The first four LCSes were to cost $270 million each, two to be built by Lockheed Martin Corp. and two by General Dynamics Corp. But the cost of Lockheed's first ship – USS Freedom – is already 30% over budget and headed north toward a possible final price of $400 million. As a result, in January, the Navy ordered a halt to work on the first three ships while it took a close look at the program. The program manager, a Navy captain, was fired. In March, Navy Secretary Donald Winter allowed Lockheed to resume work if the company agreed to switch to a fixed-price contract by April. However, Lockheed has not yet signed-on to this change. Freedom had been due to be accepted by the Navy this summer. Lockheed says the cost overruns are the Navy’s fault.
General Dynamics is on the hook to deliver its first ship (of a competing design) by the spring of 2008, and the ship (LCS-2) is approximately one-third complete. It, too, has been told to revisit its contract regarding costs.
Meanwhile, while Lockheed is blaming the Navy, the Navy is blaming Lockheed, and the business world is blaming Congress and government procurement requirements, the Navy continues to shrink as older ships and aircraft reach the end of their service lives. The Navy is approximately 45% the size it was before the collapse of the Soviet Union. While the Soviets are gone, the same cannot be said of enemies of the United States. It is also true that the demands of an asymmetric war on terrorism have run afoul of what had been traditional Navy thinking regarding hardware procurement. The Navy is still run by the aircraft carrier admirals, who are spring-loaded to want more carriers and sexy go-fast tactical aircraft in a new age that requires smaller, more modest ships, slower aircraft and UAVs, and other “homely” assets like anti-mine and anti-submarine warfare ships and aircraft (we’ll leave the topic of unmanned aircraft replacing manned aircraft for another time). The vastly increased costs associated with replacing aircraft carriers, submarines, and aircraft while having them contribute to 21st century tasking has so far not been successfully addressed.
Northrop Grumman's competing design for LCS-2