In a long-awaited development, the Navy announced late yesterday that it had awarded General Dynamics' Electric Boat division a five-year, $14 billion contract for eight Virginia Class submarines. The contract - one of the biggest multi-year procurements ever signed - is the third for the Virginia Class, which already has five subs in action.
Crew of the USS New Hampshire (SSN 778) line the boat during the commissioning ceremony at Portsmouth Naval Shipyard. Photo: U.S. Navy
After congressional pressure on the service to rein in costs, the Navy announced a goal to lower the cost of building two boats per year to $2 billion each (in 2005 dollars) by 2012, a reduction of about $400 million. The latest contract calls for Electric Boat (as the prime contractor) and Northrop Grumman Shipbuilding to start one ship per year in Fiscal Years (FY) 2009 and 2010 and two per year in FY 2011, 2012, and 2013.
In a navy release touting the deal, Virginia Class Program Manager Capt. Michael Jabaley said that “in FY 2005, then-CNO Admiral Michael Mullen said that if we could cut $400 million from the $2.4 billion authorized for that year’s Virginia by FY 2012, the Navy would buy two Virginias each year. This contract achieves both goals – the price target and the two per year build rate.”
The release continued:
To reach its cost reduction goal, the Virginia Class Program established a three-element strategy. The first element, which accounts for one-half of the required savings, involved increasing production to two ships per year in an MYP contract in order to spread the shipyards’ overhead costs over more ships. To achieve the remaining cost savings, the Navy invested $600 million to redesign portions of the ship for more efficient production and to improve construction processes reducing the construction span from 84 to 60 months. This upfront investment reduced the Virginia Class’s total program cost by $4 billion – a 6:1 return on investment.
Like SSN-784 North Dakota, the last ship of the previous contract (awarded in 2003) the new Virginias will be Block III boats with a revised, less costly bow design.
The contract award coincides with the first time in 12 years that the Navy has commissioned two submarines of the same class in the same year, USS North Carolina (SSN 777) on May 3 and USS New Hampshire (SSN 778) on Oct. 25.