Navy to make our organization far more efficient and effective. We do agree with Secretary Rumsfeld, we do believe 5 percent is certainly reasonable in terms of improved proficiency and efficiency and effectiveness, and you will see that reflected in our 2003 submittal to you.

So I do look forward to working with each of you as we address these challenges ahead. I thank you for this opportunity to appear before you, and I also look forward to your questions.

Thank you very much, sir.

[The prepared statement of Secretary England follows:]

PREPARED STATEMENT BY HON. GORDON R. ENGLAND

Mr. Chairman, members of the committee, good morning. Thank you for the opportunity to speak with you today. The CNO, Commandant and I are grateful for your continuing support to keep the Navy and Marine Corps the very best in the world.

Let me begin by saying the Navy and Marine Corps remain a strong and potent arm of our Nation's military forces. They have maintained a forward presence in all corners of the globe ready to perform any mission called for from humanitarian relief to interdiction operations. Able to deploy on short notice the Navy Marine Corps team provides the theater and regional commanders a well trained and effective fighting force.

In his remarks at the Naval Academy graduation, President Bush said, "We must build forces that draw upon the revolutionary advances in the technology of war that will allow us to keep the peace by redefining war on our terms-a force that is defined less by size and more by knowledge and swiftness . . . and that relies heavily on stealth, precision weaponry and information technologies." I am in full agreement with this challenge and, while naval forces inherently fit the President's vision, some modifications and alignments may be needed to meet these goals.

But such changes are best made with a full understanding of the uses to which Navy and Marine Corps units are being put today. For instance, forward deployed naval forces are present around the world and are central to assuring the availability of the sea lines through which international commerce and key resources such as oil flow. Also, as Theater Commanders in Chief develop their comprehensive Theater Engagement Plans (TEP) in support of the National Security Strategy and National Military Strategy, the Navy and Marine Corps play particularly important roles in TEP execution by virtue of their regular forward presence. Lastly, we know that naval forces are regularly called upon to execute combat tasking on short notice in distant parts of the world. From the time my predecessor testified before this committee on 10 February 2000, Navy or Marine forces have engaged in combat over the skies of Iraq, in humanitarian support in East Timor, South America and in Europe.

Looking forward, it is useful to note that for some time the sea services have undertaken an evolutionary shift from operations predominantly on the open seas to operations that include the littoral: an evolution that has underscored the requirement for improved data networking; tailored battle management systems and sensors; and innovative ideas for employing marines that are attuned to the difficult littoral environment-afloat and ashore. This shift in focus generates a need to look at our equipment across a broader mission range . . . such as time-critical strike, ballistic and cruise missile defense; littoral and deep water anti-submarine warfare; intelligence, surveillance, and reconnaissance; air and ground mobility; and expeditionary maneuver warfare.

We also recognize that we need to recapitalize our force-by that I mean building new platforms for the future. For instance, even as the average age of our ships has been steadily increasing to its present average of 16 years-and trending upward for the next 5 or so years-our building rates have not been keeping apace. Likewise, the average age of Navy and Marine Corps aircraft is about 18 years. close to the age of those sailors and marines who maintain them. However, the shape of the Navy of the future may change, as we work to develop a new national military strategy that takes new threats and new opportunities into consideration. Here also building aircraft in sufficient numbers . . . ideally at economical orders of production. is called for.

We have precious few new programs to recapitalize our forces other than systems like DDG 51, F/A-18E/F, and the new carrier under construction, U.S.S. Ronald Reagan. In fact, projected replacement aircraft, such as the F/A-18 E/F and the

Joint Strike Fighter do not meet the entire need under current plans, as there are no replacements scheduled for the EA-6B, P-3, or E-2 aircraft and some of our helicopter fleet. New funding may be needed, but Í also intend to identify some funding sources through process improvement.

Modernization of our current force is also an imperative because of the requirement to be able to prevail if called upon in the near term. Nonetheless, it is prudent to accept reasonable risk by some reduction of expenditure in these accounts in order to make available assets for recapitalization for the future.

