Negotiations to build the Block V Virginia-class submarines will likely result in a contract for fewer subs than what Congress authorized, than the Navy wants and than industry can build, a shipbuilding executive told Wall Street analysts on Thursday.
Mike Petters, chief executive of shipbuilder Huntington Ingalls Industries, described the Navy’s ongoing Block V negotiations as an intricate balancing act that weighs how many submarines can be built with the available funding.
“My personal view is that I think the authorizers have been pretty clear that no matter how many submarines that we have, we’re going to want more. I think the appropriators have tried to balance that with the other priorities they have,” Petters said Thursday morning while discussing his company’s third-quarter financial results. “We’re at the point now in the process where we really need to go to contract. We’ve been working very hard with our partners at General Dynamics and with the Navy to fashion a contract that makes sense.”
Earlier this week, USNI News reported key lawmakers on the House Armed Services Committee released statements detailing their disappointment that the Navy and Virginia-class builders General Dynamics Electric Boat and Huntington Ingalls appeared ready to sign a deal to build nine Block V submarines, with an option to build a tenth. For months, Navy and industry officials had hinted a 10-submarine buy was in the works, which itself was a decrease from what at one point was rumored to be up to deal to build 12 Block V submarines.
The Navy could save up to $1.8 billion using a multi-year contract for the Block V buy, according to details of an October report to Congress from Ellen Lord, the Pentagon’s chief acquisition officer, which was reported Inside Defense and confirmed by USNI News.
When asked why the pending contract now appears to be for nine Block V submarines, Petters said he wouldn’t talk about the specifics of the contract, other than it will be completed by the end of next month. The Navy has sent Congress a notification saying the contract will be signed and awarded within 30 days. Petters said the final contract “will be a good balance for all of the folks interested and involved in it.”
However, Petters did hint at what is likely a hang-up for Navy and industry. When the Navy increased its annual production to two Virginia-class submarines a year, Petters said HII scrambled to refine its production and train an expanded workforce.
Now, as HII prepares to start Block V production, Petters said the early challenges for starting Block IV production are behind the company.
“We’ve invested in facilities to expand the capacity, and we’ve reflected that as we’ve gone to negotiate the Block V contract,” Petters said. “As a result, in our contract negotiations with the Navy we’ve worked hard to make sure that we provide good value for the contract. I think that we’re going to create a contract here that’s going to address all of that.”