Navy Littoral Combat Ship (LCS) Program:
Background and Issues for Congress

Ronald O'Rourke
Specialist in Naval Affairs
May 24, 2013
Congressional Research Service
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www.crs.gov
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Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress

Summary
The Littoral Combat Ship (LCS) is a relatively inexpensive Navy surface combatant equipped
with modular “plug-and-fight” mission packages for countering mines, small boats, and diesel-
electric submarines, particularly in littoral (i.e., near-shore) waters. Navy plans call for fielding a
total force of 52 LCSs. Twelve LCSs were funded from FY2005 through FY2012. Another four
(LCSs 13 through 16) were funded in FY2013, although funding for those four ships has been
reduced by the March 1, 2013, sequester on FY2013 funding. The Navy’s proposed FY2014
budget requests $1,793.0 million for four more LCSs (LCSs 17 through 20).
Two very different LCS designs are being built. One was developed by an industry team led by
Lockheed; the other was developed by an industry team that was led by General Dynamics. The
Lockheed design is built at the Marinette Marine shipyard at Marinette, WI; the General
Dynamics design is built at the Austal USA shipyard at Mobile, AL. LCSs 1, 3, 5, and so on are
Marinette Marine-built ships; LCSs 2, 4, 6, and so on are Austal-built ships.
The 20 LCSs procured or scheduled for procurement in FY2010-FY2015 (LCSs 5 through 24) are
being procured under a pair of 10-ship, fixed-price incentive (FPI) block buy contracts that the
Navy awarded to Lockheed and Austal USA on December 29, 2010.
The LCS program has become controversial due to cost growth, design and construction issues
with the lead ships built to each design, concerns over the ships’ ability to withstand battle
damage, and concerns over whether the ships are sufficiently armed and will be able to perform
their stated missions effectively. Some observers, citing one or more of these issues, have
proposed truncating the LCS program to either 24 ships (i.e., stopping procurement after
procuring all the ships covered under the two block buy contracts) or to some other number well
short of 52. Other observers have proposed down selecting to a single LCS design (i.e.,
continuing production of only one of the two designs) after the 24th ship.
In response to criticisms of the LCS program, the Navy has acknowledged certain problems and
stated that it was taking action to correct them, disputed other arguments made against the
program, and maintained its support for continuing the program. Reported comments from some
Navy officials suggest that the Navy might be open to changing the design of one or both LCS
variants after the 24th ship or perhaps down selecting to a single LCS design after the 24th ship.
Issues for Congress concerning the LCS program include the following:
• the impact on the LCS program of the March 1, 2013, sequester on FY2013
funding and unobligated prior-year funding for the program;
• the potential impact on the LCS program of a possible sequester later this year or
early next year on FY2014 funding and unobligated prior-year funding for the
program;
• whether to truncate the LCS program to 24 ships or some other number well
short of 52;
• whether to down select to a single LCS design after the 24th ship;
• technical risk in the LCS program; and
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Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress

• what defense-acquisition policy lessons, if any, the LCS program may offer to
policymakers.

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Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress

Contents
Introduction ...................................................................................................................................... 1
Background ...................................................................................................................................... 1
The Program in General ............................................................................................................ 1
The LCS in Brief ................................................................................................................. 1
Planned Procurement Quantities ......................................................................................... 2
Two LCS Designs ................................................................................................................ 3
Two LCS Shipyards ............................................................................................................ 3
LCSs in Service ................................................................................................................... 3
Mission Package Deliveries Initial Operational Capability (IOC) Dates ............................ 5
Manning and Deployment Concept ..................................................................................... 5
Unit Procurement Cost Cap ................................................................................................. 6
Acquisition Cost .................................................................................................................. 6
Operation and Support (O&S) Cost .................................................................................... 7
Major Program Developments................................................................................................... 8
Growth in Sea Frame Procurement Costs ........................................................................... 8
2007 Program Restructuring and Ship Cancellations .......................................................... 8
2009 Down Select Acquisition Strategy (Not Implemented) .............................................. 8
2010 Dual-Award Acquisition Strategy (Implemented) ...................................................... 9
Changes in Mission Package Equipment .......................................................................... 10
2012 Establishment of LCS Council ................................................................................. 10
Controversy and Proposals to Truncate the Program .............................................................. 11
FY2014 Funding Request ........................................................................................................ 14
Issues for Congress ........................................................................................................................ 14
Impact of March 1, 2013, Sequester on FY2013 Funding ...................................................... 14
Potential Impact of Possible Late 2013/Early 2014 Sequester on FY2014 Funding ............... 15
Should The Program Be Truncated to 24 Ships or Some Other Number Well Short of
52? ........................................................................................................................................ 16
Should There Be a Down Select to A Single LCS Design After the 24th Ship? ...................... 23
Technical Risk in LCS Program .............................................................................................. 24
Sea Frame .......................................................................................................................... 24
Mission Packages .............................................................................................................. 26
Defense-Acquisition Policy Lessons of LCS Program ............................................................ 29
Legislative Activity for FY2014 .................................................................................................... 30
FY2014 Funding Request ........................................................................................................ 30

Figures
Figure 1. Lockheed LCS Design (Top) and General Dynamics LCS Design (Bottom) .................. 4

Tables
Table 1. Past (FY2005-FY2013) and Projected (FY2014-FY2018) Annual Procurement
Quantities ...................................................................................................................................... 2
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Table B-1. Status of LCSs Funded in FY2005-FY2009 ................................................................ 40
Table D-1. Navy and CBO Estimates of Ship Procurement Costs Through FY2015 Under
Down Select and Dual-Award Strategies .................................................................................... 62

Appendixes
Appendix A. Cost Growth on LCS Sea Frames in FY2007-FY2013 Budgets .............................. 31
Appendix B. 2007 Program Restructuring and Ship Cancellations ............................................... 38
Appendix C. Down Select Acquisition Strategy Announced in September 2009 .......................... 41
Appendix D. Dual-Award Acquisition Strategy Announced in November 2010........................... 55

Contacts
Author Contact Information........................................................................................................... 67

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Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress

Introduction
This report provides background information and potential issues for Congress on the Littoral
Combat Ship (LCS), a relatively inexpensive Navy surface combatant equipped with modular
“plug-and-fight” mission packages for countering mines, small boats, and diesel-electric
submarines, particularly in littoral (i.e., near-shore) waters. Navy plans call for fielding a total
force of 52 LCSs. Twelve LCSs were funded from FY2005 through FY2012. Another four (LCSs
13 through 16) were funded in FY2013, although funding for those four ships has been reduced
by the March 1, 2013, sequester on FY2013 funding. The Navy’s proposed FY2014 budget
requests $1,793.0 million for four more LCSs (LCSs 17 through 20).
The issue for Congress is whether to approve, reject, or modify the Navy’s funding requests for
the program, and whether to provide the Navy with additional direction concerning the program.
Congress’s decisions on the LCS program will affect Navy capabilities and funding requirements,
and the shipbuilding industrial base.
Background
The Program in General
The LCS in Brief
The LCS program was announced on November 1, 2001.1 The LCS is a relatively inexpensive
Navy surface combatant that is to be equipped with modular “plug-and-fight” mission packages,
including unmanned vehicles (UVs). Rather than being a multimission ship like the Navy’s larger
surface combatants, the LCS is to be a focused-mission ship, meaning a ship equipped to perform
one primary mission at any given 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 originally stated primary missions are antisubmarine warfare (ASW), mine
countermeasures (MCM), and surface warfare (SUW) against small boats (including so-called
“swarm boats”), particularly in littoral (i.e., near-shore) waters. The LCS program includes the
development and procurement of ASW, MCM, and SUW mission packages for LCS sea frames.
These three primary missions appear oriented toward countering, among other things, some of the
littoral anti-access/area-denial (A2/AD) capabilities that have been fielded in recent years by

1 On November 1, 2001, the Navy announced that it was launching a Future Surface Combatant Program aimed at
acquiring a family of next-generation surface combatants. This new family of surface combatants, the Navy stated,
would include three new classes of ships: a destroyer called the DD(X)—later redesignated the DDG-1000—for the
precision long-range strike and naval gunfire mission; a cruiser called the CG(X) for the air defense and ballistic
missile mission, and a smaller combatant called the Littoral Combat Ship (LCS) to counter submarines, small surface
attack craft, and mines in heavily contested littoral (near-shore) areas. The DDG-1000 was truncated to a total of three
ships in 2009, and the CG(X) program was terminated in 2010. For more on the DDG-1000 program, see CRS Report
RL32109, Navy DDG-51 and DDG-1000 Destroyer Programs: Background and Issues for Congress, by Ronald
O'Rourke. For more on the CG(X) program, see CRS Report RL34179, Navy CG(X) Cruiser Program: Background for
Congress
, by Ronald O'Rourke.
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Iran,2 although they could also be used to counter similar A2/AD capabilities that might be
fielded by other countries.
Additional potential missions for the LCS include peacetime engagement and partnership-
building operations; intelligence, surveillance, and reconnaissance (ISR) operations; maritime
security and intercept operations (including anti-piracy operations); support of Marines or special
operations forces; and homeland defense operations. An LCS might perform these missions at any
time, regardless of its installed mission module, although an installed mission module might
enhance an LCS’s ability to perform some of these missions.
The LCS displaces about 3,000 tons, making it about the size of a corvette (i.e., a light frigate) or
a Coast Guard cutter. It has a maximum speed of more than 40 knots, compared to something
more than 30 knots for the Navy cruisers and destroyers. The LCS has a shallower draft than
Navy cruisers and destroyers, permitting it to operate in certain coastal waters and visit certain
shallow-draft ports that are not accessible to Navy cruisers and destroyers.
Planned Procurement Quantities
The Navy plans to procure 52 LCS sea frames. Until January 2013, the Navy had planned to
procure a total of 55 LCS sea frames. A January 2013 Navy report to Congress adjusted some of
the Navy’s ship force-level objectives, including the objective for small surface combatants—a
category that in the future is to consist solely of LCSs—which was reduced from 55 ships to 52
ships.3 The Navy’s planned force of 52 LCSs would account for 17%, or about one-sixth, of the
Navy’s planned fleet of about 306 ships of all types.4 The Navy also plans to procure 64 LCS
mission packages (16 ASW, 24 MCM, and 24 SUW). Table 1 shows past (FY2005-FY2013) and
projected (FY2014-FY2017) annual procurement quantities for LCS sea frames.
Table 1. Past (FY2005-FY2013) and Projected (FY2014-FY2018) Annual
Procurement Quantities
FY05
FY06
FY07
FY08
FY09
FY10
FY11
1 1 0 0 2 2 2
FY12
FY13
FY14
FY15
FY16
FY17
FY18
4 4 4 4 2 2 2
Source: Prepared by CRS based on FY2014 Navy budget submission and congressional reports on annual
defense authorization and appropriations acts.
Notes: (1) The two ships shown in FY2005 and FY2006 were funded through Navy’s research and development
account rather than the Navy’s shipbuilding account. (2) The figures for FY2006-FY2008 do not include five LCSs
(two in FY2006, two in FY2007, and one in FY2008) that were funded in those years but later canceled by the
Navy. For details on these five canceled ships, see Table B-1 in Appendix B. (3) Funding appropriated for the
four LCSs procured in FY2013 was reduced by the March 1, 2013, sequester on FY2013 funding.

