Order Code RL33741
Navy Littoral Combat Ship (LCS) Program:
Oversight Issues and Options for Congress
Updated December 11, 2006
Ronald O’Rourke
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division

---

Navy Littoral Combat Ship (LCS) Program: Oversight
Issues and Options for Congress
Summary
The Navy is procuring a new class of surface combatant called the Littoral
Combat Ship (LCS). The first LCS was procured in FY2005, another three were
procured in FY2006, and two more were procured in FY2007. Current Navy plans
call for procuring three LCSs in FY2008, and then about six per year in FY2009-
FY2016, for a planned total of 55 ships.
The LCS is a small, fast surface combatant that uses modular “plug-and-fight”
mission packages, including unmanned vehicles (UVs). The ship’s mission
orientation can be changed by changing out its mission packages. The basic version
of the LCS, without any mission packages, is referred to as the LCS sea frame.
The LCS’s primary intended missions are countering enemy mines, submarines,
and fast attack craft in littoral (near-shore) waters. Secondary missions include
intelligence, surveillance, and reconnaissance (ISR); maritime intercept; special
operations forces (SOF) support; and logistics support for movement of personnel
and supplies. The LCS is also mentioned in connection with the Navy’s role in what
the Bush Administration refers to as the Global War on Terrorism (GWOT).
The LCS program raises several potential oversight issues for Congress,
including the increase in reported LCS unit procurement costs, the program’s total
acquisition cost, the acquisition strategy for later ships in the program, and the
funding of LCS mission packages.
Potential options for Congress regarding the LCS program include the
following: approving the program as proposed by the Navy; using a block-buy
contract for LCSs procured during the five-year period FY2007-FY2011; shifting
procurement of LCS mission packages to the SCN account to make these costs more
visible to Congress; shifting production of some LCSs to General Dynamics Bath
Iron Works (GD/BIW) or Northrop Grumman Ship Systems (NGSS) or both to
provide more work for one or both of these facilities; procuring a few LCSs and then
evaluating them in exercises before deciding whether to put the LCS into larger-scale
series production; and terminating the LCS program and invest more in other littoral-
warfare improvements.
FY2007 Defense Authorization Act (H.R. 5122/P.L. 109-364). The
conference report on the bill (H.Rept. 109-676 of September 25, 2006) approves the
Navy’s FY2007 procurement funding request for the LCS program
FY2007 Defense Appropriations Act (H.R. 5631/P.L. 109-289). The
conference report on the bill (H.Rept. 109-676 of September 25, 2006) approves the
Navy’s request for $520.7 million in FY2007 procurement funding for the LCS
program. The Senate report on the bill (S.Rept. 109-292 of July 25, 2006) had
recommended funding the procurement of one LCS (rather than two) in FY2007, and
rescinding funding for one of the three LCSs procured in FY2006. This report will
be updated as events warrant.

---

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Future Surface Combatant Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Littoral Combat Ship (LCS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Potential Oversight Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Increase in Sea Frame Unit Procurement Cost . . . . . . . . . . . . . . . . . . . . . . . 6
Cost Cap on Fifth and Sixth Ships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Total Program Acquisition Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Acquisition Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Mission Packages Funded in OPN Account . . . . . . . . . . . . . . . . . . . . . . . . . 8
Options for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
FY2007 Legislative Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
FY2007 Defense Authorization Act (H.R. 5122/P.L. 109-364) . . . . . . . . . 10
FY2007 Defense Appropriations Act (H.R. 5631/P.L. 109-289) . . . . . . . . 11
List of Tables
Table 1. LCS Program Funding, FY2002-FY2011 . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 2. Projected Procurement Of LCSs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Table 3. LCS Sea Frame Unit Procurement Costs . . . . . . . . . . . . . . . . . . . . . . . . 7

