Mr McMahon (staffer): Because of the multiyear contract that the Virginia-class is under, if the second FY21 boat is not authorized and appropriated, the shipbuilders will continue to build a second Virginia-class in FY21 because of the multiyear — so they will essentially be bringing work forward under that contract — the result of that will be, if they maintain or recover schedule, by the time they get to the end of FY23, they will run out of Virginia-class work to start, and due to the nature of the contract that they have with their unions, they are required to lay off workforce — their most recent hires — and that will be the second year of production on the Columbia-class submarine.
They will be laying off workers they intended to hire for Columbia due to the reduction in Virginia-class work. So if the second [Virginia-class] submarine isn’t authorized and appropriated in FY21, we’ll see a potential impact to Columbia in FY23, and at that point there’s very few levers for the Navy to pull to help that workforce.
Mr. Courtney (member): That extends to the shipyards in Virginia, New England, and 48 states that are part of the supply chain that are going to be instrumental to those programs.
That was from the July 1 markup of HR 6395, National Defense Authorization Act for FY 21. Here’s the issue as I understand it. GD Electric Boat has a multi-year procurement contract. Two subs are due to be authorized and appropriated in FY21. However, the deal is that there was talk that only one might be approved (though, it looks like two will be after all).
Under the terms of the MYP contract, which is not subject to the full-funding requirement, the firm will bring forward future work, potentially leaving a gap at toward the end. In that case, Electric Boat will be forced to lay off workers only to have to re-hire them when the time comes to ramp up on Columbia-class, creating an administrative burden and adding overhead costs.
That still doesn’t make complete sense to me, as to why Electric Boat doesn’t start laying off workers in FY21 if there is something of a production break. After all, if the company brings an FY22 sub forward, how would it get paid for it through progress payments? I suppose the way it goes, the second sub for FY21 would not start burning through cash until a year or so later, and so the FY22 funds could start paying for it earlier than expected — presuming the funds will be there. This is speculation on my part…
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