Next-Generation U.S. Nuclear Sub Facing Cost Overruns, Delays

The U.S. Navy’s plan to deliver the first vessel in its $128 billion next-generation submarine program on time is at risk by a dependence on inexperienced contractors with spotty quality control track records, according to a congressional watchdog.

The Government Accountability Office, in a restricted Nov. 6 report to the Pentagon and congressional defense committees, said the design contract for the first vessel in the Columbia-class sub fleet being built by General Dynamics Corp. could have a cost overrun of as much as 14%, or $384 million.

The initial vessel in the new class of nuclear-missile-carrying subs, the Navy’s highest-priority program, is due for delivery in 2027. The Navy wants the first submarine to launch on patrol in 2030.

Yet that timeline “hinges on timely and quality materials from” an “atrophied supplier base” as General Dynamics and it top subcontractor, Huntington Ingalls Industries Inc., face “risk of delays from critical suppliers that are not yet ready to support construction,” according to the 73-page report obtained by Bloomberg News and marked “For Official Use Only.”

Next-Generation U.S. Nuclear Sub Facing Cost Overruns, Delays

The GAO report outlines in detail the myriad challenges facing contractors and the Navy in the design and construction of a 12-vessel program that advocates say is most survivable leg of the U.S. nuclear triad, comprising land, air and sea-based warheads.

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As an example, the report says that General Dynamics “continues to identify problems with non-destructive testing and welding across the supplier base, including suppliers responsible for piping, valves and large mechanical equipment.”

More broadly, the report signals the difficulties the Navy will face in trying to carry out the Trump administration’s vision for a 355-to-500 vessel fleet by 2045, up from 297 today.

Those difficulties will be one of the first defense-procurement challenges confronting the Biden administration when it takes office next month amid a U.S. economy hobbled by the Covid-19 pandemic. The Columbia’s five-year plan envisions $30 billion being spent on the program through 2026, increasing from $4.7 billion planned for next year to $8.2 billion in 2026.

But first, several quality-control issues have to be addressed.

As the program enters formal construction and lead contractor General Dynamics prepares to award new subcontracts, “many suppliers have readiness and quality problems,” according to the GAO report. “Of their top 25 suppliers, the shipbuilders assessed 18 as not yet ready to support construction demand, not meeting quality expectations or both.”

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Nevertheless, “the shipbuilders plan to spend $4.2 billion on materials from these 18 suppliers out of an estimated $5.5 billion” projected for all 25 firms. They will supply “complex machinery, raw materials and electrical components, among other things,” GAO said.

Many of those contracts are sole-source for specific parts, GAO said.

Both General Dynamics and Huntington face the supply and contractor issues laid out in the report, in part, because they are simultaneously building Virginia-class attack submarines “at a schedule and pace unmatched since” the Cold War ended, the GAO said.

The Columbia class is designed to be the nation’s newest nuclear patrol submarine for deterrence efforts; the Virginia class is designed to attack land and sea targets and gather intelligence.

General Dynamics spokeswoman Elizabeth Power said the GAO’s conclusions don’t reflect current progress and that “the vast majority of our critical suppliers are assessed as ready to support construction demand and to meet quality expectations.”

The report’s findings may have influenced lawmakers on the House and Senate defense appropriations panels. A compromise report released Monday with the $696 billion fiscal 2021 spending package said that despite “significant” legislative support for the program, “challenges have occurred in certain design, prototyping, and advance construction efforts of the program.”

The lawmakers also criticized the Navy for underfunding Columbia industrial base improvements.

According to shipbuilder and Navy documents, the majority of skilled workers at the three primary submarine shipyards have less than five years experience and the majority of supervisors have less than five years experience. About 15% of the supervisors at General Dynamics’ Groton, Connecticut facility have five to nine years experience. That figure drops to about 5% at Quonset Point, Rhode Island, according to the GAO.

Fragile Base

Congress, the Navy and Columbia contractors recognize that a fragile industry base is among the program’s top challenges and made a concerted effort to bolster its capabilities, GAO said.

Since 2017 “the Navy, with strong congressional support, has invested over $573 million in shoring up existing sources and development of new suppliers to help ensure the industrial base has the capability and capacity to meet the needs of the nuclear shipbuilding enterprise,” the Naval Sea Systems Command said in a statement.

“The Navy will continue to work with the shipbuilder to reduce the risk with use of targeted investments, continued oversight, management processes, and metrics,” the command said.

General Dynamics “has been actively engaged in supplier development and readiness throughout the last several years” and worked with suppliers this year “to build on earlier initiatives to optimize their readiness and performance to support Columbia construction,” Power said.

Still, in spite of the companies’ efforts to improve subcontractor readiness, “the overall percentage of suppliers that are ready to meet demand has yet to improve,” GAO wrote.

©2020 Bloomberg L.P.

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