Legends of the Fall: Washington Policy Outlook, Conference Season and a Sub Crisis

Aaron Mehta:
The truth of the matter is the biggest story out of AFA is that there was no story.
Roman Schweizer:
From DoD to Congress and from the White House to Wall Street, the NatSec Need to Know podcast, an unrehearsed podcast presenting insightful discussion and forecasts of the major national security and defense issues of the day. We're leading off with our editor's roundtable to discuss the top national security issues in Washington. Joining me is a murderous row of experienced Washington defense editors and reporters. Tony Bertuca from Inside Defense, Aaron Mehta from Breaking Defense, and joining us for the first time is Joe Gould from Politico. They've each covered Washington and the Pentagon for years, and are as well sourced as anyone. Thank you all for joining. Gentlemen, let's get after it.
I think there is a action packed agenda of doom and gloom to discuss. We are into the lovely fall season in Washington. That means we've got a CR in place, no shutdown. Yay Congress, you did it. And then we've had a couple of conferences, or we've had one conference, AFA, which we haven't talked about, and then one upcoming, AUSA. So I'd like to preview those a little bit. And then we've got a shipbuilding mess and some other things going on. But right off the bat, guys, let's just talk about where we're at with CR appropriations and what we should expect over the next three months or so. And I'd like to mention, Joe Gould is joining us for the first time, so we're going to give him first pitch and let him lead us out. Joe, please go ahead.
Joe Gould:
Yeah, sure. Thank you, and happy fiscal new year to all who celebrate. Congress is... It's going to be quiet until November 12th. Having covered themselves in glory with a CR, they have without resolving full year appropriations, without resolving the NDAA, with a host of other questions looming, they've left town. So all that stuff is going to be waiting for them when they get back. The House has made its way through a number of fairly partisan appropes bills and the Senate really hasn't done theirs. And you have Mike Johnson vowing that he's not going to do an omnibus appropriations bill, which is a bit of a conundrum, because that's what they always do. So it's going to be jam packed once they get back.
Roman Schweizer:
And of course, one thing Washington never does, is let a good crisis go to waste. And so you've got hurricanes that ravaged the southeast. You've got the U.S. Navy popping off some standard missiles to defend Israel, plus every once in a while lobbing some shots in on the Houthis. So, there will be a supplemental at some point. Do we have any idea... I've heard upwards of 35 billion for the hurricane, who knows what for Israel and other stuff. Have you guys got any view on that?
Tony Bertuca:
Tony here. Some of the conversations I've had have gone everything from, "You know they shouldn't need one for the Red Sea because they got stuff in April and we don't want to give it to them," these are conversations I'm having on the Hill. But on the other end of that, are people going, "Oh, they should definitely throw the kitchen sink in because we don't know what's going to happen when the administrations change." People saying everything from support to Israel to more Ukraine to anything else you can imagine for DoD to get into the next supplemental. So I'm still trying to suss some of that out now, but obviously the meter continues to tick on all operations to support Israel and the Red Sea. That includes everything from fuel to missiles that are intercepting other missiles. So that's definitely something I'm not ashamed to say I don't know. I don't know what's going to happen.
Roman Schweizer:
But I'm sure it's going to be more than we all think at this point, certainly. I also have to wonder what the frequency of our hurricanes, tornadoes, and other natural disasters happening during a lame duck session. I seem to feel like there might be some correlation there, but maybe not. Okay, and then another issue we've got percolating is the NDAA, National Defense Authorization Act, conferencing perhaps in the background. The SASC sent over its manager's package. I have to admit, I've been on the road and like to think I have a little bit of a personal life. I haven't read all of the, what, 80 to 90 amendments, but anybody have a view on where we think NDAA is going to land and how that's coming along?
