Order Code RS21305
Updated December 23, 2004
CRS Report for Congress
Received through the CRS Web
Navy Littoral Combat Ship (LCS): Background
and Issues for Congress
Ronald O’Rourke
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division
Summary
The Littoral Combat Ship (LCS) is to be a small, fast Navy surface combatant with
modular weapon systems. Two industry teams are developing separate designs for the
LCS. For FY2005, the Navy requested $107.7 million in research and development
funding to begin building the first LCS. The conference report (H.Rept. 108-622 of July
20, 2004) on the FY2005 defense appropriations bill (H.R. 4613/P.L. 108-287 of August
5, 2004) approved the Navy’s plan to build the ship using research and development
funds rather than shipbuilding funds, funded the ship’s entire construction cost ($214.7
million), required the second LCS (to be funded in FY2006) to be built to the second
LCS design now being developed, prohibited the Navy from requesting funds in FY2006
to build a third LCS, and required all LCSs built after the lead ships of each design to
be funded in the Navy’s shipbuilding account rather than its research and development
account. For a longer discussion of the LCS program, see CRS Report RL32109.1 This
report will be updated as events warrant.
Background
The LCS program was announced by the Navy in November 2001 as part of a
proposed family of next-generation Navy surface combatants that also includes the much-
larger DD(X) destroyer and a future CG(X) cruiser.2 The LCS is to be a small, fast
surface combatant that would use modular “plug-and-fight” mission payload packages,
including unmanned vehicles (UVs). The primary intended missions of the LCS are
countering enemy mines, submarines, and fast attack craft (sometimes called “swarm
boats”) in heavily contested littoral (near-shore) waters. Secondary LCS missions, also
to be performed in littoral waters, include intelligence, surveillance, and reconnaissance
1 CRS Report RL32109, Navy DD(X) and LCS Ship Acquisition Programs: Oversight Issues and
Options for Congress, by Ronald O’Rourke.
2 For more on the DD(X) and CG(X), see CRS Report RL32109, op cit, and CRS Report
RS21305, Navy DD(X) Destroyer Program: Background and Issues for Congress, by Ronald
O’Rourke.
Congressional Research Service ˜ The Library of Congress

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(ISR); homeland defense/maritime intercept; special operations forces (SOF) support; and
logistics support for movement of personnel and supplies. Some observers believe the
LCS might also be suitable for homeland defense operations. Each LCS would have a
core crew size of 15 to 50 people, plus additional personnel for operating embarked
mission modules.
The Navy has stated that it wants to procure a total of 30 to 60 LCSs. The FY2005-
FY2009 Future Years Defense Plan (FYDP) submitted to Congress in February 2004
called for procuring the first LCS in FY2005, another two in FY2006, one more in
FY2007, and three more in FY2008, and six more in FY2009. A long-range shipbuilding
plan that the Navy submitted to Congress in May 2003 showed the remaining ships in the
program being procured in FY2010 and future years at a rate of five ships per year.
The Navy wants the first LCS to cost between $150 million and $220 million in
then-year dollars, exclusive of any mission modules, and wants follow-on LCSs to cost
no more than $250 million in then-year dollars, including a representative payload
package. Navy budget figures (see Table 1 on the next page) suggest that individual
mission modules to be procured during the FYDP would cost an average of $82 million
each. Using the $250-million figure for an LCS with a representative payload, the total
procurement cost for a fleet of 30 to 60 LCSs might be $7.5 billion to $15 billion, not
including at least $1.4 billion in general research and development costs for the program.
The Navy wants to procure the first and second LCSs through the Navy’s research
and development account rather than the Navy’s ship-procurement account. The Navy
wants to procure LCS mission modules through the Other Procurement, Navy (OPN)
account rather than the Navy’s ship-procurement account.
On May 27, 2004, the Navy awarded contracts to teams led Lockheed Martin and
General Dynamics (GD) for final system design of two versions of the LCS, with options
for detailed design and construction of up to two LCSs each. Under the Navy’s plan, the
Lockheed team would build the first LCS, while the GD team would build the second.
