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Remarks at Navy League Sea-Air-Space-Convention

Good afternoon, everyone. And thanks, John. I appreciate that. And thanks for all you do.

You know, I said when John was nominated to be Chief of Naval Operations that I had to wrestle him away from the Secretary of Energy, which I did every day since you've been sworn in. I'm glad I won that fight. Ernie Moniz and I said if we could clone John Richardson, that's what we'd do. But we wouldn't, so I got him.

He's doing an excellent job to steer the Navy, a terrific job. And it’s wonderful to join all of you, distinguished guests, leaders of the nation’s Sea Services, members of the Defense Department, past and present, on this, the 51st, as I understand, anniversary of this important exposition.

And I also want to recognize Skip -- Where did Skip go to? There you are, Skip -- and the entire Navy League.  For over a century, the Navy League has been a powerful voice for stronger sea service. And thanks in part to the advocacy of the Navy League and its members, the U.S. Navy, Marine Corps, Coast Guard and the Merchant Marine have helped defend our country, served as a linchpin of global security and supported prosperity by ensuring the free flow of commerce that has enabled many nations, including our own, to rise and to prosper. And with help from the Navy League and all of you, it always will.

Today's security environment is dramatically different from the one we've had in the last 25 years, but our sea services are as important as ever. We face no fewer than five major, immediate, evolving challenges. We are, first of all, countering the prospect of Russian aggression and coercion, especially in Europe. Two, we're managing historic change in the vital Asia-Pacific region, the single region of the world of most consequence for America's future. Balancing China's rise, which by itself is OK, with some of its actions such as those in the South China Sea, which aren't and with which we share the serious concerns of other countries in the region. And three, along with our allies, we're strengthening their deterrent and defense forces in the face of North Korea's continued nuclear pursuits and provocations. And four, we're checking Iranian aggression and malign influence in the Gulf and protecting our friends and allies there, especially Israel. And five, we're countering terrorism, especially by accelerating the certain defeat of ISIL, in its parent tumor first in Iraq and Syria, and everywhere else it is metastasizing around the world, as well as protecting our people here in the homeland.

We're meeting these challenges thanks in part to today's sailors, Marines, Coast Guardsmen and merchant marines. I've seen them taking on these challenges around the world, in the South China Sea not too long ago aboard the USS JOHN C. STENNIS and earlier than that, the USS THEODORE ROOSEVELT; in port, in Tallinn, Estonia with sailors of the USS SAN ANTONIO, fresh off a multilateral NATO exercise; and in the Persian Gulf aboard the USS KEARSARGE as part of a large American regional commitment to both countering ISIL and confronting Iranian malign influence there.

On shore and afloat, in the air and under the sea, in every time zone around the world, our men and women in uniform are confronting these challenges in order to protect the American people and our interests worldwide.

And in order to ensure that they have the capabilities that they need, we're making decisions based on the challenges we face and the right strategies that will help us to meet them. And we're pursuing new technology development, along with new operational concepts and new organizational constructs, all of which are reflected in or supported by our 2017 budget submission to maintain our military's technological superiority and assure we always have an operational advantage over any potential adversary.

Our budget refocuses the Navy on building lethality for high-end conflicts. We're looking at our overall warfighting posture, which is signified by presence, because it's overall posture that determines whether our maritime forces can deter and if necessary win a full- spectrum conflict. Our budget this year increases the number of ships to meet the department's 308-ship posture requirement by 2021. And even more importantly, it will make our naval forces more capable, more survivable, and more lethal, too.

Lethality is the key word here, as Admiral Richardson has stressed. We're investing in ways to make our weapons more lethal, as well as making our ships harder to find and harder to attack.

That's why our investments reflect an emphasis on payloads over platforms alone, on the ability to strike from sanctuary quickly so that no target is out of reach, and on closing capability shortfalls that have developed over the last several years.

First, the budget maximizes our undersea advantage – an area where we should be and will be doing more, not less, going forward. It provides funding for important payloads and munitions, included in improved heavy weight torpedo, as well as research and development for an advanced lightweight torpedo.  It includes $29.4 billion to buy nine Virginia-class attack submarines over the next five years – four of those submarines, up from three in last year's budget, will be equipped with a versatile Virginia Payload Module, which can more than triple each submarine's strike capacity.

