By Emelie Rutherford
As the Navy struggles with industry proposals for building the next batch of Littoral Combat Ships (LCS), a key lawmaker said late last week he was not convinced the $460 million-per-ship cost cap should be lifted.
House-Senate negotiators hammering out a conference report on the fiscal year 2009 defense authorization bill had not come to a resolution yet last Friday afternoon on how to address that congressionally mandated cost cap, which industry and the Navy are having trouble adhering to.
House Armed Services Seapower Subcommittee Chairman Gene Taylor (D-Miss.) told Defense Daily last Thursday night he was not convinced the LCS cap should be lifted above $460 million.
He said while it appeared House appropriators were receptive to adjusting the cap, he still wanted to hear more from Navy Secretary Donald Winter on the matter.
“We just want to get a handle on this,” he said, citing concerns about increasing costs with the LCS program.
“They are rapidly putting themselves out of business,” he said about the service, because of over-budget shipbuilding efforts. He said he expects the cost cap matter to be resolved this week, when a House-Senate conference report on the FY ’09 defense authorization bill is expected to emerge, and also when lawmakers are likely to address the FY ’09 defense appropriations bill.
Navy officials including new acquisition chief Sean Stackley, a former Senate Armed Services Committee (SASC) staffer, have been in discussions with congressional aides about the service’s concerns regarding the LCS cost cap. That cap was set in the FY ’08 defense authorization bill and was an increase from a previous $220 million ceiling.
Options for altering the cap could include increasing it by as much as $100 million per ship or tweaking language in the cap itself, sources said. Some sources said the cap is written in a way so it includes items not counted in other shipbuilding cost caps, and thus the Navy’s concerns could be addressed by rewriting the language. Ideally, the Navy would prefer no cost cap at all, observers said.
The Navy has received proposals from the two LCS builders–General Dynamics [GD] and Lockheed Martin [LMT]–in response to a March request for proposals (RFP) for one FY ’08 ship and two FY ’09 ships. If and when the contracts will be awarded was not clear last Friday. Two sources cited the possibility of a new RFP emerging.
Both companies struggled with submitting bids under the $460 million limit for the fixed price incentive-fee contracts. Sources said the LCS bidders had to scale back their proposals to come in under the cost cap, and that the Navy is not thrilled with the proposals.
General Dynamics and Lockheed Martin are each under contract to build one LCS, and each company previously lost contracts for second ships after failing to reach agreements with the Navy on fixed-price agreements.
Navy spokesman Lt. Cmdr. Victor Chen said he could not comment on the bids for one FY ’08 and two FY ’09 littoral ships because of the active source-selection process. He confirmed the Navy discussions with Congress regarding the LCS contract, and added: “The Navy remains committed to effective cost control and has modified contracting strategies and management practices to provide program stability for this important new class of warship.”
The FY ’09 defense authorization bill the Senate passed last Wednesday does not propose altering the current $460 million-per-LCS cost cap. The bill the House passed May 22 would keep the $460 million cap, but allow it to increase with inflation up to $10 million per vessel. Yet conferees are crafting a final version of that legislation that could include additional elements.
Both bills would authorize reducing the Navy’s request for $920 million for two littoral ships in FY ’09, and their accompanying reports note the value of equipment and material available from cancelled littoral ships that can be used. The Senate legislation proposes a $123 million cut, and the House measure calls for an $80 million reduction.
Meanwhile, the two defense appropriations subcommittees also have taken different approaches to the Navy’s $920 million LCS request for FY ’09. The Senate Appropriations Defense subcommittee marked up a FY ’09 defense appropriations bill Sept. 10 that would increase the amount for two FY ’09 ships to $1.09 billion–or $545 million each–while rescinding $337 million in FY ’08 funding, thus killing the FY ’08 LCS. The spending measure the House Appropriations Defense subcommittee marked up July 30 would reduce the Navy’s two-LCS request by $120 million to reflect prior-year assets that can be used, thus trimming the appropriation from $920 million to $800 million.
It was not clear last week if the full House and Senate appropriations committees would mark up the defense bills this week–as the first day of FY ’09 approaches and lawmakers plan to leave Washington–or if the defense measure may take a different route to each chamber’s floor (Defense Daily, Sept. 18).