With that backdrop. I intend to make the most of our Navy-Marine Corps team by focusing on four strategic areas: combat capability, people, technology, and business practices.

First, as this committee is well aware, the primary purpose of the Navy and Marine Corps is to deter, train for, and when necessary, fight and win our Nation's battles. In remaining faithful to this charge, combat capability, which includes readiness, must be our primary emphasis. In all our decision-making, we will ask the question, "Does this task, program, organization, or facility materially contribute to improving our combat capability?" Likewise we will recognize that what has worked in the past may not always succeed in the future. Therefore, the department will invest more in technical and doctrinal experimentation, and in new and different ways of accomplishing our mission. Let me emphasize, our mission is, and will remain, joint. We are committed to the concept "One Team, One Fight." Along with our sister services and allies, we will organize, equip and train to fight jointly, recognizing that forward deployed naval forces are integral to the combined efforts of all the armed services.

Second, my very highest priority is our men and women in uniform, their families and our civilian workforce. During my confirmation hearings, I commented that any capital asset purchased by the Department of the Navy has no value to the Nation until it is manned by highly motivated and trained people. Therefore, as we plan for the future, we need to first be sure that our personnel policies will provide us the people and skills we require for our future systems.

In this regard, emphasis needs to be placed on “Quality of Service”—achieving a higher quality workplace as well as a higher quality of life for our sailors, marines, active duty and reserve, and civilians and all of their families. The goal will be to create an environment where our men and women can excel at their chosen profession, unimpeded by factors that divert their attention from work and sap their morale. This includes state-of-the-art tools, cutting-edge training, competitive compensation and efficient health care, and an operational tempo that considers the individual, as well as the family. Fostering a positive working environment where young men and women believe they contribute meaningfully to their units will encourage them to want to stay and grow with our team. When people want to stay with a group, others will want to join that group. Retention is a great recruiting tool!

Third, the application of advanced technology is central to our Nation's military strength. I am concerned, however, that the application of technology in the military has for a generation lagged its commercial availability. This is a high priority in our combat systems, but also includes technology for training, testing and management systems. Technological advances are central to the priorities set forth by the President and Secretary of Defense as we shift from the 20th century force, to the more lethal and agile one of the 21st. Technology will emphasize networks of information and communications as well as improvements in sensors and weapons. Initiatives are on going to translate such concepts as the Navy's Netcentric Warfare and the Marine Corps Expeditionary Maneuver Warfare into reality. The Naval War College's Navy Warfare Development Command and Marine Corps Combat Development Command along with numerous Fleet Battle Experiments are but one example of the testing of new concepts, equipment, and doctrine in both the joint and naval environments.

But technology is changing fast, so care must be taken to plan for future advances by anticipating logical insertion points early in the design process. This preplanned improvement schedule combined with spiral design should allow for the delivery of increased combat capability over a shorter period of time. Also important, U.S. systems need to have designed into them conduits that allow our allies to participate to the best of their significant capabilities at increasing levels of complexity. It goes without saying that embarking on this technological transformation will necessitate we recruit, train, and retain bright and intelligent people to operate and maintain these systems.

Fourth, our management team should be more process-oriented, working on ways to improve "how we do business” rather than concentrating only on specific programs and products. To do that, we need to know where we are and to have clear

visibility of where we are going. Measures and metrics provide the tools to do so and as such, will be a key element of our process-oriented management strategy. Our cold war acquisition infrastructure and regulations have been described as a "voracious dinosaur consuming dollars which should be applied to the real mission." It is time to change. Borrowing applicable business practices from commercial industry is a logical step. While the Navy and Marine Corps will always need good leaders in their primary combat arms arena, the Department of Navy will also develop leaders with a better understanding of business strategies, cost control and rapid and flexible design.

The Department has embraced the use of teams for integrated product and process development. We intend also to focus on activity based costing to better understand the actual price we are paying for a platform or system, both for acquisition and equally importantly for support over the life of the system. These initiatives should help to free resources to recapitalize our operating forces, establish processes that leverage commercial capabilities, maintain excellence and attract and retain quality people.

