I would like to acknowledge the tragedy in mississippi yesterday. The 16 Service Members who lost their lives in a marine corp kc130 from cheery point, north carolina, reminds us that these brave men and women put themselves in harms way at home and abroad in service to our nation. Were all keeping their families in our at theirs and prayers. Mr. Spencer, we thank you for joining us this morning. We have also welcome your family and friends who are with us today. As is our tradition at the beginning of your testimony, we invite you to introduce those joining you. It is standard for this committee to ask questions in order to exercise its jar sight responsibilities. Its important that committees of the congress be able to receive testimony, briefings, and other communications of information. So can i ask you the standard questions we ask every nominee before this committee. Do you adhere to applicable laws and registrations governing conflicts of interest . I have. Will you ensure that your staff complies with deadlines established for requested communications, including questions for the record and hearings. I will. Will you cooperate with providing witnesses and briefings in response to congressional request . I will. Will they be protected . They will. You agree to affirm and testify upon request before this committee . I do. Do you agree to provide documents, including copies of electronic forms of communication in a timely manner when requested by a duly constituted committee . I do. Have you assumed any duties or undertaken any actions which would appear to presume the outcome of the confirmation process . I have not. Thank you. The next secretary of the navy will assume this role during a time of immense importance for u. S. Sea power. I note the presence of one of our most distinguished members and dear friend of every member of the committee, republican and democrat, and perhaps it would be more convenient for us to hear from senator warner before i proceed with my Opening Statement. Senator warner, you are recognized. Thank you, mr. Chairman. Senator reed, and members of the committee, particularly mr. Nelson and mr. Bricker. It is a very humbling experience for me to appear here on behalf of this distinguished nominee. If i ever reflect on this great committee, i just think about the mavrls traditions established for the entirety of the senate throughout its long existence. And i say to the new members of the committee, i wish you well. Im confident as you pursue your careers in life, that you will always look back on your membership on this committee as a very special privilege. After all, the function of this committee is to provide care for the men and women of the armed forces of the United States together with their families. Now, i know this chairman is thankful for me to be brief, and i will be. On my left is mr. Spencer, his lovely wife. And they will be a magnificent team, in my humble judgment, to serve america and the people of the marine corp. Mrs. Spencer has a very interesting and broad career. Hes quite adept and knowledgeable on all aspects of finance. Not only domestically here in our country but globally. Together with his other achievements in life, youve got all the papers before you, may i point out that he served on the department of defense business board for some six years. During his interest in National Security for those years. And then he was the chairman of the marine corp heritage foundation. So hes kept all of his prioriti priorities. I would like to say that he achieved something that i always wanted to achieve. Our distinguished chairman got the navy wings of gold, and he got the marine corp wings of gold. Spent one whole tour as a pilot of a helicopter. He did his wing time, im sure, before he got there. He loved the marine corp, and he loved the military life, and he looked forward to that day when he might be able to return and become more active. And this is one of the most interesting and wonderful positions in our entire establishment of the federal government, secretary of the navy. So i would like to say that im not a stranger to the proceedings were undertaking, but there is an aspect of this particular confirmation proceedings that i had never encountered before. On his own initiative, he reached out and counselled with ten secretaries of navy to ask of them what they thought of challenges of today, how best he might be able to fulfill those challeng challenges, and we have us today will ball was one of them. John dalton, richard danzic, gordon england, john okeefe, jim webb, don winter, and yours truly. I want to be very careful in my summary, having talked to all of them about this moment write sort of represent the gang. We do not wish to be p presumptuo presumptuous. We believe this fine man and his lovely wife are most worthy of being here today and being given the opportunity to appear before you as you perform your constitutional duty of advise and consent. So with that, i conclude my remarks. Semper phi my good friend. Youre on your own. Senator warner, you bring unique credentials to this body, having served as both secretary of the navy and chairman of this committee, and the members on both sides6 of the aisle take words with the utmost seriousness. We thank you for your return. Thank you for your leadership. Thank you for the many years that you spent with me, helping me in life. Responsibilities as a member of this committee. We thank you, sir. I thank you, mr. Chairman, and for our long personal friendship. And i recall so well when i became under secretary of the navy, prior to being secretary, how your father, then commander in chief of all forces in the pacific, together with your extraordinary mother reached out to help me as a very young man as i took on these responsibilities in 1969, many years ago. Thank you very much. Thank you, senator warner. The next secretary of the navy will assume this role during a time of immense importance for u. S. Sea power, some of the greatest challenges of the future will be in the maritime domain, and its critical that our navy and marine corp are ready to fight. The president has brought responsibility for all affairs of the navy, including the manning and maintaining of naval forces. As we