Navy Using 2 Littoral-Ship Teams Blunts Risk, GAO Says

The U.S. Navy’s proposal to buy Littoral Combat Ships from two teams instead of from a single supplier as originally planned might blunt the risk that a model won’t work, congressional auditors said.

“A second ship design provided under the dual-award strategy could provide the Navy an additional hedge” as the groups led by Lockheed Martin Corp. and by a unit of Australia’s Austal Ltd. face “much work and demonstration” ahead, the U.S. Government Accountability Office said today in a report to lawmakers.

The Navy’s experience with the first two vessels from the teams, and contracts locking in the price, should help improve the vessels’ chances of success, the GAO said without giving the strategy a full endorsement. “In the near term, cost increases are likely, but it is unknown whether increases will exceed what the Navy has budgeted for fiscal years 2010 and beyond,” the auditor said.

If backed by Congress, the Navy’s Nov. 3 proposal to acquire 20 of the shallow-water vessels would supersede the service’s 2009 plan to choose one design in a winner-take-all competition. U.S. lawmakers are considering separate measures that might win House approval for the dual-ship approach.

The Congressional Research Service estimated that under the single-model strategy, the ships would cost $480 million each. Using two designs can save at least $1 billion on the first 20 ships with possibly as much as $1.9 billion more in savings by 2016, according to the Navy.

Coastline Work

Littoral Combat Ships are designed to operate closer to coastlines than existing surface vessels, such as destroyers, in missions such as clearing mines, hunting submarines and providing humanitarian relief. The Navy projects buying 55 ships under the program.

Lockheed and Marinette Marine Corp. worked together on one model, while the other was developed by Austal’s U.S. subsidiary and General Dynamics Corp.

Representative Gene Taylor, Democrat of Mississippi, has introduced legislation (HR 6494) to approve the approach as a stand-alone law or part of the pending fiscal 2012 defense- policy bill. The outgoing Democratic chairman of the House Appropriations Committee, David Obey of Wisconsin, has included language (Section 2314) to approve the deal in a stopgap government funding measure until a final defense bill is passed.

Taylor, who has chaired the House Armed Services Committee seapower panel, lost in the Nov. 2 midterm election. Obey is retiring this year.

McCain’s Opposition

The proposal is opposed by Senator John McCain, the senior Republican on the Senate Armed Services Committee, who has said he considers the Littoral Combat Ship a “troubled program.”

“Fast-tracking during a lame-duck session a decision on this important issue would be improper,” McCain said in an e- mailed statement.

“Without the basic information needed to make an informed decision on the Navy’s proposal, and without the benefit of thoughtful and transparent oversight, I cannot support the Navy’s proposal,” McCain said.

Contractor prices are set to expire Dec. 14, the companies have said.

Both vessels have inherent design and construction risks, and “other shipbuilding programs have had difficulty at this stage” of development, the GAO said.

The agency also questioned some of the Navy’s long-term estimates for how much it would save on operations and support using two shipbuilders, saying there are few data so far. Costs may rise under either acquisition strategy because of design changes that don’t take effect until after completion of the first four vessels now under contract, the GAO said.

“Until this scope is fully identified and priced into existing and future contracts, the department cannot be fully confident that its budget for follow-on ships are sufficient,” the congressional auditor said.

“The Navy’s ability to stay within its budgeted limits remains to be seen,” the GAO said.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net.

To contact the editors responsible for this story: Mark Silva at msilva34@bloomberg.net; Ed Dufner at edufner@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.