The Navy has been reduced from 900-plus ships in 1970 to just about 500 ships today. This reduction was caused by two factors, (a) aging together with obsolescense; and (b) a conscious decision of the Navy to use available funds for fleet modernization to achieve. an early overall improvement in fleet readiness. The expected service life of a warship is 25-30 years; consequently, the Navy must plan to retire (and hopefully replace) about 3.7 percent of its active fleet on an annual basis. Such a replacement rate (i.e., 3.7 percent), of course, only provides for the maintenance of a given size or numbers of ships in the active Navy.

Concerning the size of the Navy to meet the national defense requirements of the near future (i.e., 1980-85), I draw attention to the colloquy reported on pages 11160 and 11161 of the hearings of the Seapower Subcommittee on November 30, 1970. Therein it was indicated that Adm. T. H. Moorer, as the CNO, had appeared before the committee on January 28, 1969, and stated that a Navy of 850 ships ought to be attained by fiscal year 1980. Subsequently, the subcommittee was informed that Admiral Zumwalt had stated that the Navy should plan to build a balanced force of about 770 ships in the 1972-79 time frame.

Currently, the Joint Chiefs of Staff recommend a U.S. Navy Active Force level of over 800 ships to support our current national defense strategy. Such a force is significantly larger than the present level of active ships and of the level of 575 ships which might be achieved in the mid-1980's if the previously discussed Navy illustrative 5-year program were to be accomplished.

In summary, we are facing a very difficult predicament-the size of the Navy has shrunk to a level that is marginal, if not inadequate, and the current annual rate of new ship acquisitions (fiscal year 1975 and prior year SCN programs) coupled with the 3.7 percent annual ship retirement rate indicates to me that the size of the Navy will remain in this same condition 10 years from now even should the $6 billion illustrative 5-year shipbuilding program be accomplished. With the present 5-year defense program the size of the Navy would grow at an annual rate of 1.5 percent. At this rate, the size of the Navy will be approximately 540 active ships in 1980. With the illustrative program, the 1.5 percent growth rate will be maintained through 1985 to yield a Navy size of 575 active ships in 1985. Considering the mission requirements of the Navy today and the uncertainty of international developments in the next decade, it appears to me that we are not adequately planning or providing for the level of U.S. seapower that may be essential to this Nation's security. It may be that it will possibly require funding levels in the order of $8-$9 billion (fiscal year 1976 dollars) in the annual SCN appropriation account to achieve the necessary Navy size for the mid-1980's. If the Congress were to implement such an expansion of the Navy, it will be necessary that these additional funds be added to the total DOD budget so that other critically important Defense programs are not adversely impacted.

I do not have any serious doubt concerning the feasibility of the shipbuilding production base in the United States (both private and public yards) being able to carry out an enlarged naval shipbuilding program. For as was demonstrated in the period 1934 to 1944,

the shipbuilding industry quickly alined its resources to the challenge of the Vinson-Trammell Act and the subsequent large naval building programs. By 1940, the stability of the Navy's program and the consequent increased efficiency of the U.S. shipbuilding industry not only had brought the size of the U.S. Navy to the treaty limits but, more importantly, readied both the Navy and the industry for the tremendous requirements of World War II.

I am aware that some may question the availability of an adequate work force for the shipbuilding industry to carry out a large naval shipbuilding program. This question gains even more significance if the additional shipbuilding requirements of the Maritime Administration program are also factored into the total work force levels needed. However, I am confident that if joint Navy/Maritime Administration shipbuilding planning is achieved in structuring a longrange program for at least 5-year increments, and if the Congress clearly enunciates a definite policy to rebuild the Navy, the work force problem both as to quantity and quality can be resolved successfully.

Finally, I believe that consideration of the national defense strategy and of the requisite Navy ship requirements in being able to support this strategy is central to the determination of the proper sizing of the Navy. However, it does appear that current Navy active ship levels and those to be attained under present shipbuilding programs (i.e., fiscal year 1975 and prior) are marginal at best. I believe it is urgent that we demonstrate our national determination to build and support an adequate Navy and at the same time strive to both. lower the ultimate cost and decrease the acquisition of ships in the Navy shipbuilding program.

Accordingly, I strongly support the idea of multiyear authorization for the Navy shipbuilding program and recommend authorization scheme along the lines outlined in subparagraph (c) earlier in this statement. Attached as an addendum is a memorandum (attachment A) describing a legislative mechanism to make possible multiyear authorization for naval shipbuilding. The Office of General Counsel (DOD) is considering legislative approaches and is available to discuss the matter further with the subcommittee staff.

Sincerely,

Attachment 1.

