Navy Awards GD Electric Boat $1.28B in Contracts While Service Continues Sub Negotiations

October 10, 2024 5:35 PM
A Virginia-class under construction at General Dynamic Electric Boat. EB Photo

The Navy this week issued General Dynamics Electric Boat two contract modifications worth $1.28 billion to keep submarine suppliers operating while the service and the shipyard continue contract negotiations for 17 planned submarines.

The service issued two separate contract modifications on Oct. 8 – one for $878 million for future USS Baltimore (SSN-812) and SSN-813, both Block V Virginia-class attack submarines, and another $350 million for long lead materials for Block VI Virginia-class boats.

“The material being procured for the two SSNs include items such as valves, pumps, castings, forgings among other items that are required in the construction of the submarines,” Naval Sea Systems Command spokesperson Jamie Koehler told USNI News in a statement.

Both modifications will bolster the “furtherance of the Navy’s commitment to the health and stability of the industrial base,” according to the Oct. 8 contract announcements. The goal of the contract is to keep critical submarine suppliers operational and solvent while the Navy and EB continue to negotiate the contract for the two submarines, a source familiar with the underlying reason for the contract modification told USNI News.

Asked to explain this language, NAVSEA said in a statement: “The Navy is committed to the health of the industrial base and providing stable demand is one manner to do so. This contract modification supports that demand signal and continues the Navy’s commitment to improving the health of the industrial base through continued procurement efforts.”

The awards come as the Navy and General Dynamics struggled to reach a deal for 17 planned submarines: the two Block V Virginias that the service is purchasing as Fiscal Year 2024 boats and multi-year procurement contracts for ten Block VI Virginia-class attack boats and five Build II Columbia-class ballistic missile submarines.

The ongoing negotiations for the 17 submarines comes as the Navy proposed a new funding proposal called Shipyard Accountability and Workforce Support (SAWS) for the FY 2024 Block V Virginia boats. That proposal could allow the service to pull money forward for submarines not yet on contract so HII Newport News Shipbuilding and Electric Boat could increase the labor wages for shipyard workers, USNI News previously reported.

Labor shortages and rising costs have been a problem for the Navy’s submarine programs since the COVID-19 pandemic. Building costs for submarines have gone up 20 percent since early 2020, USNI News understands.

Under the SAWS proposal, the Navy could separate payments to different parts of the submarine workforce, allowed the shipbuilder to have more flexibility in how it pays laborers. The proposal would create a pool of funding to pay crane operators and supervisors who work throughout the yard, while the costs to pay welders and pipe fitters would be attached to each submarine hull.

The White House Office of Management and Budget rejected the proposal, which received some support from congressional authorizers. Congressional appropriators are more skeptical of the proposal.

Cost increases on the FY 2024 boats, mostly due to increased labor wages, led the White House to ask for another $1.95 billion for SSN-812 and SSN-813, which are not part of a previous Block V multi-year deal. That request did not make it into the current continuing resolution Congress passed to fund the government into Fiscal Year 2025.

One of the FY 2024 Block V Virginia-class attack boats is a specialized submarine for seabed warfare, while the other will be a standard Block V boat with the Virginia Payload Module.

Mallory Shelbourne

Mallory Shelbourne

Mallory Shelbourne is a reporter for USNI News. She previously covered the Navy for Inside Defense and reported on politics for The Hill.
Follow @MalShelbourne

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