2 For a discussion of Iran’s littoral A2/AD capabilities, including submarines, mines, and small boats, see CRS Report
R42335, Iran’s Threat to the Strait of Hormuz, coordinated by Kenneth Katzman.
3 Department of the Navy, Report to Congress [on] Navy Combatant Vessel Force Structure Requirement, January
2013, 3 pp. The cover letters for the report were dated January 31, 2013.
4 For more on the Navy’s planned fleet, see CRS Report RL32665, Navy Force Structure and Shipbuilding Plans:
Background and Issues for Congress
, by Ronald O'Rourke.
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Two LCS Designs
On May 27, 2004, the Navy awarded contracts to two industry teams—one led by Lockheed
Martin, the other by General Dynamics (GD)—to design two versions of the LCS, with options
for each team to build up to two LCSs each. The LCS designs developed by the two teams are
quite different—the Lockheed team’s design is based on a steel semi-planing monohull, while the
GD team’s design is based on an aluminum trimaran hull (see Figure 1). The two ships also use
different built-in combat systems (i.e., different collections of built-in sensors, computers,
software, and tactical displays) that were designed by each industry team. The Navy states that
both LCS designs meet the Key Performance Parameters (KPPs) for the LCS program.
Two LCS Shipyards
The Lockheed LCS design is built at the Marinette Marine shipyard at Marinette, WI.5 The GD
LCS design is built at the Austal USA shipyard at Mobile, AL.6 Odd-numbered LCSs (i.e., LCS-
1, LCS-3, LCS-5, and so on) use the Lockheed design; even numbered LCSs (i.e., LCS-2, LCS-4,
LCS-6, and so on) use the GD design.
LCSs in Service
LCS-1 entered service on November 8, 2008; LCS-2 entered service on January 16, 2010; and
LCS-3 entered service on August 6, 2012. LCS-4 is scheduled for delivery in July 2013.

5 Marinette Marine is a division of the Fincantieri Marine Group, an Italian shipbuilding firm. In 2009, Fincantieri
purchased Manitowoc Marine Group, the owner of Marinette Marine and two other shipyards. Lockheed is a minority
investor in Marinette Marine.
6 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, with Austal Limited as the majority owner.
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Navy Littoral Combat Ship (LCS) Program: Background and Issues for Congress

Figure 1. Lockheed LCS Design (Top) and General Dynamics LCS Design (Bottom)

Source: Source: U.S. Navy file photo accessed by CRS at http://www.navy.mil/list_all.asp?id=57917 on January 6,
2010.
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Mission Package Deliveries Initial Operational Capability (IOC) Dates
Initial versions of LCS mission modules have been delivered and are undergoing testing. The
Navy stated in its FY2014 budget submission that the SUW and MCM mission packages are
scheduled to achieve IOC in late FY2014, and that the ASW mission package is scheduled to
achieve IOC in late FY2016.7 The Navy testified on May 8, 2013, that
Two Mine-Countermeasure (MCM) Mission Modules (MM), four Surface Warfare (SUW)
MMs; and one Anti-Submarine Warfare MM have been delivered. The Surface Warfare and
Anti-Submarine Warfare Mission Modules remain on schedule to reach Initial Operational
Capability (IOC) in Fiscal Year 2014 and Fiscal Year 2016, respectively. Sequestration,
combined with recent Congressional marks and rescissions, will impact the operational test
schedule for the Mine Countermeasures MM. The Navy is working to minimize this impact
and will advise the defense committees of any changes to meeting the IOC date for this
essential capability.8
Manning and Deployment Concept
The LCS employs automation to achieve a reduced-sized core crew (i.e., sea frame crew). The
program’s aim was to achieve a core crew of 40 sailors, although the Navy reportedly is
considering increasing that number to something closer to 50.9 Another 35 to 40 additional sailors
are to operate the ship’s embarked aircraft (about 15 sailors) and mission packages (about 25
sailors), which would make for a total crew of about 75 to 80 (if the core crew remains at 40),
compared to more than 200 for the Navy’s frigates and about 300 (or more) for the Navy’s current
cruisers and destroyers. The lead ship in the program, LCS-1, will reportedly begin an
approximately eight-month deployment to Singapore in March 2013 with an initial crew of 91.10
The Navy plans to maintain three LCS crews for each two LCSs, and to keep one of those two
LCSs continuously underway—a plan Navy officials refer to as “3-2-1.” Under the 3-2-1 plan,
LCSs are to be deployed for 16 months at a time, and crews are to rotate on and off deployed
ships at four-month intervals.11 The 3-2-1 plan will permit the Navy to maintain a greater
percentage of the LCS force in deployed status at any given time than would be possible under
the traditional approach of maintaining one crew for each LCS and deploying LCSs for six or
seven months at a time. The Navy plans to forward-station up to four LCSs in the Western Pacific
at Singapore, and up to eight LCSs in the Persian Gulf at Bahrain.

7 Department of Defense, Department of Defense Fiscal Year (FY) 2014 President’s Budget Submission, Navy
Justification Book Volume 2 of 5, Research, Development, Test & Evaluation, Navy Budget Activity 4
, April 2013, page
451 (pdf page 483 of 932), bottom line of schedule chart.
8 Statement of The Honorable Sean J. Stackley, Assistant Secretary of the Navy (Research, Development and
Acquisition) and Vice Admiral Allen G. Myers, Deputy Chief of Naval Operations for Integration of Capabilities and
Resources and Vice Admiral Kevin M. McCoy, Commander, Naval Sea Systems Command, Before the Subcommittee
on Seapower of the Senate Armed Services Committee on Department of the Navy Shipbuilding Programs, May 8,
2013, p. 13.
9 See, for example, Christopher P. Cavas, “U.S. Navy Boosting LCS Core Crew Up To 50%,” Defense News, July 2,
2012: 8.
10 U.S. Pacific Fleet Public Affairs, “USS Freedom to Conduct Maiden Deployment to the Asia-Pacific,” Navy News
Service
, February 27, 2012.
11 See, for example, Grace Jean, “Buying Two Littoral Combat Ship Designs Saves the Navy $600 Million, Official
Says,” NationalDefenseMagazine.org, January 12, 2011.
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Unit Procurement Cost Cap
LCS sea frames procured in FY2010 and subsequent years are subject to a unit procurement cost
cap. The legislative history of the cost cap is as follows:
• The cost cap was originally established by Section 124 of the FY2006 National
Defense Authorization act (H.R. 1815/P.L. 109-163 of January 6, 2006). Under
this provision, the fifth and sixth ships in the class were to cost no more than
$220 million each, plus adjustments for inflation and other factors.
• The cost cap was amended by Section 125 of the FY2008 National Defense
Authorization Act (H.R. 4986/P.L. 110-181 of January 28, 2008). This provision
amended the cost cap to $460 million per ship, with no adjustments for inflation,
and applied the cap to all LCSs procured in FY2008 and subsequent years.
• The cost cap was amended again by Section 122 of the FY2009 Duncan Hunter
National Defense Authorization Act (S. 3001/P.L. 110-417 of October 14,
2008). This provision deferred the implementation of the cost cap by two years,
applying it to all LCSs procured in FY2010 and subsequent years.
• The cost cap was amended again by Section 121(c) and (d) of the FY2010
National Defense Authorization Act (H.R. 2647/P.L. 111-84 of October 28,
2009). The provision adjusted the cost cap to $480 million per ship, excluded
certain costs from being counted against the $480 million cap, included
provisions for adjusting the $480 million figure over time to take inflation and
other events into account, and permitted the Secretary of the Navy to waive the
cost cap under certain conditions.12 The Navy states that after taking inflation
into account, the $480 million figure equates, as of December 2010, to $538
million.
Acquisition Cost
The Department of Defense’s (DOD’s) December 31, 2012, Selected Acquisition Report (SAR)
for the LCS program, which was released in late May 2013, estimates the total acquisition cost
for 52 LCS sea frames at $33,955.5 million (i.e., about $40.0 billion) in then-year dollars. This
figure includes $3,387.1 million in research and development costs (including funds for the
construction of LCS-1 and LCS-2), $30,331.8 million in procurement costs for LCSs 3 through
52, and $236.6 million in military construction (MilCon) costs. In constant FY2010 dollars, these