Joe Gould:
I would just say, as you had said, the House passed its version of the NDAA, the Senate punted and created this manager's package of amendments. My understanding of that manager's package is that it's mostly unrelated, although I think there are some defense related amendments in there. It was largely things that they had to work out with other committees of jurisdiction. But that was good enough, and they have started to go through the NDAA reconciliation process between the House bill and the Senate bill. Probably at this early stage they're working through the staff, the lower level staff issues. And then I think if the past is a guide, by the time we get to December, which is the real deadline probably for appropriations too, everybody wants to leave for Christmas, that's going to be the time that you have committee leaders, the heads of HASC and SASC, and also the leaders in Congress, Schumer and Johnson, working out their larger issues. Of course, by that time we'll have a new president-elect.
Roman Schweizer:
Yeah, I would just say one of the other tangential issues, which collateral duty in my area is on U.S.-China, there's obviously a piece of legislation called BioSecure that the House passed during its China week, along with a slew of other things, but it's largely about putting a bunch of Chinese biotech companies on a naughty list. And there's a thought that that could get airdropped into the NDAA during the end game, which again, you've got a number of prominent senators who have said this is a national security issue. And then of course you had JD Vance, during the debate, talking about how we've got people who hate us making our drugs for us. So that was a subliminal shout-out to the BioSecure bill. So yeah, I think we've got a full slate of things and it'll happen in the post-November timeframe after the elections, and we'll see whether all this gets done.
I am curious to see if any of you have any reporting or view on whether we get appropriations done by December 20th, by the end of the CR date, or whether it spills over into next year? I will answer first and say that I have heard from very fine people on both sides that they want to get it done during the lame duck, clear the decks, because next year is just going to be a dumpster fire of debt ceiling raises and tax policy and things like that. So the bias would be to get it done before January, before the new Congress, before the new administration, whoever that is. Do you guys have any grumblings about that?
Joe Gould:
Yeah, I would say the House appropes chair, Tom Cole, told a group of us that exact same thing. His advice would be to clear the decks. He's a veteran appropriator. I think that's what the adults in the room probably want, but I think what we've seen is that the adults in the room don't always get to call it. The other thing that he said is it likely depends on whoever the president-elect is. However, if Kamala Harris wins, I don't necessarily seeing a Republican-controlled House doing exactly what she wants, especially if they're on their way out the door. They may use their time to cause problems. And so if there is... And then there's this other question that I alluded to, which is, so if you have Johnson saying, "I don't want to do an omnibus," and that's the path of least resistance, how do you get around that? And there's this possibility that things do gum up and you wind up getting another CR into the next year, maybe even into March or something. Like I said, it's not what the adults in the room want, but it's a scenario.
Tony Bertuca:
Yeah, I think Joe said it right when he just said it. It depends who wins and how they win, and does the winner have enough juice to try to demand a clean slate, or are there people who think that being an agent of chaos after that is a better political move? I think we just have to wait and see.
Aaron Mehta:
And this is the cynical, little cynical voice coming in here. If there's a debate about whether the election was stolen or not and the results are fraudulent or not, do members even have the juice, the focus, or the interest in governing? Or is it simply, "Let's throw out some fireworks, let's just focus on this one issue," and we see the House in particular, would be the likely source of this, just basically refusing to do its job by the deadlines that have been set.
Tony Bertuca:
And you end up in a CR in that case, right? That's when you'd end up in another... You'd extend the CR.
Aaron Mehta:
If they can extend it.
Roman Schweizer:
Or is it a shutdown, right?
Aaron Mehta:
Yeah.
Roman Schweizer:
Because then-
Aaron Mehta:
Exactly.
Roman Schweizer:
Yeah, exactly. For all those folks out there that worry, and certainly very few of us are, "This is all going to go smoothly and swimmingly," and just as a reminder, Bush V. Gore was decided on December 12th, 2020 by the Supreme Court. So it could be a pretty crazy month, month or so. Hopefully it may be worst case. Okay. We've talked about as much as we want to about Washington or shenanigans. We can pass on the Veep debate. I don't really... Unless anybody's got a point. So what I'd like to do is maybe just go a little bit of history, and it's tough it seems like a million years ago, but the Air Force had a convention a few weeks ago, and I think at least by my accounts, it was underwhelming in terms of talking about their large programs and their future direction and things like that. Secretary Kendall is always good for a speech or two, and certainly Andrew Hunter and some of the four stars. But anything notable that you guys wanted to call out from your reporting, either what was said or what wasn't said?
