General Dynamics Unit Wins $33M Deal For Nuclear Submarine
Zacks Investment Research | May 22, 2017 03:07AM ET
Defense behemoth General Dynamics Corp.’s (NYSE:GD) business division, Electric Boat, recently secured a modification contract from the U.S. Navy to continue the design support requirements of a previously awarded contract for Columbia-class nuclear submarine.
Contract Details
The contract is valued at $32.7 million. It was awarded by the Naval Sea Systems Command, Washington, D.C.
Per the modification, Electric Boat will provide services for shipbuilder and vendor technology development; engineering integration; concept design studies; cost reduction initiatives using a design for affordability process; and full scale prototype manufacturing and assembly. The work for this contract will also cover engineering analysis, should-cost evaluations and technology development and integration efforts.
Work is scheduled to be completed by Jun 2017. Majority of the work will be carried out in Groton, CN; while the rest will be performed in Newport News, VA; Quonset, RI; and Bath, ME. The contract will use fiscal 2017 shipbuilding and conversion.
A Brief Note on Columbia-class Submarine
The Columbia-class submarine program, formerly known as the Ohio replacement submarine program, was designed by the Navy to replace its existing force of 14 Trident-armed Ohio-class ballistic missile submarines with a new class of 12 ballistic missile submarines (SSBNs). Originally built by Electric Corp., the Columbia-class submarines are also operated by the U.K., Russia, China, France and India.
Under the Navy’s Submarine Unified Build Strategy (SUBS), the Columbia-class submarines will be jointly constructed by General Dynamics’ Electric Boat and Huntington Ingalls Industries Inc.’s (NYSE:HII) Newport New division. However, the Navy has requested General Dynamics to continue as the prime contractor for designing and building the Columbia-class boats. In fact, the company has been performing 77–78% of the shipyard work.
Currently, the Navy’s proposed fiscal 2017 budget requests $773.1 million in advance procurement (AP) funding and $1,091.1 million in research and development funding for the Columbia-class program.
Why General Dynamics?
As one of the only two contractors in the world equipped to build nuclear-powered submarines, General Dynamics enjoys a dominant position as a Navy contractor. Apart from this, the company continues to be a prime contractor for the development of Virginia-class submarines (another class of nuclear-powered submarine), with Huntington acting as the subcontractor.
Given the Navy’s recent acknowledgement of the Columbia-class program as its top priority, the huge budget allotted to the same, and General Dynamics being as the prime contractor, the modification contract will undoubtedly render the company a leading position in the nuclear-powered submarine industry.
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