12 Section 121(d)(1) states that the Secretary of the Navy may waive the cost cap if:
(A) the Secretary provides supporting data and certifies in writing to the congressional defense
committees that—
(i) the total amount obligated or expended for procurement of the vessel-
(I) is in the best interest of the United States; and
(II) is affordable, within the context of the annual naval vessel construction plan required
by section 231 of title 10, United States Code; and
(ii) the total amount obligated or expended for procurement of at least one other vessel
authorized by subsection (a) has been or is expected to be less than $480,000,000; and
(B) a period of not less than 30 days has expired following the date on which such certification and
data are submitted to the congressional defense committees.
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figures become $27,796.0 million, including $3,329.1 million in research and development costs,
$24,266.9 million in procurement costs, and $200.0 million in MilCon costs, respectively.13
The estimated total acquisition cost of $33,955.5 million in then-year dollars reported in the
December 31, 2012, SAR for the program is $3,485.0 million less than the total of $37,440.5
million in then-year dollars reported in the December 31, 2011, SAR for the program. The
estimated total acquisition cost of $27,796.0 million in constant FY2010 dollars reported in the
December 31, 2012, SAR for the program is $2,881.5 million less than the $30,677.5 million in
constant FY2010 dollars reported in the December 31, 2011, SAR for the program. The reduction
of the program from a planned total of 55 ships to a planned total of 52 ships accounts for part of
the reduction in the program’s estimated total acquisition cost since the December 31, 2011,
SAR.14
The December 31, 2012, SAR reports an average unit procurement cost (APUC) for ships 3
through 52 of $485.3 million in constant FY2010 dollars, which is about 5.0% less than the
APUC figure of $511.0 million in constant FY2010 dollars for ships 3 through 55 reported in the
December 31, 2011, SAR for the program.15
The December 31, 2012, SAR does not contain estimated acquisition costs for the planned total
of 64 LCS mission packages. The SAR for December 31, 2010, stated:
On February 18, 2011, USD(AT&L)16 conducted a Milestone B (MS B) Defense Acquisition
Board (DAB) for the seaframe portion of the LCS program. The decision of the DAB was to
separate the program into two separate and distinct programs with separate reporting
requirements. The Seaframe portion of the program is reported in this SAR as approved at
MS B. The Mission Module portion of the program will begin reporting when it receives its
Milestone B decision.17
Operation and Support (O&S) Cost
DOD’s December 31, 2012, SAR for the sea frame portion of the LCS program estimates the total
life-cycle operation and support (O&S) cost for 55 sea frames (the previously planned total
number),18 each operated for 25 years, at $86,792.6 million (i.e., about $86.8 billion) in then-year
dollars, or $50,334.6 million in constant FY2010 dollars. Included in this estimate are costs for 83
LCS sea frame crews (i.e., 3 crews for every two ships—see “Manning and Deployment
Concept” above) consisting of 40 core crew members each. The SAR estimates the annual O&S
cost of a single LCS sea frame at $36.6 million in constant FY2010 dollars.19 These figures do not

13 Department of Defense, Selected Acquisition Report (SAR), LCS, as of December 31, 2012, p. 14.
14 Department of Defense, Selected Acquisition Report (SAR), LCS, as of December 31, 2012, pp. 31-32.
15 Department of Defense, Selected Acquisition Report (SAR), LCS, as of December 31, 2012, p. 29.
16 The Under Secretary of Defense (Acquisition, Technology, and Logistics)—DOD’s acquisition executive.
17 Department of Defense, Selected Acquisition Report (SAR), LCS, as of December 31, 2010, p. 4.
18 The December 31, 2012, states on page 42, “The Navy decision to reduce the procurement quantity of Seaframes
from 55 to 52 was announced in January 2013 and did not provide enough time to develop and approve an associated
Operating and Support (O&S) cost estimate. The updated O&S cost estimate reflecting the decrease in ship quantity
will be reported in next year’s SAR.”
19 Department of Defense, Selected Acquisition Report (SAR), LCS, as of December 31, 2012, p. 43.
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account for the Navy’s decision (see “Manning and Deployment Concept” above) to increase the
size of the LCS core crew to something more than 40.
The above estimated life-cycle O&S costs in the SAR do not include life-cycle O&S costs for 64
LCS mission modules and the additional crew members that would be embarked on LCSs to
operate them.
Major Program Developments
Growth in Sea Frame Procurement Costs
The Navy originally spoke of building LCS sea frames for about $220 million each in constant
FY2005 dollars. Costs for the first few LCSs subsequently more than doubled. Costs for
subsequent LCSs then came down under the current block buy contracts, to roughly $450 million
each in current dollars, which equates to roughly $380 million in constant FY2005 dollars, using
DOD’s budget authority deflator for procurement excluding pay, fuel, and medical.20 For a
detailed discussion of cost growth on the first few LCS sea frames from the FY2007 budget
through the FY2013 budget, see Appendix A.
2007 Program Restructuring and Ship Cancellations
The Navy substantially restructured the LCS program in 2007 in response to significant cost
growth and delays in constructing the first LCS sea frames. This restructuring led to the
cancellation in 2007 of four LCSs that were funded in FY2006 and FY2007. A fifth LCS, funded
in FY2008, was cancelled in 2008. These annual procurement quantities shown above in Table 1
reflect these cancellations (i.e., the five canceled ships no longer are shown in the annual
procurement quantities in this table). For details on the 2007 program restructuring and the
cancellation of the five LCSs funded in FY2006-FY2008, see Appendix B.
2009 Down Select Acquisition Strategy (Not Implemented)
On September 16, 2009, the Navy announced a proposed acquisition strategy under which the
Navy would hold a competition to pick a single design to which all LCSs procured in FY2010
and subsequent years would be built (i.e., carry out a design “down select”).21 Section 121(a) and

20 This deflator is shown in National Defense Budget Estimates for FY 2014, May 2013, Table 5-7 (pages 71-72). This
DOD budget reference document is also known as the “Green Book.”
21 The winner of the down select would be awarded a contract to build 10 LCSs over the five-year period FY2010-
FY2014, at a rate of two ships per year. The Navy would then hold a second competition—open to all bidders other
than the shipyard building the 10 LCSs in FY2010-FY2014—to select a second shipyard to build up to five additional
LCSs to the same design in FY2012-FY2014 (one ship in FY2012, and two ships per year in FY2013-FY2014). These
two shipyards would then compete for contracts to build LCSs procured in FY2015 and subsequent years.
Prior to the Navy’s announcement of September 16, 2009, the Navy had announced an acquisition strategy for LCSs to
be procured in FY2009 and FY2010. Under this acquisition strategy, the Navy bundled together the two LCSs funded
in FY2009 (LCSs 3 and 4) with the three LCSs to be requested for FY2010 into a single, five-ship solicitation. The
Navy announced that each LCS industry team would be awarded a contract for one of the FY2009 ships, and that the
prices that the two teams bid for both the FY2009 ships and the FY2010 ships would determine the allocation of the
three FY2010 ships, with the winning team getting two of the FY2010 ships and the other team getting one FY2010
ship. This strategy was intended to use the carrot of the third FY2010 ship to generate bidding pressure on the two
(continued...)
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(b) of the FY2010 National Defense Authorization Act (H.R. 2647/P.L. 111-84 of October 28,
2009) provided the Navy authority to implement this down select strategy. The Navy’s down
select decision was expected to be announced by December 14, 2010, the date when the two LCS
bidders’ bid prices would expire.22 The down select strategy was not implemented; it was
superseded in late December 2010 by the current dual-award acquisition strategy (see next
section). For additional background information on the down select strategy, see Appendix C.
2010 Dual-Award Acquisition Strategy (Implemented)
On November 3, 2010, while observers were awaiting the Navy’s decision under the down select
strategy (see previous section), the Navy notified congressional offices that it was prepared to
implement an alternative dual-award acquisition strategy under which the Navy would forego
making a down select decision and instead award each LCS bidder a 10-ship block buy contract
for the six-year period FY2010-FY2015, in annual quantities of 1-1-2-2-2-2.23 The Navy stated
that, compared to the down select strategy, the dual-award strategy would reduce LCS
procurement costs by hundreds of millions of dollars. The Navy needed additional legislative
authority from Congress to implement the dual-award strategy. The Navy stated that if the
additional authority were not granted by December 14, the Navy would proceed to announce its
down select decision under the acquisition strategy announced on September 16, 2009. On
December 13, 2010, it was reported that the two LCS bidders, at the Navy’s request, had extended
the prices in their bids to December 30, 2010, effectively giving Congress until then to decide
whether to grant the Navy the authority needed for the dual-award strategy.
The Navy’s November 3, 2010, proposal of a dual-award strategy posed an issue for Congress of
whether this strategy would be preferable to the down select strategy, and whether Congress
should grant the Navy, by December 30, 2010, the additional legislative authority the Navy would
need to implement the dual-award strategy. On December 14, 2010, the Senate Armed Services
Committee held a hearing to review the proposed dual-award strategy. Congress granted the Navy
authority to implement the dual-award strategy in Section 150 of H.R. 3082/P.L. 111-322 of
December 22, 2010, an act that, among other things, funded federal government operations
through March 4, 2011.

