USCG cancels $600M ship deal

The U.S. Coast Guard (USCG) has canceled a $600 million contract awarded to a joint venture of Lockheed Martin Corp. and Northrop Grumman Corp., and said it plans to award a new deal next year. The USCG opted to end the contract for 12 “fast response cutters” about a year after technical concerns were raised during testing on their original design. The design work was suspended in February 2006 and a request for proposals will be issued in May, with the new contract award expected next March, agency spokeswoman Mary Elder said.

The canceled pact is part of the so-called $24 billion Deepwater modernization contract awarded in June 2002 to Integrated Coast Guard Systems, a joint venture of Lockheed Martin and Northrop Grumman, that has been lambasted in recent inspector general reports and on Capitol Hill for spiraling costs, lax oversight of the contractors, and other design flaws.

The contractors issued a statement saying it was difficult to comment since they had not seen the Coast Guard’s new program plan, but noted that the agency decision “has always been an option under the original contract terms.”

Coast Guard Commandant Adm. Thad Allen said the recent decision was made to ensure open competition, to control costs and to get the patrol boats, which will be delivered in 2010, in the water as soon as possible. The cancellation does not affect ongoing negotiations with the contractors for other Deepwater work, which includes a deal for 46 related cutters valued at about $2.4 billion.

The 12 ships included in the request for proposals are the smallest of the three major classes of cutters in the Deepwater plan and will be used for missions at ports and waterways, for coastal security, fishery patrols, drug and illegal migrant law enforcement, search and rescue, and national-defence.