Next week, I'll see a Virginia-class-ship building up close in Groton. The budget also includes new funding for unmanned, undersea systems in multiple sizes and diverse payloads that can, importantly, operate in shallow waters where manned submarines cannot.

Second, the budget makes significant investments to bolster the lethality of our surface fleet forces, so they can deter and if necessary, prevail in a full spectrum conflict, even against most advanced adversaries. It maximizes production of the SM-6, one of our most modern and capable missiles, an investment doubly important, given the SM-6's new anti-ship capability. And it invests in developing and acquiring several other key munitions and payloads, including the SM-3 high altitude ballistic missile interceptor, the Long-Range Anti-Ship Missile, and the most advanced Tactical Tomahawk land-attack missile, which is being upgraded for maritime strike.

The budget also invests a total of $18.3 billion to buy two Arleigh Burke-class guided missile destroyers each year over the next five years – a total of 10 – as well as nearly $3 billion for modernizing our destroyers, 12 of which will also receive upgrades to their combat systems.  It continues to support 11 carrier strike groups, investing a total of more than $13 billion for new construction of Ford-class carriers, and it supports modernizing our guided missile cruisers.

And third, to ensure the U.S. military's and our sea services' continued air superiority and global reach, the budget makes important investments in aviation platforms and payloads. We're investing a total of $8 billion in a wide range of versatile munitions, including buying more of the Long-Range Anti-Ship Missile, as I said, the extended range of Anti-Radiation Guided Missile too, and the AIM-120D air-to-air missiles.

In particular, our Naval Aviation component is focused on the concept of integrated warfare to project power over and from the sea, and at the heart of this concept with the F-35, the P-8, and other air assets that are critical nodes which capture and disseminate information in an unprecedented manner, ultimately improving lethality across the battle space. That's one reason why we're maturing our investments in the stealthy five generation F-35 JSF, and to make sure our fleet has a sufficient quantity of advanced tactical aircraft long into the future, our budget also increases the Navy and the Marine Corps F-35 procurements. We're completing procurement in the advanced P-8A Poseidon maritime patrol and surveillance aircraft as well.

We're also buying an additional 16 F/A-18E/F Super Hornet fighter jets between now and F.Y. 2018, providing a significant boost to the health of the Navy and Marine Corps fourth generation fighter aircraft fleet so it's ready and capable for today's missions. And lastly, to address the Navy and Marine Corps maintenance backlog in tactical aviation, the budget funds a 15 percent increase in F/A-18 depot maintenance capacity for the Navy and the Marine Corps.

With this budget, our fleet will be larger and our sea services will be much more effective, potent and lethal than they are today because they'll be equipped with the weapons and the advanced capabilities that they will need to deter any aggressor, and make any aggressor, who isn't deterred, very much regret their decision to take on the United States.

Now, in order to maintain that lethality and capability ahead of all others in what is, after all, a competitive world, we need to continue to invest in innovation, to think outside of our five-sided box. That's why one of my top priorities as Secretary of Defense is to build, and in some cases to rebuild, the bridges between the Pentagon and the innovative business community that for decades has buttressed one of America's greatest strengths, namely superior technology. And as I'm building bridges from the DOD side, I know there are those in the private sector, including members of the Navy League represented here today, who are building from the other, and we appreciate that.

Our men and women in uniform operate in an increasingly competitive and changing world – particularly when it comes to technology. And when I began my career, most technology of consequence originated in America, and much of that was sponsored by the government, particularly by the Department of Defense.

Now, today, we're still major sponsors, but much more technology is commercial and the technology base is global.

Indeed, technologies once possessed by only the most formidable militaries have now come into the hands of previously less-capable militaries and even non-state actors. Meanwhile, nations like Russia and China are modernizing their militaries to try to close the technology gap.

So to stay ahead of those challenges, to stay the best, and to keep our edge, we're investing aggressively in high-end innovation and to enhance our own asymmetric and hybrid capabilities.

