| General Dynamics Littoral Combat Ship Faces New Cost Growth The price of General Dynamics' Littoral Combat Ship design is rising again, potentially putting the program into more hot water. The as-of-yet-unspecified price jump for the ship - known as LCS-2 - will force the Navy to redo cost estimates it recently sent to Congress with its fiscal year 2009 defense budget proposal. The Navy had projected LCS-2 would cost $507 million to build, plus other related costs that could push up the price to $636 million. Now those figures will be revised upward, but the magnitude of the increase remains to be seen. Alison Stiller, the deputy assistant secretary of the Navy for ships, and Vice Adm. Barry McCullough, the service's resources and requirements chief, informed Congress of the latest cost increase without fanfare on March 14 in written testimony provided to the House Armed Services Committee. Neither Stiller nor McCullough called attention to the price jump in their verbal testimony at the hearing. On February 25, three weeks after the Bush administration sent its FY09 budget blueprint to Capitol Hill, General Dynamics "submitted an over target baseline request" for LCS-2, according to the written testimony. The Navy is reviewing the request "prior to granting approval for General Dynamics to implement," the testimony states. No further details are given because the Navy says the information is "business sensitive and proprietary." GD spokesman Kendell Pease said it would be inappropriate to comment on the cost of the company's ship because of the ongoing competition in the LCS program. Lockheed Martin is building the first littoral warship, based on a separate design. LCS-1 is expected to cost $531 million to build, plus other related costs that would boost the price to $631 million, according to Navy budget justification materials. At the Navy's request, the FY08 National Defense Authorization Act boosted the cost cap for the fifth and sixth LCSs from $220 million to $460 million. But that might not be enough, the Navy argues in a February 14 report to Congress on its new LCS acquisition strategy. Executing the program within the cost cap "will be a challenge" because the Navy derived the $460 million estimate based on the assumption that Congress would appropriate money for two littoral warships in FY08, the report asserts. But Congress only funded one LCS in FY08, which prevents the Navy from sharing some program costs between two ships, according to the report. Whether the Navy is able to get the LCS program's cost and schedule under control will depend considerably on whether it succeeds or fails at following fundamental management rules known collectively as earned-value management, the report acknowledges. Marinette Marine, the Wisconsin shipyard building the first Littoral Combat Ship, never received proper certification to manage the project, which has suffered severe cost growth and schedule delays, according to an internal naval audit. (Christopher J. Castelli, Inside The Pentagon – 3/20) |