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December 7, 2009

Navy releases LCS contract prices

The price competition between the two rival LCS designs looks like it will be a squeaker.

The Navy has now released details of the contracts awarded for the LCS 3 and LCS 4 that indicate that the total cost to the taxpayer will be $549 million for the Lockheed Martin team's ship (LCS 3) and $548 million for the GD team's ship (LCS 4).

The Navy has released the pricing for LCS 3 and LCS 4 awarded contracts as a result of a change in acquisition strategy for the Fiscal Year (FY) 2010 Littoral Combat Ship (LCS) program.

The total value of the LCS 3 contract, awarded to Lockheed Martin Corporation on March 23, was $470,854,144. The Lockheed Martin ship is being built by Fincantieri's Marinette Marine shipyard.

The total value of the LCS 4 contract, awarded to General Dynamics -- Bath Iron Works on May 1, was $433,686,769. The GD Ship is being built by Austal USA.

In both cases, the contract amount includes ship construction, non-recurring construction and additional engineering effort, configuration management services, additional crew and shore support, special studies and post delivery support, but does not include government costs which include government furnished equipment, change orders, and program management support costs.

And the contract values do not include the cost of continuation work and material used from the terminated original contract options for LCS 3 and 4.

The value of the continuation work and material from the terminated LCS 3 was $78 million for Lockheed Martin Corporation and $114 million from the terminated LCS 4 for General Dynamics/Bath Iron Works.

Adding these values to the just announced contract prices indicates a total cost to the taxpayer of $549 million for the Lockheed Martin ship and and $548 million for the GD ship.

The dollar value of the fixed-price-type contracts awarded to each LCS prime contractor to procure two LCS seaframes in FY 2009 was previously considered source-selection sensitive information because the price of the FY 2009 ships was to be linked to the competitive solicitation for the FY 2010 ships. That solicitation was cancelled and a new acquisition strategy does not link the FY 2009 prices with the FYs 2010-2014 source selection, thereby allowing normal release of this contract data.

The Navy says it remains committed to the LCS program and the requirement for 55 of these ships to provide combatant commanders with the capability to defeat anti-access threats in the littorals, including fast surface craft, quiet submarines and various types of mines. The Navy's acquisition strategy will be guided by cost and performance of the respective designs as well as options for sustaining competition throughout the life of the program.

In September, the Navy announced a new acquisition strategy that will see it down-select between the two designs in 2010.


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