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GD May Break Up LCS Team

U.S. Navy's Acquisition Rules Force Changes

Jan. 11, 2010 - 03:45AM   |  
By CHRISTOPHER P. CAVAS   |   Comments
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The partnership between General Dynamics and Austal USA that has produced one of the two contenders for the U.S. Navy's Littoral Combat Ship (LCS) is preparing to break up - a reaction to the Navy's increased push for multiple layers of competition in the program.

The move is expected to position GD to build further LCS ships in one of its own shipyards, regardless of the outcome when, later this year, the Navy chooses between the GD LCS design and one from a Lockheed Martin-led team.

GD, through its Bath Iron Works subsidiary, is the prime contractor on the LCS bid, allied with shipbuilder Austal USA in Mobile, Ala. The partnership, formed to compete for the 2004 LCS program, saw Bath, with more than a century of experience building naval ships, overseeing relative newcomer Austal USA, a subsidiary of Australia's Austal shipbuilding company. GD's LCS proposal is based on an all-aluminum commercial ferry design from Austal.

All along, GD has planned to expand LCS construction to one of its own shipyards - Bath's yard in Maine or the National Steel and Shipbuilding Company (NASSCO) facility in San Diego - whenever LCS production ramped up. The Navy had planned to buy unspecified numbers of each team's LCS, but in September the service changed its acquisition strategy to a single-design downselect - a decision expected to come in late spring or early summer.

But with the single-design switch, the Navy also now wants a second-supplier shipyard that can't be associated with the primary builder. That would mean that, should the Navy choose GD's LCS, the company's shipyards would be excluded from bidding to become the second shipyard. As a result, GD and Austal USA are prepared to split up their partnership.

No final decisions have been made, as the companies are waiting to see the Navy's latest Request for Proposals (RfP), expected to be released in mid-January. The RfP already has been delayed several weeks to allow the Navy to react to industry responses from a preliminary RfP issued last fall.

It is not clear what effect the shipyard breakup would have on GD's Advanced Information Systems (AIS) division, which designed the combat system for the ships.

Officials from General Dynamics, Austal USA and the Navy declined to comment on the story, citing its speculative or preliminary nature.

A Beautiful Friendship

The looming breakup of the GD-Austal USA partnership is coming, ironically, with relations between the two companies at a high point. Tensions were strained beginning with the October 2005 contract award of the partnership's first LCS, the Independence. Bath officials, experienced at building large steel warships such as the Arleigh Burke-class destroyers, chafed at the methods used by Austal, a company specializing in all-aluminum ship construction. The LCS program also was Austal's first experience with the U.S. Navy as a customer, while GD has long been one of the Navy's top ship suppliers. Construction of the Independence experienced numerous problems - including program and first-of-class problems that also plagued Lockheed's Freedom under construction at Marinette Marine in Wisconsin - but also issues associated with Austal's inexperience.

But Austal USA has made a number of fundamental changes, turning over its top management, building an entirely new manufacturing facility and winning the contract to build as many as 10 high-speed ferries for the U.S. Army and Navy. Navy officials have been pleased with what they've seen at Mobile, and so far, production of the partnership's second LCS is proceeding much more smoothly.

GD initially envisioned Bath as the second LCS facility, since the yard, which has specialized since 1993 in building Arleigh Burke-class destroyers, needed future work, both because the Burke production run was coming to an end and because the planned number of follow-on Zumwalt DDG 1000-class destroyers declined in recent years. But in 2008, when the Navy capped the number of Zumwalts at three, the service also decided to reopen the Burke line, and it now appears there will be plenty of Burkes or similar follow-on designs to bid on.

New Role for NASSCO?

That development shifted the case of the GD yard with perhaps the greatest need for new contracts to NASSCO, which next month will deliver to the Navy the ninth T-AKE dry cargo ship. But only five more T-AKEs remain to build, and this year the company will wrap up construction of five Jones Act commercial tankers. The southern California yard has made a number of infrastructure improvements, taken over more land transferred from the Navy and forged what is regarded as a strong management team. Since the 1960s, the yard has built auxiliary ships for the Navy and in the 1970s built most of the Newport-class LST landing ships. It has never built surface combatants.

Sources said no internal decisions have been made at GD about focusing the next round of LCS construction at NASSCO or Bath.

Austal USA is working to finish up the Independence. The LCS was delivered to the Navy last month and will be commissioned Jan. 16 at Mobile.

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