Pentagon prefers to keep two firms in ship program

WASHINGTON (Reuters) - The Pentagon's chief weapons buyer said he would prefer to award both Lockheed Martin Corp (LMT.N) and General Dynamics Corp (GD.N) contracts for Littoral Combat Ships in fiscal 2009, but could opt for just one, if one company's price was too high.

"If one person decides to price themselves out of the market, then we can award the two '09 ships to a single vendor," Young told reporters on Tuesday.

"My preference would be to award to both vendors so I can keep both lines and competition alive," he added.

Young said a program to build a new class of 55 shore-hugging ships remains a high priority for the U.S. Navy, despite cost overruns that prompted Navy Secretary Donald Winter to cancel two ships last year.

The small, fast Littoral Combat Ship (LCS) is designed to counter coastal threats, including floating mines, diesel submarines and speedboats driven by guerrillas. Congress has approved a cost cap of $460 million for each LCS ship.

Lockheed and General Dynamics are each building the first of two different designs for the new ship class. Young said each of the hulls had different strengths and weaknesses.

He said it would be good if the Navy could be flexible about how many of each hull it wanted to buy, because that could give it an opportunity to keep competition alive.

Young said he was encouraging the Navy to move forward with its plan to award a contract for the single LCS ship funded by Congress in the budget for fiscal 2008, which ends September 31.

(Reporting by Andrea Shalal-Esa; Editing by Brian Moss)