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NYT 16 June 1985: Wayne Biddle

Lester Crown Blames The System
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WASHINGTON -- A BLACK limousine pulled up at the curb of the General Dynamics Corporation's suburban Washington office one day last week. A tall, trim man who had recently turned 60 emerged and took the elevator to Suite 1000, a warren of offices devoted to advancing the government interests of one of the world's most powerful arms manufacturers.

Though some senior General Dynamics officials have become familiar faces in the news during the past year of turmoil for the company, this man -even his name - has remained virtually unknown except to serious students of the case. He is Lester Crown, a company director whose 8.9 million shares of General Dynamics make him the company's biggest shareholder and who is playing an increasingly important role in shaping company strategy.

As the son of Henry Crown, the legendary Chicago financier who once bought the Empire State Building with borrowed funds and sold it for a $32 million profit, Lester Crown has gradually inherited much of his father's weight on General Dynamics' board. And in the past few months his role has expanded as his 89-year-old father's has diminished: While he does not have a hand in the day-to-day running of the company, Lester Crown is, by all accounts, deeply involved in major decisions. Recently, for example, he played a key role in choosing a successor to the company's beleaguered chief executive, David Lewis.

The special Crown-General Dynamics relationship has thus reached a natural milestone, a father-to-son power shift, in the midst of the most damaging attack ever on the company's business reputation.

For a year, the country's third-largest defense contractor has been investigated by the Justice Department, the Pentagon, the Securities and Exchange Commission and several Congressional committees. Its chief executive, who oversaw the production of some of the nation's most vital weapons, recently retired under the threat of being banned from military contracting. Top officials have been accused of contract fraud, stock manipulation and bribery, charges they deny. General Dynamics has been fined $676,283 for giving gifts to Admiral Hyman G. Rickover, the retired director of Navy submarine programs, who was censured last month for accepting those gratuities over a 16-year period. Indeed, the company's very name has come to symbolize a grassroots concern about corruption in the defense industry that has helped derail the Administration's military buildup.

During a daylong conversation last week in the company's suburban Washington office - the first extensive interview granted by anyone in the Crown family since the storm over General Dynamics business misconduct began a year ago - Lester Crown proffered an interpretation of the company's woes, seeking to absolve the company of any fault except perhaps lack of sufficient foresight.

Despite the damage suffered by General Dynamics over the past year and the Navy's order that the company establish ''a rigorous code of ethics for all officers and employees with mandatory sanctions for violation,'' Mr. Crown, who has been a board member for 11 years, insisted that ''there isn't a cultural, ethical change required in this company.''

Discussing what he called the company's ''foolishness and stupidity'' in not confronting problems with improper overhead billings, he said: ''We didn't do anything wrong, but it wasn't right either.''

What emerged from the interview with Mr. Crown was a portrait of a deeply troubled company: He portrayed senior management as either unaware or unconcerned about improper billings and top officers who were blindsided by recent attacks from the former manager of its Electric Boat shipyard, P. Takis Veliotis. Mr. Crown described a powerful corporation unable to find a way to stem the tide of criticism - first from antagonistic Congressional committees and then from the pro-military Reagan Administration - that has deeply blemished its reputation.

''I have to say there was some foolishness and stupidity on our part not to look ahead and say 'What could this look like on the front pages?' '' said Mr. Crown, reflecting on the millions of dollars of improper overhead expenses, including country club memberships and dog kennel fees, that a House committee discovered were charged against Pentagon contracts.

Dressed in a dark pinstriped suit that is a common uniform of power in Washington, the man whose 21 percent holding in General Dynamics is worth more than $650 million, seemed ill at ease with questions and at first refused to have his picture taken. Nonetheless, he was insistent that the company was a victim of an imperfect procurement system.

''Should we have been at the forefront of changing the system?'' he asked. ''Obviously, I'd give anything if we had.'' O N April 5, the Pentagon froze all contract payments, amounting to scores of millions of dollars per month, to General Dynamics as part of an effort to recoup $244 million in billings determined by the Defense Contract Audit Agency to be improper. In testimony before the House Energy and Commerce Committee's oversight subpanel on Feb. 28, Mr. Lewis, the company's chief executive, had conceded a wide range of unallowable billings for entertainment and lobbying costs.

