The US Navy has awarded General Dynamics Electric Boat an $8.7 billion block-buy contract for the construction of six Virginia-class submarines, the largest submarine order in US history.
The contract authorises Electric Boat, the lead shipyard, and its teammate, Northrop Grumman Newport News, to proceed with the construction of one ship per year from 2003 through to 2006, and two ships in 2007.
‘This is an extremely significant contract award,’ said Michael W. Toner, president of Electric Boat and executive vice president of General Dynamics Marine Systems group. ‘The two shipyards now will have the stable workload required for increased production efficiencies, which will benefit the Navy, the Department of Defense and the US taxpayer.’
Electric Boat will christen the lead ship of the class, Virginia (SSN-774), on August 16 and deliver it to the Navy in 2004. Three other ships are currently under construction.
The contract could transition to a multiyear agreement for seven ships from 2004 to 2008 – including two submarines in 2008 – contingent upon congressional approval of the multiyear approach. The 2003 submarine would not be included in the multiyear contract. Altogether, up to eight submarines could be procured from 2003 through 2008.
The multiyear arrangement is expected to produce savings to the government of more than $1 billion on the submarines to be authorised through to 2008.
A multiyear contract would enable Electric Boat to purchase materials, parts and components for multiple ships at one time, achieving significant economies of scale. Under the block buy approach, the company buys what it needs to build one ship at a time.