Navy cancels Lockheed's LCS 3 contract
After a failure to come to terms on cost overruns, Navy backs out of the project; other LCSs remain uneffected but under scrutiny; deal follows cancellation of Lockheed’s National Security Cutter deal
Loose lips sink ships, but so too do loose accounting and management practices. Such is the case with the Coast Guard’s National Security Cutter — which has been stung with charges of cost overruns to the point that contracts with Northrop Grumman and Lockheed Martin to build it were recently cancelled — and such is now also the case with the Navy’s third Littoral Combat Ship (LCS 3). The Navy announced last week that it was terminating construction because the Navy and Lockheed Martin could not reach agreement on the terms of a modified contract. All in all, a bad couple of months for Lockheed’s naval engineers.
The Navy originally issued a stop-work order on construction on LCS 3 in January following a series of cost overruns on LCS 1 and projection of cost increases on LCS 3, which are being built by Lockheed Martin under a cost-plus contract. (General Dynamics is building LCSs 2 and 4.) Unfortunately, the two parties could not come to terms, although the failure to do so does not effect the LCS 1 deal with Lockheed. “While this is a difficult decision,” said Secretary of the Navy Donald Winter, “we recognize that active oversight and strict cost controls in the early years are necessary to ensuring we can deliver these ships to the fleet over the long term.”
