Costs, delays surface again for new attack submarines.

Just a year after U.S. Navy officials assured Congress that they had taken steps to stem rising costs and production delays for the newest family of nuclear-powered attack submarines, they now concede that problems may not have gone away.

The first ship in the Virginia class, SSN 774, will cost about $42 million more than expected--a 2 percent increase--and the delivery date has slipped from June to October, according to the Navy.

The second vessel in the class, the Texas (SSN 775), is facing a possible cost overrun of $141.5 million--a 6.4 percent increase--and a six-month delay in delivery, from June to December 2005.

The Navy attributed these problems to "first-of-class construction issues encountered during final assembly and testing" and "unanticipated labor issues" at the two shipyards building the vessels, General Dynamics Electric Boat, of Groton, Conn., and Northrop Grumman Newport News, of Newport News, Va.

As a result of these issues, cost estimates for the first four subs in the class currently are running $419 million higher than expected, Navy spokesperson Lt. Pauline Pimentel told National Defense. To deal with the overrun, the Navy plans to ask Congress for authority to reallocate funds from its fiscal year 2004 and 2005 budget. At the moment, the Navy does not anticipate a need for additional funds, she said.

The Navy in 1998 awarded the Electric Boat and Newport News companies--the only ones in the United States that build nuclear submarines--a $4.2 billion contract to construct the first four boats.

Under the contract, the two firms are equal partners. Each shipbuilder constructs designated parts of each submarine, then alternates final assembly, outfitting and delivery of every other ship.

Electric Boat has assembled the Virginia, which was scheduled to begin sea trials in late July. Commissioning--when she receives her USS designation and joins the fleet--now is set for October 23 at Naval Station Norfolk, Va.

The Texas is being constructed at Newport News. (related story p. 43) Problems with the Texas "have been exacerbated by Northrop Grumman Newport News' decade-long hiatus from submarine construction," the Navy said in a prepared statement.

Both Electric Boat and Newport News declined to comment on the Navy statement. These latest cost increases and delays come after a series of contract modifications designed to moderate them.

Capt. John S. Heffron, the Virginia-class program manager at the Naval Sea Systems Command, in Washington, D.C., told National Defense that his program was doing "significantly better" in managing its cost and schedule than previous submarine classes.

The planned contract delivery date for Virginia was June 30, 2004, Heffron said. "Virginia will deliver within three to four months of this schedule," still within the six-month delivery period approved by the defense secretary's office, he added.

By contrast, Heffron said, the Los Angeles, lead ship of the SSN 688 class, delivered 26 months late, and the Ohio, the first of the SSBN 726 class, was nearly 30 months late. The Seawolf (SSN 21) was 25 months late and required 79 percent more man-hours than anticipated for completion, he said.

"Current estimates indicate that the Virginia will experience a 21 percent growth in man-hour requirements," Heffron said.

The Virginia class--intended eventually to replace the Seawolf and Los Angeles classes--is designed to combat enemy submarines and surface ships, fire Tomahawk missiles at land targets, gather intelligence along enemy shores and sea lanes, and stealthily insert and extract special operations teams, Heffron explained.

The new vessels are being built using an innovative modular construction process. Each shipyard is building self-contained sections of a submarine and shipping them along the Atlantic coast by shuttle boat to the yard doing the final assembly.

Virginia-class submarines are 377 feet long, bigger than a football field. They displace 7,800 runs, can travel in excess of 25 knots and can stay submerged for up to three months. They have crews of approximately 134 officers and enlisted men.

These subs are being equipped with the latest surveillance, communications and war-fighting technologies, including the advanced SEAL delivery system, "plug and play" electronics, sonar sensors for anti-submarine and mine warfare, Tomahawk cruise missiles, and Mk-48 advanced capability torpedoes.

The Virginia class will not have conventional periscopes, which use a combination of mirrors, prisms and lenses to reveal surface activities to submerged crewmembers. Instead, the new subs will have photonic masts, containing high-resolution color cameras that send images to large-screen displays in the ships' control rooms.

At the moment, the Navy plans ultimately to build 30 of the Virginia class, Heffron said. The estimated cost to complete the program however, has been rising, from $65.7 billion in 2001 to $81.8 billion in 2002 and to $83.2 billion in 2003, according to Defense Department acquisition reports required by Congress.

Under the Nunn-McCurdy Amendment to the 1982 Defense Authorization Act, the defense secretary must issue such reports, certifying that a program whose total costs grew by more than 25 percent above the original estimate is critical to national security, that the new estimates are reasonable and that steps have been taken to control expenses.

In August 2003, the Navy awarded the two shipyards a new, multiyear contract that officials said would help hold down costs. The service agreed to pay Electric Boat and Newport News up to $8.7 billion to build six Virginia class submarines.

