Over lunch at the Four Seasons during a hectic week in New York, a former secretary of the Navy, John Lehman, shared his alarm about America’s security.

“We’re building only five ships a year; we’re on the way to a 150-ship Navy” he says. In his view, that is courting disaster. “That is not enough to cover our security requirements,” he says. “Seventy-percent of the world is covered by water. We no longer have basing rights around the world. If you have combat operations going on you need air cover and support 24 hours a day, seven days a week, and that comes from the Navy. To fly one ton of cargo into Iraq takes 14 tons of fuel. That’s not cheap. It’s got to go by sea, so you have to protect it. The Iranians, for instance, have very good submarines.”

The ultimate threat, he says, is China, which “is now building their 600-ship Navy, to fill the vacuum, and they’re very good ships.”

Mr. Lehman was remarkably focused considering that three heads of state, in town for the United Nations General Assembly, were simultaneously and not always quietly having lunch in the restaurant’s famed pool room. Notwithstanding his charming demeanor, one can imagine him being quite intense and exacting. In short, it’s a stretch to imagine him cavorting in Monaco with his cousin Grace Kelly, whose foundation he now chairs. It’s almost impossible to picture him hosting his legendary black tie “Men Without Pants” parties, which were evidently the height of chic in Reagan-era Washington. “That was before I was married,” he explains somewhat sheepishly.

While not wanting to be an armchair quarterback, Mr. Lehman is critical not of the decision to go into Iraq, which he claims was justified by the intelligence available at the time, but of the management of the aftermath. “The problem with the insurgency resulted from inadequate planning, or no significant planning, for the post-period to stabilize the country,” he says. “One of the historic blunders of all time for the U.S. military was the decision to dismantle the security forces — the police, the army, the civil service, and not having any plan to replace them.”

Mr. Lehman despairs about America’s intelligence community. “The conclusions of the WMD Commission and the 9/11 Commission were that our leadership is not getting the minimum of what they should expect from the intelligence community,” he said. “It’s become bloated and bureaucratized. … The U.S. has become the GM of international security. The jihadists are the lean, flexible challengers. It’s time for reform.”

He also sets high goals, such as his well-known ambition to build a 600-ship Navy. As secretary, it was his job to promote his department; as a civilian, he continues to advocate a stronger maritime presence. He is also an advocate of lean, efficient management in the private and the public sectors. This is not, in his view, the profile of today’s Navy.

“Defense costs are skyrocketing out of sight,” he says. “Costs for ships are way beyond what they should be, even allowing for inflation. It’s being managed by a bureaucracy, not by accountable people. When I was in office my last budget was $11 billion and we built 28 ships; last year’s budget was about $11 billion and they built five ships. That’s not inflation, that’s unilateral disarmament.”

Mr. Lehman is equally concerned that bureaucratic bungling has sidetracked the effort to enact the recommendations of the 9/11 Commission, on which he served. “We called for ‘leaning out’ the 15 different intelligence agencies to create a more agile intelligence effort. Instead, the president added another layer of bureaucracy.”

Happily for New Yorkers, some of the problems raised by the commission have been solved locally. Mr. Lehman considers the city’s anti-terrorism efforts as agile and lean as can be. “New York has been the model for what an intelligence agency should be. If I wanted to know what Al Qaeda was up to, the first place I would go would be to New York City’s intelligence group. One of the recommendations that was implemented was to resolve the ‘chain of command’ issue raised on September 11. The mayor made an unpopular decision and put the police in charge.”

However, there is more work to be done. “Another issue raised by the commission was the lack of the ability to communicate,” he says. “The available channels were swamped by first responders. We recommended that Congress act to free up unused frequencies which the broadcast organizations have been hoarding all these years. Unfortunately, the lobbyists for the broadcast companies convinced them to put off implementation until 2009. In the meantime, they have every hope of getting the legislation overturned.

“In New York we also identified a desperate need to change building codes. Realtors and developers have eroded the codes such that stairwells can’t handle the number of people who need to get out in case of an emergency. They haven’t even made the stairwells fireproof,” he says.

Mr. Lehman today is actively managing a highly successful private equity shop that invests primarily in aerospace, defense, and marine companies. J.F. Lehman & Company was founded in 1992 and has provided investors with “high double-digit rates of return.” He and his partners have just raised their third fund, and currently have well more than $1 billion invested.

In this arena, too, Mr. Lehman has high standards: “We have an average transaction size of $30 to $300 million. We’re flying under Wall Street’s radar; we look for good technology, intellectual property. We’re value investors; we’re not chasing the flavor of the year. We want profitable companies with strong market positions. We go in and help management reengineer the business, make it leaner. Sometimes we help management expand globally.”

Where does the group look for deals? There are two main sources. “We look at orphans, or third-tier companies owned by conglomerates. Also, we work with entrepreneurs. There are literally thousands of companies out there that grew up in the defense build-up years of the 1970s and 1980s.

“We have a reputation for being good to work with, for closing deals. We don’t bait and switch. We’re very hands-on. Every company we’ve owned has ended up better off,” he says.

Echoing concerns of many observers, Mr. Lehman is skeptical about the mega-deals making headlines on Wall Street these days. He describes much of this activity as nothing more than financial engineering, and says he doubts that much value is added as assets are swapped in and out of the giant private equity consortiums so popular today.

The group now holds five companies in the portfolio. All the partners, many of whom came from defense or marine companies, are active in the business. They work to improve the company’s efficiency and growth. Mr. Lehman is proud that they have never cut benefits to employees to achieve their goals. “We want to leave these businesses better than we found them.It’s hard work,” he says.

Hard work, indeed, but not so timeconsuming that Mr. Lehman isn’t engaged in the political game. He is a fan of Senator McCain, and will be working for his presidential campaign. Would he go back into government? Maybe we’ll find out over dinner.