Can you give us a quick “snapshot” of where the Virginia-class stands today?
We have four ships delivered and commissioned, Virginia (SSN-774) through North Carolina (SSN-777). We are lowering our costs and improving our schedules. We are also in the middle of doing design for affordability, the cost reduction program. So we are right in the middle of approving drawings and diagrams and getting the work done to make the cost reduction real for the Block III ships, starting with the Fiscal Year 2009 (FY09) ship. And we’re also conducting Operational Evaluation which we started on April 25. So Virginia, Texas (SSN-775), Hawaii (SSN-776), and North Carolina have all participated in some form in this Operational Evaluation that will go all the way to the end of October or the beginning of November. That is the set up to reach Milestone Three, which means full rate production and is something we are working to receive by April 2009, so that we can move past the low rate production profile that we’ve been in since 1995. We’ve also deployed two Virginia-class submarines before their post-shake down availability, with Hawaii just back from her deployment. She went down to the Southern Command AOR [Area of Responsibility] and did some work down there, much like Virginia did. So that’s two ships deployed in advance of full operational capability. Virginia and Hawaii were both out there between delivery and post shake down availability, which if you look around the acquisition world, is not something you see a lot of. I don’t think anybody is doing it, frankly. Those are the pieces. And then we also have the Block III contract that we are negotiating right now. We had a request for proposal that went out on February 8, and we received essentially all elements of that proposal back on May 5. Now we are in the process of getting together something called a pre-negotiation business clearance and we’re working with the ship builder to go ahead and get into full negotiation. We hope to actually sign the contract by December, and that buys our next eight ships, the FY09 to FY13 ships.
Has the one Virginia-class submarine per year build rate changed?
We are still today building one ship per year. But if you look at how we’ve been delivering ships, because we are accelerating the delivery cycle, we delivered Texas in June 2006 and we are going to deliver New Hampshire in August 2008, which means we will have delivered four submarines in 26 months. So we’re delivering at almost a two per year rate. We are contracted for one a year until FY11 when we go up to two per year. The $588 million had a direct impact on that. Congress gave us $518 million for that second FY11 ship. It bought the long lead reactor plant and main engine components, so with that long lead purchasing the Navy can respond to the President’s FY09 budget by adding a second ship in FY11. The other $70 million allowed us to put more money into the first ship in the block, the FY09 ship, and get that schedule back to what we hope is a 66-month build schedule, as opposed to the 72-month build schedule that it would have been on. It is important because the FY09 ship doesn’t see the economic benefits of the multi-year procurement. She just gets the one year and two year advanced procurement and then it actually gets its full funding money a little later because it is the lead ship of the contract and there is always overhead in starting a contract. So that’s where the $70 million of the money will go, to help the “disadvantaged” first ship. We are able to start buying materials to start the process, so when the full funding does come in there aren’t people sitting around waiting for materials; we have enough to get the ball rolling. As you can see, the $588 million was a great congressional add for us.