Post by ferryfast admin on Sept 13, 2007 10:01:40 GMT -5
AUSTAL PHOTO CREDITS
Uncertainty over LCS threatens Austal expansion plans
Shipyard expansion plans on hold without commitment from Navy to build more vessels
Thursday, September 13, 2007
By SEAN REILLY and GEORGE TALBOT
Staff Reporters
Mobile Press-Register
www.al.com/
Possible cutbacks to the littoral combat ship program could delay Austal USA's plans for a $200 million, 1,200-job expansion of its shipyard on the east side of the Mobile River, Chief Executive Officer Bob Browning said Wednesday.
Once expected to be announced this month, the project will likely remain on hold, Browning said, until Austal receives a commitment from the Navy to build additional vessels.
The expansion would add a new administrative building, training center, erection bay and 700,000-square-foot manufacturing facility that would produce modular ship components mainly for the LCS.
"It's hard to justify a $200 million investment if you can't get a multi-ship order," Browning said.
At this point, however, the company, which already employs about 1,100 at its Mobile yard, may be doing well to keep what it has.
On Wednesday, the Senate Appropriations Committee unanimously approved a $459.6 billion defense spending bill that would cancel one of the two combat ships already ordered from Austal, which is building them as part of a team led by Virginia-based General Dynamics Corp.
The Senate bill also ignores the Navy's request for about $911 million to make two more buys -- one of which would probably be from the General Dynamics/Austal team -- in the fiscal year that begins next month.
"You just can't support anything open-ended," U.S. Sen. Richard Shelby, R-Tuscaloosa, told reporters after voting for the legislation. While he's concerned about the potential job loss for Mobile, Shelby said, "the responsible thing ... is to make sure that the Navy and the contractor work out their problems, and they haven't yet."
Once it passes the full Senate, the spending measure must be meshed with a House counterpart that would allow the second General Dynamics/Austal ship to proceed and also provide the Navy with most of the money needed to buy another vessel next year.
But the House will "probably" go along with the Senate's proposed LCS cuts, predicted military analyst Loren Thompson of the Virginia-based Lexington Institute, because U.S. Rep. John Murtha, D-Pa., a key figure on defense spending issues, doesn't like the military's current acquisition strategy.
Whatever the final word, Wednesday's Senate committee vote underscored the stiffening headwinds that now face the LCS program on Capitol Hill. Although Shelby and other key lawmakers voice support for the program -- which is a top Navy priority --they are also complaining about design changes, cost overruns and delivery delays.
The Navy ultimately wants to buy 55 of the ships, designed for submarine hunting and other tasks in shallow coastal waters.
Now about 60 percent complete, the first General Dynamics/Austal LCS is between 50 and 75 percent over its $223 million contract price, according to Navy officials who have not offered a more specific figure since March.
As the Press-Register reported last month, Navy inspectors have also expressed concern about faulty welding and other production flaws on the first General Dynamics/Austal ship.
While the Navy and General Dynamics have downplayed the impact of such problems, neither side will say how much "rework," as repairs are commonly known, has added to the ship's price tag.
Work on the second General Dynamics/Austal vessel, now at risk because of Wednesday's Senate committee vote, is just getting under way, Browning said.
In fiscal 2010, Navy managers tentatively plan to choose between the General Dynamics/Austal design and a competing prototype created by a team led by Maryland-based Lockheed Martin Corp. as the basis for future orders.
In April, however, the service canceled one of the Lockheed ships after the two sides were unable to reach a deal on reworking a cost-plus contract into a fixed-price arrangement.
The Navy has ordered the first two General Dynamics/Austal ships under cost-plus contracts, which allow for full reimbursement of expenses, coupled with an agreed-upon fee.
After the Lockheed cancellation, the Navy warned the General Dynamics/Austal team that the military could seek to restructure those agreements if cost control continued to be a problem. On Monday, the Navy told U.S. Rep. Jo Bonner, R-Mobile, that it planned to take that route, spokeswoman Nancy Wall said.
General Dynamics spokesman Kendell Pease and a Navy spokesman declined comment on the possibility of a switch to fixed-price agreements.
"The Navy's negotiations with industry partners are proprietary, and it would be inappropriate to discuss those details at this time," Lt. Cmdr. John Schofield, the Navy spokesman, said via e-mail.