Navy Littoral Combat Ship (LCS) Program: Background, Issues, and Options for Congress Ronald O'Rourke Specialist in Naval Affairs January 11, 2011 Congressional Research Service 7-5700 www.crs.gov RL33741 CRS Report for Congress Prepared for Members and Committees of Congress Report Documentation Page Form Approved OMB No. 0704-0188 Public reporting burden for the collection of information is estimated to average 1 hour per response, including the time for reviewing instructions, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington Headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington VA 22202-4302. Respondents should be aware that notwithstanding any other provision of law, no person shall be subject to a penalty for failing to comply with a collection of information if it does not display a currently valid OMB control number. 1. REPORT DATE 3. DATES COVERED 11 JAN 2011 2. REPORT TYPE 00-00-2011 to 00-00-2011 4. TITLE AND SUBTITLE 5a. CONTRACT NUMBER Navy Littoral Combat Ship (LCS) Program: Background, Issues, and 5b. GRANT NUMBER Options for Congress 5c. PROGRAM ELEMENT NUMBER 6. AUTHOR(S) 5d. PROJECT NUMBER 5e. TASK NUMBER 5f. WORK UNIT NUMBER 7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) 8. PERFORMING ORGANIZATION Congressional Research Service,The Library of Congress,101 REPORT NUMBER Independence Avenue SE,Washington,DC,20540-7500 9. SPONSORING/MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSOR/MONITOR’S ACRONYM(S) 11. SPONSOR/MONITOR’S REPORT NUMBER(S) 12. DISTRIBUTION/AVAILABILITY STATEMENT Approved for public release; distribution unlimited 13. SUPPLEMENTARY NOTES 14. ABSTRACT 15. SUBJECT TERMS 16. SECURITY CLASSIFICATION OF: 17. LIMITATION OF 18. NUMBER 19a. NAME OF ABSTRACT OF PAGES RESPONSIBLE PERSON a. REPORT b. ABSTRACT c. THIS PAGE Same as 65 unclassified unclassified unclassified Report (SAR) Standard Form 298 (Rev. 8-98) Prescribed by ANSI Std Z39-18 Navy Littoral Combat Ship (LCS) Program Summary The Littoral Combat Ship (LCS) is a relatively inexpensive Navy surface combatant equipped with modular “plug-and-fight” mission packages. The Navy wants to field a force of 55 LCSs. The first two (LCS-1 and LCS-2) were procured in FY2005 and FY2006 and were commissioned into service on November 8, 2008, and January 16, 2010. Another two (LCS-3 and LCS-4) were procured in FY2009 and are under construction. Two more were procured in FY2010, and the Navy’s proposed FY2011 budget requested funding to procure another two. Navy plans call for procuring an additional 16 in FY2012-FY2015 at a rate of four ships per year. There are two very different LCS designs—one developed and produced by an industry team led by Lockheed, and another developed and produced by an industry team led by General Dynamics. The Lockheed design is built at the Marinette Marine shipyard at Marinette, WI; the General Dynamics design is built at the Austal USA shipyard at Mobile, AL. On September 16, 2009, the Navy announced a proposed acquisition strategy under which the Navy would hold a competition to pick a single design to which all LCSs procured in FY2010 and subsequent years would be built (i.e., carry out a design “down select”). Section 121(a) and (b) of the FY2010 defense authorization act (H.R. 2647/P.L. 111-84 of October 28, 2009) provided the Navy authority to implement this down select strategy. The Navy’s down select decision was expected to be announced by December 14, 2010, the date when the two LCS bidders’ bid prices would expire. On November 3, 2010, the Navy notified congressional offices that it was prepared to implement an alternative dual-award acquisition strategy under which the Navy would forego making a down select decision and instead award each LCS bidder a 10-ship contract for the six-year period FY2010-FY2015, in annual quantities of 1-1-2-2-2-2. The Navy stated that, compared to the down select strategy, the dual-award strategy would reduce LCS procurement costs by hundreds of millions of dollars. The Navy needed additional legislative authority from Congress to implement the dual-award strategy. The Navy stated that if the additional authority were not granted by December 14, the Navy would proceed to announce its down select decision under the acquisition strategy announced on September 16, 2009. On December 13, it was reported that the two LCS bidders, at the Navy’s request, had extended the prices in their bids to December 30, effectively giving Congress until December 30 to decide whether to grant the Navy the authority needed for the dual-award strategy. The Navy’s November 3 proposal of a dual-award strategy posed an issue for Congress of whether this strategy would be preferable to the down select strategy, and whether Congress should grant the Navy, by December 30, the additional legislative authority the Navy would need to implement the dual-award