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Navy Reorients LCS Acquistition Strategy

As part of the review of defense spending started last year under Secretary of Defense Gates and also influenced by Obama's spending plans the U.S. Navy adjusted their Littoral Combat Ship (LCS) acquisition strategy. The original plan was to have two companies build two different designs for the same mission and use the dual capability to quickly get ships. Both Lockheed Martin and General Dynamics were awarded contracts for one ship each. The two companies built quite different designs with similar capabilities.

Because the first two ships cost a great deal more then originally planned there was at one time pressure to end the whole program. Congress desired keeping it going for a variety of reasons including providing jobs. The Navy then awarded a third ship to Lockheed Martin and did not award the planned fourth one to General Dynamics. This ship was to be built under a Firm Fixed Price (FFP) contract with the hope that with the lessons learned from earlier construction prices could be constrained.

Today the Navy announced that it was canceling the idea of having two sources and all planned construction. A new contract would be let after a competition between the two companies. This new contract will be let in 2010 for two new ships with further two ships a year through 2014. These ten ships will be added to the fleet of three others for a total of thirteen.

The original Navy estimate was for a fleet of fifty-five but that plan is considered optimistic now as the cost increase will drive a lower number unless more funding is found. To add more competition to the program the Navy is looking at having a second contest in 2015 to build the second batch of ships. This possible alternating of builders may lead to a mixed fleet like originally intended but the winner of the 2010 competition will have an advantage because they would already have set up their supply chains and negotiated prices with their sub-contractors. Their experience building ten ships would also help them control prices.

In the past when the Navy was building a great deal of ships like in World War II they often did have different companies and designs built for the same basic mission. They also would set a design and allow multiple yards build it allowing quick production of almost identical ships. Due to the length of construction and the changes in technology and supply issues different ships from different classes may have minor differences.

The Navy is gambling that the use of different contractor teams and possible use of alternating sources will save money over the life of the construction program. The Navy ship building plans of five years ago have been disrupted with the planned end of the DDG1000 program and its replacement for now with more DDG-51 Arleigh Burke class ships. There will be another attempt to design a new DDG to supplement the current fleet. The Navy also plans a new carrier and eventually a bigger cruiser type ship to replace the CG-47 ships. With the decision announced today to rely on sea based missile defense to defend Europe there will be a need for more, modernized cruisers capable of firing the SM-3 and more advanced missiles to come. This might have an effect on the ultimate Navy build program.