At another hearing before the committee on March 25, Mr. Lewis announced that he would voluntarily withdraw $23 million out of $63 million in overhead expenses submitted by the company but questioned by Defense Department auditors for 1979 through 1982. The Pentagon, however, found his offer to be insufficient.

''The $23 million would have fallen out anyway'' in the course of negotiations with Federal auditors, Mr. Crown said, describing how overhead charges are routinely audited on a percentage, rather than an item-by-item, basis. ''All these things were put in for reimbursement. The D.C.A.A. looked at them, then the contracting officer. They then knocked out certain percentages. That is either a very efficient or a very lazy way. You end up, with the passage of time, throwing more and more in, because you know a certain percentage of it comes out in the end.''

He added: ''Is it a right way? No, I don't think so. It should be more specific about individual charges. Perhaps we should have had the foresight and ingenuity to say it should have been changed.''

Yet while regretting with hindsight that General Dynamics never pressed for improvements in the Pentagon's auditing methods, he strongly defended the company's ethics.

''You aren't just talking about ethics,'' he said. ''I don't think anyone in the corporate office knew how these things were being charged. It was done on a local basis. The thing got sloppy, but not with any thought at the top.''

It has been the company's contention since allegations of improper overhead billing first arose that it acted within the boundaries of Pentagon regulations, which contain broad gray areas. Indeed, after House Armed Services Committee investigators found problems with overhead charges throughout the military industry this spring, at companies that included other industry giants such as Boeing and McDonnell Douglas, the committee proposed legislation that would tighten the auditing process.

But Secretary of the Navy John F. Lehman Jr. emphasized last month that ''in 1984 General Dynamics continued to charge unallowable costs to travel accounts to be charged to the Government even though it had committed to shift such charges to company funding.'' At the time, he penalized General Dynamics with a fine and contract cancellations for what he called ''a pervasive corporate attitude that we find inappropriate to the public trust.''

Secretary Lehman added that ''in many cases involving disputes on overhead going back at least to 1973, the response by General Dynamics is the same: promises to correct the abuse and a prompt return to business as usual.''

Mr. Crown refused, however, to acknowledge any willful wrongdoing on the part of company personnel. ''The system should change,'' he maintained. He noted that the company has prepared a detailed proposal for the Pentagon on how to tighten the definitions on allowable and unallowable expenses.

Besides the issue of overhead billings, the other great area of grief for General Dynamics has been the performance of its Electric Boat shipbuilding division on Navy submarine contracts during the past decade. The company has been accused - by members of both parties in the House and Senate - of filing inflated claims to cover vast cost overruns and delivery schedule delays.

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The Navy paid General Dynamics $2.5 billion for 18 688-class attack submarines, the last of which was delivered 46 months late in December 1984. These payments included $739 million in settlement of cost-overrun claims filed by the company against the Government.

Federal investigations into the claims during the late-1970's ended without prosecution of General Dynamics officials. But scrutiny began again last year after Mr. Veliotis, a former manager of the shipyard, alleged that poor performance by the company, not technical changes ordered by the Navy, was the primary cause of the overruns.

Mr. Veliotis is living in Greece as a fugitive from Federal kickback charges associated with his employment at General Dynamics but unrelated to the submarine contracts. He has supplied Federal investigators with company documents and surreptitiously made tapes of his business telephone calls at Electric Boat.

Asked how Mr. Veliotis, whose allegations David Lewis has called ''malicious and untrue,'' could rise to the highest echelons of the company, Mr. Crown replied: ''I feel I'm a good judge of character, but I feel absolutely betrayed by Veliotis.''

Mr. Crown traced the rise of Mr. Veliotis to 1973, when he was named manager of General Dynamics' commercial shipyard in Quincy, Mass. ''The Quincy yard was a disaster,'' Mr. Crown recalled. ''We were looking for someone to run it, and Veliotis's name came to the fore. I never interviewed him at the time, but he's a very impressive man. He did a fine job of putting the yard in shape.''

Mr. Crown said Mr. Veliotis ''insisted on only reporting to David Lewis,'' which irritated other executives. But his success at Quincy was so admired that he was a natural choice in 1977 for a similar task at the Electric Boat shipyard in Groton, Conn. ''We had problems at Electric Boat,'' said Mr. Crown. ''But where do you find submarine builders? It's pretty hard. I was involved with Lewis in the decision to bring in Veliotis. There's a difference of opinion today on whether he did a good job there.''