The world has changed a great deal over the past decade. But one thing, has not changed: the Navy and Marine Corps needs to deter, train for, and when necessary fight and win our Nation's battles. As we steam into this new century, I am reminded that forward presence provides an essential benefit for our Nation. The Navy and Marine Corps, and in fact the entire U.S. military, contribute to a stable global environment allowing our economy and our citizens to prosper along with other nations and peoples throughout the world. The stabilizing benefits of American military strength are key to our National interests and the well being of the international community. The investment by our Nation in its military to underwrite this prosperity is, indeed quite modest.

I look forward to working with Congress, the Secretary of Defense, and our sister Services to meet the challenges in the next year and beyond. The changes and transformations I have discussed constitute a start at the beginning of the new century. Thank you for your time this morning and your continued support for our sailors, marines . . . active and Reserve. our civilians and their families.

The statements made in this testimony are contingent upon the results of Secretary Rumsfeld's strategic review. I ask that you consider them in that light.

Chairman LEVIN. Thank you, Secretary England.

Admiral Clark.

STATEMENT OF ADM. VERNON E. CLARK, USN, CHIEF OF NAVAL OPERATIONS

Admiral CLARK. Thank you, Chairman Levin, Senator Warner, and members of this committee. I thank you for the opportunity to appear before you today. I am grateful always for your consistently strong support of the men and women of our Navy.

This morning as I speak, 96 of our 316 ships are forward deployed, almost 50,000 of our sailors at the far reaches of the Earth. That is the cycle of deployment for our Navy. Every day, every year, it never stops and it has not for many years, thanks in large part to the support of this committee.

The young men and women who volunteer to serve in our Navy, they work hard, they make it work. We owe them a great deal. They are doing a magnificent job and you have much to be proud in their service.

We do this as part of the Navy-Marine Corps team. It is appropriate that I am sitting next to General Jones. But we also do it operating jointly with the Army and the Air Force, projecting sovereign American power on and from the sea, close to home and in the far corners of the globe. We are doing this today with a relatively small force, 41 percent fewer ships than we had 10 years

ago.

Our Navy is not breaking under stress, but its operational elasticity has diminished significantly. We face serious fiscal challenges

due to the mismatch between mission requirements and resources. For too long we have deferred modernization and recapitalization of the force and paid for mission accomplishment by postponing maintenance and repair of our infrastructure. This trend now poses, in my opinion, a serious risk to our future.

We also are streamlining our organizations, and I want to refer to Secretary England's comment. It is important that we improve our analytical underpinning, our metrics on how we accurately determine our requirements in the future, to continue to improve readiness and to maximize investment effectiveness.

A major focus of our future follows Secretary England's emphasis on using better business practices throughout our Navy. I share his enthusiasm for this very important cause. We need to reform the way we do business in the Department.

Regarding current readiness, I am encouraged by the fiscal year 2002 amended defense budget. It makes substantial investments to move the readiness accounts toward required levels.

In previous appearances I have talked here about being at war for people. Certainly they are the key to mission accomplishment. The improvements in compensation that you have supported and in fact brought about-bonuses, pay table adjustments, retirement reforms, better medical care, and in fact the initiative to balance their out of pocket expenses in housing-they are having the desired impact. Recruiting is on track for 2001 and this is good news. But more exciting to me is the substantial improvement that we are making in retention. The targeted pay raise and other initiatives in the 2002 budget amendment will reinforce these positive trends.

One word about quality of service. We have made substantial gains in our quality of life programs, with the support of Congress. Our quality of work programs require improvement, especially the infrastructure. Our Navy's shore structure is in poor condition. Our recapitalization cycle exceeds 160 years and my critical backlog is over $2.75 billion. Our real property maintenance funding is significantly below private industry norms. I have spoken on this point on virtually every trip to the Hill and we continue to seek your support to change the way we think about this vital area.

