US plans for next LCS uncertain

Now that a massive defense spending bill has been passed in the US, the Navy is supposed to have enough money to buy one new littoral combat ship (LCS) this fiscal year but the Navy may delay the order. For Austal USA, stung by the recent cancellation of a previously ordered LCS, the outcome could be key to sustaining its current Mobile County work force of almost 1,200.

Austal executives had predicted ?no impact? on employment for the next nine to 12 months after the Navy dropped the second of two warships that the company was supposed to build. But without other orders to take up the slack, those executives acknowledge that the workforce’s size could nonetheless shrink during that time through attrition and more selective hiring.

Whether such steps are needed depends in part on Austal’s success in uncovering more commercial or Navy work. Besides construction of the first LCS, now about 70% complete, the company’s yard on the Mobile River is also building a second Hawaii Superferry vessel scheduled for delivery next September. But the size of Austal’s workforce may also hinge on what the Navy decides to do with the $339.5 million approved to buy another of the ships during fiscal 2008, which began last month.

Some analysts doubt that the Navy will be prepared to proceed with a ship purchase this fiscal year. That means the third LCS buy could be pushed back into fiscal 2009 or later.

In the long-term, the Navy wants to build 55 of the relatively small, speedy ships, intended for submarine hunting and other tasks in shallow coastal waters.

Under its original buying plan, two rival teams, led respectively by Virginia-based General Dynamics Corp. and Maryland-headquartered Lockheed Martin Corp., were each supposed to build several prototype vessels. The Navy would then pick a winning design as the basis for future orders. Austal is part of the General Dynamics group. That plan has now fallen apart as the first Lockheed and General Dynamics/Austal vessels have both gone far over budget.

Apart from a commitment to buy more ships and to do so with fixed-price contracts, “we really don’t have an acquisition strategy,” Deputy Assistant Navy Secretary Allison Stiller said at a recent news conference announcing the cancellation of the second General Dynamics/Austal LCS. The cancellation came after weeks of negotiations failed to clinch a deal on limiting costs. The Navy had canceled the second Lockheed ship in April for similar reasons.

Despite the program’s ills, Navy officials say they remain committed to the LCS, which is essential to their long-term goal of pushing the size of the fleet back above 300 ships. While agreeing to additional funding this fiscal year, Congress added a proviso in the defense bill signed Tuesday that other shipbuilders get a chance to compete for LCS construction work once a final design is selected. Should his team win the LCS design face off, Austal Chief Executive Officer Bob Browning said last week that he wasn’t worried about rivals taking away future business. “We think we’re in a strong position to win that work,” he said.