WASHINGTON — Defense officials are optimistic that billions of dollars of investments in the U.S. submarine industrial base will increase capacity to and even above the required two-a-year attack sub construction rate, allowing the U.S. to build for Australia under a new international agreement without restricting the American fleet.

On Monday, the U.S., Australia and the United Kingdom unveiled new details about their partnership to produce for Australia its own nuclear-powered submarine by 2040, known as the SSN AUKUS. The U.S. is offering an interim capability of three to five Virginia-class submarines, either newly built or used, in the 2030s.

To meet the U.S. Navy’s undersea warfare needs under a 2021 force structure assessment, the submarine industrial base must sustain a minimum construction rate of two Virginia-class attack submarines and one Columbia-class ballistic missile submarine per year throughout this decade and into the next — without counting any additional submarines for Australia. So far, builders have not been able to keep up with that workload and are years behind schedule on some Virginia submarines.

This week, senior defense officials, granted anonymity to discuss sensitive matters, told Defense News a series of investments from Congress and Australia, with the AUKUS pact in mind, are meant to help industry “get to that 2.0 delivery cadence that we’re expecting” on the Virginia program and even achieve rates “north of 2.0″ while working on the Australian boat or boats.

However, one of those officials said the Navy was not expecting to see “sustained 3.0 production” of these attack submarines in the long run.

Chief of Naval Operations Adm. Mike Gilday on Wednesday said the investment would help the shipbuilders and their suppliers “sustain that 2.0 cadence, which by the way needs to go above 2.0 attack boats a year if we’re going to be in a position to sell any to the Australians.”

And Naval Sea Systems Command commander Vice Adm. Bill Galinis confirmed industry is still delivering about 1.2 submarines a year — reflecting that the Navy is buying two a year and industry is delivering them late.

At a Pentagon press conference Tuesday, the assistant secretary of defense for strategy, plans and capabilities, Mara Karlin, said the pact would “lift all three nations’ submarine industrial bases and undersea capability, enhancing deterrence and promoting stability in the region.”

“Australia’s acquisition of SSNs will bolster the capabilities of one of our strongest allies by increasing the Royal Australian Navy’s range, survivability and striking power, thus strengthening deterrence in the Indo-Pacific,” Karlin said.

Before Australia acquires its own Virginia-class subs, a new collaborative entity known as Submarine Rotational Forces-West will establish a rotational presence of one UK Astute class submarine and up to four U.S. Virginia-class SSNs at Australia’s Stirling military base near Perth.

Amid the concerns of U.S. lawmakers that AUKUS will make it more difficult to meet U.S. submarine needs, defense officials say the industrial base investments will also cut maintenance timelines, making the submarines the U.S. Navy has more operationally available.

A history of industrial base challenges

The Navy was already ramping up its financial support of the submarine industrial base well before AUKUS was decided. The sea service spent more than $1 billion between fiscal 2018 and 2022 on bolstering the two nuclear shipbuilding yards and their thousands of suppliers, and kicked off another five-year, $2.4 billion investment in FY23 — on top of the annual cost of procuring submarines.

The Navy this year is also launching a separate $2.2 billion investment in Virginia-class maintenance and readiness, which will also benefit many of the same parts suppliers.

The industrial base is facing a range of challenges after shrinking by about 70% when the Navy took a break from buying submarines following the end of the Cold War. A smaller industrial base began Virginia-class construction in 1998 at a rate of one boat a year, but in FY11, the Navy moved to a two-a-year rate, and by 2019, it was clear industry had fallen behind.

Attack sub construction fell even further behind as the Navy asked industry to prioritize the growing Columbia-class workload. And the COVID-19 pandemic and subsequent labor market disruption left the Virginia production line in a dire situation, with industry delivering no submarines to the Navy between April 2020 and February 2022.

The attack submarine fleet has shrunk to 49, compared to a 2021 assessment’s requirement for 66 to 72. For the fleet to reach that required size, industry would need to get back on track and then increase its production rate to something closer to three a year.

There was a time when Navy officials thought a couple-billion-dollar infusion into the submarine industrial base could help expand production from two Virginias a year to three. In June 2021, then-acting Assistant Secretary of the Navy for Research, Development and Acquisition Jay Stefany told senators it would take “a major investment of effort, capital and workforce” and cited an internal study that called for $1.5 billion to $2 billion – plus industry’s own investments – to get to that higher rate.

The Navy will ultimately spend more than that just to secure on-time production of two Virginias a year.

But AUKUS could change that.

A senior administration official told Defense News last week the Navy investments so far “are down payments on what needs to be done for the U.S. submarine industrial base,” adding the administration would “work with Congress to get very substantial lifts in the U.S. submarine industrial base, lifts that go significantly beyond the $4.6 billion we will have submitted with the president’s budget submission,” referring to the $2.4 billion effort that began last year and the $2.2 billion effort kicked off with this week’s FY24 request.