Under the contract, if Congress authorizes and appropriates the funds, the shipyards can produce one submarine per year from 2003 through 2006 and two submarines in 2007. John J. Young Jr., assistant secretary of the Navy for research, development and acquisition, said the Navy and industry negotiating teams were working to keep costs down.

"The contract represents a step forward for shipbuilding contracts, because it provides positive incentives to under-run the target price, ties a portion of the fees to specific performance objectives and reduces the profitability if the target is exceeded," he told a Pentagon news briefing.

In January, the Navy modified the agreement from a block-buy to a multiyear contract, reduced the funding from $8.7 billion to $8.4 billion and trimmed the number of submarines from six to five. A sixth submarine--authorized in 2003--was already under construction, and not part of the multiyear agreement.

"The action to convert this contract from a block buy to a multiyear one is significant, because it provides stability to the industrial base, which includes our suppliers and our workforce, and results in production efficiencies for out Navy customer," said Tom Schievelbein, Northrop Grumman corporate vice president and president of the Newport News sector, in a company statement.

Young estimated that the multiyear contract would save the Defense Department an average of $155 million apiece on each of the seven submarines to be bought from 2004 to 2008, or more than $1 billion in total.

Apparently, however, cost estimates for the entire Virginia class have continued to rise despite the contractual changes. The most recent acquisition report, issued in April, attributed the increases to revised escalation indices, higher prices for technology insertion and growing labor costs.

In July 2003, for example, Electric Boat reached an agreement with the Metal Trades Council for a new 63-month labor agreement, including $1,000 signing bonuses and a series of wage increases through 2007.

In April of this year, the Navy awarded Electric Boat a contract modification to provide lead-yard services for the Virginia class. The modification--worth up to $500 million over five years--calls for Electric boat to maintain, update and support the Virginia-class design and related drawings and data for each submarine, including technology insertion, through its construction and post-delivery maintenance period.

These cost increases come at a time when Pentagon officials are rethinking how many ships the Navy can afford. Currently, the service has 295 ships, 54 of them submarines. This is a dramatic drop from the height of the Cold War, when the Navy had nearly 600 ships, and just under a third of the ships in the fighting fleet were submarines.

In September 2001, the Defense Department approved a plan for the Navy to have about 310 battle force ships, including 55 submarines. In 2002, Navy leaders suggested an alternative plan for 375 ships. "The primary difference between the 310-ship plan and the 375-ship plan is that the 375-ship plan includes several dozen ... littoral combat ships," said Ronald O'Rourke, national defense specialist for the Congressional Research Service.

Defense Department officials, however, have not endorsed the 375-vessel plan. In fact, the department is conducting a study on undersea warfare that could reduce the requirement for 55 submarines, O'Rourke told the House Armed Services Subcommittee on Projection Forces.

One study already completed "concluded that the attack submarine force-level requirement can be reduced to 37 boats if the day-to-day intelligence, surveillance and reconnaissance missions of attack submarines are set aside for force-planning purposes, and the force-level requirement is established solely on the basis of the number of attack submarines needed for war fighting," O'Rourke said.

Reducing the submarine force to 37--including four converted Trident ballistic subs and 33 attack submarines--"would permit the Virginia-class submarine procurement rate to remain at one per year for many years to come, or even permit it to be reduced," he said. Such a strategy could make additional funding available for procuring more surface ships, such as the LCS and the DD(X) destroyer.

The Navy had been planning to ramp up Virginia-class production to two-a-year starting in fiscal year 2007, but Congress has directed production to remain at one ship per year at least until 2009.

The chief of naval operations, Adm. Vern Clark, said that the Navy, the joint chiefs of staff and the defense secretary's office are conducting a thorough review of undersea warfare requirements for the 2006 budget request. "This is an issue we clearly have to deal with ... what the right capitalization needs to be," he said. "I can just tell you, congressmen, that this is a major issue for us."

Submarines have played a major role in U.S. naval warfare since 1900, when the Navy accepted its first submarine, the USS Holland, built by Electric boat. During World Wars I and II, submarines devastated enemy warships and commercial shipping. During the Cold War, they patrolled the oceans, monitoring the Soviet Union, tracking its warships and maintaining the capability, if need be, to rain nuclear-tipped missiles deep into enemy territory.

After the Soviet Union's dissolution, some officials question the need for submarines in post-Cold War world. Heffron, however, insisted that they have important missions in today's conflicts.

"One third of the Tomahawk missiles that were launched in the Iraq war came from submarines," he said.

Submersibles are ideal for the kinds of stealthy missions required to conduct the global war on terrorism, Heffron said. "There are certain times when you want to do things in a clandestine way, and a submarine is much less likely to be exposed than any surface ship.

"Submarines can operate both in the open-ocean, blue water and in the littorals," he said. "They can get right up close to shore, and nobody knows they're there. They provide a clandestine presence that's non-provocative, but ready to fight."