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Monday, January 10, 2011

Navy Littoral Combat Ship (LCS) Program: Background, Issues, and Options for Congress

Ronald O'Rourke
Specialist in Naval Affairs

The Littoral Combat Ship (LCS) is a relatively inexpensive Navy surface combatant equipped with modular “plug-and-fight” mission packages. The Navy wants to field a force of 55 LCSs. The first two (LCS-1 and LCS-2) were procured in FY2005 and FY2006 and were commissioned into service on November 8, 2008, and January 16, 2010. Another two (LCS-3 and LCS-4) were procured in FY2009 and are under construction. Two more were procured in FY2010, and the Navy’s proposed FY2011 budget requested funding to procure another two. Navy plans call for procuring an additional 16 in FY2012-FY2015 at a rate of four ships per year.

There are two very different LCS designs—one developed and produced by an industry team led by Lockheed, and another developed and produced by an industry team led by General Dynamics. LCS-1 and LCS-3 use the Lockheed design; LCS-2 and LCS-4 use the General Dynamics design.

On September 16, 2009, the Navy announced a proposed acquisition strategy under which the Navy would hold a competition to pick a single design to which all LCSs procured in FY2010 and subsequent years would be built (i.e., carry out a design “down select”). The winner of the down select would be awarded a contract to build 10 LCSs over the five-year period FY2010- FY2014, at a rate of two ships per year. The Navy would then hold a second competition—open to all bidders other than the shipyard building the 10 LCSs in FY2010-FY2014—to select a second shipyard to build up to five additional LCSs to the same design in FY2012-FY2014 (one ship in FY2012, and two ships per year in FY2013-FY2014). These two shipyards would then compete for contracts to build LCSs procured in FY2015 and subsequent years.

Section 121(a) and (b) of the FY2010 defense authorization act (H.R. 2647/P.L. 111-84 of October 28, 2009) provided the Navy authority to implement this down select strategy. The Navy’s down select decision was expected to be announced by December 14, 2010, the date when the two LCS bidders’ bid prices would expire.

On November 3, 2010, the Navy notified congressional offices that it was prepared to implement an alternative dual-award acquisition strategy under which the Navy would forego making a down select decision and instead award each LCS bidder a 10-ship contract for the six-year period FY2010-FY2015, in annual quantities of 1-1-2-2-2-2. The Navy stated that, compared to the down select strategy, the dual-award strategy would reduce LCS procurement costs by hundreds of millions of dollars. The Navy needed additional legislative authority from Congress to implement the dual-award strategy. The Navy stated that if the additional authority were not granted by December 14, the Navy would proceed to announce its down select decision under the acquisition strategy announced on September 16, 2009. On December 13, it was reported that the two LCS bidders, at the Navy’s request, had extended the prices in their bids to December 30, effectively giving Congress until December 30 to decide whether to grant the Navy the authority needed for the dual-award strategy.

The Navy’s November 3 proposal of a dual-award strategy posed an issue for Congress of whether this strategy would be preferable to the down select strategy, and whether Congress should grant the Navy, by December 30, the additional legislative authority the Navy would need to implement the dual-award strategy. On December 14, 2010, the Senate Armed Services Committee held a hearing to review the proposed dual-award strategy. On December 21, 2010, the Senate and House passed H.R. 3082, a bill that, among other things, funds federal government operations through March 4, 2011. Section 150 of the bill provides the Navy authority to implement a dual-award strategy. H.R. 3082 was signed into law as P.L. 111-322 of December 22, 2010.

Date of Report: December 22, 2010
Number of Pages: 63
Order Number: RL33741
Price: $29.95

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