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Navy to Congress: Block Buy Contracting Saves Money and Time

Newport News Shipbuilding placed a 900-ton superlift into dry dock, continuing construction of the nuclear-powered aircraft carrier John F. Kennedy (CVN 79). Nearly 90 lifts have been placed in the dock and joined together since the ship’s keel was laid in August 2015. Newport News Shipbuilding photo.

WASHINGTON, D.C. — The Navy’s top weapons buyer was on Capitol Hill this week pitching block buy contracting authority as a way for the service to cut both the cost of large programs and time required to field capabilities.

Since becoming the Navy’s chief weapons buyer, finding ways to save money throughout the department has been the focus of James Geurts, the assistant secretary of the Navy for research, development and acquisition. Appearing during a Wednesday House Armed Services Committee hearing, Geurts said the Navy is exploring whether block buy contracting could help make large purchases more affordable.

“How do we create the right business environment to allow business to operate cost-effectively and with an element of urgency,” Geurts said.

Block buy contracting, something the Navy has only used for a couple of recent large purchases was described by Geurts as being an authority worth exploring more.

Citing the Virginia-class block buy as an example, Geurts said “We’re delivering submarines to the fleet two years earlier at a greatly reduced price with a more capable submarine. That to me is a good mission outcome.”

The block buy contract for the next batch of 10 Virginia-class submarines will save the Navy $5.4 billion, Geurts said after the hearing. Continuous production on the Columbia-class will save $1.2 billion.

The Navy has also used block buy contracts for the Littoral Combat Ship program, and the John Lewis-class oilers, according to a December Congressional Research Service report, Multiyear Procurement (MYP) and Block Buy Contracting in Defense Acquisition: Background and Issues for Congress.

When the Navy establishes requirements and knows what it wants, it can send the message to industry that multiple programs or capabilities will be purchased at once, Geurts said. The Navy’s shipbuilding plan lays out the framework for industry to use when planning where to invest.

Following up on comments he made with the Senate on Tuesday, and echoing past comments from his boss, Secretary of the Navy Richard Spencer, Geurts said, block buying the next two carriers could save a billion dollars.

“Are there better ways to write the business contract to take advantage of that,” Geurts said. “That would be the premise that we’re studying.”