Order Code RS21305
Updated March 6, 2006
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 a small, fast Navy surface combatant with
modular weapon systems. The Navy wants to procure a total of 55. The first was
procured in FY2005, three more were procured in FY2006, and the Navy’s proposed
FY2007 budget requests $521 million to procure two additional ships. The estimated
average unit procurement cost of follow-on LCS “sea frames” (i.e., LCSs without any
mission modules) has grown to about $298 million, an increase of about 33% over last
year’s estimate of about $223 million. Section 124 of the conference report on the
FY2006 defense authorization bill (H.R. 1815) limits the cost of the two FY2007 sea
frames to $220 million per ship, plus adjustments for inflation and other factors. The
Navy’s FY2007 unfunded requirements list (URL) — its “wish list” of items desired but
not included in the FY2007 budget — includes an additional two LCSs for an additional
$520 million. For a longer discussion of the LCS program, see CRS Report RL32109,
Navy DD(X), CG(X), and LCS Ship Acquisition Programs: Oversight Issues and
Options for Congress, by Ronald O’Rourke. This report will be updated as events
warrant.
Background
The Navy announced the LCS program 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 CG(X) cruiser.1 The LCS is a small, fast surface combatant that
uses 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 (i.e., “swarm boats”) in heavily contested littoral (near-
shore) waters. Secondary LCS missions include intelligence, surveillance, and
reconnaissance (ISR); maritime intercept; special operations forces (SOF) support; and
1 For more on the DD(X) and CG(X), see CRS Report RL32109, Navy DD(X), CG(X), and LCS
Ship Acquisition Programs: Oversight Issues and Options for Congress, by Ronald O’Rourke.
Congressional Research Service ˜ The Library of Congress

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logistics support for movement of personnel and supplies. The LCS is also mentioned in
connection with the Navy’s role in the Global War on Terrorism (GWOT).2
The Navy wants to procure a total of 55 LCSs. The first was procured in FY2005,
and three more were procured in FY2006. The FY2005 ship and one of the FY2006 ships
were procured through the Navy’s research and development account. The other two
FY2006 ships and all subsequent LCSs are being procured through the Shipbuilding and
Conversion, Navy (SCN) appropriation account. The Navy’s FY2007-FY2011
shipbuilding plan includes two LCSs in FY2007, three in FY2008, and six per year in
FY2009-FY2011.
The Navy’s proposed FY2007 budget requests $521 million to procure two
additional LCSs. Section 124 of the conference report on the FY2006 defense
authorization bill (H.R. 1815) limits the cost of the two FY2007 ships to $220 million per
ship, plus adjustments for inflation and other factors. The Navy’s FY2007 unfunded
requirements list (URL) — its “wish list” of items desired but not included in the FY2007
budget — includes an additional two LCSs for an additional $520 million.
On May 27, 2004, the Navy awarded contracts to teams led Lockheed Martin and
General Dynamics (GD) for final system design of two “Flight 0” versions of the LCS,
with options for detailed design and construction of up to two LCSs each. The Lockheed
team is building the FY2006 LCS and one of the FY2007 ships, while the GD team is
building the other two FY2006 ships. The Navy wants to build at least a few LCSs to the
two Flight 0 designs before deciding whether to continue building one design, the other,
or both. Lockheed is building its LCSs at Marinette Marine of Marinette, WI, and
Bollinger Shipyards of Louisiana and Texas; GD is building its LCSs at Austal USA of
Mobile, AL. These yards are not among the six yards that have built the Navy’s major
warships in recent years.
The Navy is procuring LCS mission modules through the Other Procurement, Navy
(OPN) account rather than the SCN account. Table 1 shows LCS funding through
FY2011 as shown in the FY2007-FY2011 Future Years Defense Plan (FYDP) submitted
to Congress in early 2006.
The Navy’s FY2007 budget submission estimates the total procurement cost of a
class of 56 (not 55) LCS sea frames at about $17.6 billion in then-year dollars. Using
figures in Table 1, when other LCS program costs are included, the LCS program might
have a total acquisition (development plus procurement) cost of more than $26 billion,
or more than $470 million per ship, in then-year dollars.
2 For more on the Navy’s role in the GWOT, see CRS Report RS22373, Navy Role in Global War
on Terrorism (GWOT) — Background and Issues for Congress, by Ronald O’Rourke.

