TAB J

MEMORANDUM FOR DIRECTOR, DEFENSE ADVANCED RESEARCH PROJECTS AGENCY

SUBJ: TERMINATION OF ARSENAL SHIP/MARITIME FIRE SUPPORT DEMONSTRATOR EFFORTS

After reviewing Navy budget priorities, the Secretary of the Navy reluctantly determined insufficient funding exists to continue the MFSD program. Accordingly, Phases III and all subsequent phases of the Arsenal Ship/Maritime Fire Support Demonstrator program will not be initiated. The Arsenal Ship Joint Program Office (ASJPO) should complete all Phase II activities and then close down the Joint Program Office. I am deeply disappointed that this truly innovative program that embodied the acquisition reforms and early industry design involvement necessary to affordably procure our future surface combatants was not supported, as requested in the President's Budget.

Phase II payable milestones 5 and 6 are due to be delivered on November 14, 1997, by the three industry consortia. As previously agreed between ASJPO, Deputy Assistant Secretary of the Navy for Ship Programs, the Office of the Chief of Naval Operations (N86), and the SC 21 Program Office, a copy of the Functional Design Report, Life Cycle Cost Analysis, and Production Plan will be provided to the SC 21 Program Office on a "for Government use only" basis. This information will be used by the SC 21 Program Off ice to improve and support the acquisition process for DD 21.

FY98 funding to support payable milestones 5 and 6 was transferred to DARPA, along with sufficient funds, to support smooth and complete transfer of MFSD lessons learned to DD 21 between now and October 1, 1998. ASJPO has agreed to conduct a lessons learned study of the Phase I and II Arsenal Ship efforts, which will be completed prior to 31 December 1997. Management of the Project Office should shift to PMS 500 by January 1, 1998, and funding support for the office should shift to the SC 21 Program Office by October 1, 1998

The completed phases of the Arsenal Ship/MFSD program have provided an excellent return for the investment. These two phases successfully demonstrated that industry, involved early in the ship design process, could develop an optimum mix of performance capabilities that could be accommodated within affordability constraints, successfully demonstrated teaming between combat system integrators and shipyards, and the introduced innovative concepts in reduced manning, automated damage control, topside integration, and modular design. This investment has, and will continue to facilitate DD 21 development, and will pay significant dividends in other joint warfighting arenas.