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A Tougher Line on Government Contracting

Rising Costs Plague Navy's Shipbuilding Program

By Zachary A. Goldfarb
Washington Post Staff Writer
Monday, October 8, 2007

They are called Freedom and Independence.

The two competing ships, based in San Diego, are designed to dodge mines, hunt for submarines and conduct special operations at high speeds of up to 45 knots.

Whichever prototype proves superior -- either Lockheed Martin's Freedom or General Dynamics' Independence -- is supposed to serve as the model for a class of 55 agile ships said to be central to revitalizing the Navy's fleet in the 21st century.

But first, Lockheed of Bethesda or General Dynamics of Falls Church must ensure the shipbuilding effort doesn't disappear.

A litany of program delays and cost overruns led the Senate last week to pass a defense appropriations bill that cut more than $1 billion in spending on the program, a move that would effectively end the contractors' plans to build any more ships.

The House already has passed a defense spending bill that would allow General Dynamics to build just one more, and it left open the question of whether Lockheed would get to do so as well. Originally both companies were to build three ships apiece before further production plans were approved.

In coming weeks, lawmakers from both chambers will gather to hash out differences between the two bills, but experts warn that the legislation -- especially the Senate approach -- could be a harbinger of changes in the program .

"The bottom line is that the entire program is unsettled right now," said Robert Work, vice president of strategic studies at the Center for Strategic and Budgetary Assessments.

Navy Secretary Donald C. Winter and other top Navy officials have been visiting Capitol Hill to press the case with leaders of defense committees. Lockheed and General Dynamics, which declined to comment on the legislative action, are providing information to lawmakers as needed.

Spokesman Thomas Jurkowsky said Lockheed's specialty is bringing together the disparate parts that make up a combat ship. Robert Doolittle, a General Dynamics spokesman, said the company remains "focused on developing the most capable, most affordable" ship.

A Navy official, speaking on the condition of anonymity because the Navy discourages comment on pending legislation, said the Senate bill "means we get to 55 ships slower. We need this ship and the capabilities it brings right now."

The congressional action followed months of delays as costs ballooned. The cost for the initial two ships was estimated at about $220 million each but now appear to cost up to double that.

The report accompanying the Senate bill stated "a high degree of cost uncertainty will continue to overshadow the LCS program until the two lead ships execute test and trials."

The Navy, in turn, has been critical of the companies' inability to control expenses. After unsuccessfully pressing Lockheed to switch to a fixed-price contract for the ships to protect taxpayers against rising costs, the Navy canceled Lockheed's contract to build a second prototype.

Regardless of what Congress does, General Dynamics' work on a second ship is threatened with a similar fate. "To reaffirm the Navy's commitment to cost-control and to not further erode confidence," spokesman Lt. Cmdr. John T. Schofield said the Navy has begun discussing with General Dynamics the idea of switching to a fixed-price contract.

The ships, which will have the rare ability to operate close to shore but also on the open water, are a central part of the Navy's goal of expanding its fleet to 313 ships from 275. And key lawmakers and several outside experts agree the program is crucial. Indeed, even the more expansive Senate bill pledges $75 million for the program once the Navy decides whether to follow the General Dynamics or Lockheed Martin model for the rest of the fleet.

Once the Navy selects a prototype, it plans to hold a new competition for rest of the ships in 2010.

But Loren Thompson, a military affairs expert at Alexandria-based Lexington Institute, said the Navy has a reputation for building a few test ships and then moving on to another program.

"It seems as though all these programs are a way station en route to the next bright idea," he said. He noted that the littoral combat ship was the product of former defense secretary Donald Rumsfeld and his deputies. "It may not have the support in the Pentagon to keep it on track," he said.

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