More Littoral Combat Ships

Interesting this was released by the Navy on their website, but nothing from the Defense contracts page? Curious, I do not know why. Here is the official Navy release.

The Navy issued contract modifications to Lockheed Martin Corporation and Austal USA under their respective littoral combat ship (LCS) block buy contracts to add funding for construction of two fiscal year 2012 littoral combat ships each, March 16.

This is the third funding increment for each contractor under their previously awarded, fixed-price incentive "block buy" contracts for the design and construction of up to 10 LCS Flight 0+ ships. The two block buy contracts provide for the acquisition of a total of up to 20 littoral combat ships from fiscal year 2010 through fiscal year 2015, subject to availability of appropriations.

Under the block buy contract with Lockheed Martin Corporation, $715,000,351 was added for construction of two fiscal year 2012 LCS ships. Under the block buy contract with Austal USA, $691,599,014 was added for construction of two fiscal year 2012 LCS ships. These ships will be built at Marinette Marine Corporation in Marinette, Wis., and Austal USA in Mobile, Ala., respectively.

The prices for the fiscal year 2012 ships were determined based on the competitive, LCS dual block buy contracts awarded Dec. 29, 2010, and also includes values associated with the incorporation of approved change orders funded for the fiscal year 2010 and fiscal year 2011 ships previously awarded in the block buy contracts.

"The Navy is successfully driving down costs in the Littoral Combat Ship program," said Rear Adm. James Murdoch, program executive officer for Littoral Combat Ships. "We are continuing to execute the dual award strategy for these ships. Efforts to stabilize design, improve production planning, invest in shipbuilder improvements and leverage long-term vendor agreements all within the framework of a competitive fixed-price contract have returned this program to the level of affordability necessary for the Navy to move forward with construction at efficient rates in support of the 55-ship LCS requirement."

The funding obligated is for the ninth through the twelfth ships in the LCS class.

Worth noting, back on March 14th (last Wednesday) these two contracts moved through the DoD.

Lockheed Martin Corp, Baltimore, Md., is being awarded a $33,649,198 modification to previously awarded contract (N00024-11-C-2300) to exercise options for special studies, analyses, review and Littoral Combat Ship (LCS) class services. This effort will assess engineering and production challenges and evaluate the cost and schedule risks from affordability efforts to reduce LCS acquisition and lifecycle costs. Work will be performed in Hampton, Va. (32 percent); Marinette, Wis. (27 percent); Moorestown, N.J. (22 percent); and Washington, D.C. (19 percent). Work is expected to be complete by March 2013. Contract funds will not expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, D.C., is the contracting activity.

Austal USA, Mobile, Ala., is being awarded a $19,692,295 modification to previously awarded contract (N00024-11-C-2301) to exercise options for special studies, analyses, review and class service efforts for the Littoral Combat Ship (LCS) program. This effort will assess engineering and production challenges and evaluate the cost and schedule risks from affordability efforts to reduce LCS acquisition and lifecycle costs. Work will be performed in Mobile, Ala. (72 percent) and Pittsfield, Mass. (28 percent). Work is expected to be complete by March 2013. Contract funds will not expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington, D.C., is the contracting activity.

If you scroll down to March 14th on Tim Colton's website, he asks some interesting questions with a bit of commentary:

The funds are to be used to assess engineering and production challenges and evaluate the cost and schedule risks from affordability efforts to reduce LCS acquisition and lifecycle costs. Oh, goody. How about just not spending the money? That would save $50 million right there. Hey guys, these are fixed-price contracts: the contractors should be doing everything they can to reduce costs and schedule at their own expense. It's in their interests. This way the Government pays them to reduce costs and the contractors keep the savings. Sometimes one wonders if there's anyone in NAVSEA with even half a brain.

It is a fair question, the Navy is spending $50 million on LCS production changes, and expects to save how much money as a result?

A little math. The unit cost of the Lockheed Martin ships would be $357.5 million apiece. The unit cost for the Austal ships would be $345.8 million apiece. The combined total for both contracts is $1,406,599,365. There was $79.5 million in prior-year advanced procurement funding for each one of these four ships. According to the FY2012 budget, the estimated procurement cost including prior-year advanced funding was $1,881,600,000. That leaves $395,500,635 which I presume is government furnished equipment. While those costs aren't equal between the two ship classes, divided by four that averages out to $98,875,158.75 in government furnished equipment cost per ship.

So... for the Lockheed Martin version of the Littoral Combat Ship, we are talking about $357.5M + $19.9M advanced prior year + $98,875,158.75 for a final total cost of $475,375,158.75 per ship in FY12 dollars.

For the Austal version of the Littoral Combat Ship, we are talking about $345.8M + $19.9M advanced prior year + $98,875,158.75 for a final total cost of $464,575,158.75 per ship in FY12 dollars.

If my notes on how Section 121(c) and (d) of the FY2010 defense authorization act (H.R. 2647/P.L. 111-84 of October 28, 2024) worked for the Littoral Combat Ship cost cap, it was agreed in that the $480 million cost cap in FY2005 dollars was something like $538 million in FY11 dollars.

With the latest set of contracts, the Navy appears to be at least $60 million under the cost cap with the Lockheed Martin version and at least $70 million under the cost cap with the Austal version. Combined, for the four ships, that is some $260+ million under the cost cap for the fiscal year. My point is simple - that $260 million needs to be putting out at least 4 quality Littoral Combat Ship modules - at least 1 for each ship - or the Navy is wasting taxpayer money.

All of this suggests the shipbuilding side of the Littoral Combat Ship seems to be getting on track. It is past time to start seeing something interesting, useful, productive, and noteworthy on the module side. Without high quality modules to field, the ships are worthless.

PS: USS Little Rock (LCS 9)? Go hogs! WPS!