When the Navy unveiled its ambitious 30-year plan to build up its fleet, a key feature was the intention to produce a large number of a new class of relatively cheap surface combatants in what would have been a remarkably short time.
But the accelerated push for that new warship, called the littoral combat ship (LCS), has stalled, burdened by the all-too-familiar combination of technology challenges and skyrocketing cost. The shipbuilders had to master new hull forms, material, and construction standards, and the technology to permit minimal manning and integration of portable mission systems. Navy leaders insist, however, that the LCS program and the effort to expand the Fleet will continue.
The shipbuilding plan proposed initially in March 2005 by then-Chief of Naval Operations Admiral Vern Clark had envisioned building more than 70 of the new warships by 2024, as part of a Fleet of 325 battle-force vessels. As revised by Clark's successor, Admiral Mike Mullen, the plan proposed obtaining 55 LCSs by 2016, on the way to a Fleet of 313.
Getting that many ships that quickly would have required developing, testing, and then mass producing a new class of ships with a speed not seen since World War II, and buying them for a relatively inexpensive $220 million each.
The Axe Falls
That bold plan, which has been questioned by analysts and some key lawmakers, appeared to collapse in November 2007 when Navy Secretary Donald Winter canceled the contract with General Dynamics to build a second of its proposed LCS. Winter already had put the axe to the second LCS of a different design that Lockheed Martin was to have built. In both cases, Winter cited concerns over the soaring cost of the first ship by each contractor and the inability to negotiate a fixed-price agreement for the follow-on vessels.
Defense industry analyst Loren Thompson said the "likely long-term consequence" of Winter's two contract terminations would be "effectively canceling plans for a 300-ship Fleet." But Winter and current CNO Admiral Gary Roughead both have said they remain committed to the LCS and to rebuilding the Fleet. Roughead calls Mullen's 313-ship target "the floor," not the ceiling, for the future Fleet size. Roughead also argued that, based on his experience as Commander Pacific Fleet, the LCS is crucial to closing the gap in capabilities to operate in littoral areas.
Ronald O'Rourke, the respected naval programs analyst at the Congressional Research Service, and Robert Work, a well-regarded naval analyst at the Center for Strategic and Budgetary Assessments, shared the Secretary's and CNO's confidence that the LCS program would proceed as the core of the rebuilding plan. Congress also supported continuation of the LCS program, although funding for additional ships was nearly eliminated in the Fiscal Year 2008 Defense Appropriations Bill.
The critical factor for the LCS to survive, supporters agree, is for the Navy to test the two prototype ships and the concept of changeable "mission modules" that would allow an LCS to play a variety of operational roles, then lock in a ship design and go into full production.
The 30-year shipbuilding plan and the LCS concept were both bold initiatives for the Navy, which had appeared to be locked in a downward cycle of retiring older ships and cutting personnel to get money for new vessels, but then being unable to acquire enough because of low budgets, high price tags, and lengthy procurement timelines. That trend had cut the Fleet to 268 ships, the lowest level since just before World War I.
Reversing Course?
The LCS was to have broken that pattern. It was to be a relatively simple sea frame that could be produced cheaply and quickly and operated by a small crew. The ships would be adapted to perform missions to counter mines, submarines, or small, fast gunboats by taking on board portable packages of equipment and control systems and the technicians to operate them. A set of mission modules was to cost about $180 million.
But the ships were supposed to be capable of speeds up to 50 knots, highly automated to reduce crew size, and survivable in dangerous coastal waters. And to meet the exceptionally tight schedule for development and production, construction contracts were awarded before design details were completed. Then, as usually happens, the design requirements kept changing, even as the shipbuilders were cutting metal.
The result was the inevitable production delays and cost soaring to nearly twice the target price on the first ship by both contractors, which drew criticism from the Government Accountability Office and influential members of the congressional oversight and appropriations panels.
Winter, a former defense industry executive who has shown a determination to impose some financial discipline on the shipbuilding programs, tried to get Lockheed Martin, which was building LCS-1, to accept a fixed price on its second ship. But the negotiations failed, and Winter cancelled Lockheed Martin's contract for LCS-3 in April.
