Navy awards contracts for combat ships

The Navy on Wednesday selected Lockheed Martin Corp. and Austal USA to build 10 new littoral combat ships each. 

The Navy was able to award contracts to both competitors after Congress last week gave the go-ahead to tap two shipbuilders instead of using only one, as had been initially planned. 

The Navy says the competition between the two builders has brought down costs and pushed the contractors to improve their performance. 

The littoral combat ships are designed to sweep for mines in coastal waters, fight pirates and chase drug smugglers. 

The industry teams led by Lockheed and Austal USA, a unit of Australia’s Austal Ltd., will build 10 ships each starting with fiscal year 2010 and extending through fiscal year 2015. Lockheed Martin was awarded a contract for $436,852,639 and Austal a contract for $432,069,883 for the FY 2010 ships. 

The buy starts in fiscal 2010 because the contracts for the first ship in the 10-ship block buy are being awarded in fiscal 2010 dollars, according to the Navy’s acquisition chief, Sean Stackley.

The total value of the ship construction contracts for the 10 vessels would amount to $3.6 billion for Lockheed and $3.5 billion for Austal, according to the Navy. 

The Navy on Wednesday said that the average cost of both variants, including government-furnished equipment and a margin for potential cost growth across the five-year period, is $440 million per ship. The price of the Lockheed and Austal ships would fall below the average cost cap of $538 million set by Congress, according to Navy officials. 

“The awards represent a unique and valuable opportunity to lock in the benefits of competition and provide needed ships to our fleet in a timely and extraordinarily cost effective manner,” Secretary of the Navy Ray Mabus said in a statement on Wednesday. 

Southern Alabama could gain as many as 2,000 new jobs from the program, as Austal USA, a unit of Australia’s Austal Ltd., is based in Mobile, Ala. Wisconsin also stands to gain several thousand jobs since Marinette Marine, a unit of the Italian shipbuilding company Fincantieri, is based in Marinette, Wis. Marinette is partnered with Lockheed to build the combat ships.