Table 1 on the next page shows funding for the LCS program through FY2009.
Issues for Congress
Force Structure Justification for Program. The last officially approved Navy
force-structure plan — the 310-ship plan from the 2001 Quadrennial Defense Review —
contains no slots for LCSs. While the Navy’s subsequent proposal for a fleet of 375-ships
contains slots for 50 to 60 LCSs, this proposal was not approved by the Secretary of
Defense as an official planning goal, and Navy officials have since backed away from it.
The Navy at this juncture thus appears to be without an officially approved force-structure
plan that includes slots for any significant number of LCSs. LCS supporters could argue
that a plan for the Navy with slots for 30 to 60 LCSs will eventually be approved. Critics
could argue that, until such a plan is approved, the Navy has no approved force-structure
basis for proposing a program to build any significant number of LCSs.
Analytical Basis For Program. Prior to announcing the LCS program in
November 2001, the Navy apparently did not conduct a formal analysis to demonstrate
that a ship like the LCS would be more cost-effective than potential alternative
approaches for performing the LCS’s stated missions. Potential alternative approaches

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include (1) manned aircraft, (2) submarines equipped with UVs, (3) a larger surface
combatant equipped with UVs and operating further offshore, (4) a non-combat littoral
support craft (LSC) equipped with UVs, or (5) some combination. The absence of a
formal cost effectiveness analysis supporting the LCS as the best or most promising
approach raises a question regarding the analytical basis for the program.
Table 1. Funding For LCS Program, FY2002-FY2009
(millions of then-year dollars; totals may not add due to rounding)
2002 2003 2004
2005
2006
2007
2008
2009
Total
thru
2009
Research, Development, Test & Evaluation, Navy (RDT&EN) account
Ship 1 construction
—
—
—
107.7
107.8
—
—
—
215.5*
Ship 2 construction
—
—
—
—
106.7
107.0
—
—
213.7*
All other**
— 35.3
166.2
244.4
288.4
285.9
130.5
207.5
1358.3
Subtotal RDTEN
0 35.3
166.2
352.1
502.9
392.9
130.5
207.5
1787.5
Shipbuilding and Conversion, Navy (SCN) account
Ship 3
—
—
—
—
219.7
—
—
—
219.7
Ship 4
—
—
—
—
—
220.0
—
—
220.0
Ships 5, 6, 7***
—
—
—
—
—
—
625.7
—
625.7
Ships 8 thru 13***
—
—
—
—
—
—
— 1303.6
1303.6
Subtotal SCN
0
0
0
0
219.7
220.0
625.7 1303.6
2369.0
Other Procurement, Navy (OPN) account for procurement of LCS mission modules
(Qty of modules)
—
—
—
—
(2)
(2)
(4)
(15)
(23)
Funding
0
0
0
0
180.0
180.0
351.3 1171.3
1882.6
TOTAL
0 35.3
166.2
352.1
902.6
792.9
1107.5 2682.4
6039.1
Source: Navy data provided to CRS by Navy Office of Legislative Affairs, February 20 and 27, 2004.
* Cost figures for each ship include detailed design/nonrecurring engineering (DD/NRE) costs for that ship.
** Funding for all program RDT&E other than for construction of Ships 1 and 2.
*** Three ships funded in FY2008 at total cost of $625.7 million; six ships funded in FY2009 at total cost
of $1,303.6 million.
Supporters argue that the LCS builds on about four years of analytical work on small,
fast surface combatants done at the Naval War College, responds to the Navy’s need for
forces that can operate in littoral waters against enemy anti-access and area-denial forces,
and is consistent with the concept of network-centric warfare, the growing importance of
UVs, and the need for more affordable Navy ships. They can also argue that the Navy in
the past has built prototype ships without having first done a formal cost effectiveness
study. Critics could argue that these arguments may be true but do not demonstrate that
the LCS is the best or most promising approach for performing the LCS’s stated missions.
