By Emelie Rutherford
The Navy will meet with all of the defense-oversight committees about possibly modifying a $460 million-per-vessel cost cap on the next batch of Littoral Combat Ships (LCSs), the service’s top officer said yesterday.
While he said costs are coming down on both variants of the nascent near-shore ships, Chief of Naval Operations Adm. Gary Roughead in comments to reporters on Capitol Hill indicated uncertainty about whether the Navy can buy three of them under the terms of a cost cap set to start in FY ’10.
“Are we going to hit that in ’10?” he asked about the $460 million per-ship limit.
“We’ve got to talk to the committees about how they want to try and approach that, because it’s pretty aggressive,” Roughead said after a budget hearing.
“What we have to do is talk to them about where we are, what the prognosis looks like,” he added. “If we’re not going to make it, what are the factors involved and are some of those factors under our control, or are they just growth in commodity prices and things like that?”
The admiral said Navy acquisition officials will be meeting with all four defense authorization and appropriations committees about the cost cap.
“I think they’ll be interested in seeing what we have done (with LCS), how aggressive we’ve been, if there are areas that are under our control, and even though we may not be bringing them down to the point where they have to be, do we have plans in place to get them there,” he said.
The Navy is seeing “some really good trends” with LCS price controls, Roughead said, describing the shipbuilding program as being on a “glide slope” to lower costs.
Congress established the $460 million LCS cost cap in the FY ’08 defense authorization act, after costs soared on both LCS variants and the service canceled one ship under contract with each of the shipbuilders, Lockheed Martin [LMT] and General Dynamics [GD]. However, no FY ’08 LCS hulls were built, and when lawmakers finalized the FY ’09 defense bill last fall they chose to temporarily lift the cap and reinstate it in FY ’10. The Obama administration for FY ’10 requested $1.38 billion for buying three littoral ships.
The cost cap for the LCS is written differently than those for other ships, and includes dollar amounts–including government-program and lifecycle-support costs–not normally calculated in caps that only account for straight procurement prices. The Navy and industry are not expected to be able to build the desired FY ’10 ships under the current cap.
Roughead said the onus is on the Navy to ensure lawmakers the LCS program is on the right track.
“We have to satisfy and provide the type of information that allows them to make well-informed decisions,” he said after a Senate Armed Services Committee (SASC) hearing, which was the final of the service’s four annual posture hearings.
Roughead notes LCS cost-cap concerns in written testimony to the House Armed Services Committee (HASC), SASC, House Appropriations Defense subcommittee, and Senate Appropriations Defense subcommittee, saying: “I am committed to procuring 55 LCS. However, legislative relief may be required regarding the LCS cost-cap until manufacturing efficiencies can be achieved.”
The service has not formally requested a cost-cap change from Congress. Lawmakers and aides, though, are aware of the service’s concerns.
SASC Chairman Carl Levin (D-Mich.) asked Navy Secretary Raymond Mabus during yesterday’s hearing if the Navy can buy the FY ’10 LCS hulls under the cost cap.
Mabus noted that costs are being driven down on the littoral vessels and requirements have been frozen for them, but said he could not say if the Navy can meet the $460 million-per-ship goal.
“I think there’s a realistic prospect that we can drive toward that goal,” the Navy secretary said. “(Yet) there, as you know, (were) no escalators built into that cap. And things outside of our control or the contractors’ control–escalating cost of material, escalating labor costs–have frankly made that less realistic.”
The Navy in May awarded General Dynamics a fixed-price contract of an unspecified amount for its second littoral ship: the USS Coronado, LCS-4 (Defense Daily, May 4). The Navy in March gave Lockheed Martin a similar-type contract for its No. 2 littoral ship: the USS Fort Worth, LCS-3 (Defense Daily, March 24).
Lawmakers will start tweaking the Navy’s FY ’10 budget request next Friday, when the HASC’s Seapower subcommittee will mark up its version of the service’s authorization bill.
Seapower panel Chairman Gene Taylor (D-Miss.) has said he wants to insert legislative language directing the Navy to open the LCS program to increased competition if the ships cannot be purchased at specified prices. Observers note such a move would not necessarily solve cost and schedule problems that have plagued multiple Navy shipbuilding efforts.
Cost overruns with the initial littoral ship have been attributed in large part to the Navy’s changing of requirements and standards.