Lockheed, Austal’s Littoral Ships to Cost At Least $37 Billion
The U.S. Navy program to develop and build 55 vessels for close-to-shore operations will cost at least $37.4 billion -- not including equipment required for a full range of missions, according to new Pentagon figures.
Development of the Littoral Combat Ship is estimated at $3.5 billion and construction of the fleet at $33.7 billion in inflation-adjusted dollars, according to the estimate disclosed April 15 in an annual Selected Acquisition Report to Congress. Another $236 million is included for construction of facilities to support the ships.
Prior to the April 15 report and summary, the Navy published only a development cost estimate. Pentagon officials April 8 approved moving the program into the engineering and manufacturing phase -- an act that requires a formal estimate of the procurement costs.
Two teams led by Lockheed Martin Corp. (LMT) and Austal Ltd. (ASB) are designing and building respective LCS versions. The first two vessels have been commissioned into the Navy. Six others are under contract.
The 37-page report estimates the ships will cost about $535 million apiece in fiscal 2010 dollars. It estimates future-year costs of as much as $636 million in inflation-adjusted dollars.
Those estimates are for ship construction only and don’t include money for as many as 64 so-called mission modules -- interchangeable systems on each vessel for mine-hunting, anti- submarine missions and surface warfare against small boats, according to the report obtained by Bloomberg News.
Total Cost Unknown
“More than nine years after the program was first announced and six years after the start of the sea frame procurement, there is still no official Pentagon estimate for the total cost of the LCS program,” said Ronald O’Rourke, a naval analyst with the non-partisan Congressional Research Service.
“I’m not sure how many other Defense Department weapon procurement programs of comparable size have proceeded for that long into the procurement phase without an official estimate of total cost,” he said in an e-mail.
The mission modules are being developed as a separate program, and there isn’t yet a procurement cost estimate, the report to Congress said.
The $37.4 billion figure likely will elevate the LCS’s profile as the White House and Congress look for ways to reduce the federal deficit. The White House last week directed the Pentagon to begin a “comprehensive review” to find $400 billion in spending cuts as part of President Barack Obama’s plan to reduce the debt.
Biggest Programs
One area for review is the $14 billion average expenditure the Navy plans to spend annually on shipbuilding, including the LCS program.
Another area is Lockheed Martin’s F-35 fighter jet. The U.S. Government Accountability Office in a report said the F-35 is anticipated to require “unprecedented demands for funding,” averaging about $11 billion a year.
The LCS vessels are expected to last about 25 years and cost about $36.6 million a year apiece to operate or support,
That’s about $50 billion over the program’s life, when calculated in 2010 dollars, or $87 billion in inflation-adjusted dollars, according to the report.
Lockheed, based in Bethesda, Maryland, and Marinette Marine Corp. of Marinette, Wisconsin, are working together on one model, while the other is being developed by the Mobile, Alabama-based U.S. subsidiary of Australia’s Austal and General Dynamics Corp. (GD)
General Dynamics is providing combat systems designed at its Pittsfield, Massachusetts, facility for the Austal vessel.
To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net
To contact the editor responsible for this story: Mark Silva at msilva34@bloomberg.net
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