SECRETARY OF THE AIR FORCE WASHINGTON 7 DEC 2001 The Honorable Patty Murray Committee on Appropriations Dear Ms. Murray: Thank you for your support of our KC-135 replacement program. The KC-135 fleet is the backbone of our Nation's Global Reach. But, with an average age of over 41 years, coupled with the increasing expense required to maintain them, it is readily apparem that we must start replacing these critical assets. I strongly endorse beginning to upgrade this critical warfighting capability with new Boeing 767 tanker aircraft. I know there has been much discussion on how we should acquire these aircraft. A lease initiative spocifying a "tanker replaccinent” would allow us to acquire the increased capability of the 767 in greater quantities and earlier than a traditional procurement. However, we support whatever approach Congress determines should be used. The most important factor is that this replacement program starts as soon as possible. To this end, we will work with the ASD (AT&L.) and the OSD Comptroller to amend the FY03 budget currently being vetted through the Department. Our long-term goal is to expand our tanker replacement vision from air refueling to include other key mission areas. We also intend to consider elements of command and control, as well as intelligence, surveillance, and reconnaissance (ISR). This initiative would also enhance our efforts to expedite development and fielding of a Joint Stars Radar Technology Improvement Program on a 767 multi-mission command and control aircraft platform. I greatly appreciate your support in the FY02 Appropriations Act as we work to upgrade our overburdened tanker fleet. Your interest and continued support are crucial as we move forward with this critical recapitalization effort. I appreciate your interest in jump-starting the replacement program for our venerable KC-135 tanker fleet. These critical aircraft, which are the backbone of our nation's Global Reach capability, have an average age of over 41 years and are becoming more and more. expensive to maintain. Due to the effects of age, these aircraft are spending over 300 days on average in depot maintenance, which affects our ability to respond to the many global demands on our force. I strongly endorse beginning to upgrade this critical warfighting capability with new Boeing 767 aircraft. If Congress provides the needed supporting language, we could initiate this program through an operating lease with an option to purchase the aircraft in the future. This leasing approach will allow more rapid retirement and replacement of the KC-135Es. However, if the Congress determines this approach is not advisable, completing the upgrade through the purchase of new 767 airframes beginning in FY 02 will be in the best interest of the Air Force. To implement this transition, we intend to work with the USD(AT&L) and the OSD Comptroller to amend the FY03 budget currently being vetted through the Department. From the warfighter's perspective, this initiative could provide the opportunity to expand our tanker vision from air refueling and limited airlift to include other key mission areas. We intend to consider elements of command and control, as well as intelligence, surveillance, and reconnaissance (ISR) for the KC-X-in other words, a smart tanker. This initiative will further enhance our efforts to expedite development and fielding of a Joint Stars Radar Technology Improvement Program on a 767 multi-mission command and control aircraft platform which we are hopeful the Congress will also expedite in the FY02 Appropriations Act. I very much appreciate your support in the FY02 Appropriations Act as we work to upgrade our overburdened tanker and ISR fleets. Your interest and support are crucial as we move forward with this critical recapitalization effort. Secretary ROCHE. I do not believe I orchestrated this. I asked for something because I felt Senator MCCAIN. You advocated it. Secretary ROCHE. I advocated it, yes, because I feel that the tanker situation is sufficiently worrisome to me that the sooner we can fix it the better, which is one of the reasons you do leases, like Her Majesty's Air Force is leasing C-17s to get a capability much, much more quickly. With regard to asking others at the time there had been competitions both in Italy and in France and in both cases the Airbus candidate lost. But I was open to it, and I stated so publicly. Senator MCCAIN. I ask my question again: have you solicited any other offers from any other entity that may be able to compete, number 1, like we do usually, to compete for bids and things like that? Number 2 is, does the language prohibit any other, since it says only Boeing aircraft? Secretary ROCHE. The language as it currently stands would prohibit it, but if I were to come back and say that X has a much better deal for the country, can in fact help Navy and Air Force planes be tanked, and it requires some change, I would assume that language could be changed. Senator MCCAIN. Which is why your letters ask specifically for Boeing aircraft? Secretary ROCHE. If I can on that point, sir, if I may. At the 11th of September, after the attack, there was a drop in commercial airlines. There were a number of cancelled orders. Very much like the situation a predecessor of mine a number of years ago faced when he found a number of DC-10s that were not usable, brought them into the Air Force, and converted them into KC-10s. I looked to see if there could be a deal that would be good for the American people, good for the Air Force, by picking up excess aircraft that were made excess because of cancelled orders with Boeing. That is what started it, sir. Senator MCCAIN. I would again like an answer to the question: Have you solicited any group or organization or entity to make a proposal? Secretary ROCHE. Sure. I said I have spoken with Philippe Delmas. Senator MCCAIN. Have you solicited? I would like an answer. Have you solicited Secretary ROCHE. I said yes. Senator MCCAIN.