Categories  Merging & Acquisition US DoD

Congress: OKs Dual-Source Warship Purchase

Congress cleared the Navy to split a roughly $10 billion purchase of the first 20 in a new class of coastal warships between teams led by Lockheed Martin Corp and Australia’s Austal Ltd, instead of picking just one of the two rival designs as previously planned.

The split would save $2.9 billion through 2016, and yield 20 “littoral combat ships” for the price of 19, Navy Secretary Ray Mabus said last week in urging Congress to approve the revamped purchase plan.

The vote to buy both types of coastal combat ships is likely to fuel controversies over proposed dual purchases of other major military systems.

Among these are engines for Lockheed Martin’s F-35 Joint Strike Fighter aircraft.

Separately the Air Force is preparing to start buying a new fleet of mid-air refueling aircraft either from Boeing Co or Europe’s EADS. In these two cases, the Pentagon is seeking to rely on one model only.

President Barack Obama is expected to sign into law this week the so-called “continuing resolution” that funds the government through March and that contains the split-buy provision for the new ships.

The highly automated vessels are designed to operate close to shore and feature equipment modules that may be swapped out for missions such as combating enemy surface vessels or sweeping for mines.

They will be built by Austal USA, which has a shipyard in Mobile, Alabama, and Lockheed Martin, which has partnered with a shipyard in Marinette, Wisconsin, just across the border from Michigan.

The Lockheed Martin ship has a steel hull; Austal’s is an aluminum trimaran. Each shipyard is now building its second vessel on contract, and the Navy hopes to buy 55 of the ships overall. When complete, the LCS fleet would make up about one-sixth of the entire U.S. Navy fleet.

“This is 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,” Mabus, the Navy secretary, said in a statement.

Senate Armed Services Committee chairman Carl Levin, a Michigan Democrat, said the deal was expected to fund 500 direct jobs in Michigan’s upper peninsula, and support up to an additional 2,500 jobs in Michigan.

Senator Richard Shelby, an Alabama Republican, said Austal would add nearly 2,000 jobs in south Alabama for the program.

Without the legislation, the Navy would have to pick one contractor for the next phase of the ship’s construction. In revamping its acquisition strategy, the Navy said last month that the prices offered by the rivals were so good that it made sense to buy from both and preserve competition.

The measure passed the House of Representatives by a vote of 193 to 165 after clearing the Senate earlier in the day, 79 to 16. In opposing the new approach, Senator John McCain of Arizona, the top Republican on the Armed Services Committee, argued that it constituted “an abrogation of our constitutional oversight responsibility.”

“I suggest that, having made key decisions on the program hastily and ill-informed, we in Congress are partly to blame” for what he called a program that has been plagued by instability.

He cited questions raised by congressional experts about the cost of operating and maintaining two versions of the ship rather than reaping economies of scale from just one.

Separately, Senator Sherrod Brown, an Ohio Democrat, said he had received confirmation from the White House’s Office of Management and Budget director Jacob Lew that the continuing resolution would maintain funding for the alternate F-35 engine.

The interchangeable engine is being developed by the team of General Electric- Rolls Royce despite President Barack Obama’s contention that it is wasteful. He has vowed to veto any spending measure that funds it.

United Technologies Corp’s Pratt & Whitney unit builds the engine being used in early F-35 production. Its backers had hoped that the White House would cut off funds for the rival engine in the absence of a specific appropriation for it.

The Defense Department has sought to end the second engine program for the past five years as a belt-tightening measure.

Sen. Joseph Lieberman, an Independent of Connecticut, where United Technologies is headquartered, said he would continue to fight to kill the alternate engine during the term of the continuing resolution and when the Senate considers a measure to fund the government for the rest of 2011.

Obama, in a May 28 statement, said the military did not want or need the second engine nor more Boeing C-17 cargo planes “and should Congress ignore this fact, I will veto any such legislation so that it can be returned to me without those provisions.”

Congress has not sought to fund any more C-17s for fiscal 2011, which began October 1. The House on Friday approved a defense authorization bill that ducked a decision on the alternate engine. Senate action on its version of the defense spending bill may come this week.

Courtney Howard Military & Aerospace

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