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Navy changes plan, will drop 1 LCS shipbuilder

WASHINGTON — The Navy said Wednesday it will select either Lockheed Martin Corp. or General Dynamics Corp., but not both, to build a fleet of small, speedy Littoral Combat Ships.

As part of its new strategy, Navy acquisition chief Sean Stackley and Vice Adm. Barry McCullough said only one defense contractor will be picked in fiscal 2010, not two as initially planned, due to rising costs. The contractor with the winning design will be awarded a fixed-price contract for up to 10 ships, two of which will be built in the coming fiscal year, which begins Oct. 1.

Lockheed Martin, based in Bethesda, Maryland, and General Dynamics, based in Falls Church, Virginia, have each been building separate, and very different models of the ships.

The Navy said it canceled its previous competition to buy three ships in fiscal 2010 due to affordability concerns. In total, the Navy wants a fleet of 55. Navy Adm. Gary Roughead, chief of naval operations, said selecting one contractor will help improve affordability and allow the service to buy the ships at a “realistic cost.”

The service has been trying to stabilize the Littoral Combat Ship program while maintaining affordable pricing through competition, after costs for each ship more than doubled from initial estimates of $220 million. The program is also subject to a cost cap of $460 million on each new ship, starting in the new fiscal year.

Last week, the Senate Appropriations Committee voted 30-0 to slash funding for the ship program. It would give the Pentagon about $1.1 billion to order two littoral combat ships, rather than the three requested by the Navy in its fiscal 2010 budget request. Even so, the bill still has many more hurdles to face before the defense budget is complete.

Lockheed Martin spokeswoman Jen Allen said the Navy’s approach will make it possible to cut costs even further on the ship program. A spokesman for General Dynamics was not immediately available to comment Wednesday evening.

Shares of Lockheed Martin fell 41 cents to $75.75 in after-hours trading, after adding 46 cents to close earlier at $76.16. General Dynamics shares fell 98 cents to $62.31 in after-hours trading, after finishing up 16 cents to close at $63.29.