McCain rejects US Navy drive to buy 2 coastal warship designs

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Senator John McCain has opposed the Navy’s drive to buy coastal warships from both Lockheed Martin Corp and Australia’s Austal Ltd , rather than pick just one design, citing the program’s troubled history on cost, schedule and performance.

McCain, the top Republican on the Senate Armed Services Committee, said Congress lacked the basic information it needed to make an informed decision about plan to buy 10 ships from each company, a move the Navy says would save US$2.9 billion.

He said two congressional agencies, the Government Accountability Office and the Congressional Research Service had raised “salient” questions about the Navy’s new acquisition strategy, which meant that reaching a speedy decision during the current lame duck session of Congress would be “improper.”
“Without the basic information needed to make an informed decision on the Navy’s proposal — and without the benefit of thoughtful and transparent oversight — I cannot support the Navy’s proposal at this time,” McCain said in a statement, reports Reuters.

The Navy this week said it was hopeful that Congress would approve its bid to buy 20 ships from both companies instead of just 10 ships from one firm, plus combat systems for 5 more.

House lawmakers have introduced a measure to approve the plan, but even if that bill wins approval, it still needs the backing of the Senate, which is often more skeptical about unusual Pentagon procurement programs.

The new GAO report, issued on Wednesday, said the program still faced design and construction risks, but proceeding with both ship designs could give the Navy, “an additional hedge against risk, should one design prove problematic.”

At the same time, it said costs on the program, which have already more than doubled from the initial level of US$220 million per ship, could rise further if the Navy adopted more design changes that slowed production of the new ships.

It noted the Navy expected to limit government cost risk through a clause that caps spending on design changes at US$12 million, but said it was unclear if the service could stay within that limit, “pending full identification and resolution of deficiencies affecting the lead ships.”

Both Lockheed and Austal have plans to increase efficiency and improve capacity at their shipyards, but design changes could make it difficult to fully implement those improvements, especially if technical issues disrupted production plans, adding labor costs, GAO said.

It said there was little actual operating data from either ship design and both ships relied on new operational concepts for personnel, training and maintenance that had not been fully developed, tested or implemented. The Navy also had not studied the potential savings associated with early retirement of the losing ship design, if it failed to win congressional approval to buy both.
“As such, decision makers do not have a complete picture of the various options available to them,” the report said.

The nonpartisan group, Project on Government Oversight, said Congress needed more time to consider the Navy’s “rushed proposal” and whether it is “fiscally responsible or increases risks that already exist in the program.”

POGO said it was not clear if the low-price bids submitted by the two companies were reasonable, noting that fixed-price contracts would not necessarily prevent the companies from rolling any losses into its prices for follow-on ships.



Deputy Assistant Defence Secretary David Ahern provided the Pentagon’s response to the GAO report, repeating the department’s view that buying both ships would provide dramatic savings and fixed price contract terms would limit cost risk.