ATTACHMENT A

W. P. CLEMENTS.

Obviously the matter of the legislative mechanics necessary for a multi-year authorization procedure is a subject which will require much further discussion between the HASC, its staff, and the Department of Defense. However, at this time it may be appropriate to present the general outline of the design of a possible legislative approach:

1. Initially Congress would authorize a mixture of a full program buy for some types of vessels (even if extended somewhat beyond five years), as well as a five year buy for other types. For example, if DOD had a program for acquiring 50 PF's, then even if the planned acquisition extended somewhat beyond five years, all 50 PF's would be authorized. However, for a program such as the SSN's which might, hypothetically, continue at a rate of say three per year into the foreseeable future, then authorization for fifteen (a five year buy) would be provided.

2. After this initial multi-year authorization was provided, DOD would from time to time request authorization for additional vessels. These additional requests would not necessarily be made annually, five years in advance. This would, among other things, preclude the necessity of requesting authorization for vessels before they were fully developed.

3. Although DOD would present a multi-year program indicating what vessels will be built each year, authorizations should not be statutorily specified by program year. This would permit the acceleration or deferral of authorized vessel procurement without a statutory amendment, subject to such reprogramming understandings as may be developed with the Armed Services Committees.

4. The authorization should be in terms of numbers of vessels of general categories and should not authorize dollar amounts. The difficulties in making cost estimates for items incorporating the latest technology over a period of five years or more in a time of unpredictable inflation make it unwise to include funding limitations in the authorizing statutes.

5. The Congress would continually be advised of program progress through Selected Acquisition Reports, Congressional Data Sheets and testimony at committee hearings and will therefore be aware of authorizations that require amendment or repeal.

One appropriate way to create the system described above would be to amend section 138(a) of Title 10 U.S. C. to require that no naval vessel may be procured or converted unless its procurement or conversion has been specifically authorized by law instead of requiring fund authorization for naval vessels. The "multi-year" authorization would then provide the requisite specific statutory authority for vessel procurement and conversion in terms of numbers of vessels of general categories.

There may, of course, be alternative methods of implementing essentially the same system.

Mr. BENNETT. Mr. Wilson has asked me, could you ask the Navy to be thinking about a 5-year plan. We didn't specifically set up a period of time when the Navy witnesses addressed us. They really had not totally looked at the things that were in the minds of the committee members on this matter. They had looked at it purely from the standpoint of shipbuilding programing rather than from the standpoint of the country; coming to the conclusion that it was going to have a Navy of a certain strength.

Secretary CLEMENTS. Yes, sir.

Mr. BENNETT. I think that it's essential that we do this because, as I said on the conference between the House and the Senate, I find that here the House has presented a reasonable package of Navy procurement and then, for reasons that seem to me to be mostly unrelated to the overall thrust of the strength of the national defense of our country, we get nitpicked to death in the conference, eliminating essential ships, and the country doesn't really see what's happening. In other words, we have presented a magnificent program, or a bloated program, in anyway from the House to the Senate, and it seems reasonable to the people when a compromise comes to reduce it in the conference that, well, some people feel we ought to have more and some people feel we ought to have less, but the truth of the mattor is we're gradually putting the country in jeopardy by this process, and it's conceivable that having a long-range program, this would be clearer to the public, that we are nitpicking our program down to danger levels, and if we have a long-range thing it might be not done that way.

Do you have any comments or any questions?

Mr. BOB WILSON. The Vinson-Trammel Act was based primarily on tonnage. I think perhaps that's an old-fashioned way now for us to act. I think we have a broad sense of parameters of numbers of ships and general types of ships, rather than specifics as to how many of each type we specifically want.

But I agree with the chairman that our committee has, I think, been reasonable in its request to the Congress, and yet we find that, not only on the Senate side but on the appropriations side, on our House

side, it's even worse, with this nitpicking, and decisions made by staff members rather than Members of Congress. I find very distasteful, and after this committee has spent hours, and weeks, and months going into the specific needs for the fleet, to have some staff member say, "We really don't need that type of ship," or something is rather discouraging for us, and it seems to me we could sell better to the Congress at one time with a tremendous effort of our whole committee the whole need for a program that will eliminate a lot of this so-called nitpicking, and different ideas on what type of ship is best needed. I think we need to set the policy. Our committee has more of a chance to look into, and has time to look into, the specific needs better than any other subcommittee.

The Appropriations Committee is divided into about 50 subcommittees, and with two or three members on each subcommittee, it can't possibly have the facts on it to inquire into the need, and the possibility of having such things as major ships, and so forth, and I think we have to fight a little harder on our side to see that we're the experts and not some staff on some Appropriations Committee.