heard last movanth, the forces face shortfalls and the need to grow and modernize. We look forward to knowing how you would address the challenges with more than 15 billion in readiness shortfalls and unfunded priorities. Plans to achieve what leaders say we need and delivering acquisitions ac programs and capability. The sad truth is in recent years, we have not given our sailors and marines what they need to succeed. As weve asked them, we have failed in our responsibility to provide them with the necessary resources, training, and equipment. This puts their lives in greater danger every day, and we can waste no time in reversing the course. The readiness, building capacity, and modernizing to regain the technical advantage of our naval forces but require a clear vision and strong leadership from the next navy secretary. Mr. Spencer, i look forward to discussing your plans to approach these demands if confirmed. This committee is grateful for your Prior Service as well as your willingness to serve again. As part of the department of defense business board, youve demonstrated your dedication to this nation. Im confidence your experience leading large complex operations and businesses has repaired you to take on this role, if you are confirmed. In closing, this committee honors the sacrifice of all of our sailors and marines. Mr. Spencer, we look forward to hearing your testimony about how you plan to lead the department of the navy during this crucial time. Thank you very much, mr. Chairman. Let me join you in welcoming mr. Spencer to the committee. Let me thank your family for the support they provide you. Senator warner, your example continues to inspire this committee. Well get there eventually, to your level, but were trying. Let me assure you. I, too, want to join the chairman in recommending and paying tribute to Service Members and their families. We are saddened by the loss of life during the recent incident on the uss fitzgerald and last evening with the crashing of the kc130 marine corp tanker. This serves as a reminder our Service Member go through daily. Mr. Spencer, if youre confirmed with this position, you will be faced with a number of Critical Issues that confront the department of the navy. The navy and marine corp have had to deal with deployment and high operating tempos. The next sector is managing improvements in the force and the structure will be critical. It seems to me the secretary of the navy should focus on readiness of the existing forces. For example, it seems very short sided to me for the navy to allow the diving certifications to expire and then have to tie that boat to a pier for more than a year when commanders have a demand. Theres increased need for platforms like the boise. While readiness is very important, there are other challenges that face our navy. For many years, weve expressed the concern for the fleet and the size of ships were building each year. The chief Naval Operations released an assessment. Numbers alone are not enough. This past may, the cno released the titles the future of the navy in which he said more platforms are necessary but not sufficient. The navy must incorporate new ting and concepts. I echo the statement, but you may face this obstacle. Years ago the chain of command was changed. The service secretary, however, plays a Critical Role in the budget and requirement decisions that drive the program. As procurement funding begins, the secretary of the navy will play an integral role in guiding this program. The challenges that the navy faces are furs exacerbated by the constraints impose bed i the budget control act. This will limit the navys ability to confront the threats to our country. I look forward to hearing your testimony on how we can modernize our fleet and improve our course efficiency. Mr. Chairman, thank you for calling this hearing. I look forward to supporting this nomination and working with mr. Spencer in the future. Mr. Spencer, welcome. As i mentioned earlier, if you would like to introduce members of your family who are here today, please proceed so we can interrogate you as quickly as possible. Thank you, senator. First i would like to thank senator warner for his eloquent introduction and his unending service to our country. I would also like to thank secretary mad mattis. I would like to introduce polly and my children who are here with me today. I would like to reflect for a minute the navymarine corp team was struck last night with a tragedy. 15 marines, one sailor perished. I would like us to keep their families in our thoughts and prayers as we conduct our business today. Thank you, mr. Chairman, members of this committee. 36 years ago to the month, i was driving in california. My trustee steed at that time was a beige 1968vw bug that carried me out of the gates for the last times aended a tour with squadron 161. Headed to the Pacific Coast highway, i could tell you that the thought of me sitting before this group being considered as secretary of the navy was not to be found even in the most remote parts of my mind. However, during those 36 years, i was educated in financial and operational management, increasing as scopes aprogressed through my career. The leadership skills developed in the marine corp continued to grow. I was respectful of industrial science. The journey has, i believe, provided me with the knowledge and the skill set to tackle the issues at hand. It truly is a great honor for me to appear before you to seek the confirmation as secretary of the navy. The honor to be here today is magnified by the current state of play today which is nothing less than a perfect storm. Weve been at war for the past 16 years with the operational tempo of the various conflicts in which we are engaged, denying us the needed time and resources for modernization and maintenance. Add to that the commanders who are facing continually,nn evolv threats the secretariat and the senators and members of congress that is grounded in transparency and accountability. Thank you. And i look forward to your questions. Thank you, mr. Spencer. I was just on a trip with several of my colleagues, senator warren, senator purdue, senator graham, senator whi whitehouse. The fourth of july n an outsi kabul and outside f kabul. There were a