strategy. On December 14, 2010, the Senate Armed Services Committee held a hearing to review the proposed dual-award strategy. On December 21, 2010, the Senate and House passed H.R. 3082, a bill that, among other things, funds federal government operations through March 4, 2011. Section 150 of the bill provides the Navy authority to implement a dual-award strategy. H.R. 3082 was signed into law as P.L. 111-322 of December 22, 2010. On December 29, 2010, the Navy implemented the dual-award strategy, awarding a 10- ship, fixed-price incentive (FPI) block-buy contract to Lockheed, and another 10-ship, FPI block- buy contract to Austal USA. Congressional Research Service Navy Littoral Combat Ship (LCS) Program Contents Introduction................................................................................................................................1 Background................................................................................................................................1 The LCS in General..............................................................................................................1 Planned Procurement Quantities............................................................................................2 Two LCS Designs.................................................................................................................2 Two LCS Shipyards..............................................................................................................4 Unit Procurement Cost Cap...................................................................................................4 Growth in Sea Frame Procurement Costs..............................................................................5 2007 Program Restructuring and Ship Cancellations.............................................................5 2009 Down Select Acquisition Strategy (Not Implemented)..................................................5 2010 Dual-Award Acquisition Strategy (Implemented)..........................................................6 FY2011 Funding Request......................................................................................................7 FY2012 Funding Request......................................................................................................8 Issues for Congress.....................................................................................................................8 Technical Risk......................................................................................................................8 Seaframe.........................................................................................................................8 Mission Packages............................................................................................................9 Combat Survivability..........................................................................................................12 Impact of Cancellation of NLOS-LS Missile System...........................................................13 Total Program Acquisition Cost...........................................................................................14 Operation and Support (O&S) Cost.....................................................................................14 Operational Concepts..........................................................................................................15 Legislative Activity for FY2012................................................................................................16 Figures Figure 1. Lockheed LCS Design (Top) and General Dynamics LCS Design (Bottom)..................3 Tables Table A-1. FY2010 Funding Compared to FY2011 Funding Request.........................................19 Table A-2. Congressional Action Other Than H.R. 3082/P.L. 111-322 on FY2011 Funding Request....................................................................................................................20 Table D-1. Status of LCSs Funded in FY2005-FY2009.............................................................35 Table F-1. Navy and CBO Estimates of Ship Procurement Costs Through FY2015 Under Down Select and Dual-Award Strategies................................................................................55 Appendixes Appendix A. Legislative Activity for FY2011............................................................................17 Appendix B. Summary of Congressional Action in FY2005-FY2010.........................................25 Congressional Research Service Navy Littoral Combat Ship (LCS) Program Appendix C. Cost Growth on LCS Sea Frames in FY2007-FY2011 Budgets.............................27 Appendix D. 2007 Program Restructuring and Ship Cancellations.............................................33 Appendix E. Down