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SSN-688 Los Angeles-class History

Electric Boat was the principal designer of Navy submarines for many years. However, the Navy decided to develop an alternative design capability, and in November 1969 awarded a design contract for the SSN-688 class nuclear attack submarine to Newport News Shipbuilding and Dry Dock Company (Newport News). This was followed in February 1970 by a contract with Newport News for construction of the lead ship. By 1982 the Navy had issued Newport News 4 later contracts for constructing 15 additional SSN-688s.

In January 1971, the Navy awarded Electric Boat a contract for seven follow ships. Despite Navy concern over Electric Boat's ability to meet proposed delivery dates, the Navy awarded Electric Boat a contract for seven additional SSN-688s in October 1973 and opted for four more in December 1973. Thus, within a period of 35 months, the Navy awarded Electric Boat construction contracts for 18 SSN-688s or 78 percent of the total construction program.

Early in the construction phase it became evident, that Newport News, as the Navy design agent, was having difficulty developing and providing timely design information. Two years after the initial contract award, Electric Boat had received only one-half of the 5,368 drawings eventually used to construct an SSN-688. In early 1974, Electric Boat's delivery schedule for the first seven SSN-688s had slipped 7 months. Nevertheless, the Navy decided to award Electric Boat still another contract for the construction of the lead TRIDENT, a ballistic missile submarine, and three follow-on ships. In an effort to meet its contractual commitments, Electric Boat increased its labor force from about 12,000 in January 1971 to 19,000 in January 1975 and to 26,000 in January 1977. Serious productivity problems were associated with this buildup. It soon became apparent that the cumulative effects of low productivity, shortage of skilled' workers, and late receipt of Government-furnished information were affecting the SSN-688 program.

As early as contract negotiations, strong indications existed that Electric Boat's direct labor hours were underestimated. Electric Boat proposed to construct the SSN-688s for about the same direct labor hours as the previous SSN-637 class submarine, even though the SSN-688 displaces 2,600 more tons and is 68 feet longer. Moreover, the direct labor hour estimates were substantially below its only competitor and well below the Navy's estimate.

On February 14, 1975, Electric Boat filed a claim against the Navy for about $220 million. The' prindpal basis of the claim was that defective and late Government-furnished design data resulted in SSN-688 delivery date extension and additional work. On April 7, 1976, the claim was settled for a $97 million increase in the contract ceiling price. Electric Boat filed a second claim in December 1976 for $544 million on the basis of the effect of late and unsuitable Government-furnished information. Navy analysts recommended a $125 million adjustment to the contracts. General Dynamics refused to accept this amount as full and final settlement. The company was determined to resort to litigation to prove that it was legally entitled to a significantly larger amount.

As of December 24, 1977, Electric Boat's estimated cost at completion of the two contracts was $2,668 million which would result in a loss of $843 million if nothing was received from present or future claims against the Navy. In the settlement effective as of June 9, 1978, under Public Law 85-804, the Navy agreed that cost growth had occurred as a result of complex causes beyond the control of either earth and misjudgments made by both the Navy and Electric Boat.

A number of factors adversely affected the SSN-688 program, beginning with a deliberate decision by the Navy to have an alternative source for nuclear rubmarine design after relying solely on Electric Boat for the previous 20 years. The attitude in the early 1970s that rapid construction and development of the SSN-688 was vitally important to national security was another factor. The award to Electric Boat of all 11 submarines in 1973 with all the risks inherent in that decision was compounded by Electric Boat's underestimation of the complexity of the SSN-688 and its inability to effectively control manpower and productivity.

The settlement provided for

  • a $125 million contract price increase to cover existing company claims against the Navy;
  • $359 million, one-half of the remaining estimated loss, to be absorbed by the Navy;
  • $359 million,, one-half of the remaining estimated to be absorbed by General Dynamics over the remaining submarine construction period;
  • cost overruns to be divided 5O/5O up to a total of $100 million with costs above that figure being the total responsibility of General Dynamics; and
  • cost underruns to be shared on a 50/50 basis.

Even after the experience with the 668 II contract, the Navy continued to accept unrealistic direct labor hour estimates for establishing target costs. In 1979 the Navy awarded the 688 V contract to Electric Boat to construct the SSN-719 and -720, even though it knew the labor budgets were undereestimated. Electric Boat based its initial labor hour budgets on the estimated hours to complete the last boat being built under the 688 II contract, even though it was less than 2-percent complete and other SSN-688s had already been delivered. In selecting this boat as the base for its estimates, Electric Boat made a number of adjustments which reduced the direct labor hour estimates by about 12 percent. The adjustments were based entirely on projected savings from unrealized improvements in productivity. Electric Boat then reduced this adjusted base by about 7 percent to reflect other anticipated productivity improvements. The result was that 688 V budgets were estimates of estimates and did not reflect proven performance.

In October 1980 Electric Boat upgraded its quality assurance program to preclude the recurrence of past quality problems such as nonconforming steel, incomplete welding, and defective paint. In this program, Electric Boat established new procedures and trend analysis reports to identify, document, and report deficiencies. However, improvements were still needed in implementing inspection procedures and obtaining and verifying timely corrective actions.

For a period of time in 1980-81, the Navy was unable to secure firm delivery schedules from Electric Boat. In August 1981, the Navy and Electric Boat agreed to revised contractual Trident submarine delivery dates. In March 1981, before the Subcommittee on Seapower and Strategic and Critical Materials, House Committee on Armed Services, the Navy publicly surfaced the controversy by criticizing Electric Boat for shoddy construction, poor quality control, and the high cost of its SSN-688 submarines when compared to Newport News. Electric Boat defended its position before the same subcommittee by refuting the Navy's criticism and charging that defective Government-furnished equipment and design changes were major contributors to its problems. The ensuing claims and counterclaims only served to exacerbate an already hostile situation.

With the award of the SSN-688 class contract in February 1982, the Navy and Electric Boat reached an agreement on revised contract delivery dates for all previous SSN-688 class submarines. In February 1982 the Navy awarded Electric Boat a new contract for additional SSN-688 class submarines. At the same time, contract modifications were negotiated on existing contracts whereby Electric Boat agreed not to pursue an insurance reimbursement issue. In its annual report for 1981, General Dynamics, Electric Boat's parent corporation, recognized a $45 million loss, which it attributed to workmanship problems at Electric Boat.

According to published reports, company officials believed that the $84 million loss should be the last loss incurred for completing the first two SSN-688 class contracts and anticipated that the remaining SSN-688 class contracts would be profitable. The Navy believed that these losses on the first two contracts more realistically reflected the true cost of the contracts, and that Electric Boat will make a profit on the SSN-688 V contract. In its Selected Acquisition Report, the Navy excluded its completion cost estimates for the SSN-688 V contract citing that the disclosure of this information was sensitive and could jeopardize the government's negotiating position.

In 1989 USS Memphis (SSN-691) was withdrawn from active service to become a research platform to test advanced submarine technology such as optronic non-hull-penetrating masts, Unmanned Underwater Vehicles (UUV), and large diameter torpedoes. Although the USS MEMPHIS was modified to serve as a test and evaluation platform for advanced submarine systems and equipment, she retained her combat capability.

The final Los Angeles Class Attack submarine, Cheyenne (SSN 773), was commissioned during a 10 a.m. ceremony Friday, September 13, 1996, at Pier 12, Naval Station, Norfolk, Virginia.



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