Aaron Mehta:
There were no program announcements. The biggest thing was that they had two life-like martyrs of the collaborative combat aircraft competitors on the show floor. That's neat. When that's the big news from your big national event, it's not a great sign. Part of the problem was the election, right? Nobody knows who's going to be running things. Nobody wants to make decisions. If your friend Kendall, and he said he would be happy to stir the vast, which would be no surprise to anybody who knows Frank Kendall, you don't want to put out anything new because it runs the risk of becoming a big juicy target for your successor if Harris loses. Also, you don't want to talk about your fancy six generation [inaudible 00:11:54] program because you've basically said, "We have to scrap what we've done to start over." You don't want to talk about your fancy nuclear ICBM program, 80% over budget.
CCA is a safe program to talk about, but it's in the early source selection right now, and a lot of is still classified, so you can't talk that much about that. So there just wasn't a lot of news. There weren't really big company announcements. There really wasn't a lot said in speeches. Some interesting tidbits as there always are, and we managed to write a whole lot of stories out of it, because we're good at getting blood from a stone, but the truth of the biggest story out of AFA is that there was no story.
Roman Schweizer:
Yeah, I think that's fair. Joe, you want to cue something up?
Joe Gould:
Well, yeah, actually, Aaron, I want to say one thing you're underselling on CCA, was you guys had the dust up between General Atomics and Anduril on CCA is one of those things that you don't always see, is this clash between... Where you have companies going at each other directly. But yeah, it definitely was eye-catching that a General Atomics spokesman called Anduril the Theranos of defense. I think all of us hear a lot from Anduril, and it's a punch that lands, because that's this question of like, "Okay, are these guys going to do everything that they are promising that they're going to do? Are they going to live up to the hype?" And so I thought that was interesting. Yeah, fair. It's definitely not programmatic, anything you could hang your hat on, but it was a little bit of fireworks.
Aaron Mehta:
You know General Atomics is now a staple of the defense industry, but that's a fairly new thing in the last 15 years, and they still have an outsider's stance on things. And then Anduril is the disruptor by design type situation. So yeah, as Joe said, we had a spokesperson from General Atomics calling Anduril the Theranos of defense, and then after seeing that article, Paul Milwaukee who's Theranos' founder and frontman, put out a photoshopped image of him on Elizabeth Holmes' body with the black tear at the neck. So you do get a lot of fun back and forth. I think it's telling that for both these companies, CCA is a big deal. Partly because right now, as I said, the only program the Air Force is putting out there, but it's... We're [inaudible 00:14:30]. It was a little bit of what happens when the defense industry stops being polite and starts getting real. And as [inaudible 00:14:36], it's fun to get a little bit of juice out of that at least.
Roman Schweizer:
And just because I think this is fun, I will point out that anybody who takes public transportation in the Washington area has now seen the General Atomics ads. It's something like, what is it? "The only sensible solution to CCA." Something like that.
Aaron Mehta:
I think Anduril had bus ads going as well, so they're countered... You had a bunch of riders, bus riders, picking sides.
Joe Gould:
Well, and at the airport, I just got... Yeah, I mean it is the age-old game of... And perhaps even sponsoring some advertisements in news publications, but I won't... We'll talk about that.
Roman Schweizer:
Here's the one observation, I'll use this as an opportunity to opine a little bit since I know these guys won't. I have to think of a more eloquent way to say this, but what don't Anduril and General Atomics do? What don't they do that Boeing, Lockheed and Northrop do? What don't those two companies do?
Joe Gould:
Go ahead.