Regarding the tape recordings that have embarrassed the company, Mr. Crown said: ''He put a Dictaphone behind his desk. You mean to tell me I couldn't set you up in a conversation under the same circumstances? He misled us and he fooled us right up until he took the Fifth Amendment on the Frigitemp case.''

In May 1982, according to company statements, Mr. Veliotis's lawyer told General Dynamics representatives that his client would invoke the Fifth Amendment if he appeared before a Federal grand jury in New York. The panel was examining charges that Mr. Veliotis and a Quincy colleague had received a $2.7 million kickback for awarding a $44 million subcontract to the Frigitemp Corporation of Brooklyn in 1973. In November 1981, Mr. Veliotis had been promoted to executive vice president for marine and international operations.

''Can you be sure of the girl you married?'' Mr. Crown asked rhetorically, summing up the company's broken love affair with the Greek shipbuilder.

T HE Veliotis matter aside, did

Electric Boat from 1973 to 1981 give the Navy cost and schedule information on submarine work that was ''grossly inaccurate,'' as Secretary Lehman charged last month?

''It was wrong, but it was never purposefully wrong,'' Mr. Crown said. He insisted that the information represented senior management's best estimates.

On the subject of David Lewis, who announced his retirement last month the morning after Secretary Lehman penalized the company for business misconduct, Mr. Crown expressed nothing short of idolization for the 67-year-old executive.

''Other than my dad, Dave Lewis is the best example for children I know of,'' he said.

Henry Crown handpicked David Lewis in 1970 to be General Dynamics chief executive, enticing him away from the McDonnell Douglas Corporation, where he had been heir apparent to founder James S. McDonnell. Mr. Lewis enjoyed a reputation as a brilliant manager and aeronautical engineer. His relationship with the Crowns has been without apparent conflict ever since.

But on May 2 this year, the Pentagon's Inspector General, Joseph H. Sherick, formally recommended that Mr. Lewis and two other top General Dynamics executives be banned from military contracting. He said they ''lack the business integrity and honesty required of high-level officials in corporations that do business with the Government.'' Such action, known as debarment, would have left the company with the choice of dumping the executives or losing billions in Pentagon work.

At the annual General Dynamics shareholders meeting the same day, Mr. Lewis vowed to fight any Pentagon attempt to debar him, saying ''our board has directly authorized management to follow all steps available through the Federal courts to overturn any such action.''

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Lester Crown asserted that it was a coincidence that the Lewis retirement announcement on May 22, and the simultaneous notice that Stanley C. Pace, vice chairman of TRW Inc., would succeed him later this year, came just a day after Mr. Lehman penalized the company for misconduct. But his comments on the choice of Mr. Pace seemed to contradict what had been said at the shareholders meeting.

''David and I were almost a committee of two to determine what the succession should be,'' he recalled. ''We talked about Stan Pace before any of these problems came up. But we had concern about debarment, and the Pace succession was accelerated because of it.''

As it turned out, Mr. Lehman had decided against the Inspector General's immediate debarment recommendation. But he left the possibility open for the future, pending further investigations.

For General Dynamics, the troubles have created an unprecedented corporate maelstrom. For Lester Crown, however, it is but the second major tempest in his career. Mr. Crown, heads the Material Service Corporation, a General Dynamics subsidiary and the original Crown holding. In 1974, the United States District Court for Northern Illinois named him and four Material Services associates as unindicted co-conspirators in a case involving bribery of Illinois state legislators. He has consistently declined to discuss any aspect of that case.

But others are not so reticent. ''Bribery is a major felony involving serious moral turpitude,'' said Representative John D. Dingell in a letter regarding the episode that he wrote to Secretary of Defense Caspar W. Weinberger earlier this year. As chairman of the House Energy and Commerce Committee's oversight subpanel, Mr. Dingell has spearheaded Congressional inquiries into the company's business conduct. ''The election to, and the retention on, the Board of Directors of an individual who admittedly was involved in the commission of a major crime is a statement of the integrity of the management of our nation's largest defense contractor.''

