Senator SALTONSTALL. So that will maintain the 817 running on to 1980?

Admiral BEAKLEY. That is right.

Senator SALTONSTALL. Admiral Burke told us at the rate of obsolescence and rate of replacement and modernization we would not have any fleet by 1980. I will not ask you to correct the statement of Admiral Burke, but does that 41 ships replacement offset that statement of Admiral Burke?

Admiral BEAKLEY. It would, sir.

Senator SALTONSTALL. You have only had 21 average in the period of 1948 through 1960, and none in 1947 and 1948. Are you going to overcome that by getting the 41?

Admiral BEAKLEY. No.

It would take some more, sir, because, for example, in my charts I show this 457 becoming overage in 1966. That is only 6 years from now.

So this would take some 70 ships a year to stop this, sir.

Senator SALTONSTALL. Could you put in the record the amount that you believe must be new ships or modernized in the same period of time that you put in your statement there?

Admiral BEAKLEY. To overcome this condition?

Senator SALTONSTALL. To overcome and keep a modernized fleet of 817.

Admiral BEAKLEY. Yes, sir; and it is not straight arithmetic. Senator SALTONSTALL. I think that is very important. Then we can go into the question of funds later if we want to.

Admiral BEAKLEY. I shall be glad to.

(The information referred to follows:)

Assuming an average life of 20 years, 817 divided by 20, or about 41 new ships per year are needed to maintain a force level of 817 ships on a continuing basis. Thus, if our present active fleet of 817 ships were in an adequate state of modernity, annual replacement programs of about 40 to 41 new ships per year would maintain it in that condition. About 75 percent of the 817 ships of our June 30, 1960, inventory, however, are from fiscal year 1945 and prior years' programs; and from fiscal year 1948 through fiscal year 1960 our programs have averaged only 22 new ships per year. In order to overcome this condition, programs averaging about 60 new ships per year during the period in question (fiscal year 196166), plus the continuation of the FRAM program, would be required. This would enable the replacement of about 20 additional old ships per year and upgrade modernity of the fleet, while maintaining the force level at 817 ships.

FRAM PROGRAM

Senator SALTONSTALL. Now, I just have two more questions, Admiral.

Is there not more than one FRAM program?

Admiral BEAKLEY. Yes, there is, sir.

Senator SALTONSTALL. There are two FRAM programs?
Admiral Beakley. Yes.

Senator SALTONSTALL. Why do you mention only one?

Admiral BEAKLEY. Because this is the only one which is so expensive as to come into the area of a conversion, sir. If we spend beyond a certain amount of money in modernizing a ship, there is a certain point in here where it becomes a conversion and we are required by law to go to the Congress to get authorization to do this.

Otherwise, we can make minor changes and some repairs under the operation and maintenance program. This is where the FRAM Mark

II program, as we call it, is included, in our operation and maintenance budget.

Senator SALTONSTALL. So the FRAM II program is something that you do not have to come to Congress for?

Admiral JONES. We were before you, Mr. Senator, with the requirement of the FRAM II program in the Navy operation and maintenance appropriation hearing about 10 days ago.

SHIPS DROPPED FROM PROGRAM

Senator SALTONSTALL. Now, you say that five ships that were authorized have been dropped to help pay up for the changes in cost. Do you plan to leave those out indefinitely?

Admiral BEAKLEY. It is a question, Senator Saltonstall, at the present time.

For example, three of them are frigates. There are three frigates in the 1961 program and they are costed in here. One is an experimental research escort ship, plans for which were not ready in fiscal year 1960.

So that one is funded for again. It will be the only one of its type. But the cruiser conversion and those three frigates are types of ships that we will continually come in for.

Senator SALTONSTALL. They are deferred rather than dropped. Admiral BEAKLEY. For authorization purposes, but each year now we are required to come to the Congress for authorization as well, so it makes no difference.

Senator SALTONSTALL. Wait a minute. I did not get that. You say it makes no difference?

Admiral BEAKLEY. What I mean is that we have to come in for funds. We have taken their funds and applied them to increased costs of other ships.

BASIC AUTHORIZATION

Now, the law next year will be slightly different. This is the last year that we don't have to come in for authorization for every ship that we ask for, so you may say you have authorized ships and we deferred them. If we wanted to build them next year, we could leave them out of the program, but we would have to get the money for them. The new law means there is no back tonnage authorization left. Senator SALTONSTALL. I don't know whether the chairman remembers it or not, and I do not recall, but did we pass a law last year saying that you were authorized to build any type of ship you wanted within the appropriation?

Admiral BEAKLEY. No, sir; we have to come to you for every type of ship. You remember on warships we had a great big standing backlog of tonnage. That has been wiped out now, sir.

Senator SALTONSTALL. I understand now.

Now, I thought that Admiral James, for whom I have the utmost respect, made a terrific statement here, if I may say so, Admiral, on page 5, when you say under item 4:

Hereafter there will be no requirement for ship cancellations due to cost adjustments.

Are you confident that you can live up to that statement?

Admiral JAMES. Admiral Burke and Secretary Franke have indicated the design of the gallows that I will swing from, sir, if this does not in fact develop.

VALIDITY OF LONG-TERM ESTIMATE

Senator SALTONSTALL. Are you able to tell this committee, headed by this distinguished chairman, that you are going to be able to estimate 3 years ahead the exact cost of a ship that is going to be completed, have no extras and no changes in cost, no changes in anything, over a 3-year period of time?

Will not either one or two things happen?

You are going to ask for a lot more money than you need and then you will lose track of that money, or else you are not going to ask for enough and we are going to have to appropriate some more.