-anyone to propose, to make a proposal, in writing said, we would like to have proposals? Was it published anywhere, we would like to have proposals by different corporations, companies, anybody who thinks that they can fulfil this requirement? Secretary ROCHE. In writing, no, sir. But I think I have solicited-I have not solicited Boeing in writing, either. Senator MCCAIN. Boeing is in the law, Mr. Secretary. Why would you have to solicit them? Secretary ROCHE. Senator, I have spoken to Philippe Delmas, who is the chief executive of Airbus. Senator MCCAIN. But you have not solicited any. Now it is past December and here we are in February. Secretary ROCHE. If he has a proposal I would be more than willing to look at it. Senator MCCAIN. I thank you very much, Mr. Chairman. Again, I strongly urge that we have a full committee hearing on this issue. It is $26 billion, which is on track to go to Boeing Aircraft in violation of what the head of the Office of Management and Budget deems inappropriate lease-purchase contracts. I strongly urge a hearing. I thank you, Mr. Chairman. Chairman LEVIN. Senator Collins. Senator COLLINS. Thank you, Mr. Chairman. Secretary_England, as you well know from our numerous conversations, I am very concerned about the low current procurement rates of ships and aircraft. The Navy has over and over stated that its goals are to procure 8 to 10 ships per year and 180 to 210 aircraft per year. Yet the Navy's budget does not reach these goals until very late in the Future Year Defense Program. That is also of great concern to me because I have seen too often the pattern where the Navy or the other services sincerely intend in those out years to reach the goals, but then events intervene or budget constraints interfere and we never get to where we need to go. The fact is that we are seeing a continual increase in the operational tempo. We are seeing increases in the average age per platform. Ship depot maintenance availabilities are more often than not exceeding the notational costs. Aircraft are requiring more maintenance per hour and are experiencing increasing failure rates on major components, resulting in significantly increased costs per flight hour. My concern is that we need to start rectifying these deficiencies now and that we are fast sliding down a procurement hole that is going to be very difficult for us to climb out of and to meet our goals and current requirements. I was struck in my visit to Central Asia and talking to the service men and women, the sailors and the admirals on the U.S.S. Theodore Roosevelt, the operational tempo is incredible. I do not know what we would have done if we did not have our aircraft carriers and our carrier battle groups in this war, since so many of the strikes have originated from our aircraft carriers. I think it is in the neighborhood of 75 percent, according to your testimony. So what are your thoughts on our current force structure and our budget plans and whether or not we have a match here for our mission requirements? Secretary ENGLAND. Well, first of all, as Secretary Roche just said, I violently agree with you. I will use the same expression. Obviously, we do need more ships, we need more airplanes. We made some hard decisions this year and I believe we made the right decisions in 2003, just like the Kennedy that had trouble getting out to sea because the maintenance had not been done in the past and we had a lot of delays. It is no value to our Navy to have assets that do not operate. So this year we put a lot of money, we put $3 billion, into our operations and maintenance (O&M) accounts. So $3 billion went into O&M accounts. By the way, the Navy had an increase this year of $9.5 billion. $4 billion went to the personnel account, $3 billion went to O&M accounts, a little over $1 billion went into R&D, and a billion dollars went into procurement. But the billion dollars that went into procurement went into munitions because in the past years it had been way underfunded and we had to fund the munitions. So we put a lot of money into munitions this year, $1 billion over last year. Now, also we are doing two SSGNS. That is another billion dollars we invested, and they count. They are real assets of the United States Navy. We had prior year shipbuilding accounts. Last year it was $800 million, this year it is $645 million. That is money we spend for prior year contracts. We do not get anything for that. That is for bills from prior years, prior year accounts. We still have, by the way, $1.6 billion to work off in that account, so we will be back here every year working that off. We put $400 million into our current shipbuilding account so we would forestall these problems in the future. So just our prior year shipbuilding and our $400 million where we increased our funding level, that is another whole ship, frankly. But it will help protect the future and pay bills that we had run up in the past. Now, this year we're doing what I call filling all the buckets. To the best of my knowledge, we filled all the buckets across the Navy and the Marines. So in the out years, we should not have to take money out of shipbuilding or airplanes. We should actually see the benefits of that money to buy airplanes and ships. I would certainly like to buy more this year, but we made priority decisions and I believe they were the right decisions, Senator. Senator COLLINS. I do not dispute the need for more funding in each of the accounts. I guess maybe the question for this committee is whether the Navy's share of the $48 billion increase overall is sufficient, given the shortfall in procurement accounts. One other quick question before I go on to a question for Secretary Roche and for you as well. Is the down-select for the DDX still on track for April? Secretary ENGLAND. Yes, it is. Senator COLLINS. Thank you. Secretary Roche, as you are well aware, the Mobility Requirements Study 2005 identified a sea and airlift shortfall, and this obviously applies, I guess, across the board. Could both you and Secretary England tell us more specifically how the current operations of Enduring Freedom and Noble Eagle have exacerbated the lift shortfall? Secretary ROCHE. Yes, Senator. A couple of things come to mind. One, the older aircraft like the C-141s, a number of our C-5s, are breaking. They are old, they are just old. C-141s have to be retired. We are using them now until we get enough C-17s in place. Second, we are using the C-17 more than we ever intended to and I am concerned that its maintenance is not getting enough attention because it is not being pulled off the line enough. We are looking for the future to say-there was the study having to do with expected scenarios of conflict, but then there are the realities of what we are doing in this long-term war on terrorism, and mobility is key since Afghanistan is totally landlocked. Everything that goes in, everything that comes out, has to go in by air, including the water our troops drink. Therefore, we will look over the next couple of years at the C17 situation to see if we should extend that line. At the same time, we are in this year's budget requesting the permission of the committee to have a multiyear funding for the C-130J, which is a longer haul, more retailing airplane compared to C-17, which is wholesale. Senator COLLINS. Secretary England, would you like to add any comments? Secretary ENGLAND. Senator, I really do not have much to add here. I believe we have been able to deal with the requirements for |