Certainly the challenge of sustaining current readiness while investing in key future capabilities is a difficult balancing act. Following underinvestment in the decade of the nineties, we face an acquisition bow wave. It has been spoken about here before. We need nine ships and at least 180 airplanes a year to sustain the 1997 QDR level. I use that frame of reference because that is what we are targeted against until we arrive at a new strategy and force structure profile. But we are proceeding at significantly less than that and we cannot sustain the Navy that we have today with current funding levels, which will lead eventually to a Navy of somewhere around 230 ships.

I am very interested in innovative solutions to accelerate ship and aircraft procurement rates. To do this, I am convinced that we must find ways to more effectively partner with industry and level fund our annual investments in this type of construction.

Ensuring current readiness, modernizing our fleet, providing sailors with high quality of service, and transforming to meet fu

ture needs-we also need these things to do this. This budget moves us in the right direction, but we need continued and increased investment. The challenges facing our Navy are significant, but with the help of this committee and Congress they can be over

come.

I again thank the committee for your continued support to our Navy, to our sailors, and to their families, and I look forward to answering your questions.

[The prepared statement of Admiral Clark follows:]

PREPARED STATEMENT BY ADM. VERNON E. CLARK, USN

Mr. Chairman and members of the committee, I appreciate this opportunity to appear before you. Your consistent support of Navy requirements and vision of a strong Navy for our Nation have protected the quality of life of our sailors and enhanced operational readiness during the past year. I am very grateful and I thank

you.

THE UNITED STATES NAVY: ON WATCH FOR AMERICA'S SECURITY

The defense and prosperity of the United States has been tied to the seas since the founding of our Republic and the United States Navy has been the principal instrument of that security. Our Navy's history is one of international engagement in peacetime, effective response in crisis, and victory in conflict. It includes a rich tradition of innovation, adaptation, and courage in meeting regional and global threats that have confronted our Nation over the past two and a quarter centuries.

Today, on the threshold of this new century, we face emergent challenges that are adding complexity to the missions our Navy has traditionally accomplished, providing powerful impetus for change. Cyberwar, weapons of mass destruction (WMD), international terrorism, and the violence accompanying failed states-to name but some of these threats-do not replace the specter of state on state conflict. Rather they add to the danger, providing spark to already combustible situations.

To counter these challenges, we are investing in a 21st Century Navy of awesome capability: a Navy that is strategically, operationally, and tactically agile; technologically and organizationally innovative; networked at every level; highly joint; and effectively integrated with allies. It is a Navy that will remain at the leading edge of the joint and combined fight-forward deployed to enhance deterrence, react swiftly to crises, and triumph in war.

These attributes are critical because our Navy will operate in a volatile world of rapid change, more dangerous in some regards than when we faced the global strike and sea denial capabilities of the Soviet Union. This strategic environment will place a premium on freedom of access, and America will need the capabilities of the Navy/Marine Corps team operating from the maritime domain-free to move about the world, influencing events, representing our Nation's vital interests, and remaining ready to fight and win.

THE IMPORTANCE OF NAVAL FORCES

In 2002 and beyond, our Navy's posture, programs, and character will be shaped by the mission of projecting sovereign American power in support of national interests while forward-deployed to the far corners of the earth.

Such forward-deployed naval forces are central to the success of the National Military Strategy and integral to regional Commander in Chief (CINC) plans for peacetime and combat operations. A premier instrument of American power, your Navy operates around the globe, demonstrating command of the seas, ensuring the free flow of trade and resources, providing combat-ready presence, and assuring access for joint forces.

Our Navy is shaped to meet the national and regional requirement for forward forces. While some ships and squadrons are homeported overseas, most deploy rotationally for periods of up to 6 months in an 18-24 month cycle. This construct drives the Navy's force structure.

Fulfilling these important missions has become steadily more challenging. While the requirement for forward-deployed, combat-capable naval forces has remained constant since the end of the Cold War, assets available to meet that requirement have decreased markedly. Our force structure declined 41 percent since 1991, from 538 to 316 ships. Currently one-third of our ships are forward deployed every day compared to approximately one-fifth during the Cold War. Our Navy is a carefully