But others have staunchly defended Mr. Crown. ''Lester Crown is, and always has been, truly a moral person,'' wrote M.J. O'Brien, a family friend and president of Marblehead Lime, a General Dynamics unit, in a letter to Mr. Dingell last April. He added that Lester Crown's seven children had been ''well schooled in the Judeo-Christian ethic of hard work and honesty.''

Albert E. Jenner Jr., who was Republican counsel during the Watergate hearings and has long been a member of the General Dynamics board, said: ''Lester is a splendid person. He's very careful not to have the board believe he is the major domo of this corporation,'' but Mr. Jenner conceded that Mr. Crown was not just one among equals.

Last week in the company's Crystal City, Va., offices, Mr. Crown admitted that the company ''should have had more foresight,'' But he was more irritated than shamed about General Dynamics' problems.

''Certainly this hurts, but it comes out more in anger than anything else,'' he concluded, expressing exasperation at the company's plight. ''Our friends and our family, we have no problem with. The rest of the world I can't do anything about.''

HENRY CROWN: A FATHER'S LEGACY

WASHINGTON --Henry Crown, who turned 89 on Thursday, is arguably one of America's most influential industrialists, although his name is hardly as well known as Hughes or Getty. Born into a large Jewish immigrant family in a poor Chicago home, he started a building supplies company in 1916 that hit it rich in the rough-and-tumble world of Chicago construction. His Material Service Corporation eventually provided the capital for the family's entry into a widening sphere of business.

Since 1959, when the Crowns merged Material Service with General Dynamics, then a faltering aircraft maker, Henry Crown has guided the big company to preeminence in the weapons market. He remains executive committee chairman, but he ''has been less active over the past year'' because of his wife's illness and his own advancing age, according to his son, Lester.

The Crown family controls 9,828,240 shares of General Dynamics common stock, about 23 percent of the total, according to the company's 1985 proxy statement. The family also has an option to buy 1,687,755 additional shares from the estate of Nathan Cummings, former head of the Consolidated Foods Corporation, now the Sara Lee Corporation, who was the company's second-largest stockholder. A close associate of Henry Crown, Mr. Cummings died on Feb. 19 at the age of 88.

Henry Crown has been chairman of the company's executive committee since 1959, except for a four-year period after 1966, when then-chief executive Roger Lewis (no relation to the recently retired chief executive, David Lewis) forced him off the board in a dramatic power play.

''He's the one from whom everything has emanated around here,'' Lester Crown said reverentially of his father, whom he frequently refers to in conversation as ''my dad.''

The empire that the elder Mr. Crown built is a large, albeit unpublicized, one. The Crown family, according to a proxy statement, owns 10.8 percent of the Chicago Pacific Corporation. According to other proxy statements, the family owns less than 1 percent of the Transworld Corporation and of Trans World Airlines. Among its other holdings are an estimated 3.8 percent of the Hilton Hotels Corporation, and, according to Lester Crown, shares in First Chicago, Pennzoil and Aetna Life.

Today, the elder Mr. Crown, an intensely private man, divides his time among homes in Chicago, Miami and Los Angeles. ''He is not well and Mrs. Crown is quite ill,'' said Albert E. Jenner Jr., a longtime friend and business associate. ''Lester calls him almost every day.''

Lester Crown said that while the patriarch no longer has a ''directional presence'' in General Dynamics' workaday world, ''we keep him up to date and use him for advice.'' Henry Crown ''still has the instinctive ability to get to the heart of a problem,'' he added. ''He does not interfere, but if he has a feeling about something, we listen to it.''

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The Nation 9 Feb 2004
Alexander Cockburn

The Fog Of Cop-out



My dear friend and late Nation colleague Andrew Kopkind liked to tell how, skiing in Aspen at the height of the Vietnam War, he came round a bend and saw another skier, Defense Secretary Robert McNamara, alone near the edge of a precipice. This was during the period of Rolling Thunder, which ultimately saw three times as many bombs dropped on Vietnam as the Allies dropped on Europe in the Second World War. "I could have reached out with my ski pole," Andy would say wistfully, "and pushed him over."

