The multi-billion dollar anomaly for submarines in the current stopgap spending bill isn’t enough to get the boats the Navy wants under contract, the chief executive officer of the nation’s largest shipbuilder said Thursday.
“It’s a step in the right direction,” HII CEO Chris Kastner told reporters of the $5.6 billion in the current continuing resolution allotted for the Virginia-class submarines and the workforce for the Navy’s nuclear-powered ships. “It just doesn’t solve all the challenges.”
Kastner said he is currently in talks with the Navy, along with General Dyanmics Electric Boat, about the money in the CR and how to get two Fiscal Year 2024 Block V Virginia-class boats under contract. The current CR, which keeps the government funded through March 14, includes anomalies to fund the Virginia and Columbia programs. Under a CR, the Pentagon is restricted to spending at the prior fiscal year’s levels and can’t spend money on new start programs.
Cost increases for the two FY 2024 boats – Baltimore SSN-812 and Atlanta SSN-813 – are mostly due to an increase in labor costs. Congress appropriated $9.4 billion for the two boats in Fiscal Year 2024 and the stop-gap bill added an additional $1.95 billion to cover the cost of the two boats.
HII’s Newport News Shipbuilding, General Dynamics Electric Boat and the Navy are struggling to ink a deal on 17 planned boats, including the two FY 2024 Virginia-class submarines and multi-year procurement contracts for ten Block VI Virginia-class boats and five Build II Columbia-class ballistic missile submarines.
“The most elegant and innovative solution to that is the SAWS approach, which I think we have a bit of a timing issue with the change in administration,” Kastner said.
The Shipyard Accountability and Workforce Support proposal, also known as SAWS, is a Navy-crafted plan meant to deal with the rising costs on both the Virginia and Columbia-class boats. SAWS would allow the Navy to pull money forward for boats not yet under contract so Electric Boat and HII’s Newport News Shipbuilding could increase wages for shipyard workers. It would also let the Navy create a funding pool for employees like crane operators and supervisors working throughout the yard, while wages for trades like pipe fitters and welders could be attached to each hull.
“We need to continue those discussions with the exiting administration and the incoming administration on SAWS to get that done. It’s definitely the most innovative approach to getting it done,” Kastner said. “It stabilizes the industrial base. It allows for additional investment. It allows for additional wages, which will increase the ability to improve attrition. It just solves a lot of significant structural issues within the nuclear shipbuilding business.”
The White House Office of Management and Budget opted not to use the Navy’s SAWS proposal. Lawmakers, citing a lack of transparency from the Navy in the Fiscal Year 2025 National Defense Authorization Act, shelved the SAWS plan in the policy bill.
“I think the challenge with SAWS … was that it was put on the table pretty late in the game to give the [House Armed Services Committee] and [Senate Armed Services Committee] members and then maybe more appropriately, the appropriators, the time to kick the tires and wrap their head around it,” Sen. Tim Kaine (D-Va.), who was the chair of the SASC seapower subcommittee in the last Congress, told reporters last month. “I think the case was convincingly made that the anomaly was needed to keep us moving forward. But I think SAWs was not dismissed out of hand, but it was kind of maybe not ready for prime time yet.”
Kastner said he thinks the incoming Trump administration might be more open to contracting approaches like SAWS.
The shipbuilding CEO attributed the cost growth on the submarine programs to increases costs for materials, labor and overhead. Newport News has struggled with a greener workforce since the COVID-19 pandemic and has had high attrition rates in recent years. Kastner said most of the workforce issues boil down to needing to increase workers’ wages so the shipbuilder is competitive with companies like Amazon.
HII is trying to increase the number of people they hire out of the Newport News regional development centers where welders and electricians train, Kastner said.
“We had been hiring only about five percent of our workers from that,” he said. “We were able to improve that to 30 percent. We would like to get that to over 50 percent because then you have people coming in the door … they’ve chosen the profession, they have some idea of how hard it is, and they still want to do it. They still want to accept the job.”
He also said expanding federal PELL grants and making apprenticeships more accessible could help the shipbuilders hire and retain more people.
“They’ve been discussed. They’ve not gotten over the goal line yet,” Kastner said. “But I think both of those would help expand the manufacturing labor in the United States.”
