TESTIMONY OF JOHN K. WELCH

Thank you, Mr. Chairman for the opportunity to testify before the committee on behalf of General Dynamics Marine Systems.

I would like to thank you Mr. Chairman for recognizing that there is a critical shortfall in the shipbuilding budget and for taking the lead in raising this issue in the Congress.

General Dynamics Marine Systems employs more than 17,000 people at four major sites around the country. This highly skilled workforce possesses the broadest range of ship system integration, design, engineering and production skills in naval shipbuilding.

General Dynamics Marine Systems is the leading supplier of naval vessels – including nuclear submarines, complex surface combatants, and auxiliary ships; and, operates three of this country's six major new construction shipyards: Electric Boat, with its manufacturing facility in Quonset Point, Rhode Island, and its shipyard in Groton, Connecticut; Bath Iron Works, in Maine; and National Steel and Shipbuilding Company, in San Diego, California.  GD Marine Systems also manages ready-reserve and prepositioning ships and builds commercial vessels through our AMSEA and NASSCO subsidiaries respectively.

Together, the shipyards that comprise General Dynamics Marine Systems offer the Navy over 250 years of collective experience in ship design, engineering, construction, and fleet support. Today, these shipyards are actively involved in the design and/or construction of virtually all of the navy’s major shipbuilding programs. As we look to the future, it is abundantly clear that the success of General Dynamics Marine Systems is inextricably linked to the success of the Navy’s shipbuilding program.

The challenge confronting the Navy/Industry team today - and in the future - is sustaining and growing an integrated ship design and construction capability for the new millennium; An integrated capability that will achieve the Navy’s force level goals by providing affordable and technologically superior war-fighting platforms; and, a capability that will sustain a healthy shipbuilding industrial base.

Increased ship procurement rates are absolutely essential to achieving the Navy’s force level objectives and achieving the stability so essential to a healthy industrial base.  For submarines, this means achieving a procurement level of two ships per year as rapidly as possible; for surface combatants, this means maintaining a procurement level of no less than 3 ships per year; and, for auxiliaries, this means achieving a stable procurement rate such that a shipyard, such as NASSCO, can plan the correct mix of commercial and naval vessels to maximize efficiencies.

However, it is equally important that the Navy and industry continue to work together to reduce the cost of future ships by continuing to pursue new models for ship construction contracts and opportunities to reduce Total Ownership Cost. 

Our response to this challenge is a commitment to provide the “Best Value” to our customer. We are meeting this commitment by continuing to provide the Navy with a balanced approach to affordability and capability. We must build on the twin pillars of business and technology innovation that has carried us through the transition from the high ship production rates of the cold war and positioned us to design and build the ships of the next millennium.

For example, in the Virginia class submarine program, the Navy utilized a “Block Buy” construction contract for the first four ships of this new program.  This acquisition strategy, coupled with the innovative teaming approach to construction developed by Electric Boat and Newport News, was key to enabling the Navy to afford these four ships, and it provided stability to the industrial base during an extended period of low rate submarine production.  To date, the benefits of this Block Buy contract have been validated with both cost and schedule performance tracking to plan.

A follow-on Block Buy, or Multi-Year procurement, of the next five ships in this program will help support attack submarine force levels and ensure industrial base stability for both shipbuilders and key suppliers – stability that is key to affordability. The benefits of this approach have been dramatically demonstrated with the ongoing DDG 51 Program.  The Navy attributes $1.4B in savings to the FY98 - FY01 DDG 51 multi-year compared to separate annual procurements. The Navy can continue to reap further efficiency and savings by exercising existing legislative authority to apply the DDG multi-year procurement approach for the next six ships in the program.

As the force is restructured for the twenty-first century, we must not only consider the capacity of the force but the capability that is required as well.  For example, the recent Joint Chief’s study on submarine force levels mentioned not only a force level of 55-68 submarines but also fielding 18 Virginia Class submarines by 2015. The proposed FY 02 and beyond surface combatant procurement rate will support a surface combatant force of only 70 ships, a significant shortfall to the 1997 QDR minimum force of 116 ships, let alone the projected requirement for a force of 134-138 ships.  Capability is even more important as the force levels have been considerably downsized resulting in ships and submarines that will be operated harder and longer.  Consequently, we must field our fleet with the most modern and capable warships possible, and while being mindful of the need to maintain force levels in the near term, we must not lose sight of the long-term recapitalization required to maintain superior capability.

A look at the Virginia class submarine and DD 21 next generation destroyer illustrate two programs that are clearly focused on ensuring affordability while delivering maximum capability.

