TYPES OF SHIP REDUCTIONS Senator ELLENDER. Of the reduction from 880 ships before the Vietnam buildup to 757 as of the end of fiscal year 1971, in what types of ships did this reduction concentrate? Secretary CHAFEE. The reduction in numbers of ships has not been concentrated in any specific type ships, however, the greatest number of ships retired has been destroyers, amphibious, and auxiliaries because of the larger number of ships in these categories. I have a comparison of the ships by type for the end of fiscal year 1965 and end of fiscal year 1971 which I will submit for the record. 1 Actual end fiscal year 1965 force level because of delayed inactivation of Midway (CVA-41). Normal force level 15. a Increase because of delivery of FBM submarines. SEABEE CIVIC ACTION IN MICRONESIA Senator ELLENDER. What is the estimated cost to the United States of Seabee Civic Action Construction going on in Micronesia mentioned on page 11? Secretary CHAFEE. The fiscal year 1970 cost to the Navy is approximately $16,400 per team month and includes personnel pay, training costs, equipment depreciation, and related administration charges. These costs would, for the most part, be incurred by the Navy in any event regardless of the employment of the unit. The Department of the Interior funds the additional costs directly associated with deployment to the Trust Territory of the Pacific Islands (TTPI). These additional costs amount to about $7,850 a team month and include transportation charges, per diem for team members, equipment maintenance, tool replacement, and support charges. For fiscal year 1971, the corresponding cost to the Department of the Interior will be $8,200 per team month. The total program cost for operation of the six teams during fiscal year 1970 will amount to about $1,543,800 which includes approximately $499,800 reimbursed to the Navy by the Department of the Interior. All construction materials used by civic action teams are provided by the Trust Territory Government or the local communities. In addition, we assist the Trust Territory Government by providing ship and aircraft lift support, using fleet assets on a space available, opportune basis. MERCHANT MARINE Senator ELLENDER. Describe the extent and cost of the augmentation of the MSTS-controlled sealift by ships from the merchant marine mentioned on page 12. Secretary CHAFEE. The extent and cost of merchant marine augmentation would be dependent upon the magnitude and duration of the contingency involved. Basically the cost of ships obtained from the merchant marine are subject to contract negotiation and vary with ship types. Generally speaking, the daily charter rates range from $4,500 to $7,500 per ship. As a point of reference, during the logistic peak of the Vietnam War in October-November 1967, 420 merchant marine type ships operated by the steamship lines were used to augment the MSTS Nucleus Fleet. These included 165 GAA ships obtained from the controlled MARAD National Defense Reserve Fleet. MULTIPURPOSE SHIP Senator ELLENDER. On page 13, you refer to legislation required to charter 10 multipurpose ships and nine small tankers for a 10-year period. What is the status of that legislation? Secretary CHAFEE. The legislation to authorize charter of 10 multipurpose ships and nine small tankers is presently before the House Armed Services Committee. Senator ELLENDER. What is the estimated cost over a 10-year period? Secretary CHAFEE. The estimated cost over a 10-year period for time charter of 10 multipurpose cargo ships and nine small diesel tankers is estimated as [deleted] for MPS and [deleted] for tankers. This includes adjustments for 10 percent annual discounts on the ships under charter. FUNCTION OF MULTIPURPOSE SHIP Senator ELLENDER. What is the function of the multipurpose ships? Secretary CHAFEE. The 10 multipurpose dry cargo ships are intended as replacements for the existing overaged MSTS Nucleus Dry Cargo Fleet. They are uniquely designed to carry outsized cargo such as helicopters in a flyaway status, vehicles in a ready to role mode and have the capability to discharge in underdeveloped ports. This is the type of capability essential in the early period of a contingency which is not generally available in future commercial ships. FIVE-YEAR CHARTER Senator ELLENDER. What happened in connection with the 5-year charter authority referred to on page 13? Secretary CHAFEE. The 5-year charter authority is still in effect and charters of older type ships are still made under its provisions. FIXED PRICE INCENTIVE CONTRACTS Senator ELLENDER. On page 15, you indicate that you plan to substitute fixed-price-incentive contracts for firm-fixed price contracts. From previous experience, has this been shown to be economical? Secretary CHAFEE. Our experience in the use of the fixed-price-incentive contract for other programs in the Navy has, by and large, been successful. While its application to shipbuilding is relatively recent, we expect that the use of this form of contracting will have beneficial results. We believe that the firm-fixed price contract approach for complex ships