UPDATE 1-Pentagon postpones Oct. 29 meeting on coastal ship

Tue Oct 12, 2010 5:33pm EDT

* No new date set for high-level Pentagon meeting

* Top Navy official says program in "good place"

* Navy pleased with both designs (adds details, comments from top Navy official)

By Andrea Shalal-Esa

WASHINGTON, Oct 12 (Reuters) - The Pentagon has again postponed a high-level meeting on the Navy's new Littoral Combat Ship program that was due take place on Oct. 29, a spokeswoman said, citing scheduling issues.

Pentagon spokeswoman Cheryl Irwin said no new date had been set for the meeting of the Defense Acquisition Board, which was expected to pave the way for the Navy to award a $5 billion contract for its new class of coastal warships.

Chief of Naval Operations Admiral Gary Roughead told reporters earlier on Tuesday that the Navy was in "a good place" and gearing up to move ahead with selection of the winning design for the class of modular ships.

Lockheed Martin Corp (LMT.N) and Australia's Austal (ASB.AX) (ASB.AX) are locked in a close competition for a contract valued at over $5 billion to build 10 of the new modular warships and supply combat systems for five more.

Roughead said he expected the new ship to be "a real workhorse" for the Navy, and said he was pleased with what he had seen on both competing designs. Lockheed is offering a more traditional steel monohull design, while Austal, teamed with General Dynamics Corp (GD.N) is offering an aluminum trimaran.

Roughead said he was not concerned by news that the Navy had to replace one engine on the first Lockheed ship that is already in service, saying that it was not uncommon for engines to be swapped out on naval vessels.

The Navy in July hired PricewaterhouseCoopers to analyze the finances of Austal's U.S. unit, and the Wisconsin shipyard owned by Italy's Fincantieri, which is teamed with Lockheed.

Defense analysts and several other sources said the move was aimed at ensuring the Navy's contract award was not eventually reversed and showed the competition was too close to call. [ID:nN24212890]

Industry executives had been expecting a contract award shortly after the Oct. 29 meeting.

It was not immediately clear how soon the meeting would be rescheduled. It already had been postponed from Aug. 4.

The Navy aims to ultimately buy 55 of the new ships as part of a plan to expand the U.S. fleet to 313 ships, but lawmakers have questioned if that is realistic given heavy cost growth in the program. [ID:nN31257759] (Reporting by Andrea Shalal-Esa; editing by Carol Bishopric)

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