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LCS a disaster?
Many predicted this outcome:
LCS hits ‘considerable cost overruns’
By CHRISTOPHER P. CAVAS
The Littoral Combat Ship (LCS), advertised by the U.S. Navy as a $220 million bargain, is going to come in at considerably more than that, according to a senior Navy official.
“It appears that we’re having considerable cost overruns on it,” Delores Etter, the Navy’s top acquisition official, told reporters Jan. 11.
“We’ve been doing our cost-performance review on the Lockheed Martin ship,” Etter said, noting that as the first of a class, “you’ve got some surprises you didn’t expect. But we’re trying to understand the exact cost increases and we’re working with Lockheed Martin so you’ve got the right numbers.”
Etter vigorously declined to provide any specific cost figures.
“We don’t have numbers at this point. So one of the things I hope you will help us with is not using numbers right now, because we don’t know the numbers. So that has to mean your numbers aren’t accurate if you’ve got numbers.”
Nevertheless, a Navy official said the cost of the ship was “closer to the mid-threes,” or around $350 million. Other, unofficial, figures approach and break the $400 million barrier.
One problem with providing accurate figures is that it appears cost estimates prepared by different groups are being analyzed by the Navy, although officials could not confirm that is the case.
Chief of Naval Operations Adm. Mike Mullen, and Secretary of the Navy Donald Winter were briefed late Jan. 10 on the LCS cost situation, and Etter noted the Navy has “shared this with Congress.”
“At this point you know everything that we feel we can share at this point on LCS,” she told reporters gathered at the Surface Navy Association symposium in Washington.
Navy officials stressed that the cost figures applied only to the USS Freedom, the first LCS, and not to the class a whole, nor to a competing LCS design being built by General Dynamics.
But the price of GD’s first ship also is rising, although one source claimed the price for their first ship remains well under $300 million, and that “the estimate for the second GD ship will be around $240 million to $250 million.”
Construction of the Freedom began in February 2005 at Marinette Marine in Marinette, Wisc. The ship was launched in September and is expected to be delivered to the Navy this summer. A second Lockheed ship is being built at Bollinger Shipyards in Lockport, La. Lockheed plans to alternate construction of its LCS ships between the two builder yards.
General Dynamics is building its ships at Austal USA in Mobile, Ala. Construction of the first GD ship, the Independence, began in November 2005, with delivery scheduled for 2008. GD plans to build all its ships at the Mobile shipyard.
One reason the cumulative cost growth is so apparent on Lockheed’s ship, Navy and industry officials pointed out, is that progress on the Freedom is further along than on other ships. Freedom is about 73 percent complete, Lockheed said, while the Independence is about 50 percent.
Craig Quigley, spokesman for Lockheed Martin, noted a number of reasons for cost growth on the Freedom.
“Keep in mind that this entire process from concept to ship in the water is happening about 60 percent faster than traditional ship processes,” he said. “This is indeed a warship, not a commercial ship. That defines different requirements.”
Quigley said four principle reasons are behind the cost increases:
• First-of-class issues. The first ship in a new class historically experiences cost increases as shipbuilders learn the best ways to build the ships, Quigley pointed out, adding that numerous representatives from the Bollinger shipyard have been in Marinette “to learn those lessons so we don’t learn them again.”
• Vendor issues. Quigley noted that mistakes by General Electric in manufacturing the ship’s reduction gears — critical elements in a ship’s propulsion system — resulted in schedule changes as the builders struggled to keep construction on track while waiting for new gears. Supply issues also arose in getting the right kind of steel for the ship because it was the same high-priority material used by the Army in up-armoring its High Mobility Multipurpose Wheeled Vehicles (HMMWV or Humvee) being used in Iraq. “Both these issues caused a resequencing of production to maintain schedule. And that increased cost,” he said.
• The impact of new Naval Vessel Rules (NVR), regulations being created by the Navy to standardize and strengthen ship construction requirements. “Shortly after the contract was awarded in 2004 the Navy directed a change to the Naval Vessel Rules,” Quigley said. “The tightened NVRs will make a tougher ship. But there is an impact on cost. It is particularly relevant when you’re adapting a commercial design to a naval warship.” Lockheed’s hull form is based on a large, commercial, Italian-designed yacht.
• The impact of a fast-track acquisition program where ships are being put into production while design work still is being carried out. “The Navy and Lockheed Martin always knew this was going to be an element of moving a ship along this fast,” Quigley said. “You’re not going to get a ship in the water in four years unless you do this. But this was exacerbated when the Navy imposed the use of NVR, which introduced more concurrency, more redesign and reconstruction.”
“We will continue to work very closely with the Navy,” Quigley added, “to understand these cost increases and put the best and most affordable warship we can to sea.”
Navy and General Dynamics officials said it was too early to assess the cumulative impact of cost growth on the Independence.
“It is premature to draw any conclusions about the General Dynamics ship as it is only about 50 percent complete,” said GD spokesman Kendell Pease.
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Navy Issues Stop Work Order for Littoral Combat Ship 3 Announced
The Navy has issued a stop work order today to Lockheed Martin Corp. Maritime Systems & Sensors unit, Moorestown, N.J., for the construction of the third Littoral Combat Ship (LCS). This stop work order will take effect immediately and is for a period of 90 days.
The stop work order was issued because of significant cost increases currently being experienced with the construction of LCS-1 and LCS-3, under construction by Lockheed Martin.
“I determined that at this point in time it was critical to stop work on LCS-3 to assess the LCS program and ensure we understand the program’s cost and management processes before we move forward. It is essential that we complete LCS 1 and get it to sea so we can evaluate this new ship design” said Secretary of the Navy Donald Winter.
The Navy is working closely with the contractor to identify the root cause of the costs growth. The Navy is reviewing the overall acquisition strategy for the LCS program and is working closely with the contractors to keep this program on track.
The contract for LCS-3 was awarded June 26, 2006, for $197.6 million, and the ship is being constructed at Bollinger Shipyard, Lockport, La.
"The Littoral Combat Ship program remains of critical importance to our Navy. With its great speed and interchangeable warfighting modules, the ship will provide unprecedented flexibility, allowing us to combat almost any specific threat -- from enemy mines to submarines to even pirates. It will help us defend our nation not just in the deep blue, but up close in the coastal regions of the world where our enemies like to hide and where so many of our friends and partners strive to prosper," said Chief of Naval Operations Adm. Mike Mullen.
The Navy is committed to the LCS class ship as it remains the cornerstone of the future fleet by providing critical capability.
For further information, contact Navy Public Affairs at (703) 697-5342.
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