(...continued)
industry teams for both the FY2009 ships and the FY2010 ships.
The Navy stated that the contracts for the two FY2009 ships would be awarded by the end of January 2009. The first
contract (for Lockheed Martin, to build LCS-3) was awarded March 23, 2009; the second contract (for General
Dynamics, to build LCS-4) was awarded May 1, 2009. The delay in the awarding of the contracts past the end-of-
January target date may have been due in part to the challenge the Navy faced in coming to agreement with the industry
teams on prices for the two FY2009 ships that would permit the three FY2010 ships to be built within the $460 million
LCS unit procurement cost cap. See also Statement of RADM Victor Guillory, U.S. Navy Director of Surface Warfare,
and RADM William E. Landay, III, Program Executive Officer Ships, and Ms. E. Anne Sandel, Program Executive
Officer Littoral and Mine Warfare, before the Subcommittee on Seapower and Expeditionary Forces of the House
Armed Services Committee [hearing] on the Current Status of the Littoral Combat Ship Program, March 10, 2009, pp.
7-8.
22 The Navy had earlier planned to make the down select decision and award the contract to build the 10 LCSs in the
summer of 2010, but the decision was delayed to as late as December 14. (The final bids submitted by the two LCS
contractors were submitted on about September 15, and were valid for another 90 days, or until December 14.)
23 For more on block buy contracts, see CRS Report R41909, Multiyear Procurement (MYP) and Block Buy
Contracting in Defense Acquisition: Background and Issues for Congress
, by Ronald O'Rourke and Moshe Schwartz.
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On December 29, 2010, using the authority granted in H.R. 3082/P.L. 111-322, the Navy
implemented the dual-award strategy, awarding a 10-ship, fixed-price incentive (FPI) block-buy
contract to Lockheed, and another 10-ship, FPI block-buy contract to Austal USA. In awarding
the contracts, the Navy stated that LCSs to be acquired under the two contracts are to have an
average unit cost of about $440 million, a figure well below the program’s adjusted unit
procurement cost cap (as of December 2010) of $538 million (see “Unit Procurement Cost Cap”).
The 20 ships to be acquired under the two contracts have a target cost and a higher ceiling cost.
Any cost growth above the target cost and up to the ceiling cost would be shared between the
contractor and the Navy according to an agreed apportionment (i.e., a “share line”). Any cost
growth above the ceiling cost would be borne entirely by the contractor. The Navy stated that, as
a worst case, if the costs of the 20 ships under the two FPI contracts grew to the ceiling figure and
all change orders were expended, the average cost of the ships would increase by about $20
million, to about $460 million, a figure still well below the adjusted cost cap figure of $538
million.24
The Navy on December 29, 2010, technically awarded only two LCSs (one to each contractor).
These ships (LCS-5 and LCS-6) are the two LCSs funded in FY2010. Awards of additional ships
under the two contracts are subject to congressional authorization and appropriations. The Navy
states that if authorization or sufficient funding for any ship covered under the contracts is not
provided, or if the Navy is not satisfied with the performance of a contractor, the Navy is not
obliged to award additional ships covered under contracts. The Navy states that it can do this
without paying a penalty to the contractor, because the two block-buy contracts, unlike a typical
multiyear procurement (MYP) contract, do not include a provision requiring the government to
pay the contractor a contract cancellation penalty.25
For additional background information on the dual-award strategy, see Appendix D.
Changes in Mission Package Equipment
The Navy since January 2011 has announced changes to the composition of all three LCS mission
packages. The concept for the ASW package, and consequently the equipment making up the
package, has changed substantially. The equipment making up the MIW package has changed
somewhat, partly as a result of the testing of the MIW systems being developed for the package.
An Army-developed missile called Non-Line of Sight Launch System (NLOS-LS) that was to be
used in the SUW package was canceled by the Army and has been replaced for the next few years
in the LCS SUW module by a shorter-ranged missile called the Griffin, pending the eventual
acquisition of a follow-on to the Griffin missile with longer range.
2012 Establishment of LCS Council
On August 22, 2012, Admiral Jonathan Greenert, the Chief of Naval Operations, established an
LCS Council headed by four vice admirals to address challenges faced by the LCS program for
supporting the planned deployment of an LCS to Singapore beginning in 2013. The challenges

24 Source: Contract-award information provided to CRS by navy office of Legislative Affairs, December 29, 2010.
25 Source: Navy briefing to CRS and the Congressional Budget Office (CBO) on December 15, 2010. For a press
article on this issue, see Cid Standifer, “FY-11 LCS Contracts On Hold Because Of Continuing Resolution,” Inside the
Navy
, March 14, 2011.
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were identified in four internal Navy reviews of the LCS program (two of them based on
wargames) that were completed between February and August of 2012. The memorandum from
the CNO establishing the council states that the council will be “empowered ... to drive action
across the acquisition, requirements and Fleet enterprises of the Navy.” The council was given an
immediate focus of developing and implementing an LCS plan of action and milestones by
January 31, 2013. The memorandum also required the council to develop a charter for its
operations within 14 days.26 The charter for the council, dated September 2012, states that
The LCS program’s unique requirements, rapid acquisition, and innovative manning and
sustainment strategies pose unique challenges as LCS is introduced to the fleet. The Council
will rapidly and decisively resolve impediments to the LCS program’s success, determine the
way forward for the future evolution of LCS capabilities, and inform senior Navy civilian
and uniformed leadership of key issues which require decisions at the highest level....
The LCS Council will drive actions across the requirements, acquisition, and Fleet
enterprises of the Navy to ensure the successful procurement, development, manning,
training, sustainment, and operational employment of the LCS Class ships, their associated
Mission Packages, and shore infrastructure.
The LCS Council provides oversight and direction of the efforts required at all echelons of
the administrative chain of command to achieve successful fleet introduction of LCS, to
identify and resolve challenges and impediments, and to evolve the program. The Council is
constituted and empowered to bridge “gaps and seams” that may exist or arise between
various LCS stakeholders, warfare and mission communities, and supporting activities.27
Controversy and Proposals to Truncate the Program
The LCS program has become controversial due to cost growth, design and construction issues
with the lead ships built to each design, concerns over the ships’ ability to withstand battle
damage, and concerns over whether the ships are sufficiently armed and will be able to perform
their stated missions effectively. Some observers, citing one or more of these issues, have
proposed truncating the LCS program to either 24 ships (i.e., stopping procurement after
procuring all the ships covered under the two block buy contracts) or to some other number well
short of 52. For example, a May 2012 report by the Center for a New American Security (CNAS)
recommended stopping the LCS program in FY2017 after procuring a total of 27 ships,28 and an
April 2011 report by the Heritage Foundation recommended a future Navy fleet with a total of 28
small surface combatants—a category that appears to include both Oliver Hazard Perry (FFG-7)

26 Memorandum from Chief of Naval Operations to Director, Navy Staff, dated August 22, 2012, on Lilttoral Combat
Ship (LCS) Council, posted at InsideDefense.com (subscription required), August 24, 2012. See also Defense Media
Activity—Navy, “CNO Establishes LCS Council,” Navy News Service, August 22, 2012; Christopher P. Cavas, “U.S.
Navy Creates LCS ‘Council’ To Guide Development,” DefenseNews.com, August 22, 2012; Megan Eckstein, “CNO
Establishes LCS Council To Review Recent Data, Lessons Learned,” Inside the Navy, August 27, 2012; Mike
McCarthy, “Navy Establishes LCS Council,” Defense Daily, August 27, 2012.
27 Littoral Combat Ship Council Charter, September 2012, posted at InsideDefense.com (subscription required),
September 28, 2012, p. 3.
28 David W. Barno, et al, Sustainable Pre-eminence[:] Reforming the U.S. Military at a Time of Strategic Change,
Center for a New American Security, May 2012, pp. 35, 67. CNAS made a similar recommendation in a report it
published in October 2011 (David W. Barno, et al, Hard Choices[:] Responsible Defense in an Age of Austerity, Center
for a New American Security, October 2011, pp. 13, 14, 15, 16, 18, 20, 21, 34, 35. The report recommends procuring a
total of 27 LCSs under three DOD budget scenarios, or a total of 12 LCSs under a fourth DOD budget scenario.)
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frigates (which are being phased out of service) and LCSs.29 Other observers have proposed down
selecting to a single LCS design (i.e., continuing production of only one of the two designs) after
the 24th ship.
The LCS is by no means the only Navy shipbuilding program to have encountered controversy
over the years; several others have experienced controversy for one reason or another, with recent
examples including the Gerald R. Ford (CVN-78) class aircraft carrier program (due to cost
growth),30 the Zumwalt (DDG-1000) class destroyer program (due to affordability and technical
risk),31 and the San Antonio (LPD-17) class amphibious ship program (due to cost growth and
construction quality issues).32 In response to criticisms of the LCS program, the Navy has
acknowledged certain problems and stated that it was taking action to correct them, disputed
other arguments made against the program, and maintained its support for continuing the
program. The August 2012 establishment of the LCS Council (see “2012 Establishment of LCS
Council” above) might be viewed as a Navy response to certain criticisms of the program made
by some observers.
Reported comments from some Navy officials suggest that the Navy might be open to changing
the design of one or both LCS variants after the 24th ship or perhaps down selecting to a single
LCS design after the 24th ship. A March 17, 2013, press report states:
Whatever the future holds for the U.S. Navy’s Littoral Combat Ship (LCS) program, it’s
becoming less likely the service will continue to buy both variants after 2015.
The successor may either be the Freedom-class [LCS-1 type] or Independence-class [LCS-2
type] designs now being built, an up-gunned, multimission variant of the current ships, or a
completely different type of ship, according to senior Navy officials familiar with high-level
thinking.
The up-gunned, multimission variant would perhaps be similar to the “international”
versions that both builders have developed to entice foreign customers.
A recommended re-evaluation of the next flights of LCSs—beyond the 24 ships now
delivered, under construction, on order or with contract options—is only part of a classified
memo, “Vision for the 2025 Surface Fleet,” submitted late last year by the head of Naval
Surface Forces, Vice Adm. Tom Copeman, to Chief of Naval Operations Adm. Jon Greenert.
The Navy’s current plans call for building 52 littoral combat ships, so if the service opted to
go in a different direction it would essentially cut the LCS program of record in half....
Separate from the vision statement, the Navy has been strongly considering a downselect to a
single LCS combat system in 2015, doing away with one of the program’s most glaring
inefficiencies. Consideration of a downselect to a single design also has been underway.