Mr. BENNETT. Not only does it have the aspect of getting the ships that are actually essential to the national defense of our country, but the multiyear thing also, according to the testimony that we've had before this committee, could lead to reductions in cost.

One of the very disturbing things to the private shipbuilder when he starts building Navy ships is that he is not at all sure that this chain of seven patrol frigates is not going to wind up being three or two, or something like that, and it's all very well for a committee of Congress to say, "Well, two ought to cost just half of what four would cost,' but, as a matter of fact, it costs a lot more than half of that cost because there's no certainty on the part of the shipbuilder that there's going to be a long production of this type of ship. Even though he will eventually produce the ship, there's no assurance to the industry that the ship will be built, and therefore it can't put into the thing the advantage of multiple production of ships. We've had a lot of testimony to that effect, that it would be cheaper if we really could make up our mind in Congress what we want to buy.

Secretary CLEMENTS. It's not only cheaper, Mr. Chairman, in the sense of the initial cost of the ship, which it certainly is, but it's also cheaper for the Navy in its planning processes as it relates to a steady state of production of a certain ship, where we can make our planning both on the personnel training, logistical support, and so forth, for that type of a program, instead of this constantly changing it back and forth and switching, where no one can really understand what the plan is except on a year-to-year basis. We just have to grab as we get it.

Mr. BENNETT. I think you were primarily addressing yourself to personnel in the Navy itself, but if that were so, then I must add that one of the most distressing things about shipbuilding, that has been brought out in these hearings, is the personnel problem with people who actually build the ships, and one of the greatest reasons why there is tremendous needs for these shipbuilders, the individual people, is the insecurity of their job. They themselves don't know. Therefore, they go somewhere else where they may even get less money. If there's some permanence in taking care of their wives and children, they prefer something that's a little more stable than shipbuilding

has been.

Secretary CLEMENTS. We agree completely.

Mr. BENNETT. Does anybody else have any observations or questions? Mr. Norris, do you have anything?

Mr. NORRIS. Yes. Thank you, Mr. Chairman.

Mr. Secretary, on page 10 you make the statement: "The 'lead ship-follow ships' technique should be employed," and I'm assuming that in connection with that statement you did not mean to imply any criticism of the Trident contract that has just been signed.

Secretary CLEMENTS. No, sir. To the contrary, I personally approved the Trident contract, and I feel it's a prudent and appropriate contract, and it was not undertaken lightly in any sense of the word.

Mr. BENNETT. Could you tell us why you approved the contract, because the country's very interested in this. There's been a lot of publicity on this, and actually it's kind of hard to put you on the spot about it because you're not really in the Navy, but you're the only witness we have now at the moment, so if you could tell us why you feel the Trident-type contract is the right type contract for that ship we would appreciate it.

Secretary CLEMENTs. Well, the contract, Mr. Chairman, has within it the aspects that cover costs within reasonable parameters, and it has in it an incentive aspect that will give the contractor sufficient leeway in his cost anticipations that it makes it desirable on his part to control his costs and discipline those costs to where he can share, and yet at the same time not take an undue risk.

Mr. BENNETT. Would you call this contract, this lead-ship contract, a cost-plus-incentive-plus-ceiling contract? Is that what you might term it?

Secretary CLEMENTS. Yes, sir, it could be termed that. There have been several terms put on it, one of which was fixed price, which is absolutely wrong. It is not a fixed-price contract.

Mr. NORRIS. Mr. Secretary, on page 11, No. 6, where you're talking about the oversight of Government contractors, where you say "to safeguard the tax dollars," I presume you don't mean to eliminate the need for special supervision of the nuclear reactor so that we don't get into the kind of a bind that the Japanese have just gotten into with their tanker.

Secretary CLEMENTS. No, sir, I don't mean that at all. I'm talking here in terms not of the shipyard inspection and construction procedures, which is what you're talking about, I believe, but I'm talking here in terms of the reporting systems that we use for the auditing, the management reviews, this type of thing, to where we are constantly going back, and almost to the point of harassment of these yards, and creating an atmosphere of management that the private shipyards take serious exception to, and we have received enormous numbers of complaints about this: overmanagement, overmonitoring, overauditing, overreporting, which puts an undue burden and hardship on the shipyards, and I think, to the contrary, you're talking about the construction inspection itself and the standards related thereto. Mr. NORRIS. Yes, sir.

Mr. BENNETT. The committee is very deeply appreciative of the testimony this morning, Mr. Secretary.

The subcommittee will recess, subject to the call of the Chair. [Whereupon, the subcommittee hearing was closed at 11:15 o'clock

a.m.]