Musings: Lifting the Veil: Part V

I got home late last night and it was so beautiful out that Koko and I took a midnight walk in enchanting starry darkness. By the time I awoke the stars had disappeared, but the clarity remained, and I was treated to the sun rising in a puffy, gilt-edged cloud, as the craggy face of flat-topped Waialeale shifted from gray to lavender to pink.

It was the kind of day that makes me glad to feel alive, and apparently Koko shared my sentiments, as she was frisky and bouncing and barking at trucks.

Ran into my neighbor Andy, who told me there’d been a big shakeup at Honsador Kauai and all the top management, including Jeff Mira, had lost their jobs. Mira is our business rep on the Superferry Task Force, which is set to have its second meeting on Thursday.

When I talked to Dennis Chun, our cultural rep on the panel, after the first meeting, he said the big question for him and some of the more outspoken members was just how much authority they had to dig into stuff and demand answers. They didn’t want to participate in something that was mere window dressing.

So much about the Hawaii Superferry is mere window-dressing, including its purported reason for being here. Remember how it was supposed to bring the Islands together? That seemed to me a rather flimsy explanation for why JF Lehman & Co., a firm that invests nearly entirely in defense-related companies, suddenly made a foray into the passenger ferry business.

As I laid out in the first four installments of Lifting the Veil, the Navy is pursuing a new smaller, faster vessel, the Littoral Combat Ship (LCS), that can operate in deep and shallow waters. The Superferry closely resembles one version of aluminum prototype craft known as the Sea Fighter, which the Navy initially didn’t want, or even ask for.

The Navy had a slightly different vision in mind for the LCS, and originally issued contracts to General Dynamics/Austal (Austal also built the Superferry) and Lockheed Martin to build two ships each of a competing design.

According to an Oct. 1, 2007 article in Defense Industry Daily, “The General Dynamics team is offering a futuristic but practical high-speed trimaran based on Austal designs and experience. The Lockheed Martin team offers a high-speed semi-planing monohull based on Fincantieri designs that have set trans-Atlantic speed records.”

General Dynamic’s LCS is being built by Austal USA’s shipyard in Mobile, Alabama, where the Superferry was also constructed.

The plan was to choose one of the designs in 2010 and move toward building 55 of the vessels.

But after both companies encountered construction delays and serious cost overruns in building the first vessel, the Navy last year cancelled its contracts for the second ship from each. The first two ships are slated for delivery sometime this year.

According to Nov. 2, 2007 article on the contract cancellation in Everything Alabama, “The Navy plans to try out the two vessels in an ‘operational assessment’ in early 2009, which could lead to a decision on future moves, Rear Admiral Barry McCullough said.

 Looking ahead, a key issue is the price tag for future vessels, said Ronald O'Rourke, an analyst with the nonpartisan Congressional Research Service.

 The first four ships (including the two that have been canceled) were supposed to cost around $220 million each, although the final bill for the first two will be much higher, the Navy has acknowledged. Earlier this year, the military had asked Congress to allow the tab for the next two ships to go as high as $460 million each. The Navy has blamed the cost overruns on several factors, including rising raw material prices and an approach that called for ship construction to begin before the design was complete.”

An August 2007 article in National Defense Magazine provides more detail, and some revealing nuggets about the difficulties the LCS program in encountering in Congress because of the mounting costs:

“In the midst of a contentious debate about the Navy’s embattled littoral combat ship program, the service’s coveted warship has come under fire by its own supporters on Capitol Hill.

“A combination of escalating costs and uncertain procurement plans have raised questions about the Navy’s ability to keep the LCS afloat, analysts warn.

“I’t’s clear that Congress is really worried about this program,’ says Robert Work, senior naval analyst for the Center for Strategic and Budgetary Assessments.

“As Congress battles over the Defense Department’s budget, lawmakers have signaled their displeasure at LCS cost overruns and delays. The number of littoral combat ships that policymakers allow the sea service to buy in 2008 could portend whether the program uprights itself in the next few years, say analysts.

“’I think this is going to be a big, big deal, whether they get one or two, and whether Lockheed Martin’s given a ship. This will tell us what the Navy — and the Congress — is thinking,’ says Work.

“Touted as an inexpensive warship, the LCS originally had been advertised at $220 million per hull. The Navy intends to buy 55 of them in an effort to build its fleet to 313 ships from 277. But in recent months the price tag has more than doubled, setting off alarms among lawmakers.

“Navy officials requested $910 million for three ships in the 2008 defense budget. But after significant cost overruns materialized in January on the first-of-class ship, Secretary of the Navy Donald Winter amended the request, asking for two ships instead of three.

“Congressional leaders have voiced their concern over the price increases in their defense spending deliberations.

“In the House, lawmakers passed a bill that gives the Navy $710.5 million for two LCSs. The Senate’s committee on armed services took a more drastic measure, cutting the Navy’s budget request by almost half in its recommendation of $480 million for one LCS.

“’Before awarding contracts for additional ships in the LCS program, we need to maintain focus on delivering the most capability possible for the $1.6 billion invested thus far for six ships,’ wrote the committee.

