RADM BLAKE: Good afternoon. My name, as the lieutenant mentioned, is Rear Admiral Terry Blake. I'm the deputy assistant secretary of the Navy for budget, and I'll be delivering the Fiscal Year '10 rollout budget for the Department of the Navy.
Before I begin I have to say that if I had to define this year's budget for us in a single term, it would be balance -- balance between competing priorities, balance between the right mix for addressing such issues as conventional versus irregular warfare, balance between addressing current events and anticipating future events.
Could I have the next slide, please?
As we developed this budget we had three principal objectives. Number one was to reaffirm our commitment to take care of the all-volunteer force; number two was where necessary rebalance the department's programs -- by that I mean institutionalize and enhance our capabilities to fight the wars we are in today and the scenarios we are most likely to face in the future, while simultaneously providing a wedge against other risks and contingencies; number three, to do this, we must reform how and what we buy -- a fundamental overhaul of our approach to procurement, acquisition and contracting.
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What you see here on this slide is a snapshot of the typical day for the department. If you were to take this day and compare it with the day last year, you would see that there has been no decrease in op tempo. On any given day, we have approximately 40 percent of the fleet underway, we have 30,000 Marines deployed worldwide, and we have approximately 10,000 Navy individual augmentees deployed worldwide. While a good portion of our focus is on Iraq and Afghanistan, the department has other commitments and has always been and remains a forward-deployed force capable of a full spectrum of skill sets, from humanitarian assistance, disaster relief and maritime security to deterrence, sea control, and power projections.
Can I have the next slide, please?
What I'm going to do is I'm going to break the budget down into three pieces, so this is the big-picture slide, if you will. This slide gives you the big picture perspective for the department. If you look at the picture you'll see that there are two numbers listed on the top left side -- baseline funding and total funding. If you -- baseline funding I'll define for you, but you'll see that that has essentially -- between fiscal year '07 and '10, it's gone from $127.2 billion in '07 to a fiscal year '10 submission of $156.4 billion. During the same time, the total funding -- and what we include in that, which is different because of the contingency funding which had previously been characterized as supplemental funding -- this has declined between fiscal years '07 and '10. It has gone from $25 billion in '07 to this year's submission of $15.3 billion. And I'll go into these in greater detail.
If you'll look over in the lower right column there, you'll see that there is a -- the first piece is in red for military personnel at $44.3 billion. The second piece is for ops -- operations and maintenance at $43 billion. And the third piece, in gray, is our investment accounts. Investments is made up of procurement, R&D or research and development, and infrastructure. Those three pieces make up the baseline budget. When you then add in there the green section of $15.3 billion, that is the overseas contingency operations fund, which I'll -- in the future will refer to just as contingency funding, and that is at $15.3 (billion), which gets you to the overall funding for the Department of the Navy of $171.7 billion.
Go to the next slide, please.
What you see here is a baseline summary. In the middle you have the $156.4 billion, which is our baseline total, and I've broken it into five pieces for you, and I'll walk you through each one of these.
The first is the MILPERS piece up in the upper left hand corner. That is $44.3 billion. That is an increase from the previous year of $2.8 billion from fiscal year '09 to '10. In that, what you have is Navy strength at 324,400 personnel, and Marine Corps strength growing to 202,100 personnel. What is not included in here are the 4,400 individual augmentees, which I will talk about when we get to the contingency funding. What that will do is that will give Navy a total strength of 328,800. So there's a distinction there, and I just want to make sure that everybody is aware of it; that we have part of the funding for these people in the baseline and the supplemental or the contingency funding, I should say. And the Marine Corps is totally in the baseline budget.
The second area you see there is the ops and maintenance account. As I mentioned earlier, there has been no decrease in either the op tempo or maintenance for this fiscal year. And what you see there is that has actually increased by $1.6 billion from fiscal year '09 to '10. That is there in order to support both our forward presence and to meet and sustain the current COCOM requirements.
The third area is infrastructure. Infrastructure is down slightly by approximately $100 million. While the MILCON account is up almost $400 million, we have BRAC and family housing going down. Part of the reason there is the fact that BRAC, as you know, is completing in fiscal year '11, and the other is we have certain programs in the private-public venture in the family housing area that we fund. We had more funded -- and I'll show it to you in the latest slide -- we had more funded in '09 than we do in '10 as that program matures.
The third area is R&D. You'll also see there that that has declined slightly -- approximately $400 million. That is principally due to the termination of the VH-71 program -- the presidential helicopter, and I'll discuss that in a later slide.
