The CHAIRMAN. Pardon me, is that on page 10?

Admiral FINNERAN. Page 10, sir, the third graph down, the dotted line, pilot training rate.

The CHAIRMAN. I see it now.

Admiral FINNERAN. On the lower graph, we present our graduate education and our service college training programs.

As a point of interest, in excess of 90 percent of our postgraduate officers remain in the Navy for a full and productive career.

Turning now to chart 11 and on through the remainder of the charts, rather than take you through them one by one, we present in charts 11 through 19 experience data for the past and projected expectations on promotion, retention, our early release programs, our quality control program, and losses, for your information. In the interest of brevity. I will not comment on them at this time, but I do have, with your permission, Mr. Chairman, some extended remarks that explain those charts for the record.

The CHAIRMAN. Fine. Without objection, the extended remarks of the Admiral will be included in the record.

I will now present some examples of our promotion system. Chart #11 provides the numbers of enlisted promotions by pay grade in recent years and projected through FY 73 (bottom graph) compared to strength and losses on the upper graphs. It is noteworthy that our senior grades are relatively stable (solid line) despite significant variations in strength. The greatest fluctuations occur in those grades most sensitive to retention, petty officer second class (pay grade E-5) and below (dotted lines). An increase in the numbers of promotions in these grades in FY 73 is predominantly the result of relatively high projected losses (middle graph) and does not represent absolute increases in the numbers of people serving in these grades.

ENLISTED GRADE 1964-1973

Chart #12 illustrates two related facets of the enlisted force. First, the issue of increasing gradelevels. I have indicated two years-FY 64 and FY 73. I will speak to the two solid lines first with the left margin percentage scale. These two lines represent the percent of the enlisted force at each pay grade in FY 64 and FY 73. Our principal increase has occurred at pay grade E-6 (petty officer first class). This is a function partially of minimal promotion opportunity and requirements growth for experienced and responsible petty officers required to maintain our weapon systems.

Additionally, we have increases at pay grades E-1 and E-2. This is caused by our increased time in grade requirements which were effected 1 January 1972 and are slowing flow out of these grades. We believe this slow down is appropriate now that Congress has provided substantial increased pay at these grade levels. An allied issue is illustrated by the two dotted lines and the right hand scale. These lines illustrate how the percentage of careerists has declined at the key pay grades of E-4 and E-5. This represents a loss of skilled experience caused by past years declining retention at the 1st term and mid-career points. The area between the curves explicitly demonstrates the experience gap which results from poor retention and contributes to increased costs not only to provide more junior technicians trained, but narrowly experienced, and also influences our training costs. The solution is increased retention of skilled technicians to reduce this gap.

There has been essentially no growth in our chief petty officer grades (E7-E9). Essentially, the problem resolves to this-as increasing technology forces increasing responsibility on our petty officers, they are increasingly less experienced because of our inability to keep them long enough.

Chart #13 presents the officer promotion picture. Navy's promotion system is based upon grade controls in the unrestricted line and permits restricted line and staff corps promotions on the running mate principle essentially unconstrained to specific limited numbers in each grade. Therefore, I present both groups by grade on the lower graph and provide a strength profile for comparison on the upper graph. I would point out the following factors: So called "grade creep" in the grade of Captain does not exist now but did from FY 64-68 (lower graph, bottom two lines). This was caused by the need to provide minimal promotion flow and opportunity to large numbers of officers procured in World War II and eligible for promotion in the early and mid-60's. You will note that as these officers leave service, we are making progress to reduce Captain grade representation. We have achieved a 15% reduction in unrestricted line Captains and a 5.7% reduction overall from the peak year, Fiscal Year 68. In the grade of Commander (next two lines) that same influence exists due to increased procurement during the Korean War. Slightly slower progress in reductions is being made in this grade to avoid promotion stagnation and to meet our billet requirements. The grade of Lieutenant Commander (top two lines) is highly sensitive to retention influence and is substantially below requirements. Please

note the upward trend in the restricted line and staff corps communities in the Lieutenant Commander grade which is caused primarily by our direct procurement programs for medical officers.

Chart #14 shows officer promotion from a different perspective. The lower graph presents actual numbers of promotions in the combined grades indicated. Captain, Commander and Lieutenant Commander are essentially stable except as influenced by Lieutenant Commander Staff Corps Officers, primarily medical. The grades of Lieutenant and Lieutenant (junior grade) respond to procurement and changes in upper grade flow rates. Slight increases for 73 are programmed. Flow rates in the grades of Lieutenant Commander, Commander and Captain are retarding slowly as a result of a decreased strength base.

An area of vital interest to increased readiness and future cost control is retention. The enlisted retention picture is mixed. Chart #15 (upper graph) shows the numbers of first term reenlistments and compares it with our goals for overall Navy. We have established numerical goals for each of 69 ratings in the Navy which equate to approximately a 31% overall retention objective. The upturn since FY 70 is encouraging but still less than satisfactory. We have 29 ratings whose retention rates are less than 10% and severely inhibit our experience mix, stability and readiness improvements. The Variable Reenlistment Bonus (VRB) is our most useful management device. The average reenlistment rate among ratings eligible is 25% which is 12% higher than those ratings not eligible for VRB. The bottom graph presents the reenlistment profile for a single rating, radioman, as a detailed example of our actual versus desired experience.

RETENTION (OFFICERS)

Retention of high quality officers in proper balance by specialty is our objective. This chart provides on percentage scales our experience with officer retention and projects our expectations for the coming year. The percentage goals are also shown. Marked improvement in aviation and submarine retention has occurred in the past year (upper two lines). Aviation successes may be influenced by reduced commercial hiring. We attribute our success in submarines to the nuclear officer continuation pay which Congress provided two years ago and which expires in FY 73. We anticipate requesting extension of that authority and extending it to include nuclear surface officers for whom we currently realize 11% retention. This must be arrested and reversed. The lower two lines show our poor experience with surface and medical officer retention which continue as our severest officer problems.