For example, we're investing a combined total of $34 billion across the cyber, electronic warfare and space domains in F.Y. '17 alone. We're building fast, resilient microdrones that can be kicked out the back of a fighter jet moving at Mach .9 and fly through heavy winds.

We're developing an arsenal plane, which will function as a very large airborne magazine with different conventional payloads, networked to fifth-generation aircraft that act as forward sensors and targeting nodes. And for the Navy, we're working on autonomous, self-driving boats, which can network together to do all sorts of missions, from fleet defense to close-in  surveillance – including around an island, real or artificial – without putting our sailors at risk. These are just a few of many examples.

Overall, our budget invests nearly $72 billion in R&D. To give you a little context, that's more than double what Apple, Intel and Google spent on R&D last year combined. That includes $12.5 billion specifically invested in science and technology to support groundbreaking work happening in the military services in our dozens of DOD labs and engineering centers across the country, and at DARPA to develop and advance disruptive technologies and capabilities in areas like undersea systems, hypersonics, electronic warfare, big data analytics, advanced materials, energy and propulsion, robotics, autonomy, and advanced sensing in computing.

And at the same time, we're also investing in further partnerships with our nation's innovative private-sector in technology communities – in places like Boston, Silicon Valley, Austin, Seattle, Northern Virginia and America's many, many other hubs of globally unrivaled innovation.

Last week, I visited and announced enhancements to a path-breaking innovation hub that we launched in Silicon Valley. I call it the Defense Innovation Unit Experimental, or DIUx – which is essentially an outpost of us, of the Pentagon on the West Coast – to help broaden the range of great companies that we work with. We've launched and funded Manufacturing Innovation Institutes across the country to advance emerging technologies like flexible hybrid electronics, which will make it possible to seamlessly print lightweight, flexible, structural integrity sensors right onto the surface of ships and aircraft; revolutionary textiles which combine fibers and yarns with things like circuits and LEDs, solar cells, electronic sensors and other capabilities to create fabrics that can see and hear and sense and communicate, store energy, regulate temperature, monitor health, change color and much more.

But as good as America's technology is, it's nothing compared to our people – they're the reason why our military is the finest fighting force the world has ever known. It's them. And in the future, our mission requires that we continue to recruit and retain the very best talent. That's why we opened up all combat positions to women who qualify, in order to expand our access to 100 percent of Americans for our all-volunteer force.

It's also why we're building what I call the Force of the Future, to ensure that amid changes in generations, technologies and labor markets, we're always postured to bring in, develop and retain young men and women as fine as the ones it's our privilege to have in our military today.

Last November, I announced the first link to the Force of the Future, with over a dozen new initiatives, including programs such as the Defense Digital Service, which brings in talent from America's vibrant, innovative business community for a time—a few months, a year, a project—to help solve some of our most complex problems, and also expanding opportunities for those currently in DOD both military and civilian to gain new skills, experiences and perspectives by working outside of DOD. And reforms to improve and modernize our talent management systems, to make sure that we recruit, train and retain the best people for our best -- for our force in the best possible way.

In January, I announced the second link, a set of several initiatives with a singular focus: strengthening the support we provide our military families because this is, after all, a married force in the Navy. To improve their quality of life and for our purposes, get them to stay, stick with us, including expanded maternity and paternity leave, as well as extended childcare on our bases and giving families the possibility of some geographic flexibility in return for additional commitments.

Competing for good people for an all-volunteer force is a critical part of our military edge, and everyone should understand this need any my commitment to it. And our work on this front continues full steam ahead – and while these first two links are important – we'll have more to announce on the Force of the Future in coming weeks.

In order to meet the challenges of the future, we're also innovating operationally, making sure that our contingency plans and operations are more flexible and dynamic in every region. Because our military has to have the agility and ability to win, both the fights we're in and the wars that could happen tomorrow—the ones we're in, the ones that could happen today and the ones that could happen tomorrow, I should say all three—we're always updating our plans and developing new operational approaches to account for any changes in potential adversary threats and capabilities, always innovating to stay ahead of that—including ways to overcome emerging threats, such as cyberattacks, anti-satellite weapons, hybrid threats and anti-access area denial systems. And because we owe it to America's taxpayers to spend our defense dollars as wisely and responsibly as possible, we're also pushing for needed reforms across the Defense enterprise.