Finally we have procurement. As you see there, it is at $44.8 billion, which is 5.7 billion -- which is a $5.7 billion increase between fiscal years '09 and '10. What that equates to is an increase of approximately 14.6 percent in our procurement accounts. I'd like to give you a fact on that: Between 1955 and 1990, the procurement account was the largest single account in the Navy budget. As you know, the Department of the Navy is a capital-intensive service. Since 1991 and up until this year, both the MILPERS and the O&M accounts taken individually have been larger than the procurement accounts. We are reversing the trend this year. What we are doing is we are -- we have reversed it to now where the procurement account in our submission is the largest account. This is to go along with the guidance given to us by both the CNO and the commandant to build the future force and to posture the force for the future.
As I mentioned, I was going to drill down to each of those five areas. The first one I'd like to talk about is manpower. What you see here are two different stories, if you will. On the Navy side you'll see that the Navy is on a downward glide slope. If you look at PRESBUD 2005, we were at 365,900 personnel. We are currently leveling off. In Presidential Budget '10 to 328,800 personnel. And within that, as I mentioned earlier, we have the 4,400 individual augmentees which are funded through contingency funding.
On the Marine Corps side, there is an initiative to grow the force. The Marine Corps -- the blue line there represents the original plan, and the top green line represents where we currently are. As of fiscal year '10, the Marine Corps will reach, two years ahead of schedule, 202,100 personnel. So they are ahead of schedule for their Grow the Force program.
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The second piece on the personnel side is our civilian personnel. The civilian personnel is up -- and you'll see there's a change of approximately 1,395 personnel on the upper right hand side of this slide.
That is due to two initiatives: The first is the acquisition workforce. There is an initiative within the department to grow the acquisition workforce and make sure that they are in-house as opposed to using contractors. The second piece is to bring more civil servants online and to back out of our current contracting programs. So those two initiatives -- and you'll see the numbers at the bottom -- between in-sourcing, which increases our number by 1,204, and the acquisition workforce, which increases our number by 1,428, you have -- also includes the 685 in-sourcing personnel within that. There are a number of other puts and takes within the account, but overall the increase in CIVPERS is going to be 1,395 people in fiscal year '10.
What I'll drill down into now is probably the most dynamic account we have, which is the readiness account. Between fiscal year '09 and '10, the account grew from $41.3 billion in '09 to $42.9 billion in '10. And I'll take you through each of these six categories.
On the Ship Operations side, we were able to increase our numbers to 58 days per quarter deployed, and 24 days per quarter non-deployed for our ship assets. Probably the biggest growth within this line took place in the ship charter line, which is our MSC -- Military Sealift Command. There were rate increases there; there was also a net gain of three ships in the MSC force.
If you go down to ship depot maintenance, you'll see that that is funded at 96 percent of our projected maintenance funding. This account is up almost $800 million. As I mentioned to you earlier, we have seen no decrease in op tempo, and our numbers are going up.
Additionally we have an initiative to do the Surface Ship Lifecycle Management Program, which we are, if you will, following the programs that we use currently in both our carrier and our submarine programs, and they give us additional granularity. So what we are doing is we are taking that and we are modifying the surface ship program, and that's part of the reason why we see those costs going up.
When we look at the Flying Hour Program, you'll see that for the Navy T-rating, we've been able to achieve 2.5, and for the Marine Corps we've been able to achieve 2.0. There are a number of issues within here as to why the increase -- specifically there's been a change in the type model series of aircraft. For example, we've got the B-22 coming online now; we've also had three additional helo squadrons added to the Marine Corps.
When you look at aircraft depot maintenance, you'll see that we are able to achieve 100 percent of the PAA, which is the Primary Authorized Aircraft for deployed squadrons, and 97 percent for non-deployed squadrons.
The final column over there shows -- in the upper right hand corner -- is Marine Corps operations. If you look there you'll see that there's been a slight decline in the supplemental dollars. The reason for this is on average, there will be about 6,000 less boots on the ground, if you will, as we transition from OIF to OEF for the shift between Iraq and Afghanistan.
Finally, in base support we were able to achieve 93 percent of our facilities maintenance model and to keep our -- (inaudible) --capability at levels two and three.
Next slide, please.
This is the ship building account, and as you will see here, we've been able to procure eight ships in fiscal year '10. What you -- the eight ships we are able to purchase -- one Virginia-class submarine, one DDG-51, three LCSs, two TAKEs, and one JHSV.
Let me walk you through the lines here. In the first line you have CVN-21. What is funded in there is the third year funding for the Gerald R. Ford, plus there's some additional procurement fund or advanced procurement funding for CVN-79. If you go to the second line, SSN-774, what we have in there is the Virginia-class -- the twelfth of the Virginia-class being funded, as well as AP for future Virginia-class submarines. In the DDG-1000 line, while we buy the third ship based on the truncation to the fiscal year '09 and only getting that third ship then, this funds the second installment of that third ship in that year. For the DDG-51, we have one ship in there. That funds the one ship plus the restart of that line. For LCS, we have three ships in the plan, and that is funded at the $460 million cost-cap set by Congress. For LPD-17 class, while we have zero ships, we actually had the second part of the fiscal year '09 ship, and AP for a ship in '11. For MPFA, which is the aviation piece of that, the decision was to build an LHA-7 vice the first MPFA. So the AP funding for that LHA-7 remains but the ship itself will slide to the right. For the TAKE, we buy the last two TAKEs and buy out the line in fiscal year '10, which will give us a total of 11 CLF and three MPF units in that class. For the MLP program, this slips to the right, again, and AP is remaining for that ship in that year. Finally, for the JHSV we were able to procure the second ship in that class, and this one is the USN version. There is also a -- one for the Army, but that is not in our lines.
