Navy signs contract for nuclear submarines

WASHINGTON -- The Navy announced contracts Thursday for construction of as many as seven nuclear-powered submarines that would cost almost $11 billion if all are built.

The basic contract calls for divisions of defense contractors Northrop Grumman and General Dynamics to begin building six Virginia-class submarines between this year and 2007. Congress could decide to cut that number to five, leave it at six or increase it to seven.

The 377-foot ships are the Navy's most advanced attack submarines, capable of carrying the kind of Tomahawk cruise missiles used in the war with Iraq as well as nuclear-tipped missiles and Navy SEAL commandos. Four are now under construction, including the first, the USS Virginia, which is to be christened this weekend and completed next June.

Congress has so far refused to approve the Bush administration's plans for starting construction of seven submarines by 2007 because of cost overruns and delays in past submarine-building programs.

The latest contract sets aside close to a third of the companies' $146 million profit on each sub -- $45 million -- as incentives for meeting objectives such as construction deadlines and giving subcontracts to small businesses, said John J. Young Jr., the Navy's assistant secretary for research, development and acquisition.

The companies can be asked to repay those incentives and will lose more of their profit if costs are more than projected, Young said.

If Congress agrees to pay for all seven subs, the Navy will save about $1 billion -- $155 million per submarine -- over buying the ships individually, Young said. The savings fall to $126 million per submarine at six ships and $80 million per submarine for five, he said.

The contract with General Dynamics Electric Boat Corp. and Northrop Grumman's Newport News Shipbuilding does not include the submarines' nuclear reactors, sophisticated electronics and some other gear. Each hull will cost about $1.4 billion, with each fully outfitted submarine costing about $2.2 billion, Young said.

Final construction of each submarine hull is scheduled to alternate between the Electric Boat shipyards in Connecticut and the Newport News shipyards in Virginia. If Congress approves six or seven subs, each shipyard will be working on one hull at the same time by 2007.