Navy to buy warships from both bidders: sources

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The US Navy, acting on lower-than-expected pricing, plans to buy 10 coastal warships from both Lockheed Martin Corp and Australia’s Austal rather than just buying 10 ships from one bidder, sources familiar with the matter said.

Navy officials are expected to unveil the revamped acquisition plan for the Littoral Combat Ships (LCS) program on Thursday, said the sources, who were not authorized to speak on the record.

They called the new plan an integral part of the military’s cost-efficiency drive, saying it would give the Navy more bang for its buck and help avert any time-consuming contract protests by the losing bidder.

The Navy ultimately plans to buy 55 of the new modular warships that will operate close to shore, a key part of its drive to expand the naval fleet to at least 313 ships.

The contract for the initial order of 10 ships, plus computer systems for five more, had been valued at well over US$5 billion. The sources said the Navy now believed it could buy 20 ships for the price it had expected to pay for those 15 ships.
“This is good news for all the parties involved,” said Loren Thompson with the Virginia-based Lexington Institute.
“Both of the contractors are going to get the 10 ships they were competing for and the Navy is going to get its future warships much faster and at a much lower price.”

Lockheed is offering a more traditional steel monohull design, while the US unit of Austal, teamed with General Dynamics Corp, is offering an aluminum trimaran.

The Navy has been pressing both companies to trim any fat from their proposals, coming back again and again for additional concessions on the cost of the new fast warships, but company executives were not formally informed about the new plan to buy both ships until Wednesday, the sources said.

Navy officials declined comment on the revamped strategy.
“The pricing is so good that they think they can build 20 ships,” said one source familiar with the decision.

FROM 10 TO 20

Lockheed and Austal both submitted bids based on the Navy’s request for 10 ships and computer systems for five more. Now the Navy will skip buying the five combat packages, using the money to buy 20 ships instead, the sources said.

It was not immediately clear if the companies would seek to revise their bids as a result of the changed acquisition strategy, but Thompson expected both companies to generally welcome the new plan, especially given the dearth of other new big shipbuilding projects in coming years.



One source said the changes would require further discussions between the Navy and industry, especially about the service’s plans for the next purchase of ships beyond these.