(Bloomberg) -- The US Navy has accepted its newest attack submarine, but the USS Hyman G. Rickover was nine months past its due date, underscoring production pitfalls that could undermine the AUKUS partnership between Australia, the UK and the US.

Program documents had predicted a February acceptance date but that milestone wasn’t reached until Oct. 8. The next nuclear-powered Virginia-class sub, the USS New Jersey, was supposed to be delivered last month but the Navy now says it will be delivered by year’s end.

Under the AUKUS agreement, starting in the early 2030s, the Navy will sell Australia the first of as many as five new Virginia-class subs to fill a capability gap until it takes delivery of the first new vessels to be built in Australia with technology from the US and UK. Australia’s Prime Minister Anthony Albanese is in Washington this week and met Wednesday with President Joe Biden. 

At a joint news conference with Albanese, Biden urged Congress to approve the defense accord “because it’s overwhelmingly in our interest.” During the prime minister’s visit, he’s expected to lobby US lawmakers to back AUKUS.

In a statement on the Rickover and New Jersey vessels, the Naval Sea Systems Command said “material issues and testing delays impacted both ships’ delivery schedules.” It said “this is caused by the Navy’s relentless focus on submarine quality and delivering submarines in a high state of readiness.”  Still, the Rickover “performed well with results consistent with the previous 10 Virginia class submarines,” it said.

The previously unreported delays in the schedule for new Virginia-class submarines reflect challenges that shipbuilders General Dynamics Corp. and HII are experiencing as “the ships became more complex and large,” according to Bryan Clark, a former special assistant to the chief of naval operations and now a naval fellow with the Hudson Institute. He said the newer vessels “added a host of new acoustic superiority and other systems.”

The House Armed Services seapower subcommittee held a hearing Wednesday to review the Navy’s high-wire act as it tries to stretch the existing workforce and supplier base to build both the Virginia-class attack subs and the higher-priority Columbia-class submarines that will carry intercontinental ballistic missiles. 

Industrial Base

Underscoring the urgency, the Biden administration is requesting $3.4 billion in its proposed $106 billion supplemental spending package for Ukraine and Israel to shore up the US defense industrial base. “This funding is critical to improve build and sustainment rates in order to meet U.S. military requirements, and will also support our commitments under AUKUS,” the Navy said in its prepared statement for the subcommittee.

Navy Undersecretary Erik Raven said in his prepared testimony that “adding AUKUS requires us to improve our new-construction and sustainment efforts to ensure we meet our domestic requirements while supporting the trilateral partnership.”

Raven said during the House hearing that Australia has pledged to invest $3 billion in the US’s submarine industrial base as part of AUKUS. He said that “largely mirrors” US workforce investments and will help reach production goals.

To support AUKUS, General Dynamics and HII will need to ramp up to constructing seven Virginia-class subs every three years, or 2.33 subs per year in Navy parlance, according to a newly disclosed figure in the service’s testimony.

Currently, they are building the equivalent of one complete Virginia-class sub a year and 20% of a second one, or in Navy-speak a “1.2 vessel rate,” according to service data. The Navy doesn’t expect to get to an annual completion rate of two Virginia-class subs per year until 2028, according to the Congressional Research Service in its latest Virginia-class report.

General Dynamics Chief Financial Officer Jason Aiken told analysts Wednesday on the company’s third-quarter earnings call that before Covid “we were right on the threshold of getting to two per year, so it is eminently doable in terms of the industrial base” with the help of a maturing new work force, Navy investments and attempts to remove shipyard bottlenecks. 

“There’s a lot of talk around AUKUS, and obviously we’re going to do everything we can to support our customer in that regard,” Aiken said. “But the fact is, this supply chain still remains very fragile.”

--With assistance from Roxana Tiron.

(Updates with Navy comment from hearing in 10th paragraph)

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