Select Acquisition Strategy Announced in September 2009.........................36 Appendix F. Dual-Award Acquisition Strategy Announced in November 2010...........................50 Appendix G. May 2010 Navy Testimony Regarding Impact of NLOS-LS Cancellation..............59 Contacts Author Contact Information......................................................................................................61 Congressional Research Service Navy Littoral Combat Ship (LCS) Program Introduction The Littoral Combat Ship (LCS) is a relatively inexpensive Navy surface combatant equipped with modular “plug-and-fight” mission packages. The Navy wants to field a force of 55 LCSs. The first two (LCS-1 and LCS-2) were procured in FY2005 and FY2006 and were commissioned into service on November 8, 2008, and January 16, 2010. Another two (LCS-3 and LCS-4) were procured in FY2009 and are under construction. Two more were procured in FY2010, and the Navy’s proposed FY2011 budget requested funding to procure another two. Navy plans call for procuring an additional 16 in FY2012-FY2015 at a rate of four ships per year. The 20 LCSs procured or scheduled to be procured in the six-year period FY2010-FY2015 are being acquired under a dual-award acquisition strategy. The Navy proposed the dual-award strategy to Congress on November 3, 2010. Congress granted the Navy the legislative authority needed to implement the strategy as part of H.R. 3082/P.L. 111-322 of December 22, 2010, an act that, among other things, funds federal government operations through March 4, 2011. The Navy implemented the dual-award strategy on December 29, 2010, awarding 10-ship, fixed-price incentive (FPI) block-buy contracts to each of the two current LCS builders. The LCS program poses a number of potential oversight issues for Congress. Congress’s decisions on the LCS program could affect Navy capabilities and funding requirements, and the shipbuilding industrial base. Background The LCS in General The LCS program was announced on November 1, 2001.1 The LCS is a relatively inexpensive Navy surface combatant that is to be equipped with modular “plug-and-fight” mission packages, including unmanned vehicles (UVs). Rather than being a multimission ship like the Navy’s larger surface combatants, the LCS is to be a focused-mission ship, meaning a ship equipped to perform one primary mission at any given time. The ship’s mission orientation can be changed by changing out its mission packages. The basic version of the LCS, without any mission packages, is referred to as the LCS sea frame. The LCS’s primary intended missions are antisubmarine warfare (ASW), mine countermeasures (MCM), and surface warfare (SUW) against small boats (including so-called “swarm boats”), particularly in littoral (i.e., near-shore) waters. The LCS program includes the development and procurement of ASW, MCM, and SUW mission packages for LCS sea frames. The LCS’s 1 On November 1, 2001, the Navy announced that it was launching a Future Surface Combatant Program aimed at acquiring a family of next-generation surface combatants. This new family of surface combatants, the Navy stated, would include three new classes of ships: a destroyer called the DD(X)—later redesignated the DDG-1000—for the precision long-range strike and naval gunfire mission; a cruiser called the CG(X) for the air defense and ballistic missile mission, and a smaller combatant called the Littoral Combat Ship (LCS) to counter submarines, small surface attack craft, and mines in heavily contested littoral (near-shore) areas. For more on the DDG-1000 program, see CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress, by Ronald O'Rourke. For more on the CG(X) program, see CRS Report RL34179, Navy CG(X) Cruiser Program: Background for Congress, by Ronald O'Rourke. Congressional Research Service 1 Navy Littoral Combat Ship (LCS) Program permanently built-in gun gives it some ability to perform the SUW mission even without an SUW module. Additional missions for the LCS include peacetime engagement and partnership-building operations, intelligence, surveillance, and reconnaissance (ISR) operations, maritime intercept operations, operations to support special operations forces, and homeland defense operations. An LCS might perform these missions at any time, regardless of its installed mission module, although an installed mission module might enhance an LCS’s ability to perform some of these missions. The LCS displaces about 3,000 tons, making it about the size of a corvette (i.e., a light frigate) or a Coast Guard cutter. It has a maximum speed of more than 40 knots, compared to something more than 30 knots for the Navy cruisers and destroyers. The LCS has a shallower draft than Navy cruisers and destroyers, permitting it to operate in certain coastal waters and visit certain ports that are not accessible to