Next slide, please.
On the aviation side, you'll see that we have a 203-aircraft buy. I would point out that aviation increases by over $4 billion between fiscal years '09 and '10. As you take the first line there for the JSF, there are two variants there -- both the STOVL and the CV variant. It should be noted that the -- this is the first of the four -- first four of the CV variant being bought, and these are going to be for operational test and evaluation.
If you look at the F-18 lines, you have 31 E, Fs, and Gs being procured, which is well above the minimum sustainment rate of 24 per year for that line. Under MV22, we currently have a stable program, and this is part of a multi-year procurement in that year. For the helos, the Zulus and the Yankees, we are procuring 28. That is 16 Yankees and 12 Zulus. For the 60 Romeo program and the 60 Sierra program, we are holding those at the multiyear procurement floor of 18 and 24, respectively. For the E2 program there was insufficient AP for the third aircraft in '09, and therefore we are only purchasing two in '10. The KC-130j line has been reduced for affordability purposes and to commit to priority tradeoffs. The C-40 line has one additional aircraft in there, and this completes the three-aircraft squadron buy. For the T-6 JPAT aircraft, this has been reduced to fund other priorities. The VH-71, as you know, has been terminated, and therefore there are no aircraft being purchased in this year. For the P-8, we are buying the first low-rate initial production six aircraft in that line, and these are -- this was previously funding in R&D; we've now moved it over into the APM account. And finally, for Fire Scout -- that's our VTUAV -- we have reduced that from six to five; the reason being that we've adjusted it to match the LCS schedule and mission packages. As you know, Fire Scout is part of the mission packages for the LCS.
What I've listed for you here is a cross-section of the Navy and the Marine Corps' missiles and munitions for fiscal year '10. While a number of the programs are both mature and stable, such as RAM, Trident II and Tomahawk, we have experienced some higher-than-expected unit costs as well as earlier production issues, which we've subsequently leveled off. Two of the programs in here I'd like to highlight for you -- the first is the standard missile at the top of the page. It should be noted that this only covers the purchase of standard missiles for non-BMD use. Missiles deployed for BMD purposes are procured from a separate Defense-wide account. The second item I'd like to bring to your attention is at the bottom of the page -- that's the advanced precision-kill weapons system, which is an ACAT III program for both the Navy and Marine Corps. It's to provide an air-to-surface helo-launched weapon to fill the gap between the guns system and long-range lethal systems. This -- and the procurement in this year of the 325 precision-guided missiles which are listed here is the low-rate initial production lot -- one inventory. And these are used primarily for initial testing.
To the next slide.
What you see here is a breakdown of -- on both the baseline and the contingency budget -- funding, rather, for ground equipment for not only the Marine Corps but also for the Navy. As you'll see on the Marine Corps side, they have both baseline and contingency funds to support their ground-based equipment. On the Navy side it's totally on the contingency funding side.
With respect to R&D, you'll notice that the line has gone down slightly from $19.6 billion in '09 down to $19.3 billion. As I mentioned earlier, this is primarily due to the termination of the VH-71 program. If you'll look over on the right side of the slide, you'll see that there -- the funding for the VH-71 program goes from $832 million in '09 down to $85 million in '10.
Two other programs I should probably highlight for you here are the SSBN-X line in the yellow, which is the start of -- this is the R&D funding for the Ohio-class replacement. This funding will be principally for a propulsion plant and for the missile compartment. The other one I'd mention is the CGX program. As you know, it was announced by the secretary approximately a month ago that we would delay the Navy CGX next-generation program to revisit both the requirements and the acquisition strategy.
With respect to military construction, BRAC, and family housing, if you look in the upper left hand side of this slide, you'll see that we currently have -- the first one is the BRAC program, which is on a downward-glide slope as it heads to a termination in Fiscal Year '11. With respect to military construction, the Navy currently has 36 projects in there for just over $1 billion, and the Marine Corps has 81 projects in there for just over $2.7 billion. The reason that the Marine Corps program is as robust as it is -- it's part of the Grow the Force Initiative, as well as the project for the Guam Initiative. We'll be moving 8,000 families and 8,000 personnel in theater from bases in Japan into Guam.
If you look over on the right side of the slide, you'll see family housing. As I mentioned earlier, the difference -- the reason you see it go from $383 million down to $147 million is that we had four significant projects in fiscal year '09, and in fiscal year '10 we only have one significant project. This is the public-private venture program in which we convert housing and bring it under contractors.
