Submarine Industrial  Base Council

From Inside the Navy: Pentagon seeks OK to jump-start negotiations in FY-18 for potential $32B submarine deal

The Defense Department wants permission from Congress to begin negotiations with General Dynamics on a five-year deal beginning in fiscal year 2019 to buy 10 attack submarines for a potential $32.6 billion, a package the Navy estimates would cost $5.4 billion less than buying the Virginia-class boats annually.

On June 16, DOD provided Congress a package of legislative proposals to accompany the FY-18 spending request. In them, the Pentagon details the case for negotiating a multiyear contract with General Dynamics Electric Boat, Groton, CT, beginning in FY-18.

The proposal seeks authority for the Navy secretary to enter into a multiyear contract for Virginia-class Block V boats. The service has previously executed multiyear contracts to buy five Block II Virginia-class boats between FY-04 and FY-08, then another deal to procure eight Block III ships between FY-09 and FY-13, and a current deal to buy 10 Block IV boats between FY-14 and FY-18.

“A successful and integral part of the Block IV negotiations was the program office’s ability to receive MYP authority in FY-13, one year prior to contract award, thus improving the program office’s negotiating position resulting in greater than $2 billion in acquisition savings over that of single year procurements,” according to the legislative proposal. “With MYP authority a year ahead of award, the program office was able to send a strong signal to the shipbuilders and, more importantly, the industrial base, that the shipbuilders could negotiate with the confidence and stability provided by the MYP authority.”

By granting the Navy authority in FY-18, a year in advance, the service estimates it could lower total costs by $901 million, compared to if Congress were to wait a year and grant MYP authority in FY-19, the first year of the planned block buy, according to the legislative proposal.

Read the full story here.

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