Finding the funds to recapitalize the force is no simple matter. We must generate about $10 billion annually over the next five years to improve our recapitalization investment from a projected $228 billion to more than $275 billion. That money almost certainly will not come from increases in the Navy budget. It will come only from our more efficient use of the resources provided us by the taxpayer. To realize these efficiencies, we must understand the example of the most competitive and agile industries in the United States. The industry standard for cost reductions is generally 5-10%. Our goals should be similar. Corporations that fail to meet these resource efficiency goals have only one fate: they cease to exist. For obvious reasons, we cannot fail in our efforts. The nation is counting on us. To achieve these efficiencies at every level of our organization, from the most junior sailor all the way to the Chief of Naval Operations, we must:
- Leverage technology to improve performance and minimize manpower costs
- Promote competition and reward innovation and efficiency
- Challenge the barriers to innovation
- Divest noncore, underperforming, or unnecessary products, services, and production capacity, especially ashore
- Merge redundant efforts to become lean and agile
- Minimize acquisition and life-cycle costs
- Maximize in-service capital equipment use
- Challenge every assumption, cost, and requirement
Our focus must be on getting the right level of readiness at the right cost so we can afford the right force for our future Navy.
- It is right for our Navy. Since 1990, the Navy has undergone a dramatic reduction in size—37% fewer ships, 26% decrease in number of aircraft, and 35% decrease in active-duty end strength. Despite this decline, our operational costs to maintain an aging force structure continue to rise at about 7% per year (a percentage of total obligation authority) and consume critical recapitalization resources.
For example, within the Planning, Programming, Budgeting, and Execution System, the Navy traditionally met its budget challenges by inserting a wedge—a predetermined amount of cost avoidance—into a particular capability or process funding line. It frequently served to distribute the pain while leaders nursed the product of that capability or process along until some illusionary relief appeared, if ever. In the end, the wedge attacked the product. It was simply easier to provide less than to find a way to deliver that product at less cost by reducing overhead, streamlining processes, substituting technology for manpower, or creating the incentives needed for positive change. In effect, the culture of the wedge created challenges from opportunity rather than the reverse. Sea Enterprise seeks to change the culture of the wedge, not by changing how much, but by identifying how our defense dollars are spent to improve the naval bottom line—increased combat power.
Initial Results and Implications
As one way to look at our costs and operations, the Chief of Naval Operations and other leaders are conducting a standardized evaluation of Echelon II commands to assess budget planning and execution, manning, process and overhead costs, and return on investment based on the core missions and functions of the command. After completing several of these assessments to date, some general observations can be made.
First, a culture of readiness clearly exists, and the desire to embrace Sea Enterprise is strong. That said, we still have lots of room to grow, and further education on how to define measurable metrics will assist in quantifying return on investment and evaluating the product of the plan.
Second, we are achieving some successes. Integrating Navy-Marine Corps TacAir, implementing programs to reduce cycle times and increase maintenance efficiency, increasing aircraft readiness through Naval Air Systems Command's Naval Aviation Readiness Integrated Improvement Program, transforming the Naval Supply Systems Command, and the creation of the "virtual" systems command and establishment of Commander Navy Installations are just some of the examples. Smart, committed people challenged long-held beliefs, rewarded critical thought, and boldly breached boundaries to eliminate redundancy and reduce overhead in these efforts. Their example demonstrates that no one is too junior to make a recommendation for change, and often times, the junior-most sailors work in the best places to see where change must occur. Sea Enterprise depends on both difficult but necessary initiatives and innovative people like these.
The Way Ahead
The Navy today is the best this nation has ever seen. But winning organizations never rest; they continually seek improvement. Adaptation in a competitive and rapidly changing world is an absolute requirement, and that means challenging basic notions like:
- Past practice guarantees future success.
- People are a free commodity.
- More money is always available.
- There is no incentive for improvement.
Indeed, there is incentive, and it is the proper defense of this nation, both now and in the future. We will do what is best for this nation.
Our culture of readiness will be preserved, but we no longer can afford readiness at any cost. We must deliver it at the right cost. In the weeks, months, and years ahead, we will change our culture and mind-set. We will continue to value operational and tactical excellence above all, but the Navy of the future also needs to promote and screen leaders trained and focused on understanding the cost implications of their actions. Sea Enterprise will help us identify, devise, and implement the tools that facilitate appropriate levels of risk in our business operations and undertake the types of reform and restructuring needed to significantly reduce our operating costs.
We seek bold and innovative capability for our Navy. It is dependent on us, at every level of command, seizing opportunities to improve the way we go about the "business" of generating and sustaining the world's most formidable naval force. This nation needs a Navy to take credible, persistent combat power to the far corners of the earth. Sea Enterprise, as a primary enabler of "Sea Power 21," will help us deliver that capability now and in the future.
Admiral Mullen is Vice Chief of Naval Operations.
Part I—Projecting Decisive Joint Capabilities
Part II—Sea Shield: Projecting Global Defensive Assurance
Part III—Sea Strike: Projecting Persistent, Responsive, and Precise Power
Part IV—Sea Basing: Operational Independence for a New Century
Part V—ForceNet: Turning Information into Power
Part VI—Global Concept of Operations
Part VII—Sea Warrior: Maximizing Human Capital
Part VIII—Sea Trial: Enabler for a Transformed Fleet