Can I get the next slide, please?
What I've got for you here graphically is the breakdown of the budget. You'll see that there is -- in the Guam piece there's approximately $378 million. This money is principally for enablers, such as wharf improvements, ramp improvements and the like, access roads, as we get ready to move the Marine Corps onto the island. The second part of it there, the large green piece in the middle, is the $1.9 billion for the Grow the Force Initiative. That includes everything from mess halls to electric systems to admin and ops support to training.
What you see here is the contingency funding program. I would point out two points to you. First, if you go across the bottom of the slide, you'll see that from fiscal year '08 to fiscal year '10, contingency funding has gone from $25.5 billion down to $15.2 billion. And this as we are moving or transitioning, if you will, out of the contingency funding program. The other point that I would make is that, overall, you'll see that while the Marine Corps does not have any of their manpower currently funded in contingency, there is a piece in there for the 4,400 individual augmentees which the Navy is going to support in '10.
To give you some background on that, there are approximately 10,000 -- and the number varies from day to day -- but there are approximately 10,000 people in the individual augmentee program. When you take those that are all from the pipeline, that number gets up as high as just something north of 14,000 personnel.
So this piece is the temporary piece. The other is in the base budget. So you would say -- you could take the 4,400 people, subtract it from the 14,000 and the rest of those personnel are in our base budget.
So as I mentioned at the beginning of this brief, our defining principle for the bill, the fiscal year '10 program is balance, and there's balance in three areas -- prevail in the current conflicts; prepare for other contingencies; and maintain the United States conventional and strategic and technological edge against other military forces.
Subject to your questions, that concludes my brief.
Q Is 313 ships still the number for the shipbuilding plan?
RADM. BLAKE: As it stands right now, what you're going to have is you're going to have the QDR, and one of the significant pieces in the QDR is force structure. So that would be a discussion as to what is the right force structure, and that's going to occur later this summer.
So I -- so if you -- that was the last, if you will, number that was put out, but I will tell you that those discussions will still -- that'll take place with the leadership later this summer as to what the right number is.
Q Basically, to waive the legislation that requires you to turn in a shipbuilding plan?
RADM. BLAKE: There are ongoing discussions with respect to the shipbuilding plan, and it wouldn't be appropriate for me to discuss them at this time because there are ongoing discussions on that.
Q Title 10 calls for you to discuss that at this time as you present the budget to the Congress. How are you avoiding or not living up to your legal obligation to comply with Title 10 by not putting forth a ship building plan?
RADM. BLAKE: Well, as I said to you, the issue is one of discussions currently going on between the parties, as well as congressional correspondence. I'm not privy to those and I'll defer that until those discussions are complete.
Q Can you explain please how that squares with the Obama administration's pledge for more openness and accountability? Because we all know that a plan changes every year --
RADM. BLAKE: True.
Q -- and plans are always under review. And that's why it's an annual submission. And the requirement to submit every year is because it's going to change every year.
RADM. BLAKE: Well, I would --
Q But aside from -- so you have an upcoming review because there's always an upcoming review.
RADM. BLAKE: Right.
Q Where's the plan?
RADM. BLAKE: I would say there are several pieces which are affecting that. One, you've got the operations plan, which they're currently working through and they haven't made any decisions on that; two, they've got the QDR; three, we are working under a compressed timeline. As you know, we have a new administration. We are rolling this out at this point now and I think that until those discussions as I've already mentioned are completed, it would be inappropriate for me to comment. Sir?
Q Explain the rationale behind cutting Super Hornets from 18 to nine with the Strike Fighter gap looming.
RADM. BLAKE: Well, the Strike Fighter gap is another issue that's going to be taken up with the QDR. And as I mentioned in the brief, there are within that line, we are well above the 24 per year requirement to keep that line viable. So you've got 31 in the current plan and I think that, based on those discussions, they will then determine what's to be done.
But I am not saying there is not a Strike Fighter shortfall out there. What I'm saying is that there are going to be future discussions with respect to that.
Q You think you can defer that to future years, is what you're saying.
RADM. BLAKE: I think the discussion for that will take place during the QDR, which, as you know, is just ramping up. And then there will be a determination made at that point. Ma'am.
Q A follow up to his question. Is the QDR going to determine whether you're going to buy more Super Hornets? Or what exactly are you determining in the QDR?
RADM. BLAKE: One of the premises that the QDR will operate under is what is the right force structure. And within that, there will be an issue as to what is the right amount of Strike Fighters and what is the right mix of those.
Q If you already know you have a striker gap, which is pretty significant from what I understand, why are you waiting for the QDR in the outer years to fill that gap?
RADM. BLAKE: Well, I think because the QDR is going to affect what you've got within the force structure. Ma'am.
