The US Navy intends to double future Virginia-class attack submarine production to two boats per year in the years it will build the Ohio-class replacement ballistic missile submarine. The Navy's long term plan had been to reduce the current procurement of two attack boats per year to one for those years in which it procures one of the 12 extremely expensive Ohio-class replacement subs (first boat = $11B). The new plan adds one Va-class sub valued at ~$3.7B in 2021, 2024 and in every year from 2026 to 2035.
The Navy has not yet determined exactly how the work share for the new plan will be divided between GD and HII. The additional work will stretch US submarine industrial capacity. Senior acquisition officials want to ensure that the additional work at either yard does not impact the cost or schedule for the Ohio replacement or any other shipbuilding work. They believe that skilled workers and material management rather than physical infrastructure will be the constraining factors. Upon completion of an evaluation already underway, the Navy will determine if adjustments to existing GD-HII work share agreements will be required in order to accomplish the entire new body of work to the best benefit of the Navy. According to a previously announced agreement, 78% of the much larger Ohio-class replacement ballistic missile submarine work is to be done by Electric Boat (GD) and 22% by HII.
The Navy currently splits the construction of two $2.7B Va-class boats per year approximately 50/50 between GD's Electric Boat facility in Connecticut and HII's Newport News, VA yard. Each yard produces sections and components of approximately equal total value with the final assembly and delivery then alternated between the two primes. This arrangement allowed the Navy to maintain its industrial base even when it was procuring only one submarine per year. The program is viewed as a great success in terms of cost and schedule and is operating under a multiyear contract that will deliver 10 submarines for the same cost as 9.
First beneficiary of the increased Va-class expenditure will be BWXT, manufacturer of US Navy reactors which is the largest long lead item. Each Va-class sub needs ~$600M in advanced procurement two years in advance implying that additional long lead contracts must be let NLT FY19.
The need for the additional procurement is recognized as a strategic imperative. The Navy's Los Angeles-class attack submarines were procured at the rate of three per year in the 80's and are now being retired annually at that same rate. However, the Navy has never maintained an adequate replacement rate. Until 2012 the Navy was only buying one Va-class per year to replace the Los Angeles boats and since then only two per year. The nation's attack submarine fleet continues to shrink and, unavoidably, will fall below the minimum requirement of 48 boats in 2022. The new sub construction plan will not begin to change the shape of the "bathtub" shown in the current plan chart until the first additional boat's delivery in 2027.
We expect full throated support of the plan by Congress. Not only does it support Republican President-elect Trump's campaign call for a 350 ship Navy (today's plan is for 304), approximately half of the additional work will be accomplished in the heavily Democratic northeast which should ensure support from those delegations for the necessary additional funding.
