Pursuant to a congressional request, GAO reviewed the Navy's plans and anticipated liabilities in terminating the Seawolf class nuclear-powered attack submarine program contracts.

GAO found that: (1) Congress rejected the administration's proposal to cancel planned spending for the Seawolf submarines, and restored $1.6 billion in appropriated funds for some submarine construction and preservation of the submarine industrial base; (2) the Navy's estimated cost to build one submarine is more than $2 billion, but its estimated cost to complete some contracts and terminate the rest is $714 million; (3) the Navy could save about $15 billion if it ends its construction program with the second submarine class; (4) the Navy decided to complete contracts for major subsystems and components to facilitate the potential construction of more submarines; (5) the Navy plans to use $540.2 million in appropriated funds to partially fund cost growth and purchase spare parts, but has not addressed congressional directions regarding advance procurement, restarting a submarine construction program, and maintaining the submarine shipbuilding industrial base; (6) the two U.S. shipbuilders with current submarine construction contracts do not project any further nuclear-powered submarine construction contracts until 1998, and the projected work load for the shipbuilders will not sustain their capacity or capability; and (7) costs for the submarines currently under contract could increase because of reallocated overhead costs over a smaller production base, a smaller but higher-paid work force, and higher vendor costs.