Navy cruisers and destroyers. The LCS employs automation to achieve a reduced “core” crew of 40 sailors. Up to 35 or so additional sailors are to operate the ship’s embarked aircraft and mission packages, making for a total crew of about 75, compared to more than 200 for the Navy’s frigates and about 300 (or more) for the Navy’s current cruisers and destroyers. Planned Procurement Quantities The Navy plans to field a force of 55 LCS sea frames and 64 LCS mission packages (16 ASW, 24 MCM, and 24 SUW). The Navy’s planned force of 55 LCSs would account for about 18% of the Navy’s planned force of 313 ships of all types.2 Navy plans call for procuring 20 LCSs in the six-year period FY2010-FY2015, at a rate of two per year in FY2010 and FY2011, and four per year in FY2012-FY2015. The Navy’s 30-year (FY2011-FY2040) shipbuilding plan shows three LCSs per year for FY2016-FY2019, two per year for FY2020-FY2024, a 1-2-1-2 pattern for FY2025-FY2033, and two per year for FY2034- FY2040. LCSs scheduled for procurement in the final years of the 30-year plan would be replacements for LCSs that will have reached the end of their 25-year expected service lives by that time. Two LCS Designs On May 27, 2004, the Navy awarded contracts to two industry teams—one led by Lockheed Martin, the other by General Dynamics (GD)—to design two versions of the LCS, with options for each team to build up to two LCSs each. The LCS designs developed by the two teams are quite different—the Lockheed team’s design is based on a steel semi-planing monohull, while GD team’s design is based on an aluminum trimaran hull (see Figure 1). The two ships also use different built-in combat systems (i.e., different collections of built-in sensors, computers, software, and tactical displays) that were designed by each industry team. The Navy states that both LCS designs meet the Key Performance Parameters (KPPs) for the LCS program. 2 For more on the Navy’s planned 313-ship fleet, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress, by Ronald O'Rourke. Congressional Research Service 2 Navy Littoral Combat Ship (LCS) Program Figure 1. Lockheed LCS Design (Top) and General Dynamics LCS Design (Bottom) Source: Source: U.S. Navy file photo accessed by CRS at http://www.navy.mil/list_all.asp?id=57917 on January 6, 2010. Congressional Research Service 3 Navy Littoral Combat Ship (LCS) Program Two LCS Shipyards The Lockheed LCS design is built at the Marinette Marine shipyard at Marinette, WI.3 The GD LCS design is built at the Austal USA shipyard at Mobile, AL.4 LCS-1 and LCS-3 use the Lockheed design; LCS-2 and LCS-4 use the GD design. Unit Procurement Cost Cap LCS sea frames procured in FY2010 and subsequent years are subject to a unit procurement cost cap. The legislative history of the cost cap is as follows: • The cost cap was originally established by Section 124 of the FY2006 defense authorization act (H.R. 1815/P.L. 109-163 of January 6, 2006). Under this provision, the fifth and sixth ships in the class were to cost no more than $220 million each, plus adjustments for inflation and other factors. • The cost cap was amended by Section 125 of the FY2008 defense authorization act (H.R. 4986/P.L. 110-181 of January 28, 2008). This provision amended the cost cap to $460 million per ship, with no adjustments for inflation, and applied the cap to all LCSs procured in FY2008 and subsequent years. • The cost cap was amended again by Section 122 of the FY2009 defense authorization act (S. 3001/P.L. 110-417 of October 14, 2008). This provision deferred the implementation of the cost cap by two years, applying it to all LCSs procured in FY2010 and subsequent years. • The cost cap was amended again by Section 121(c) and (d) of the FY2010 defense authorization act (H.R. 2647/P.L. 111-84 of October 28, 2009). The provision adjusted the cost cap to $480 million per ship, excluded certain costs from being counted against the $480 million cap, included provisions for adjusting the $480 million figure over time to take inflation and other events into account, and permitted the Secretary of the Navy to waive the cost cap under certain conditions.5 The Navy states that after taking inflation into account, the $480 million figure equates, as of December 2010, to $538 million. 3 Marinette Marine is a division of the Fincantieri Marine Group, an Italian shipbuilding firm. In 2009, Fincantieri purchased Manitowoc Marine Group, the owner of Marinette Marine and two other shipyards. Lockheed is a minority investor in Marinette Marine. 4 Austal USA was created in 1999 as a joint venture between Austal Limited of Henderson, Western Australia, and Bender Shipbuilding & Repair Company of Mobile, AL, with Austal Limited as the majority owner. 