General Dynamics: We Need Navy's Answers On SSBN(X) Subs Acquisition Plan
By Christopher P. Cavas
October 4, 2015
WASHINGTON – Advanced procurement for the SSBN(X) Ohio-class Replacement Program (ORP) submarine is slated to begin in 2017, and the shipyards that will build the submarines are already preparing for the biggest new construction program planned by the U.S. Navy over the next quarter century.
But the Navy has yet to announce or sign off on its ORP acquisition strategy, and the shipyard that is expected to lead the effort, General Dynamics’ Electric Boat, would like some decisions soon. Among the leading reasons, said the company’s top shipbuilder, is the need to determine the right workload so work can proceed on building or changing facilities to build the new submarines.
“We’re within a year or so of needing to start, aside from what we already have started,” said John Casey, GD’s executive vice president for marine systems, which includes Electric Boat, the shipyard in Connecticut and Rhode Island that is expected to lead the ORP effort.
GD expects to spend more than $2 billion to ready its facilities to build the submarines, Casey said.
“It costs money,” he said. “There are modifications to the facilities where you launched the ships that are required. There are buildings, just based on sheer capacity or the size of these [ship module] units, needed to house them, that need to be built.
“I suspect that for the parts Newport News needs to build, they have some investments that need to be made as well,” Casey said, referring to Virginia-based submarine building partner Newport News Shipbuilding, a division of Huntington Ingalls Industries (HII).
So what’s the holdup?
The shipbuilders can’t move ahead, Casey said, until the Navy approves the work-sharing plan submitted in March by Electric Boat and Newport News.
“We do not have a commitment,” Casey said. “Until we have the details of an estimate of what it takes to build a particular building or the equipment that goes in it,” the work can’t begin.
The Navy has said ORP will not replicate the 50-50 teaming arrangement used to build Virginia-class attack submarines. That joint-production agreement, approved in 1998 after a bitter, politically charged struggle that played out in Congress and in federal court, preserved the two-shipyard U.S. submarine-building industrial base but was not intended to provide the most cost-efficient strategy. Under the teaming agreement, both shipyards build certain portions of each submarine and alternate in assembling and completing the subs.
With cost a major driving factor in the ORP production arrangement – the Navy expects the lead ship will cost about $7.6 billion to build plus $4.8 billion for detail design and nonrecurring engineering costs, dropping to around $5 billion each for later subs – it’s expected that Electric Boat will oversee the design and assemble and complete all 12 ORP submarines. But Newport News will make a major contribution to the new submarines and, at the Navy’s direction, the two shipyards got together last winter to hash out the details. Negotiations were tough, Casey said, but agreement was reached and the yards submitted their plan in March for approval.
But they’re still waiting for the Navy's response.
“I cannot honestly tell you that I understand what has happened in the last six months since we turned in that recommendation,” Casey said. “I am not privy to the internal Navy deliberations. There are people that have said it will be done by the end of the year.”
Driving the sense of urgency, he said, is the need to have decisions in place before the middle of 2016, when a Milestone B decision on the program is due – a Pentagon review that decides if a program is ready to move into the engineering and manufacturing development phase.
“If the answer comes back, ‘We do not like your recommendation. We want you to do something different,’ then we have to start all over again,” Casey said. “We have to evaluate what is most important to us. Newport News has to evaluate what is most important to them. We have to re-estimate the cost of the ship. We have to re-define what we think the schedules of the ship are.
“There is a lot of work to be done if the path we are on is disrupted. Frankly, we do not need any disruption. There is not any spare time in this program. We started a little late with the design as a result of the initial construction start being moved about two years to the right. There is no room to be messing with this thing anymore in terms of schedule.”
Discussions with the Navy continued throughout this summer, Casey said.
“There have been a number of meetings with the Navy. I am not sure we have answered all of their questions satisfactorily, frankly – they have not put them in a position of telling us what their position is," he said. “It is kind of tough to know for sure what concerns they specifically have.
“When there is a concern on an issue, I think it is important to understand what the source of that is, he said. “We have seen nothing that I am aware of that would demonstrate that the recommendation we made is not the best recommendation available.”
The Navy declined to comment or provide any sense of how the discussions are going.
“The U.S. Navy has worked and continues to work with Electric Boat and Newport News Shipbuilding to develop a successful build strategy for Virginia and Ohio Replacement submarines while ensuring the most capable submarine force at the most affordable price,” Cmdr. Thurraya Kent, spokesperson for the service’s acquisition directorate, said. “Detailed cost analysis and workforce studies are ongoing – coordinated with both shipbuilders – to ensure a stable foundation is in place when construction of ORP begins in fiscal 2021.”
Newport News shipbuilding also declined to comment for this story, referring a reporter to the Navy.
But questions about the work-sharing agreement have been raised this year during each of HII’s quarterly earnings calls and at industry conferences.
“How we participate in the submarine construction for the country is all under discussion at this point,” HII president Mike Petters said Aug. 6 during an earnings call, “because the submarine industrial base that produces the Virginia-class will be called on to produce the Ohio replacement program.
“And when you take a ship that's the size of Ohio [replacement] and you put it into that base, it's going to have an impact on various parts of the base, and so the discussions that we're having between us and our partner and our customer are all about how do we do all of the submarine work as efficiently as possible. So without trying to handicap or predict how all that's going to turn out, I would just say we expect to be fully engaged in the production of submarines for this nation for the foreseeable future.”
The agreement hashed out between the companies, Casey said, provides for EB to undertake the larger share of the work, but also leaves a hefty portion for Newport News. Based on modular construction work, and not counting the hours needed to deliver, assemble and deliver each submarine, the work split is roughly 60 percent to 40 percent, he said.
“The estimates are not refined,” Casey said, and “assume we do what that proposal says.”
And, unlike the Virginia teaming arrangement, where illustrations and charts point to certain sections of each submarine denoting who builds what, the companies have decided not to talk about how the work is divided.
“We do have this agreement in place,” Casey said. “We are not going to talk details of what this agreement says. But it plays out in pretty clear detail how the pieces and parts of the ship go together.”
Experience from the Virginia program flowed into the proposed ORP build plan. “We tried to pick areas of the ship that were similar to areas that each person was already building for the most part,” Casey said.
Casey pointed out that it’s not just the two shipyards that need agreement on the ORP work plan. Britain has a significant interest, with a common Trident missile compartment designed for the SSBN(X) and the UK’s Successor submarine program.
“I think of the 5,000 suppliers, along with the U.K. suppliers, that are necessary to execute a successful global strategic deterrent,” Casey said. “I think the sooner we have alignment between the industrial base in the Navy, the better off we all will be.”
A Capitol Hill source familiar with the issue agreed with much of what Casey had to say.
“The Navy agrees with 90 to 95 percent of this thing,” the source said. “Issues have been raised about fees – prime versus subcontractor. The Navy is doing deep dives on what elements of the work split they can agree with, and which have questions.”
In the absence of any public discussion of the submarine building plan, GD has been on the Hill in recent weeks briefing congressional delegations and staffers, the source said. According to the source, Newport News has not taken part in that process.
“That could give the impression that Newport News isn’t totally on board with the agreement,” the source said.
The source agreed that the Navy vetting process seems to be taking a long time, saying, “We sort of expected this to be done and out of the way by now.”
But with major milestone decisions looming in 2016 and the need for clarity growing each week, the Hill source echoed Casey’s calls for some answers.
“It would be helpful to know what we’re all working toward,” the source said. “Aside from the delay in evaluating the joint proposal, it would probably be good if, going into that detail design process, everyone was set on what General Dynamics is doing, what Newport News is doing, what the Navy is doing.”