Through acquisition reform, an innovative DD 21 acquisition approach is being employed that preserves competition while facilitating incorporation of “best practices” to produce a highly capable and affordable next generation surface combatant.  The two shipyards that will build DD 21 are presently leading separate industry teams in an intense design competition.  This design competition is planned to complete by the end of this year with the Navy scheduled to down select to one design in 2001. By structuring the DD 21 Program around a series of phased competitions, the Navy will realize the long term benefits of a state-of-the-art market design that reflects industry’s best concepts and incorporates the latest technology to ensure maximum capability within affordability constraints.  After the design down-select, the shipyards will share “best practices” and collaborate in detail design to develop a common production plan, thereby ensuring a highly producible and affordable ship.

Technology advancements will significantly reduce DD 21 acquisition costs, Total Ownership Costs, and increase warfighting capability.  Several examples illustrate my point.  Through the use of virtual models and simulations during detail design, much of the expensive validation and verification testing can be accomplished earlier in the program thus reducing risk and the cost associated with physical models.  Through the use of non-traditional materials and other  applications of advanced technology, maintenance costs will be significantly reduced and sailors will be freed from many burdensome tasks with a commensurate improvement in Quality of Life aboard ship.  These same materials will contribute to reductions in the ship’s signature thereby reducing the probability of detection.  State-of-the-art shipboard network architecture and automation will help reduce and optimize crew size – DD 21 will be capable of operating effectively and safely with a crew of less than 100 as compared to the present crew of present generation surface combatants which numbers approximately 350.

The DD 21 program will introduce a range of new technologies that successfully integrate cost and capability.  One such technology is Electric Drive propulsion.  On January 6, 2000, Secretary of the Navy Danzig announced that DD 21 would be powered by Electric Drive.  In his announcement, Secretary Danzig said, " Electric Drive will reduce the cost, noise and maintenance demand of how our ships are driven.  More importantly, electric drive, like other propulsion changes, will offer immense opportunities for redesigning ship architecture, reducing manpower, improving shipboard life, reducing vulnerability and allocating a great deal more power to warfighting applications."  The key to this system's affordability will be commonality -- the use of the same components for multiple platforms.

On the Virginia class program, Electric Boat introduced a dramatically new approach to ship design. A new ship design was developed using engineering and design personnel teamed with representatives from production, suppliers, and the customer. This approach is being leveraged on new shipbuilding programs such as LPD 17, DD 21 and CVNX.

The result is a ship design that is captured in a fully integrated electronic design data base that supports all current and future applications, including engineering analysis, electronic visualization, design products to build the ship, and all maintenance, logistics and training information. This unique team approach facilitated an effective, streamlined decision making process that incorporated the best ideas from all program stakeholders. The result is a ship design that is more producible, and will be easier to maintain over its life cycle.

To ensure Virginia Class ships remain technologically advanced, the ships are designed to accommodate technology insertions and upgrades.  The Virginia Class technology insertion process focuses on three key attributes: capability, flexibility, and affordability.  This same technology insertion approach will be applied to other programs such as DDG 51, CVNX and DD 21.

At NASSCO, production processes have been revolutionized to make this shipyard a model in its market segment.  Cycle times have been reduced, quality improved and costs reduced resulting in early delivery and savings to the Navy.  NASSCO, the only major shipyard remaining on the West Coast, is dependent on both military and commercial work.  The strategic Sealift program, at NASSCO, is about 50% complete.  NASSCO is also building two RO/RO ships for the commercial market.  The TADC(X) program, the Navy’s new class of auxiliary dry cargo ships, is an important element to the future stability and maintenance of critical skills at NASSCO. 

Lastly, but perhaps most importantly, we must sustain a stable and predictable ship procurement plan.  For the Navy, a stable and predictable plan is essential to meeting their force level goals.  For industry, a stable business plan is essential to achieving optimum efficiencies and the confidence to invest for the future. 

Moreover, after years of reducing this country’s shipbuilding workforce from its cold war peak, we need to attract young workers to sustain the critical human capabilities and talents for meeting the Navy's requirements. In our shipyards today we have a workforce with an incredible depth and breadth of shipbuilding  knowledge. But it is an aging workforce, in a physically demanding profession. If we fail to achieve stability in our industry, we will seriously impact our ability to recruit our next generation shipbuilders, and we will fail to capture this unique knowledge.  This element is also key to the overall affordability of our services.

In response to a new global threat environment, the Navy has embarked on a course to upgrade its fleet that is unprecedented. Five major new ship design and construction programs – underway at the same time.  The success of these programs is absolutely essential to the ability of the Navy to carry out its roles and missions in the new global threat environment.

Since the end of the Cold War, General Dynamics has stood out in the defense industry as a leader in repositioning itself to be successful in a new business environment.  A new environment that would reward innovation and creativity, while demanding reduced costs in all areas of business. 

Ensuring the success of the Navy’s programs will demand continued innovation, leadership, and commitment from this nation’s shipbuilding industry.  I can assure you, General Dynamics Marine Systems stands ready to deliver.