Gates' LCS recommendation good news for Mobile's Austal
Defense Secretary Robert Gates' recommendation Monday that the Navy buy three, not two, littoral combat ships in fiscal 2010 is good news for a program that at least initially struggled with cost overruns.
The news came on a day when Gates delayed or canceled a series of other high-profile defense programs.
"Gates rejiggered a lot of programs but he didn't mess with the LCS," said Jay Korman, an analyst with Washington, D.C.-based Avascent Group.
"I've got to think that both teams have done a good job in controlling cost."
Mobile's Austal USA is part of a General Dynamics Corp. team building a version of the LCS, a shallow-water warship.
Both General Dynamics and its rival, Lockheed Martin Corp., built a vessel under deals that allowed contractors to recoup their costs, plus an agreed-upon profit.
Gates also said Monday he wants to charter two additional Joint High Speed Vessels, which are used for transporting troops and equipment.
Gates' recommendations "affirm the Navy's position regarding both the LCS and JHSV programs," said Joe Rella, Austal's president and chief operating officer. "Austal, the city, and the state will all benefit from the continuance and growth associated with this plan."
Both versions of the LCS, built to different designs, ended up with a price tag of over a half-billion dollars, against a $220 million estimate.
Last fall, the Navy asked the teams to submit fixed-price bids for five vessels, and Lockheed has since gotten a second contract. The Navy has said it plans to award General Dynamics its second ship by Sept. 30.
The Navy last fall announced plans to buy two vessels from one team and a third from the other in fiscal 2010, which begins Oct. 1. The service has not said which contractor will get the third ship. Gates said Monday the Pentagon eventually will buy up to 55 LCS.
Austal has been ramping up employment in anticipation of the work, and is adding a $170 million assembly-line style facility in an effort to cut per-vessel costs. The shipyard employs 1,000 people and has said jobs could more than double if Austal is awarded three LCS in the next two years.
Austal in November was awarded a potential $1.6 billion contract to build up to 10 of the Joint High Speed Vessels, but the first is not scheduled for delivery until 2011. That could mean a new mission for two commercial ferries, both built at Austal USA, that are out of work after Hawaii Superferry Inc. canceled its inter-island service last month.
Industry analyst Tim Colton said the military is a natural fit for the ferries, now adorned with colorful swimming manta rays. "Any day now, they'll be painted gray," Colton said.