Absent a formal study, they could argue, the Navy has not, for example, shown why it
would be necessary or preferable to send a small and potentially vulnerable manned ship
into heavily defended littoral waters to deploy UVs when UVs could also be launched
from aircraft or from larger ships operating further offshore. The Administration, LCS

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critics could argue, is being proposed on the basis of “analysis by assertion.” They can
argue that while it may be acceptable to build one or a few ships as operational prototypes
without first having analytically validated the cost-effectiveness of the effort, it is quite
another thing to propose a 30- to 60-ship program costing billions of dollars without first
examining through rigorous analysis whether this would be the most cost-effective
approach.
Potential Homeland Defense Mission. As mentioned earlier, some observers
believe the LCS might also be suitable for homeland defense operations. Making this an
additional mission for the LCS could lead to an increase in the total planned LCS
procurement quantity. The Coast Guard, however, could also conduct such operations,
and is currently procuring new cutters and aircraft under its Deepwater acquisition
program to improve its ability to conduct these and other operations in the future.3
Supporters of adding homeland defense as a mission for the LCS could argue that many
of the features that make the LCS suitable for Navy operations in littoral waters overseas
could make it suitable for homeland defense operations in littoral waters close to the
United States. Skeptics could argue that the Coast Guard’s new Deepwater cutters and
aircraft may be more cost effective than the LCS for conducting these operations, and that
a more rigorous examination of potential Navy and Coast Guard methods for performing
such operations should be conducted before adding homeland defense as a mission for the
LCS and possibly increasing the size (and cost) of the LCS program.
Program Cost. Navy officials acknowledge that the total number of LCSs, the
cost of individual LCS mission modules, and the ratio of mission modules to LCSs, is not
yet clear, and that the potential total procurement cost of the LCS program, including
mission modules, is therefore unknown. Supporters could argue that total program cost
will become clearer as the Navy works through the details of the program. Critics could
argue that a major acquisition program like the LCS program should not be initiated until
its potential total costs are better understood. As shown in Table 1, the first 13 LCSs
would cost an average of $215 million each, and the first 23 mission modules would cost
an average of $82 million each. Using these figures, the combined average cost for an
LCS equipped with a single mission module would be $297 million, which is 19% more
than the Navy’s $250-million target cost for an LCS with a representative payload
package. Navy officials, moreover, have spoken about equipping each LCS with more
than one mission module. Achieving the Navy’s $250-million cost goal may therefore
require reducing average procurement costs for LCSs, mission modules, or both, after
FY2009.
Rapid Acquisition Schedule. The Navy’s plan called for Congress to approve
the start of LCS construction in 2004, less than three years after the LCS program was
first announced. Supporters of this rapid schedule could argue that it responded to an
urgent Navy need for improved littoral warfighting capability and is consistent with
defense acquisition streamlining and reform. Skeptics could argue that it is not clear,
based on recent Navy combat operations in Kosovo, Afghanistan, and Iraq, whether the
need for the LCS is urgent, and that the Navy’s rapid acquisition strategy may be
motivated more by other considerations, such as getting the LCS program started before
3 For more on the Deepwater program, see CRS Report RS21019, Coast Guard Deepwater
Program: Background and Issues for Congress, by Ronald O’Rourke.

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there is a change in the Administration, or before there is a change in Navy leadership, or
before supporters of the DD(X) destroyer possibly try to end the LCS program, or before
Congress fully understands the details of the LCS program. Skeptics could also argue that
allowing LCS program to proceed as planned could provide DOD with a precedent to
begin other major acquisition programs in a similar rapid manner, which might reduce
Congress’ ability to conduct effective oversight of proposed DOD procurement programs.
Funding Strategy for Mission Modules. Supporters of the Navy’s plan to
procure LCS mission modules through the OPN account can argue that it is consistent
with the traditional practice of procuring ship weapons (e.g., missiles and gun shells)
through the Weapon Procurement, Navy (WPN) appropriation account or the Procurement
of Ammunition, Navy and Marine Corps (PANMC) appropriation account rather than the
ship-procurement account. Skeptics could argue that the LCS mission modules are not
missiles and gun shells, and that funding the modules through the OPN account would
effectively obscure a significant portion of the total LCS program acquisition cost by
placing them in a part of the Navy’s budget where they might be less visible to Congress.
