Navy Ships

Although final termination costs may not be known for years, the Navy's tab for ending contracts for the Seawolf nuclear submarines is significantly below the estimated cost to build the vessels. The estimated cost to build one SSN-21 class submarine tops $2 billion, but completing several Seawolf contracts and terminating the rest is pegged at $714 million. Ending the SSN-21 class submarine construction program with the second submarine (SSN-22) should save about $15 billion. The Navy did not terminate all SSN-23 contracts and is going ahead with construction of a spare nuclear core, a main propulsion unit, and other components--a move that should facilitate the building of the third SSN-21 class submarine if it is approved. Congress provided about $540 million to help preserve the industrial base for submarine construction. The Pentagon has no plans to release these funds to the Navy until a final decision is made on spending--most likely in early 1993 following the release of a Defense Department study on the shipbuilding base. Ending the SSN-21 program will likely reduce U.S. nuclear-powered submarine construction capacity and capability. Construction of nuclear submarines should be finished by the mid-1990s, and no new contracts are expected until fiscal year 1998. The declining work load for submarine builders is not sustaining their current construction capacity or capability. As a result, costs for the two SSN-21 submarines and other ships now being assembled by the two submarine shipbuilders will probably increase because of reallocating overhead costs over a smaller production base; a smaller, more senior, higher paid work force; and higher vendor costs.

GAO found that: (1) Congress rejected the administration's proposal to cancel planned spending for the Seawolf submarines, and restored $1.6 billion in appropriated funds for some submarine construction and preservation of the submarine industrial base; (2) the Navy's estimated cost to build one submarine is more than $2 billion, but its estimated cost to complete some contracts and terminate the rest is $714 million; (3) the Navy could save about $15 billion if it ends its construction program with the second submarine class; (4) the Navy decided to complete contracts for major subsystems and components to facilitate the potential construction of more submarines; (5) the Navy plans to use $540.2 million in appropriated funds to partially fund cost growth and purchase spare parts, but has not addressed congressional directions regarding advance procurement, restarting a submarine construction program, and maintaining the submarine shipbuilding industrial base; (6) the two U.S. shipbuilders with current submarine construction contracts do not project any further nuclear-powered submarine construction contracts until 1998, and the projected work load for the shipbuilders will not sustain their capacity or capability; and (7) costs for the submarines currently under contract could increase because of reallocated overhead costs over a smaller production base, a smaller but higher-paid work force, and higher vendor costs.