Electric Boat receives $2.5 billion in sub contract increases this spring

PROVIDENCE – So far, federal funding is falling into place nicely for defense contractor General Dynamics Electric Boat, one of Rhode Island’s largest employers. The company has received about $2.5 billion in contract extras awarded this spring for its work on the U.S. Navy’s nuclear submarines.

Earlier this week, the U.S. Department of Defense announced a $497 million increase – called a contract modification, awarded through the Navy – for Electric Boat to support development of the Navy’s new generation of ballistic missile subs, called the Columbia class.

That followed a similar announcement in March, when the Navy awarded Electric Boat an even larger modification – an extra $2 billion – to support maintenance and construction of the Navy’s current fleet of ballistic missile subs, the Virginia class.

A subsidiary of Falls Church, Va.-based General Dynamics Corp., Electric Boat is the prime contractor for the design and build of 12 Columbia-class subs, which will replace the Navy’s aging Ohio-class ballistic sub fleet, at an estimated cost of $128 billion. That includes money for work spread out, often through Electric Boat, to several thousand subcontractors around the country.

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Much of the work will take place at Electric Boat’s plant at Quonset Point in North Kingstown, with the company being based in nearby southeastern Connecticut.

Electric Boat’s three primary locations are Groton, Conn.; New London, Conn.; and Quonset Point on the Narragansett Bay in southern Rhode Island. In those and other locations, the company has a total workforce of about 17,000 employees.

At Quonset Point, Electric Boat’s workforce currently numbers about 4,500 people, according to company spokeswoman Liz Power.

“We plan to hire more than 500 people at Quonset this year, which will help us grow toward a peak employment of 6,000 at the site” in coming years, Power said this week. “In addition, we are doing a major facility expansion at Quonset to enable construction of the Columbia class.”

Electric Boat’s hiring numbers include both new positions and those vacated through attrition. Power referred further questions about the impact of the contract modifications to the Naval Sea Systems Command.

The contract increases come after President Donald Trump and Congress agreed to make funding of the Navy’s nuclear sub programs a budget priority this year.

Regarding the $497 million contract increase, 10% of that work will take place at Quonset Point, while 80% will be performed in Groton and the other 10% will be in Newport News, Va., said Naval Sea Systems Command spokesman William Couch.

Other related work also is anticipated at other locations, but that information is “competitive-sensitive” and it is not being disclosed, Couch said.

The extra funds for Electric Boat’s contracts were authorized under the Fiscal Year 2019 National Defense Authorization Act for the “submarine industrial base expansion” and to ensure “second- and third-tier contractors are able to meet increased production requirements,” Couch said. “These investments support cost savings and improved efficiencies as production increases to match the ramp-up of Columbia- and Virginia-class production.”

In a statement this week about the $497 million increase, Electric Boat President Jeff Geiger said: “It will allow Electric Boat to continue to prepare our suppliers for the increased demand for material and services to support the Columbia and Virginia classes. The submarine industrial base, comprised of more than 5,000 businesses across the United States, will need to expand its output by 250% in the period of peak production to meet the increased demand of the Navy.”

On the $2 billion increase, the Navy said the money augments a contract awarded in 2017 providing funding for “long lead-time material for steam and electrical plant components, main propulsion unit, and ship service turbine generator efforts and miscellaneous hull, mechanical and electrical system components.”

The expansion work on Electric Boat’s facilities at Quonset Point started in 2017. At Quonset and elsewhere, the company said, it is investing $1.8 billion to upgrade its facilities. Final assembly and testing of the Columbia class is slated to start in 2024 at the company’s shipyard in Groton.

Meanwhile, the Navy’s spending plans for its sub programs have come under scrutiny from federal auditors.

With an estimated cost of $128 billion, the Columbia-class program is the Pentagon’s third-costliest system. A report this spring by the Government Accountability Office raised concerns about the affordability of such programs, saying the Navy may have to ask Congress to boost funding again in fiscal 2021 for the Columbia class.

The report found the Columbia cost estimate “is not accurate because it relies on overly optimistic” reductions in labor costs. It added: “Without an updated cost estimate with more realistic assumptions, Congress will be asked to commit billions of dollars for the lead submarine without knowing the full potential cost of construction and the possible effect on other [Naval] shipbuilding programs.”

Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.