number of events that we do with them for fourth of july. We do a town hall meeting with a large number of men and women who are in uniform. Senator graham, as happens once every decade, asked an astute question. He asked how many in the room were there for more than the first time in afghanistan. The majority raised their hand. He said how many have been here more than twice . The majority raised their hands. He said, how many have been here three times . A significant number raised their hands. In other words, to me it was something that was a graphic demonstration of the incredible burden that our active duty military has been bearing over the last 15 or 16 years. Theyre brave. Theyre proud. Theyre the best, maybe, weve had in a long, long time. But theyre not fully equipped, and theyre not fully trained, and theyre not given the authority and responsibility that they need in order to win this conflict. The fact is, in afghanistan, were not winning. Were not winning. No less than our military commander in afghanistan will tell you that as a fact. That has to be turned around. We cannot ask these young men and women to keep going over there with a strategy that in order to defend. They have to have a mission from somebody in the white house on the National Security council staff. Im exaggerating a bit, but the fact is that if you ask any of these young men and women who have been there and there and there, they will tell you that they can win this fight but theyve got to have both the equipment and the authority to do so. Its not that theyre not well led. They are. Its not that theyre not capable. They are. But it is a dont lose strategy, which is epitomized by the former president s speech at west point where he said were going to surge and were going to increase the number of troops there, and were going to win. And, by the way, were leaving on a certain date. Youre in baghdad and you hear that, its obvious. Theres two Nuclear Submarines that have been sitting at the pier for over a year because of lack of spare parts. 60 of our f16s are grounded. The list goes on and on and on and on. Its got to do with the budget control act, one of the greatest acts thats ever enacted by the congress of the United States. How serious do you think the problem is, and what do you think we need to do . Senator, i believe its probably one of the most serious issues that were facing right now for National Security. The budget control act has wreaked havoc with our readiness, the impact on the lives of our sailors and marines. Doing the office calls that ive had with you all, i find great comfort and excitement in the fact that everyone is leaning in on this issue. Theres a lot of heavy lifting that has to be done. Theres the a lot of cheese moving that has to be done. We have to streamline processes and address capabilities. I believe that is number one on the issue. If you look at my priorities, they are people, capabilities, and process. To address these and provide apply the resources that we have for the down payment on readiness and move forward into building out the fleet. Well, on your third one, the process, probably the greatest source of frustration to members of this committee on both sides is the continued cost overruns associated with acquisition. A few years ago, in 2013, i asked the former chief of operations who was responsible for the 2 billion overrun cost and he said he didnt know. I ask the former chief of staff about the overruns. He didnt think anyone had been fired. What . What are we going to do about this now . Two years in a row now weve held people accountability. Weve taken a number of measures to hold people responsible. How is it we reached a point where you can have a 2 billion cost overrun on an Aircraft Carrier, one ship. One ship. 2 billion cost overrun, and no one is responsible . Senator, my career has been steep in accountability. I can tell you the accountability starts right here. The way we address this is through Behavioral Management. You reward positive events and you have other tools at your disposal to take care of people or projects that are not performing. And you make this very transparent. Im going to be coming before you all asking for resources, but i also have to have my deck clean to make sure those resources and the treasures of the american taxpayer are put forth in a fiduciarily prudent manner. Do you know of anyone who has been fired from their job because of cost overruns . Not yet, senator. Senator reed . Thank you very much, mr. Chairman. Thank you, mr. Spencer, again, for your service already and your service to the navy. You spoke about the critical nature of the triad and the navy is the leading edge of that with the colombia class program. The top Modernization Priority has been brought up. I assume you feel the same way. Most definitely. And one of the things we want to do is make sure that program stays on schedule and on budget or below budget. Theres been a remarkable job done with the virginia class, keeping them ahead of schedule with each new boat and making sure the budget is there. I know you want that same tradition with colombia. Most definitely. Thank you. As i mentioned before, not only do we need more ships, we need new operational concepts and new technology. I wonder if youve given any thoughts on your discussions with the former secretary or the cno about what areas you see that you could collaborate with the cno on. I have, senator, starting out with the acquisition process itself, i think if you heard what i laid out in my priorities, we now have, i believe, when we did a study at the defense business board, 32 plus layers of people needed to sign off. That did not involver9d major platforms. We have to allow the people who have the education and intelligence to make acquisitions and to face off problems to provide the solutions. And they have to know and be responsible for the outcome and be accountable for it. I think thats one of the biggest steps forward we make right off the bat. Are there any technologies that youre giving your extensive experience. Anything you think could be sort of break the mold and a leap ahead approach . Most definitely, senator. People have asked what do you think about the 355ship navy . I said, it is a