Similar bargaining with General Dynamics also failed, and its LCS-4 contract was terminated on 1 November. In a 6 November Internet news letter, Thompson noted the Navy's professed commitment to the LCS program, but said the failure of the negotiations with the two contractors showed that "there's no way to reconcile the insistence of shipbuilders on limitation of risks with the Navy customer's insistence on low cost."
No Deal, No LCS
Although Winter was insisting on fixed-price contracts, Thompson said, "the Navy wasn't willing to restrain itself from making changes to the ship design after the contracts were signed, so the companies couldn't know for sure what their costs would be. End result: neither company was willing to accept the Navy's terms." That appears to have killed the LCS program and the drive for 313 ships, he concluded.
But in a speech to an international naval symposium at the Naval War College, Winter said: "Our 30-year shipbuilding program—which already reflects our plans for LCS—is unchanged. . . . There is no deviation from our plan to reach at least 313 ships."
In a written response to a Proceedings query, Winter said:
We are encouraged by the products we are seeing from the LCS program, but we are disappointed in the cost and schedule overruns. Our objective is to build 55 ships in a timely, cost-effective manner. It is critical that we fully understand what we want to build and how we want to build it before we embark on the full production aspects of this program.
Focusing on LCS-1 and LCS-2 will enable us to make determinations and support the decisions that need to be made before we initiate future production buys. We are still hopeful that this type of vessel can be produced cost effectively in quantity. It will be a major part of our Fleet for years to come.
Winter said the Navy plans to conduct operational assessments on both sea frames next year "to determine what capabilities we want, and which configurations will be deemed suitable. LCS remains a critical part of our 313-ship plan, and we must continue to work with industry to control cost and keep this program on track for success."
Admiral Roughead, in an interview, said he has confidence in the analysis behind the proposed force structure that includes a 313-ship Fleet. "But I temper that with the fact that when I was out as a Fleet commander, I could have used more capacity. And the area that I believe we have the most significant gap to address is in the green water, the littorals.
"And that's why the LCS is so important," the CNO said, noting his statement while Pacific Fleet commander "that had I had five or six LCSs, I could have done much more operationally in the Western Pacific.
"The fact that we had to make some hard decisions on the LCS in no way shakes my commitment to that ship," Roughead said, because the need to be able to operate in the littorals remains.
'Appetite Suppressor'
Although cancellation of LCS-3 and -4 means that getting to 313 ships will be delayed, the admiral said, "there's no question that it was the right thing in my mind. We have to get the cost under control. We have to make sure that the requirements are rigorously reviewed, and enforced and . . . we have to put ourselves on an appetite suppressor" that keeps the Navy from seizing on every good idea. "We can't afford to do that."
"What we must do now is to finish one and two, to conduct an operational assessment and then make future procurement decisions based on what we find as a result of that assessment," Roughead said. The admiral noted that he saw both LCS prototypes while at Fleet Forces Command. "I was impressed with both of them. . . . They're different, but each one has some incredible strengths and features that I will want in the future."
The decision on who will be able to compete to build additional LCSs will be made after the assessment, he said. "I personally favor having as wide as possible a chance for builders around the country. The objective is still 55, and that means there will be a lot of shipbuilding."
Although O'Rourke at CRS has questioned the Navy's ability to fund its 30-year shipbuilding plan, he rejected Thompson's grim view of the impact of Winter's contract decisions. "I don't understand how the cancellation of LCS-3 and -4, by itself, implies a Navy abandonment of, or a weakening of the Navy's commitment to, the 313-ship plan," he said.
But, he added, "the substantial increase in the estimated procurement cost of the LCS sea frame," will add "hundreds of millions of dollars" a year to the amount the Navy will need to fund the shipbuilding plan, which "increases the funding challenge associated with implementing the plan."
