U.S. Navy delaying Huntington Ingalls carrier deal -sources
WASHINGTON, Sept 13
WASHINGTON, Sept 13 (Reuters) - The U.S. Navy is delaying a multibillion-dollar contract with Huntington Ingalls Industries Inc to start building a second new aircraft carrier, but will extend an existing preparation contract to avoid a potentially costly gap in production, sources familiar with the program said.
The sources, who were not authorized to speak publicly, said the decision would allow government and industry officials to continue negotiating the larger contract for construction of the USS John F. Kennedy, the second carrier in the new Ford-class.
They said it was unclear when those contract negotiations would be completed, but they were likely to be "lengthy" and would slip into 2014.
"This is going to give the contracting officials a little breathing room," said one of the sources. Six days of budget-cutting staff furloughs earlier this year had slowed progress on the contract somewhat, this source said, but the two sides were still working on reducing the cost of the new carrier.
Pentagon acquisition chief Frank Kendall last week said the department was deferring many contracts until it had more clarity about fiscal 2014 funding levels, but a second source said the delay in the carrier construction contract was not directly related to $500 billion in across-the-board cuts facing the Pentagon over the next decade under the deficit reduction measure known as sequestration.
Commander Thurraya Kent, a Navy spokeswoman, confirmed that the Navy planned to extend the current construction preparation contract for continued planning, material procurement and other tasks to keep the ship on an optimal build plan.
The Navy first awarded Huntington Ingalls the current $296 million contract in September 2012. It was not immediately clear how much additional funding would be added now.
"Extension of the construction preparation contract avoids a costly production break," Kent said in a statement, adding that the extension would not affect funding plans for the ship, its delivery date, or the carrier's cost cap of $11.49 billion.
Sean Stackley, the Navy's top acquisition official, told Reuters in July that interrupting production on the second carrier would add $600 million a year to the cost of the new warship. By continuing the smaller, existing contract, the Navy hopes to avoid that cost increase, the sources said.
Kent said continued negotiations on the bigger contract would allow the company and the Navy to factor in improvements in the construction process and other initiatives under way to lower the cost of the carrier.
Beci Brenton, a spokeswoman for Huntington Ingalls, said extension of the existing contract would ensure continued orders for the carrier's "fragile supplier base" and should minimize any delay to ship delivery and associated cost increases.
The latest contracting developments on the carrier were first reported by Bloomberg.
Kent said early construction of the USS Kennedy began in December 2010, with an expected delivery date in fiscal 2022.
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