26 October 2016
General Dynamics expects the Navy to award a contract to commence detailed design and construction of the Ohio-class replacement submarine program by the end of the year, the top executive of the defense contractor said this week, providing new insight into the revised schedule for the high-profile program.
Phebe Novakovic, General Dynamics chairman and chief executive officer, said during an Oct. 26 earnings call with investment bankers today that the company proposed to a detailed design to the Navy for the new ballistic missile submarine this summer along with proposals for component development design.
"And they would like to give us an award by the end of the year," Novakovic said.
Previously, the Navy had aimed to seek permission in August from the Pentagon's acquisition executive to transition the Ohio-class Replacement Program from technology maturation and risk reduction into engineering and manufacturing development and award a contract for detailed design and construction to General Dynamics by Oct. 1.
Last month, however, Navy officials acknowledged that schedule had slipped. A meeting of the Defense Acquisition Board meeting is now scheduled for Nov. 1 to consider a milestone B decision for the Ohio-Replacement Program, a decision with major budgetary implications for the service and the Defense Department.
"When you think about these large, nationally strategic programs, one of the most important things that we all get right is that cost is well understood," Novakovic said.
"One of the things that has been driving our work the last three years is a bottom-up analysis of full cost of construction," she added. "That will be an important element as we work through those costs with the Navy."
As part of the milestone B review, Pentagon leaders will consider cost estimates from the Navy and the office of cost analysis and program evaluation. These estimates will supersede 2014 Navy figures that have been the basis for public discussion of the new submarine program.
That 2014 estimate, in then-year dollars, includes "lead ship end cost (with plans)" to be $14.5 billion, the "lead ship end cost (without plans)" to be $8.8 billion; lead ship non-recurring engineering to be $17.4 billion, and the average ship cost for boats two through 12 to be $9.8 billion, according to a February report to Congress.
The "end costs" account for government-furnished equipment, ordnance, construction costs as well as change costs, according to the report.
Non-recurring engineering accounts for one-time costs to research, develop, design and test new things while the cost of plans factors in NRE for detail design funded in the Navy's shipbuilding accounts.
The Navy is seeking $773 million in advance procurement funding in FY-17 -- the first resources for construction of the new ship class. The lead ship of the planned 12-submarine fleet is forecast to cost $14.5 billion,
according to the most recent Navy figures. The service plans to finance the bulk of the procurement costs of the lead ship across seven years with most of the payments in 2021, 2022, and 2023.
Chief of Naval Operations Adm. John Richardson told a Senate panel last month that the Navy is looking to the new year for the Ohio Replacement Program to transition to the next phase in the acquisition system.
"In the immediate future, January 2017 is planned to be a major ORP milestone when we transition from research and development to ship construction funding in order to conduct detailed design work," Richardson told the Senate Armed Services Committee Sept. 14.
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