Brian Bradley
NS&D Monitor
4/24/2015
The House Armed Services Seapower & Projection Forces Subcommittee markup of the Fiscal Year 2016 National Defense Authorization Act authorizes the transfer of $1.4 billion into the Sea-Based Deterrence Fund from Navy research and development funds, expands the transfer authority for the Fund from the Navy to the Defense Department, allows the account to be involved in “cross-program coordinated procurement efforts,” and provides incremental funding and facilities funding authority. A recently ordered Navy study explores ways to collaboratively develop common pieces of the Ohio-class Replacement and Virginia Payload Module to keep the programs affordable and on schedule.
After Thursday’s markup session, subcommittee Ranking Member Rep. Joe Courtney (R-Conn.) told reporters the logic behind expanding the Fund’s role to establish the appropriation-dormant account as an actionable funding mechanism. “We’ve got to get this thing sort of out of the realm of bar talk and into like a really functioning system within the budget process. So last year, it was created. It was kind of like opening a bank account, but just putting five bucks in it. Now we’re actually trying to activate it as a real meaningful program,” he said. “If you just fund it out of the shipbuilding account, the rest of the surface fleet, and even the Virginia submarines, are all going to really struggle. Bigtime. I mean in some respects, this is a bigger deal than sequestration.”
‘Economic Order Quantity Contracts’
The legislation allows Navy Secretary Ray Mabus to enter into contracts known as “economic order quantity contracts” with private shipyards and other commercial or government entities to achieve efficiency derived from major component or subsystem development. The economic order quantity is the order quantity that minimizes total inventory holding costs and ordering costs. “The authority under this subsection extends to the procurement of parts, components, and systems (including weapon systems) common with and required for other nuclear powered vessels under joint economic order quantity contracts,” the mark states. The language also requires Mabus to submit a report on the fund to Congressional defense committees by March 1, 2016, and annually through 2025. Reports would include information about class design and construction, program and procurement schedules and funding requirements.
If adopted, the mark would also authorize deposited money to enter into advanced procurement contracts to save money through proper workload management, manufacturing efficiencies and workforce stability. Also, the mark would authorize the Navy Secretary to use funds to incentivize investments in critical infrastructure at “nuclear capable shipyards and critical sub-tier vendors.” Courtney said expanding the Fund’s expanded parameters lay the groundwork for negotiations with fellow Congress members and Pentagon officials. “I think it kind of bolsters the stature of that fund, that it’s now the place to go to get funding for research and development for Ohio, and even they’re starting to do a little bit of production work now,” he said. “We want to get that in the loop as far as a funding mechanism.” The Navy estimates the Ohio-class Replacement will cost $139 billion for all 12 subs.