Q Just to then follow up on that further, I mean -
RADM. BLAKE: Sure.
Q -- you know, the contractor would argue then that you're going to lose out on a quantity discount by not buying out through a multi-year and by kicking that decision ahead. You know, in this budget where you're trying to improve cost accountability, is that a good decision or what -- I mean, what's your take on that?
RADM. BLAKE: Well, I think the discussion on that will take place at the QDR and I think there'll be a determination made. And then subsequent to whatever that decision is, there'll be then negotiations to determine what is the right mix, what you're going to buy, how are you going to buy it?
Q What's going to happen to the ones that have been built, the VH-71s that have been built? And is there a plan in place to start a new program? And if so, what's it called?
RADM. BLAKE: Okay. Let me talk about -- I'll take that in a couple of ways. There were a couple of questions actually. With respect to the VH-71 program, there's a question asked earlier when Mr. Hale was in here. The termination -- not termination, but the sum costs if you will for that program right now is somewhere in the vicinity of $3.2 billion. There were two increments as you know. When the Secretary announced his decision to terminate that program, he said -- one of the points he made during that was there were two increments, increment one and increment two. And there were some who were saying that perhaps we should look at keeping increment one. His remarks were, I believe -- he said something to the effect it was neither advisable nor affordable and he brought up the fact that the program was behind schedule, it was more than double in cost. And that if you had looked at those aircraft, they had a service life between five and 10 years in increment one, as opposed to the current fleet, which is between 30 and 40 years.
So as -- to your question on is there a program in place or what the follow-on is, part of the decision that was made when that was terminated is that we would engage to determine what the future program is. That is currently ongoing and I have not been privy to what they've been doing.
Q Is there a name for it, yet?
RADM. BLAKE: No, sir. Not that I'm aware of.
Q On the previous point, I literally wanted to know what's going to happen on those nine helicopters.
RADM. BLAKE: I don't know. I'd have to go back and ask that question. I can take that one, but I don't know what's going to be done with that program.
I would presume there are significant negotiations going on, or that there will be significant negotiations to go on, with respect to the termination of that program and the follow on system, just like I'll talk to the question on termination costs. I'm sure that while we may have some funds currently allocated within '10 in order to cover some of the termination costs, it is very likely that there will be additional termination costs as the program goes forward.
Q Do you know if they'll take those nine helicopters at this point? The government?
RADM. BLAKE: I don't know. I don't know what the status of either increment one or increment two is.
Q Going back to the issue of balance on the force. Back in December, the Navy made a $14 billion buy of Virginia Class subs. And if I recall that came out around the same time The New York Times had an editorial calling for a complete cut of that Virginia class program.
Did that program ever come up as an area for savings or for any kind of changes, looking forward to -- balancing more towards more toward regular warfare versus conventional --
RADM. BLAKE: Well, actually, one of the initiatives that's currently going on within the Department is to get the cost of the Virginia Class down to $2 billion per boat. And we're estimating that that would occur possibly as early as fiscal year '12.
So there is a tremendous amount of pressure on the system in order to drive costs down, and you see that. There are cost caps on several of the programs. So I think the answer to your question is yes.
I would also tell you that there is AP in the current budget to support the two boats in '11.
Q On the subject of LCS, a clarification, $460 million --
RADM. BLAKE: That's correct.
Q -- for three ships. And if the contractors can't do that, then they can't reach the costs?
RADM. BLAKE: Right now, what you have is -- you have the -- our acquisition folks in negotiations. As you know, they announced LCS 3 and 4. They awarded contracts, but they didn't talk anything about what the costs were, and now we've got these three in fiscal year '10 and it's all part of the negotiations.
The idea is to drive that number down as close as possible to the congressional cost cap. And I would say that those negotiations are currently going on and I have no idea where they are in that process.
Q (Off mike) -- for one ship, right?
RADM. BLAKE: Yes, ma'am. That's correct.
Q Could it be a winner-take-all if only one contractor can reach the cost threshold?
RADM. BLAKE: I think -- that's a speculative question. I think I'd let the acquisition folks work on that and see what they come up with.
Q It's my understanding that there was also going to be a 30-year aviation plan. Is the status of that the same as you described the shipbuilding plan?
RADM. BLAKE: As far as I know, yes.
Q What is the total cost of the move of Marines from Okinawa to Guam and how much of that is being paid in fiscal 2009?
RADM. BLAKE: I don't know the answer to that question. I'll have to take that one for the record and I'll get back to you.
Q Mr. Hale mentioned increased funding for leasing of high-speed vessels. Do you know how many they're talking about -- how many vessels?
RADM. BLAKE: I believe that they announced they were chartering and they were going to go to four. And I'll check that number for you, but I believe there was statement that it was charter.
But the ones I talked about in the plan, that one that we are buying in fiscal year '10 is a Navy ship. So it will be going there. And as I mentioned it, I gave you the break down on the full line on that.
