Navy Plans to Surge Submarine Spending to $5 Billion by 2024

(Bloomberg) -- The U.S. Navy plans to boost spending for its next-generation nuclear missile submarine program by $2 billion in fiscal year 2021 and continue pushing toward $5 billion in 2024, according to the service’s latest annual report to Congress.

The surge begins next year, when the Navy will seek $4.3 billion in funding for the Columbia-class submarine program, up from $2.3 billion in the 2020 fiscal year that begins in October. The funding increase includes $3.9 billion in procurement, according to the service’s new Selected Acquisition Report sent to Congress last month.

The previously undisclosed “For Official Use Only” document projects budget requests of $4.46 billion in fiscal 2022, $4.13 billion in fiscal 2023 and $5 billion in 2024. The document indicates estimated spending beyond 2024 of $92 billion to complete the estimated $128 billion program.

Navy Plans to Surge Submarine Spending to $5 Billion by 2024

The Columbia-class program is an effort to build 12 new ballistic missile submarines, which would replace an older force of 14 Ohio-class subs first built in the 1970s. The submarines are part of a trillion-dollar effort to modernize the U.S.’s sea-air-land nuclear triad over the next 30 years, including maintenance and support. The Columbia-class program was initially approved during the Obama administration, though President Donald Trump has asked the Pentagon to accelerate efforts to bolster the size of the naval fleet.

The planned cost figures outline the enormous financial stakes General Dynamics Corp. and top subcontractors Huntington Ingalls Industries Inc. and BWX Technologies Inc. have in keeping the Pentagon’s fourth-largest program on track and meeting program schedules. The figures give analysts and investors a current snapshot of planned funding that will be competing with the F-35 jet, Navy surface ship purchases and accelerated spending on space systems.

The Government Accountability Office, in a report last month, said the Pentagon’s cost estimate for the program is “not accurate because it relies on overly optimistic” reductions in labor costs, the audit found. The watchdog called on the Pentagon to update its estimate.

The Navy report generally gives an upbeat assessment of a program that remains in the planning and design phase. The initial sub remains on track to start construction in October 2020 even though “design progress is slightly behind schedule with improving trends.” Program management is executing “vigilant oversight to continue progress toward” completing 83 percent of the overall design by construction start, according to the document.

Overall, the industrial base “remains a top program risk” of delivering components on time, on cost and with the required quality, the report said.

The program has 324 critical suppliers who “will be continually visited to insure we can manage what they’re doing,” said Captain Jon Rucker, the Navy’s Columbia program manager. “This is not just a quality thing, this is capability, capacity -- do they have the people, do they have the schedule, do they have the machines” to perform, he added.

To date, General Dynamics on its way to the overall goal has completed 95 percent of “arrangement” designs for the steel structure and electrical or piping systems throughout the submarine versus 96 percent planned.

The company has also completed 40 percent of design work for the lowest-level items of the submarine that need to be completed before General Dynamics can begin ordering material and hard-to-make “long-lead” items for the submarine. It should be at 43 percent, according to plans.

A General Dynamics spokesman referred to the April 24 remarks of Chief Executive Officer and Chairman Phebe Novakovic during an analyst call to discuss first quarter earnings. “We continue to invest in each of our yards with particular emphasis at” the Electric Boat unit “to prepare for the higher production associated with” not only the Columbia but also the latest version of the Virginia-class submarine, Novakovic said then.

Both programs, she added “represent a significant increase in size and performance by acquiring additional manufacturing capacity and different logistics infrastructure.”

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