---

Navy Littoral Combat Ship (LCS) Program:
Oversight Issues and Options for Congress
Introduction
The Navy is procuring a new class of surface combatant called the Littoral
Combat Ship (LCS). The first LCS was procured in FY2005, another three were
procured in FY2006, and two more were procured in FY2007. Current Navy plans
call for procuring three LCSs in FY2008, and then about six per year in FY2009-
FY2016, for a planned total of 55 ships.
The issue for Congress is whether to approve, modify, or reject the Navy’s
proposals for the LCS program. Decisions that Congress makes on procurement of
surface combatants will significantly affect future Navy capabilities, Navy funding
requirements, and the U.S. defense industrial base.
This report succeeds an earlier CRS report on the LCS program.1
Background
Future Surface Combatant Program
On November 1, 2001, the Navy announced a Future Surface Combatant
Program aimed at developing and acquiring a family of three new classes of surface
combatants:
! a destroyer called DDG-1000 (formerly DD(X)) for the precision
long-range strike and naval gunfire mission,
! a cruiser called CG(X) for the missile and air defense mission, and
! a smaller combatant called the Littoral Combat Ship (LCS) to
counter submarines, small surface attack craft (also called “swarm
boats”), and mines in heavily contested littoral (near-shore) areas.
For additional information on the DDG-1000 and CG(X) programs, see CRS
Report RL32109, Navy DDG-1000 (DD(X)) and CG(X) Ship Acquisition Programs:
Oversight Issues and Options for Congress, by Ronald O’Rourke.
1 The earlier report was CRS Report RS21305, Navy Littoral Combat Ship (LCS):
Background and Issues for Congress, by Ronald O’Rourke.

---

CRS-2
Littoral Combat Ship (LCS)
The LCS is a small, fast surface combatant that uses modular “plug-and-fight”
mission packages, including unmanned vehicles (UVs). Rather than being a
multimission ship like the Navy’s current large surface combatants, the LCS is a
focused-mission ship that will be equipped to perform one or two missions at any one
time. The ship’s mission orientation can be changed by changing out its mission
packages. The basic version of the LCS, without any mission packages, is referred
to as the LCS sea frame.
The LCS’s primary intended missions are countering enemy mines, submarines,
and fast attack craft in littoral (near-shore) waters. Secondary missions include
intelligence, surveillance, and reconnaissance (ISR); maritime intercept; special
operations forces (SOF) support; and logistics support for movement of personnel
and supplies. The LCS is also mentioned in connection with the Navy’s role in what
the Bush Administration refers to as the Global War on Terrorism (GWOT).2
The LCS would displace about 3,000 tons — about the size of a corvette or
Coast Guard cutter. It would have a maximum speed of about 45 knots, compared
to about 30 knots for the Navy’s current surface combatants. The LCS would have
a shallower draft than the Navy’s current surface combatants, permitting it to operate
in certain coastal waters and visit certain ports that are not accessible to the Navy’s
current large surface combatants. The LCS would employ automation to achieve a
reduced crew size of 40 “core” crew members, not including the additional crew
members that would operate the embarked mission packages.
In FY2005, Congress approved the Navy’s plan to fund the construction of the
first two LCSs using research and development funds rather than shipbuilding funds,
funded the first LCS’s construction cost, required the second LCS to be built to a
different design from the first, 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.
In FY2006, Congress funded the procurement of the second, third, and fourth
LCSs. (The Navy requested one LCS for FY2006, consistent with Congress’s
FY2005 action. Congress funded that ship and provided funding for two additional
ships.) Congress in FY2006 also established a $220-million unit procurement cost
limit on the fifth and sixth LCSs (the two ships to be procured in FY2007), plus
adjustments for inflation and other factors, required an annual report on LCS mission
packages, and made procurement of more than four LCSs contingent on the Navy
certifying that there exists a stable design for the LCS.
For FY2007, the Navy requested $520.7 million to procure two additional LCSs.
Section 124 of the conference report on the FY2006 defense authorization bill (H.R.
1815/P.L. 109-163), limits the cost of these two ships to $220 million per ship, plus
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.