Alas, Andy missed this chance to get into the history books and McNamara survived the 1960s, when he contributed more than most to the slaughter of 3.4 million Vietnamese (his own estimate). He went on to run the World Bank, where he presided over the impoverishment, eviction from their lands and death of many millions more round the world. And now here he is, the star of Errol Morris's much-praised documentary The Fog of War, talking comfortably about the millions of people he's helped to kill. It reminded me of films of Albert Speer, Hitler's architect and then head of war production. Speer loved to admit to an overall guilt. But when he was pressed on specific nastiness, like working Jews or Russians to death in arms factories, he would insist, eyes ablaze with forthrightness, that he knew nothing of such infamies.

It's good to have a new generation reminded of history's broad outlines, like the firebombing of Japanese cities and Vietnam, but I don't think Morris laid a glove on McNamara, who should be feeling well pleased. Like Speer, he got away with it yet again.

The documentary's gimmickry--cuts to black, Morris shouting his questions away from the mike, McNamara off-center in the frame, montage of typewriter-ribbon wheels, skulls dropping in slow motion down a stairwell, captions offering banal "lessons"--gives us a clue. Morris didn't have much to throw at McNamara. He didn't do enough homework. Time and again, McNamara gets away with it, muffling himself in the ever-useful camouflage of the "fog of war," cowering in the shadow of baroque monsters like Curtis LeMay or LBJ, choking up about his choice of Kennedy's gravesite in Arlington, choking up at the memory of Johnson giving him the Medal of Freedom, spouting nonsense about how Kennedy would have pulled out of Vietnam.

When McNamara looks back down memory lane there are no real shadows, just the sunlight of moral self-satisfaction: "I don't fault Truman for dropping the bomb ..."; "I never saw Kennedy more shocked" (after the murder of Ngo Dinh Diem); "never would I have authorized an illegal action" (after the Tonkin Gulf fakery); "I'm very proud of my accomplishments and I'm very sorry I made errors" (his life). Slabs of instructive history are missing from Morris's film. McNamara came in on one of the biggest of big lies, the bogus "missile gap." As Defense Secretary he ordered the production of 1,000 Minuteman nukes, this at a time when he was looking at US intelligence reports showing that the Soviets had one silo with one untested missile.

Reminiscing about his acceptance of Kennedy's invitation to come from Ford in Detroit (much nonsense here) to Camelot, McNamara claims to Morris that he insisted he would not be part of Georgetown's pesky social round. Nonsense. He took to it like a parvenu to ermine, as more than one Washington hostess could glowingly recall.

"It's beyond the capacity of the human mind to comprehend all the variables," the systems analyst proclaims to Morris, which would have afforded a better-informed filmmaker a chance to ask this cold engine of statistical calculation for his take on the prime business of the Pentagon, the allocation of pork. Why did Defense Secretary McNamara overrule all expert review and procurement recommendations and insist that General Dynamics rather than Boeing make the F-111? Could it be that Henry Crown of Chicago was calling in some chits for his role in fixing the 1960 JFK vote in Cook County, Illinois? Crown, of Chicago Sand and Gravel, had $300 million of the mob's money in GD debentures, and after the disaster of the Convair, GD needed the F-111 to avoid going belly-up, taking the mob's $300 million with it. McNamara misled Congressional investigators about this for years afterward.

The Gulf of Tonkin "attack" prompted the Gulf of Tonkin Resolution in 1964, whereby Congress gave LBJ legal authority to prosecute and escalate the war in Vietnam. McNamara does some fancy footwork here, stating that there wasn't any attack by North Vietnamese PT boats on the US destroyer Maddox on August 4, but that there had been such an attack on August 2. It shouldn't have been beyond Morris's powers to pull up an excellent piece by Robert Scheer, published in the Los Angeles Times in April 1985, establishing not only that the Maddox was attacked neither on August 2 nor 4 but that, beginning in July, South Vietnamese navy personnel, US-trained and -equipped, "had begun conducting secret raids on targets in North Vietnam." As Scheer said, the North Vietnamese PT boats that approached the Maddox on August 2 were probably responding to that assault.

The Six-Day War? Just before this '67 war the Israelis were ready to attack and knew they were going to win but couldn't get a clear go-ahead from the Johnson Administration. As the documentary The 50 Years War narrates, Meir Amit, head of Israel's Mossad, flew to Washington. The crucial OK came from McNamara, thus launching Israel's long-planned, aggressive war on Egypt, Jordan and Syria, which led to present disasters. And no, Morris didn't quiz McNamara on Israel's deliberate attack on the US ship Liberty during that war (with thirty-four US sailors dead and 174 wounded), or on the cover-up that McNamara supervised.

