The Navy’s littoral combat ship is under fire by lawmakers who are threatening to pull the plug at a time when the Obama administration is prepared to commit long-term funding to the program.
Defense Secretary Robert Gates recently announced that the Pentagon will fund three LCSs in fiscal 2010. He characterized the ship as a “key capability for presence, stability, and counterinsurgency operations in coastal regions … Our goal is to eventually acquire 55.”
Once the darling of the Navy’s shipbuilding plan, the LCS has had a rough ride. It costs far more than what the Navy originally estimated and the first two ships of the class are taking much longer to design and build than had been predicted.
It is too early to forecast whether LCS will survive the storm, analysts say. The Navy and the shipyards now need more time to work through technical and management issues, says Robert Work, vice president of strategic studies and a naval analyst at the Center for Strategic and Budgetary Assessments.
Designed to ply near-shore waters, the littoral combat ship is the Navy’s newest class of vessels. The contract was awarded to two teams, one led by Lockheed Martin Corp. and the other led by General Dynamics Corp. The Lockheed team is building a 374-foot steel monohull ship, while the General Dynamics team is constructing a 417-foot aluminum trimaran version.
It was originally estimated to cost $220 million per hull, but the price tag more than doubled during construction on both lead ships. The Navy in 2007 canceled its second ship contracts. Since then, lawmakers have viewed the program with a jaundiced eye and have placed a price cap of $460 million per ship on the program, beginning in the 2010 budget.
The Congressional Budget Office estimates that the cost per hull is $550 million. Each ship will have specialized “mission modules” that will cost approximately $60 million per unit.
Work believes that the cost of the ship will drop below $500 million.
Lockheed last year delivered its first-of-class ship, USS Freedom, (LCS-1) to the Navy. Delivery of General Dynamics’ first-of-class, USS Independence (LCS-2), is expected in September.
As long as there is not an additional cost overrun on LCS-2, then the program ought to be fine, Work says. But any unexpected cost escalation on either ship could potentially kill the program because Congress is extremely upset, and rightly so, he cautions.
“To call this program troubled would be an understatement,” Rep. Gene Taylor, D-Miss., chairman of the seapower and expeditionary forces subcommittee, says at a hearing on Capitol Hill.
“Instead of having 13 delivered or under contract, with another six in this year’s budget, we have one ship delivered that will likely tip the scales well above two and a half times the original estimate and one ship that might finish this summer, with similar if not higher cost growth,” he says.
“I totally understand why Congress is upset … but we ought to see what we’ve built and what its capabilities are before we throw the baby out with the bath water,” says Work.
The Navy in late March awarded Lockheed Martin its second LCS contract. The fixed-price contract for the USS Fort Worth, LCS-3, was for an undisclosed amount because the Navy intends to have both shipbuilders compete for the three LCS contracts to be awarded next year.
Work says that it is unprecedented for a builder to accept a firm fixed-price contract on a second ship of a class, especially after a production break. That implies that Lockheed Martin is confident that it has the price-point nailed, he says.
In the past, Navy officials have said that they would down-select to a single design. But experts say that keeping both versions in production could encourage more cost reductions and hedge against problems that may crop up later in either design.
A study conducted by the Navy showed that the difference in life cycle costs of having two LCS designs in service versus one was not that great, says Joe Carnevale, senior defense advisor at the Shipbuilders Council of America.
Work recommends that the Navy follow a different shipbuilding strategy for LCS. Instead of building six per year and then stopping production when the fleet reaches 55 ships, he says that building four ships a year nonstop would maintain the industrial and design base while balancing the Navy’s budget.
Under the 2009 shipbuilding plan, the Navy would attain its fleet of 55 LCS by 2019. If the hulls were built at a rate of four per year, that fleet size would be attained in 2025.
The real test is how well the ships perform in the water, says Work. “My money right now is on that these ships are going to turn out to be a pretty good deal for the Navy, and most of the problems are going to be forgotten.”
Navy officials acknowledged that one reason for the cost overruns was the decision to begin production before the design was mature.
“One of the things that we have really been taking a hard look at and a hard line on is the percent complete you are in design before we ever start production,” says Allison Stiller, deputy assistant secretary of the Navy for ships. Designs should be about 80 to 85 percent complete before construction begins, she told lawmakers at a hearing of the House Appropriations Committee’s defense subcommittee. However, “We did not do that on LCS,” Stiller said. “We learned that lesson again. And I will tell you that we are very focused on making sure the design is of adequate completion before we start construction.”
Vice Adm. Barry McCullough, deputy chief of naval operations for resources, said it will take at least two years to evaluate both designs. After trials are completed, the Navy will decide whether it will choose one of the two LCS variants, he told the subcommittee. The performance, as well as the acquisition and life-cycle costs, will be weighed. “Just from touring both the ships, I’ll tell you that LCS 1 will probably launch and recover remotely operated vehicles better than LCS 2, and that’s just from looking at it,” said McCullough. “The aviation capability due to the beam on LCS 2 will probably be looked at more favorably just because the sheer size of it. We’ll be working through that over the next couple years as we get these ships in the water and operate them.”