---

CRS-3
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 — included an additional two LCSs for an additional $520 million.
On May 27, 2004, the Navy awarded contracts to teams led by 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. 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 LCSs to the two
teams’ initial (i.e., “Flight 0”) LCS designs through at least FY2009 before deciding
whether to shift to one or two modified Flight 1 designs. Lockheed is building its
LCSs at Marinette Marine of Marinette, WI, and Bollinger Shipyards of Louisiana
and Texas,3 with the first being built by Marinette. GD is building its LCSs at Austal
USA of Mobile, AL.4
The Navy procured the first and second LCSs through the Navy’s research and
development account rather than the Navy’s ship-procurement account. The Navy
is procuring LCS mission packages through the Other Procurement, Navy (OPN)
account rather than the Navy’s ship-procurement account.
Table 1 shows LCS funding through FY2011. 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.
3 Bollinger operates about 15 shipyards and ship-related facilities in Louisiana and Texas,
of which three, located in Lockport, LA, Gretna, LA, and Amelia, LA, are for building new
ships.
4 Austal USA was created in 1999 as a joint venture between Austal Limited of Henderson,
Western Australia and Bender Shipbuilding & Repair Company of Mobile, AL. The
Lockheed LCS team also includes GD/BIW as prime contractor, to provide program
management and planning, to provide technical management, and to serve as “LCS system
production lead.”

---

CRS-4
Table 1. LCS Program Funding, FY2002-FY2011
(millions of then-year dollars; totals may not add due to rounding)
Total
03
04
05
06
07
08
09
10
11
thru
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
(qty)
(1)
Ship 2 construction
0
0
16.0
207.1
55.0
0
0
0
0
278.1
(qty)
(1)
Ships 1and 2 outfit-
0
0
0
8.7
36.7
36.8
7.1
0
0
89.3
ting/post 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)
(4)
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
0
0
0
440.0
520.7
947.6 1764.3 1774.2 1825.4
7272.3
construction
(2)
(2)
(3)
(6)
(6)
(6)
(25)
(qty)
Outfitting & post
0
0
0
0
13
37
70
95
122
337
delivery
Subtotal SCN
0
0
0
440.0
533.7
984.6 1834.3 1869.2 1947.4
7609.3
Other Procurement, Navy (OPN) account (for LCS mission packages)
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 12308.9
Source: Navy Office of Legislative Affairs, March 6 and April 17, 2006.
Table 2 shows projected procurement of LCSs as shown in a Navy 30-year
shipbuilding plan dated December 30, 2005.

---

CRS-5
Table 2. Projected Procurement Of LCSs
FY
LCSa
07
2
08
3
09
6
10
6
11
6
12
6
13
5
14
6
15
6
16
5
17
18
19
20
21
22
23
24
25
26
27
28
29
30
1
31
1
32
2
33
3
34
6
35
6
36
4
Source: U.S. Department of the Navy, Draft Report to Congress on Annual Long-Range Plan
for Construction of Naval Vessels for FY 2007. Table 1 on page 7.
a. Plus one LCS procured in FY2005 and another three procured in FY2006.

---

CRS-6
Potential Oversight Issues for Congress
The LCS program raises several potential oversight issues for Congress. These
issues are discussed below.
Increase in Sea Frame Unit Procurement Cost
Estimated LCS sea frame unit procurement costs as shown in the FY2007 budget
submission are substantially greater than 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 3, 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%.
The Navy states that these differences are due mostly to the fact that the figures
shown in last year’s budget did not include items that are traditionally included in the
total budgeted procurement cost of a Navy shipbuilding program, such as Navy
program-management costs, an allowance for changes, and escalation (inflation). The
absence of these costs from last year’s LCS budget submission raises potential
oversight issues for Congress, including the following:
! Why were these costs excluded from the LCS budget submission in
last year’s budget? Was this an oversight? If so, how could such an
oversight occur, and why did it occur on the LCS program but not
other programs? Was anyone held accountable for this oversight, and
if so, how? If this was not an oversight, then what was the reason?
! Do LCS procurement costs as presented in the FY2007 budget
submission now include all costs that, under traditional budgeting
practices, should be included in LCS procurement costs? If not, how
many other costs are still unacknowledged? Have personnel or
resources from other Navy programs been used for the LCS program
in any way? If so, have the costs of these personnel or resources been
fully charged to the LCS program and fully reflected in LCS program
costs shown in the FY2007 budget submission?
! What is the likelihood that the Navy in future budget submissions
will substantially increase procurement cost estimates for other Navy
shipbuilding programs to account for costs that were excluded from
previous budgets? Does the Navy believe there is no substantial risk
of penalty for submitting to Congress a budget presentation for a
shipbuilding program that, for whatever reason, significantly
underestimates procurement costs?