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CRS-3
Table 1. LCS Program Funding, FY2002-FY2011
(millions of then-year dollars; totals may not add due to rounding)
Total thru
03
04
05
06
07
08
09
10
11
FY11
Research, Development, Test & Evaluation, Navy (RDT&EN) account
Ship 1 construction
0
0
206.7
59.2
8.5
0
0
0
0
274..5
Ship 2 construction
0
0
16.0
207.1
55.0
0
0
0
0
278.1
Ships 1and 2 outfitting/post
0
0
0
8.7
36.7
36.8
7.1
0
0
89.3
delivery
LCS ship development
35.3
160.1
228.0
86.0
57.0
60.3
43.2
43.9
22.4
736.2
LCS mission package
0
0
0
213.0
162.3
90.4
82.5
100.1
40.8
689.2
project (qty)
(3)
(1)
Subtotal RDT&EN
35.3
160.1
450.8
574.0
319.6
187.6
132.8
144.1
63.2
2067.3
Shipbuilding and Conversion, Navy (SCN) account
Ships 3-27, (qty)
0
0
0
440.0
520.7
947.6 1764.3 1774.2 1825.4
7272.3
(2)
(2)
(3)
(6)
(6)
(6)
(25)
Subtotal SCN
0
0
0
440.0
520.7
947.6 1764.3 1774.2 1825.4
7272.3
Other Procurement, Navy (OPN) account (for LCS mission modules)
Subtotal OPN
0
0
0
40.1
79.1
207.6
652.3
656.2
720.2
2355.5
(qty)
(0)
(1)
(3)
(13)
(12)
(15)
(44)
Weapons Procurement, Navy (WPN) account
Subtotal WPN
0
0
0
0
0
12.5
39.1
91.0
134.2
276.8
TOTAL
35.3
160.1
450.8 1054.1
919.3 1355.3 2588.5 2665.6 2743.0
11971.9
Source: Navy Office of Legislative Affairs, March 6, 2006.
Issues for Congress
Cost Increase On LCS Sea Frame. Estimated LCS sea frame procurement
costs as shown in the FY2007 budget submission have increased from figures shown in
the FY2006 budget submission. The estimate for the first LCS has increased from $212.5
million to $274.5 million, an increase of about 29%. The estimate for the second LCS has
increased from $256.5 million to $278.1 million, an increase of about 8%. As shown in
Table 2, the estimate for follow-on ships to be procured in FY2009-FY2011, when the
LCS program is to reach its maximum annual procurement rate of 6 ships per year, has
increased from $223.3 million in then-year dollars to $298 million in then-year dollars,
an increase of about 33%. These increases raise potential oversight issues for Congress,
including the following:
! Why have estimated LCS procurement costs increased since last year?
! When did the Navy first know that estimated LCS procurement costs
were increasing above figures shown in the FY2006 budget submission?
! What is the potential for the costs of LCS sea frames to be procured in
FY2009 and future years to increase above figures shown in the FY2007
budget submission?

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! Is the Navy’s estimated $520 million cost for the two LCSs requested for
FY2007 consistent with the FY2006 legislation limiting the cost of these
two ships to $220 million each, with adjustments for inflation and other
factors?
Navy officials, in comments to reporters following a March 1, 2006, hearing before
the House Armed Services Committee, stated that, after permitted adjustments for
inflation and other factors are taken into account, the $520 million estimated combined
cost for the two LCSs requested for FY2007 is consistent with the FY2006 legislation
limiting the cost of these two ships to $220 million each. They also acknowledged that
there has been growth in the estimated cost of the LCS sea frame.3
Table 2. Estimated LCS Sea Frame Unit Procurement Costs In
FY2006 and FY2007 Budget Submissions
(Costs in millions of then-year dollars)
FY07
FY08
FY09
FY10
FY11
FY09-11
FY2006 budget submission
Total procurement cost
542.4
779.7
1,127.2
1,112.3
1,110.3
3,349.8
Number of ships
2
3
5
5
5
15
Unit procurement cost
271.2
259.9
225.4
222.5
222.1
223.3
FY2007 budget submission
Total procurement cost
520.7
947.6
1,764.3
1,774.2
1,825.4
5,363.9
Number of ships
2
3
6
6
6
18
Unit procurement cost
260.4
315.9
294.1
295.7
304.2
298.0
% change in unit pro-
(4%)
21%
30%
33%
37%
33%
curement cost, FY07
compared to FY06
Source: Prepared by CRS using Navy data from FY2006 and FY2007 Navy budget submissions.
Total Acquisition Cost. Although this CRS report estimates that a 55-ship LCS
program might have a total acquisition cost of more than $26 billion, Navy officials
acknowledge that the cost of individual LCS mission modules and the ratio of mission
modules to LCSs is not yet clear, and that the potential total acquisition cost of the LCS
program, including mission modules, is therefore uncertain. Supporters could argue that
total program acquisition 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 proceed at full pace until its potential total costs are better understood.
Funding Strategy for Mission Modules. Table 1 suggests that the Navy’s plan
to procure LCS mission modules in the Other Procurement, Navy (OPN) account may
result in roughly 25% of the LCS program’s total costs being funded through this account.
Supporters of this plan could argue that procuring LCS mission modules in the OPN
account is consistent with the practice of procuring ship weapons (e.g., missiles and gun
3 Dave Ahearn, “CNO Says LCS Cost Increase Doesn’t Breach Lawmakers’ Cap,” Defense
Today, March 2, 2006.

