ARLINGTON, Va. – The Navy and General Dynamics are still at an impasse over an insurance spat that has resulted in the 11-month delay to contracts for two Virginia-class attack submarines, Secretary of the Navy Carlos Del Toro told USNI News on Wednesday.
The service and the submarine builder disagree on the share of responsibility in the event of an accident occurring either during construction or operations aboard attack boats that field Tomahawk Land Attack Missiles. Until 2018, the Navy had financially protected General Dynamics Electric Boat from liability in the event of a Tomahawk accident in new submarine construction under an unusually high-risk provision due to its higher energy propellant.
The Navy says that EB should cover the risk, while General Dynamics has said they are unable to secure an insurance policy that would cover any accidents with high-energy propellant in the missiles that could cost billions in damages and be an existential risk for the company, several sources familiar with the negotiations have told USNI News.
“The American taxpayers have the right that when a company does something that is willful and wrong … and it results in a catastrophic event, that they not be the ones to be held accountable, that industry be held accountable for that. That’s my responsibility to the American taxpayer, as a U.S. government official,” Del Toro told reporters during a press roundtable at the Surface Navy Association symposium.
“I’m going to hold the ground and I’m willing to compromise on some things. I’m not willing to compromise on everything. They’re going to have to come to the table with reasonable language that the American taxpayer can accommodate on that ground.”
A spokesman for General Dynamics declined to comment on the contract dispute when contacted by USNI News.
Del Toro would not elaborate on the specific divisions between EB and his office when asked by USNI News.
“I’m not going to go into the details of what the negotiation is exactly over. What I’m saying is, you need to come back with reasonable language that is acceptable to the American taxpayer and that myself and the Secretary of Defense and everybody else is comfortable with before we sign the agreement,” he said.
“We continue to have those discussions and I just spoke to one of their senior VPs and basically encourage them to come to the table with language and compromises that make sense for the U.S. government.”
The split between the service and the shipbuilder has stalled the advance procurement contracts for two Block V Virginia-attack boat that were set to start in Fiscal Year 2024 and are now almost a year late, several sources confirmed to USNI News over the last month.
The lag in the contracts for the submarines and indemnification issues from Tomahawks and the emerging hypersonic missiles came up in the Fiscal Year 2023 defense policy bill.
“We remain concerned with the lack of resolution regarding open indemnification requests related to the Conventional Prompt Strike program, other weapons programs, and the associated planned employment platforms. We note these delays could lead to significant delivery delays for both Navy and Army hypersonic weapons programs, the next block of Virginia-class submarines, and other programs,” reads the explanatory statement accompanying the compromise Fiscal Year 2023 National Defense Authorization Act.
In terms of hypersonic missiles, which will be fielded on attack boats with the Virginia Payload Module and the Zumwalt-class guided missile destroyers, the Navy signed an indemnification agreement on Tuesday with Northrop Grumman and Lockheed Martin, Del Toro told USNI News.
“Lockheed Martin and Northrop Grumman came to the table in a reasonable way and we came to an agreement on what the language should be,” he said.
“So, there’s no reason why General Dynamics can’t do the same.”