---

CRS-7
Table 3. LCS Sea Frame Unit Procurement Costs
(Costs in millions of then-year dollars)
FY07
FY08
FY09
FY10
FY11
FY09-
11
FY2006 budget submission
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
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.
Cost Cap on Fifth and Sixth Ships
Navy officials have stated to CRS that the fifth and sixth LCSs will meet the
legislated cost cap of $220 million per ship because the hands-on construction cost of
the ships, when adjusted for inflation, fall within the $220-million figure.5 The
Navy’s explanation suggests that the Navy is interpreting the LCS cost cap as
something that applies to the hands-on construction cost of the ship, rather than to the
larger procurement cost of the ship as it appears in the budget, which includes costs
for other items, such as Navy program-management costs and allowance for changes.
The LCS cost cap (Sec. 124 of H.R. 1815/P.L. 109-163) refers to “the total amount
obligated or expended for procurement of the fifth and sixth vessels....” Potential
oversight questions for Congress include the following:
! Does the Navy’s apparent interpretation of the meaning of the LCS
cost cap mean that the Navy will interpret cost caps on other Navy
shipbuilding programs the same way, so as to exclude budgeted
procurement costs other than the actual hands-on construction costs
of the ships?
! Is the Navy’s apparent interpretation of the LCS cost cap consistent
with how the Navy interpreted past legislated cost caps on ships such
as the Seawolf-class submarines and the aircraft carrier CVN-77?
5 Source: Information paper provided to CRS by Navy Office of Legislative Affairs, Apr.
3, 2006.

---

CRS-8
Total Program Acquisition Cost
Although this CRS report estimates that a 55-ship LCS program might have a
total acquisition cost of more than $26 billion, the potential total acquisition cost of
the LCS program is 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.
Acquisition Strategy
The Navy’s acquisition strategy for the LCS program remains unclear in terms
of the following:
! the date when procurement will shift from the current Flight 0
designs to one or two modified Flight 1 designs;
! the future division of work between the Lockheed-led and General-
dynamics led LCS teams, and how this division will be determined;
and
! whether the Navy at some point will decide to downselect to only one
industry team.
Observers have also expressed concern about the degree of coordination between
procurement of LCS sea frames and development and procurement of LCS mission
packages.6
Mission Packages Funded in OPN Account
As mentioned in the Background section, the Navy plans to procure LCS mission
packages through the Other Procurement, Navy (OPN) appropriation account rather
than the Navy’s ship-procurement account. The OPN account, as its name suggests,
is a large, “grab-bag” appropriation account for procuring a wide variety of items,
many of them miscellaneous in nature.
Supporters of the Navy’s plan 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. LCS mission packages, they could argue, are the
payload of the LCS, just as missiles and gun shells are the payload of other types of
6 For more on Navy efforts to develop LCS mission packages, see Chris Johnson,
“Advanced Deployable System Faces Weight and Manpower Issues,” Inside the Navy, Aug.
14, 2006; Chris Johnson, “Program Manager Says LCS Mission Module Testing ‘On
Track’,” Inside the Navy, Aug. 14, 2006; and Michael Bruno, “With LCS Launching Soon,
Navy Still Works On USVs,” Aerospace Daily & Defense Report,” Aug. 25, 2006.