Q A question about the carriers. The White House in its booklet today on program terminations talked a little bit about the five-year build cycle.
Can you explain in layman's language how that saves money? I read this and I'm still not sure how.
RADM. BLAKE: Okay, you got me there – I haven’t read whatever you’ve read.
Q (Off mike) – the five year cycle alluded to it. Almost like everybody understood that. What is the play on that?
RADM. BLAKE: All right. I'll tell you I’ll take that question -- because what I'll have to do is I have to see what you've got there, and then I'll get back to you and give you the answer.
Q Let me follow up on this too, because they tie in the problems with the Gerald Ford's EMALS -- the catapult system -- they tie this directly to the delay in CVN-79 saying that giving you an extra year will help iron out the problems on the first Ford class aircraft carrier that will help you with CVN-79.
That's the first time there's been a direct link there. Do you agree with that?
RADM. BLAKE: I would tell you this, two points: First, the Navy's committed to EMALS. We've already made that decision. EMALS is the way ahead as far as the Navy goes for the Gerald Ford. And as it stands right now, there's going to be -- there is not expected to be a delay when she gets delivered in 2015.
Q That's the latest gouge?
RADM. BLAKE: Well, as I said, you've sort of got me over a barrel on that one, so I think I have to read it before I can comment any further. So let me get a copy of that and I'll take the question.
Q From a budgeting standpoint, what are your concerns about the cost growth on EMALS system, even though you might want to stick with it and it might work. But at what cost do you stay with it -- at what price?
RADM. BLAKE: That, again, is a speculative question. I would tell you if there -- well, if there are cost increases I'll handle those through a reprogramming action. It could be as early as this year or not. I don't know.
Q But there is cost growth. You just don't know off the top of your head --
RADM. BLAKE: With any new technology, you always run into difficulties. But I will tell you this: I have not seen a reprogramming request come across my desk yet.
Q Going back to the VH-71, could you talk about what the $85 million on R&D – what that's for if you're zeroing out the program?
RADM. BLAKE: For VH-71? Part of that is going to be used for termination. Part of it is going to be used for the start of the -- whatever the new program is.
Q You're allocating funding, but you don't know what it's going to be?
RADM. BLAKE: Well, it's in there right now as a placeholder.
Q Can you share where the reduction in Navy end-strength is going to come from?
RADM. BLAKE: The reduction in Navy end-strength?
Q Yeah. Down to 324,000 or 328,000 --
RADM. BLAKE: -- 328,000? Well, currently our end-strength is in the neighborhood of 331,000. And what we are presently doing in order to mitigate that is we have reduced some accessions. We are also looking at shaping the force. If we have either a high-year tenured personnel or personnel with either disciplinary or problems along that line. And the chief of naval personnel will work with that as we drive the number down.
So basically what we've done -- and I'd go back -- is we've leveled off, if you will, at the 328 level.
Q Sir, a couple things: Can you clarify the status of the presidential helicopter program right now? Has that been terminated or has it not been terminated yet, but it's going to be terminated?
RADM. BLAKE: Well, I believe, if we go back to Secretary Gates' statement, it is terminated. I do not know at what specific point in the termination process they are, but I would say – that the budget submission that is going to go up to the Hill is going to have that as a terminated program.
Q I asked one of the public affairs folks in the Navy recently: Are you still spending any money on that program right now?
RADM. BLAKE: I don't know.
Q And that' the thing. They didn't know. And you'd think the Navy would know if they're spending money on the program or if they'd ceased spending. Has there been a stop work order --
RADM. BLAKE: I don't know if there has been a stop work order issued. I would have to go find out.
Q To describe the reduction of two KC-130J's, you said that it was priority tradeoffs. Can you go into a little more detail on why you cut those and if you added any O&M funds to mitigate that very old fleet?
RADM. BLAKE: Well, I think that what you do is take the program in the whole. While I agree that program is cut, but I also mentioned in the brief is that we've increased APN between fiscal years '09 and '10 by over $4 billion.
So while that may have changed, you've still got an overall plus-up in the procurement account there of over $4 billion.
Q That's two aircraft that aren't going to hit the tarmac. So are you bumping up any O&M funds for maintenance on those older aircraft?
RADM. BLAKE: Well, we'll deal with that as they're being used. As I mentioned earlier, we haven't seen any decline in optempofor ourselves. And I also mentioned in there that we are increasing the amount of dollars.
Now, there's a -- you have to draw that back to sort of the tight model series and then we'll have to -- we'd have to work through that.
Q With the carrier procurement stretching out for five years now, are the RCOHs on the Nimitz's going to stretch out as well?
RADM. BLAKE: No, not at this point. They are still on schedule.
Q With respect to MV-22 Osprey, do you have plan to replace -- change 46s in Okinawa to MV-22? And is there are any related program in that budget?
RADM. BLAKE: I do not know the answer to that question. I have to take that one for the record.
