sources and pushing into new innovative ways of second sourcing from the beginning of programs. Without your support, these would not have been able to have been carried through.

The results are revolutionary when viewed against the previous 30 years. If you plot the prices of naval ships and naval aircraft over the 30 years prior to 1982 you will find an average 10 percent growth per year. Suddenly in 1982, the prices of Navy ships and aircraft have started coming down. It is because of this new philosophy that you have been so critical in helping us implement in getting these second sources, and in getting discipline through a fixedprice competitive base, in being willing to pay a fair and commensurate profit, but requiring performance for that profit.

We have averaged over a billion dollars a year in cost underruns in our shipbuilding account as you know, for the past four yearsafter thirty years of overruns. We have averaged a half a billion dollars a year in cost underruns in our aircraft accounts across the board, again, after 30 years of cost increases.

So this philosophy pays off. It has kept us on course. It has enabled us to contribute with the help of this committee to the MX program, for instance, from our shipbuilding accounts and other initiatives that you helped us with. We are happy to give these benefits across the board. But, we urge you to continue to support these initiatives. They are going to continue to drive the philosophy of our management in the Department of the Navy. We applaud the support that you have given us over these past five years.

Thank you, Mr. Chairman.

Mr. ADDABBO. Thank you.

[The statement of Secretary Lehman follows:]

Prepared Statement of Hon. John F. Lehman, Jr.
Secretary of the Navy

Mr. Chairman, I welcome this opportunity to appear for the sixth time to offer my assessment of the current posture of the Navy/Marine Corps team and to present the Department of the Navy budget request for Fiscal Year 1987.

Since my first report to you five years ago, President Reagan's Naval Recovery Program has more than doubled our overall naval capability. By cancelling plans for early retirement of two carriers and some thirty destroyers and amphibious ships, and by doubling the rate of new ship construction and reactivating battleships, our Navy has grown from 479 to 547 ships, with another 84 under construction; our Ready Reserve--including strategic sealift--has grown from 32 to 85 merchant ships; the measured readiness of our ships and squadrons has increased nearly 40 percent, and our ammunition stocks have nearly doubled. All this has been achieved with an average real growth in in the DON budget of only 5.6 percent from FY-82-86. The Navy Department share of the Defense budget has declined an average 1.1 percent during this same period.

THE 600-SHIP NAVY: WHY DO WE NEED IT? HOW CAN WE AFFORD IT?

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Now that the President's program is well established, it is timely to reexamine its premises as we plan for the next five years. Media-anointed experts have raised questions about the size, character, and complexity of the Navy and Marine Corps: Do we really need so many ships? Are the Navy and Marine Corps effective in helping to deter Soviet aggression--across the full spectrum of violence, from terrorism to nuclear war? Do we have a strategy that guides the planning and training of our forces? it the correct strategy? If it is, what have we accomplished to date in ensuring we can carry it out, and are we building the right types and numbers of ships to execute it in the future? Finally, can this nation afford to sustain a 600-ship fleet--not only well-equipped but properly manned--for the long term? Now that Gramm-Rudman-Hollings has become law and retrenchment is the theme of the hour, the answers to these questions take on added significance.

Why 600 Ships?

To understand how we arrived at the size of our planned fleet of ships, we must begin by discarding the idea that this number has sprung, full blown, from the brow of some would-be Napoleon of the high seas. Since World War II, maritime force planners have found themselves at the mercy of three enduring elements:

Geography

Water covers three quarters of the world; and the United States is an "island continent" washed by the Atlantic and Pacific

oceans.

Vital Interests of the United States

These are expressed in the web of more than 40 treaty relationships that bind us to mutual defense coalitions around the world. These relationships shape our national security

requirements--together with the energy and commercial dependencies that support our economy in peace and in war.

The Soviet Threat

Whatever its original rationale, the Soviet Navy's postwar expansion has created an offense-oriented blue water force, a major element in the Soviet Union's global military reach that supports expanding Soviet influence from Nicaragua to Vietnam to Ethiopia. From the Baltic to the Caribbean to the South China Sea, our ships and men pass within yards of Soviet naval forces every day. But familiarity, in this case, is breeding a well-deserved respect; they are good and getting better.

The Navy's recently updated publication, Understanding Soviet Naval Developments, provides the facts about the Soviet Navy.

