The Navy awarded General Dynamics Electric Boat nearly half a billion dollars to help shore up its submarine supplier base through equipment purchases and plant expansions.

The Department of Defense 2019 Appropriations Act included this money, aimed at addressing the health of the companies that supply Electric Boat with components and the lower-tier companies that supply the suppliers, according to the Navy.

The $497-million award is a modification of an existing contract for Electric Boat to build the Columbia-class ballistic missile submarines (SSBNs), the Navy announced Monday evening.

“(General Dynamics Electric Boat) will support industrial base expansion through the use of investments in vendor facilities, fixtures, capability development and vendor qualification efforts. This modification will address capacity constraints by leveraging opportunities at sub-tier vendors,” Bill Couch, a Naval Sea Systems Command spokesman, said in a statement sent to USNI News.

Citing “competition-sensitive” information, both Navy and Electric Boat officials would not disclose how the money will be distributed to subcontractors.

The half-billion-dollar sum will not be distributed all at once. During the current Fiscal Year 2019, the Navy will dole out about $177.2 million of the total funding. The remainder of the award will be appropriated in future years, according to the Navy.

“The submarine industrial base, comprised of more than 5,000 businesses across the United States, will need to expand its output by 250 percent in the period of peak production to meet the increased demand of the Navy,” Jeff Geiger, president of Electric Boat, said in a statement announcing the latest contract modification.

Lawmakers are concerned with the submarine industrial base’s ability to keep up with an aggressive manufacturing pace set by the Navy. While there are hundreds of private sector firms, laboratories and research facilities providing submarine components, the base is not deep with suppliers, according to a Congressional Research Service report, released in April.

Yet Electric Boat and Huntington Ingalls Industries’ Newport News Shipbuilding, which co-build the Virginia-class attack submarine and will leverage the same sharing agreement on the Columbia class, are leaning heavily on these single-source providers to manufacture an increased number of nuclear propulsion components to the Columbia-class, Virginia-class and Ford-class aircraft carrier programs, according to the report. The Navy’s 30-year shipbuilding plan includes building 12 new SSBNs and having a fleet of 66 attack submarines.

The Navy nearly ceased constructing new submarines in the 1990s before the Virginia-class program started. Starting with the Block IV Virginia-class contract, the Navy has ramped up its manufacturing pace to build at least two Virginia-class subs a year. In its Block V contract, it may shoe-horn construction of a third Virginia-class sub into select years. Simultaneously, the Navy is adding the Columbia-class program to this manufacturing schedule.

“Much of the total material procured from supplier firms for the construction of submarines comes from sole-source suppliers. For nuclear-propulsion component suppliers, an additional source of stabilizing work is the Navy’s nuclear-powered aircraft carrier construction program,” the report states.

The original Navy contract for the Columbia class, awarded in September 2017, gave Electric Boat $5.1 billion to fund the integrated product and process development design completion for the SSBN program. The Navy has modified this contract several times, adding more than $876 million to the original award before Monday’s announcement, according to the Navy.

Electric Boat is itself in the midst of a multi-billion-dollar upgrade and retooling project focused on growing its submarine construction business. Company-wide, General Dynamics, the parent of Electric Boat, plans to reinvest about $1 billion of its annual income on capital expenditures – new equipment and plant expansions – until the Columbia program ramps-up to full production after 2022, company officials said in January when discussing their financial outlook for the year during a conference call with investors and analysts.

Related to the company’s internal reinvestment program, Electric Boat also pledged a year ago to increase its annual spending in its home state of Connecticut to more than $500 million on parts and material from some 700 in-state suppliers. The spending plan is directly related to the company’s efforts to build Columbia-class submarines while also building Virginia-class submarines.

The following is the Navy’s full May 20, 2019 contract modification awarded to General Dynamics Electric Boat:

General Dynamics Electric Boat (GDEB), Groton, Connecticut, is awarded a $497,012,105 cost-plus-fixed-fee modification to previously awarded contract (N00024-17-C-2117) for a submarine industrial base development and expansion in support of Columbia-class fleet ballistic missile submarines, as well as the nuclear shipbuilding enterprise (Virginia class and Ford class), as part of the integrated enterprise plan and multi-program material procurement and production backup units. This submarine industrial base development and expansion effort utilizes the enhanced acquisition authorities contained in 10 U.S. Code §2218a, National Sea-Based Deterrence Fund, to improve sub-tier vendor stability and gain economic efficiencies based on production economies for major components. The nuclear shipbuilding industrial base is ramping up production capability to support the increased demand associated with the Navy’s force structure assessment. Improved capacity at the sub-tier vendors reduces risk to the Columbia, Virginia, and Ford class programs. This modification supports GDEB’s execution of funding authorized in fiscal 2019 National Defense Authorization Act (NDAA) and appropriated by the Department of Defense Appropriations Act, 2019. This contract will be incrementally funded, with $177,155,000 obligated at time of award. In addition to the locations listed above, performance of work is anticipated at additional locations; however, this information is competition-sensitive and is therefore not disclosed. Work will be performed in Groton, Connecticut (80 percent); Quonset Point, Rhode Island (10 percent); and Newport News, Virginia (10 percent), and is expected to be completed by December 2031. This work is a furtherance of the fiscal 2019 NDAA (Public Law 115-232) and the Department of Defense Appropriations Act, 2019 (Public Law 115-245), which authorized and appropriated additional funds for submarine industrial base development and expansion to ensure second- and third-tier contractors are able to meet increased production requirements. Fiscal 2019 National Sea-Based Deterrence Funds in the amount of $177,155,000 will be obligated at the time of award and will not expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, District of Columbia, is the contracting activity.

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