WASHINGTON — Saudi Arabia has turned down a US Navy offer to build four frigates based on the Lockheed Martin littoral combat ship (LCS) design, sources familiar with the situation said, but the move is thought to be part of a continuing negotiation over price and schedule, not a rejection of the overall deal.
The Saudis were responding to a Nov. 22 US Letter of Offer and Acceptance (LoA) that contained more specific details of the deal, which was announced by the US Department of State on Oct. 20.
The ships are known as the Multi-Mission Surface Combatant (MMSC), based on the LCS but armed with surface-to-air missiles and a more robust combat system. The MMSC is the largest element of the Saudi Naval Expansion Program II (SNEP 2), a major effort to replace and modernize the kingdom's eastern fleet that operates in the Persian Gulf.
The country's western fleet, based in the Red Sea, is supplied primarily by France.
The SNEP 2 plan features four larger surface warships – the MMSC – along with six smaller corvette-sized ships, all operating Lockheed Martin Sikorsky MH-60R helicopters. A $1.9 billion deal to purchase the helicopters was announced in May. A number of smaller vessels and aircraft also are in the plan.
Negotiations have been underway between the US and the Saudis to reach agreement on over the MMSC package, which includes weapons, logistics, training and other services. The Saudis declined the latest offer last week, sources said.
Reportedly, the Saudis balked at the price tag for the MMSC package – thought to be more than $3 billion but less than $4 billion – and were unhappy with the time it would take to complete detail design of the ships, carry out systems integration, build the vessels, deliver them and install infrastructure improvements in the kingdom.
One source thought the time to deliver the first ship would be around seven years, which the Saudis reportedly think is excessive.
The US, sources said, is expected to come back with counteroffers.
Sources thought the Saudis were not reacting to the Dec. 14 direction from US Defense Secretary Ash Carter to cap the US Navy's buy of the LCS and its frigate variant at 40 ships rather than 52, select a single design for the frigate variant, and reduce the average three-ships-a-year building profile to a 1-1-1-1-2 per year build rate over the next five years.
The US Navy is expected to include those details in its fiscal 2017 budget submission to be delivered to Congress in February.
Sources pointed out that should the reduced build US build rate be adopted, it could actually help the Saudi construction plan, since it would be easier to insert the Saudi ships into Lockheed's construction schedule.
The Saudis had been expected to spend upwards of $16 billion or more on the SNEP 2 program. But with oil revenues fallingcontinuing to be down, and the conflict in Yemen turning into a longer and more-protracted affair than originally envisioned, it is not clear how committed the government is to its naval modernization plans.