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Huge LCS Restructure To Lower Prices

The Navy scrapped one of three Littoral Combat ships for 2010 and completely restructured the program, trying to increase competition between shipyards and thus lower costs.

The new plan, in very simple terms, is this: Pick a contractor and buy 10 ships over the next five years from one of the two builders, and then, in 2012, pick another shipyard to build another five ships of the same design. The Navy canceled the earlier decision to award a contract to both Lockheed Martin and to General Dynamics after concluding that they could only get economies of scale by encouraging competition between shipyards instead of prime contractors. Otherwise, senior Navy officials made clear they feared they would not be able to buy all 55 LCS ships it plans to buy.

LCS is designed to execute mine detection, anti-submarine warfare and combat against small surface craft.

Congressional reaction was a bit grumpy. Sen. Richard Shelby, (R-Ala.) said he was "disappointed" by the restructuring and hoped that the General Dynamics team wins next year. The Austal shipyard in his state, with which GD is teamed, is located in his state.

“Several months ago, the Navy received bids for two versions of the Littoral Combat Ship (LCS). The bids turned out to be unaffordable. In response, the Navy has made a dramatic change of course," Rep. Todd Akin (R-Mo.), ranking member of the House Armed Services seapower and expeditionary warfare subcommittee, said in a statement. “This is a bold decision, but it is probably the right one. However, I am concerned that the Navy is forgoing an opportunity to put both ships into a robust sea trial and use operational data to inform their decision.”

In addition to forcing competition between shipyards, the Navy plans to force the combat systems on the ships to become standard systems that can be used on a range of Navy ships, not just LCS. They plan to do this by making them government furnished equipment to which the government owns the data rights.

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