As a two-thirds of their time on non-mission-related paperwork. result of this study, we have reduced administrative-related reports and duties imposed by Department of the Navy directives by over 50 percent. We have also recommended to the Secretary of Defense that thirty-four. of the over seventy reports required by Office of the Secretary of Defense (OSD) directives should be cancelled. Secretary Weinberger has indicated that he will review the list of reports and that action will be taken to cancel those that are unnecessary. In the case of those reports established by statute, he will seek Congressional relief. Secretary Weinberger also stated that the results of his review will be applied to the entire Department of Defense. Management Initiative Results The results of these management initiatives are quite dramatic. A few highlights are listed below: The disputes, litigation, claims, cost overruns, and schedule delays that characterized naval shipbuilding in the 1970s have been eliminated. Over the last four years (CY 1982-85), 78 ships have been delivered to the Navy of which 30 were ahead of schedule, 33 on schedule, and only 15 behind schedule. The net of all four years is 46 months ahead of schedule for all ships. After years of bitterness and massive cost overruns and claims in our submarine programs, all submarines have been delivered on or under budget. For the fifth straight year there has not been a single new construction contract shipbuilding claim outstanding against the Navy. Aircraft carriers. Our acquisition strategy for nuclear aircraft carriers has been very effective in reducing the cost of achieving airpower at sea and in accelerating the growth to a fifteen carrier battle group force level. Originally, a split buy of two new aircraft carriers in separate annual procurements for ABRAHAM LINCOLN (CVN 72) and GEORGE WASHINGTON (CVN 73) was estimated to cost $8024M. Our multiple ship award strategy in FY 1983 brought these costs down to $7270M, a savings of $754M. Furthermore, since contract award, sound management practices and the success of the Administration's national economic policies have achieved further cost savings of another $754M, bringing the estimated end cost to $6516M for the two CVNs. These savings permitted us to return $450M from the carrier account alone for reprogramming to the MX program. Escalation adjustment and shift of funds to other programs resulted in a further transfer of $54M from the carrier program. In addition to saving over $1.5B by our CVN 72/73 acquisition strategy, we will also deliver these ships earlier than would have been achieved by the traditional split annual procurement approach. We estimate that CVN 72 and CVN 73 will each deliver 22 months earlier than would have been achieved by the traditional approach. Also, we expect THEODORE ROOSEVELT (CVN 71) to deliver by September 1986, at least 17 months earlier than the original schedule, through incentives we have established in the CVN 71 construction contract. Thus, a total of 61 additional nuclear aircraft carrier ship months will be achieved through our acquisition strategy. AEGIS cruisers. Bath Iron Works was selected as a second source to compete with Litton for procurement of AEGIS cruisers. Contracts were signed in December 1983 for the first three cruisers to be competitively awarded: two to Litton and one to Bath. The contracts resulted in a net constant dollar savings of more than $100 million compared to the previous year's sole source award of three ships to Litton. In November 1984, the second year of competition resulted in Bath winning two FY 85 ships and Litton one, with a net constant dollar savings of $97.7 million compared to the FY 1984 award. In December 1985, the third year of competition resulted again in Bath winning two FY86 ships and Litton one. Battleships. NEW JERSEY was recommissioned in December 1982 ahead of schedule and under budget. IOWA was delivered well ahead of schedule and under budget in April 1984 and is now deployed in the Caribbean. MISSOURI was in large part funded from contract savings and is currently ahead of its reactivation schedule in the Long Beach Naval Shipyard. Requests for proposals are out for WISCONSIN, fully funded by Congress in FY 1986. Award of a contract is anticipated in October 1986, with ship delivery in January 1989. Build/Convert and Charter Programs. Thirteen Maritime Pre-positioning Ships (MPS) and five T-5 tankers have been contracted for and are under conversion and construction. Eleven MPS have delivered; the final two deliver this year. Three of the T-5s have been delivered; the final two deliver this year. These ships provide a dramatic new capability to preposition the equipment and supplies to support three Marine Amphibious Brigades in areas of potential crisis around the world. The first six of the MPS ships were completed two months ahead of original schedule and under budget. Aircraft Unit Costs. The fly-away cost of the F/A-18 HORNET has declined almost 17 percent during the past three years, from $22.5 million per plane to $18.7 million in 1985, a savings of 16.9 percent. In terms of FY-82 dollars, we are paying a price 32 percent below the rate paid in FY-82. This is part of a sea change, an overall downward trend of major Navy aircraft prices during the 1980s, a break with 30 years of uninterrupted cost escalation in naval aircraft procurement. (See illustration next page.) Contract Manning. In the major Reagan Administration effort to reinvigorate the maritime industry and the merchant mariner profession, a total of 16 more ships, including cable ships, missile range ships, and fleet tugs, will be offered for contract manning in FY 1986 and 1987. This will raise to 40 the total of naval ships offered for contract manning added by this Administration. This has resulted in a cost reduction of nearly 40 percent. Small Business. The Navy Department (from FY 1982 to FY 1985) increased by 55 percent in dollar value its awards to small businesses, including women-owned and minority-owned concerns. These contracts to small business totaled $7.046 billion in FY 1985, reflecting a new commitment to bring the benefits of competition and the small business industrial base to Navy procurement. Navy Acquisition Reporting System. This new system has been a dramatic success. It involves a