Navy’s Single Sub Buy Plan Raises Concerns with Congress

April 18, 2024 6:33 PM - Updated: April 24, 2024 12:18 PM
A Virginia-class under construction at General Dynamic Electric Boat. EB Photo

Lawmakers raised concerns with Navy leaders this week over lags in U.S. naval shipbuilding after the service altered plans for attack boat procurement for the first time in several years.Seeking to adhere to the Fiscal Responsibility Act of 2023 that capped defense spending, the Navy released a Fiscal Year 2025 budget that wants to buy six battle force ships and decommission 19. The service elected to buy one Virginia-class submarine instead of the usual two attack boats it purchases.

Lawmakers have criticized that decision and voiced concern over what the decreased buy means for the submarine industrial base.

Industry is currently building Virginias at a rate of about 1.3 boats per year. Navy officials argue that the backlog at General Dynamics Electric Boat in Connecticut and HII’s Newport News Shipbuilding in Virginia justifies the decision to buy one attack boat this year and that a multi-billion dollar funding injection into the submarine industrial base will prevent disruptions to suppliers.

During a House Armed Services seapower and projection forces subcommittee hearing on Wednesday, ranking member Rep. Joe Courtney (D-Conn.) contested the Navy’s assumptions and argued the purchase reduction would take $1 billion out of the program, with limited benefits to many companies in the industrial base.

The Navy is asking for $7.3 billion for the Virginia-class program, with $3.6 billion for the one submarine and $3.7 billion in advanced procurement funding for submarines it plans to buy in FY 2026 and FY 2027. In an exchange with Navy acquisition chief Nickolas Guertin, Courtney pointed to submarine suppliers that wouldn’t benefit from advanced procurement funding.

“Not every supply chain company that feeds into the submarine program is an advanced procurement long lead supply company,” Courtney said. “A lot of the other pieces of the submarine that are funded through just the full funding of any vessel may not be in that bucket of advanced procurement.”

Asked what happens to the companies that do not contribute to long lead items, Guertin told Courtney the service had to make “difficult trades” but cited the advanced procurement money for boats in later years.

“The supply chain actors that are perhaps not in that same category, we’ll have to take a closer look at that one and see what we can do to help that aspect of the industry as well,” Guertin said.

Courtney issued a three-page memo about the submarine industrial base to his HASC colleagues before the Wednesday hearing this week. In that memo, Courtney cited the consequences of the decreased attack boat buy, including almost $1 billion of “sunk costs” from advanced procurement funding the Navy received in FY 2023 and FY 2024.

“The Navy has been unable to demonstrate how these funds will be used now that they have reduced procurement from two submarines in FY25 down to one,” Courtney wrote in the memo.
“Either way, by not using the already-purchased parts on the second FY25 boat, the Navy is not only sinking costs, but is creating uncertainty in the industrial base which will have dramatic effects to the number of domestic suppliers and their workforce as they consider if they have a stable, strong demand signal to make capital investments to increase capacity.”

Speaking to reporters before the hearing, Courtney said money for the submarine industrial base projects might not benefit the narrow bench of suppliers that need assistance the most.

“If you look at the SIB investment and break it down, the fact is a significant portion of that is not going into submarine production,” he said.

“There’s definitely money going into submarine maintenance, which is a good thing. There’s no question that that’s been neglected for a really long time. But even the portion that is allocated for supply chain companies, it’s not going to be like peanut butter being spread across the whole universe of supply chain companies. There are supply chain companies, which don’t fall into the SIB formula for assistance. So for them, they’re basically looking at a 50 percent cut.”

The Navy has not detailed how it plans to use the more than $17 billion SIB funding planned for the next five years across the maintenance, new production and public shipyard infrastructure improvement. Some of the money marked for the SIB is for projects like updating the drydocks at the four public shipyards as part of the Shipyard Infrastructure Optimization Plan, or SIOP.

“What’s the right strategy here?” Courtney said rhetorically to reporters earlier this week.
“What the Navy has embraced is a cut procurement strategy and I think that’s the wrong way to go.”

“We’re seeing boats that are coming in late, but they’re coming in and they’re coming in with high-quality scores on their sea trials,” he added.

Courtney said he was in touch with Australian officials about how the one submarine purchased in FY 2025 could affect the tripartite submarine agreement between the U.K., the U.S. and Australia. To meet the Australian demand for three to five Virginia-class attack boats and also build the Columbia-class ballistic missile submarine, Newport News and Electric Boat would have to build at a rate of 2.33 Virginias per year.

“They’re still very much committed to AUKUS and they’re watching this very closely. I can tell you that they have also been talking to the Navy and at this point this has not changed their decisions to make investments in the U.S. industrial base,” Courtney said to reporters.
“Which is an amazing decision on their part. But certainly, the media noise in Australia viewed [the one Virginia buy in 2025] as a potential obstacle for AUKUS.”

Subcommittee chairman Rep. Trent Kelly (R-Miss.) said cutting an attack submarine will not allow the U.S. to get to the build rate it needs to support the Australians.

“Sending a strong demand signal is essential for maintaining industrial capabilities and international confidence in our naval production,” Kelly said in his opening statement. “Reducing our order from two boats to one in this year’s budget does not inspire confidence, nor does it forecast stability to our industry partners and allies.”

Some lawmakers, like Senate Appropriations Committee defense subcommittee chairman Sen. Jon Tester (D-Mont.), echoed Navy Secretary Carlos Del Toro’s criticisms of industry over the last few months.

“Secretary Del Toro, you had a 45-day review of Navy shipbuilding and documented a three year delay in the new frigate program, a two-year delay in the latest aircraft carrier, two to three year delay in Virginia-class attack submarines, a 12 to 16 month delay in the Columbia-class submarine This is despite unprecedented support by Congress,” Tester said Tuesday during his subcommittee’s hearing.

“Headlines and delays like this should constitute a full-blown emergency for the Navy and shipbuilding industry. I know there are no quick fixes, but I have yet to see what either party is prepared to do about it. And to be specific, who’s being held accountable?”

Del Toro referred to the buybacks during his testimony before Tester’s subcommittee on Tuesday.

“Many of these shipyards are actually making stock buyback programs, where they’re buying back stocks to the tune of $4 billion and upwards of that, that’s unforgivable. And we need them to invest in their own shipyards, just as much as the American taxpayer is investing in the budget to get these production lines back up,” Del Toro said.

According to data provided to USNI News, the seven major U.S. naval shipyards have invested about $5 billion in capital improvements over the last five years.

During the HASC seapower hearing, Kelly said it’s “unclear exactly what has been achieved” through the 45-day review.

“What is clear is we need a deeper level of self-reflection from the Navy,” Kelly said.

Mallory Shelbourne and Sam LaGrone

Mallory Shelbourne and Sam LaGrone are USNI News staff writers.

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