Roman Schweizer:
They don't buy back stock. They don't issue dividends, and their IRAD spending is not public information. So they don't have to report quarterly and annually to the SEC how they're spending their free cashflow. And Frank Kendall has lamented time and time again, and others, including the Secretary of the Navy, about how these companies... And what they spend their money on. Now, the only other thing I would say, and this is my understanding of the CCA competition from the Air Force press release, is that the production contract for increment one will be decided in fiscal 26. So we are still a good two and a half years out, and it will be a full and open competition, so everybody will be able, right? So Anduril and General Atomics have been awarded contracts to build prototypes. We've been building prototypes for 30 years.
This is not... I am somewhat appalled. I mean, the real question should be who could put up a thousand of these things over the Taiwan Strait tomorrow? But that's a whole different story. So I think there's a lot of complex effort that needs to happen, including requirements, ConOps, the AI and algos that are going to drive these things, but building an air vehicle to a certain specification, any of these companies could do it. I mean, hell, we could probably do it in my garage over the weekend. I'm joking, of course, but I'm more worried that NGAD... Now, again, I've said all year long that NGAD wouldn't be announced until after the presidential election, because why would you want to upset the fine residents of St. Louis, right? Or Georgia, the state of Georgia in terms of denying them a next generation fighter program. So maybe that'll still happen after the election and sometime in the December timeframe, but I think everyone in the world, including Frank Kendall, knows you're not going to get a twin engine kick-ass air superiority fighter for the price of an F-35. That's just knock it.
I mean, I don't think it's going to happen. So all right, I think we've beat that proverbial horse to death. Let's talk about what's coming up in, I guess a week and a half here or something like that, AUSA. It's always a big show. I will tell you there's a lot of interest from my world and in the investor world, obviously the Ukraine read-throughs, drone technology, the future of the tank, flora still knocking around. Lots of big issues at play even though the Army has been short of the net budget loser in the grand scheme of things in terms of DoD. Anything that you guys are paying attention to or expect to hear from AUSA? I don't know. I'm also curious if you just think it'll be as sleepy as AFA was.
Aaron Mehta:
Top level, expect some of the same constraints on AUSA as there was for AFA in terms of nobody's going to want to get ahead of the election, nobody's going to announce anything really new from the Army, because you don't know who the boss is going to be and you don't want to preemptively piss them off. That said, AUSA has just from sheer size and magnitude, so much bigger than AFA. Just the show floor alone is probably six or seven times what AFA has at least, and includes actual vehicles on it. It's a whole big show. So there will be announcements. You'll hear from industry. I think drones and counter drones are going to be a big showcase. We've already gotten a bunch of pre-show pitches on counter drone technology. That's not necessarily new. That's been true since Ukraine kicked off, but I think if you're in bio development cycle of the last two years, you saw what was happening in Ukraine, you started to develop something new, two years later, you're ready to roll it out.
So I think you'll see that. Personally I'm watching it for the international companies. I'm curious, last year Hanwha had a bigger presence that it had in the past. I expect that to be bigger this year. The South Korean company, which has had a lot of success with land-based sales in Europe, particularly Poland recently. I think there'll be some more international firms. I'm curious to see the Ukrainian presence. The other thing to just keep in mind is it was literally the first day of AUSA last year that the October 7th attacks happened in Israel. It was literally the overnight heading into the first day. So what lessons learned we'll hear about from one year, what takeaways, and then the Israeli presence. There were a bunch of Israeli firms at AUSA last year who literally shut down their booths and headed home because they were getting called up as reservists. So it'll be interesting to talk to some of those companies and hear what they've been doing for the last year.
Tony Bertuca:
Yeah, I'll just foot stump, to use a DoD term. Aaron's point on counter drone. I think we're going to have a lot of that at AUSA. That's the latest gold rush that people are talking about. It also, it got more... I don't know how it could be more high profile, but it got more attention when Austin, the defense secretary, put out his Replicator II memo saying... Obviously it would say, "A brush fire of excellence that's very secretive and classified, but a well-publicized brush fire," the Replicator program. And so saying what we're going to do for Replicator II is going to be counter drone. I think also it's interesting that you also heard Army Acquisition executive, Doug Bush, say at CSIS, "My service is the Replicator service." He believes his service has got the most to do with fielding these drones and doing counter drone. So it'll be interesting to see if they can talk more about that at AUSA.