new, simple, and straight-forward acquisition reporting system for the top 60 programs. It requires quarterly reports on any changes of estimated cost for R&D or production or changes in schedule for each of those 60 programs and provides early warning of performance difficulties. While this system is primarily meant for senior Navy management, its effectiveness makes it a prime candidate for eventual replacement of the current Selective Acquisition Reporting System. Assignment policy for Program Managers and Industrial Facilities Commands. The minimum tour length for officers serving in these important acquisition billets has been lengthened to four years. Arrival and departure from these assignments now is planned to coincide with major Department of the Navy Systems Acquisition Review Council (DNSARC) milestones and/or program starts or completions. Provision of guidance to promotion boards has been modified to increase emphasis on the performance of officers in acquisition management billets. BOSS. The Department of the Navy instituted in 1983 a spare parts procurement program called "Buy Our Spares Smart" (BOSS). It is particularly frustrating to us to find that the abuses and overcharging uncovered by the Navy itself over the past three years--items for which we recovered monies--are being used by headline-hunting critics seeking to discredit the very effort itself. Working with suppliers and parts contractors, we have made great progress in finding abuses, receiving refunds, challenging sole-source relationships, locating alternative sources, and reducing barriers to competition for spare parts by identifying and eliminating proprietary-data requirements. There are more than 2.3 million inventory items in the Navy's spare parts supply system (over 65 percent are controlled by the Defense Logistics Agency). We are methodically reexamining the more than 600,000 under Navy control--over 100,000 of them during this past year. During Return on investment in BOSS is considerable. 1984-1985, the Navy invested $101 million in BOSS resources and achieved cost avoidance exceeding $520 million. In 1983, 13.5 percent of our spare parts were procured competitively. In 1985 the figure was 33.8 percent. We are competing more buys to achieve more reasonable pricing. Where competing the buy is inefficient, we are exercising proper management techniques to control prices. A 1983 audit showed 35 percent of our non-competitively procured spares to be overpriced. By 1985 that had been reduced to 18 percent, and the trend continues downward. Depot Level Repairable (DLR) Components. In a major innovation in the management of maintenance funding, we have instituted a decentralization of the management of DLR components to the ship and the air station level. From 1981 to 1984 we tested financing the procurement and repair of non-aviation DLRS through the Navy Stock Fund. This improved material availability by 38 percent, reduced casualty response time by 26 percent, and increased the carcass return rate by 36 percent. We then began testing financing procurement and repair of aviation DLRs through the Stock Fund in April 1985. These initiatives establish a buyer/seller relationship between the Stock Fund and its customers who in turn are being held accountable for their expenditures. This should bring a much more frugal approach to ordering, based on truly needy, and an incentive to repair at the lowest authorized level and not waste repairable assets which can be turned in for credit. Our management and acquisition reforms are not intended to impact the system for a few brief years only and then be buried under the weight of bureaucratic inertia and free-spending reaction. They are clearly being institutionalized into the very fabric of Navy life. In November 1985 I signed out an acquisition policy instruction codifying our acquisition reforms and ensuring their institutionalization at all levels of the Department of the Navy. DEPARTMENT OF THE NAVY BUDGET FOR FY 1987 The Source of the Navy/Marine Corps Budget Commentators with little knowledge of defense policy have criticized the service budget requests as exercises in simply asking for more programs that have a momentum of their own. Nothing could be further from the truth. The preparation of the 1987 budget began with the foundation of national strategy and the maritime objectives assigned to the Navy and Marine Corps. From maritime strategy came the force structure planning requirement. Throughout the year, the strategy and the force levels have been refined and tested in multi-national exercises, simulations, and wargaming. The most important input to the preparation of this budget are the assessments of the operational and theater commanders in their net assessments and recommendations for funding priorities. The lessons learned from real-world operations and conflicts such as the Falklands and the Middle East are applied and often further modify the budget planning. From the start of the FY 1987 programming process in September 1984, the application of common sense in placing priority on the "Strategy Areas of Concern" has been applied throughout. Then after exhaustive scrubbing and debate within the Department of Defense and with other agencies of the government, the Department of the Navy budget request has been completed. Readiness Personnel Readiness. The FY 1987 budget continues to place personnel readiness at the top of spending priorities as in the previous five budgets. Nothing is more important than our personnel. The tremendous turn-around in morale and personnel quality and performance has proved to the skeptics that, for the Navy and Marine Corps, an All-Volunteer Force produces a better and readier force for the long term than a peacetime draft. This success, however, depends on the maintenance of adequate compensation and adequate quality of life. We must maintain budgetary support for those priorities. Our budget request contains the following priority programs: Even with the 3% pay raise on 1 October 1985, our uniformed people are still behind civilian wage growth by 8.38. The FY 87 four percent increase requested 1 October 1986 parallels the projected OMB FY 87 civilian wage growth. This is the absolute minimum we need to stay even and not widen the gap even further. Sea-duty enhancement programs. Naval service can be |