THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, June 12, 1995 TAG: 9506120035
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY DALE EISMAN, STAFF WRITER
DATELINE: WASHINGTON LENGTH: Long : 125 lines
It's the car of your dreams, a sleek model with a big engine but great fuel economy, state-of-the-art safety features and lots of high-tech gizmos.
Not sure you can afford it? Maybe it's more than you really need?
Well then, how about two or three? For no more than you'd spend now on one, you can make a down payment on several. You won't take delivery for a while and you'll have some hefty payments, but you'll end up with a whole fleet of hot cars.
Substitute submarines for cars and you have the outline of a buying strategy that was emerging last week as congressional leaders tried to resolve a battle between Newport News Shipbuilding and Electric Boat of Groton, Conn., two giant shipyards vying for the Navy's sub work.
They are months away from a deal, if one is even possible. But sources in the Pentagon and on Capitol Hill suggested that the Navy, the builders and key lawmakers are looking hard at this ``incremental funding'' approach as a mechanism for submarine purchases.
With incremental funding, the $2.2 billion in sub money the Navy is seeking this year might be divided among three, four or even more projects; some could go to continue work on the third and last ship in the Seawolf class of subs, for example, while the balance was used to begin work on successor subs.
The Navy typically buys ships with only one or two massive appropriations. This year it's asking Congress for $1.5 billion for the third Seawolf and $700 million to do preliminary work on a new class of subs. Last year, by comparison, it got $3.5 billion as the second and final slug of money for a single aircraft carrier.
Because ship costs are so high and building takes years, the Navy and its builders like having all the money in hand at the outset. The approach ``presumably leads to better planning,'' said Steve Kosiak, an analyst at the Defense Budget Project, an independent group that monitors Pentagon spending.
Incremental funding, in contrast, keeps a project's future uncertain, one senior defense official said. If money gets tight, and ``people start shaving,'' then ``you end up spending a lot and not getting what you wanted,'' said the official, who spoke on condition of anonymity.
But its proponents see the incremental approach as a way to keep both Newport News and Electric Boat, the nation's only builders of nuclear-powered ships, in the sub business.
Electric Boat, a General Dynamics division which has emerged in recent years as the Navy's preferred sub supplier, builds only submarines. But with the naval service ending production on the Los Angeles class of attack subs and only two boats authorized in the Seawolf class, Electric Boat is running out of work.
As recently as 1992, ``EB,'' as the company is known, was working on 13 subs, said John Welch, a shipyard vice president. Unless Congress provides more sub work this year, the firm will begin in January to close its hull construction center in Rhode Island and will be down to a single sub by 1998, he said.
``If you let the people go and shut the facility down . . . it's going to be hard to bring the people back into the submarine business,'' when new boats are needed, Welch said.
To keep EB viable, the Navy wants to direct the third Seawolf and at least the first ship in the successor class of subs to the Groton yard.
Newport News, a Tenneco Inc. subsidiary, is to complete its final sub contract next year. But the Navy argues that the Virginia yard can get by on its contracts for commercial ships and nuclear-powered aircraft carriers. Many nuclear skills are transferrable from carriers to subs, the service contends, so the Virginia yard can be brought back into the sub trade later if needed.
Newport News, which with 19,000 workers is Virginia's largest private employer, concedes that the loss of sub contracts doesn't threaten its survival.
But shipyard President Bill Fricks has told a succession of congressional committees this spring that he'll close his submarine lines and lay off sub workers unless he gets some more sub work. And he argues that once the firm is out of the sub business, reconstituting production would carry enormous costs, if it could be done at all.
Fricks contends his yard should be permitted to compete for post-Seawolf sub contracts and claims Newport News could save taxpayers up to $10 billion if allowed to build all 30 ships projected for the new class. He and other Newport News executives, including Tenneco Chairman Dana Mead, came to Washington last Thursday to press their case with House Speaker Newt Gingrich.
Their hourlong session was private. But Rep. Herbert H. Bateman, a Newport News Republican who helped arrange it, hinted that incremental funding of future subs was on the agenda.
Gingrich has taken a personal interest in the submarine issue, forming an unusual alliance with President Clinton in support of the Navy's plan to build the third Seawolf and preserve the Groton yard, while also promising to work to keep Newport News in the sub business.
The speaker's involvement is among several actions taken this spring that have helped fuel speculation he is interested in challenging Clinton next year. He is spending this weekend in New Hampshire, site of the first presidential primary.
Gingrich may have other considerations as well. Connecticut Republican Rep. Nancy Johnson, a strong EB supporter, heads the House Ethics Committee which is reviewing ethics charges against the speaker.
And though both are considered more moderate than Gingrich, Johnson and Connecticut Gov. John G. Rowland, then a congressman, were key Gingrich supporters when he became House GOP whip in 1989.
Despite his obvious interest in the issue, the iron hand Gingrich showed in pushing his ``Contract with America'' through the House this spring has not been evident during the sub debate.
Rep. Duncan Hunter, a Californian who is a close Gingrich ally, last month crafted a sub plan that kills the third Seawolf and then rammed the plan through the House National Security Committee.
Hunter wants to keep EB alive by letting it do special modifications to the submarine Connecticut, a Seawolf-class ship under construction in Groton, and letting it design and build what could become the prototype for the new sub class.
The plan ``costs one helluva lot more,'' EB's Welch observed last week, gives the Navy one less submarine and doesn't provide his yard with enough work. It also denies Newport News the right to compete on the prototype for the new class but opens the door to competition after that.
``From a taxpayer point of view, this is the worst of all possible results,'' said one veteran Democratic staff member. But rather than try to cut a deal quickly, Gingrich and other leaders on both sides of the dispute have signaled that they will let Hunter's plan go through the House unchallenged this week and concentrate on working out a better plan in the Senate.
KEYWORDS: SUBMARINE NAVY CONTRACT NEWPORT NEWS SHIPBUILDING AND DRYDOCK
by CNB