Contracts to begin primary construction of the second and third DDG 1000 Zumwalt-class destroyers for the U.S. Navy were awarded Sept. 15, the service announced.
Work on long-lead items for both ships - the Michael Monsoor (DDG 1001) and yet-to-be-named DDG 1002 - already has begun at General Dynamics Bath Iron Works in Bath, Maine, but the most recent awards allow primary fabrication to be carried out.
The $1.8 billion contract is valued at more than $2 billion should all options be exercised, the Navy said.
The new contract does not cover work being done for the ships by other major contractors such as Raytheon, which is building the combat systems and much of the electronic gear, and Huntington-Ingalls Industries, which is building the composite-construction superstructure.
The new, fixed-price incentive contract includes firm-fixed-price line items for class-common equipment, the Navy said.
"The pricing approach shares the risk of over-target cost growth between the government and industry and establishes a ceiling on the government's liability," the Naval Sea Systems Command (NAVSEA) said in its announcement of the contract award. "If the cost exceeds the ceiling, industry would have to bear those additional costs," NAVSEA added.
The Navy announced on July 26 that an agreement with General Dynamics on the contracts had been reached. Both sides had characterized the negotiations as tough.
Negotiators had once hoped to conclude contract agreements on the ships in early 2010. But a host of complex factors intervened to delay and extend the talks. Chief among the obstacles was a Nunn-McCurdy review brought about by the Navy's decision to build three, rather than seven units of the class, thus increasing the unit cost.
Resolution of the Northrop Grumman shipbuilding situation was also necessary to proceed. Both shipbuilders agreed in April 2009 to shift construction of all DDG 1000s to Bath in exchange for DDG 51-class ships that would be allocated to Northrop's Mississippi shipyard. In early July 2010 Northrop, the original prime contractor for the DDG 1000, announced its intention to spin off its shipbuilding operations, a process which culminated in March with the formation of Huntington-Ingalls Industries.
Congress' failure to agree last fall on a 2011 defense spending bill also prevented new construction starts - a hurdle that wasn't cleared until spring.
The Navy and GD expressed great satisfaction with the announcement.
"This contract award demonstrates the Navy's commitment to balancing cost, capability and industrial base considerations to improve the affordability of this shipbuilding program," Sean Stackley, assistant secretary of the Navy, said in a statement. "This is a great example of putting in place should-cost targets to meet validated warfighting requirements."
"This contract enables us to maintain a strong base of quality shipbuilding jobs in Maine and continue our contributions to sustaining the U.S. Navy fleet," said Jeff Geiger, president of Bath Iron Works. "It provides Bath Iron Works with a healthy backlog of work and reflects the Navy's continued commitment to the DDG 1000 program, as well as their confidence in our ability to build and deliver all three ships of this class."
Construction of the first ship, the Zumwalt (DDG 1000), is more than 50 percent complete, with delivery scheduled for late 2014.
Work already has begun on the Monsoor and the 1002. Delivery of the Monsoor is expected in 2015, with the 1002 following in 2018.