This post has been updated to include additional information on the Columbia program cost.
ARLINGTON, Va. – The Navy will spend the next year negotiating a contract for the first two hulls in the Columbia-class ballistic missile submarine program, in a strategy that would get the first two boats on contract and under construction quickly and then insert cost-saving lessons learned into later ships.
Rear Adm. Scott Pappano, the program executive officer for Columbia, said last week that the request for proposals for the first two hulls is out and that his PEO and its industry partners were in negotiations to get a contract in place before October 2020.
“The contract needs to be in place in [Fiscal Year 2021] so that we can get construction rolling and meet that FY ‘27 delivery,” he said while addressing the Naval Submarine League’s annual symposium.
Asked by USNI News after his presentation about the two-submarine RFP, Pappano said, “the thought process is, we wanted to get as much work in there as we can. It’s designed to be a cost-plus-incentive-fee contract, and the reason why we picked two ships was because as we work the first ship, any lessons learned on the first ship aren’t going to roll into, there’s not going to be enough time to roll into the second ship as they overlap.
“So the thought process is, contract those two ships under one contract, a cost-plus contract, and then use lessons learned from that to do fixed-price contracting for hulls 3 and beyond,” he continued.
Pappano added that the lead ship will inherently have more cost risk, but he believes the Navy will be in a good spot to move to a fixed-price contract by the third boat in the production line.
Despite the risk inherent in the lead ship’s cost, Pappano noted that the program has a Defense Department-imposed affordability cap of $8 billion per submarine across the whole program – with the lead ship costing the most and submarines decreasing in cost as production continues – and current estimates have the Columbia program at $7.18 billion apiece. Current estimates also have the annual operations and sustainment cost sitting under the affordability cap, at around $120 million a year compared to the cap of $131 million annually.
During a question-and-answer session, Pappano answered a USNI News question about balancing cost with schedule and quality. In this program’s case – where the Navy has called the Columbia SSBN its top acquisition priority and the Pentagon has foot stomped the need to modernize its nuclear triad – quality and schedule are not levers that can be adjusted.
“We’re going to deliver the Columbia. I also talked about being a schedule-constrained program, because of the earlier decisions we made,” he said.
“In the acquisition triangle of cost, schedule, performance, I’ve got performance locked, I’ve got the schedule locked; that puts me in kind of a bad spot for cost, because that’s the only variable. It is what it is. So it’s my job to make sure we control cost.”
“Schedule is king; I need to deliver strategic requirements, that’s the bottom line,” he concluded.
“My job is to make sure we deliver Columbia at a fair and reasonable cost so I don’t put at risk other Navy programs we need in great power competition.”
Navy acquisition chief James Geurts also spoke at the Sub League symposium, and he noted that the Navy would never be able to buy and sustain all the new platforms and weapons it needs if it continued to spend as it had in the past. Rather than quibble with industry over a half-percent difference in cost to the Navy versus profit for the company, Geurts said the service needed to think radically differently about how it operates and look for decisions that could yield savings in the tens of percents. He calls these “fundamental costs” that the Navy can look to save, rather than looking for bits of savings in the margins.
Asked after his speech whether there were any fundamental costs to be taken out of the Columbia program, or whether the rest of the Navy acquisition portfolio would be pressurized to find these savings to allow for the large investment into the SSBNs, Geurts too told USNI News that Columbia schedule was more at the front of the Navy’s mind than its cost.
“One of the ways to take cost out could be to take cost risk out. And so getting the design mature much earlier, prototyping critical areas which we knew were going to be hard to rebuild (industry capacity) was more taking out potential cost growth than taking fundamental costs out,” he said.
“And then we had a fairly robust design for affordability. In my mind, though, if we can hold schedule, that is the number-one way to hold cost down; when schedule starts moving to the right, then generally your costs are going up.”
Pappano said during his speech that he’s trying to reduce risk in the program by bringing in new suppliers who can take on work – particularly in areas like pipe-fitting, where traditionally the shipyards have done the work in-house but they’ll now need to contract out some of that labor because the combination of the Columbia program and building two Virginia-class attack subs a year will require more man hours than the yards can do themselves. Pappano said it can be hard to attract new companies to do business with the military because of a perception that Defense Department requirements can be too much of a burden, especially for small businesses – and while DoD often times tries to reduce these burdens, Pappano said in this case it was important to ensure high quality and that the Navy would need to “apply appropriate oversight, auditing, inspections, that sometimes might be intrusive” but are necessary for the success of Columbia program.
The rear admiral added that he needed to keep up oversight on existing suppliers too – especially in the aftermath of a welding problem with missile tubes last year that was predicted to cost $27 million and take a year to fix. Pappano said these companies know how to do business with the Navy but that the PEO needed to monitor them carefully in case changes in the volume of their work, the scope of their work, in the demographics of their workforce or other factors could put quality or schedule at risk.