US Navy Sinks LCS-4 Construction

"Cost Growth Puts the Brakes on the USA's Littoral Combat Ship Program" described major program changes and accompanying issues for a ship set that was originally intended to be the numerical backbone of the USA's future navy.

Since then, the headlines tell the story. "Cost Growth Leads to Stop-Work on Team Lockheed LCS-3 Construction." "Littoral combat ship could slip behind schedule as price tag nears $500 million." And more. The Navy was negotiating with the General Dynamics/ Austal team to turn the LCS 4 contract into a fixed-price contract where the contractor would assume all risk for price inflation above a set figure. That's not a problem in principle, as long as (1) the price target is seen as achievable, based on the specifications; and (2) the Navy has a finished design that it will not interfere with once the contract is signed. If either stipulation fails, the fixed-price contract become either dangerous to the contractor, or meaningless as compensated changes drive costs higher.

The current news is not good news for the contractor – or for the Navy…

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