I cannot conceive of the fact you can estimate $280 million for an aircraft carrier, which I see already has gone up to $293 million, and keep it accurate 3 years ahead of time.

Admiral JAMES. We are making you almost that exact promise, Mr. Senator.

Senator SALTONSTALL. You are making it to the committee.

Admiral JAMES. I would like to give you a little bit of the philosophy as to why we feel this is possible. Certainly in the record of our past performance you are entitled to your doubts, sir, but I tried to draw the comparison of our being required to look backward under this system that we have lived with. We have been able all of the time to make a forward-looking estimate, and we have done so. We have made some terrifically precise estimates just in these terms of reference that are bothering you right at this moment. But the very nature of the rules under which we have been operating prevented us from applying this forward look because we were required never to anticipate the requirements beyond that which was immediately before us.

We have every confidence that we will do this. Now each year as we come before you there will be a balancing of the books before you for cost adjustments within a given program.

None of us is confident that for each and every ship in the given program we are going to be able to make such a precise estimate. But within, as in this case, a $12 billion shipbuilding program, and if Admiral Beakley's persuasiveness gets us a larger program hereafter, within these multiple programs, we believe, indeed, sir, that we can give you precise estimates, and where we have not realized the predicted increases, it will be brought to your attention so that any excesses may be applied to the new program that we are asking you to approve.

In the case of where we have underestimated, only in the case of major military characteristics would we bring the item back before you and say here is a tremendous new missile development, for example, that has to be applied to this particular cruiser conversion, the price tag is roughly $20 million, will you please authorize us to undertake this?

On other changes within the terms of reference of modification, developments, and lesser improvements, we will live within these figures by edict and by administrative control.

ORIGINAL REQUEST

Senator CHAVEZ. Admiral Beakley, how does the budget compare with your original request?

Admiral BEAKLEY. Through the whole year and so forth, Senator, we came in with a budget originally that was of the order of $2 billion for ships. This one is now at $1.5.

Senator CHAVEZ. How many ships?

Admiral BEAKLEY. Twenty-nine new ships and 15 conversions were in our original request.

Senator CHAVEZ. Thank you.

Senator Smith, do you have any questions?
Senator SMITH. Yes, I have one, Mr. Chairman.

CHANGES IN CONSTRUCTION PLANS

I am not quite sure that I understood you, Admiral, when you answered Senator Saltonstall about the agreement with Admiral Burke on these costs. I would like to ask what have you done with the architects and engineers who make frequent changes during construction periods!?"

Admiral JAMES. That is a very searching question.

We have what I have termed in my statement the senior officers change review board. These are all of the flag officers of the Bureau of Ships except myself who are endowed with some particular obnoxious personalities to consider all of these suggested improvements and to be as hard boiled about them as it is possible to be.

Since the creation of this change group, in excess of $30 million worth of intended costs have been struck out of the ships for which they were intended and this board is in full existence to do the herd riding on the problem that is in your mind.

Senator SMITH. Of course, those changes come about in the interest of progress and very well, I am sure, but I do not see how you can determine just what that is going to be during the 3 or 4 or 5 years required for the building of the ship.

Admiral JAMES. By reviewing each and every ship type that we have built since the beginning of World War II, we have arrived at a value of these developments that have traditionally occurred and we have applied these kinds of numbers in projecting the cost for improve

ment.

FUNDS FOR SHIPBUILDING PROGRAMS

Senator SMITH. Mr. Chairman, I have one observation to make. It seems to me, Admiral Beakley, and Admiral James, that Congress has always responded and responded very generously to the requests of the Navy particularly for appropriations.

I am somewhat disturbed by page 9 of Admiral Beakley's statement, when he states that:

In fiscal year 1946 and 1947 we had no new shipbuilding programs. Our programs from 1948 through fiscal year 1960 have only averaged about 22 ships

per year.

I would like you to make it very clear for the record that that was not because Congress did not appropriate the full amount and more that the Navy asked for. Am I correct in that?

Admiral BEAKLEY. I cannot speak historically on that, Mrs. Smith, but I will put it in the record.

Senator SMITH. Will you, if you please?

Admiral BEAKLEY. Yes.

Senator SMITH. It would seem to me if the Navy had requested any ships in 1946 and 1947, that there would have been some built. Admiral BEAKLEY. Yes, you remember this was a time when the United Nations was going to solve all our problems, and we had some 3,000 or more ships in the Navy of recent construction.

So we were coming down in size and we had more ships than we could foresee we would ever need.

Senator SMITH. Mr. Chairman, I would ask that Admiral Beakley provide for the hearings a clear statement with regard to the programs from 1946 on through this average of 22 ships a year so that there will be no misunderstanding as to where, if there was any blame, where the blame should be and not to those of us who have supported the full appropriations and more for the Navy through the years. Admiral BEAKLEY. Yes.

Senator SALTONSTALL. That in my opinion, Admiral Beakley, should require the number of ships, the appropriation requested and the amount of appropriation.

Admiral BEAKLEY. Yes, sir; I can do this.

Senator CHAVEZ. We generally try to give you more than you ask for.

Senator SMITH. I am sure that those of us who are sitting here at the table at the moment, have so voted.

I would like the record to be very clear so that there will not be any accusations made in shipbuilding such as are being made in some of the aircraft.

(The information requested follows:)

Amounts requested and appropriated for Navy shipbuilding programs, fiscal years

1946-60

NOTES.-A. This table includes funds for new programs and increases in fold programs. In the increase and replacement of naval vessels, hull and machinery, construction of ships, ordnance for new construction, shipbuilding and conversion, ordnance for shipbuilding and conversion; it also includes reimbursements applied to these programs.

B. Small service and landing craft are excluded from the ship totals.