WASHINGTON — Over two days in May, a bizarre scene played out in Washington involving the U.S. Navy's controversial littoral combat ship program and the fiscal year 2018 budget request.
On May 23, the U.S. Navy rolled out its 2018 budget request that included one littoral combat ship, or LCS. The logic was that since Congress had given the Navy three in fiscal year 2017, an additional one would keep both builders — Wisconsin-based Marinette Marine and Alabama-based Austal USA — afloat.
But inside the White House, alarm bells went off in some sectors. Peter Navarro, the head of U.S. President Donald Trump's trade and industrial policy office, was looking at information indicating one ship could trigger layoffs at both shipyards. Those concerns were shared by senior Trump aides Rick Dearborn and Stephen Miller — both old hands of long-time Alabama Sen. Jeff Sessions — and together they lobbied and prevailed upon Office of Management and Budget Director Mick Mulvaney to add a second ship to the request.
The White House estimated that one ship in 2018 could trigger more than 1,000 layoffs between Marinette and Austal — not a good look for an administration that rode a populist wave into office months earlier on a message of preserving and growing the manufacturing and industrial sectors, and who flipped Wisconsin red for the first time since 1984.
Concerns were mounting that continuing a tepid buying strategy could even lead to the closure of one or both shipyards ahead of the Navy's planned shift from LCS to a new, more deadly frigate by the end of 2020.
"Maintaining the industrial base was really the sole consideration," said a source familiar with the White House deliberations.
On the morning of May 24, acting Navy Secretary Sean Stackley testified to the Senate defense appropriations subcommittee that the Navy was asking for the one LCS as the "minimum sustaining" amount to keep the shipyards viable. But by that afternoon, acting Assistant Secretary of the Navy Research, Development and Acquisition Allison Stiller testified to the House Seapower and Projection Forces Subcommittee that the administration supported a second LCS.
"We desire to transition to the frigate as soon as possible. However, the administration recognizes the criticality of our industrial base and supports funding a second LCS in FY-18," Stiller testified.
Defense watchers and experts were dumbfounded by the quick course reversal in just 24 hours. The strange back-and-forth over the troubled ship class highlighted the current reality of the program. Interviews with more than a dozen Navy, industry and government officials and a Defense News review of hours of public testimony reveal a ship-buying program caught between the Navy's shifting requirements, politics and the realities of a strained industrial base — all of which has combined to create an insurmountable inertia that is keeping the program alive even as the Navy desperately tries to change directions.
'The Navy doesn't want them'
The littoral combat ship's budget season got off to a rough start.
After shepherding a revised 2017 budget through Congress, the Trump administration prepared to roll out its FY18 budget three weeks later. On May 4, Mulvaney went on the conservative Hew Hewitt radio show and talked ship building.
Hewitt told Mulvaney he was unhappy that Trump's 2017 budget didn't have extra money for shipbuilding, which set Mulvaney off on the LCS.
"There's a discussion right now on whether or not we add some additional littoral combat ships. … And there's a really healthy and positive debate on that. Here's one of the issues: the Navy doesn't want them."
Hewitt, a long-time LCS critic, went on to ask Mulvaney if the shipbuilders could repurpose the yards to build more lethal frigates. Mulvaney answered that it would take time and that whole build-up to the administration's goal of 350 ships would be a challenge due to a lack of capacity in the industrial base.
But Mulvaney's assertion that the Navy didn't want the ships was catnip for LCS critics on Capitol Hill, who pounced on it and the rapid reversal of the Navy's initial budget request support for just one LCS. During the House Armed Services Committee markup of the 2018 National Defense Authorization Act, Rep. Seth Moulton, D-Mass., cited Mulvaney's comment while he introduced an amendment to strip one of the three LCS HASC intended to authorize. Moulton's amendment, which intended to redirect funding to munitions shortfalls, ultimately failed after HASC Chairman Mac Thornberry, R-Texas, spoke out against it. In doing so, Thornberry said the savings generated by continuing the lines ultimately saved money.
"I'm … convinced the Navy is moving from the LCS towards the frigate," Thornberry said. "They believe they can do that smoother and better by continuing the LCS line, and it is a matter of economics. If you can do it, ... avoid the ups and downs of industrial production cost [and] ultimately save the taxpayers more money."
Keeping the yards running is as much about national defense as it is about Congress' parochial concerns, said Eric Wertheim, a naval analyst and author and editor of the U.S. Naval Institute's "Guide to Combat Fleets of the World."
"You can't negate the value of the shipbuilding industry; it's a core element of our national defense infrastructure," Wertheim said. "From the top level — Congress, the secretary of the Navy — they are looking at more than just the most efficient way to buy any individual ship. When you look at the shipyards as part of the national defense infrastructure, you want to keep those skills alive.
"There is a reason we don't just outsource our shipbuilding to the cheapest bidder overseas: We really have to maintain a very deep capability and have shipyards fully engaged."
Furthermore, several Navy and government officials pointed to the long-term benefit to the Navy of having more than just two companies, General Dynamics and Huntington Ingalls, building Navy ships.
"Yes, we want the frigate as soon as possible, but when we get there, we want as much competition as possible," said a Navy official who spoke on background. "If one or both of those shipyards were to go under, the process would be a lot less competitive for future vessels."
Navy officials have testified that the shrinking industrial base, including the shipbuilders and the litany of subcontractors and vendors, is a significant concern. In 2015, Stackley testified before Congress that some of the shipyards were just a contract away from going under.
"We have eight shipyards currently building U.S. Navy ships. And of those eight shipyards, about half of them are a single contract away from being what I would call 'not viable,'" Stackley told the Senate Armed Services Committee. "In other words, the workload drops below the point at which the shipyard can sustain the investment that it needs to be competitive and the loss of skilled labor that comes with the breakage of a contract."
'We went to sleep'
Underpinning all the concerns about LCS from its critics both in and outside of the Navy has been the rising threat from China and Russia.
When the Navy launched the program in the early 2000s, it was preparing for more low-end missions such as counter-drug, counter-terror and counter-piracy missions that don't require multibillion-dollar warships. The program was envisioned as a way to address a broad scope of mission by making it modular — given the ship the ability to convert from a submarine hunter to a mine sweeper or light frigate.
The program was never envisioned for a world with a rising China and resurgent Russia posing a significant threat to the Navy that it thought died with the Cold War, said a retired senior naval officer closely familiar with the program who spoke on background. That caused the Navy to want to push for a more lethal frigate. It also caused the Navy to try and figure out what its going to do with the nearly 30 ships it has in the fleet or under contract now, the source said.
"We went to sleep after the Cold War, and when we woke up we found we had two near-peer competitors who were trying to kick our ass," the officer said. "Against China, Russia, hell, even Yemen as we saw last year: The thing has to be able to defend itself. They are going to put more armor on it, better electronic warfare systems to make it harder for missiles to seek; they're giving it the ability to shoot down super-sonic missiles. They have to bring it up to a level where it's survivable."
In the meantime, the Navy has maintained that it needs at least 52 small surface combatants, ultimately made up mostly of littoral combat ships, to do security cooperation exercises with allies and the low-end missions the LCS was purchased for in the first place, said Bryan Clark, a retired submariner and analyst with the Center for Strategic and Budgetary Assessments.
Having the LCS in the fleet would allow the Navy to work through deferred maintenance on its larger surface combatants.
"The Navy needs these ships for security cooperation missions," Clark said. "You want to talk about the readiness crisis; they keep deploying cruisers and destroyers to do missions that could easily be handled by a ship with less capability. These are the ships that you'd really want for that."