The U.S. Navy has awarded two multiyear contracts worth $14.6 billion to General Dynamics' (NYSE:GD) Bath Iron Works business and Huntington Ingalls Industries' (NYSE:NYSE:HII) Ingalls Shipbuilding division for the construction of Flight III Arleigh Burke-class destroyers, as announced on Thursday. The contracts, which were initially disclosed in early August, stipulate that General Dynamics will build three DDG 51 ships, while HII will construct seven destroyers.
The Department of Defense revealed on Wednesday that deliveries to the Navy are expected to run through fiscal year 2026 for General Dynamics and FY 2027 for HII Ingalls. The contracts also include options for the Navy to order additional ships and provide for post-delivery availabilities and other relevant efforts.
The detailed timeline for the vessels indicates that HII’s Ingalls Shipbuilding division will construct seven destroyers – two in 2023, one in 2024, two in 2025, one in 2026, and one in 2027. General Dynamics Bath Iron Works will also build three units – one ship per fiscal year in 2023, 2024, and 2026. The total cost of the construction program was disclosed by the DoD on September 6th as $14.58 billion; however, no cost breakdown between the two contractors was provided.
These contracts come amidst a growing military posture of China’s Navy and a Congressional Research Service report published on September 5th suggesting an average shipbuilding rate of 11 ships per year over a 35-year period. This would increase the size of the US Navy to 385 ships by the 2060s. "It’s right to say that the US is contemplating force size – and maintaining a larger fleet of Arleigh Burke ships is part of the answer," said GlobalData Defence analyst James Marques.
The cost of these subsystems is critical to the construction program with hull costs estimated at around $1 billion per ship and an equal amount required for next-generation systems integration.
The Navy's procurement plan includes a significant change with a new radar system called SPY-6 that is more capable than the SPY-1 radar installed on earlier versions. The maintenance of previous systems, such as the Aegis ballistic missile defense (BMD), remains crucial given its prominence in Arleigh Burke destroyers. According to a Congressional Research Service report published on August 28th, "by the end of 2024, there will be 53 total BMD capable [Aegis] ships requiring maintenance support."
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