Bright future for sub industry, if Navy can find the money

Washington – Forced to retire aging submarines and facing an increased need for subs to fend off potential threats from China and Russia, the Navy has an ambitious, $100 billion plan that would boost work at Connecticut’s Electric Boat.

But despite its strategic vision and detailed timeline for the new fleet of boats that still has no name – the class is still called the “Ohio-class replacement” –  the Navy doesn’t know yet how it will pay for the ambitious program.

Nor does the Navy know how Congress will react to its requests for tens of billions of dollars in additional funds for the new subs because of the threat that it will  strip money from other Navy shipbuilding programs.

“I am concerned that the extraordinary cost of the Ohio-class submarine replacement program will place tremendous stress on our already constrained shipbuilding budget, unless funding from outside this account continues to be provided,” said Sen. Roger Wicker, R-Miss., the head of the seapower subcommittee of the Senate Armed Services Committee.

The problem is an aging fleet of Ohio-class submarines, armed with Trident nuclear missiles, that patrols the globe and are a key element of the nation’s strategic defense.

Electric Boat built the 18 Ohio-class subs from 1974 to 1991 at its facilities in Groton and Quonset, R.I.  They were originally designed for a 30-year service, but the Navy has extended their operational life to 42 years, the limit that submarines can safely serve.

Replacing those subs “is our top-priority program,” said Sean Stackley, the head of the Navy’s acquisition office, at a recent Senate Armed Services Committee hearing.

While Electric Boat will be the prime contractor on the 12 Ohio-class replacement subs the Navy wants to buy, Stackley said the question of how to pay for the $100 billion program is still up in the air.

“If we don’t find an innovative way to pay for the Ohio-class replacement, the Navy is going to look far different,” he said.

Just in the first year of construction, 2021, the Navy’s shipbuilding budget would have to jump from a current $16.5 billion to more than $20 billion.

Navy officials have testified that unless a new source of money is identified, the Navy would need to eliminate from its 30-year shipbuilding plan a total of 32 other ships, including eight Virginia-class attack submarines that are built by Electric Boat, eight destroyers, and 16 other combatant ships.

Rep. Joe Courtney, D-2^nd District, who is a big supporter of the Ohio-class replacement, conceded, “We have this bulge on the horizon.”

“But shipbuilding is the long game. You have to look to the horizon,” he said.

To the dismay of Connecticut lawmakers, the Navy’s present plan calls for the current two-per-year construction pace of Virginia-class submarines to drop to one in 2021.

Sen. Richard Blumenthal, D-Conn., questioned Stackley on that decision at the hearing on the shipbuilding budget.

Stackley responded the Navy’s current plan is to build two submarines a year for 30 years.

“But those two submarines are going to be – in years when you have an Ohio Replacement, it would just be one Virginia, and that’s a fiscal issue… largely because of the significant cost associated with the Ohio-replacement program,” Stackley said.

Stackley said the Navy would support the construction of a second Virginia-class ship in 2021 – if Congress found a way to pay for it.

“We’ve got to nail down what it’s going to cost to add a second Virginia in 2021,” he said.

Building boats in batches

In a new report, the Congressional Research Service developed some options to pay for the new submarines.

One is a “block buy option” of several subs at a time that could drive down costs by about 10 percent. The CRS said the Navy is also investigating the possibility of using a block-buy contract that would cover both Ohio replacement boats and Virginia-class attack submarines.

“Such a contract, which could be viewed as precedent-setting in its scope, could offer savings beyond what would be possible using separate block buy or (multi-year procurement) contracts for the two submarine programs,” the CRS report said.

Another option is one that Courtney has championed and was able to include in the last two defense authorization bills approved by Congress.

It’s the idea of a separate account, called the National Sea-Based Deterrence Fund, that would pay for the cost of the Ohio-class replacement subs in an account that’s separate from the Navy’s budget.

Supporters argue that the ballistic-missile subs will meet a national strategic military need rather than a Navy-specific need and that funding for the Ohio-replacement program could be pulled together from the Pentagon’s budget as a whole, rather than from the Navy’s budget in particular.

“This (sub) has one mission and one mission only,” Courtney said, referring to the sub’s role as a critical leg of the nation’s nuclear deterrent. “In my opinion you really have to take it out of the (Navy shipbuilding) account.”

The CRS said establishment of such a fund “could marginally reduce the procurement costs of not only Ohio-replacement boats, but also other nuclear-powered ships, such as Virginia-class attack submarines and Gerald R. Ford class aircraft carriers, by increasing economies of scale in the production of ship components and better optimizing ship construction schedules.”

But there’s opposition in Congress to the plan.

“We want to build them as quickly as we can and as efficiently as we can,” said Sen. John McCain, R-Ariz., the head of the Senate Armed Services Committee, of the Ohio-class replacement subs.

But, he said, he is opposed to establishing a separate fund to pay for them, citing concerns about “transparency.”

“We should authorize and appropriate everything according to established congressional procedure,” he said.

The CRS also proposed building the boats in “batches” instead of in serial fashion and stretching out the current planned 15-year production schedule.

To Loren Thompson, defense analyst for the Lexington Institute, there is no doubt the Navy will move on its plans for the new class of submarines.

“Replacing the Ohio-class submarine is the most important project the Pentagon has,” he said. “The real issue isn’t where the Ohio-class replacement will be funded but whether the Navy will continue to build two Virginia-class subs a year.”

But with the retirement of the original nuclear ballistic submarines coupled with the decommissioning of the Los Angeles-class subs, a nuclear attack sub that predated the Virginia-class boats, Thompson predicted there’s a good chance Electric Boat will be building three subs in 2021.