Well get started. Good morning, everyone. Today represents our second dialogue for 2017and we look forward to welcome you all back for additional events throughout the year. We would also like to thank in a special way, Lockheed Martin and huntington engles in make thanksgiving series possible. Before we get underway, for big events like this, just a brief announcement, safety announcement. We dont expect any difficulties, but should there be anything as convenor, make sure you know, we have exits here in the back on both sides and downstairs down the front and both myself and anthony bell in the back will be your responsible officers to direct you in the right way, just in case anything should ome up, look for one of us. So for our formal introduction to get us started, i will turn over to vice admiral peter daily, retired, chief executive officer of the u. S. Naval institute, were happy to have him here and partner with s i. Okay, welcome, those who dont know me, pete daily, ceo naval institute. We are proud to bring you this maritime dialogue series continuation in our third year and as mentioned, we give special recognition to our sponsors, huntington engles and Lockheed Martin for make thanksgiving event possible. Our speaker for today, 1981 graduate of the academy, also holds degrees from George Washington university, and a Naval Nuclear engineering degree from mit. After serving 13 years as a Nuclear Propulsion qualified surface war fare officer, he made lateral transfer to the duty officer community. There he served and focused on refueling, complex overhauls of Aircraft Carriers. Major command include Major Program manager for inservice Aircraft Carriers and Program Executive officer for submarines, peos, subs. Last year in june, assumed command as 44th supervision of all maintenance on those ships directly. We welcome the admiral who controls one quarter of the navy budget. People always say, by the way, you have one quarter of the budget. Thank you for the invite. Last night was a ignite for the navy. Number one, my band played on the waterfront. And we delivered the forward to the navy. It was a big night for us having worked on ford for most of the past 10 years. The navy accepted delivery last night. You heard it here first. The theme that i was given was the maintenance challenge and how to reset the fleet. In the context of talking about where the cnote is headed. More importantly, to talk about how the maintenance side of that equation fits in. It is not either. You have to do both. We tend to forget about that. Having been a ship loader for most of the last three years, but having spent most of the last year on sea readiness, i am well aware that you have to do both. If you have not read the sea notes white paper, it is a good read. A short, it has pictures in it. It is great for command master chiefs. Their lips do not get tired when they read it. They make three key points. They are applicable whether you are talking construction or maintenance. It s some of the things were getting after today. It applies across the board. Figuring out how to design these ships quicker and build them quicker. The pace today is exponential. If you look at the world and thet threats were facing, and the pace of their changing capability is growing exponentially. It is like we went into halftime up 283 and said the game is over. The referee said halftime is over, e said, we will get there when we get there, and strolled out we get there, and strolled out through the Third Quarter to find the score was now 2824. That capability gap has really closed and is something of a keen interest to us on the navy side of the house. There is a lot of discussion going on about, what is the navy that we need. What is the navy we need in the 20 20s. We are trying to figure out, what is the navy that we need in the mid20s. . There have been a number of recent studies, some to the navy, some by independent groups about what is the navy and what should it look like . They have various mixes of ships they all came to the same conclusion that we need a bigger navy. All around 340350 ships. The size matters and the apability matters. How do we get there . When we talk about the size of the fletet, i get questions about how the budget did not add new ships. What happened . We were never going to be able to turn that around overnight. The 18 budget holds the new construction side, but make a significant advancement n the readiness side. If you listen to the vice chiefs testimony, he says the first dollar we get should go to readiness. We spent a lot of time talking about the strategy, the future navy white paper, it all goes to the avys strategy Going Forward. S since 1985, i tell people, i am a my 18th palm. If i had a dollar for every time someone told me we need to build Strategy First and that will drive the budget. That sounds great, but you dont want a budget completely driving your strategy, but you cannot ignore the fact that we live in a financially constrained environment. What we need is a reformed strategy. We will increase the builds of the ships we have. We think the Industrial Base can probably build 29 more ships than we had in the original 310 ship plan. E have to figure out where the curve of the dollar is, and we have to figure out how to innovate, and what we are going to work on. We will continue building edgs, the amphibs that we have today. There is ngoing discussion on the frigate. We owe some answers to frigate. We owe some answers to congress over the summer on frigate. We owe some answers to congress over the summer on that. As we head further out, what the a new buzzword inside the pentagon is sswap. Space, weight, and power. As we go toward the future navy, i can tell you that one of the things that is really important as we build these platforms, is o make sure that they have enough space, weight, and power to identify future threats. The our class carriers are a prime example of building space, weight, and power Going Forward. The dd51 class, which is around today and serving well, we will provide more space and