As a learning organization, DOD has a long history of striving to reform our command structures and improve how our strategies and policies are formulated, integrated and implemented. That's why last month I proposed several reforms to the Goldwater-Nichols Act – for example, to improve the Chairman of Joint Chief's ability to integrate, on my and the President's behalf, our military capabilities across domains and across cross-regional and cross-functional challenges, to simplify command and control and address where headquarters have become less efficient than they should be and to streamline our acquisition system. And I appreciate that the House and the Senate have advanced several of our recommendations in the annual National Defense Authorization Act.

In other areas, though, I have concerns about some of the reform proposals being put forward. One area I must comment on is the proposal—the Senate version of the NDAA—to extensively reorganize the functions of the Under Secretary for Acquisition, Technology and Logistics.

I believe strongly in acquisition reform. It's a competitive world and we need to make the best use of taxpayer dollars. I appreciate the serious attention that both SASC and HASC have given this imperative in their bills. I share the views of the SASC that over time, the acquisition executive’s position has become so preoccupied with program management, including a lot of unnecessary bureaucracy associated with it, that perhaps takes some management attention away from the research and engineering function.

In fact, I know this myself because I once served as the Under Secretary for Acquisition, Technology and Logistics, and I know the research and engineering function, both as an engineer and scientist and also because my first job was for then-Secretary of Defense Harold Brown, who had been a Director of Defense, Research and Engineering. And his Under Secretary, who was called the Under Secretary for Research and Engineering, not AT&L, in those days, was Bill Perry, who also became Secretary of Defense.

And I worked for and with every other incumbent of that job as it was renamed over time, including on the Defense Science Board for Robert McNamara’s Director of Defense, Research and Engineering, who was the Chairman of the DSB, Johnny Foster.

So, I do, however, have a serious caution: separating research and engineering from manufacturing, which is implied in this proposal, could introduce problems in the transition from the research and engineering phase to the production phase and then to the sustainment phase, and that is in fact, a frequent stumbling block for programs.

One need only remember the Joint Strike Fighter's growing pains, which I remember quite well, in moving from Engineering and Manufacturing Design, to Low-Rate Initial Reduction.

Procurement and sustainment are tightly coupled with technology and engineering and development, and those two together represent about 90 percent of program cost. So, separating these functions makes no sense, as procurement and sustainment costs are controlled by decisions made during development. This proposal could also derail the success we've had lowering our contract cost grow in the most high-risk contracts to what is now a 35-year low. Finally, an overly prescriptive approach risks unhelpful micro-management with a high potential for negative second and third order effects. So, I would like to work with the committees on this and other provisions of their bill.

I'm also compelled to address the budget gimmickry included in the proposed NDAA in the House.

Most disturbingly, it raids war funds in a time of war, when we have men and women deployed in operations in Afghanistan, Iraq and Syria. It also threatens the budget stability that undergirds all of the reforms, investments and initiatives I've detailed here today. And it threatens the readiness of the force – an actual contrast to the narrative its proponents propound. Now, I was an early advocate for Washington to escape gridlock, and to come together behind an agreement along the lines of last fall's Bipartisan Budget Act, for we in the Department are very grateful. The passage of this act gave us some much needed stability to plan and build for the future, after years of gridlock and turbulence.

That budget deal set the size of our budget, and with this degree of certainty, we focused on its shape and building the FY 2017 budget we've submitted and I've described—changing that shape in fundamental but carefully considered ways to adjust to a new strategic year end to seize opportunities for the future.

But the budget stability that was supposed to last for two years is already under threat after only six months with a proposal to underfund DOD's overseas warfighting accounts by $18 billion and spend that money on programmatic items we didn't request. This approach is deeply troubling. It's flawed for several reasons.

