By Carlo Mu-oz
The Navy late last month awarded dual multimillion procurement deals to Lockheed Martin [LMT] and Austal USA to build the sea service’s next generation Littoral Combat Ship (LCS).
The 20-ship deal will be split down the middle, with separate 10-ship contracts being awarded to both companies, according to a Dec. 29 service statement. The Lockheed Martin team was awarded $437 million for development and construction on its half of the LCS, while Austal USA won $432 million for its portion of the build.
“The Lockheed Martin team’s Littoral Combat Ship is designed to confront rapidly changing global threats while providing a cost-effective solution in an era of tight budgets,” said Lockheed Martin Chairman and CEO Bob Stevens in a statement issued the same day. “This team’s strong performance will enable the Navy to deploy a class of affordable, multi- mission combatants to address the nation’s needs for decades to come.”
While the deal covers LCS production through 2015, the funds awarded under the deal will finance a single ship build by each company beginning in fiscal year 2010, with another single-ship build in FY ’11, Navy acquisition chief Sean Stackley said during a Dec. 29 media briefing according to a transcript provided by the Navy.
“With this award Lockheed Martin and Austal USA will be able to begin work on LCS-5 and LCS-6,” according to Stackley, who noted that the dual award approach would save roughly $2.9 billion over the life of the program.
Navy officials are eyeing a three-year delivery timeline for the two ships slated to begin construction in FY ’10, according to Stackley.
“The first thing that’s going to happen for those ships is getting material on order. So there will be a period of material procurement before they actually get into ship construction. The construction period is on the order of 24 to 30 months,” Stackley said.
Late last month, Congress gave the Navy the green light to pursue a dual development track for the LCS, according to language included in the FY ’11 continuing resolution (CR) (Defense Daily, Dec. 21). That CR will fund the federal government through March 4.
Initially, Navy officials had planned to issue a single, 10-ship LCS contract to either Lockheed Martin or Austal. But the sea service moved to shelve that plan, in favor of the dual award, due to the proposed savings that approach would generate.
The Navy is shooting for an average per unit cost of $362 million for the Lockheed Martin-built LCS variant and $352 million per ship on the Austal version, according to Stackley.
Those estimates, he added, were calculated using figures from the initial LCS program of record.
With inflation, coupled with the $25 million per-ship cost of “government-furnished equipment, added into the equation,” per unit cost will average out to between $380 [million] to $390 [million] per LCS, Stackley said. To that end, the Navy awarded slightly higher contract award totals for both Lockheed Martin and Austal.
Also included in that higher contract award was the $20 million per-ship cost buffer that service officials included to account for “any other cause for cost growth over and above the target price,” he said.
On the operational side, senior Navy officials within the LCS-class squadron stationed in San Diego are currently working various options on the pending concept of operations for both ships, Rear Adm. Frank Pandolfe, director of the Navy’s surface warfare division, said at the same briefing.
“These ships fulfill the requirements of counter-mine, counter-surface craft, and counter-submarine warfare. They do have different characteristics,” Pandolfe said. “We’re looking forward to operating them together to see how they complement one another in the real world operational environment.” While squadron decisionmakers are hammering out the details for the future LCS concepts of operations, Pandolfe was quick to note that no basing decisions have been made regarding the ships now under contract.
“We will look at different options as to how to base these ships, but no decisions have been made at this point,” he said.