Bloomberg News

Navy to Seek More Money for Cost-Challenged Ship Programs

April 08, 2013

The U.S. Navy is seeking more money for the Gerald R. Ford-class aircraft carrier dogged by rising costs and sticking to its plan to buy four more troubled Littoral Combat Ships, according to internal budget figures obtained by Bloomberg News.

The service’s budget request for the fiscal year beginning Oct. 1 also seeks $5.41 billion for the Virginia-class submarine made jointly by Huntington Ingalls Industries Inc. (HII:US) and General Dynamics Corp. (GD:US), a 27 percent increase from $4.25 billion this year.

The Navy’s request is to be released tomorrow as part of the Pentagon’s $526.6 billion budget plan.

It asks for $1.8 billion to fund the previously planned procurement of four Littoral Combat Ships, built by Lockheed Martin Corp. (LMT:US) and Austal Ltd. (ASB) teams, the same number funded in the current fiscal year.

The price of the ship, which is intended to be a small, speedy vessel for use in shallow waters close to shore, has doubled since 2005 to $440 million apiece. A decision to simultaneously build two versions will add to long-term operating costs.

The Pentagon’s chief weapons tester has cited flaws with the ship’s guns and questioned whether the LCS could carry on its mission after being hit in combat. A classified Navy memo last year called on the service to consider a ship with more firepower after the first 24 are built.

Cost Ceiling

The Navy’s request includes $1.68 billion for continued development and construction on the CVN-21 Ford-class aircraft carrier program, more than doubling this year’s $781.7 million request. Of that, $945 million would bankroll continued detailed design and construction of the second Ford-class carrier, the CVN-79 John F. Kennedy.

Debate about the carrier, built by Newport News, Virginia- based Huntington Ingalls, will intensify this year because the Navy will ask Congress to increase a cost ceiling imposed on the first carrier in the fiscal 2007 defense authorization bill. The ceiling, which allowed for increases to keep up with inflation, is now $11.8 billion.

“We expect to spend $12.3 billion and, if I am capped at $11.8 billion, that would obviously cause us some challenges,” Rear Admiral Thomas Moore, the Navy’s program executive office for aircraft carriers, told Bloomberg News in November.

“We are going to put a proposal before Congress,” Moore said. “We can’t spend more than $11.8 billion on the ship right now.”

Government Review

Senator John McCain of Arizona, the senior Republican on the Senate Armed Services Committee’s seapower subcommittee, last year asked the U.S. Government Accountability Office to review the Ford-class program’s cost, schedule and performance status.

The increased funding request for the Virginia-class submarine program would pay for two vessels in fiscal 2014 and includes a $1.6 billion down payment Congress has approved for two additional submarines in fiscal 2015.

Huntington Ingalls and General Dynamics also benefit from $1.7 billion in the 2014 budget plan for one DDG-51 destroyer Congress added last month as part of final negotiations on this year’s funding request.

Requests for more submarine and destroyer money in the 2014 plan underscores the importance of a spending measure funding the government through Sept. 30 that was passed by Congress last month and signed by President Barack Obama. Before that, the Pentagon was operating under a continuing resolution that didn’t contain added submarine or destroyer dollars.

Continuing Resolution

“The Navy’s inclusion of a second Virginia-class submarine in fiscal 2014 follows through on Congress’ action,” Ronald O’Rourke, naval analyst for the nonpartisan Congressional Research Service, said in an e-mail statement.

The Navy’s request will seek authority to enter into another multiyear contract for as many as 10 additional submarines. The current contract expires this year. Babcock & Wilcox Co. (BWC:US), based in Charlotte, North Carolina, makes the submarine nuclear reactors.

Still, Pentagon funding may face additional across-the- board reductions if automatic cuts known as sequestration stay in place throughout fiscal 2014.

Lieutenant Courtney Hillson, a Navy spokeswoman, declined to comment on details of the spending plan.

“Until the fiscal 2014 president’s budget request is submitted to Congress later this week, and becomes part of public record, all decisions are pre-decisional and it would be inappropriate to discuss specific details,” Hillson said.

The Navy is “committed to working more efficiently and cost-effectively in this resource-constrained environment,” she said.

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net


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Companies Mentioned

  • HII
    (Huntington Ingalls Industries Inc)
    • $105.06 USD
    • -0.11
    • -0.1%
  • GD
    (General Dynamics Corp)
    • $126.85 USD
    • 0.45
    • 0.35%
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