Industrial Base. Supporters of the current plan to build LCSs in a yard or yards
other than the two current surface combatant builders — General Dynamics’ Bath Iron
Works (BIW) and Northrop Grumman’s Ship Systems (NGSS) division — could argue
that this will help constrain LCS construction costs because the yards in question have
lower overhead costs than BIW or NGSS. Skeptics could argue that BIW and NGSS have
considerable unused building capacity, that building LCSs at BIW or NGSS could reduce
the cost of other Navy shipbuilding programs being performed at these yards by spreading
BIW’s or NGSS’ fixed overhead costs over a larger amount of shipbuilding work, and
that building LCSs at yards other than those that already build major ships for the Navy
will create one or more additional shipyards with a strong dependence on Navy
shipbuilding contracts and thereby exacerbate the current excess-capacity situation in
Navy shipbuilding.
Potential Options for Congress. Potential options for Congress for the LCS
program include the following:
! shift procurement of LCS mission modules to the Navy’s ship-
procurement account;
! procure a few LCSs and then evaluate them in exercises before deciding
whether to put the LCS into larger-scale series production;4
! procure LCSs at a rate of up to 10 per year to get LCSs into the fleet
sooner and achieve better production economies of scale;
! procure LCSs at a rate of less than 5 per year so as to reduce annual LCS
funding requirements;
4 This option would also provide time to confirm the emergence of projected littoral threats and
an opportunity to conduct an Analysis of Multiple Concepts that would not be tainted by a Navy
commitment to putting the LCS in larger-scale production. For a discussion of this option see
Robert O. Work, Naval Transformation and the Littoral Combat Ship, Center for Strategic and
Budgetary Assessments, Feb. 2004.

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! terminate the LCS program (and the DD(X) program) and instead
procure a new-design frigate as a common replacement;5 and
! terminate the LCS program and invest more in other littoral-warfare
improvements.
Legislative Activity for FY2005
For detailed information on the LCS program in the FY2005 defense authorization
bill (H.R. 4200/S. 2400), see the Legislative Activity section of CRS Report RL32109.
The conference report (H.Rept. 108-622 of July 20, 2004) on the FY2005 defense
appropriations bill (H.R. 4613) includes a provision (Section 8092) that provides $214.7
million in the Navy’s research and development account for construction of the lead LCS.
The provision also states: “None of the funds provided in this act may be obligated to
prepare a FY2006 budget request for a third vessel under the Littoral Combat Ship
program in FY2006: Provided, That funds for the second vessel shall be for a second
source supplier: Provided further, That all subsequent ships shall be purchased with
‘Shipbuilding and Conversion, Navy’ funds beginning in FY2007.” The conference
report stated:
The conferees agree to provide $457,089,000 for the Littoral Combat Ship (LCS)
program instead of $409,089,000 as proposed by the House and $352,089,000 as
requested and proposed by the Senate. The conferees agree with the Senate that all
follow-on ships, beyond one of each prototype design, should be fully funded in the
Shipbuilding and Conversion, Navy appropriation. The conferees also agree that
substantial testing of the LCS and associated mission modules is required to evaluate
each ship design and validate operational requirements. Therefore, the conferees
direct that no funds shall be obligated to prepare a fiscal year 2006 budget request for
construction of a third vessel, as reflected in the conference agreement including
Section 8092 as originally proposed by the Senate. This directive is intended to
provide for a “gap” year between construction of the prototype ships and the
follow-on construction of a second ship of each design, thereby ensuring that design
problems discovered during the prototype phase of each ship design are identified and
corrected before construction of follow-on ships. The conferees also agree with the
Senate that beginning in the fiscal year 2006 budget request, the Navy should identify
LCS mission module funding separately within the Research, Development, Test and
Evaluation, Navy and Other Procurement, Navy appropriations. (Pages 310-311)
5 For a discussion of this option, see U.S. Congressional Budget Office, Transforming the Navy’s
Surface Combatant Force, Mar. 2003, pp. 4-17.

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