Q You mentioned the Military Sealift Command having an increase. I didn't catch why.
RADM. BLAKE: There were a couple of reasons. One, they had a net increase by three ships within the force. And also, there was an increase in the ship charter line. Ship charter's how we pay for those vessels. So there was an increase in the cost on the line. We call it ship charter. By that I mean the MSC -- we pay them for either full operating status or reduced operating status on the vessels. And it's just part of the process as we go through. So there was an increase in the cost there.
Q The CNO said that the expeditionary command is now in the base budget as opposed to the supplemental budget. What is the amount for that?
RADM. BLAKE: It is in both the base and the supplemental. Total in that -- including manpower -- is probably in the neighborhood of about $2 billion in the '10 budget, yes.
Q (Off mike.)
RADM. BLAKE: Well, it's broken down. You have three pieces.
It's about in the -- for both procurement and O&M, it's about 50/50 in each of those. And for the manpower it's about -- somewhere -- I think it's in the neighborhood of $1.2 billion. That's just a general number. That's just for people, if you will.
Q So what is it -- in the base budget or is it in the supplemental? Because the CNO said it's being moved to the base budget.
RADM. BLAKE: Right. It is in both. It is in both the base and the supplemental.
Q The ship depot maintenance. You're running 96 percent of projected maintenance funds. First, is there any request in the supplemental for ship maintenance?
RADM. BLAKE: Yes, there is. You have that in there. And in fact, if you go to the -- if you go to the chart – the OCO chart, slide 16, and look under "operations" -- embedded in that $6.2 billion request is maintenance dollars.
Q So does that make up the 4 percent projected shortfall?
RADM. BLAKE: No, sir. It's still funded at 96 percent.
Q So 96 percent includes the baseline?
RADM. BLAKE: The baseline and the supplemental.
Q (inaudible) -- budget.
RADM. BLAKE: Right.
Q I'm presuming you don't know if final figures aren't in for 2009. Would you know for 2008 how far that account went beyond the projected amount?
RADM. BLAKE: I wouldn't know that, sir.
I would tell you, if you go to slide -- the slide on Readiness, if you look there you'll see it's broken down in two categories in fiscal year '10: You have $4.3 billion in the baseline budget for the maintenance; and then you have, on top of that, you have a billion dollars -- so there's your number, you have a billion dollars for Ship Depot Maintenance in the Contingency Fund.
Q Still -- there's still a shortfall here in the funding Maintenance accounts.
RADM. BLAKE: There is. We're funding it at 96 percent of the requirement.
Q But, you don't -- and, you don't know how -- okay. All right, thanks.
Q Yeah, why are some IAs funded through the Contingency account, and some in the baseline? And is any part of that have to do with, say, where they are, boots on ground -- say, you know, IAs going to Afghanistan, versus Iraq?
RADM. BLAKE: There are three, if you will, within the -- within the Navy we have three pieces in the Individual Augmentees. We have a group called the "Core Group" -- that would be people like Seabees. We have people called "Adaptive Core” -- that would be people who are also in the baseline budget, that could be, like, military policemen. And then we have a group called the -- and then we have the Temporary funding, and that would be for non-traditional Navy skills. And I'm trying to think of an example. Would anyone give me an example of a -- a Temporary? I can get back to you. I can tell you -- but I can break that down. And what the idea was, is that this is just a temporary, if you will, boost within the account -- they are not, it's not permanent, those 4,400 people, or personnel, are temporary. And that's why we're funding them out of Temporary -- out of Contingency, I should say.
Q It has nothing to do with, say, you know, moving IAs from Iraq to Afghanistan?
RADM. BLAKE: I'm not aware of that, no.
Q We have $500 million allocated toward next-generation SSBN --
RADM. BLAKE: Right.
Q -- can you talk about what that is going to cover?
RADM. BLAKE: Yes, it'll cover two pieces. It'll cover the propulsion plant and it'll cover the missile compartment.
Q So, does that mean you don't have a design in mind, or --
RADM. BLAKE: Those are the pieces -- that's what they're starting, that's their starting numbers. And that's the two "big bins," if you will, that that money is allocated for.
Q Same question of your R&D funding for DDG-1000 -- $539 million, I guess, for '10. Given that construction has already started on the first ship, can you tell us what that will focus on -- that R&D?
RADM. BLAKE: Say that again, now -- for which one?
Q DDG-1000 R&D, what will that cover?
RADM. BLAKE: I have to get back to you on that. I don't know the answer to that question.
Q Sir, is the Department concerned that with the lack of a five-year, you know, outlook plan, that industry is going to get a little concerned about the, you know, lack of stability, and not being able to plan their advanced procurement stuff? Is that going to actually increase costs in the future for some of your systems?
