February 9, 2007
Hard questions on LCS cost overruns
Rep. Gene Taylor (D. Miss) had some tough things to say about the Navy's Littoral Combat Ship program.
Taylor is Chairman of the Subcommittee on Seapower and Expeditionary Forces of the House Armed Services Committee. In his opening statement to an oversight hearing on the LCS program, Taylor noted that on January 12, the Secretary of the Navy issued a stop-work order for construction of the third LCS, citing escalating costs in the program.
"One of the key selling points for the development, design, and construction of the LCS was affordability," said Taylor. In the FY 2006 National Defense Authorization Act, he recalled, "this subcommittee ... directed the Secretary of the Navy to meet the cost target of $220 million dollars by the fifth ship of the class. This committee was told that the cost target was achievable."
"Now, it appears that this is not the case," he said. "I have been informed that Lockheed's first ship, the Freedom, is 50 percent above a baseline of about $270 million. We are looking at a ship that is going to cost the American taxpayers almost $400 million."
"The Navy needs to start budgeting within its cost margins to deliver ships at the price they promised the American people," declared Taylor. "Industry needs to understand that a government contract does not equal a blank check from Uncle Sam. If industry can't execute a contract at the agreed-upon cost, then there will be repercussions."
You can read the complete text of Rep. Taylor's opening statement here.
The subcommittee heard testimony from two panels of witnesses.
Among some of the reasons for cost increases that the witnesses cited in their prepared statements were an accelerated 24 month build cycle for each seaframe, late delivery of a critical propulsion component, and the fact that the design called for HSLA-80 steel for the shell plate below the waterline for its high strength, light weight and fracture toughness. This steel alloy is unique to military applications and is available from only one domestic supplier. The team was informed by the mill that a higher priority Army program would delay the material for several months. After an exhaustive search for alternate supplies the team decided to redesign the effected hull modules to use alternate steel alloys to maintain the production schedule.
Another issue was the fact that the ship is being built to new Naval Vessel Rules (NVR) that apparently were evolving and changing as the ship was being designed. These were a factor in many of the over 600 engineering changes on the lead ship compared with the preliminary design.
Dr. Delores Etter, Assistant Secretary of the Navy for Research, Development and Acquisition, led a Navy panel that also included VADM Paul Sullivan; the Commander of the Naval Sea Systems Command, RADM Charles Hamilton, the Program Executive Officer for ship construction and RADM Barry McCullough, the Director of Surface Warfare Requirements for the Chief of Naval Operations.
You can read the Navy panel's joint prepared statement here.
The second panel included the following representatives from the prime contractor and major subcontractors: Fred Moosally, President of Marine Systems for Lockheed Martin, the prime contractor and system integrator for the Lockheed Martin team LCS, Richard McCrery, Vice President and General Manager of Marinette Marine Shipyard, the construction yard for the first Lockheed Martin team LCS, Mike Ellis, Vice President and Chief Operating Officer for Bollinger shipyards, slated to build LCS 3 and
Kevin Moak, Chairman, Gibbs and Cox, Inc. The naval architecture firm that designed the LCS ship built by the Lockheed Martin team.
You can read that team's prepared testimony here.