Pause in Procurement of LPDs is Mostly Due To Price, CNO Says

The Navy’s top officer on Wednesday said the department is pausing procurement of amphibious ships primarily because the San Antonio-class Flight II amphibious transport dock ships (LPD) are increasing in cost and starting to run late. 

“It’s been said publicly that a year ago, the Office of the Secretary of Defense (OSD) made a decision to take a pause and do a study on LPDs and whether or not we’re going to continue with the current hull, or whether or not we’re going to shift to some variant of the current hull. The driving issue here that drove that decision had to do with costs,” Chief of Naval Operations (CNO) Adm. Mike Gilday said on Wednesday at the McAleese FY 2024 Defense Programs Conference.

Gilday argued the cost of the LPD Flight II has grown from $1.47 billion in the first ship, the future USS Harrisburg (LPD-30) to $1.5 billion in the second one, the future USS Pittsburgh (LPD-31) and appears to be rising further.

“The third one that we’re contracting for right now, is probably going to be between $1.9 and $2 billion. So that increase will be somewhere between 21 and 25 percent. The FY ‘25 ship, unless we get a bundle buy, would likely be a $2 billion or above, at least a 25% increase. We’re moving in the wrong direction,” the CNO said. 

HII [HII] builds the San Antonio-class Flight II LPDs at its Ingalls Shipbuilding facility in Pascagoula, Miss.

Gilday reiterated if the Navy maintains two-year centers, or increments, for LPD procurement, they do not need to procure the next ship, LPD-33, until fiscal year 2025, especially since the Navy has not put LPD-32 on contract yet. LPD-32 is due to be on contract before the end of this fiscal year.

Gilday argued the LPD production line “is already running behind. So as a taxpayer, if you want to give the vendor money next year for a ship that they can’t bend metal on – so I think that we have time here to take a look” at lowering costs.

He said this is all tied to them understanding the Navy will “not going to be swimming in money forever. And we’ve got to start making some hard decisions.”

Also speaking at the McAleese event, Secretary of the Navy Carlos Del Toro said it is necessary to figure out why the cost of LPD Flight II ships are going up at that pace. 

“It’s now approaching pretty much the cost of a DDG Flight III destroyer, so there are some concerns for that,” Del Toro said.

The secretary said he hopes the amphibious procurement pause and study will be completed “hopefully by either June or September, we’ll have the final answer to are there ways that we can perhaps bring that cost down a bit.”

However, Marine Commandant Gen. David Berger disagreed with the CNO’s figures and thinks the LPD Flight II ships are not rising in price when comparing them to base dollars over current dollars.

Base dollars refers to translating the cost of a product using the inflation-adjusted year when a program began vs. current year dollars, so a ship can appear to cost more in current year dollars with inflation compared to the base year dollars. 

Berger said he sees the original San Antonio-class (LPD-17) ships as costing $2 billion, and the transition ships LPD-28 and 29 were cheaper at $1.66 billion, with “the last one Huntington Ingalls built (LPD-30), $1.62 billion. So I use base dollars –  that’s the most apples to apples comparison. So I look at two to 1.6. I don’t see a price increase there.”

He argued that with inflation you can say many things are more expensive, comparing LPD procurement to a gallon of milk or car prices.

Berger told reporters during the conference that Gilday reporting $1.47 billion for LPD-30 and $1.5 billion for LPD-31 were contract numbers when bought one at a time while $1.9-$2 billion for LPD-32 is his opinion before a contract award and not a fact.

“So if you’re Huntington Ingalls, and you’re negotiating for one at a time, you have no longevity. You have two years, that’s all you got for your workforce. The third one…he believes it might be up to that amount. I don’t know. But that’s not a contract ship yet,” the  commandant said.

Berger said when using base year dollars, LPD costs lowering from $2 billion for Flight I to $1.66 billion and then $1.62 billion for the first Flight II ship is a good rate for investments.

However, he said he is on the same page as the CNO and Secretary of the Navy, preferring block buys for amphibious ships.

Gilday argued in favor of buying LPD-like ships in multi-ship buys, comparing buying LPD-33 in FY ‘25 by itself as akin to going to a car dealership and negotiating after insisting you will buy a car that day.

“It’s just not going to drive down the price of that ship. Needs to be competitive. Actually, with that production line and that ship, it’s not competitive – One company builds it,” he said.

Last week, Berger argued in favor of multi-year buys for the LPD Flight II “to make sure that taxpayers get their dollar’s worth. We have bought these one at a time. That’s not the way you do it. We do block buys for other platforms, for all the right reasons: destroyers, submarines, aircraft carriers, all the right reasons. We need to do it also for amphibious ships, (Defense Daily, March 9).

Berger also reiterated he previously participated in a 2014 study that decided the LPD Flight II was needed to replace the aging Whidbey Island/Harpers Ferry-class Dock Landing Ships (LSDs) and it stripped out what the service could live without on the ship to lower the cost.

“So for a year and a half, little by little what could be pulled out of there, but still do what we needed to do. So from my perspective, that thoroughness that I saw in all of the staff meetings and all that took us to the final Navy decision to go with Flight II, all that made perfect sense, and there was a lot of head butting on every little detail. So I don’t know [about] doing that again with the same ship. I don’t know what you find out that we don’t already know,” Berger said.

The Commandant argued HII is at the most efficient point of the production curve with two-year centers “and if you gave [HII] several years, several block buys like the Secretary wants to do, you’re going to see that keep going down because they know how to build them.”

Berger also told reporters that OSD told Congress in 2019 that if the Navy buys four or five LPDs at a time they will get 10 to 11 percent savings, and agrees the department should do that and stop the pause.

“Why would we not do that, if we know we’re going to need them?”

Del Toro said while he generally believes in multi-year procurements he hopes to see the amphibious study results lean that way for LPDs before the FY 2025 presidential budget request.

If OSD decides that, “what we should do is actually invest in multi-year procurements in greater numbers that meet our requirements to get us where we want to be in order to bring down those costs. And so I hope that that’s the desired outcome that we eventually get to over the course of the next year by hopefully the next presidential budget that gets submitted.”

Berger warned if the OSD “timeout on amphibious ship procurement persists along with Navy plans to retire three older LSDs, the amphibious force will go below the 31-ship minimum requirement.