year 2003 will need to be performed in fiscal year 2004 to support the current operational schedule. We will continue to adjust our maintenance plan as the return dates of the deployed ships are finalized.

Aviation depot maintenance is schedule and usage driven. We may find additional maintenance on particular airframes and engines is required once we induct each plane. The induction schedule has been modified and is executable if we receive supplemental funding soon (mid-May 2003).

Question. Will the Navy need supplemental funding in order to accomplish increased depot level ship maintenance requirements in the current fiscal year? If the ships can be made available and the money is there, is the shipyard capacity adequate?

Answer. Yes, we will need supplemental funding to accomplish increased depotlevel ship maintenance requirements in fiscal year 2003 and for the depot-level maintenance that will be required on the ships participating in Operation IRAQI FREEDOM that are going into a maintenance period in fiscal year 2004. If the ships are available and the supplemental funding is provided, we expect the public and private shipyards to be able to perform the required work.

Question. Given the current pace of operations, do you now expect a surge in depot work requirements for 2004? Please discuss how you will balance deployment requirements and maintenance facility capacity. Will additional funding be needed in fiscal year 2004 for this surge?

Answer. We do expect additional ship depot work requirements for fiscal year 2004 as a result of Operation IRAQI FREEDOM (OIF). Based on projected operational requirements as of March 20, 2003, we anticipate that we will have the capacity at the public and private maintenance facilities to perform the work that will be required in fiscal year 2004.

Our request for the fiscal year 2003 supplemental included funding to perform depot level maintenance on OIF ships. If the fiscal year 2003 supplemental is adequate and allows for funding to be obligated in fiscal year 2004, additional fiscal year 2004 funding is not projected at this time. If fiscal year 2003 supplemental funding cannot be used in fiscal year 2004 or other higher priority fiscal year 2003 OIF issues take precedent, additional funding will be required in fiscal year 2004 to cover the increased fiscal year 2004 ship maintenance requirement.

We expect a "bow wave" of depot inductions of those aircraft that were deployed in support of OIF and couldn't meet their originally scheduled inductions. These inductions will be accomplished when the aircraft return to the continental United States (CONUS). Additional funding should not be needed if supplemental funding is received soon (mid-May 2003).

SHIP DEPOT MAINTENANCE

Question. The fiscal year 2004 ship depot maintenance request consolidates funding for ship intermediate maintenance into the depot maintenance line, and overall funding declines by approximately $300 million and scheduled availabilities decline from 95 in 2003 to 87 in 2004 while funding for surface ship depot maintenance declines from 95% to 91.6%. In addition, fiscal year 2004 depot operations funding declines another $300 million from 2003 levels. Admiral Clark, please provide your assessment of the health of the ship depot maintenance program.

Answer. The fiscal year 2004 budgeted amounts reflect the acceleration of the retirement of our oldest, most maintenance-intensive ships and the benefits provided through the fiscal year 2002 supplemental appropriations. The fiscal year 2004 percent funding is consistent with that budgeted for fiscal year 2003 in the fiscal year 2003 President's budget. Because ships' decommissioning dates were advanced from those planned in the fiscal year 2003 budget, maintenance funding budgeted for those ships was available to apply to other unfunded fiscal year 2003 requirements. This resulted in a higher percent funding for the fiscal year 2003 surface ships' maintenance.

The decrease in the ship depot operations support budget line is primarily driven by the $236 million reduction in funding for Naval Sea Systems Command ship alteration program and funding for the Supervisor of Shipbuilding and Repair. This funding is a parallel reflection of the lower ship maintenance account. Question. Why have scheduled availabilities been cut?

Answer. The actual number of scheduled availabilities varies on an annual basis based on force structure, operational requirements, and the ship class maintenance plan. We were able to reduce the ship maintenance funding in fiscal year 2004 while budgeting to fund a higher percentage of the requirement for several reasons. The cyclic nature of ship maintenance contributed to a lower requirement in fiscal year 2004; the requirement was reduced as we accelerated the retirement of our oldest, most maintenance-intensive ships; and finally, the reduced requirement directly reflects the benefits provided in the fiscal year 2002 supplemental appropriations.

Question. How can the ship depot maintenance program absorb a cut of $600 million?