Joe Gould:
All the above. One thing I might look out for is how are folks selling armored vehicles talking about them. Armed vehicles, tanks. Didn't we send Ukraine a bunch of tanks and have they made a huge difference on the battlefield? What are companies who are marketing tanks saying about what their relevance to any future battlefield... What kinds of improvements are they making on them in relation to what we're seeing on the ground in Ukraine?
Roman Schweizer:
I just want to piggyback into a couple of themes. You guys all made great points. I mean, here's the one thing I'm curious about, and I made this joke before and I don't want to ruin anybody's weekend by suggesting they watch War Porn on YouTube, but you can look at what some of the U.S. loaner Bradley fighting vehicles are doing over in Ukraine, and they seem to be ripping up the Russians pretty good, including their big tanks. And so as the Army is going to go off and spend, I don't know, 35 billion on XM30 OMFV, why would you be doing that if Bradley's over there against your top tier baddie on the ground and making them look silly? So I'm curious as to how has Bradley done, how has M-I Abrams done and how should that inform the Army's ground modernization strategy? Because that's it. I mean, if you're beating the Russians with American gear, there's your answer, and if you're not, obviously there's another answer which might be painful as well.
I think absolutely right on the counter-UAS stuff, it has been somewhat discouraging, I think, to me, at least from an outside observer to see how slowly we have moved with one, the introduction of lethal drone technology, whether that's FPVs or larger things. I would also note DIU announced they're looking for long range one-way drones, which I got to be honest, it sure looks a hell of a lot like a Kratos Valkyrie to me, but again, who the hell am I? But so one, the offensive potential, but two, obviously the defensive potential, right? When Switchblade 300 came out a decade ago, I remember having a conversation with someone, and I basically said, "Yeah, this is a flying IED, and it is bad news when you see these things in mass, and it's even going to be worse news when they are faster, have different payloads and are all driven by an AI coordination swarm that allows them to dip, dive, duck, dodge."
I forget the dodge ball reference, but you guys know what I'm talking about. It is really where things are headed and it is not great if you're a traditional armored or a force like we have. And I also love the thing about really the internationals, and not just the Korean firms. You've got Rheinmetall in the mix in a big way. They just won a contract as well for the unmanned ground vehicle. And then even firms like Kongsberg or Namo, the Norwegian solid rocket manufacturer, jumping in here to the U.S. market. So yeah, I really do think you've seen that. We will continue to see that. So no, I'm looking forward to it. I'm sure I'll see you guys around and see a bunch of folks there. But I think of all of the services, I think the Army probably has the most potential churn, just given from the events we've seen in Ukraine over the last two years.
I always like to... I say this tongue in cheek, right, but there is a cottage industry of lessons learned in this town of trying to justify the Buggy Whip or the Maginot line, and I really hope that folks are learning the right lessons. So, all right, changing gears a little bit, I do also want to just talk about one piece of research that we published this week, but certainly if you pay attention to this stuff, it is not that big a deal. But as Joe mentioned, the fiscal year closed on September 30th, U.S. foreign military sales by my count were $127 billion in forward-looking case announcement. That is a 18% increase over a fiscal 23's record year of 108 billion. And again, just the way we do the math, because I'm lazy, it does not include Ukraine money and it does not include direct commercial sales. The only way to tally that up is when the State Department announces it in a couple of weeks.
But this is a crazy backlog, and obviously as our note breaks down the geographic spread and the system shift and things like that. The one thing that I would say, just a couple of observations from that is, is one, Europe is of course a big spender as you would think. Again, this is not Ukraine money, but these are NATO countries buying U.S. systems. And then Lockheed is the clear cut, or has the most dollar value, I won't say winner, but most clear cut dollar value followed by Boeing and then RTX. So I mean look, this is the second year over year over year record FMS case announcement. These are still deals that have to be negotiated and turned into contracts and converted into revenue, but the world's a dangerous place and these U.S. companies are doing a hell of a lot of FMS. I'll just mention that, see if there's anything you guys want to talk about off that.
