By Emelie Rutherford
The Coast Guard hopes to be cleared to award Northrop Grumman [NOC] a fixed-price contract before October for the fourth National Security Cutter (NSC), a ship whose estimated price appears to have dropped, the service’s outgoing acquisition chief said yesterday.
Rear Adm. Gary Blore told reporters at the Coast Guard’s Washington offices that because the service wants to change the contracting type for the eight-ship NSC program it is soliciting comments from industry on the fourth NSC.
Integrated Coast Guard Systems, the Northrop Grumman-Lockheed Martin [LMT] joint venture phased out as lead-systems integrator of the Deepwater program, has cost-plus deals for the first three NSCs. The 418-foot ships are the cornerstone of the service’s previously troubled Deepwater modernization effort.
The Coast Guard recently published a notice in Commerce Business Daily of its intent to award Northrop Grumman a fixed-price, incentive-fee contract for the fourth NSC. Under federal acquisition regulations, Blore said, the service must justify why it wouldn’t recompete the NSC-4 contract. The notice will help the service gauge industry reaction, he said.
“We’re doing a fairly thorough analysis to show why we should continue that contract at Northrop,” Blore said.
“We believe it’s best value to the government, and that we can make a sound argument that if we’re going to do a fixed-price contract it would be with Northrop Grumman, because that’s where all the tooling is, that’s where all the supplies are, that’s where all the talent is,” he added.
“When you’re building a ship of this class, and you’re only building eight, the economics of building it someplace else just don’t make a lot of business sense. Because…you’re already tooled up, the expertise is already there, so it would be impossible for anybody to compete with this on a cost basis.”
The Coast Guard estimates it would cost an alternate shipbuilder up to $300 million more than it would cost Northrop Grumman to build NSC-4, he said.
The service hopes to negotiate and award the ship’s contract “at the very end of the fiscal year,” which runs until Sept. 30, he said.
Blore said he is less concerned now than he was last fall about the fourth NSC’s construction cost soaring because of the U.S. dollar’s weakness and commodities’ high prices (Defense Daily, Oct. 7, 2008).
“We’re going to be negotiating a price for No. 4 as we convert to a fixed-price, incentive-fee environment, and having the commodities going down and exchange rates becoming more favorable works to the government’s favor as we negotiate that contract,” Blore said yesterday.
The average estimated price for all eight NSCs works out to $560 million to $590 million per ship, he said. The first NSC–the Bertholf, which the Coast Guard took final acceptance of last Friday–is pegged at slightly more than $700 million. The cost of each subsequent ship should drop, he said.
Blore will be leaving the Coast Guard post of assistant commandant for acquisition this summer, when he assumes command of the Seattle-based Coast Guard District 13.