We have so many sponsors of mass murder hanging around, it would be nice to see one of them, once in a while, take a real pasting. But no, they live on into happy old age, vivid in their worries about the human condition, writing in The New York Review of Books, passing on no honest records about the evil it really takes to run an empire. So suddenly people are shocked about a relative piker like George W. Bush and start talking about Hitler. If only they knew. It's not that hard to find out.

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Haaretz 23 June 2017

President of his family's Chicago-based investment firm, Henry Crown and Company, a director of JPMorgan Chase and General Dynamics, he is also the managing partner of the Aspen Skiing Company, James Crown turns 64

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Chicago Tribune 2 Jan 1998
Storey H Rowley

....  Chicagoans have donated hundreds of millions of dollars over the decades to philanthropy in the Jewish state. The sheer number of individual donations by Chicago Jews toward buildings, education and the arts strikes any casual observer strolling streets in Jerusalem, Tel Aviv or Haifa.

Prominent among them are contributions from the Crown family, starting with the state's creation in 1948 and including countless gifts since, such as Jerusalem's Ida Crown Plaza, an elegant outdoor walkway at the Israel Museum built some 30 years ago.

More recently, in 1986, came Crown gifts to Jerusalem's theater complex used for official functions, conferences and festivals. They include the 765-seat Henry Crown Hall, permanent home for the Jerusalem Symphony Orchestra; the 470-seat Rebecca Crown Hall for concerts, plays, dance and films; and a smaller 115-seat Crown hall mainly for films.

Israel has been showered with three generations of giving by the Crown family, now led by Lester Crown, 72, a nationally recognized leader in both the U.S. business and Jewish communities and a stalwart friend of Israel.

"It's the obvious thrill of having a State of Israel," said Crown in an interview.

"Starting with my dad (Henry) and his brothers and the generation before me, this became important to all of them," adds Crown, now president of Henry Crown and Company of Chicago, chairman of the executive committee of General Dynamics Corp. and chairman of Material Service Corp.

The Crown name has become almost as prominent in Israel as it is in Chicago. Around the turn of the century, Crown's father, Henry, came to Chicago from what is now Lithuania, and his mother, Rebecca, came from Hungary, via Canada. The Arie and Ida Crown Foundation, named for Crown's grandparents, is the family's charitable fund, now run by his daughter, Susan.

But it was Henry Crown's friendship with Jerusalem's legendary longtime Mayor Teddy Kollek that also spurred the family's generous philanthropy to Israel. Lester Crown remains a close friend of the former mayor, who persuaded the family to donate the theaters.

"Those were done because of Teddy's concern there wasn't enough secular activity in Jerusalem and that people, other than the ultra-religious, would go to Tel Aviv for fun," recalls Crown. "He wanted to have attractions for those who are not part of the ultra-Orthodox."

The Crowns have also given substantially to educational institutions, including Jerusalem's Hebrew University, the Weizmann Institute of Science in Rehovot and the Technion Israel Institute of Technology in Haifa, as well as to the Jerusalem Foundation and Hadassah Hospital's hospice program.

The Weizmann Institute's Chicago chapter honored Crown and his wife, Renee, by creating a research endowment fund in their names. Technion has awarded Crown and several other Chicago benefactors--including Leonard Sherman, Max Dresher and Helen Asher--honorary doctorates for their contributions. Two recent presidents of the American Technion Society, Sherman and Ben Sosewitz, are from the Chicago area. ....

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Inside The Navy 3 July 2017
Jason Sherman



The Defense Department wants permission from Congress to begin negotiations with General Dynamics on a five-year deal beginning in fiscal year 2019 to buy 10 attack submarines for a potential $32.6 billion, a package the Navy estimates would cost $5.4 billion less than buying the Virginia-class boats annually.

On June 16, DOD provided Congress a package of legislative proposals to accompany the FY-18 spending request. In them, the Pentagon details the case for negotiating a multiyear contract with General Dynamics Electric Boat, Groton, CT, beginning in FY-18.

