The Navy will be billed as much as $100 million for the costs of admittedly faulty workmanship done on strategic-missile and nuclear-attack submarines by employes of the Electric Boat Division of General Dynamics Corp.
Electric Boat's general manager, P. Takis Veliotis, made the "ballpark" dollar estimate yesterday under questioning at a House Armed Services seapower subcommittee hearing on disturbing cost increases and delivery lags on Tridents and SSN688-class boats contracted for at the Groton, Conn., yard.
While rejecting charges of "shocking, incredible" and "negligent" workmanship made two weeks ago by Vice Adm. Earl B. Fowler, Veliotis testified that Electric Boat is preparing requests for reimbursement under standard insurance provisions included in Navy shipbuilding contrasts for nearly 40 years.
By substituting itself for commercial insurers and pocketing hundreds of millions of dollars in saved premiums, the Navy obligated itself to pay for faulty workmanship by a contractor, Veliotis contended.
Fault on Electric Boat's part "has no bearing" on the question of coverage because "the entire purpose of insurance of this type is to protect against the occurrence itself," he said.
"Some of us don't buy it," Veliotis was warned by Rep. Charles F. Dougherty (R-Pa.). The Navy position is that its insurance provisions do not cover faculty workmanship even if commercial policies do.
It a tense exchange, Dougherty recalled Electric Boat's threat a few years ago to stop work on 16 attack submarines. Finally, an agreement was reached in which it took a loss of $359 million and the Navy paid it an extra $609 million.
Dougherty expressed concern that the dispute about the insurance claims, which is headed for the courts, might produce a similiar threat to halt production.
Veliotis, who denied allegations that Electric Boat is "setting up" the Navy for huge omnibus claims, especially on the multibillion-dollar Trident program, complained that the company was being unfairly blamed for many cost, quality and delivery problems not of its making.
He acknowledged Electric Boat's responsibility for problems that occurred during a swift expansion of the work force from 11,000 in 1972 to 29,000 in 1977 but said they were corrected after he was installed as general manager 3 1/2 years ago.
By contrast, some subcommittee members said they understood Fowler to have attacked recent and current workmanship.
Veliotis said that Electric Boat, not the Navy, discovered in 1979 that it had on hand 6,126 tons of carbon steel that did not meet specifications. In addition, some had gone into five SSNs now at sea, and Fowler testified that non-conforming steel could have been used in 126,000 places on the Ohio, the first Trident.
All of the questioned steel was used only in secondary, non-critical locations, Veliotis said. "On the Ohio," he testified, "with full Navy technical agreement, only 41 pieces of steel weighing 50 pounds ended up being replaced."
The 50 pounds should be measured against the 23,600,000 pounds of steel bought for construction of the Ohio, he said.
Veliotis also rejected any suggestion that submarines built at Electric Boat may be "loaded with dangerously defective welds." He said the Navy had been disruptive, supplying defective equipment and making large numbers of design changes.