December 14, 2010 / 9:20 PM / 9 years ago

UPDATE 1-US Navy urges Senate to approve LCS warship plan

* Top Navy officials cite “turnaround” of program

* Senator raises concerns about past cost increases

* Senate spending bill allows buy of up to 20 ships (Recasts with Senate spending bill, adds byline)

By Andrea Shalal-Esa

WASHINGTON, Dec 14 (Reuters) - Four top U.S. Navy officials appeared at a hastily arranged Senate hearing to press for approval of a $9.8 billion plan to buy 10 new coastal warships each from both Lockheed Martin Corp (LMT.N) and Australia’s Austal Ltd (ASB.AX), instead of selecting just one.

Senate appropriators included language approving the Navy’s revamped acquisition strategy in an omnibus spending bill that they want to pass this week, marking a victory for the Navy. [ID:nN03135735]

The House of Representatives passed a similar message in a bill last week.

But Senator John McCain, the top Republican on the Senate Armed Services Committee, has been a vocal critic of the Navy’s decision to switch its acquisition strategy so late in the game, and could still hold up approval by the full Senate. [ID:nN13230132]

“The story of this ship is one that makes me ashamed and embarrassed,” McCain told Navy Secretary Ray Mabus and other officials on Tuesday, noting that the cost of the new Littoral Combat Ship had more than tripled since its start.

McCain said the Navy had already spent $8 billion to build the first four ships and the program had been characterized by “an incredible and disgraceful waste of money.”

Mabus acknowledged the LCS program had a troubled history but said the new acquisition plan was specifically intended to get more ships for less money,.

He said the plan would save $2.9 billion through 2016, he said, allowing the Navy to buy 20 ships for the price of 19.

Navy acquisition chief Sean Stackley told senators he could not give exact details, but said the average cost of the 20 ships in the Navy plan would range from $440 million per ship at the lower end to a worst case of $460 million.

That was well below currently budgeted levels, and below the current congressional cost cap, which would total $538 million when adjusted for inflation, Stackley said.

“This program has done a complete turnaround,” Stackley told the hearing, noting that Navy efforts to limit changes to the new ships were paying off, and the two ships now being built by both Austal and Lockheed were on cost and schedule.

He noted that the ships would not be purchased through a multiyear agreement, giving Congress the ability to manage or alter the program during each budget year.

Senator Carl Levin, chairman of the committee, endorsed the Navy’s plan to buy ships from both bidders, saying it would help stabilize the Navy’s shipbuilding program, while continuing competition and cutting acquisition costs,

McCain, who asked for the hearing, had urged Senate appropriators not to fund the Navy plan in their omnibus $1.1 trillion spending bill, citing questions raised by congressional watchdog groups about whether buying and maintaining two different LCS ships could boost costs later.

He noted that Lockheed and Austal had extended the pricing in their bids through Dec. 30, and said he saw no reason why they could not extend those bids through January, February or March to give Congress more time to study the proposal.

The Navy said on Monday that Lockheed and Austal had extended the pricing in their bids to Dec. 30 from Dec. 14, giving the Navy more time to win approval for the revamped acquisition plan, and finalize contracts with one or both bidders.

McCain chastised Navy officials at the hearing for trying to rush through the changes during a lame duck session of Congress, noting it was the third time the Navy had presented Congress with a difficult choice about the LCS program after budget hearings were held and defense bills had been written.

The Government Accountability Office, the Congressional Budget Office and the Congressional Research Service all raised questions about possible risks to the program in reports last week and testimony at the Senate hearing.

But officials from those groups said the Navy’s plan to buy ships from both bidders could also stabilize the industrial base and ensure continued competition.

The Navy initially planned to buy 10 of the fast new coastal warships from one of the bidders, plus combat systems for five more ships, but last month said the pricing offered by both companies was so good that it could buy 10 from each. (Reporting by Andrea Shalal-Esa; Editing by Tim Dobbyn)

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