Submarine Builders Push Lawmakers to Approve Budget
“Any program such as ours that has significant contractual actions required to keep it on track are being caught up in this mousetrap,” said John P. Casey, president of General Dynamics Electric Boat.
Electric Boat, in Groton, Conn., is one of the prime contractors for the Virginia-class submarine. It is teamed with Northrop Grumman Shipbuilding in Newport News, Va. The Navy plans to buy 30 boats to replace aging Los Angeles-class submarines. So far, seven ships have been delivered. The yards had begun to double production rates to two boats per year beginning in 2011, but the ramp-up is being slowed down by the budget crisis, industry officials said.
The Navy at the end of January funded one ship and approved early purchases of materials for the second submarine, which is scheduled to begin construction this summer. Until the Pentagon gets a 2011 budget approved, as opposed to being funded by temporary “continuing resolutions,” those plans are at risk, shipyard executives said.
“We’re trying to be as creative as we can to schedule our material procurement and our construction activities so that the program will avoid this disruption. But at some point, we’re supposed to be cutting steel and making parts at both shipyards,” said Casey. “Then we get into a position where we cannot continue to absorb that delay without it interfering with the cost of that program.”
This is bad news for the Navy, because the cost of submarines may go up, he told reporters. “I can safely say, if it gets resolved in another couple weeks, I think we can mitigate any issues,” Casey said. “If it doesn’t get resolved until the end of the year, I can safely say there’s going to be some significant issues.”
The worst-case scenario for the short term is that the second ship gets bumped from the plan, said Becky Stewart, vice president for submarines at Northrop Grumman Shipbuilding-Newport News. Delaying that boat to next year is not an option. That would mean adding an eleventh ship to the Navy’s 2012 budget, which already includes two Virginia-class submarines. The Navy simply cannot afford another $2.5 billion to buy a third submarine, she said.
“Eventually, if we don’t get that ship funded, it goes all-stop,” said Stewart.
In the latest contract for eight Virginia-class submarines, there is a clause that essentially allows for its cancellation should funding not arrive, said Casey, who emphasized that there has not been any discussion of contract termination. Yard officials previously agreed to a contract modification that changed the cancellation date to March 21.
“We’re in discussions with the Navy to move it some more, to make sure they have the flexibility that they may need while the Congress is debating this budget issue,” said Casey. “We’re not trying to pressure the Navy in any way to make a decision to interfere with the progress we’ve made on this program,” he added.
In addition to wringing out costs, the yards have compressed the delivery schedule so that every submarine is produced faster than its immediate predecessor. The goal is to build them in 60 months, and they don’t want to lose the momentum, officials said.
Yards also worry about their supplier base. Lower-tier subcontractors are particularly vulnerable to funding disruptions, Stewart pointed out.
Some legislators sounded confident about resolving the budget problem soon, before shipbuilding programs are compromised.
“You and the workers have now made the case that the investment we make in submarines is very cost effective,” said Sen. Joe Lieberman, D-Conn. “It’s the standard for what should happen in the Defense Department.”
“We just have to tap the putt in,” said Rep. Joe Courtney, D-Conn.
But others, including Sen. Jack Reed, D-R.I., were more pessimistic about upcoming votes on competing budget proposals. “My guess is, that will get into serious negotiations. I think neither will pass,” he told submarine officials.
In remarks to the shipbuilders, Sen. Mark Warner, D-Va., a former businessman, expressed frustration with the current standoff. “This is a crazy way to run an enterprise as large as the federal government, to be moving on two-week [continuing resolutions],” he said. “We cannot give you the predictability you need if we can’t get our political act together and put the balance of this fiscal year’s budget in place and start putting forward for the following year.”