Every American should be aware, for example, that Soviet nuclear submarines operate continuously off our coasts. "Victor"-class nuclear attack submarines are routinely found lurking near many of our principal naval ports. Soviet surface units are now making regular deployments to the contentious and vulnerable chokepoints of the Caribbean Sea and Gulf of Mexico. Worldwide, we find the Soviet Navy astride the vital sea-lanes and navigational chokepoints, through which most of the Western world's international trade must pass. This is the new reality. pattern of Soviet naval deployments has revealed itself only over the last several years. These deployments constitute a post-World War II change in the global military balance of power that has been surpassed only by the advent of thermonuclear weapons. planner, civilian or military, can ignore the growing dimensions of Soviet maritime power.

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The past year alone has provided cause enough for alarm. In mid-1985 naval forces from the Soviet Northern and Baltic fleets conducted a major open-ocean exercise in the North Atlantic, Norwegian and North Seas. Nearly three-quarters of all combatant ships and submarines from these fleets were deployed. The exercise involved submarine, surface ship and aircraft strikes on Soviet surface combatants simulating NATO battle groups moving into the Norwegian Sea. The exercise included the most modern Soviet major surface combatants, such as the aircraft carrier KIEV and the nuclear-powered battle cruiser KIROV. Soviet anti-carrier strike, reconnaissance and anti-submarine aircraft flew around the clock. The exercise was similar in activity level and realism to an unprecedented Soviet Pacific fleet exercise conducted in April which centered around KIEV's sister ship, NOVOROSSIYSK.

Two other significant events marked the Soviet naval calendar in 1985: In the first, Fleet Admiral of the Soviet Union Sergei G. Gorshkov, a flag officer since 1941 and leader of the Soviet Navy since 1956, stepped down, to be replaced by nuclear submariner Vladimir N. Chernavin. Chernavin is known to be more of a "team player" than Gorshkov and has advocated closer cooperation with Soviet land forces in his published writings. other matters, however, he is not likely to change the pull or direction of the growth in capability of the Red Fleet established over three decades by his illustrious predecessor.

On

The other major development in Soviet seapower was the launching of the 65,000-ton nuclear-powered aircraft carrier and, we believe, the immediate laying of the keel for a second unit of the class. These ships--and--the enormous TYPHOON-Class ballistic missile submarines--may be said to mark the culmination of Admiral Gorshkov's long career. For the first time Soviet carrier battle groups will be able to provide visible and truly potent seaborne presence wherever Soviet "state interests" dictate. Along with such units as the KIROV-Class nuclear-powered battle cruisers--the third of which is now under construction--the Soviet carriers will be able to bring fixed-wing strike aviation and local air-superiority to bear in support of Soviet offensive fleet

operations, and in support of clients and proteges, such as Nicaragua, Libya, Vietnam and Angola. Just as important, these carriers will bring the enormous benefit of air cover to the Soviet surface fleet permitting them a new dimension of survivability and flexibility.

What is particularly disturbing about the "fleet that Gorshkov built" is that improvements in its individual unit capabilities have taken place across broad areas. Submarines are faster, quieter, and have better sensors and self-protection. Surface ships carry new generations of missiles and radars. Aircraft have greater endurance and payloads. And the people who operate this Soviet concept of a balanced fleet are ever better trained and confident.

Two operational trends are significant. First, the Soviet Pacific Ocean Fleet continues to be built up in size and--more importantly--capability. 1985 saw the transfer to the Pacific of the second KIROV-Class battle cruiser and its first examples of the SOVREMENNYY and UDALOY guided missile destroyers; that fleet already had two of the three completed KIEV-Class V/STOL carriers. The second trend is toward greater security for the ballistic missile submarine force, which the Soviet Navy considers a prime responsibility. Increasingly, that force is concentrated in the waters of the Arctic, protected by layers of surface, submarine and air forces as well as by the ice cap.

What determines the size of the Navy?

Geography, alliances, and the Soviet threat combine to dictate the actual numbers of ships--the "size of the Navy"--required to fulfill our commitments in each of our maritime theaters. Before reviewing in detail the forces we need in each theater, some observations are in order:

Any view of the global disposition of the U.S. Navy and Marine Corps reveals that we often deploy in peacetime very much in the same manner as we would operate in wartime. For purposes of deterrence, crisis management, and diplomacy, we must be present in the areas where we would have to fight if war broke out. of course, the operational tempo is different--a roughly three-to-one ratio in wartime, as compared with peacetime.

We also train as we intend to fight. A full-scale general war at sea would rarely find a carrier battle group operating alone. So we train often in multiple carrier battle forces.

Allied Navies

Our maritime security depends on significant assistance from allies in executing our missions. Fortunately, we count among our friends all of the world's great navies, save one. Clearly, in areas such as diesel submarines, frigates, coastal patrol craft, minesweepers, and maritime patrol aircraft, allies of the United States have assets absolutely essential for sea control in war and peace. In some regions, such as the Eastern Atlantic and the