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US Navy cancels combat ship contract

world Updated: Oct 18, 2008 12:58 IST

AP
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The US Navy has canceled plans to buy a third new combat ship this year from either Lockheed Martin Corp or General Dynamics Corp, citing budget shortfalls.

Both companies have been waiting since April for a decision from the Navy on that deal and another order for two more ships. The service last year canceled deals with both Lockheed and General Dynamics for second ships from each due to cost overruns. The Navy's latest cost estimate for the current ships being built is US$ 550 million per vessel.

But with a decision by Congress to cut funding for a third planned ship in fiscal 2008, the Navy is trying to stabilise the program while maintaining affordable pricing through competition.

The Littoral combat ship is smaller than the Navy's next-generation surface combat ship and capable of operating in shallow, coastal waters that can move at "sprint speed" to get Marines safely out of enemy territory. The LCS can travel at 92 kilometers per hour, compared with the average speed of 55 kph for other combat ships.

The Navy now plans to award one ship to each contractor under the fiscal 2009 budget, and hold a competition for another three vessels with funding in fiscal 2010 to keep competitive pressure between the two companies. Each of the 2009 contracts will come with options for future ships.

However, the Navy said it will evaluate pricing of the fiscal 2010 ships before making a decision, and envisions awarding two ships to a winning contractor and one ship to a losing bidder, the same as its original plan.

A contract for the next set of ships is expected to be awarded early next year.