The Navy has awarded Lockheed Martin Corp. and Austal USA each a fixed-price incentive contract for the design and construction of a 10 ship block-buy, for a total of 20 littoral combat ships from fiscal 2010 through fiscal 2015.
The amount awarded to Lockheed Martin Corp. for fiscal 2010 littoral combat ships is $436,852,639. The amount awarded to Austal USA for the fiscal 2010 littoral combat ships is $432,069,883. Both contracts also include line items for nine additional ships, subject to Congressional appropriation of each year’s Littoral Combat Ship (LCS) Program requirements. When all 10 ships of each block buy are awarded, the value of the ship construction portion of the two contracts would be $3,620,625,192 for Lockheed Martin Corp., and $3,518,156,851 for Austal USA. The average cost of both variants including government-furnished equipment and margin for potential cost growth across the five year period is $440 million per ship. The pricing for these ships falls well below the escalated average Congressional cost cap of $538 million.
“The awards represent a unique and valuable opportunity to lock in the benefits of competition and provide needed ships to our fleet in a timely and extraordinarily cost effective manner,” said Secretary of the Navy Ray Mabus.
This award is a unique opportunity to maximize the buying power on the LCS Program by leveraging the highly effective competition between the bidders. Each contractor’s 10-ship bids reflect mature designs, investments made to improve performance, stable production, and continuous labor learning at their respective shipyards. The award was based on limited competition between teams led by Lockheed Martin and Austal USA. Under these contracts, both shipbuilders will also deliver a technical data package as part of the dual award, allowing the government a wide range of viable alternatives for effective future competition.
This approach, which is self-financed within the program by adding a year to the procurement and utilizing a portion of the greater than $2 billion total savings (throughout the Future Years Defense Program), enables the Navy to efficiently produce these ships at an increased rate and meet operational requirements sooner.
Chief of Naval Operations Adm. Gary Roughead praised the Navy’s plan to add both ship designs to the fleet: “The LCS is uniquely designed to win against 21st century threats in coastal waters posed by increasingly capable submarines, mines and swarming small craft. Both designs provide the capabilities our Navy needs, and each offers unique features that will provide fleet commanders with a high level of flexibility in employing these ships.”
The innovation and willingness to seize opportunities displayed in this LCS competition reflect exactly the improvements to ‘the way we do business’ in order to deliver better value to the taxpayer and greater capability to the warfighter. Moreover, the Navy’s LCS acquisition strategy meets the spirit and intent of the Weapon Systems Acquisition Reform Act of 2009 and reflects the Navy’s commitment to affordability. The benefits of competition, serial production, employment of mature technologies, design stability, fixed-price contracting, commonality, and economies of scale will provide a highly affordable ship construction program.
“The rigor and diligence of the source selection process has resulted in the acquisition of quality, capable ships at fair prices,” said Assistant Secretary of the Navy for Research, Development and Acquisition Sean Stackley. “This dual award strategy exemplifies the Navy's compliance with Secretary Gates’ and Under Secretary Carter’s direction to improve the buying power of the Defense Department. Both teams have shown cost control on their second ships, and we look forward to the delivery of these capable fleet assets in the future.”
The Navy remains committed to a 55-ship program and the LCS is needed to fill critical, urgent warfighting requirements gaps that exist today. The LCS Program is required to establish and maintain U.S. Navy dominance in the littorals and sea lanes of communication choke points around the world. The LCS Program operational requirements have been virtually unchanged since the program’s inception in 2002 and the both hull forms will meet the Navy’s operational warfighting requirements.
Media may direct queries to the Navy Office of Information at 703-697-5342.