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Lockheed, Austal Extend Prices on Littoral Ship Bids

Lockheed Martin Corp. and the U.S. unit of Australia’s Austal Ltd. will extend by two weeks prices for the U.S. Navy’s Littoral Combat Ship to allow Congress time to possibly authorize the project’s dual-team strategy and for the service to process the resulting contract.

Captain Catherine Mueller, a Navy spokeswoman, disclosed the accord today in an e-mailed statement. The prices would have lapsed on Dec. 14. Lockheed and Austal are leading two separate teams designated by the Navy to build 10 of the first 20 production vessels.

“The Navy has asked for and received from Lockheed Martin and Austal a limited extension on the prices submitted under the current solicitation,” Mueller said.

The Navy needs congressional approval to proceed with plans to buy ships from each team in a newly proposed dual-design approach, instead of choosing one design supplier as originally announced in September. If Congress doesn’t authorize the dual- team strategy by Dec. 30, the Navy will award the contract to one team. The service needs time to process the resulting contract in either case, Mueller said.

The Navy and congressional supporters of the two-team approach, including Representative Gene Taylor, Democrat of Mississippi, are searching for the best legislative vehicle for proposing it during the current lame-duck session. The proposal could be approved as a separate bill, part of the annual defense authorization policy bill or included in a stopgap government funding measure known as a “continuing resolution.”

Dec. 30 Deadline

“This extension does not allow the Navy to continue to work for the dual-block buy authorization beyond Dec. 30, 2010,” Mueller said.

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.

The nonpartisan Congressional Budget Office in a Dec. 10 report said that based on its analysis of publicly available Navy budget data, the two-team proposal would cost about $490 million per ship.

The CBO, using its own ship-pricing cost models, projected that the price for each ship at about $591 million. The budget office didn’t have access to the Lockheed and Austal bids, the report said.

The budget office estimate for the entire 20-vessel plan is $11.8 billion, or $2 billion more than the Navy proposal.

“Although CBO estimates that the dual-award plan would be slightly more costly, that approach might also provide some benefits” over a sole source, such as sustaining the ship- building industrial base, according to the report.

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

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net

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