29 A Strong National Defense[:] The Armed Forces America Needs and What They Will Cost, Heritage Foundation,
April 5, 2011, pp. 25-26.
30 For more on the CVN-78 program, see CRS Report RS20643, Navy Ford (CVN-78) Class Aircraft Carrier Program:
Background and Issues for Congress
, by Ronald O'Rourke.
31 For more on the DDG-1000 program, see CRS Report RL32109, Navy DDG-51 and DDG-1000 Destroyer
Programs: Background and Issues for Congress
, by Ronald O'Rourke.
32 For more on the LPD-17 program, see CRS Report RL34476, Navy LPD-17 Amphibious Ship Procurement:
Background, Issues, and Options for Congress
, by Ronald O'Rourke.
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Lockheed Martin makes the monohull Freedom-class ships and Austal USA builds the
aluminum trimaran-hulled Independence-class ships.
Copeman’s call to re-evaluate the LCS program seems to take the discussion several steps
further. Critics have long called for something other than the existing designs to answer the
Navy’s need for a smaller-than-a-destroyer, relatively inexpensive, surface combatant, even
as the service’s top leaders have strongly advocated going forward with the existing ships.
Budget pressures are only adding to the need to neck-down on the program and reduce
current and future costs.
Sources familiar with the thinking behind the vision said Copeman is not necessarily
advocating for an entirely new ship, but would consider a modified version of the existing
designs. The new ship would drop much of the modularity inherent in the LCS concept,
which is intended as a reconfigurable, single-mission ship fitted with mission modules
tailored to specific functions such as anti-mine, anti-surface and anti-submarine warfare.
While the LCS concept envisions several types of modules, the Navy’s most pressing need is
to field a mine countermeasure module to replace aging minesweepers and their equipment.
With 24 littoral combat ships in service, and with a mature mine warfare package, fleet
planners will have considerably more anti-mine capability than is currently budgeted.
The new ship, sources said, could have a 16-cell vertical launch system able to launch
surface-to-air or surface-to-surface missiles, an improved sensor suite and more installed
power. Such a ship might be 500 to 1,000 tons larger than the roughly 3,000-ton Freedom
and Independence ships.
Another option for a medium-sized surface combatant could be for a scaled-down DDG 51,
perhaps without an Aegis system.
Several European frigate designs would seem to answer some of the requirements, but a
foreign design is not being considered at this point, although that is a possibility.
A key requirement would be to keep the cost of the new ship roughly where today’s LCS-
plus-mission packages are, somewhere in the $600 million to $700 million per ship range or
less, one source said, although no cost figures are presented in the vision memo.
Better capabilities at lesser cost is a driving theme of the vision, sources said—a concept in
line with numerous public statements by top Navy officials. Affordability of the fleet’s 30-
year shipbuilding plan long has been in question, and the new vision seeks to add more
adaptable designs to the fleet while not driving up costs.33
An April 1, 2013, press report states that
the U.S. Navy should prepare for more changes to its LCS hulls, says the head of the LCS
Council of high-powered admirals overseeing the program.
“We may end up with significantly different-looking ships,” Vice Adm. Richard Hunt, the
Navy director of staff and LCS Council head, tells the Aviation Week Intelligence Network.

33 Christopher P. Cavas, “U.S. Navy Weighs Halving LCS Order,” DefenseNews.com, March 17, 2013.
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“Everything is on the table,” he says. “At least everything ought to be on the table for
consideration.”
Indeed, he says, it makes sense for the hulls to evolve as the Navy learns more about its new-
ship concept and builds the LCS fleet....
Recent speculation points to lower numbers, but Hunt says there could be more. “I want to
make sure we continue to 55 or 52 or 110 or 165—whatever makes sense based on what we
learn,” Hunt says. “Does it [the LCS hull] have to look exactly the same? I can’t look you in
the eye and say, ‘innovation, change—let’s go for it,’ and say the sea-frame has got to be the
same. I hope that it’s not. The question is when and where [to change the frames], and we’re
looking at everything all the time. We haven’t looked at it from an acquisition perspective,
we’ve looked at it from commonality, from life cycle costs, those kinds of things. And it’s
premature to make any comments on those things.”
He notes there have already been changes between the first ships of both versions and their
immediate successors. “I want to make changes,” he says. “We are finding things that are not
the way we like when we operate them and we’re going aggressively after them.”
The Navy is treating the first ships as research and development models, he points out, and
the service needs to operate each of them more to get additional data before making any
decisions to modify hulls, neck down to one design or make other changes.
“To just take a look at a ship when it sits there is kind of [like] looking at blueprints,” he
says. “What I want is to run both of them before we start making premature decisions.”34
FY2014 Funding Request
The Navy’s proposed FY2014 budget requests $1,793.0 million for procuring four LCS sea
frames (LCSs 17 through 20), and $143.1 million in procurement funding for procuring LCS
mission modules.
Issues for Congress
Impact of March 1, 2013, Sequester on FY2013 Funding
One potential issue for Congress concerns the impact on the LCS program of the March 1, 2013,
sequester on FY2013 funding and unobligated prior-year funding for the program. In its prepared
statement for a May 8, 2013, hearing on Navy shipbuilding programs before the Seapower
subcommittee of the Senate Armed Services Committee, the Navy stated that
The Surface Warfare and Anti-Submarine Warfare Mission Modules [MMs] remain on
schedule to reach Initial Operational Capability (IOC) in Fiscal Year 2014 and Fiscal Year
2016, respectively. Sequestration, combined with recent Congressional marks and
rescissions, will impact the operational test schedule for the Mine Countermeasures MM.

34 Michael Fabey, “LCS Hulls Will Continue To Evolve, Council Chief Says,” Aerospace Daily & Defense Report,
April 1, 2013: 4. Material in brackets as in original.
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The Navy is working to minimize this impact and will advise the defense committees of any
changes to meeting the IOC date for this essential capability.35
In the discussion portion of the hearing, Sean Stackley, the Assistant Secretary of the Navy for
Research, Development and Acquisition (i.e., the Navy’s acquisition executive), stated that
We're still early in production [of the LCSs being acquired under the block buy contracts],
but we see the learning that we expect to see. We see the investment by the shipyards that
they needed to make, and we're seeing them leverage the block buys with the vendor base in
order to get savings in material as well.
So production is stable. Sequestration, frankly, pulled the margins out of those [LCS
construction] budgets so where we held a margin above the target to account for a potential
risk, sequestration pulled much of that margin out. Sequestration pulled out much of the
government’s reserve for change orders that we included in our budget, but frankly, we have
locked down requirements to the extent that we are not burning dollars on change orders in
production. So we're on a good path on the ship production side and really working out, I'll
call it the learning that goes with the investments that the shipyards have made in the early
deliveries.
On the mission package side, we're in developmental testing across the three mission
packages. LCS, one, [sic: LCS-1] deployed with an early increment of the surface warfare
capability. The mine countermeasure mission package in the first statement [sic: increment]
of the mine countermeasure mission package and surface warfare mission package is
scheduled the [sic: for] IOC next year.
In terms of sequestration impacts, the dollars that we have lost in research and development
to support those development efforts are likely pushing those IOCs into 2015. So if I have—
if I have a plea for the Congress [it is] is to recognize that it’s difficult to hold on to
developmental schedules when you suffer these types of setbacks in your funding. And so I
would ask that we do not compound that issue in marking the 2014 budget.
Actually, let’s sit down and take a look at what we need in terms of completing that
development so we can, in fact, IOC those systems that we need desperately today.
[The] Mine counter mission package is a priority for the Navy. Our capability today with the
legacy [mine warfare] ships is extremely limited and we've got to get increased capability
and capacity to deal with a potential threat in the mine warfare area.36
Potential Impact of Possible Late 2013/Early 2014 Sequester on
FY2014 Funding

Another potential issue for Congress concerns the potential impact on the LCS program of a
possible sequester on FY2014 funding (and unobligated prior-year funding) for the program that

35 Statement of The Honorable Sean J. Stackley, Assistant Secretary of the Navy (Research, Development and
Acquisition) and Vice Admiral Allen G. Myers, Deputy Chief of Naval Operations for Integration of Capabilities and
Resources and Vice Admiral Kevin M. McCoy, Commander, Naval Sea Systems Command, Before the Subcommittee
on Seapower of the Senate Armed Services Committee on Department of the Navy Shipbuilding Programs, May 8,
2013, p. 13.
36 Transcript of hearing.
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might occur in late 2013 or early 2014 under the terms of the Budget Control Act of 2011 (S.
365/P.L. 112-25 of August 2, 2011).
Should The Program Be Truncated to 24 Ships or Some Other
Number Well Short of 52?

