Israel May Rethink LCS Plans as Costs Soar
Tel Aviv - Cost growth plaguing the U.S. Navy's Littoral Combat Ship (LCS) program has forced the Israel Navy (IN) to ponder fallback options should its preferred Israeli-tailored variant - dubbed LCS-I - prove unaffordable.
Sources here used the word "panic" to characterize the state of affairs within the recently reshuffled IN headquarters staff, not only from the anticipated local impact of U.S. cost overruns, but from the apparent lack of realistic alternatives to the Lockheed Martin-proposed LCS-I.
Compounding pressures confronting Israel's new Navy commander, Vice Adm. Eliezer Marom, and his staff is the risk of losing some $300 million recently approved by the Israel Defense Forces (IDF) General Staff.
Sources here noted with dismay that at least two of Marom's predecessors had fought long and hard since the beginning of the decade to secure funding to bolster the service's three-ship, high-end Sa'ar 5 fleet.
At one point in late 2004, the General Staff had tentatively approved nearly $400 million for the program, but IN quickly rescinded some $200 million and indefinitely deferred remaining funds due to last-minute changes in the Navy's acquisition strategy.
This time around, during an intensive General Staff budget scrub conducted during the summer, the Navy came fully prepared with two years' worth of data and documentation to press its case for the Lockheed Martin-proposed LCS-I. Sources here said the $300 million approved for the program through 2012 provides most costs for one ship, which includes the U.S.-built platform and a full suite of Israeli-unique combat systems. A slightly larger amount for a second LCS-I was promised in the follow-on five-year plan, provided that the initial contract was well into its implementation phase, sources here said.
But as U.S. Navy LCS costs continue to soar - from $220 million to $375 million per ship - IDF brass fear a single Israeli-configured vessel could reach $500 million or more, a price tag one general officer dismissed as "not an option." In a Jan. 1 interview, the officer said the Navy has another five or six months to re-evaluate the LCS and examine alternative solutions before reporting to the IDF General Staff.
"The LCS looked good based on the data we had at the time. But a particular solution has not yet been approved, only a certain amount to bring new vessels into the fleet. … If this is the price [about $500 million for each LCS-1], then this won't be the solution," the officer said.
But U.S. sources insisted that rising LCS costs have little bearing on the LCS-I, since estimated U.S. Navy unit costs are for a complete combat-ready system, not the basic hull, mechanical and electrical (HME) platform sought by the Israelis. Moreover, they said, U.S. Navy estimates reflect nonrecurring costs that would not necessarily be carried over into the Israeli program.
A retired IN officer said Lockheed Martin promised to deliver the ship for $220 million to $240 million. On top of that, he said, the Navy has to allow for $150 million to $200 million for the Israeli-developed combat weapons system.
Looking at Options
Meanwhile, the U.S. sticker shock has imposed parallel backtracking on sea-service planners, Navy proponents said. Not only must they now re-evaluate overall LCS affordability and trade off combat configurations, but at the same time, they are being forced to revisit a range of options discarded years ago in favor of the Lockheed Martin solution.
One such option, Navy and industry sources here said, is a stretched version of the Israeli Sa'ar-5 corvettes built in the 1990s at Ingalls Shipyards in Pascagoula, Miss., now part of Northrop Grumman.
The resulting confusion, Navy supporters fear, could prove an irresistible temptation to detractors on the General Staff, already jockeying to use earmarked funds for pressing Air Force and Ground Force programs.
"People are already smelling vulnerability and, like vultures, are just hovering in wait for their prey," one recently retired Navy officer said. He added, "Every day those funds sit around without a program to implement brings us one step closer to losing it all."
For its part, the IN is struggling to downplay program disarray, insisting ongoing studies and the service's basic acquisition strategy are continuing apace. Service sources said Marom spent five days in early December in the United States meeting senior U.S. Navy leaders and discussing common operational and acquisition interests, including the LCS.
In a Dec. 4 meeting with Adm. Gary Roughead, U.S. chief of naval operations, Marom underscored Israel's need to receive all relevant data on LCS cost growth and how it might affect his own high-priority modernization program.
As a follow-up to the IN chief's visit, sources here said service planners prepared a formal Letter of Request to the U.S. government for a detailed cost proposal that would serve as the basis for a final contract for implementation in 2009. A Pentagon source confirmed the Israeli request was received Jan. 3.
Gary Feldman, Lockheed's director of business development and head of the LCS-I program, said the company is doing its utmost to assuage Israeli affordability concerns.
"We're confident that we can deliver the ship that best meets Israel Navy requirements at a cost that meets their budget," he said.
In a Jan. 2 interview, Feldman said Lockheed Martin already has completed a hull study for the Israelis and is now working to complete a separate combat system study to determine how locally developed radar, weapons and other gear could be integrated into the Israeli platform. When that study is concluded by mid-year, Lockheed Martin would be ready to begin contract design, with an expectation of a finalized deal and the beginning of construction in 2009, he said.
"We understand they're keeping their eyes open and looking at fallback options. But we remain focused on providing the LCS-I, their solution of choice," Feldman said.
Joshua Shani, president of Lockheed Martin Israel, added that the company has invested effort over many years to develop jointly with the IN a new concept for the service's future multirole surface fleet.
"We expect results from all the studies will reaffirm the LCS-I as the optimum solution for the Israel Navy's future multirole ship," Shani said. ■
E-mail: bopallrome@defensenews.com.
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