Competing the fuel tanks for both the F/A-18 and H-53 aircraft, yielded combined savings in excess of $32 million.

By establishing second production sources for three major testers in the family of automatic test equipment and maximizing competition for the test program sets used on this tester family, the Navy expects savings of $334 million.

Competing a multi-year procurement of the AN/SSQ-36 sonobuoy, gained an estimated savings of $5.6 million.

Missiles:

Current savings for the competitive Sparrow (AIM/RIM-7M) missile program total $45 million.

Shipboard Combat Systems:

In FY 1985, the first year of competing the vertical launch system, we achieved net savings of $55 million from the sole-source budget estimate. In other examples, competition for the last 15 units of the MK-15 gun system produced savings of at least $3.6 million.

Competition for the acoustic array of the AN/SQR-19 sonar system should produce a total savings of some $165 million. Electronics:

During FY 1985, we competed the TT-624 high-speed teletype, which had been procured sole-source for the past 20 years. As a result, we achieved a 38 percent reduction in the unit price from the incumbent supplier, who won the competition. Other examples of savings include $43 million from competing the vertical omni-directional broad-band antenna; $2.5 million from competing the programmable scanning communication receiver; and $1.6 million from competing the AN/ULQ-13 signal enhancement source. Spare Parts:

In FY-85, the Navy achieved an average cost reduction of 12% for shipboard spare parts for the second consecutive year. For a sample of 5500 items bought in both FY-83 and FY-85, the cumulative savings achieved through competition are approximately 80%. Question. Did you increase your percentage of competitive contracts again this past year?

Answer. In FY 1985, we awarded $20.2 billion competitively, or 45 percent of all Navy procurement dollars. That performance reflected $5.7 billion more than FY 1984 and $10.8 billion more than we awarded competitively in FY 1982.

Over 69 percent of all individual contract actions executed in FY 85 were competitive, versus 50 percent in FY 1984 and 30 percent in FY 1982.

Question. What major programs do you intend to compete in Fiscal Year 1986?

Answer. Some of the hundreds of major programs that have been competed and will continue to be competed during FY 86 include the CG-47, SSN-688 and the LSD-41.

Question. How much do you anticipate saving as a result of these competitive procurements?

Answer. The following figures give an indication of the magnitude of the savings resulting from competition:

CG-47:

FY 83-85 (billion)..

FY 86 (million)...

$1.5

1154

Question. Mr. Secretary, the Congressional Budget Office has recently estimated that in order to meet the Navy's force level goals, the Service's budget will require annual real growth of between three and five percent. They add that this rate of growth "might be difficult to achieve if history is a guide". This conclusion is strengthened by Congress' action on the FY 1986 budget as well as enactment of Gramm-Rudman-Hollings legislation. Does the Navy agree with CBO's conclusion?

Answer. The CBO estimates are based upon data from 1980 to 1985. These were rebuilding years to make up for negative growth and stagnation policies of the 1960s and 1970s. Using this period as a benchmark for projecting future budget trends is inappropriate. As a result the CBO estimates are biased on the high-side.

We have now, under construction and fully funded the ships necessary to attain a 600-ship Navy consisting of 15 carrier battle groups, 4 battleship surface action groups, and 100 nuclear-powered attack submarines. As such, our future and current budgets reflect the resources necessary to sustain the 600-ship Navy. An average of 20 ships a year in new construction will be required to sustain the ship force levels necessary to execute the national and maritime strategy. This steady 20-new-ships-a-year average will require three percent real budget growth.

Regarding the question of history, throughout the past two decades, critics have predicted that the American people will not support sustained defense growth. History shows, however, that except for the post-Vietnam War period, post-World War II naval budgets have maintained growth commensurate with the national economy. The middle and late seventies are seen by many as an anomaly in U.S. history. It is not apparent that the American people want to return to the declining numbers of ships, morale, and readiness experienced in the 1970s and early 1980s.

Question. CBO further concluded that "accommodation to such budget deficiencies would be more efficient if a strategy were developed well in advance." Has the navy begun developing a strategy or options paper to address these potential major funding shortfalls, and if so, please outline your plans?

Answer. For planning and programming purposes, we are using the President's FY-87 Budget as a basis for developing a balanced and affordable Department of the Navy program which meets national defense requirements. We do not anticipate major funding shortfalls.

ANTISURFACE SHIP WARFARE TORPEDO

Question. Your budget includes a request for $17 million to procure a low cost anti-surface ship torpedo. Admiral Watkins, when was this requirement established.

Answer. The formal Operational Requirement (OR) for a lowcost, Anti-Surface Warfare (ASUW) torpedo was promulgated on 2 December 1985. This requirement came about in response to the need for a low-cost torpedo, capable of destroying surface shipping,

Question. As a submariner, you know that there is limited space on a submarine to carry weapons. What weapons would have to come off in order to make room to carry these anti-surface ship torpedoes?

Answer. No weapons presently carried by our submarines would have to be removed to make room for these torpedoes.

Question. Although the Mark-48 and the Mark-48 ADCAP are more expensive weapons, can't they sink surface ships?

Answer. The MK-48 and the MK-48 ADCAP are fully-capable, dual purpose (ASW/ASUW) torpedoes. The use of these sophisticated relatively expensive torpedoes to attack an undefended surface target can seldom be justified.

SHIPBUILDING CONTRACTS

Question. During the past three or four years, the Navy has awarded a great number of its shipbuilding contracts early in the fiscal year. This, we have been told, saves substantial sums of money. Could you first tell us if the Navy plans to continue this approach?

