Navy awards contract for next generation of submarines expected to cost $110B

The Navy on Thursday awarded a $9.4 billion contract to begin construction work on what has for years been its biggest modernization priority: A project to build a new class of at least a dozen nuclear-armed ballistic missile submarines that’s expected to cost $110 billion once all is said and done.

The contract for the new Columbia class went to General Dynamics Electric Boat, one of only two U.S. firms capable of building nuclear-powered vessels. It is the first class of ballistic missile subs the Navy has begun since the 1970s, and will eventually replace the current fleet of Ohio class boats when that fleet reaches its retirement age decades from now.

Senior Navy leaders have long said that the program — which they see as vital, since submarines are the most “survivable” part of the military’s nuclear weapons arsenal — will be placed at the front of the line for funding and construction capacity for years to come. That makes it especially important to hold Columbia’s costs in check so they don’t swallow the rest of DoD’s maritime acquisition budget.

James Geurts, the assistant secretary of the Navy for research, development and acquisition said there’s every reason to think the Navy can do that.

“The design maturity of this program surpasses any other submarine we have ever done. We’ve got a solid design,” he told reporters during a briefing Thursday. “Now we’re moving from design refinement and advance construction into full construction for the first ship, and not taking our eye off the ball of the fact that we will quickly move into annual construction by the time we’re on the third ship. There’s a whole lot of effort to get the first ship out, and get the first ship out right. That’s necessary, but not sufficient. We’ve got to make sure the enterprise is ready to execute the full scope of the program so that we can meet the nuclear deterrent requirements for the nation.”

Thursday’s contract also includes a locked-in price for the second boat in the Columbia class, whose construction isn’t expected to start in earnest until 2024. But in the meantime, the agreement also lets the Navy and Electric Boat get started with construction of components and procurement of materials for that vessel.

Kevin Graney, Electric Boat’s CEO, said that degree of funding certainty is critical for his company, its workforce, and the roughly 5,000 subcontractors who are expected to serve as suppliers for the program. He said it would allow his firm alone the confidence to hire about 3,000 additional workers and begin new capital investments in its shipyards.

“[It sends] certain signals to the industrial base so that they’re going to invest in their facilities, get the workforce in house, and be able to support the required in-yard need date for all that material,” he said. “Getting certainty in that is something that we have long preached to the Navy and to the Congress. We’ve got an opportunity to go execute [the first boat] and then take that workforce and apply them immediately in a second. That’s the way you’re going to maximize learning in this business: Build hull-over-hull as quickly as we can allow the workforce to do it.”

The Pentagon approval process for the Columbia class set affordability thresholds at an average of $8 billion per submarine in constant 2017 dollars. Navy officials said the first ship is expected to come in well under that figure, even though it will be the first of the class — typically the most costly, since it’s also effectively the prototype.

But according to the Congressional Research Service, the Navy itself has acknowledged reservations about its ability to hold the massive program’s costs in check. As recently as May 2019, the service estimated there was a 50% chance that costs would grow once construction actually started.

The Government Accountability Office has also expressed concerns. In June, GAO reported that several key technologies the submarine will rely on aren’t yet mature. For example, a new first-of-its-kind propulsion system designed for the Columbia subs won’t be completely tested and ready until after the first boat is delivered in 2026. GAO warned costs could balloon and the sub’s first planned patrol, in 2031, could be delayed if newly-discovered problems force major redesigns.

Navy officials insist, however, that even though the schedule is aggressive, it is nonetheless realistic.

Rear Adm. Scott Pappano, the program executive officer for the Columbia program, said that’s partly because a significant amount of risk reduction work has already happened, funded mainly through a previous $5 billion detail design contract the Navy awarded Electric Boat in 2017.

“It’s taken a hell of a lot of work to get to this point today. We’ve done a lot of work with large scale, land-based prototyping to shake out the design. We’ve done significant construction prototyping to shake out our manufacturing processes,” he said.

Part of the early design work has also gone toward making the sub’s construction more modular. Electric Boat says 85% of the missile compartments for the new boats can be pre-assembled in sections before they’re attached to the hull, up from the 2% on the Ohio class.

“We’ve also done quite a bit of early advance procurement and construction to shakeout the defense industrial base, which helped us identify missile tube weld issues several years ago that we learned from and addressed to the point now where vendors have delivered 13 missile tubes, 11 of which have been completed,” Pappano said. “But now the real work does begin in earnest.”

The contract the Navy awarded Thursday will be paid out of the National Sea-Based Deterrent Fund, a budgeting mechanism Congress set up specifically to pay for the new generation of ballistic missile subs that will eventually replace the Ohio class boats.

That fund also included special acquisition authorities that let the Navy buy the Columbia class with incremental funding. That’s a significant departure from the normal funding process for federal procurement accounts, which otherwise would require the Navy to obligate all of the money needed to buy a particular submarine in a single fiscal year.

“Some [of] those authorities allow us to more quickly get savings because we can go into serial production earlier — we don’t have to wait for the whole ship,” Geurts said. “In the case of missile tubes, for example, we can go into continuous production early and build those in the most cost effective way across ships. So we’re taking advantage of that.”

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