
The White House Office of Management and Budget is proposing a $5 to $6 billion injection of money into submarine funding to get at least two Virginia-class attack boats under contract and alleviate workforce shortfalls, several sources familiar with the proposal have told USNI News.
The proposal, expected to be part of the upcoming continuing resolution bill to keep the government funded past December, will pay for the future Virginia-class submarines Baltimore (SSN-812) and Atlanta (SSN-813) and help alleviate the unexpected increase in worker pay for shipbuilders.
The money, which could be included as an anomaly in the next continuing resolution, is an alternative to a plan known as the Shipbuilder Accountability and Workforce Support that the Navy originally formed, but has backed away from recently. SAWS is designed to take money that has been appropriated for already contracted submarines not yet under construction and allow it to be used to pay for workforce shortfalls. The service backed away from the proposal at the direction of OMB, several sources have told USNI News.
In a Tuesday statement to USNI News, the service said it’s working with Congress and the shipbuilders on larger submarine funding issues.
“The Navy is making substantial investments to strengthen and expand the submarine industrial base, as reflected in the Fiscal Year 2025 budget request and our plans over the next five years,” Navy spokesperson Capt. Courtney Hillson told USNI News on Tuesday.
“We are working closely with industry partners and Congress to increase capacity, enhance capabilities, and grow the skilled workforce needed to support both construction and sustainment efforts across the maritime industrial base. At this time, I have no additional information to share regarding potential legislation or internal deliberations.”
OMB’s anomaly proposal for the upcoming CR will be the second time the White House has tried to get the money together to put Baltimore and Atlanta under contract. OMB asked for a $1.94 billion anomaly in September’s patchwork spending bill, but Congress rejected the proposal.
Congress appropriated $9.4 billion for two Block V Virginia-class attack submarines as part of the Fiscal Year 2024 budget, but when the Navy moved to close the contract with prime contractor General Dynamics Electric Boat, the service found it was still short about a $1 billion per boat. The price difference was due mostly to increased labor costs as a result of the worldwide inflation in salaries.
The cost increases for Baltimore and Atlanta were harbingers for two major submarine contracts the Navy is still negotiating with EB and its shipbuilding partner, HII’s Newport News Shipbuilding, for 9 to 10 Block VI attack boats and five Build II Columbia-class ballistic missile submarines. The dramatic cost increase for labor drove the Navy to propose the SAWS plan, which would pay for a one-time boost for labor and infrastructure costs. Instead of SAWS, OMB instead went with the first failed anomaly plan for Baltimore and Atlanta instead of negotiating contracts potentially work more than $120 billion for up to 17 submarines.
“I expect that the FY 24 ships that are not yet under contract will happen maybe in the next few months, but I don’t have a good sense of timing for the remainder of their negotiations on Block VI or Build II of Columbia,” General Dynamics CEO Phebe Novakovic said in late October.
“It’s going to be hard to get those ships under contract … So, we’re going to have to work that with our customer and Congress.”
A General Dynamics spokesperson referred USNI News to the Navy when contacted on Tuesday.
The delay in awarding the contracts for the new boats resulted in a blow to HII’s bottom line, with the shipbuilder revising its revenue targets last month, causing a one-day stock price drop of more than 20 percent. HII supports the Navy’s SAWS proposal.
“HII is aware of parallel efforts by stakeholders to address critical nuclear shipbuilding needs,” company spokesperson Danny Hernandez told USNI News in a statement.
“We remain committed to an enterprise-wide solution that improves nuclear shipbuilding production capacity and efficiency. Based on the alternatives reviewed thus far, SAWS remains the optimal solution to achieving sustainable production rate increases.”
The contracts for Baltimore and Atlanta were already delayed by more than year ahead of the current stall over funding. Starting in 2022, advanced procurement contracts for the two boats were delayed for over a year due to a disagreement between Secretary of the Navy Carlos Del Toro and EB on insurance liability in a potential missile accident on a submarine.