The Navy yesterday awarded a $1.8-billion contract to General Dynamics‘ [GD] Bath Iron Works for the construction of the DDG-1001 and DDG-1002, the second and third ships procured under the Zumwalt-class (DDG-1000) destroyer program.

Bath Iron works had already begun construction on the first ship of the class, the USS Zumwalt, which is scheduled for delivery in fiscal 2014. But there had been some speculation that the Navy would not proceed with building the envisioned three ships in the class because of concerns about cost. DDG 1001 is expected to be delivered in fiscal year 2015, with delivery of DDG 1002 in fiscal year 2018, the Navy said.

"The contract marks the culmination of careful and deliberate negotiations between government and industry," the Navy said.

Under the contract, any cost overruns would be shared by General Dynamics and the government, and it places a ceiling on the government’s liability, the Navy said. Any costs above the ceiling would be picked by by General Dynamics, the Navy said.

"This contract award demonstrates the Navy’s commitment to balancing cost, capability and industrial base considerations to improve the affordability of this shipbuilding program," Assistant Secretary of the Navy Sean Stackley said. "This is a great example of putting in place should-cost targets to meet validated warfighting requirements."

Huntington Ingalls Industries [HII] will be responsible for construction of the deckhouse, helicopter hanger and aft peripheral vertical launch system on the DDG-1000 ships under a previously arranged agreement with Bath Iron Works, the Navy said.

General Dynamics said the USS Zumwalt is 50 percent complete. Bath Iron Works President Jeff Geiger said the contract provides the Bath, Maine shipyard with a "healthy backlog" of work and reflected the Navy’s commitment to the program.

"Winning this work is a result of our commitment to operational excellence and to finding more efficient, affordable ways to operate in every part of our business," Geiger said. "It gives us the opportunity to continue introducing new and innovative ways to build capable ships for the Navy.”

Bath Iron Works said building was already underway on the two ship under previous congressional funding for advanced procurement and initial construction.