And, O'Rourke noted, the cancellation of LCS-3 and -4 and the cuts in funding for additional ships in the next two fiscal years has reduced the planned procurement by nine ships through FY09. Even if the Navy is able to get back to the previous goal of six ships annually the following year, it would delay completion of the 55-ship LCS program by two years, to FY18, he said.
That would run LCS funding into years when the Navy intends to buy several DDG-1000s, two Virginia-class submarines, another CVN-21-class aircraft carrier and other ships. But, O'Rourke said, even with the substantial growth in its estimated cost, "the LCS remains the only relatively inexpensive combatant in the Navy's shipbuilding program."
Figures provided by the Navy during the year indicated that future LCS sea frames might cost as much as $460 million each, which is what the Navy suggested to Congress for the unit procurement cost cap on LCS-5 and -6, he said. "Without such a ship in the shipbuilding program, it is difficult for me to see how the Navy would be able, within currently projected shipbuilding funds, to achieve and maintain a Fleet of 300 or more ships."
Hard Times Ahead
Naval analyst Work, a retired Marine colonel who has worked on programs and requirements on the Secretary of Defense's staff, expressed similar views. Given that "55 of the 313 ships are supposed to be affordable surface combatants, the fact that the LCS is in this very unsettled position right now does not bode well for the Fleet," Work said.
"If LCS goes away, the Navy will have an extremely hard problem" reaching the planned Fleet size, he said. But, Work added, "the CNO has reiterated his commitment to the ship over and over. So that would lead me to believe that the Navy is going to continue to pursue those ships and that they will just get the 313 ships later, rather than sooner."
Work also found the current cost estimates for LCS less troublesome than some of the critics. "The original guidance on that ship is that the total cost had to be $400 million, including the modules. The Navy made a guess that it would be $220 (million) for the sea frame, $180 (million) for the modules," he said. "What's happened is that the sea frame is coming in higher than expected, but the Navy's plan for the modules and the associated cost is coming in much lower than expected."
Work explained that the Navy initially had planned to buy three modules for each LCS, at an average cost of $63 million per module. But now the Navy is planning to buy only 64 modules for 55 hulls, for an average additional cost of $73 million per LCS, he said. That means a total cost per ship of $533 million, instead of $400 million, which is a 33 percent increase, he said. "That's not great by any means. But if you compare it to all the ships we've built over the last 25 years, that's not bad."
"To my perspective, the LCS is absolutely critical to the 313-ship Fleet," Work said. "You have to get the things in the water, have to test them out, you have to find out if this modularity works out and is cost effective, then you can make a production decision and go." Work suggested that with a firm design and long-term contracts to build a lot of ships, the price of future LCSs could be reduced.
Despite the program turmoil and the higher cost, Congress essentially gave the Navy the green light to press ahead on LCS. The compromise FY08 Defense Appropriations Bill signed into law by President Bush slashed $571 million from the LCS funding the Navy had requested. But it provided $339.5 million in procurement funds and noted that combined with money left over from the canceled ships, that would be enough to buy an additional LCS, within the cost cap of $460 million.
Deputy Defense Secretary Gordon England later issued guidance cutting the planned LCS buys over the next five years from 32 to 21, which will slow the program even more.
The Big If
Report language put in the bill by the two defense appropriations subcommittees endorsed the capabilities sought for LCS and noted the importance of those 55 ships to increasing the Fleet. "If the (Navy) Secretary cannot maintain affordability in this vital program, the 313-ship Fleet cannot be realized. The committee believes it is imperative that the Navy pursue all reasonable means to control costs in the LCS program," the report said.
In the report, Congress basically endorsed the Navy's current plan for LCS, telling it to conduct the operational assessment with the two prototypes under construction, leading to "a down-select decision in late fiscal year 2008." Congress also stated its view that the Navy should conduct "a full and open competition" for future LCSs and ordered the Navy to use "fixed-priced incentive contracting" for them.
Congressional support for what now is the Navy's plan for the LCS is reassuring, O'Rourke said. But whether the Navy and industry can keep the LCS program within the cost limits set by Congress and whether the Navy will get the funding it needs in future years to buy all 55 of the revolutionary ships remains in doubt.