Halibut Hangar

Originally Published August 08, 2008; Updated and Republished December 21, 2008:

We can expect to see a lot more articles about our newest $2.5 billion dollar Virginia-class submarine as both the prime contractors (General Dynamics and Northrop Grumman) and the Navy (PMS 450)1 begin their push to justify its unprecedented, jaw-dropping, and eye-popping price tag!

Virginia-class Submarine

To date PMS 450 has made very little or no Virginia-class submarine historical or future cost data, supporting data, and related assumptions publicly available².

It is not meaningful or credible for John Holmander (General Dynamics, Program Office) or others to repeatedly chant numbers, without making public, for analysis, the underlying cost data, supporting data, and assumptions².

Worse, bordering on insulting is to tell our submarine community and the public "the subs are cool. James Bond cool"³. The subs may be "James Bond cool", especially if your last sub was diesel and you're not current on submarine advances, but the question is are they $2.5 billion dollars per copy cool!?

Web:

• UPDATED 12/21/2008 NYT Editorial, How to Pay for a 21st-Century Military

  "Halt production of the Virginia class sub. Ten of these unneeded attack submarines — modeled on the cold-war-era Seawolf, whose mission was to counter Soviet attack and nuclear launch submarines — have already been built. The program is little more than a public works project to keep the Newport News, Va., and Groton, Conn., naval shipyards in business."--NYT--

  It's no accident that Navy acquisition is planning to purchase 10 8 more Virginia class submarines (20 18 total) before the next administration takes office.

  • UPDATED 12/23/2008 NavyTimes, Navy orders 8 new Virginia-class subs
  • UPDATED 12/22/2008 General Dynamics and Northrop awarded submarine deal (Fixed Price Incentive Contract⁴—N00024-09-C-2104)

  It will be a shame to unnecessarily waste so many dollars in contract cancellation and close-out.

-----notes-----

1. The Navy's Virginia-class submarine program office—executive officer Rear Admiral William H. Hilarides and Program Manager Captain Michael Jabaley (incoming).

2. These are not fixed priced prime contracts requiring the prime contractors to deliver each submarine at a set price and accept all risk and the loss for not doing so.

On the contrary, these are cost reimbursement contracts requiring the prime contractors to spend our tax dollars until they run out or are told to stop, whichever occurs first.

There is no legitimate reason for not disclosing all cost data for the construction of the Virginia-class submarine so long as the prime contracts remain other than fixed price contracts.

3. See Chris Joyner, Clarion Ledger, New Navy nuclear submarine to be christened 'Mississippi' quoting Michael Jabaley.

4. Each submarine is purchased without weapons for a fixed price of say $1.65 billion current dollars (weapons are purchased separately for, say another $.850 billion).

The contractor is then "incentivized" with additional dollars, as a function of capital investment (which is huge for shipbuilding) depending on negotiated performance goals.

Contracting on a fixed price basis without an established and fixed submarine design is illusory. The fixed price effectively becomes cost reimbursement each time the design is changed (this applies to the submarine's weapons as well as the submarine itself).

It is useful to use total cost of ownership figures as opposed to any single announced price tag. An announced price tag always comes with so many assumptions about future events that it rarely if ever is meaningful or represents the true price, even within large margins of error!