Tony Bertuca:
I would say it's a good thing there's a tiger team working on this, because there's a whole lot of these FMS deals that haven't really been moving. Yeah, I mean, I'll put the question in my fellow reporters, anybody here about that tiger team since they announced it and said we're going to get after this, and they acknowledged it was a massive problem and then they said they're doing it and nothing's happened and they haven't even said... You think they'd point out, "Look, see we did it and something's moving faster." They haven't pointed to any success.
Joe Gould:
It's the tiger that never roared.
Tony Bertuca:
Oh, I like that. That's good.
Aaron Mehta:
One thing on AUSA is they do this annual, used to be the state of DSCA speech and you have, especially on Charles Hooper who was the [inaudible 00:28:11], he used to give their annual numbers. I've been told they are not doing manual numbers this year. They didn't do them last year, they're going to wait until December or January to roll those out with the direct commercial sale numbers. A lot of the Loman's numbers are fully in line with I think what's been announced. So I think we know based on Loman's research, what that looks like. I would expect they would talk about that Tiger team somewhat at this panel at AUSA. It's their annual state of the process. If they don't bring it up with some real concrete solutions, to Tony's point, I think we can say, "Okay, so that thing was a dud and we got to figure something else out."
Roman Schweizer:
Well, I was just going to say, correct me if I'm wrong, but I believe I saw some coverage of this over the last day or two, and granted I've been on a plane here or there, DSCA did roll out a new logo though, right? Is that right? Does that count for Tuca? Is that...
Tony Bertuca:
I have not seen the new logo, but if it's like a tiger, flames and money flung everywhere, that'd be cool. No. Not aware of it.
Roman Schweizer:
All right.
Joe Gould:
Yeah, I don't know what it is, like Aaron, I've picked up on how quiet DSCA has been in terms of announcing what it's doing and I just thinking you said 127, I want to say Trump's big number was like 120. So maybe this is the biggest number, and what a contrast between Trump, the salesman in chief, holding up charts and inviting the press to his meetings and the Biden administration, which is allowing its big numbers to just quietly show up on the State Department website or however they wind up releasing it. It's a big style change. And I mean, you could look at the politics of arm sales right now, specifically with Israel as a reason, but they were doing this last year, when this wasn't a hot button topic. So I'm scratching my head over why. Maybe it's just bureaucratic inertia.
Roman Schweizer:
Yeah, well no, I think you touched on a part of it. You don't want to trump... Or I guess, pun intended. You don't want to trump it, foreign military sales number, when you have a large arms control population within your party that isn't too happy about that. And I will say, just because I do like to nerd it out and keep some truth to the numbers. The reason why that some of the Trump years, particularly the last year is suspect, is because they were double counting case approvals. For example, Finland was cleared for F-18s and F-35s, but only wound up buying the F-35s. But you throw in 6 billion for the Super Hornet... They tried to juice those... They were really pumping up those numbers that last year. So I try to strip that out and have a huge caveat in my numbers.
All right, let's change gears a little bit. Just maybe talk about, and we've been really getting after it here, I think you guys have talked about this. I don't know if each one of you is published, or your publications have, but there's definitely some, what I would call submarine shenanigans, on the Hill right now in terms of Virginia class Columbia. Kenny Calvert seems hopping mad, although I always wonder, is that right before he strokes a check for $17 billion or something like that? I mean, what we do in private is not necessarily what we always say in public, but shocked that there's gambling at Rick's Casino. So where do we think we're at in terms of the U.S. Navy submarines and Congress?