more power Going Forward. Those ships are unique in their ability to stay around. My first position was on the dd cunningham. We got rid of them at the 25year point. Anyone who served on a ddg knows that they were tough to maintain, but we didnt rid of them at the 25year pend any money after the 25year site. People think we need to get rid of them because they are rust buckets. The reality is, from a common sense tandpoint, they were obsolete. Fastforward to totday. Look at open architecture and spy adar, and vertical launch, now you have a platform that can stay around a lot longer. L back to the maintenance side of the house. If you want to get more service life out of the hull, you want more maintenance on. Admiral daly and i, we had reached this epiphany we had not spend any money doing maintenance for 10 years and we woke up and realized we are failing all these in serves, and we do not have ships to get to their expected service life. In hindsight, it does not take a Rocket Scientist to realize if you do not make investments on the maintenance side, you cannot get to where you want to. We had gone for 10 year saying. Doing maintenance is working, but we were consuming the service life, and eventually get caught up to us it caught up to us. We spent the last seven years digging ourselves out of that hole. One of the key components of getting out to the size of the fleet that we need is taking the ddgs and extending the service lives of these ships. Most of them are in the 35 year range. What would it take to get them out another 10 years . For a steel hull, if you do the maintenance, you can get the service life out much longer. With todays architecture and vertical launch, we have the opportunity to make a relatively small investment to keep them around longer. People say we have never gone with a service ship beyond 35 years, but i point out that we have taken aircraft routinely to 50 years. We know how to do this. Hat you will see is, we will take a very serious look at the service life of the existing fleet. If you do that, and you have seen some of the structure assessments, around 2045, which keeps ships at their current shelflife and build new, we can probably get them from 35 for another 15 years. Will take a close look at that. One of the things i have consistently pointed out as we look at the new design is, we should not design a ship with a planned service life of 2530 years. We should have planned service life of 40 plus years for all our ships and build into the context the space, weight, and power on forward. The last thing that i want to talk about is the maintenance side of the house. If you heard the vice chief, talked about how the first new dollar needs to go to readiness. The new budget has about 9 million for readiness. As i say, we got the resources, it is over to us to deliver. It is important that when you talk about maintenance it is not just resources. It is not just about money and adding more eople. Clearly, the 9. 7 billion that we get is better. E need to grow the size of the aval yard to 36,100. That is where we need to be to deliver things on time. We are not doing a good job of that. We have had a better year on the carrierside, but 12 of those ships which are in maintenance or activations are behind. Eople will help. Capacity is important, but it is not the only piece. The Number One Mission priority is the delivery of submarines. About one third of the ships i have today, at anytime, are under naveseas control. It causes great stress on the force. There was an article in january or february where a reporter said that the u. S. Navy for the naveseas control. It causes first time did not have an Aircraft Carrier at sea. That is a startling statement. Part of that is because we were done to 10 carriers, but another part was a study that was supposed to last 8 months, took 13 months. It wasnt lost on me that navseas ability to get them out on time is critically important. Back to my original omment, we need more people, but it cannot be only about the people. I have to have the capacity to do the work, and hen i have to figure out new ways to train the workforce. Kids learn differently than we learned. By the time you get ways to train the workforce. Them in the door to the time they can go down and do something useful on the ship is about five years. We need to cut that mback. When you them to be able to do something useful in two to three years rather than five. Young men and them in the door to the time women coming in today learn differently than we do. We need to make an investment in the ship yards to get the work done more productively than to day. Many of our shipyards are several hundred years old. A lot of them were designed to build ships in the early part of the 20th century. They are not set up to handle maintenance in the way that they should. In terms of Capital Improvements in the yard, we make investments in equipment. The Industry Standard is 10 to 15 years less. I have buildings that are over 100 years old. We have to make a concerted effort to look at how we set our yards up. We have to be able to make investments to get the work done more productively Going Forward. Youve heard kevin mccoy talk about this. We have to take the entire Industrial Base into account. This one Shipyard Concept that we talked bout 10 years ago is something that we will have to take a serious look at again. We are getting some serious help. We ave a lot of challenges ahead, but from the maintenance side, im very encouraged. We have the resources that we need. We will start delivering ships and submarines on time. We will take a very serious look. When you combine those things together and add that into the build strategy, we have a viable path Going Forward and we may be able to get there sooner than we would otherwise. Together and add that into the with that, i will conclude my remarks. I will be happy to take any questions that you ight have. Thank you for those remarks. For the audience and our guest speaker, will start with a few questions and get a discussion going and have plenty