“Congress funded the first two LCS prototypes through the Defense Department’s research and development budget. In 2006, it provided money for the Navy’s third LCS and allocated additional funds for two more ships. In the 2007 budget, Congress approved funding for LCS 5 and 6. However, it appears poised to rebuke the Navy in the 2008 budget for recent program troubles.

“'The Senate is really worried about whether the program is stable and is on track, and that’s why they made the bigger cut than the House,’ says Work.

“The Navy lacks a warship that can operate effectively in coastal waters. To fill the gap, the LCS was conceived in a few short years to fight in the near-shore environment in anti-submarine, anti-mine and anti-terrorism warfare.

“In an effort to expedite the ship to the fleet, the Navy set the LCS on an aggressive construction schedule that has contributed to the cost overrun problems on both lead ships.

“The Navy has since proposed to restructure the LCS program to keep the ship on track and within budget. But analysts say it could be difficult to veer the ship back on course because the program is already three ships behind.

“’We started this year with six ships either authorized in the program or in the budget,” says Work. But now there are only three ships, after Winter canceled the LCS 3 contract, and then canceled the fifth and sixth ships to compensate for the cost overruns on the first four ships.

“The Navy’s shipbuilding plan indicated that it expected to procure two LCSs in 2007, three in 2008, and then ramp up to building six ships per year — split between the two shipyards — beginning in 2009 through 2012, for a total of 32 LCSs in the next five years.

“But the Navy will fall further behind in the next two years. Amended procurement plans show the service purchasing two ships in 2008 and three in 2009, instead of three ships and six ships, respectively. Depending on how Congress votes, the Navy could end up with even fewer ships.

“The Navy’s shipbuilding plan ‘is really messed up, says Work and it raises concerns that LCS won’t get into the fleet in as many numbers nor as quickly as the Navy had wanted. The first LCS ship was due for delivery to the fleet this summer, but that date has been moved back to next year.

“Already, the program delay is having a negative impact upon the Navy’s shipbuilding goal of 313 ships by 2013.

“’Changes to the previous profile of the LCS program will result in reaching the 313 objective approximately three years later than previously planned,’ says Lt. Lara Bollinger, spokesperson for the Navy.

“Secretary of the Navy Winter has come down hard on the shipbuilding industry and his actions in dealing with the LCS debacle reveals a ‘zero-tolerance’ policy for going over budget and falling behind schedule.

“’By canceling LCS 5 and 6, he penalized both of the builders,’ says Work. But he wonders whether there’s more motivation behind the actions than is apparent.

“’If the message was, ‘hey I want to get your costs under control,’ he could easily have done that in the ’09, ’10 ships, when they were competing for it.’

“Further complicating matters is that the Navy plans to pare down the two designs to one and build that model exclusively beginning in 2010. It also will conduct a full and open competition for the selected design for subsequent procurement, says Lt. Bashon Mann, spokesman for the Navy.

“That was an unexpected move by the Navy and it leaves many wondering about the ship’s future, says Work.

“’You’ve got this program, which the Navy has said is their number one program, it’s the absolute heart of the fleet, and you have an awful lot of uncertainty in it now,’ he says.

“In his updated Congressional Research Service report on LCS, Ronald O’Rourke writes, ‘among other things, the Navy’s proposed plan raises the possibility that firms that designed the winning LCS design might not be among those selected to build it.’

“In selecting dual hulls for LCS, the Navy’s intention had been to deliver ships quickly to the fleet through two shipyards, with the option to downselect to one design at a later point in time. But now it appears that companies that were edged out in the original competition might have another shot at LCS.

“’Boy are we going to be in for interesting times, because you can say you’re going to have a full and open competition, but when you’re competing against a lead shipbuilder — someone who has built two or three or four of these — you are at a huge disadvantage,’ says Joe Carnevale, senior defense advisor for the Shipbuilder’s Council of America.

“The LCS’s rising price tag remains a contentious issue, and the latest round of increases is no exception.

“Paradoxically, the increase in the estimated cost of the LCS sea frame could actually strengthen, rather than weaken, the Navy’s sense of need for the program, says O’Rourke. As the cost of the LCS goes up, it puts more pressure on the shipbuilding budget and the affordability of the Navy shipbuilding program. But the higher the pressure, the more the Navy will believe it needs to have, within the mix of ships it’s procuring, a relatively inexpensive ship, and the LCS is that ship, he explains.

“’You don’t solve a problem in shipbuilding affordability by getting rid of the one relatively inexpensive ship in the program. With other ships, a cost increase could weaken the Navy’s sense of need for the ship. With the LCS, for the paradoxical reason just outlined, a cost increase could make the ship, in the Navy’s eyes, seem even more necessary,’ says O’Rourke.

“Despite all the brouhaha and the latest rise in price, the Navy is still aiming for a fleet of 55 LCS and it remains adamant about the ship’s importance in future operations,” the article concludes.

So here we have a situation where the Navy is under pressure to deliver an LCS quickly, at low-cost, in a procurement process that is suddenly going to be opened up to other bidders. The two LCS under contract have yet to be completed, delivered or undergo sea trials. The Sea Fighter, a less-expensive version of the LCS, has been accepted by the Navy and completed sea trials, but has experienced propulsion and fish-tailing problems.

And who already has a ship in the water, proving itself daily — and soon to be twice-daily — running fast and hard in some of the nation’s roughest waters?