---

CRS-9
surface combatants, and should therefore be funded outside the ship-procurement
account.
Those skeptical of the Navy’s plan to fund LCS mission packages through the
OPN account could argue that the LCS mission packages are not comparable to
missiles and gun shells. Missiles and gun shells, they could argue, are expendable
items that are procured for use by various classes of ships while the LCS mission
packages will incorporate sensors as well as weapons, are not intended to be
expendable in the way that missiles and gun shells are, and are to be used largely, if
not exclusively, by LCSs, making them intrinsic to the LCS program. In light of this,
they could argue, it would be more consistent to fund LCS mission packages in the
ship-procurement account rather than the OPN account.
Potential oversight questions for Congress include the following:
! Are LCS mission packages analogous to missiles and gun shells that
are procured through the WPN and PANMC appropriation accounts?
! Does the Navy’s plan to fund the LCS mission packages through this
account 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? If so, was this
the Navy’s intention?
! Does funding a significant portion of the LCS program’s total
procurement cost through the OPN account give the LCS program an
unfair advantage in the competition for limited ship-procurement
funding by making the LCS program, as it appears in the ship-
procurement account, look less expensive? If so, was this the Navy’s
intention?
Options for Congress
Potential options for Congress on the LCS program, some of which could be
combined, include the following:
! approve the program as proposed by the Navy;
! use a block-buy contract for LCSs procured during the five-year
period FY2007-FY2011;
! shift procurement of LCS mission packages to the SCN account to
make these costs more visible to Congress;
! shift production of some LCSs to GD/BIW or NGSS or both to
provide more work for one or both of these facilities;

---

CRS-10
! procure a few LCSs and then evaluate them in exercises before
deciding whether to put the LCS into larger-scale series production;
and
! terminate the LCS program and invest more in other littoral-warfare
improvements.
FY2007 Legislative Activity
FY2007 Defense Authorization Act (H.R. 5122/P.L. 109-364)
House. The House Armed Services Committees, in its report on H.R. 5122
(H.Rept. 109-452 of May 5, 2006), recommended approval of the $520.7 million
requested for procuring two LCSs, and expressed concerns about the program’s
acquisition strategy. The report stated:
The committee is concerned about the uncertainty in the Navy’s acquisition
strategy for the Littoral Combat Ship (LCS).... How long the Navy intends to
continue with two separate designs for these vessels remains unclear. The
committee believes that it is also unclear when the Navy will place this program
into the discipline of the normal acquisition process with definitive and mature
requirements and Director, Operational Test and Evaluation, review before
continuing with procurement.... the committee encourages the Navy to develop an
acquisition strategy for the long-term that clarifies any ambiguity in the current
build profile. The committee further encourages the Navy to downselect to one
of the two LCS variants currently in procurement in order to achieve economy of
scale, or present a compelling case to the congressional defense committees on
why both variants should be procured. (Page 69)
Senate. The Senate Armed Services Committees, in its report (S.Rept. 109-254
of May 9, 2006) on the Senate version of the FY2007 defense authorization bill (S.
2766), recommended approval of the $520.7 million requested for procuring two
LCSs, and expressed concerns about the program’s acquisition strategy. The report
stated:
The construction of lead LCS vessels at two shipyards inherently adds cost
risk, which will persist until these ships near completion in 2007 and 2008. The
emphasis on cost control would dictate that the Navy pursue competition,
commonality, and the results of learning curves to the extent practical in the
procurement of this 55 ship class.
The committee views LCS as an important component of the Navy’s strategy
for conducting the global war on terror, and has supported the Navy’s approach
to rapidly field this capability. The design and construction of LCS in parallel
with development of the mission modules requires heightened management of
program risk to ensure affordable, full mission capability of the LCS program.
However, the committee is concerned that the affordability appeal of the LCS
program is being overtaken by apparent cost growth, and that the rapid ramp up
in LCS procurement will compound the issue. The stated emphasis on
affordability is obscured by the absence of a clear acquisition strategy to guide
strategic program decisions. Additionally, it is unclear that the Navy has assessed