RADM. BLAKE: I think that's sort of speculative in nature. I would tell you this, that I think the fiscal year '10, if you look at the Department of the Navy's account -- the Department of Navy account, with respect to procurement, is in good shape. And I base that on the fact that between '09 and '10 that account has grown by over $4 billion.
Q Obviously, you can't fund everything to the max when you're doing an exercise like a budget, but how do you feel you did in terms of S&T? The Navy always seems to come up little bit short, compared to the Army and the Air Force, in terms of how much you're investing, and that's the case this year.
RADM. BLAKE: I would tell you that for S&T we met the guidance that was provided, that was given to us for that. And I don't have anymore particulars than that, but I do know that, what the requirements, as they were laid out for us, we met those.
Q What do you mean by the guidance?
RADM. BLAKE: Okay, we have to fund to a certain level, and we did that. And, beyond that, I think that's the extent of my knowledge on that one. And I'd have to find out what the specific guidance given out for S&T was.
Q Let me ask you a broader question. Across the board, what sorts of unfunded requirements might you identify for the exercise -- you know, annual exercise of sending a list over to the Hill? Have you already started to think about that?
RADM. BLAKE: Well, I'll tell you this: I know that both Service chiefs -- the Commandant and CNO are working on a list, but I have not seen either one of those lists yet. And I do not know if they have discussed those with either the Secretary of Defense or delivered them over to the Hill yet.
Q Do you have some general sense of what the substance or the size of the list might be?
RADM. BLAKE: No, I do not, sir.
Q The secretary's requesting more helicopter training and maintenance. How much of that, if any, comes from -- for Marines and Navy? Or was that supposed to be Army?
RADM. BLAKE: That, I believe, was all on the Army side. There was not an issue –
(asks staff.) -- correct me if I’m wrong. Was there issue with respect to the Marine Corps? I do not believe -- no. They're all shaking their head no over there. So, no. That was an Army issue, and it was a crew issue for them.
Q One more. On DDG-1000 -- I'm sorry, 51, if you got one ship -- and, of course, the record is that you're going to ask for two ships next year, previously that class has been multi-year procurement. Is there going to be an effort to make that a multi-year procurement effort? And how might you characterize multi-year procurement efforts as it relates to the LCS program?
RADM. BLAKE: I don't know if it's going to be multi-year procurement or not. I will tell you that the -- what I know, with respect to that, is that the third 1000, we would truncate at the third 1000, and that would be a three-ship buy; and that the issue of workforce and maintaining a stable workforce was going to be part of those negotiations. Other than that, I don't know much more about that program.
Q I'm sorry, the 51s, not the --
RADM. BLAKE: I'm sorry, the 51s, yeah. Yeah, I'm not buying (laughs) -- we're truncating the DDG-1000s at the third ship, and then we are -- and then what is going on right now in negotiations to do whatever it happens to be. But, it'll be at least a three-ship buy.
Q Is the Navy interested, in this current budget cycle, asking Congress or lobbying for a multi-year procurement both in the 51s and in the LCS program?
RADM. BLAKE: Well, I think -- I think what will happen there is when the budget gets over to the Hill we'll have those discussions.
Q How concerned are you about finding the resources to fund this new SSBNX program?
RADM. BLAKE: Well, we are -- one, we're committed to it. You're talking about a ship, I believe, that delivers in either 2019 or 2020, and this is just the first step in the process. So, this is the first year we're putting significant funding toward it.
Q I mean, last year when you sent the 30-year shipbuilding plan to the Hill there was this, sort of, stunning exception for this program, where you actually had -- of all the ships on the chart, you had, you know, the numbers of the submarines you wanted to buy, and you had a funding program for those, except for this brand new submarine. And you had this cover letter that said, "Oh, by the way, we're going to need a whole lot of extra money for this" -- that's my own paraphrase, for this program.
So, I wonder, are you committed to finding the resources within your own budget for that program? Or is that something that you're feeling you're going to have appeal to OSD for some sort of special relief to fund it?
RADM. BLAKE: Well, I will tell you this. As far as the fiscal year '10 budget goes, we're committed. And I think we are -- obviously, if we're committing a half a billion dollars to the program, I think that there will be probably subsequent discussions during events such as QDR in which a determination is made on that program.
I have time for one more.
Q You explained why the Family Housing had gone down on the Military Construction side. Any reason why that's fallen off 20 percent?
RADM. BLAKE: Which one was that, now?
Q Page 14, Military Construction, next to Family Housing.
RADM. BLAKE: Well, that was -- the issue was we had 36 projects in that year. Additionally, what I should have mentioned when I -- what I didn't mention when I went through that slide was if you'd look in the lower left-hand corner of that slide, we had the American Recovery and Reinvestment Act, and the departments received approximately $1.2 billion, of which some of that, $280 million is going to be in milcon; $866 (million) is going to be in FSRM; and $75 million is going to be in R&D. So, that's going to be in addition to what's currently in there.
All right, well, thank you for your time.
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