INTERVIEW-Northrop offers US Navy new ship for fixed price

By Andrea Shalal-Esa

WASHINGTON, Jan 16 (Reuters) - Northrop Grumman Corp (NOC.N) said on Wednesday a proposal to turn its 418-foot Coast Guard cutter into a new class of Navy frigates is sparking some interest among U.S. Navy officials and lawmakers.

Northrop is offering the Navy a fixed price for the new ship of under $400 million and could deliver the first one as early as 2012 to help out with maritime security, humanitarian aid and disaster response, among other things, said Eric Womble, vice president of Northrop Grumman Ship Systems.

So far, the officials briefed have found Northrop's offer "intriguing," Womble told Reuters in an interview.

"They like the fact that we're putting an option on the table. No one has told us, 'Go away, don't come back, we don't want to hear this'," Womble said.

At the same time, the Navy says it remains committed to another class of smaller, more agile ships -- the Littoral Combat Ships (LCS) being built by Lockheed Martin Corp (LMT.N) and General Dynamics Corp (GD.N) -- amid huge cost overruns.

"There currently is no requirement for a frigate," Navy spokesman Lt. Clay Doss said. He said the Navy and Coast Guard had discussed a common hull during the initial stage of the LCS competition, but agreed that was "not a likely course of action due to the unique mission capabilities."

For now, he said the Navy was proceeding as quickly as it could with the 55-ship LCS program as well as design work on a new DDG-1000 destroyer, and a planned cruiser, CG-X.

The Navy last year canceled the second ship to be built by each of the LCS contractors after they refused to accept fixed-price terms for those ships. The Navy asked Congress to put a cap of $460 million on the new shore-hugging LCS ships, more than twice the initial estimate for their cost.

Virginia-based defense consultant Jim McAleese said the fixed-price offer could be good news for the Navy, which has typically borne the risk of cost-based shipbuilding contracts.

"That is a potential catalyst that could have a huge impact on the way the Navy buys small- and mid-sized surface combatants," McAleese said.

HULLS IN THE WATER FASTER

Northrop says its new Coast Guard cutter also experienced some cost growth, but says that was mainly due to requirements added after the Sept. 11, 2001, hijacking attacks. The first of the new ships is due to be delivered to the Coast Guard in March, followed by one ship annually over the next few years.

Northrop said it could offer the Navy a fixed price on the frigate because design work on the ships is already largely completed. Its price excludes government-furnished equipment that would still have to be put on board.

"We're not advocating an LCS replacement," said spokesman Randy Belote. "But after listening to the Navy leadership and studying the new maritime strategy, we think we can get hulls and capabilities into the water at a much faster pace."