“In an unprecedented move, Australia has agreed to make a proportional contribution to the U.S. submarine industrial base to help lift our production and maintenance capabilities to offset the loss of those submarines,” the official added, noting this undisclosed sum would come on top of paying the “full and fair price” for the used and the new submarines.

The official called the American and Australian investments “generational” and said they would have “a huge impact on our overall defense posture.”

Though the senior administration official would not say the amount of Australia’s contribution to the industrial base, Reuters reported Australia would invest $3 billion in the U.S. and U.K. submarine industrial bases over the next four years. That includes funds for U.S. workers to help Australia set up its own nascent submarine industrial base in Adelaide and for their Australian counterparts to work in U.S. shipyards across the country.

Here’s a closer look at what’s been invested so far:

Submarine industrial base and workforce development

The Navy last year made the first payments of a five-year, $2.4 billion investment in industrial base and workforce development support, including nearly $750 million in FY23 for the submarine industrial base.

Rep. Joe Courtney, the top Democrat on the House Armed Services Committee’s seapower panel, noted the newly released FY24 budget proposal seeks $647 million more to expand the submarine industrial base.

Courtney’s Connecticut district includes the General Dynamics Electric Boat submarine construction yard, one of only two shipyards in the nation that build nuclear-powered submarines. (The other is HII’s Newport News Shipbuilding in Virginia.)

“I’ve been in Congress now 17 years, we’ve never seen a number like that in terms of workforce, supply chain and facility” investments, Courtney told reporters on a Tuesday call, noting previous submarine capacity investments ranged from $100 to $200 million per year prior to FY23.

The FY23 funding included $541 million for supplier development, workforce development, shipyard infrastructure and strategic outsourcing to other shipyards – which Courtney noted benefitted not just the Connecticut and Virginia shipyards, but suppliers around the country.

For instance, Austal USA’s Alabama shipyard recently started to build Command and Control Systems Modules and Electronic Deck Modules for Virginia- and Columbia-class submarines.

“The strategic outsourcing like what’s happening down in Alabama can be replicated in other parts of the country to take some of the pressure off of man hours” at the construction yards that don’t have the workforce or the facilities to accept more work, said Courtney.

During the Tuesday interview, the senior administration official said some of these investments are aimed at vendors deep in the supply chain, for hard-to-get metals, machine tooling or, say, an air conditioning unit unique to nuclear-powered ships.

“The supplier base investment goes all the way down [the supply chain] to better access to the right types of alloys, the right types of metals for material procurement,” one senior administration official said.

Congress designated the remaining $207 million in FY23 submarine industrial base funding for workforce development initiatives to help the shipyards cope with labor shortages that have hindered production.

“The pursuit of people and investments is almost like The Hunger Games out there right now,” said Courtney, referencing the dystopian novels and movies. He noted Electric Boat made almost 4,000 new hires last year and has set an ambitious target to hire an additional 5,700 workers this year alone.

The Department of Labor has also funds a manufacturing pipeline program that trains the welders, mechanists and electricians that shipyards rely on in as little as eight to 10 weeks.

Virginia-class readiness spending

Another challenge stemming from the industry output is the lack of spare parts for in-service Virginia submarines, leading the Navy to have to cannibalize parts from one submarine to finish up another boat’s repairs.

In fact, a 2021 Congressional Budget Office report showed the number of parts taken from one Virginia submarine to complete maintenance on another skyrocketed in 2019 and remained high since.

That’s where the new $2.2 billion investment in Virginia-class spares and maintenance will come into play.

The Navy is asking for $541 million in FY24 for spare parts, according to Rear Adm. John Gumbleton, the deputy assistant secretary of the Navy for budget and director of fiscal management.

“This is a dramatic increase that we’ve never done before,” he said, noting the remainder of the investment will come across the next five years.

Gumbleton said the Navy did not want to wait to start fixing the problem. Even as Congress works through the FY24 budget process, the service will use its Navy Working Capital Fund to purchase $200 million to $350 million in spare parts so that they’re waiting on the shelves in FY24 and the Navy can use its appropriated funds to buy those parts for immediate use.

This funding is meant to give parts suppliers an increased but stable demand while also helping address widespread maintenance delays. These delays have led to 18 submarines in or awaiting maintenance, instead of what should be 10 under operations and maintenance planning assumptions.

This means the Navy has 31 attack subs available to conduct training, global operations and tactics development work, compared to 39 if today’s fleet saw on-time maintenance, or 53 to 58 if the submarine fleet was the required size.

Megan Eckstein is the naval warfare reporter at Defense News. She has covered military news since 2009, with a focus on U.S. Navy and Marine Corps operations, acquisition programs and budgets. She has reported from four geographic fleets and is happiest when she’s filing stories from a ship. Megan is a University of Maryland alumna.

Joe Gould was the senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry. He had previously served as Congress reporter.

Bryant Harris is the Congress reporter for Defense News. He has covered U.S. foreign policy, national security, international affairs and politics in Washington since 2014. He has also written for Foreign Policy, Al-Monitor, Al Jazeera English and IPS News.

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