WASHINGTON — The US Navy has or is building 75 Arleigh Burke-class destroyers, considered among the most powerful surface ships ever fielded. The service is banking that the 76th ship — probably — is even more effective, incorporating a powerful new radar designed to deal with the threat from enemy ballistic missiles. The Navy is likely to spend more than $50 billion over the next decade to build 22 of the new ships, according to a government report.
But negotiations to build the version of the Arleigh Burke, dubbed Flight III, are proving tough. The Navy wants its preferred builder, General Dynamics Bath Iron Works (BIW), to agree to a fixed-price contract – a standard tactic to hold down cost growth and, along the way, please Congressional critics. The shipyard, which built the original Arleigh Burke in the late 1980s and remains the lead yard for the program, contends there are too many changes in the design to accurately predict the costs. And the Navy, turning the negotiating screws, is considering switching the ship to rival Huntington Ingalls Industries (HII) – a move sure to displease Maine's powerful Congressional delegation.
Complicating the picture is the situation at Bath's Maine shipyard, where virtually every ship is behind schedule due to delays in the three-ship Zumwalt-class destroyer program and a series of management decisions on dealing with the delays. The shipyard picture is improving, company officials say, after reaching a nadir in 2015 when a disgruntled workforce chaffed under yard president Fred Harris' handling of contract negotiations. A new labor agreement eventually was reached, but Bath's shipbuilding schedule woes continued, and hopes for the future received a major blow in September when the company lost out on a construction program worth up to $2.4 billion as the US Coast Guard picked a Florida shipyard with no experience building ships for the government over the Maine shipbuilders.
The combination proved lethal to Harris' career, and his retirement was announced in November. He's been replaced by Dirk Lesko, formerly the company's head of surface combatants.
In contrast to Bath, rival Ingalls Shipbuilding in Mississippi has multiple shipbuilding projects well in hand. Both yards build Arleigh Burke destroyers, with Ingalls building all the Navy's amphibious ships and large National Security Cutters for the Coast Guard. By many accounts, the Pascagoula shipbuilder has overcome most of the many problems from recent years, including poor workmanship, bad management decisions and, perhaps most famously, the devastation suffered in 2005 from Hurricane Katrina and the efforts under previous owners Northrop Grumman to get the Navy to pay for much of the repairs. Recently, Ingalls has been starting a new destroyer every nine months.
The Navy’s insistence on a fixed-price contract for what is officially called an engineering change proposal supports a government position that the new design is close enough to the previous version to accurately estimate the cost.
Three destroyer contracts funded in 2016 are in negotiation between the Navy and its shipbuilders – a repeat Flight IIA for Ingalls, the Flight III destroyer, and an extra "swap ship" Flight IIA added by Congress specifically for Bath as part of a complex agreement negotiated by the Navy more than a decade ago.
Declining comment on the negotiations, Navy acquisition directorate spokesperson Capt. Thurraya Kent would only confirm that "the Navy continues to negotiate the DDG 51 Flight III Fixed Price Incentive ECPs with both Bath Iron Works and Huntington Ingalls Industries in accordance with the acquisition strategy."
But BIW feels the fixed-price requirement puts too much risk on the shipbuilder.
Sources said Bath’s bid for the Flight III was a "no-bid," or a "non-compliant" bid – apparently indicating the company came back with a cost-plus contract proposal, a more typical construct for early ships in a class. Neither the Navy nor Bath’s parent General Dynamics would confirm the non-compliant bid, but sources said the Navy responded by asking Ingalls to bid on the ship, which they did.
GD spokesperson Lucy Ryan confirmed on Jan. 5 that, "last year, Bath Iron Works proposed a construct for the swap ship, including the Flight III upgrade, which the Navy declined to accept."
Ryan noted that the "history of Navy shipbuilding has shown significant risk to cost and schedule in starting construction when the detail design of the ship and ship systems is largely incomplete. With the current status of the design, we can’t accurately estimate the cost of constructing the ship at this time."
GD’s negotiating position is buttressed by a Government Accountability Office report issued in August detailing the many changes in the Flight III design, mostly driven by new SPY-6 Air Missile Defense Radars (AMDR) that will replace older SPY-1D phased-array radars built by Lockheed Martin as the primary sensor for the Aegis combat system.
GAO noted that the "Flight III ship design and construction will be complex — primarily due to changes needed to incorporate SPY-6 onto the ship." GAO ticked off some of the more significant changes from the earlier Flight IIA design, including a new electrical system to provide increased power to the radars; new high-efficiency air conditioning plants; strengthened hull structure; a widened stern to increase buoyancy; more crew accommodation; Aegis system upgrades; superstructure modifications; and rearrangement of machinery.
"The Navy has not demonstrated sufficient acquisition and design knowledge regarding its Flight III procurement approach," GAO said. "If the Navy procures the lead Flight III ship in fiscal year 2016 as planned, limited detail design knowledge will be available to inform the procurement."
The service is planning to ask Congress for a new multi-year procurement authority to order a batch of Flight III ships at the same time – a proven method of keeping costs down and one used for earlier Flight IIA destroyers. The first Flight III ship is scheduled to be the 10
, and last, ship of the current MYP plan, which covers ships authorized and appropriated from 2013 to 2017. The next MYP is to cover ships from 2018 through 2022, and authority for the plan is expected to be requested in the 2018 defense budget expected this spring.
GAO, however, noted that the Navy will be requesting MYP authority for the Flight III ships "before being able to meet the criteria to seek this authority," observing that "detail design will not be complete and costs will not be informed by any Flight III construction history."
Because negotiations are continuing, and because it’s not been decided which shipyard will build the first Flight III ship, it’s not even clear which hull will become the first AMDR ship. The Navy swapped hull numbers of six destroyers in 2015 to incorporate the swap ship added by Congress to the original nine-ship 2013-2016 MYP and to line up even-hull ships with Bath and odd numbers with Ingalls. By that reckoning, the Louis H. Wilson (DDG 126), last ship appropriated in 2016, would be the first Flight III. But if the ship is built in Mississippi, it could be the Jack H. Lucas (DDG 125). If the Navy delays ordering the ship – as recommended by GAO – it could become the yet-to-be-named DDG 127, first ship of the next MYP.
Meanwhile, Raytheon’s development of the AMDR continues unabated. According to Navy and industry sources, the program has met 13 of 13 milestones and is aiming for a Milestone C decision this spring, which would allow the start of low-rate initial production. The first radar set is scheduled to be sent to the shipyard in 2019.
One Pentagon source shook his head at the prospect of delays to build a ship in a particular yard.
"What’s more important, building in your district or building the fleet," the source asked. "If we’re going to build 355 ships in an expeditious manner, you can’t have all these food fights."