The Navy and its nuclear submarine shipbuilders are closing in on a deal to put two long-awaited Virginia-class submarines under contract, company leaders said in earnings calls over the last week.
Supported by a $5.7 billion anomaly for submarine construction in the most recent continuing resolution to fund the federal government, the Navy, General Dynamics Electric Boat and HII’s Newport News are finalizing the detail design and construction contracts for the Block V Baltimore (SSN-812) and Atlanta (SSN-813) attack submarines following an injection of funds to make up for cost overruns.
As part of the Fiscal Year 2024 defense spending bill, Congress appropriated $9.4 billion for the two boats, but were short by almost $2 billion to cover the rising cost of labor and supplies.
The funds “allow the Navy to cover fact-of-life cost increases on the two FY 24 boats and one FY 25 boat. They also provide funds for additional workforce development and allow us to target funding at specific productivity areas that we are working at with our customer,” General Dynamics CEO Phebe Novakovic said in a Jan. 29 earnings call.
“We are working with our customer to get this under contract as soon as possible.”
The Fiscal Year 2025 boat will be the first of nine or ten Block VI attack boats. The Navy is also set to negotiate contracts for five Build II of the Columbia-class nuclear ballistic-missile submarines.
The year-plus delay in signing contracts for the 17 boats has been at the center of a struggle for how Navy, Congress and industry should manage the ballooning costs of submarine construction after the COVID-19 pandemic. HII is pushing a plan called the Shipbuilder Accountability and Workforce Support, or SAWS, that the Navy developed and then abandoned.
SAWS allows HII and EB to take some workforce money in existing contracts for boats that haven’t begun construction and break those open to create a pool of more than $10 billion to apply more freely to infrastructure and labor costs.
“Block VI and Columbia Build II, we’re going to have to see the acquisition approach for those boats they developed,” HII CEO Chris Kastner said during a Thursday earnings call.
“Anything that brings additional investment into the industrial base that accelerates shipbuilding production is positive, but we’re going to take this one step at a time.”
In addition to the cost for the new construction boats, HII and EB also have to contend with the pre-COVID-19 Block IV fixed price contracts for four boats — Idaho (SSN-799) and Utah (SSN-801) at EB and Massachusetts (SSN-798) and Arkansas (SSN-800) at HII’s Newport News Shipbuilding.
Those boats will require additional money to complete due to the same labor and supply pressures and SAWS could help with those costs, supporters of the proposal have told USNI News. Those opposed to SAWS worry that the money would live outside of oversight controls.
Last week at the WEST 2025 conference, Vice Adm. John Skillman, deputy chief of naval operations for integration of capabilities and resources (N8), said the Navy is working through the two yards’ concerns in the contracting process.
“I would say that bottom line, regardless of the fiscal strategy that was, some of the functionality that SAWS provided for would help the yard be better at building submarines,” he said.
The CR anomaly listed specifically where the development money would go “to help them in the very near term and then working the [upcoming] contract to figure out what we would do in the next contract,” Skillman said.
“That’s what they’re working on and that’s why it’s taken a little while.”
