Littoral Combat Ship Miracle Bids Likely To Be Accepted By Congress

Recent testimony by senior officials of the Department of the Navy before the Senate Appropriations Committee reveal the source of their new-found enthusiasm for buying both variants of the Littoral Combat Ship (LCS). Apparently both bidders, Lockheed Martin and Austal, came in with bids one-third lower than the price being charged for the initial set of four vessels. At $440-460 million a copy for the sea frame, the opportunity to acquire a mixed fleet of LCS is almost irresistible. Moreover, these “miracle bids” do not reflect further cost savings that could result as both builders move up the learning curve, take advantage of a multi-year procurement contract to reduce supplier costs and refine their cost estimating methodologies. The Navy’s experience with cost reduction in the Virginia-class submarine program, a collaborative effort by General Dynamics’ Electric Boat and Northrop Grumman’s Newport News shipyards, is illustrative of possible savings once production is underway.

If the new acquisition strategy is approved both bidders will be challenged to make good on their promises. This may be particularly difficult for Austal which no longer has the level of support from General Dynamic (GD) that existed when the two were partners on their construction of the first LCS. Unquestionably, Lockheed Martin will be working closely with Marinette Marine, the Wisconsin shipyards, to ensure both quality and cost controls. The Government Accountability Office (GAO) reported that considerable risks remain in the LCS program. A recent GAO review of the LCS programs noted that the Navy believes that experience to date on the program, coupled with fixed price contracts and a sufficient budget for ship changes, mitigates this risk. This same study went on to point out that a second ship design and source provided under the dual award strategy could provide the Navy an additional hedge against risk.

In their testimony, senior Navy leaders discussed the evolution of the program and their overall level of confidence. They perceive the risks noted by the GAO as manageable. Sean Stackley, assistant secretary of the Navy for research, development and acquisition, declared that “this program has done a complete turn-around.”

Building both variants of the LCS opens up new possibilities for further design modifications to one or both to meet specific mission requirements. Allies in the Persian Gulf have been looking seriously at the Lockheed Martin design as a potential missile defense ship. The addition of a more powerful gun and long-range missile launchers could turn the Austral/GD design into a “gunship” to support amphibious operations. The explosion of research and development in the area of unmanned systems also will create new options for both LCS designs.