A key issue for Congress on the LCS program is whether the program should be truncated to 24
ships (i.e., after procuring all the ships covered under the two block buy contracts) or to some
other number well short of 52.
Supporters of truncating the program could argue one or more of the following:
Alternative Potential Ways To Perform Missions. There are alternative and
potentially more cost effective ways to perform the LCSs’ three primary missions
of countering mines, small boats, and diesel-electric submarines, particularly in
littoral waters. Possibilities include extending the service lives of existing mine
warfare ships and mine warfare helicopters, equipping cruisers and destroyers
(and their embarked helicopters and unmanned aerial vehicles) with small anti-
ship weapons for countering small boats, and using antisubmarine aircraft as well
as attack submarines, cruisers, and destroyers (and their embarked helicopters
and unmanned vehicles) to counter submarines.37 The LCS’s secondary missions
could similarly be performed by other platforms, including Joint High Speed
Vessels (JHSVs), amphibious ships, cruisers and destroyers, and attack
submarines.
Procurement cost growth. LCS sea frames have turned out to be much more
expensive to procure than the original target of $220 million each in constant
FY2005 dollars. This procurement cost growth makes the LCS program less cost
effective than originally envisaged as a way of performing the program’s three
primary missions.
Potential O&S cost growth. The possible increase in LCS core crew size that
the Navy is considering would increase annual operating and support (O&S)
costs for LCSs. Growth in LCS annual O&S costs would make the LCS program
less cost effective than originally envisaged as a way of performing the
program’s three primary missions.
Potential cost of fixing design and construction issues. The lead ships built to
each LCS design have experienced a variety of design and construction issues.
Fixing these issues on follow-on LCSs could make them more expensive to

37 Prior to announcing the LCS in November 2001, the Navy did not perform a formal study (which at the time might
have been called an analysis of multiple concepts) to show through rigorous analysis that a small, fast, modular surface
ship like the LCS was the most cost-effective way to perform the program’s three primary missions. The Navy did not
perform such a study until after the LCS program was announced; the results of this after-the-fact study could be
tainted by the knowledge that the Navy had already announced the LCS program. For additional discussion, see, for
example, pages 35-40 of the October 28, 2004, update of CRS Report RL32109, Navy DDG-51 and DDG-1000
Destroyer Programs: Background and Issues for Congress
, by Ronald O'Rourke, Navy DD(X) and LCS Ship
Acquisition Programs: Oversight Issues and Options for Congress, by Ronald O’Rourke
, out of print and available
directly from the author. (In 2004, CRS Report RL32109 covered both the DD(X) destroyer program—now called the
DDG-1000 destroyer program—and the LCS program.)
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procure, which would make the LCS program less cost effective than originally
envisaged as a way of performing the program’s three primary missions.
Survivability of LCS design. The LCS was designed to a Level I+ survivability
standard, which is less than the Level II standard of the Navy’s existing Oliver
Hazard Perry (FFG-7) frigates, which are among the ships that LCSs effectively
are to replace in the Navy’s force structure.38
Comparison with foreign frigates and corvettes. In terms of amount of
weaponry and other ship characteristics, the LCS does not fare well in
comparisons with certain frigate and corvette designs operated by other navies.
Ability to perform missions. A July 14, 2012, press report states that initial
Navy experience with the lead LCSs has led to questions in the Navy about the
prospective ability of LCSs to effectively perform certain missions.39
Changing mission priorities. In the years that have passed since the LCS
program was first announced in November 2001, countering China’s maritime
military modernization effort has become an increasing concern. Countering
improved Chinese maritime military forces will involve procuring ships (such as
destroyers and attack submarines) that are oriented toward ballistic missile
defense, anti-ship cruise missile defense, countering larger surface ships, and
countering submarines that are operating far from shore as well as in littoral
waters.40 The LCS is not optimized for most of these missions. The LCS’s three
primary missions of countering mines, small boats, and diesel-electric
submarines, particularly in littoral waters, remain valid, but in a period of

38 Navy surface ships traditionally have been designed to one of three survivability standards, called Level I (low),
Level II (moderate), and Level II (high). Aircraft carriers, cruisers, and destroyers are designed to Level III. Frigates,
amphibious ships, and certain underway replenishment (resupply) ships are designed to Level II. Other replenishment
ships, as well as mine warfare ships, patrol craft, and support ships are designed to Level I. Although future Navy ships
will be designed to a new set of survivability standards that the Navy recently established as a replacement for the
Level I/II/III standards, the LCS and prior classes of warships will continue to be covered under the Level I/II/III
standards.
The Navy plans to station up to eight LCSs at Bahrain, in the Persian Gulf. Currently, several Navy mine warfare ships
and patrol craft are stationed at Bahrain, and the Navy regularly deploys other ships, including aircraft carriers,
destroyers, frigates, and support ships, into the Gulf. In the late 1980s, two of the Navy’s FFG-7 class frigates were
severely damaged by enemy attack while operating in the Persian Gulf: In May 1987, the frigate Stark (FFG-31) was
severely damaged by two Iraqi cruise missiles, and in April 1988 the frigate Samuel B. Roberts (FFG-58) was severely
damaged by an Iranian mine. Both ships were saved by a combination of their built-in survivability features and the
damage-control actions of their crews. (The ships were later repaired and returned to service.) How the physical
structures of the two ships might have responded to the attacks if they had been designed to something less than a Level
II survivability standard is not certain. Navy ships operating in the Gulf today continue to face significant potential
threats from Iranian cruise missiles, mines, and other weapons. (See, for example, CRS Report R42335, Iran’s Threat
to the Strait of Hormuz
, coordinated by Kenneth Katzman.)
39 Christopher P. Cavas, “LCS: Quick Swap Concept Dead,” DefenseNews.com, July 14, 2012. See also Christopher P.
Cavas, “Maintenance Hurdles Mount for New USN Ship,” DefenseNews.com, July 23, 2012; Michael Fabey, “U.S.
Navy Finds More LCS-1 Issues During Special Trials,” Aerospace Daily & Defense Report, June 21, 2012: 2;
Christopher P. Cavas, “U.S. Navy’s LCS Yet to Fulfill Its Promise,” DefenseNews.com, April 15, 2012.
40 In 2008-2009, the Navy reversed its plans for procuring larger surface combatants (i.e., destroyers) in response to
changing mission priorities. As a result, the Navy truncated procurement of DDG-1000 destroyers, which were
originally designed with an emphasis on land-attack and operations in littoral waters, and restarted procurement of
DDG-51 destroyers, which the Navy judged to be more cost effective than a modified DDG-1000 would have been for
BMD, area air defense, and blue-water ASW operations. For further discussion, see CRS Report RL32109, Navy DDG-
51 and DDG-1000 Destroyer Programs: Background and Issues for Congress
, by Ronald O'Rourke.
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constrained defense spending, resources devoted to these missions must be
balanced against resources devoted to ships with mission orientations that are
more closely aligned with the goal of countering China’s improving maritime
military capabilities.
Opponents of truncating the LCS program to 24 ships or some other numbers well short of 52
could argue one or more of the following:
Alternative Potential Ways To Perform Missions. Although there may be
alternative potential ways to perform the LCSs’ three primary missions of
countering mines, small boats, and diesel-electric submarines, particularly in
littoral waters, the LCS program was devised specifically to address these three
capability gaps and remains the most economical way of addressing them. Critics
of the LCS program cannot point to a rigorous study that shows a more cost
effective way for performing these three primary missions. Extending the lives of
existing mine warfare ships and mine warfare helicopters for more than a few
years may not be feasible, and the LCS can perform the mission more effectively.
Other types of ships, such as cruisers and destroyers, are already fully occupied
performing their own missions; assigning LCS missions to these ships would
reduce their capacity for performing their core missions.
Procurement cost growth. Although LCS sea frames have turned out to be
much more expensive to procure than the original target of $220 million each in
constant FY2005 dollars, the LCS remains a relatively inexpensive surface
combatant, and the program remains cost effective as a way of performing the
program’s three primary missions.
Potential O&S cost growth. Although increasing the LCS core crew would
increase annual operating and support (O&S) costs for LCSs, the increase would
not be that great, and the program would remain cost effective as a way of
performing the program’s three primary missions.
Potential cost of fixing design and construction issues. Fixing the LCSs’
design and construction issues will not substantially increase the procurement
cost of follow-on LCSs.
Survivability of LCS design. Although LCSs are not intended as direct
replacements for the Navy’s current patrol craft, mine warfare ships, and frigates,
they are to perform missions that in several cases are similar to those currently
performed by patrol craft, mine warfare ships, and frigates. The Navy decided to
design the LCS to what it calls a Level 1+ survivability standard, which is greater
than the Level I standard to which the Navy’s current patrol craft and mine
warfare ships were designed, and less than the Level II standard to which the
Navy’s current Oliver Hazard Perry (FFG-7) class frigates were designed. The
Navy believes that, after taking planned ship employment and specific potential
threats into proper account, a Level 1+ survivability standard is appropriate for
the LCS.41

41 See, for example, Michael Fabey, “LCS Council Chief Touts Ship Survivability Package,” Aerospace Daily &
Defense Report
, March 29, 2013: 5; Mike McCarthy, “Navy Continues Defense of LCS Survivability,” Defense Daily,
January 17, 2013: 6-7.
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Comparison with foreign frigates and corvettes. When assessed in terms of
ability to perform the LCS program’s three primary missions, the LCS fares well
in terms of weaponry and other ship features in comparisons with frigate and
corvette designs operated by other navies. The goal of the LCS program was not
to design a small warship with as much onboard weaponry as possible (a goal
that drives up procurement and operation and support costs), but rather to acquire
a ship that could most cost effectively perform the program’s three primary
missions. The LCS is cost effective because it is designed to carry the equipment
needed to perform its stated missions—nothing more and nothing less. Frigates
and corvettes operated by other navies in general cannot perform at least one of
the LCS’s three primary missions, and in some cases are equipped with systems
that are not needed to perform those missions.
Ability to perform missions. The July 14, 2012, press report stating that initial
Navy experience with the lead LCSs has led to questions in the Navy about the
prospective ability of LCSs to effectively perform certain missions is based on a
group of Navy studies and war games that were aimed at identifying what needs
to be done to ensure that the LCS can perform its missions. The studies, in other
words, were aimed at identifying problems, so that those problems could be
fixed. Fixing these problems will ensure that the LCS will be able to perform its
missions.42
Changing mission priorities. Although countering China’s maritime military
modernization effort has become an increasing concern in recent years, Iran’s
littoral anti-access/area denial (A2/AD) capabilities (including small boats,
mines, and diesel-electric submarines) remain a defense-planning concern. The
LCS’s ASW mission package will give the ship an ability to counter diesel-
electric submarines far from shore, not just in littoral waters, and an ability to
conduct ASW at higher speeds than other Navy surface combatants.43 The Navy
in recent years has also focused on missions such as peacetime engagement and
partnership-building and maritime security and intercept (including anti-piracy
operations)—missions that might be performed more cost effectively by LCSs
than by cruisers and destroyers.
Regarding the prospective ability of the LCS to perform missions, a July 14, 2012, press report
based on some of the internal Navy reviews of the LCS program that led to the August 2012
establishment of the LCS Council states:
The original idea for the littoral combat ship (LCS) envisioned modular mission packages
that could be rapidly swapped, so one ship could change missions easily from mine warfare,
for example, to anti-submarine warfare over the course of a single deployment.
But instead of taking just days to make the switch, it’s now apparent it could take weeks. An
LCS assigned to a particular operation will likely operate in a single “come-as-you-are”

