Morning Briefing - August 09, 2018
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August 09, 2018

BWXT Anticipates No Great Financial Impact After Botching Welds for Columbia-Class Subs

By ExchangeMonitor

Botched welding jobs on 12 missile tubes for the Navy’s next-generation ballistic-missile submarines should not materially affect tube vendor BWX Technologies’ bottom line this year, CEO Rex Geveden said Tuesday.

But it is “too early to tell” whether the gaffe will prevent BWXT from winning more subcontracting business from General Dynamics Electric Boat (GDEB), prime contractor for the Columbia-class submarine program, Geveden said on a conference call with investor analysts. The CEO said he expected another award opportunity in the first quarter of 2019.

BWXT self-reported bad welding on the 12 common missile compartment tube assemblies to both GDEB and the Navy during the quarter ended June 30. The company delivered seven balky tubes to GDEB, while another five remain in the vendor’s factory in Mount Vernon, Ind., Bill Couch, a spokesperson for Naval Sea Systems Command, said by email Tuesday.

BWXT Nuclear Operations built the 12 troubled tubes under a roughly $75 million Block II Common Missile Compartment tube assembly subcontract awarded by GDEB in April 2017. The company is under contract for 26 tubes, Couch said. It expects to finish building the tubes in 2021, according to a press release announcing the Block II subcontract award.

BWXT’s internal inspections were not rigorous enough to catch the bad welds before some tubes shipped out, Geveden said on the call.

“Some welding indications were not caught in the inspection,” he said. “I don’t view it as a welding quality issue, I view it as an inspection technique issue.”

The Navy plans to replace 14 current Ohio-class subs with 12 Columbia-class boats.

The Department of Energy’s contribution to the submarine fleet, the W76 warhead, is slated to be ready by 2020, more than a decade before the first Columbia-class sub would head out on patrol in 2031. The agency’s semiautonomous National Nuclear Security Administration (NNSA) plans to finish its W76 life-extension program in the federal 2019 fiscal year, which begins Oct. 1 and ends Sept. 30, 2019.

During fiscal 2019, assuming Congress passes a DOE appropriations bill by September’s end, the NNSA will start modifying an unspecified number of W76 warheads to create the low-yield W76-2. The NNSA’s share of the low-yield modification is expected to cost $125 million or so over two years. The White House requested $65 million for fiscal 2019, and Sen. Dianne Feinstein (D-Calif.) has said the weapon will cost another $60 million in fiscal 2020.