The U.S. Navy has reached an agreement with the parent company of Groton-based Electric Boat on a multibillion-dollar deal to buy the next batch of Virginia-class attack submarines, according to the service.
After protracted negotiations, the deal was cut from 11 submarines to nine, with an option to buy a 10th vessel in 2023, because funding was running more than $1 billion short, according to service documents and congressional correspondence. The value of the resulting agreement wasn’t immediately disclosed.
"We have reached a multiyear" agreement "and are working to announce a contract" by Dec. 31, Navy spokesman Danny Hernandez said in a statement. It "will achieve significant savings, will include important lethality enhancements," and "provide critical stability to the industrial base. Further information will be available upon contract award," he said.
Elizabeth Power, a spokeswoman with Electric Boat, a division of General Dynamics Corp. which makes the Virginia-class sub with Huntington Ingalls Industries Inc., said “we have been working closely with the Navy and stand ready to support their needs. The contract being contemplated allows us to maintain a stable Virginia-class build rate.”
"Today’s announcement is an investment from the Navy in the future of Connecticut manufacturing, and a testament to the amazing work that the men and women of Electric Boat are doing in New London and Groton,” Sen. Chris Murphy, a member of the Senate Appropriations Committee, said in a written statement.
Global military strategy is having a local impact as Electric Boat benefits from U.S. military strategy that’s turning to the oceans to check Russian and Chinese ambitions. The sub-builder is adding thousands of jobs as it expands to build an additional third submarine every year.
To keep up with new submarine demand, EB has been hiring and expanding its supplier base. Last year, it surpassed 17,000 employees for the first time since 1992, up by 1,000, then-President Jeffrey Geiger said in January. Of that, about 12,000 are in Connecticut. EB hired 2,241 workers last year and expects to bring on a total of 1,400 this year, with 500 in Quonset Point, R.I., in addition to the 900 in Connecticut.
Electric Boat broke ground in September on a 200,000-square-foot assembly building that will jut into the Thames River, part of an $850 million expansion at the shipyard. EB will expand and update other manufacturing spaces and build a floating dry dock to launch Columbia-class ballistic missile submarines.
“This contract is good news and a strong vote of confidence in the highly skilled, dedicated workers who build the best submarines on the planet to protect America,” Sen. Richard Blumenthal, who serves on the Senate Armed Forces Committee, said, in a written statement. “I am always amazed when I visit them by the strength, stealth, and versatility of the submarines they make.”
By law, the Pentagon must submit a detailed justification for proceeding with a multiyear contract, including outlining "significant savings" that would be realized over annual purchases that give Congress more oversight. Last week, the Defense Department submitted to congressional defense committees a proposal certifying savings of 6.8%, or $1.8 billion, from a nine-ship contract.
Ellen Lord, the Pentagon's acquisitions chief, said in letters to the four defense committees that "while there are sufficient funds" to execute the program through 2024, "there are shortfalls" in fiscal 2022 and 2023 that the Navy has committed to address in its next proposed budget.
Reps. Joe Courtney, D-2nd District, and Rob Wittman of Virginia, the chairman and ranking Republican on the House Armed Services seapower panel, wrote Defense Secretary Mark Esper in September to “express our very serious concern” over the “reduced scope for the contract due to funding shortfalls.” They represent districts where the subs are built or workers live.
“As recently as last Thursday, myself and Ranking Member Wittman met personally with the Secretary of the Navy to emphatically restate Congress’s support for the President’s budget request for two subs a year, as well as the Administration’s request for an eleventh submarine," Courtney said in a written statement Monday. "The final design of the contract is still weeks away, and we are going to continue to advocate for a program that addresses the Navy’s attack submarine shortfall as well as integrates this program into the Columbia class that is beginning in earnest. If the Navy believes that the option for a tenth boat is the best way forward, then using the Congressionally-mandated option in 2023 is the most prudent way to achieve that goal.”
Navy Secretary Richard Spencer acknowledged, in a Sept. 27 reply to lawmakers, the reduction to nine submarines with an option to add at least one. The Navy "has been in negotiations" to "achieve a balanced approach with full considerations of technical risk, the industrial base capability and fleet requirements."
“There seem to be two issues at work here,” said Ron O’Rourke, naval analyst for the nonpartisan Congressional Research Service. “The first are the concerns about the capacity of the industrial base,” and the other is a funding shortfall, “the origin of which is unclear,” he said. “So it seems that something has happened on the Navy’s side regarding the cost of these submarines. It would be helpful for the Navy to explain what that is.”