5 Section 121(d)(1) states that the Secretary of the Navy may waive the cost cap if: (A) the Secretary provides supporting data and certifies in writing to the congressional defense committees that— (i) the total amount obligated or expended for procurement of the vessel- (I) is in the best interest of the United States; and (II) is affordable, within the context of the annual naval vessel construction plan required by section 231 of title 10, United States Code; and (ii) the total amount obligated or expended for procurement of at least one other vessel authorized by subsection (a) has been or is expected to be less than $480,000,000; and (B) a period of not less than 30 days has expired following the date on which such certification and (continued...) Congressional Research Service 4 Navy Littoral Combat Ship (LCS) Program Growth in Sea Frame Procurement Costs The Navy originally spoke of building LCS sea frames for about $220 million each in constant FY2005 dollars. Costs for the first few LCSs subsequently more than doubled. For a detailed discussion of cost growth on the first few LCS sea frames from the FY2007 budget through the FY2011 budget, see Appendix C. 2007 Program Restructuring and Ship Cancellations The Navy substantially restructured the LCS program in 2007 in response to significant cost growth and delays in constructing the first LCS sea frames. This restructuring led to the cancellation of four LCSs that were funded in FY2006 and FY2007. A fifth LCS, funded in FY2008, was cancelled in 2008. For details on the 2007 program restructuring and the cancellation of the five LCSs funded in FY2006-FY2008, see Appendix D. 2009 Down Select Acquisition Strategy (Not Implemented) On September 16, 2009, the Navy announced a proposed acquisition strategy under which the Navy would hold a competition to pick a single design to which all LCSs procured in FY2010 and subsequent years would be built (i.e., carry out a design “down select”).6 Section 121(a) and (b) of the FY2010 defense authorization act (H.R. 2647/P.L. 111-84 of October 28, 2009) provided the Navy authority to implement this down select strategy. The Navy’s down select decision was expected to be announced by December 14, 2010, the date when the two LCS bidders’ bid prices would expire.7 The down select strategy was not implemented; it was (...continued) data are submitted to the congressional defense committees. 6 The winner of the down select would be awarded a contract to build 10 LCSs over the five-year period FY2010- FY2014, at a rate of two ships per year. The Navy would then hold a second competition—open to all bidders other than the shipyard building the 10 LCSs in FY2010-FY2014—to select a second shipyard to build up to five additional LCSs to the same design in FY2012-FY2014 (one ship in FY2012, and two ships per year in FY2013-FY2014). These two shipyards would then compete for contracts to build LCSs procured in FY2015 and subsequent years. Prior to the Navy’s announcement of September 16, 2009, the Navy had announced an acquisition strategy for LCSs to be procured in FY2009 and FY2010. Under this acquisition strategy, the Navy bundled together the two LCSs funded in FY2009 (LCSs 3 and 4) with the three LCSs to be requested for FY2010 into a single, five-ship solicitation. The Navy announced that each LCS industry team would be awarded a contract for one of the FY2009 ships, and that the prices that the two teams bid for both the FY2009 ships and the FY2010 ships would determine the allocation of the three FY2010 ships, with the winning team getting two of the FY2010 ships and the other team getting one FY2010 ship. This strategy was intended to use the carrot of the third FY2010 ship to generate bidding pressure on the two industry teams for both the FY2009 ships and the FY2010 ships. The Navy stated that the contracts for the two FY2009 ships would be awarded by the end of January 2009. The first contract (for Lockheed Martin, to build LCS-3) was awarded March 23, 2009; the second contract (for General Dynamics, to build LCS-4) was awarded May 1, 2009. The delay in the awarding of the contracts past the end-of- January target date may have been due in part to the challenge the Navy faced in coming to agreement with the industry teams on prices for the two FY2009 ships that would permit the three FY2010 ships to be built within the $460 million LCS unit procurement cost cap. See also Statement of RADM Victor Guillory, U.S. Navy Director of Surface Warfare, and RADM William E. Landay, III, Program Executive Officer Ships, and Ms. E. Anne Sandel, Program Executive Officer Littoral and Mine Warfare, before the Subcommittee on Seapower and Expeditionary Forces of the House Armed Services Committee [hearing] on the Current Status of the Littoral Combat Ship Program, March 10, 2009, pp. 7-8. 7 The Navy had earlier planned to make the down select decision and award the contract to build the 10 LCSs in the (continued...) Congressional Research Service 5