JUST IN: Navy’s New Shipbuilding Contracts First to Include Workforce Funds

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ARLINGTON, Virginia — A recent pair of Navy procurement contracts are the first of their kind to include workforce development funds that are designed to help the shipbuilding sector overcome its skilled labor shortages, service officials said Aug. 2.

On Aug. 1, the Navy awarded Huntington Ingalls Industries' Ingalls Shipbuilding division and General Dynamics Bath Iron Works fixed-price incentive (firm-target) multiyear contracts for the construction of Flight III Arleigh Burke-class destroyers. Ingalls Shipbuilding will construct six ships and Bath Iron Works three, with options included for additional destroyers.

Due to potential competition for the option ships, the dollar values of the contracts were not disclosed. However, the contracts do include funding for workforce development introduced in the fiscal year 2023 National Defense Authorization Act, said Program Executive Officer for Ships Rear Adm. Tom Anderson.

Section 122 of the 2023 NDAA requires the secretary of the Navy to “include in any solicitation for a covered contract a special incentive for workforce development.” The amount of funding for workforce development “shall be equal to not less than one-quarter of one percent and not more than one percent of the estimated cost of the covered contract,” according to the NDAA.

“That was something that we added to provide industry [the] opportunity to partner with us to stabilize the existing workforce and bring in additional workforce,” Anderson said during a media roundtable. “So, from a workforce perspective, we assessed what we had, and then of course in the terms of the contract now there are some opportunities” for the two companies to continue developing shipbuilding talent.

Acting Assistant Secretary of the Navy for Research, Development and Acquisition Frederick Stefany said these are the first contracts to include the workforce development funding outlined in Section 122 of the 2023 NDAA. The funds will be used by the companies “to work with their local schools and other local entities to improve the pipeline of talent coming into the shipyards,” he said during the roundtable.

Anderson acknowledged that during and coming out of the COVID-19 pandemic, “we certainly had some challenges with workforce and throughput,” and it remains a challenge “across all of the shipyards.” The workforce development funding “gives us [an] opportunity to aid in the retention, which is a major effort right now.”

During the pandemic, “shipyards had some experience leave the yard — just like every other sector of the economy — and it's really important that they retain the skilled workforce that they have, and that they attract future workforce.

“That's exactly what [the funding] was intended to do,” he continued. “So, getting it on that contract, I think will absolutely benefit us.”

President of the Shipbuilders Council of America Matthew Paxton testified during a House Armed Services Committee hearing in February that the shipbuilding industry’s workforce challenges were “caused in part by the lack of stable and predictable acquisition plans from our government customers.” Stefany noted that multiyear procurement contracts such as the ones awarded for the Arleigh Burke-class ships provide the needed stability for the shipyards.

“The shipyards can plan out their work with a guarantee — as much as a guarantee [there] can be — of, ‘I'm going to get these ships over the next five years, I can plan my workforce, I can put the best production schedule in place knowing I have this work … going forward,’” he said.

The Navy’s confidence in the shipyards to deliver vessels on time is “increasing,” Anderson said. “We are seeing improving trends with regards to schedule performance.” He highlighted the “capital investments” both Ingalls Shipbuilding and Bath Iron Works have made, “which we're starting to see pay off in improved efficiency.”

And the multiyear contracts will “allow both companies the best path forward” to grow stronger and “be able to surge or flex as things go forward,” Stefany said. “The way it turned out is probably the best way for each of them to grow … at the right pace for their own company and their suppliers.”

Topics: Navy News, Shipbuilding