Navy will have 25,000 fewer sailors by 2007.

With retention rates at an all-time high, the U.S. Navy is trying to figure out how to go about downsizing its ranks by 25,000 people while simultaneously upgrading sailors' skills.

The cutbacks are to be accomplished by 2007, said Chief of Naval Operations Adm. Vernon Clark.

Clark has embraced the notion that quality matters more than quantity, especially given the sophistication of current weapon systems and the expanding use of technology throughout the fleet.

The timing for the cutbacks favors the Navy, which is experiencing an unusually high retention rate for officers and enlisted sailors.

"One of my biggest problems now is that retention is too high," Clark told a Washington, D.C., gathering hosted by Government Executive magazine.

Even though the Navy has about 377,000 people on active duty (55,000 officers, 317,000 enlisted and 4,200 midshipmen), the service's workforce adds up to more than 900,000, including reserves, Department of the Navy civilians and contractors. Personnel costs are eating up more than 65 percent of the Navy's $119 billion budget, Clark said. He estimated that for every 10,000 people cut, the Navy saves $1.2 billion. And for every sailor who is replaced by a civilian, the savings add to about $10,000.

Without giving specifics, Clark said he expects to launch "pilot programs" designed to draw down the force and to retain the most qualified individuals, particularly the more experienced enlisted sailors who have acquired valuable skills.

Growing numbers of enlisted personnel will be moved to more senior positions now reserved for officers, said Clark. "The lines between officers and enlisted structure will blur," he noted. "This will be a really good thing."

Specialized sailors will have more job security than "non-rated" people, he added. "We are focusing on job content." Sailors who don't have a designated specialty are more likely to be cut.

But Clark cautioned that the Navy plans to carefully study options before rushing to fire people. "This is not a 'slash and burn' drill," he said. One of the areas that will receive more scrutiny is the replacement of active-duty sailors with civilians or contractors.

Adm. Michael G. Mullen, vice chief of naval operations, said the Navy must get used to seeing more civilian crews aboard ships. That is not a new concept, by any means, he noted. The Military Sealift Command has employed civilian crews for many decades.

But he acknowledged a cultural tendency within the Navy to not treat civilian crews with the same respect that active-duty sailors receive. "Sometimes the reaction is as if you are inviting the enemy to be the crew," Mullen told a recent National Defense Industrial Association conference. "We've had civilians on combatant ships forever."