42 Christopher P. Cavas, “LCS: Quick Swap Concept Dead,” DefenseNews.com, July 14, 2012. See also Christopher P.
Cavas, “Maintenance Hurdles Mount for New USN Ship,” DefenseNews.com, July 23, 2012; Michael Fabey, “U.S.
Navy Finds More LCS-1 Issues During Special Trials,” Aerospace Daily & Defense Report, June 21, 2012: 2;
Christopher P. Cavas, “U.S. Navy’s LCS Yet to Fulfill Its Promise,” DefenseNews.com, April 15, 2012.
43 For an article discussing the latter point, see Michael Fabey, “Module To Make LCS A Faster Sub Hunter, Official
Says,” Aerospace Daily & Defense Report, April 9, 2013: 2.
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configuration, requiring additional ships equipped with other mission modules to provide the
flexibility the concept once promised.
That’s one conclusion among many following a series of Navy exercises and reports
intended to take stock of LCS. Other conclusions criticize the ship as failing to match
capabilities inherent to the ships it would replace. The assessment aims to figure out what the
ship can and can’t do, how it should be employed, what kind of support it will need, and
what changes must be made to man and fight the ships without wearing out their small
crews.
These include a classified study ordered by Adm. Mark Ferguson, the vice chief of naval
operations; two war games carried out by U.S. Fleet Forces Command (USFFC) in Norfolk,
Va.; and the ongoing operating experiences of the two ships already in service....
The classified study, known as the OPNAV report (referring to staff reporting to the chief of
naval operations), was headed by Rear Adm. Samuel Perez. Beginning in January, Perez and
a 10-person team looked at all aspects of the fleet’s “readiness to receive, employ and
deploy” the LCS.
USFFC in January conducted a “sustainment war game” to understand the issues and risks in
manning and supporting an LCS across the Pacific Ocean—a key concern with the Freedom,
the first LCS, scheduled to deploy to Singapore in the spring of 2013. It will be the first time
an LCS has operated outside the Western Hemisphere.
Another war game, focusing on operations and war fighting, was held in mid-June. The
results of that effort are still being analyzed, Navy sources said.
While the Navy would not release the OPNAV report, a number of sources familiar with
both LCS and the report said it lays out in greater detail the problems and issues confronting
the entire LCS effort, including the concept of operations (CONOPS), manning shortages,
maintenance and training concerns, modularity and mission module issues, and commonality
problems between the two LCS variants.
It also cites problems with how the LCS is perceived in the fleet, how leadership presents
LCS capabilities, and the need to effect changes in virtually every operational area.
“As I looked at some of the draft documentation to say how we’re going to run LCS, what I
thought we needed to do was a rebaselining, understanding how much information we’ve
generated on how we’re going to operate these ships, and take that and build a foundation,”
said Rear Adm. Thomas Rowden, OPNAV’s director of surface warfare, during an interview
at the Pentagon. “I will call this a concept of employment, or CONEMP.”
Rowden is leading the work to coordinate and compile the LCS analytical efforts.
“The reality of it is, it’s time to step back and say, what did we get wrong here?”
CONOPS
Planners originally envisaged the LCS as a replacement for the fleet’s frigates, minesweepers
and patrol boats, but the new assessments conclude the ships are not equal to today’s frigates
or mine countermeasures ships, and they are too large to operate as patrol boats.
The LCS, according to the assessments, is not able to fulfill most of the fleet missions
required by the Navy’s primary strategy document, the “Cooperative Strategy for 21st
Century Seapower,” and included in a 2011 revision of the LCS CONOPS document.
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Equipped with a surface warfare or maritime security mission package, the ships were
judged capable of carrying out theater security cooperation and deterrence missions, and
maritime security operations, such as anti-piracy.
But the LCS vessels cannot successfully perform three other core missions envisioned for
them—forward presence, sea control or power projection missions—and they can provide
only limited humanitarian assistance or disaster relief operations, sources said.
The shortcomings are well known in the fleet, prompting a perception that service leaders are
looking for missions to fit LCS, rather than the other way around.
A key LCS failure identified by the OPNAV report, sources said, is its inability to effectively
defend against anti-ship cruise missiles (ASCMs), a weapon carried by hundreds of small,
fast-attack craft operated by virtually all potentially hostile navies....
The U.S. Navy’s requirements document for the LCS says it must be able to operate
offensively in multithreat environments—areas that would include the Arabian Gulf or the
Yellow Sea—but until a solution is found, the assessments call for a CONOPS more
consistent with the ships’ capabilities, and suggest the need for studies to increase LCS
combat power.
The Navy is continuing to look at ways to increase the ship’s weaponry and lethality. A
major gap is for a weapon to replace the Non-Line of Sight Launch System (NLOS-LS), a
surface-to-surface missile program canceled in 2010 that was to have given the LCS a
prodigious capability.
“I certainly have asked to take a look at Harpoon, if we can take the weight,” Rowden said.
“Also looking at the Griffin,” a small weapon being purchased for a trial installation on the
Freedom. “There are some other missiles that we’re looking at, but those are the two I can
talk about right now.”
The Harpoon is currently the Navy’s standard surface-to-surface missile, carried on
destroyers and cruisers. But adding such a missile would probably mean removing
something else to compensate for the additional weight. The Griffin is much smaller, but
doesn’t pack the Harpoon’s punch.
Rowden also has asked the Naval Sea Systems Command (NAVSEA) to study replacing the
57mm gun on both LCS designs with a 76mm weapon, similar to the weapon on today’s
frigates.
“It’s a larger gun, more range, certainly gives us a better opportunity to engage the enemy,”
Rowden said of the 76mm.
The trouble with that weapon is that it can fit on Freedom LCS 1-class ships, but not on the
narrow bow of the trimaran Independence LCS 2-class. “I don’t know if we can get it on
both hulls,” Rowden acknowledged.
Range is still another concern, because of capacity for both fuel and crew provisions.
Although the original CONOPS called for ships to operate at sea for at least 21 days, the
ships have storage capacity to only carry enough food for 14 days, according to sources
familiar with the classified report....
Eventually, all the effort will be gathered into the concept of employment, or CONEMP,
document.
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“It is not going to be a static document,” Rowden declared. “We’re going to be inputting
things, and as we learn things we’re going to make modifications to keep it relevant and
reflect experience.
“We’ve got folks from Fleet Forces Command, Pacific Fleet, Naval Surface Forces, Naval
Air Forces, NAVSEA, OPNAV and the manpower assessment team all working together to
try and understand what we’ve observed and what we have learned so we can have a good,
informed document with respect to this concept of employment,” Rowden said.
“My gut tells me we’ve got to get the manning squared away, then the training, sustainment
and maintenance will flow from that as we move forward,” he added. “We’ll get to a better
place to say these are the things we need to do to maximize the availability and capability of
the ships.”44
An August 2, 2012, Navy information paper responding to the above article states:
1. ASSERTION: The Mission Package quick-swap concept is dead.
RESPONSE: Each LCS will deploy with the Mission Package (MP) required to accomplish
the Combatant Commander (COCOM)-directed missions. As expected, if COCOMs direct a
MP swap, materiel staging and personnel movement will need to be planned and coordinated
in advance. The physical swap of MP equipment can occur in less than 96 hours, as the
requirement dictates.
2. ASSERTION: Planners originally envisaged LCS as a replacement for Frigates,
Minesweepers, and Patrol Boats, but new assessments conclude that the ships are not equal
to the legacy ships.
RESPONSE: While LCS will provide the capabilities and conduct the missions currently
performed by the FFG, MCM and PC type ships, LCS is not a direct class replacement for
any of these. It is a new ship type with distinct capabilities. LCS with its mission packages
will provide equal or greater capability than the legacy platforms whose missions it is
assuming.
3. ASSERTION: LCS vessels cannot successfully perform three other core missions
envisioned for them-forward presence, sea control or power projection.
RESPONSE: LCS will be able to perform all of the missions for which she was built. As the
ships transition from research and development assets to operational Fleet units, the ongoing
efforts to determine the infrastructure requirements and sustainment processes will be
implemented and provide the requisite support to enable the successful execution of these
missions.
4. ASSERTION: Key failure is inability to effectively defend against ASCMs.
RESPONSE: LCS, with its 3-D air search radar and highly effective Rolling Airframe
Missile, is at least as capable against the cruise missile threat as the CIWS-equipped FFG 7

44 Christopher P. Cavas, “LCS: Quick Swap Concept Dead,” DefenseNews.com, July 14, 2012. See also Tony
Capaccio, “Navy Ship Can’t Meet Mission, Internal Report Finds,” Bloomberg News, May 6, 2013; Christopher P.
Cavas, “Maintenance Hurdles Mount for New USN Ship,” DefenseNews.com, July 23, 2012; Michael Fabey, “U.S.
Navy Finds More LCS-1 Issues During Special Trials,” Aerospace Daily & Defense Report, June 21, 2012: 2;
Christopher P. Cavas, “U.S. Navy’s LCS Yet to Fulfill Its Promise,” DefenseNews.com, April 15, 2012.
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and significantly more capable that the Avenger class MCM and Cyclone Class PC, which
have no self-defense anti-cruise missile capability. LCS capability against ASCMs has been
demonstrated with two live firings of RAM from LCS against cruise missile targets, as well
as multiple tracking exercises and simulated ASCM engagements within the developmental
test window.
5. ASSERTION: CONOPS dictates ships operate at sea for 21 days but ship can only store
food for 14 days.
RESPONSE: The LCS CDD gives a 14-day threshold and a 30-day objective for
replenishment, which supports the expected 21-day underway cycles referenced in the
CONOPS. The CDD, not the CONOPS, is the governing document for all LCS
requirements. And as noted earlier, when operating within its normal speed range profile
(<15 knots), LCS has comparable endurance to an FFG 7.
6. ASSERTION: Navy is looking at ways to increase ship’s weaponry and lethality.
RESPONSE: Every Navy weapon, sensor, ship and aircraft system is continually being
reviewed and evaluated against current and future operations and threats to determine the
best mix of total combat power that can be brought to the fight. LCS is no exception to this
ongoing process.
7. ASSERTION: Major gap is the replacement of the Non-Line of Sight Launch System
(NLOS-LS).
RESPONSE: While the cancellation of NLOS was indeed a setback in bringing the surface-
to-surface missile to LCS, the modular design of LCS allows the Navy to select another
missile, without costly redesign. As an interim solution, the Griffin missile has already been
selected for incorporation until an extended range missile can be competitively awarded.45
Should There Be a Down Select to A Single LCS Design After the
24th Ship?