Joe Gould:
Yeah, I mean, just to bring us up to speed, there was this $2 billion proposal for submarines that made it into the CR. And then we came to find out that there was this other proposal called the Shipyard Accountability and Workforce Support Program, which is basically to reallocate funds for Virginia and Columbia class so that the shipyards could cover their inflation costs, pay worker shortfalls. I don't know about my colleagues. I never saw a number associated with that. My sense is maybe that's a bigger number. The White House didn't go for it. Instead, they went for the 2 billion and then there were... But appropriators seemed surprised by all of it. And by the time we caught up with them, they were inviting the Navy Secretary, Carlos del Toro, to sit down with them one day and then the industry to sit down with them the next day.
Coming out of that, that was a no good, very bad closed door briefing for Carlos Del Toro. Folks were really furious. One thing that Calvert told us and others, was that he heard that there was... He was only just learning that there was the $17 billion shortfall in the Virginia class sub program. By the time... I think... What I was hearing was that industry had a friendlier reception, that somehow that was a meeting that went better. But then, just as industry asking for more money for workers, we got this other story now, which is that there are these faulty welds at Newport News and it's not entirely clear what's happening there, but to me it's like, "What happened there? Did workers cut corners? Or maybe were they so stretched that these workforce issues that industry's talking about are legit?" And so, I don't know, it's just like you say, it sounds like... It's a big mess.
Tony Bertuca:
Yeah, and I'll just point out, Calvert, he did not mince words. His quote here is, "Frankly, the only reason we're not discussing non-McCurdy breaches is that the Navy system of keeping metrics and reporting facts is murky and flawed at best, misleading at worst." That's pretty direct. His beef is with the U.S. Navy, and I don't think it's scheduled to go away anytime soon here in terms of he does not believe the service is being honest with Congress. That's a significant problem for the Navy, right?
Aaron Mehta:
Now, it should probably be said that... I'm honestly not entirely sure exactly why, but it's been pretty consistent for at least the last two years. Republicans in Congress just really hate Navy Secretary Carlos Del Toro in a way that I've never seen it get quite so personal with any service secretary before, and I've been covering this. The best explanation I found for that is he's talked a lot about diversity and inclusion and things like that. And so those are social hot button issues that combined with ship-building's not going great, creates an easy target. But many of it really seems personal with him and some of these guys up there, including Calvert in particular. So I don't know what the deal is there, but that just always strikes me when you hear these things. It's not like with other service secretaries.
Tony Bertuca:
Yeah, I would second that. He does not enjoy a good relationship with the Capitol Hill GOP.
Joe Gould:
And if I can third it, I remember Dan Sullivan asked him if he was going to resign in a hearing, point-blank, hit him in a hearing.
Tony Bertuca:
I don't know. Yeah, I've been trying to puzzle this over too. Does he come from a business background? I mean, I don't know whether... It seems like he's trying some... He's unveiled some novel ideas. I can't imagine that he's the one guy that... Shipbuilding is a year's long endeavor. It's always, "Who's holding the bag?" Maybe he's just not holding it graciously here. I mean, let's just add that he didn't do himself any favors by breaching the Hatch Act and then having to apologize for it for making political commentary that he shouldn't have.
Roman Schweizer:
There is a lot going on. And again, I will say as a guy who used to spend a decade or so working in Navy shipbuilding, I do not want to besmirch any of my fine former colleagues, but I will point out the secretary has also complained about industry buybacks and dividends and how they're preparing. He's also invited foreign yards into America, which is probably not drawn him favors from the U.S. industrial base. And then again, the other thing I would say is he called for this very high profile shipbuilding review, which then dropped a pamphlet and didn't really do anything. Right? So I mean, honestly, if you were going to break some bad news about submarines or shipbuilding programs, you should have done it about a year... I mean, you guys could tell me, I don't even know off the top of my head when that analysis was released, but you could have been having this discussion with congress all year long and in the lead up to this.