Answer. We will continue to plan and award our shipbuilding contracts early in the fiscal year whenever it is possible. Some impediments to early award are late appropriations or lack of sufficient authority under a continuing resolution. Early awards also mean earlier deliveries, thereby putting the ships into active service sooner.

Question. How much money do you estimate has been saved to date? Saving money is obviously one major advantage, are there other advantages?

Are there any disadvantages to this approach?

Answer. The Navy has not maintained any type of record of the savings accrued through early awards but in the case of many programs, early awards will generate escalation savings since ship deliveries occur at an earlier date. A pertinent example might be the FY84 LSD-41 which was awarded in November 1983. If the award had slipped to March 1984, escalation requirements would have increased by an estimated $3.4 million (14%) for that change alone. Corresponding increases for other ship types would vary depending upon such factors as current shipyard workload and material availability. Another example of savings is in the Government Furnished Equipment (GFE) area. Many programs do not order GFE until the shipbuilding contract is awarded. Because many blockbuy GFE contracts are awarded at the beginning of the calendar year, an early ship award will also permit the award of GFE a year earlier, saving the cost of a year's inflation on that GFE.

The second major advantage is that early award leads to early delivery, particularly when the builder has no advance procurement funds to order long-leadtime material required to start fabrication.

For those programs where awards are scheduled early in the fiscal year, we have identified no disadvantages.

MSH MINESWEEPER PROGRAM

Question. It appears that the MSH minesweeping program may be heading down the same path as the MCM program. There are already delays in the program and recently a test section of the ship developed cracks after being shock tested. First, how do you intend to proceed with this program, and what actions do you intend to take to make sure we don't have similar problems that we face with the MCM program?

Answer. The MSH is an industry produced design unlike the MCM which was a Navy design. The contractor is responsible for a design that meets the ship requirement document. The Navy has been working closely with the contractor during the detail design phase and we are proceeding cautiously. There are several technical risk areas including the hull structure. These are being worked by the contractor and monitor by the Navy. This increased engineering effort is taking longer and costing more than the contractor had planned, but it is necessary to ensure a valid design. The contractor has voluntarily delayed start of construction as a result of the initial shock tests. Additional tests will be conducted. The Navy will not proceed with the program until we are satisfied with the design and the program.

Question. Do you intend to let the contractor proceed with full production of the first ship at this time, or will you wait until all shock tests are completed and analyzed before you proceed?

Answer. The Navy does not intend to proceed with full production of the first ship until physical validation of the structural design is complete. The contractor has already voluntarily stopped the start of lead shop production pending additional shock tests to the test section. Subsequent to these data-gathering tests, the contractor will present a plan for additional design and testing that will be required to validate the MSH design prior to proceeding with production.

Question. Given the state of the art technology being used, would it not be more prudent to proceed with caution?

Answer. The Navy is exercising caution. The detail design development by the contractor is being monitored closely by the Navy. All aspects of the design are analyzed and questioned, and continual interchanges and design reviews are conducted by the Navy with the Contractor. The Navy will ensure that the design is acceptable.

Question. As you know, Congress funded four more of these ships last year. When do you intend to award the fiscal year 1986 contract?

Answer. The contractor has notified us that he is currently reviewing the design status. This will be discussed with the Navy. The present contractual option period ends 30 April 1986, and the

contractor has been requested to extend this date. The four FY 86 option ships will not be awarded until the Navy is satisfied with the design.

Question. Since you have fixed priced contracts with options, will the Navy face a cost penalty if any changes are made to the contract.

Answer. MSH-1 changes may have a cost impact on the contract. The cost impact of any shipbuilding contract changes will be proposed by the contractor, evaluated by the Government, and negotiated.

During last year's hearing, the Committee asked whether the Navy was considering introducing a second source in the MSH program to set a basis for competition. The answer at the time was to the effect that the Navy did want to introduce competition, but that it was rethinking the methodology to be followed.

Question. Has the Navy developed specific plans for the introduction of a second source for the MSH program?

Answer. The Navy is pursuing its current acquisition strategy of awarding a competitive fixed price contract for the FY88 and 89 ships (MSH 10-17).

Question. Given the unique nature of the MSH, both in terms of design and the materials being used, does the Navy foresee any significant problems in initiating a second source?

Answer. The MSH design is a Surface Effect Ship (SES) utilizing a structure totally of Glass Reinforced Plastic (GRP). No other shipbuilder has built an SES and very little experience is available in GRP production in this country for a ship of this size. Therefore, any second source must become familiar with the design, technology and production of the MSH.

STAFFING THE HOSPITAL SHIPS

Question. Mr. Secretary, the first hospital ship (TAH-19) is scheduled to come on line in October of this year. The second hospital ship (TAH-20) is coming on line August 1987.

Just this week, the Navy stated that there is currently a shortage of medical personnel precluding the ability of the Navy to provide quality care to their current population, causing the closing of some medical facilities.

Considering this shortage of Navy physicians and other medical personnel, how does the Navy plan to staff these hospital ships?

Answer. The TAH hospital ships are to be maintained in a readiness posture of reduced operational status 5 (ROS-5). That means the ships have 5 days to be fully operational, mission capable and underway to the theater of operations. Each hospital ship will be manned during ROS by a cadre crew. The ROS cadre crews are composed of 56 enlisted and 10 officer billets for both ships. There are no Medical Corps officers assigned to the ROS cadre crews.

In case of a major contingency operation, the hospital ships will be brought to full operational status. During full operational status the Medical Personnel Unit Augmentation System will be used to staff the hospital ships. Going to full operational status will result in the partial drawdown of the Continental United States (CONUS) medial treatment facilities to provide augmentation personnel for