The proposal seeks authority for the Navy secretary to enter into a multiyear contract for Virginia-class Block V boats. The service has previously executed multiyear contracts to buy five Block II Virginia-class boats between FY-04 and FY-08, then another deal to procure eight Block III ships between FY-09 and FY-13, and a current deal to buy 10 Block IV boats between FY-14 and FY-18.

"A successful and integral part of the Block IV negotiations was the program office's ability to receive MYP authority in FY-13, one year prior to contract award, thus improving the program office's negotiating position resulting in greater than $2 billion in acquisition savings over that of single year procurements," according to the legislative proposal. "With MYP authority a year ahead of award, the program office was able to send a strong signal to the shipbuilders and, more importantly, the industrial base, that the shipbuilders could negotiate with the confidence and stability provided by the MYP authority."

By granting the Navy authority in FY-18, a year in advance, the service estimates it could lower total costs by $901 million, compared to if Congress were to wait a year and grant MYP authority in FY-19, the first year of the planned block buy, according to the legislative proposal.

The Navy estimates that buying 10 Block V boats, SSN 802 through SSN 811, using annual contracts would cost $38.1 billion; with multiyear authority granted in FY-18, the estimated cost is $32.6 billion, a cost avoidance of $5.4 billion. If MYP authority were delayed until FY-19, the estimated cost for a block buy for the same submarines would be $33.6, a savings of $4.4 billion, according to the legislative proposal.

"Due to the complexity of shipbuilding contracts, much of the proposal development, as well as the negotiations between the [Navy] and the shipbuilders will take place in FY-18," according to DOD. "The Navy would be in a stronger negotiating position if the agency could enter the negotiating efforts with MYP authority from Congress, helping to achieve maximum savings."

The first two MYP contracts -- for the Block II and Block III boats -- netted savings of more than 10 percent compared to annual purchases, according to the Navy. The current block buy is forecast to achieve savings of 15 percent compared to annual purchases, the legislative proposal states.

This, according to the proposal, represents total estimated savings of $4.9 billion -- $4.5 billion for ship construction and $400 million for government furnished equipment for the Block IV boats, about $496 million per submarine.

The Navy, according to the proposal, "has high confidence that this is the best and most cost-effective contracting approach, in light of actual costs under the Block II, Block III, and Block IV contracts."

While the Navy anticipates potential savings of $5.4 billion for a Block V multiyear contract, the Pentagon office of cost assessment and program evaluation -- in an independent assessment completed June 14 -- forecast lower savings: $2.5 billion.

While both the CAPE and Navy estimates account for savings expected from the shipbuilding contract, the Navy's higher forecast includes expected savings from government furnished equipment, according to the legislative proposal.

Both the House and Senate Armed Services committees, in their respective versions of the FY-18 defense authorization bill, endorsed multiyear contract authority the Navy seeks. However, both panels have advanced legislation that would allow the government to negotiate for 13 Virginia-class submarines as part of the five-year deal, a 30 percent increase above what the Navy proposed.

Sputnik News Service 23 June 2017
Rossiya Segodnya IIA


WASHINGTON, June 24 (Sputnik) - General Dynamics Electric Boat has won an $85-million US Navy contract for work on two fiscal 2019 Virginia-class submarines, the Department of Defense said in a press release.

"General Dynamics Electric Boat [of] Groton, Connecticut, is being awarded an $85,000,000… modification… contract for additional long-lead time material associated with the fiscal 2019 Virginia-class submarines (SSN 802) and (SSN 803)," the release stated on Friday.

The contract provides long-lead time material for steam and electric plant components; the main propulsion unit efforts and ship service turbine generator efforts; and for hull, mechanical and electrical system components to support ship construction, the Defense Department added.

The Herald 24 June 2017

General Dynamics (NYSE: GD) Electric Boat subsidiary has received a $203.1 million contract modification to increase design support for the U.S. Navys Columbia-class nuclear submarines.

The service branch awarded the modification as part of the Navy and the U.K.s joint Common Missile Compartment program, the Defense Department said Thursday.

The Pentagon issued a Milestone B approval to the potential $125 billion Columbia-class submarine program in January.

The Naval Sea Systems Command will obligate the full amount of the modification from the service branchs fiscal year 2017 shipbuilding and conversion, research, development, test and evaluation funds as well as U.K. foreign military sales funds.

Work will occur in Connecticut, Maine, Rhode Island and Virginia through October 2017.


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