of interaction. Admiral, you mentioned that there is tension between readiness today and builds for the future. Going back all of those 18, or however many you worked on, that was probably there then, and is probably there today. He gap me be widened more than four. That made more of the fleet more available for asking. You alluded to the report and did not mention it by name. Have we caught up enough. In 2008 or 2009, corrections were put in place. It strikes me that from a maintenance standpoint, and modernization, things are pretty tough to catch up. How caught up are we . Are you satisfied . I think it is a hallenging scenario. Vice adm. Moore we have made major gains to catch up. We have some members from the board sitting over here. I think they would tell you that he recent trends. I think we ave closed the gap. We are almost there. It is one of the things that, as we saw before, if you get there and dont aintain the funding, you can rapidly lose the edge you had. That is particularly important when you talk about the ofrp. When you talk about the ofrp. It was built, and they put maintenance at the front for a reason. The other thing about frp is, it was designed to provide more force. You will hear admiral davidson talk about how it is designed to reset the force, provide the power forward, and also meant to provide surge capacity. We have not yet cap into that piece yet tapped into that ipecepiece of it until we see an Aircraft Carrier in a 36month cycle, she has a ignificant period of time. Center on a sevenmonth deployment send her on a 700 month deployment, we would like to continue send her on a sevenmonth deployment, and she comes back, we would like to ontinue to use her. It circles back to your point at the beginning. We are going to use ofrp the way it is meant to be used and make forces available. It becomes more important to do the maintenance. There is a direct correlation between how uch you use them, and how much maintenance you have to do. In the post9 11 era, even though he total number did not change maintenance you have to do. In were 40 more deploy days and before. It is like running your car to church or running your car across country, we were running across the country a lot more. Dramatically, we found there you mention it had shipyard need to recapitalize the infrastructure. You can go up to maine and see buildings over 100 years old. So if thats need to important, there money budgetted for the recap . You mentioned that youve i have limited money to do that. One of the things i have been working at, and have had very serious discussions about, and we have been open about discussions about providing more flexibility on the use of that money to make hthe investments we need. The milcon side of the house, the budget is relatively small. We are laying out a specific strategy for the Naval Shipyard. This gets back to my original comment. We are throwing more money and more people and its not going to make us more productive. We have to make necessary investments in capital, welding machines, etc. But also, in the shops where you get your work done, that will flow the material into the ship better. While we do not make the investments we need today, that is pretty clear. We meet the threshold, but we will have to take a serious look at what it takes to invest in these shipyards if we want to grow the size of the fleet. The shipyards can handle the 235 ships, but if you are talking dry docks and shops and throughput to handle 355 ships, that is a capacity issue. You have a lot of folks out here working in industry. In your remarks, you highlighted that the 18 budget came down on focusing on nearterm readiness. It makes sense to a degree, but there were a lot of people expecting a little bit more, the same number of ships in the should count for 18 as the previous administrations budget. Are there things that you are looking at, and that industry should be looking at, as you lay in for the ramp up to 355 . What should be looking at . Going forward, we have laid out where we want to go ahead. We tell industry that we want to keep production lines going. We need to look at ways to streamline the acquisition process. The new buzzword is setbased design. It is a way to take options and get to the early stages of what the design of the ship will look like. I think industry is partnering well on that area. It will be a combination of continuing to build ddg51s, and then innovating and figuring out how we can build quicker for the next set of ships. We continue on building fourclass carriers. We would like to get to 12. That would change build centers from five to four. On the service side, we have a number of ongoing efforts that will yield dividends Going Forward. We have to make the case on the budget side of the house for the resources necessary to get that done. That is obviously challenging in the environment we are in today. I think you will see with the 2019 budget and beyond that we are laying out a compelling case. You mentioned capacity in terms of people. You mentioned the dusting off of kevin mccoys one Shipyard Concept. Are we seeing strain in competing for the same people . A couple of observations is that what we found with the sequester, the fiscal cliff, and some of the wild swings is we we were turning on and off avails. When you went back and tried to find that person, they were not there or you had to pay more. The last i saw was that you were still a little bit short on the government side of hiring the shipyard workers. You had a goal to 2016 of having 2000 more than you currently have on board. Are we eating ourselves on this and is there a better way to do this . In the near term, we do compete for resources with other industries. So when we do have these down turns, we tend to lose the workforce shortterm, but to your question, can we get the workforce necessary to build the ships we need and do maintenance . The answer is yes. We have had that in the past. In in the 1990s, newport had 25,000 workers. We have to provide a package of things that would interest young people