First and foremost for me, it's gambling with warfighting money at a time of war, proposing to cut off funding for ongoing operations in the middle of the fiscal year. Moreover, it would spend money taken from the war account on things, as I said, that are not DOD's highest priorities across the joint force.

It's a step in the direction of unraveling the Bipartisan Budget Act, which provided critical stability the DOD needs and leaves us facing now the Department's greatest strategic threat, which is a return to sequestration, a $100 billion in looming, automatic cuts beginning next year if this isn't fixed.

And it's another road to nowhere with uncertain chances of ever becoming a law, and a high probability of leading to more gridlock and another continuing resolution -- exactly the kind of terrible distraction we've had for years. It undercuts stable planning and efficient use of taxpayer dollars, dispirits troops and their families, baffles friends, and emboldens foes.

Particularly concerning is the potential impact of this proposal on the readiness of our force. Whether taken from overseas contingency operations or added on top of existing resources, buying force structure in this fiscal year without the resources to sustain it in future years is not the path to increased readiness. It's a path to a hollow force. It exacerbates the readiness challenges we currently have. Our readiness recovery plans are centered on synchronized and sustainable manning, training and equipping pipelines that are rigorously shaped based on the size of the force.

For that reason, increasing the size of the force without sustaining our ranges and schoolhouses over time doesn't produce readiness. Buying additional force structure without expanding depots and shipyards in the years to come doesn't produce readiness.

Simply put, readiness is the most critical priority right now for each one of our services. And that's why our budget aggressively funded the readiness plans of each of the services, based on the most that is actually executable such as, for example, take an Army example, the maximum number of rotations through the National Training Centers. Readiness is the core of our mission, from the forces on the Korean Peninsula standing ready to “fight tonight,” to the ships patrolling the Persian Gulf, to the pilots flying over the Baltics. And the readiness of our men and women in uniform to carry out their missions and return home safely will always be my highest priority. Looking ahead, that's why I ordered a strategic portfolio review to determine if we are doing everything possible to help the services continue to recover their high-end combat readiness next year. We'll make adjustments to our plans in funding in FY 2018 based on the outcome of that review.

The raids on wartime funding in the House authorization bill and the concerning approach to reforming our research, engineering and acquisition enterprise in the Senate bill represent two specific concerns. The fact is, these bills have become lengthy and extraordinarily prescriptive. And the pages and provisions continue to accumulate from year to year. It's cumulative. They've been used repeatedly to block necessary reform in the Department, such as BRAC, and a wide range of force management approaches which are needed to sustain our enterprise and operate effectively.

I would respectfully suggest that the informed expert judgment of the civilian and military leadership at the Department of Defense, which is embodied in our budget proposal, should receive greater support and be subject to less micromanagement.

If a final version of the NDAA reaches the President this year and includes a raid on war funding that risks stability and gambles with war funding, jeopardizes readiness and rejects key judgments in the department, I'll be compelled to recommend that he veto the bill. I'm hopeful, however, that we can work with Congress to achieve a better solution. Our warfighters deserve nothing less because our mission is a deadly serious one.

It's been said that security is like oxygen; when you have enough of it, you tend to pay no attention to it, but when you don't have enough, you can think of nothing else. The men and women of our military are not only defending the United States and its people, they're providing the oxygen that provides better lives and a better world.

It's in the new commitment. I saw the same dedication to these principles last month when I was at the American Cemetery in Manila, where 17,000 Americans, many sailors and Marines, are buried after making the ultimate sacrifice in the Pacific. And I see it in our newest personnel and I'm sure I'll see the same commitment in the eyes of our Navy and Marine officers next week at the Naval Academy commencement in Annapolis.

Because in a new strategic era and a time of great change, we must and will continue to ensure the security, stability and prosperity that has meant so much to so many here at home and around the world. To do so, we'll invest and innovate, we'll change how we plan, how we operate and how we fight.

But we'll never change what we're willing to fight for: for our safety and freedoms, for those of our friends and allies and for the values and principles that have produced security, stability and prosperity for all for so long.

With the help of the Navy League and many others in this room, we'll continue to do that for years to come.

Thank you so much for being here.