U.S. Navy Awards LCS Contracts
As anticipated, the U.S. Navy has awarded follow-on contracts worth about $745.2 million to teams led by Lockheed Martin and Austal USA for each to build another Littoral Combat Ship (LCS).
Lockheed received a $376.6 million contract modification to start the fiscal 2011 construction of its LCS version. Work is expected to be complete by April 2016.
Austal USA of Mobile, Ala., received a $368.6 million contract modification to start work on its LCS, with work to be complete by October 2015.
Last year, the Navy decided to award the LCS shipbuilding teams contracts to construct the two different versions of the ship, instead of picking only one design through a downselect. The Navy said recent cost-saving measures and updated bids showed it would be better to award both teams the work through dual-block-buy deals.
But analysts at organizations such as the Congressional Research Service (CRS) have questioned the Navy’s wisdom in making the dual-block buy. “What impact, if any, might the Navy’s proposal to shift from its downselect strategy to the dual-award strategy have on the ability of the Department of Defense to implement downselect strategies for other acquisition programs?” CRS Navy analyst Ron O’Rourke asks in his January update on the LCS procurement.
“For example,” the report says, “will the Navy’s proposal to shift to the dual-award strategy cause contractors bidding for other acquisition programs to treat with increased skepticism stated DOD intentions to carry out downselects? If so, could that reduce the benefits of competition that DOD might hope to achieve through the use of downselect strategies?”
In the short term, though, CRS notes Navy savings for the LCS procurement. “It appears that the Navy estimates that, compared to the downselect strategy, the dual-award strategy might save a net total of $615 million (net present value) through fiscal 2016 (or $305 million through FY2015). This figure includes $910 million (net present value) in savings through FY2016 ($600 million through FY2015) in ship procurement costs, less $295 million (net present value) in additional ship . . . costs.”
However, CRS cautions, “this figure does not account for possible changes in the costs of other Navy ships that might occur as a consequence of changes in the spreading of shipyard fixed overhead costs.”
The estimated net savings of $615 million would be reduced by any LCS combat system modification costs, CRS adds (Aerospace DAILY, Jan. 4).
Photo: Paul McLeary
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