By Geoff Fein
The cost for the recently awarded contracts for the third and fourth Littoral Combat Ships (LCS) was more than $430 million per ship–however missing from that number are a variety of items including government costs and change orders, the Navy said.
True to its word, the Navy issued the numbers yesterday, citing the cost for the Fort Worth (LCS-3) at $470.85 million. That ship is being built by Lockheed Martin [LMT] at Marinette Marine shipyard in Wisconsin.
General Dynamics‘ [GD] Coronado (LCS-4) came in at $433.68 million. That ship is being built at Austal USA in Mobile, Ala.
Earlier this year the Navy awarded Lockheed Martin a contract for LCS-3, the first contract award for the program since cancellation of the first LCS-3 in 2007 (Defense Daily, March 24).
On May 1, General Dynamics was awarded a contract for LCS-4.
The Navy had planned to award contracts for three ships in fiscal year ’10, however, with the service’s decision to change its direction for acquiring LCS, the fiscal year ’10 buy was canceled.
The Navy has since issued a draft request for proposals (RFP) to the two industry teams for 10 LCS to be bought between FY ’10 and FY ’14. A RFP is expected to be released by the end of the year.
Service officials had previously declined to disclose the contract award costs for the FY ’09 ships because those vessels were linked to the competitive solicitation for three LCS in FY ’10.
Once the decision was made to scrap the FY ’10 buy and proceed with a new acquisition plan not linked to the FY ’09 award, the Navy opted to release most of the specifics of the LCS-3 and -4 contract awards.
While both teams’ awards included ship construction, non-recurring construction and additional engineering effort, configuration management services, additional crew and shore support, special studies and post delivery support, the Navy’s numbers do not reflect the value of government furnished equipment, change orders and program management support costs, the Navy added.
The contract values for both ships also does not include the costs of continuation work and material used from the terminated original contract options for LCS-3 and -4.
In April 2007, the Navy terminated its contract with Lockheed Martin for LCS-3 (Defense Daily, April 13, 2007). Seven months later the Navy canceled its contract with General Dynamics for LCS-4 (Defense Daily, Nov. 2, 2007).
Taking into account the value of continuation work and material from the terminated LCS-3, the FY ’09 contract award for Ft. Worth increased by $78 million to $548.85 million and the award for the Coronado (LCS-4) increased by $114 million to $547.68 million, according to the Navy’s numbers.
The dollar amounts are still above the congressionally mandated cost cap of $460 million established in 2007 for each ship. The Navy has been in discussions with lawmakers on revising the cost cap upward to adjust for inflation, among other things.
In May 2007 the Navy had requested a change in the cost cap from $200 million to $460 million (Defense Daily, May 10, 2007)
In November 2008 the Navy commissioned Lockheed Martin’s USS Freedom (LCS-1). The ship has been undergoing testing and is readying for an earlier deployment than planned to begin integration of the ship into the fleet and to incorporate lessons learned into future deployments (Defense Daily, Oct. 15).
General Dynamics’ Independence (LCS-2) wrapped up her acceptance trials last month and the company is preparing to deliver the ship to the Navy by the end of this year (Defense Daily, Nov. 17).
Coming on the heels of yesterday’s release of the contract award costs for LCS-3 and -4, Republican Sens. Richard Shelby and Jeff Sessions along with Rep. Jo Bonner (R-Ala) sent a letter to Navy Secretary Ray Mabus expressing serious concerns about the Navy’s new LCS acquisition strategy, and urging Mabus to evaluate the LCS designs through a modified best value selection methodology.
“The draft RFP emphasizes cost as the decisive factor in the design decision, placing technological advancements as secondary criteria. This means that price is more important than quality and that performance is not a critical factor,” the letter said. “Additional capabilities of the ships-technology that could help save the lives of our men and women in uniform-are not a key consideration in the decision. The draft RFP has the competition structured to buy the cheapest ship without consideration of any other factor. If this procurement process is ultimately utilized for the final RFP, it is abundantly clear that the less capable offering will be selected.”
The three lawmakers also questioned whether the Navy intends to evaluate the cost differential between the two ship designs’ life-cycle costs.
“We believe up front acquisition cost of the LCS must be balanced against total ownership cost. Acquisition decisions made in the near future will affect fleet effectiveness and operating costs for decades to come,” the lawmakers said. “Therefore, total ownership cost, including fuel efficiency, should be a critical factor of competitive cost evaluation. “
The trio also noted that Lockheed Martin is at an advantage with Freedom because the company was awarded its contract 10 months earlier than General Dynamics was for Independence.
“LCS-1 has completed more of its construction, industrial post delivery period, and test and certification program than LCS-2,” the letter said. “As a result, one team has significantly more information about the performance of its ship and recurring cost of correcting its deficiencies. This creates an uneven playing field and significantly more risk for the team that had its construction contract awarded second. Given the clear disparity in information, this issue must be rectified prior to the final release of the RFP.”
The lawmakers’ added that their primary interest is to ensure that the capabilities of the United States Navy are the very best and that the nation’s armed forces receive the equipment they need in executing future operations. The procurement strategy, therefore, “cannot allow cost to come at the expense of additional capabilities for our sailors.,” the lawmakers said.