So again, I can't really speak to how much the ball has been dropped. It's been framed to me is that the level of trust between the Congress, the Navy and industry is just terrible, right? Or zero. And there's a... You know the Spider-Man cartoon where all the Spider-Men are pointing at one another, that's a little bit of what's going on. But the other thing I would point out is that at some point, this is about higher labor rates, and this is about hiring and retention. And I will tell you, I'm happy to share it, but there is a chart, there's a public chart out there from the head of Naval Nuclear Reactors that shows the amount of workload, the demand, that the actually building two Virginias in one Columbia per year is going to take, I don't know how we ever get there in terms of just man hours and skilled labor, but everyone has reached the conclusion you have to pay shipyard workers more money.
And obviously we've averted a longshoremen strike. You've got Boeing on strike, you've had Spirit, you've had UPS. I mean, it's a good time to be in a labor union and it's going to cost more to build these ships and submarines. And I don't know how much that has been factored in or how much that is... Aside from just supply chain, just hiring people above the 20 bucks... You can make 20 bucks an hour in an air-conditioned Starbucks and use recreational marijuana. You can't do any of that nonsense, build the Navy ship, right? So it's definitely a tougher sell for these guys, and I do appreciate that. The other point of information I would point out, and would just commend you to, the GAO did put a report out on the Columbia class this week.
It is worth reading because of a couple of things. One, there was a version of this report that was restricted earlier in the year. I noted it and made a joke of the headline, but it was not released. So this was the GAO working with the Navy, I think since... I think they said July, to actually come up with a redacted non-competition sensitive et cetera version of this report. But the one thing that I would say is that the GAO estimates that the actual overruns are five to six times higher than what the Navy and electric boat estimate. And then the other thing I would just say is, I was surprised. Calvert's comment talked about prior year seems to be overruns or what's required for the existing subs on contract. But really I think on a go forward, the Navy is looking for a block by of 12 Virginias, two block five boats, and then 10 block sixes in the next multi-year, and then five Colombias, which they intend to buy at a rate of one per year.
That is a massive contract. And if you are talking about prior subs being more expensive because of labor on a go forward, I don't know what that looks like in the future. And then there's way, you get more efficiency and all kinds of things, but I would just say, you've got three legs of the nuclear triad and GBSD is more expensive. It seems like Colombia might be more expensive. And the only reason B-21 is not more expensive, is because Northrop has to eat it on the fixed price. So there are a lot of demands out there, not necessarily growing budget. We've overtalked shipbuilding, but I could talk shipbuilding all day. Anything you guys want to add on any of that?
Aaron Mehta:
Yeah, the only thing I'd say is... Well, two things. One is it's notable the Navy has awarded now a couple of contracts to this Blue Forge Alliance Group, which you've probably seen on NASCAR or MLB or I assume we'll see in the NFL playoffs this year ads for. I think they got a $900 million contract was the last one, and that's the second or third similar contract they've gotten. And that's specifically to get people to be workers in shipyards. So the Navy is certainly aware of this and at least trying something to help out. Another thing is just to tie it back to your FMS comments, in addition to this big backlog of FMS, there's a lot of questions about production of everything right now. So how are you going to get the workers to actually produce enough to meet FMS demands plus U.S. demands? I think that's a low-key issue that hasn't gotten talked about as this big FMS demand has started to spin up post Ukraine. I think it's something we're going to start seeing a lot more talk about in the next year.
Roman Schweizer:
Yeah, no, I mean... And this is really at the 30,000-foot level, but this is just to opine. There's plenty of rumors around the Olympics and around the Ukraine invasion that Xi Jinping was never consulted when Vladimir Putin went into Ukraine. But if you're Xi, you've got to support Putin of course, because he's your junior partner. But if you ever really wanted the U.S. to realize... And Europe, how atrophied and more abundant its defense industrial capability had become, Putin did it in spade. It's really, I mean, you see the U.S. actually building up things that are more Pacific focused, Taiwan focused, and developing that capacity for if there were some 2027 data as some in DoD have talked about in Taiwan scenario. So it's inopportune timing for Xi if he has grander designs on Taiwan. Not saying he does, but that's what people are saying. Obviously that's a little pun intended. All right gentlemen, we have covered the budget, the globe, the services. We will close this out. Gentlemen, thanks so much. Look forward to doing it again.

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