Report to Congress on Virginia-class Submarine Program, AUKUS

June 19, 2024 8:23 AM

The following is the June 12, 2024, Congressional Research Service report, Navy Virginia-Class Submarine Program and AUKUS Submarine (Pillar 1) Project: Background and Issues for Congress/

From the report

Virginia-class submarine program. The Navy has been procuring Virginia (SSN-774) class nuclear-powered attack submarines (SSNs) since FY1998, and a total of 40 have been procured through FY2024. From FY2011 through FY2024, they have been procured at a rate of two per year. When procured at that rate, they have an estimated procurement cost of about $4.5 billion each. Although they have been procured at a rate of two boats per year, the actual production rate has fallen short of 2.0 boats per year, and since 2022 has been limited by shipyard and supplier firm workforce and supply chain challenges to about 1.2 to 1.4 boats per year, resulting in a growing backlog of boats procured but not yet built. The Navy and industry are working to increase the Virginia-class production rate to 2.0 boats per year by 2028, and subsequently to 2.33 boats per year, so as to execute the two-per-year procurement rate, replace three to five Virginia-class boats that are to be sold to Australia under the AUKUS submarine (Pillar 1) project (see below), and reduce the accumulated Virginia-class production backlog. Congress has appropriated billions of dollars of submarine industrial-base funding to support this effort.

The Navy’s proposed FY2025 budget requests the procurement of one Virginia-class boat, which would be the 41st boat in the class. Prior-year Navy budget submissions had projected that two boats would be requested for FY2025. The boat requested for FY2025 has an estimated procurement cost of $5,759.5 million (i.e., about $5.8 billion), but the Navy states that about $1 billion of that is for materials and equipment for future Virginia-class boats, making the estimated cost for the requested boat itself roughly $4.8 billion. The boat has received $1,871.6 million in prior-year “regular” advance procurement (AP) funding and $272.0 million in prior-year Economic Order Quantity (EOQ) funding, which is another kind of AP funding. The Navy’s proposed FY2025 budget requests the remaining $3,615.9 million needed to complete the boat’s estimated procurement cost, as well as $2,422.0 million in “regular” AP funding and $1,298.3 million in EOQ funding for Virginia-class boats to be procured in future fiscal years, and $293.0 million in cost-to-complete (CTC) funding to cover cost growth on boats procured in prior years.

A key issue for Congress for FY2025 is whether to procure one or two Virginia-class boats in FY2025. The Navy states that procuring two would require adding $3,225.0 million (i.e., about $3.2 billion) to the Navy’s FY2025 procurement funding request for the program, that the Navy requested one boat rather than two due to limits on the Navy’s budget topline and the growing Virginia-class production backlog, and that the request includes a second shipset of selected Virginia-class components so as to provide stability to key submarine supplier firms. Supporters of procuring two boats argue that doing so would provide greater stability for the industrial base and send a stronger signal of resolve to potential adversaries such as China.

AUKUS submarine (Pillar 1) project. In September 2021, the Australian, UK, and U.S governments announced a significant new security partnership, called AUKUS. Pillar 1 of AUKUS is a project to (1) rotationally deploy four U.S. SSNs and one UK SSN out of a port in Western Australia; (2) more significantly, sell three to five Virginia-class SSNs to Australia and subsequently build three to five replacement SSNs for the U.S. Navy; and (3) have the United States and UK provide assistance to Australia for an Australian effort to build additional three to five SSNs of a new UK-Australian SSN design to complete a planned eight-boat Australian SSN force. Congress approved enabling legislation for Pillar 1 as part of its action on the FY2024 National Defense Authorization Act (NDAA) (H.R. 2670/P.L. 118-31 of December 22, 2023). The potential benefits, costs, and risks of implementing (2) and (3) can be compared with the potential benefits, costs, and risks of an alternative of procuring up to eight additional Virginia-class SSNs that would be retained in U.S. Navy service and operated out of Australia along with the U.S. and UK SSNs that are already planned to be operated out of Australia under.

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