While members of Congress hashed out the conference agreement on the Fiscal Year 2008 defense appropriations bill, the Navy was apparently in the final stages of hashing out negotiations with the contractor of its beleaguered Littoral Combat Ship program. On Thursday, the day after conference committee leader John Murtha (D-PA) said negotiations on the bill were locked down, the Navy issued a press release saying it would terminate its contract with General Dynamics for a fourth ship because the parties could not agree on how to switch from a cost-plus to a fixed-price contract.

The Navy contracted Lockheed Martin and General Dynamics in 2004 to each build two ships as prototypes that would be measured against one another in competition for a 55- ship contract. Though this head-to-head fight was supposed to save taxpayers money, both companies ended up going way over schedule and budget—128 percent over budget, according to the GAO—due mostly to lack of  contract oversight and the Navy’s drive to push construction through before ship design was finalized. The Navy terminated Lockheed Martin’s contract in April because it could not agree to terms for a fixed-price contract, meaning the two companies will each ultimately finish one ship.

Back in February, the Bush administration requested $910 million for the LCS program. The Senate’s version of the defense bill zeroed out the request, the report stating that LCS had been “a case study in how not to acquire ships” and that “accelerating any of the current shipbuilding programs is unexecutable and would have the effect of just ‘banking’ funds.”  The House allotted $339.5 million for one ship, due in large part to support by Murtha and others (the program garnered $17 million in earmarks in the House, compared with $2 million in the Senate).

The concurrent announcement of the fourth LCS ship’s demise and the completion of the defense bill is an interesting coincidence. The Defense Department lobbied appropriators earlier this month to keep the House allocation for the program. Does Murtha’s statement that the negotiations are closed mean it’s too late to hold off on giving $340 million to a program that clearly needs to take breather before getting in the ring again?

Contact: Laura Peterson (202) 546-8500 x114