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The Challenge Facing The U.S. Navy

To accommodate lower post-Cold War budget levels, the Navy significantly reduced its modernization funding. The Navy leadership now needs about an additional $3.5 billion to $5.0 billion per year to recapitalize and modernize for the future while maintaining fleet readiness, and the Department of Defense (DOD) has identified infrastructure savings as the source for funding this short-fall.3 If the Navy is to maintain its current fleet size and recent levels of peace-time deployment and peacekeeping operational activity with constant or declining budgets, the only available source of funds for modernization is the infrastructure.4 Currently, infrastructure activities account for $28 billion (or 40 percent) of the annual Navy budget of about $70 billion. This is an increase from about 37 percent in FY 1991.

The Need For A Corporate Strategy And Leadership

Past performance and the committee's review of ongoing initiatives indicate that reallocating $3.5 billion to $5.0 billion annually from Navy infrastructure activities for recapitalization and modernization will require a more extensive effort than is currently underway. Current initiatives such as regional consolidation of installation management functions, designation of regional maintenance coordinators, and the Smart Base project are a good start, but they will not provide the desired savings. There are two primary reasons for this conclusion:

• First, ongoing initiatives are focused on only about one-third of the infrastructure and are projected to result in a maximum of about $750 million in annual infrastructure cost reductions—well short of the $3.5 billion to $5.0 billion annual goal. Thus, there is little likelihood that today's initiatives could by themselves solve the problem at hand.

• Second, and perhaps more important, is the fact that the committee could not identify an overall corporate Navy strategy for solving the problem. The important changes that are underway are being led by individual staff activities and support elements that lack the authority to change the requirements for or the methods of providing goods and services to the fleet. Moreover, many of the reductions made thus far appear to be pro rata cuts rather than being based on solid research, analyses, and assessments of risk.

3U.S. General Accounting Office. 1997. Defense Infrastructure, GAO/HR-97-7, Washington, D.C., February.

4If defense and Navy budget levels were not determined in large part by domestic and political considerations, the linkage between modernization needs and infrastructure efficiencies could be broken, but that is unlikely in the current national security environment.

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