---

CRS-11
the added cost for training, maintenance, configuration management, planning and
engineering, and supply support for the two flight 0 ship classes. Further, by
virtue of budgeting the costs for procuring the flight 0 LCS vessels in three
different appropriations, total costs for the program’s start are difficult to discern.
In view of these concerns, the committee directs the Secretary of the Navy to
submit a report on the LCS program, no later than December 1, 2006 to the
congressional defense committees. The report shall outline the Navy’s acquisition
strategy for the program, including the competition plan, the flight strategy, and
the cost containment strategy for the program; contain a clear representation of all
R&D and procurement costs for the total program; and assess the added life cycle
costs associated with operation and support for two dissimilar flight 0 LCS
designs. (Page 113)
Conference Report. The conference report on H.R. 5122 (H.Rept. 109-702
of September 29, 2006) approves the Navy’s request for $520.7 million in
procurement funding for the program (page 501).
FY2007 Defense Appropriations Act (H.R. 5631/P.L. 109-289)
House. The House Appropriations Committee, in its report on H.R. 5631
(H.Rept. 109-504 of June 16, 2006), recommended approval of the $521 million
requested for procuring two LCSs (page 141). The committee also recommended
increasing funding for LCS research and development work by $12.6 million above
the requested amount to fund four additional LCS-related research and development
projects (pages 239 and 250).
Senate. The Senate Appropriations Committee, in its report on H.R. 5631
(S.Rept. 109-292 of July 25, 2006), recommended funding the procurement of one
LCS (rather than the requested two) in FY2007, and rescinding funding (in Section
8043) for one of the three LCSs procured in FY2006 (pages 114, 115-116, and 230-
231). The report states:
The Navy’s [earlier LCS] acquisition strategy was to procure four flight 0 ships
evenly split between two competing designs and then progress to a single flight
1 design selected while evaluating system performance of the flight 0 ships. In
2005, the Navy proposed expanding the planned purchase of flight 0 ships from
four to 15 and to continue production of both designs.
The Defense Appropriations Act, 2006 (Public Law 109-148) appropriated
an additional $440,000,000 in the “Shipbuilding and Conversion, Navy” account
to accelerate procurement of the third and fourth LCS flight 0 ships. The
additional funding was based upon the Navy’s estimated $220,000,000 unit cost.
With the fiscal year 2007 budget submission of $520,670,000 for the fifth and
sixth LCS flight 0 ships, the Navy revealed the LCS unit cost estimate used as a
basis for last year’s appropriation was exclusive of contract change orders,
planning and engineering services, program management support and other costs
not included in the ship construction contract. The Congressional Research
Service estimates these adjustments would increase the average unit cost of LCS
ships about 33 percent, to approximately $300,000,000. As a result, the Navy is
unable to procure both the third and fourth LCS flight 0 ships without the
availability of additional funding. The Committee is troubled by this revelation

---

CRS-12
and recommends rescinding the insufficient fiscal year 2006 funds currently
allocated to the fourth LCS flight 0 vessel.
The Committee is further troubled by reports that the first two LCS flight 0
ships under construction are exceeding their cost as previously budgeted. In last
year’s report, the Committee reminded the Navy that “the appeal of the LCS is its
relative simplicity of design and low cost.” The Committee believes cost growth
and design changes are jeopardizing the affordability appeal of LCS. As a result,
the Committee believes the fiscal year 2007 budget request is insufficient to
procure two ships and recommends $300,670,000 to fully fund procurement of
one LCS seaframe, which is a reduction of $220,000,000 and one seaframe from
the request. The Committee notes that this recommendation puts the Navy on its
previously established path of procuring four LCS flight 0 ships by the end of
fiscal year 2007. (Pages 115-116)
The report recommended increasing the FY2007 request for LCS research and
development funding by $1.8 million for advanced lightweight metals technology for
aluminum-intensive marine structures (pages 177 and 185).
Conference Report. The conference report on H.R. 5631 (H.Rept. 109-676
of September 25, 2006) approves the Navy’s request for $520.7 million in
procurement funding for the program (pages 178 and 179).

---