This post has been updated to include additional information from the administration.
The White House asked Congress on Monday for $7.3 billion split across two requests for additional funds for the Navy to pay for Columbia and Virginia-class submarines, USNI News has learned.
According to a senior Navy official, the White House Office of Management and Budget is asking Congress for an additional $5.69 billion to pay for cost overages on three Virginia-class submarines and workforce development at General Dynamics Electric Boat and HII’s Newport News Shipbuilding. In a separate ask, OMB wants Congress to fund $1.59 billion to keep Columbia-class nuclear ballistic missile submarine construction on track during the current stop-gap federal funding bill, which expires in about a month.
The $5.69 request is an “emergency appropriations … that’s designed to address shortfalls in our Virginia-class fast attack submarine program,” a senior Navy official told reporters on Monday.
“Our Virginia-class fast attack submarine program is not where it needs to be right now, the program and the shipyards are not producing submarines at the rate that our national security strategy and the national defense strategy require.”
Currently, the yards deliver Virginias at a rate of 1.3 boats per year – far short of the two-per-year cadence the Navy needs to meet its national security goals and the 2.33 rate it needs to meet the commitment to the AUKUS Pillar 1 agreement between the U.S., Australia and the U.K., that will provide the Royal Australian Navy with three to four Virginia-class boats.
The $5.69 Virginia emergency funding request includes:
- $1.95 billion to cover the unplanned cost increases for Block V attack boats Baltimore (SSN-812) and Atlanta (SSN-813) over the $9.5 billion already appropriated.
- $1.53 billion over the $7.3 billion Fiscal Year 2025 request for the first Block VI Virginia boat.
- $518 million for “wage productivity enhancements” at Electric Boat and Newport News.
- $1.95 billion for “other productivity enhancements” at the two yards.
Additionally, the request includes a legislative proposal for the Navy to directly support wages at the two nuclear yards in the future.
The OMB request for emergency funding comes as the Navy and the White House have distanced themselves from a competing proposal that would allow EB and Newport News to access money that has been appropriated for submarines not-yet under construction. The proposal, also created by the Navy but then abandoned, would pay for current cost gaps in wages and improve infrastructure as part of the negotiations for 17 submarines the service wanted to get under contract this year.
The Shipbuilder Accountability and Workforce Support, or SAWS plan, as a means to ease the spike in worker wages following the COVID-19 pandemic OMB elected not to use the plan and offered up its expanded supplemental instead.
“We believe [OMB’s] proposal offers the best way forward to improve shipyard performance while allowing the executive and legislative branch to direct this money where it will go and hold ourselves accountable based on the metrics that we’ve been using with Congress,” the senior official said.
“There are no easy solutions.”
The current OMB proposal and competing SAWS funding model are acknowledgments of the more than 20 percent increase in workforce cost since the Block V Virginia-class multi-year submarine contract. SAWS would have created a pool of about $10 billion for the shipyards to use as they needed for workforce development and infrastructure, several sources familiar with the proposal have told USNI News.
Creating that pool of funds under SAWS was part of larger contract negotiations for 17 total submarines between EB, Newport News and the Navy. Those included Baltimore, Atlanta,9 to 10 Block VI boats and five Build II Columbia-class submarines.
OMB elected to go with an incremental funding approach focusing on the three Virginias and then wants to wait and see.
“We’re trying to make targeted investments based on our conversations with industry that will address the most acute pain points, and then see if those investments have, in fact, generated the return,” the official said.
“This is not about addressing a challenge associated with 17 boats. This is about putting in place productivity enhancements that can make the two yards more productive, while … addressing the challenges that are closest to our current fiscal cycle.”
Both EB and HII previously expected to sign the contracts for the 17 boats by the end of this calendar year, but revised their revenue targets to reflect the stalled negotiations. HII, which doesn’t have the diversified portfolio that General Dynamics has, saw a stock drop of more than 20 percent when it revised the revenue targets.
A spokesperson with EB declined to comment on the OMB proposal.
In a Monday statement to USNI News, HII’s CEO Chris Kastner defended the SAWS proposal over the OMB supplemental pitch.
“A piecemeal approach will not yield the sustained production rate increases required a) to complete current construction contracts that pre-date the pandemic, and b) to meet the generational increase in the demand for submarines,” reads the statement.
“By annualizing support services using funds already within the Navy’s current FYDP – ie, requiring no new appropriations unlike OMB alternative – SAWS recognizes the underlying realities: a tight fiscal environment, inflation, increased wage expectations for skilled labor, and extended supplier lead times… We look forward to resolving these challenges with the Navy, through SAWS or a comparable alternative.”
Following an earlier version of this post, Rep. Joe Courtney (D-Conn.) told USNI News the OMB proposal was a late recognition of Navy funding shortfalls in the Fiscal Year 2025 budget.
“The Navy’s request is a belated recognition of short-term funding shortfalls in the Virginia program that its original 2025 budget omitted. This delay has also impeded the completion of a new contract for 17 submarines that is 18 months overdue,” Courtney said.
“I look forward to hearing from the Navy on how today’s request will enable the submarine industrial base to address future funding shortfalls and achieve the performance we need to satisfy the overall inventory goal for the Navy, as well as our commitment to our allies with regard to AUKUS.”