Answer. The fiscal year 2004 ship maintenance budget supports 96.2% of our notional operations and maintenance ship maintenance requirements. In fact, this percentage is slightly higher than the 95.5% funded in the fiscal year 2003 President's budget. We were able to reduce ship maintenance funding in fiscal year 2004 while budgeting to fund a higher percentage of the requirement for several reasons. The cyclic nature of ship maintenance contributed to a lower requirement in fiscal year 2004; the requirement was reduced as we accelerated the retirement of our oldest, most maintenance-intensive ships; and finally, the reduced requirement directly reflects the benefits provided in the fiscal year 2002 supplemental appropriations.

Question. Ship depot maintenance at Puget Sound Naval Shipyard has been transferred from the working capital fund and the proposal is that it be mission funded. To those of us who are unfamiliar with the intricacies of the working capital fund, what does this proposal mean? What are the factors that resulted in this deci

sion?

Answer. Mission funding increases the Fleet's flexibility to respond to execution year priorities.

The primary factors for the shift to mission funding are:

Responsive to Fleet Needs: Maintenance required to prepare a ship for early deployment can be executed by adjusting work priorities. Under Navy Working Capital Fund additional funding for emergent work must be made available in the execution

year.

Efficient use of Resources: Under Navy Working Capital Fund all work must have specific customer funding. At times temporary low depot workload has resulted in workers being idle despite ships being available that require work. Under mission funding the underutilized workforce can be assigned to any required ship maintenance work.

Facilitates Integration and Consolidation of Maintenance Infrastructure within a Region: In some regions, Navy Working Capital Funded shipyards and mission funded intermediate maintenance facilities exist in close proximity to each other. This difference in funding systems inhibits sharing of resources between activities and the potential for "singling up" infrastructure. Moving the shipyards to mission funding facilitates this integration and consolidation.

Positive Execution Year Financial Controls: Mission funding provides direct and positive control of funds during the execution year. Under Navy Working Capital Funding execution year costs can vary from the planned costs and result in adjustments to the cost of work (rates charges) two years in the future.

CHEMICAL BIOLOGICAL INCIDENT RESPONSE FORCE

Question. The Marine Corps established the Chemical Biological Incident Response Force to provide rapid response to mitigate the effects of terrorism including chemical and biological incidents. CBIRF units include a total of 373 personnel of which 32 are from the Navy, 1 from the Army and the balance from the Marine Corps. Elements of the CBIRF were deployed in response to the Anthrax contamination discovered on Capitol Hill in late 2001.

An operational requirements document (ORD) has been approved within the past year to upgrade CBIRF equipment through the Family of Incident Response Systems (FIRS) program.

Please explain the composition of CBIRF units in terms of both manpower and equipment.

Answer. The present Manpower Table of Organization (T/O) of CBIRF is:

A T/O increase of 98 personnel has been approved to take place during FY-04. It will add 4 Marine Officers, 4 Navy Officers, 84 Marine Enlisted and 6 Navy Enlisted to the current T/O. Total strength will then equal: 471.

The total dollar value of CBIRF equipment is $22 million. Of this, $3 million is purely military equipment used for overseas deployment. The balance, $19 million, is response equipment which is roughly 90% Commercial-Off-the-Shelf equipment that allows the CBIRF to operate autonomously or to operate with other domestic first responders.

Question. How many CBIRF units are there in the Marine Corps?

Answer. One. However, the single battalion can provide a full response unit to two separate, simultaneous events. The first response unit of 125 Marines and Sailors is on one hour alert. It can deploy via trucks within one hour of notification. It can be ready for air deployment via military commercial aircraft within four hours of notification. The second unit will require about 4 hours to move out of Indian Head via truck and about 8 hours to be prepared for air embarkation.

Question. How are the CBIRF units incorporated into Marine Expeditionary Units (MEUS)? Does each MEU have CBIRF capabilities?

Answer: The Enhanced MEU NBC (E-NBC) Capability Set is a tailored set of over 40 pieces of equipment. This capability set was developed based on lessons learned and on CBIRF equipment successes. It provides the MEU commander a limited capability to address Weapons of Mass Destruction (WMD) and enhances his capability to detect and identify Toxic Industrial Chemicals/Toxic Industrial Materials (TICS/TIMs).

CBIRF elements are not incorporated in the MEUS. CBIRF can provide support directly to the MEU if directed. CBIRF, in conjunction with Marine Corps Systems Command (MARCORSYSCOM), provides a training package on Consequence Management to each MEU prior to its deployment. MARCORSYSCOM provides contract personnel to conduct the technical training for the equipment that is included in the E-NBC Capability Set. CBIRF personnel focus on the tactical employment of these assets.