with some elements of development does not afford the shipbuilder an opportunity to recover unexpected added costs. The fixed-price-incentive contracts should alleviate this problem somewhat, and furthermore should contractor costs be less than anticipated, the Navy shares in the savings under the incentive feature. Senator ELLENDER. I note on pages 17 and 18 that large claims submitted by shipbuilding contractors have resulted in the shipbuilding appropriation deficiency increasing from $800 to $850 million, with a "potential problem" involving $350 million more. What are the more important causes of this? Secretary CHAFEE. The funding deficit is the result of claims and other cost growth. The Navy encountered significant cost problems in the ship-building program during fiscal year 1968 when, based on quotations being received, it became evident that funds appropriated for a number of ships in the fiscal years 1967 and 1968 shipbuilding programs would be inadequate to permit the award of these ships. The principle reasons for the significant increase in funding requirement to award the contracts for these ships were the changing market conditions caused by higher than anticipated labor rates, increased material costs, higher profits and single sources of supply. Another significant problem contributing to the cost growth has been the filing of a large number of claim by various shipbuilders. This problem of shipbuilders' claims is a particularly difficult one. The claims are against ship programs largely in the fiscal years 1962 through 1967 shipbuilding programs. These contracts are firm fixed price type, awarded as the result of intense competition. The claims are based on a variety of allegations such as: (a) Specification ambiguities which experience proved were impossible to meet. (6) Failure of the Government to provide timely design information for Government-furnished equipment. (c) Late Government plan approval. (d) Government-directed technical changes. (e) More stringent Government administration of inspection and quality assurance requirements on both surface ships and submarines following the Thresher tragedy. In addition to the above, cost growth has been encountered in other areas. A most significant factor has been delay and disruption of work on ships under construction or conversion in naval shipyards where significant segments of the work force had to be diverted from the new construction and conversion effort to higher priority ship repair/ overhaul work which had expanded significantly since the beginning of Southeast Asia hostilities. Other cost growth has been encountered in the purchase of equipments (radars, sonars, electronic ordnance, and fire control equipment), which the Government must furnish to the shipbuilders. The fiscal year 1969 unliquidated recoupment objective of $100 million is a contributor to the total deficit. The "potential problem" of $350 million (for which no funding has been requested through the fiscal year 1971 budget), principally reflects the Navy's estimate of the value of additional contractor claims that may be submitted against ships in the fiscal year 1967 and prior programs. As a result of a thorough analysis of the Navy's management of shipbuilding programs, we have uncovered several areas of weakness for which we have instituted a vigorous correction program. I believe we are now well along in our improvement efforts. OFFICER RETENTION Senator YOUNG. On pages 19 and 20, you refer to being in "far deeper trouble than most people acknowledge" in connection with Navy pilot and nuclear submarine officer retention. What effect has this had on the quality of such key personnel? Secretary CHAFEE. While the quality of our key nuclear submarine officer personnel remains high, the impact of a decline in nuclear officer retention experienced in fiscal year 1969 and 1970 is manifest in an overall decrease in experience level of officers manning nuclear submarines. Although the ships will continue to be manned at an allowance of 11 submarine officers, the total number of years of submarine experience in each wardroom will be reduced because of the departure from the Navy in fiscal year 1970 of nearly 400 experienced nuclear-trained officers. Likewise in the aviation community, decreased retention has reduced the number of young officers who remain in our inventory past their minimum service obligation. Thus the number of high quality, experienced officers is reduced, particularly in the middle grades. In fiscal year 1970, with a retention rate of 25 percent for junior aviators, we cannot meet all the demands for such officers. The only solution lies in improved retention of our experienced men. However, it is becoming increasingly difficult to compete with more attractive civilian pursuits which offer less family separation and equal or better pay. Senator ELLENDER. Any further questions? STATEMENT OF ADM. THOMAS H. MOORER, USN, CHIEF OF NAVAL OPERATIONS NAVY POSTURE Senator ELLENDER. We shall now hear from Adm. Thomas H. Moorer, Chief of Naval Operations, who will speak to the posture of the