Mr. ATWOOD. There are two aspects to it, Senator. One is that we continue, and we have under construction, under contract now, I think, 14 of the 688 submarines-the predecessor to it, if I am not mistaken, 14 of them still are being and will be produced for a number of years. We have six Tridents, Mr. O'Keefe mentioned to me as well.

So as far as nuclear submarines are concerned, there is a base of business which extends for some period of time. Canceling the SSN-21 right now does not bring a sudden halt to those activities. What I have asked the Chairman and the Under Secretary for Defense for Acquisition to do is to analyze that industry to determine those critical processes and technologies that we would need to fund to continue it if and when there is a gap in the production of nuclear submarines.

It is not quite a gap, completely, because we will be continuing to upgrade. But there will be a gap, or there could well be a gap in the production of them out several years from now.

But this is not the end of it because we have canceled the SSN21. The Tridents that are being built, and the 688 submarines that are being built, will continue for some period.

Senator INOUYE. Would it be safe to assume that a follow-on program is a thing of the past on the submarine?

Mr. ATWOOD. No; for two reasons. One is, we still continue the design effort and will continue the design effort for an upgraded nuclear attack submarine. And that could be what we are looking for. Something cheaper; something less expensive; something that is simpler to work and a more advanced version of the SSN-21. Those design and development efforts will continue.

No. 2, I believe we will always need attack submarines for any potential threat we see in the future. Therefore, if one goes out 10 or 20 years from now and said there is a level of attack submarines we need, they have a given life.

Let me just give you an example. Let us say that we needed 30 attack submarines, and that they have a life expectancy, with overhaul, of 30 years. Then it says that some time in that period, we should be building one a year. I have given you two hypotheses to go on.

SSN-21 TERMINATION COSTS

Senator INOUYE. What is the anticipated cost of termination of this program?

Mr. ATWOOD. Sean?

Mr. O'KEEFE. We are currently in the process of preparing all the estimates that go along with that.

As it stands there is, I think, a total of about $3.4 billion that is proposed as part of the next rescission package which will come along, which is a combination of 1991 and 1992 funds associated with this.

The concern that we are breaking down now to arrive at that answer is, How much is true termination liability versus the cost that you will incur otherwise because of a change in the workload base, or whatever else?

And so, we are trying to narrow down that first one, which is how much is the legal liability we really have to incur, versus what the financial impact will be. These are two severable issues.

Right now the answer is, on the first phase, not more than $400 million is the current question. And as far as the larger financial impact, that is the longer term issue that Secretary Atwood referred to what the impact of the decision is.

Because for every dime you spend to keep either nuclear vendors producing at whatever rate is an impact, but it is not necessarily a termination liability expense, per se.

Senator INOUYE. In other words, the termination cost is not part of this budget proposal?

Mr. O'Keefe: Yes, sir; it is. It is part of what you see-it will be coming as part of the rescission package-will discount the value of what is legally termination liability that we anticipate will be incurring. And that number is again being run to ground now. And the rescission package should be up here shortly.

Senator INOUYE. Although you are not certain of the cost, you made it part of it.

Mr. O'KEEFE. Yes, sir; we expect it to be not more than $400 million, as legal termination liability expense. And that is the value projected as a piece of this budget.

Senator INOUYE. I suppose when you terminate the 21, the Tridents will cost more and the other submarines will cost more.

Mr. O'KEEFE. It could. There is an argument, certainly, to be made that the current contracts for both the Trident and the 688's have a target-to-ceiling share line of a percentage break. They are different between the two contracts, I am advised.

But to speculate that absolutely every one of those will go from target to ceiling between now and fiscal year 1997, which is the last date of delivery of the last Trident submarine is highly speculative.

Senator INOUYE. Well, Mr. Secretary, Mr. O'Keefe, we thank you very much for your testimony today, and I appreciate your responses to our questions and concerns.

We would like to continue working with you as we move toward the final figure. We want to make certain that our decisions are prudent and cost-effective.

As I indicated earlier, we will be submitting questions for your consideration.

ADDITIONAL COMMITTEE QUESTIONS

[CLERK'S NOTE.-Additional questions submitted by subcommittee members, together with the Department's responses, will appear in the appendix portion of the hearings.]

SUBCOMMITTEE RECESS

Senator INOUYE. This subcommittee will stand in recess until 1:30 p.m. this Thursday. We will then receive testimony, in closed session, from the Chairman of the Joint Chiefs of Staff, General Powell. It will be in room SD-116.

DEPARTMENT OF DEFENSE APPROPRIATIONS

FOR FISCAL YEAR 1993

THURSDAY, FEBRUARY 27, 1992

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC. The subcommittee met at 1:30 p.m., in room SD-116, Dirksen Senate Office Building, Hon. Daniel K. Inouye (chairman) presiding.

Present: Senators Inouye, Hollings, Leahy, Sasser, DeConcini, Bumpers, Stevens, Kasten, D'Amato, Rudman, Cochran, Specter, and Domenici.

DEPARTMENT OF DEFENSE

GLOBAL OVERVIEW

STATEMENT OF GEN. COLIN L. POWELL, U.S. ARMY, CHAIRMAN OF THE JOINT CHIEFS OF STAFF

OPENING STATEMENT OF SENATOR INOUYE

Senator INOUYE. Today the subcommittee continues its review of the fiscal year 1993 defense budget request by hearing from the Chairman of the Joint Chiefs of Staff, Gen. Colin Powell. General Powell will present an overview of the national security environment, and we have asked him to discuss the base force, manpower and equipment requirements, total force concept, and restructuring of our Reserve forces.

We are pleased to welcome you again, sir. Much has changed in the international security environment since you last testified to the subcommittee. Although it seems difficult to believe, the pace of change continues.

Following the rapid changes of 1989 and 1990, 1991 was another year of historic events which affect our security requirements. On a global scale, the actual demise of the Soviet Union has brought with it new opportunities and new challenges with respect to our defense planning. In Europe, NATO has taken the first concrete steps to redefine itself. Nevertheless, the end of the Soviet Union raises new questions about the alliance's post-cold war planning assumptions. These may already be out of date.

In the Pacific region, the United States departure from its bases in the Philippines and the events on the Korean Peninsula raise new challenges for Pentagon strategists. Security conditions in the Middle East and in Southwest Asia remain a continuing concern.