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March 11, 2009

LCS costs and delays come under fire

The Littoral Combat Ship (LCS) came under a cannonade of congressional carping at a hearing held yesterday by House Armed Services Subcommittee on Seapower and Expeditionary Forces.

One hot topic was the possibility of opening up the program to more competition through a straegy of "build to print."

Navy witnesses told the hearing that the Navy remains committed to procuring 55 LCSs, and is aggressively pursuing cost reduction measures to ensure delivery of future ships on a schedule that affordably paces evolving threats.

However, lawmakers seemed skeptical about the program's affordability. Chairman Gene Taylor set the tone. He pointed out that the LCS program has so far delivered one ship.

"When I look at the plan from just two years ago," he said, "we should by now have at least four ships delivered, three more nearing completion from a fiscal year 2008 authorization, six under contract from a fiscal year 2009 authorization, and today we should be discussing the authorization of six more ships for fiscal year 2010. That would be a total of 19 ships."

"So instead of having 13 delivered or under contract with another 6 in this year's budget," continued Chairman Taylor, "we have one ship delivered that will likely tip the scales well above two and a half times the original estimate and one ship that might finish this summer, with similar if not higher cost growth. The Navy cancelled two previously authorized ships, no ships were placed under contract for fiscal year 2008 and no contract award has been made for the two ships authorized for fiscal year 2009. And all this is from the program that was hailed as a poster child for its 'transformational' and 'affordable' acquisition strategy. "

Chairman Taylor said that what was needed was to "bring true competition into this program, not the pseudo competition we currently have between the two poor performers but true competition based on price, schedule, and quality. I have been asking for over two years if the government owns the rights to the design drawings of the ships so they can bid them out directly to any shipyard with the capability of constructing the vessels. The answer seems to be yes and no."

This is apparently what's meant by that term "build to print" (print out the drawings for anyone to build the ships).

On that note, the Navy witnesses (RADM Vic Guillory, Director of Surface Ship Programs for the CNO, RADM Bill Landay, PEO for Surface Ship Construction, and Ms. Anne Sandel, PEO for Littoral and Mine Warfare) said in joint prepared testimony that "It is the Navy's legal and contractual position that the Navy has Government Purpose Rights (GPR) to the seaframe designs of both LCS variants and, as such, can solicit full and open competition for either seaframe design after an adequate design package for such a competition is developed."

That, however, is apparently only part of the story. Essentially, the Navy does not apparently have GPR rights to the equipment and systems within the seaframes, which would force shipyards new to the program to make their own deals with the relevant suppliers.

At the hearing it emerged that the Navy believed that "build to print" would add around $60 million to each ship--and an 18 months delay.

Still, Chairman Taylor continued to press for affordability.

"Everyone should understand that the current situation of these vessels costing in excess of a half billion dollars cannot continue." he said. "There are too many other needs and too little resources to pour money into the program that was designed to be affordable. I would also like to remind all of the parties involved that, particularly right now, you don't want to be the program that is breaking the bank. From what I read in the newspapers there are no 'protected programs' in the ongoing debate on affordability."

Discomfort with the LCS program's progress seemed to be bipartisan.

The panel's Ranking Member, Rep. Todd Akin (R-MO), said that the program still lacks a well-conceived strategy.

"At various times in the last two years," he said, "the Navy has proposed a 'fly-off' and down-select between these two Flight 0 ships, to be followed by a re-design for a Flight 1 ship; investing in a class design services effort to convert the selected design to a build-to-print and re-competing the class; redesigning the ships to include a common combat system in both; and lastly, an apparent desire to procure both ships from the existing teams with minimal changes. We cannot reasonably expect the industry teams to make the investments in facilities and designs for affordability we demand, if we cannot articulate what we want to buy. Further, we cannot reasonably expect the taxpayers to continue to fund ships that we cannot definitively say we want."

Rep Akin noted that the high cost of shipbuilding frequently has its roots in decisions we make to protect the industrial base.

"We need to be very cautious about increasing capacity for which the Navy lacks the volume to support," he said. "We must ensure that we are not creating two additional shipyards who rely on a sole customer for support. The strategy for building LCS at mid-tier yards was explicitly to avoid this phenomenon, since these yards had commercial work. Now, we hear that these yards may have turned away commercial work and are considering capital investments with the intent of constructing LCS only."

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