Another issue for Congress is whether there should be a down select to a single LCS design after
the 24th ship (i.e., whether production of only one of the two designs should be continued upon
completing the two block buy contracts in FY2015). The Navy’s FY2013 30-year (FY2013-
FY2042) shipbuilding plan, which was submitted to Congress on March 28, 2012 (i.e., when the
Navy was still planning a force of 55 LCSs, as opposed to the currently planned total of 52),
states that “The DoN [Department of the Navy] will continue to procure both versions of the
Littoral Combat Ship through FY2026 [i.e., through a total of 55 ships], and achieve the 55-ship
inventory objective in FY2029.”46 The Navy’s FY2014 30-year shipbuilding plan shows the
planned LCS procurement rate changing from four ships per year in FY2014-FY2015 (i.e., the
final two years of the two LCS block buy contracts) to two ships per year in FY2016-FY2018 and
three ships per year in FY2019-FY2026.

45 Navy information paper dated August 2, 2012, provided by Navy Office of legislative Affairs to CRS and CBO on
August 2, 2012.
46 U.S. Navy, Annual Report to Congress on Long-Range Plan for Construction of Naval Vessels for FY2013, April
2012, p. 16.
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Supporters of down selecting to a single design after the 24th ship might argue that it would be
uneconomical to continue production of two designs after FY2015 at the Navy’s planned
procurement rate of two ships or three ships per year (i.e., at a rate of 1 or 1.5 ships per year per
shipyard), and that maintaining ongoing competition between the two LCS builders through the
end of the LCS program would not be critical, because the 2010 competition between the two
LCS builders that resulted in the awarding of the two block buy contracts gave the Navy
information on competitive pricing for LCSs, a subsequent down select competition between the
two LCS builders in FY2015 would give the Navy additional information on competitive pricing
for LCSs, and the Navy would be able to use all this information to inform its negotiations with
the sole LCS builder through the end of the LCS program.
Opponents of down selecting to a single design after the 24th ship might argue that maintaining
competition between the two LCS builders would still be economical after FY2015, because the
rate of two ships per year is to be in place for only three years (FY2016-FY2018), after which the
Navy could maintain economical production at the planned rate of three ships per year by using
ongoing competition between the two LCSs builders to award the third ship each year to the
lower bidder. They might also argue that maintaining ongoing competition between the two LCS
builders through the end of the LCS program will be critical for the Navy to generate bargaining
leverage with the LCS builders in areas other than pricing, such as building ships on schedule,
ensuring high construction quality, and developing innovations in processes that can further
reduce production costs.
Technical Risk in LCS Program
Another potential oversight issue for Congress concerns the amount of technical risk in the LCS
program. The discussion below addresses this issue first with respect to the LCS sea frame, and
then with respect to LCS mission packages.
Sea Frame
March 2013 GAO Report
A March 2013 GAO report assessing DOD weapon acquisition programs stated:
Technology Maturity
Sixteen of the 19 critical technologies for both LCS Seaframes designs are mature and have
been demonstrated in a realistic environment. The three remaining technologies—LCS 1’s
overhead launch and retrieval system and LCS 2’s aluminum structure and trimaran hull—
are nearing maturity. The overhead launch and retrieval system has not yet demonstrated its
maturity by loading and offloading an actual mission module vehicle, though tests have been
completed with realistic models. LCS 1 is planned to deploy to Singapore in 2013, before the
system reaches full maturity. Program officials believe that LCS 2’s aluminum structure and
trimaran hull are mature as the ship is operational. However, an April 2010 independent
assessment did not reach the same conclusion, in part because of the inability to assure a 20-
year service life.
Design and Production Maturity
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The Navy started construction of LCS 1 and LCS 2 without a stable design and has had to
incorporate design changes on follow-on seaframes. LCS 1 and LCS 2 are still undergoing
testing and any issues found will need to be incorporated into the design of follow-on ships.
LCS 3 delivered in June 2012 and LCS 4 has experienced delays, but the program stated
these issues are resolved and will not impact follow-on construction schedules.
After approximately 30 months of operations, the Navy discovered cracks in the
superstructure and hull of LCS 1. The program office indicated that the cracks occurred
either in high stress areas or were due to poor workmanship. Program officials stated that all
cracks have been repaired and modifications to the design and processes have been made to
mitigate cracking on follow-on ships. The Navy also reported corrosion on both variants.
The corrosion on LCS 2 was due to insufficient insulation between the aluminum hull and
the steel water jet and the absence of a robust corrosion protection system. The Navy will
now use a corrosion protection system similar to the one found on odd numbered variants on
future even-numbered seaframes to mitigate the corrosion and will backfit it on existing
hulls. Corrosion was found on LCS 1 in the waterborne mission zone due in part to an
inadequate stern door seal. The Navy has made some design changes to limit corrosion on
follow-on ships.
Other Program Issues
According to Navy officials, 20 berths will be added to LCS 1 to support additional manning
for its deployment to Singapore in 2013. Adding crew and berthing can impact ship weight
and other resources such as storage and water supplies. The requirement to conduct a
Milestone C for the LCS seaframes was rescinded in October 2012. The next block-buy is
scheduled for fiscal 2016, although a review supporting a full rate production decision is not
planned until after fiscal 2019, when 24 of the planned 55 seaframes will already be
delivered, constructed, or under contract. Due to the complexities of the LCS program, the
Chief of Naval Operations established the LCS Council in August 2012 with a 3-star flag
officer membership, which is responsible for ensuring that the LCS class is ready to meet its
assigned capability and missions. The Council is expected to develop a plan of action with
completion dates by January 2013.
As requested, we reviewed whether individual subcontracting reports from the prime
contractor for the program were accepted on eSRS [Electronic Subcontracting Reporting
System]. The government uses subcontracting reports on eSRS as one method of monitoring
small business participation. As of December 2012, eSRS indicated that two of the
associated subcontracting reports for LCS Seaframes’ four contracts have been accepted.
Program Office Comments
In commenting on a draft of this assessment, the program office noted that LCS 3 was
delivered on target cost and ahead of schedule and LCS 5, 6, 7, and 8 have all successfully
accomplished production readiness and integrated baseline reviews. LCS 5 is approximately
53 percent complete, LCS 6 is approximately 49 percent complete, LCS 7 is approximately
37 percent complete and LCS 8 is approximately 24 percent complete. The next LCS
procurement is planned for fiscal year 2016 and the acquisition strategy governing the
procurement has not been determined. A Defense Acquisition Board will be conducted prior
to award of the next seaframe procurement. The program office also provided technical
comments, which were incorporated where deemed appropriate.47

47 Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-13-
294SP, March 2013, p. 96.
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December 2012 DOT&E Report
Regarding technical risk in developing and building the LCS sea frame, a December 2012 report
from DOD’s Director, Operational Test and Evaluation (DOT&E)—DOT&E’s annual report for
FY2012—states:
Seaframe
Freedom Variant (LCS 1 and 3):
—As reported in the FY11 Annual Report, the Navy discovered cracks in the hull and
superstructure of LCS 1 that required interim repairs as well as design changes. The Navy
made production changes to reduce cracking on LCS 3; cracking has not been observed to
date.
Independence Variant (LCS 2):
—As noted in the FY11 Annual Report, the Navy completed interim repairs on LCS 2
because of aggressive galvanic corrosion in the vicinity of water jets. The Navy is installing
a system to prevent corrosion on LCS 2 during the current PSA. An Impressed Current
Cathodic Protection system is planned for the water jet tunnels on LCS 4.
—The Navy continued to work through problems associated with the Twin Boom Extensible
Crane on LCS 2. Limited testing to date precludes further assessment of this variant.
• Both variants:
—Crew size can limit the mission capabilities of the ship. Core crew size provides little
flexibility to support more than one operation at a time; unplanned manning losses and
corrective maintenance further exacerbate the problem. The Navy is reviewing manning
levels and installing 20 additional bunks in LCS 1 for flexibility during its deployment, but is
not changing the final manning levels.
—Ship operations at high speeds cause vibrations that make accurate use of the 57 mm gun
very difficult. Insufficient operator training and proficiency also appear to have contributed
to the poor performance of the 57 mm gun.48
Mission Packages
March 2013 GAO Report
The March 2013 GAO report assessing DOD weapon acquisition programs stated:
Mine Countermeasures (MCM)
The Navy has accepted delivery of three mission modules, and plans to accept one more in
2013, that do not yet meet requirements. According to the Navy, the critical technologies in
these modules are mature, even though technologies required for the initial increment of
capability have not completed developmental testing. For example, the remote minehunting

48 Department of Defense, Director, Operational Test & Evaluation, FY 2012 Annual Report, December 2012, p. 166.
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system has experienced performance issues. Since the Navy concluded no better alternative
exists, the system is undergoing improvements to deliver starting in 2015. