Contractors win submarine deal

Northrop Grumman Corp. and General Dynamics Corp., the Navy’s top shipbuilders, received a $14-billion contract to jointly build more of the latest nuclear-powered submarines.

The fixed-price incentive fee contract calls for construction of eight of the Virginia-class vessels, the Defense Department said in a statement Monday.

Construction of the submarines by Northrop of Century City and General Dynamics of Falls Church, Va., will start between 2009 and 2013, and work will be finished by 2020, the statement said.

The sub is designed to be able to fire Tomahawk cruise missiles, attack surface ships and conduct reconnaissance against land targets.

The vessels are intended as a low-cost replacement for the current Los Angeles-class attack submarines.

Congress has approved funds for the new vessels in defense bills covering fiscal 2009, which began in October, and last fiscal year.

The last contract in 2004 was valued at $8.4 billion for five submarines. Ten vessels have been delivered or were already under contract before Monday’s announcement.

“The award gives GD and Northrop a degree of confidence that the Navy will order eight boats between fiscal 2009 and fiscal 2013,” said Congressional Research Service analyst Ronald O’Rourke in an e-mailed statement.

The Navy wants to buy as many as 30 submarines in the $92-billion program.

Rear Adm. William Hilarides, program executive officer for submarines, said a key to awarding the contract was a plan for the contractors and the Navy to shave as much as $400 million off the price of a submarine.

The Navy invested up to $600 million to redesign portions of the ship for more efficient production, reducing construction time to 60 months from 84 months, Hilarides said.

The companies would share in any savings above a prearranged target cost, increasing their profit per ship, or be penalized if costs rise above the target, he said.

General Dynamics works on the ships at its Electric Boat yard in Groton, Conn. Northrop Grumman works on them at the Newport News yard in Virginia.

General Dynamics shares fell 38 cents to $55.48 in trading Monday. Northrop gained 71 cents to $43.15.