By Andrea Shalal-Esa
WASHINGTON, Sept 16 (Reuters) - The U.S. Navy has decided to pick one Littoral Combat Ship design in fiscal 2010, instead of two, as part of a new acquisition strategy for the large shipbuilding program, two sources familiar with the Navy plan said on Wednesday.
Navy acquisition chief Sean Stackley and Vice Admiral Barry McCullough, deputy chief of naval operations, are due to announce the new acquisition plan later on Wednesday, the sources said.
Lockheed Martin Corp and General Dynamics Corp are building separate models of the shore-hugging ship, which the Navy plans to use in coastal areas for mine detection, anti-submarine warfare and combat against small surface craft such as pirates.
The Navy had planned to buy 55 of the new lighter, more agile warships to help the Navy expand its fleet from 283 ships to 313 over time, but those plans have been jeopardized by big cost increases on the program.
It was not immediately clear if the total number would remain the same under the new acquisition plan.
Chief of Naval Operations Gary Roughead told reporters in June that costs had nearly stabilized on a second set of LCS ships being built by Lockheed and General Dynamics.
Roughead said he was encouraged by cost trends on the two ships under construction and that the Navy would try to avoid adding any new requirements that could drive costs higher.
Costs have more than doubled from an original projection of $220 million and the program is subject to a congressional cost cap of $460 million on each new ship, beginning in fiscal 2010, which begins Oct. 1, although lawmakers have proposed various options on how to adjust the cap for inflation and other items.
Lockheed's first LCS ship successfully completed a second round of builders' trials earlier this month.
General Dynamics' first ship had been going through its builders' trials, but ran into several unexpected problems.
The decision to pick just one design in fiscal 2010 could be bad news for General Dynamics, which started later on its version of the ship program, said Loren Thompson, a defense analyst with the Virginia-based Lexington Institute.
Thompson advises many defense companies including both Lockheed and General Dynamics, but is not involved with either company on the LCS program.
'Right now, the obvious ship to downselect is the Lockheed Martin ship. They have worked through their problems and the ship is performing very well. The GD ship really isn't ready for primetime because it started so much later,' he said.
The problem was that the Navy's current shipbuilding plan was not affordable, putting the service under pressure to simplify programs like LCS by 'prematurely selecting one winner,' Thompson said.
'The shipbuilding budget is underfunded, so they have to make cuts somewhere,' he said.
Lockheed shares closed up 46 cents at $76.16, while General Dynamics shares gained 16 cents to close at $63.29.
(Reporting by Andrea Shalal-Esa; editing by Carol Bishopric) Keywords: NAVY SHIPS/ (andrea.shalal-esa@thomsonreuters.com + 1 202 354 5807; Reuters Messaging: andrea.shalal-esa.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, Sept 16 (Reuters) - The U.S. Navy has decided to pick one Littoral Combat Ship design in fiscal 2010, instead of two, as part of a new acquisition strategy for the large shipbuilding program, two sources familiar with the Navy plan said on Wednesday.
Navy acquisition chief Sean Stackley and Vice Admiral Barry McCullough, deputy chief of naval operations, are due to announce the new acquisition plan later on Wednesday, the sources said.
Lockheed Martin Corp and General Dynamics Corp are building separate models of the shore-hugging ship, which the Navy plans to use in coastal areas for mine detection, anti-submarine warfare and combat against small surface craft such as pirates.
The Navy had planned to buy 55 of the new lighter, more agile warships to help the Navy expand its fleet from 283 ships to 313 over time, but those plans have been jeopardized by big cost increases on the program.
It was not immediately clear if the total number would remain the same under the new acquisition plan.
Chief of Naval Operations Gary Roughead told reporters in June that costs had nearly stabilized on a second set of LCS ships being built by Lockheed and General Dynamics.
Roughead said he was encouraged by cost trends on the two ships under construction and that the Navy would try to avoid adding any new requirements that could drive costs higher.
Costs have more than doubled from an original projection of $220 million and the program is subject to a congressional cost cap of $460 million on each new ship, beginning in fiscal 2010, which begins Oct. 1, although lawmakers have proposed various options on how to adjust the cap for inflation and other items.
Lockheed's first LCS ship successfully completed a second round of builders' trials earlier this month.
General Dynamics' first ship had been going through its builders' trials, but ran into several unexpected problems.
The decision to pick just one design in fiscal 2010 could be bad news for General Dynamics, which started later on its version of the ship program, said Loren Thompson, a defense analyst with the Virginia-based Lexington Institute.
Thompson advises many defense companies including both Lockheed and General Dynamics, but is not involved with either company on the LCS program.
'Right now, the obvious ship to downselect is the Lockheed Martin ship. They have worked through their problems and the ship is performing very well. The GD ship really isn't ready for primetime because it started so much later,' he said.
The problem was that the Navy's current shipbuilding plan was not affordable, putting the service under pressure to simplify programs like LCS by 'prematurely selecting one winner,' Thompson said.
'The shipbuilding budget is underfunded, so they have to make cuts somewhere,' he said.
Lockheed shares closed up 46 cents at $76.16, while General Dynamics shares gained 16 cents to close at $63.29.
(Reporting by Andrea Shalal-Esa; editing by Carol Bishopric) Keywords: NAVY SHIPS/ (andrea.shalal-esa@thomsonreuters.com + 1 202 354 5807; Reuters Messaging: andrea.shalal-esa.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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