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shells) through the Weapon Procurement, Navy (WPN) appropriation account or the
Procurement of Ammunition, Navy and Marine Corps (PANMC) appropriation. Skeptics
could argue that the LCS mission modules are not missiles and gun shells, but rather
elements of the ships’ combat systems, and that funding the modules through the OPN
account rather than the ship-procurement (SCN) account would effectively obscure a
significant portion of total LCS program procurement costs by placing it in a part of the
Navy’s budget that is less visible to Congress.
Industrial Base. Supporters of the current plan to build LCSs in 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 (SCN) account to make these costs more visible to
Congress;
! 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 five per year so as to reduce annual
LCS funding requirements; and
! terminate the LCS program and invest more in other littoral-warfare
improvements.
Legislative Activity for FY2006
FY2006 Defense Authorization Bill (H.R. 1815/P.L. 109-163). Section 124
of the conference report (H.Rept. 109-360 of December 18, 2005) on H.R. 1815/P.L. 109-
163 of January 6, 2006 limits the cost of the fifth and sixth LCSs to $220 million per ship,
with the limit to become effective with the budget that request funds for the procurement
of the two ships. (This is the FY2007 budget.) The section also requires an annual report
on the content, cost, and number of LCS mission packages, and states that no funds may
be used for procurement of LCSs or LCS mission packages after the procurement of the
first four LCSs until the Navy certifies in writing that stable designs exist for the LCS.
4 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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FY2006 Defense Appropriations Bill (H.R. 2863/P.L. 109-148). The
conference report (H.Rept. 109-359 of December 18, 2005) on H.R. 2863/P.L. 109-148
of December 30, 2005 approves funding for the procurement of three LCSs in FY2006.
The report approves $582.7 million in research and development funding for the LCS
program, a $6.2-million increase over the requested amount. This total includes funding
for the procurement of one LCS, as requested by the Navy. The conference report also
includes an $440 million in the Shipbuilding and Conversion, Navy (SCN) account, not
requested by the Navy, for the procurement of two additional LCSs. Of the $6.2-million
increase in research and development funding, $3.0 million is to be used for remote
operation of active sonar technology (ROAST), $2.2 million is for unmanned surface
vehicle concepts and technology solutions, and $1.0 million is for antisubmarine warfare
multistatic sensor mission planing upgrade and LCS mission package projects.
The conference report states that “The conferees agree to the report on Littoral
Combat Ship (LCS) mission modules proposed by the House, and specify that such report
should include cost estimates for these modules by fiscal year.” The House
Appropriations Committee, in its report (H.Rept. 109-119 of June 10, 2005) on H.R.
2863, stated:
The Committee directs that, prior to obligation of SCN funds for the third and fourth
“flight zero” LCS ships, the Navy certify in writing to the congressional defense
committees that the ship designs from each prime contractor are sufficiently stable to
allow further construction. The Committee also believes that, while the LCS ship
itself is of stable and mature design, the mission modules essential to LCS warfighting
capabilities are less mature. A number of these technologies have not been
demonstrated in an operational environment, and cost estimates for the mission
modules appear immature as well. To address this issue, the Committee directs the
Navy to submit, not later than February 1, 2006, a report on the development and
procurement plan for LCS mission modules, including a description of the
development status of each subsystem. (p. 146)

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