U.S. Navy. PREPARED STATEMENT Admiral MOORER. Mr. Chairman, I welcome this opportunity to appear before you. I have a comprehensive statement which, with your concurrence, I would like to insert in the record. Senator ELLENDER. Very well. (The statement follows:) Mr. Chairman and Members of the Committee: I welcome this opportunity to appear before you today in support of the Fiscal Year 1971 Navy budget requests. In my prepared remarks I will highlight the key factors which bear on the make-up of this budget and I will present certain perspectives for your consideration. Upon conclusion, I will be most pleased to enlarge upon these and such other matters as you may wish. At the outset, let me set forth the force levels which this budget supports: included are 15 Attack Carriers; 4 Antisubmarine Warfare Carriers; 10 Guided Missile and Gun Cruisers; 234 Frigates, Destroyers and Ocean Escorts; 41 POLARIS/POSEIDON submarines; and 105 Attack Submarines (of which 52 are nuclear-powered). In addition, we have included amphibious forces sufficient to provide a lift capability for four Marine Expeditionary Brigades as well as the necessary logistics support ships and miscellaneous craft. May I call your attention to the fact that the Navy will end Fiscal Year 1971 with force levels that reflect a net reduction (i.e., total inactivations less acquisition of new and converted ships) of 175 active fleet ships and 732 active aircraft below the levels operated at the end of Fiscal Year 1968, the height of activity in Southeast Asia. Perhaps more striking is the fact that these force levels will be significantly lower than those of 1960, or what are often referred to in the press as the "EISENHOWER baseline-forces." THE PROBLEM OF BALANCE In developing this year's budget requests, one basic objective was sought by Secretary Chafee and me at every major decision point. That is, how best to maintain balance between modernization programs and forces in-being while giving full consideration to: Operational requirements and their demands on our human resources; All of these factors are interrelated and each has its own immediate impact. This Committee is well aware of the basic problem the Navy faces with the encroaching obsolescence of much of the Fleet. This fact was well-documented last year by the House Armed Services Committee report on Seapower. Replacement of these worn-out ships and aircraft is expensive under today's market conditions, but cannot be delayed further if the Navy is to have the combat capabilities the country can rely upon in the future. In this regard, it must be noted that the increased expenditures of recent years necessitated by the conflict in Vietnam have had relatively little constructive effect on the long-term modernization of the Navy. Some weapon sub-systems necessary to meet the environment of that unusual situation have been brought into being, but the bulk of the increased Navy expenditures were devoted primarily to sustaining combat operations to buying for attrition; not modernization. Therefore, in an effort to correct this situation the Navy has found it necessary to introduce, on a compressed time scale, several new ship and aircraft programs that were repeatedly deferred during the mid-1960's. Looking to the future, the Navy must also continue a substantial research and development investment. Only by a vigorous and imaginative assault on the bounds of technology can we ensure the soundness of our investment in ships, aircraft, and people. The Navy of the 1980's depends upon the research and development we can do today. An equal claim on the Navy's budget resources stems from the necessity to sustain and support our present deployment requirements at a tolerable tempo of operations as well as meet our initial wartime needs. In view of the extensive force level cuts which have taken place, we have fewer ships to do essentially the same job and our tempo of operations continues at a high rate. With respect to Southeast Asia, Secretary Chafee has described the progress made and in prospect for turning over many of our in-country functions to the Vietnamese Navy. Offshore, the Navy is still very actively engaged, although in future the assumption of some of the patrol and other functions by the Vietnamese Navy may ease the demands on our SEVENTH Fleet resources. In this regard, two offsetting factors must be appreciated. First, the situation in Korea demands a degree of readiness which has imposed an additional operational stress on deployed resources which will not be relieved until the naval force requirements in the Tonkin Gulf and South China Sea diminish. Secondly, the Naval and Marine forces in the Western Pacific, with their quick reaction capability, constitute an important reserve which must be kept at the ready. In the Atlantic, Navy resources now available must be stretched thin in order to maintain the SIXTH Fleet in the Mediterranean as well as a modest Middle East Force. For reasons I will touch on later, it is unlikely that these deployment requirements will diminish. For several years the Atlantic Fleet has been called |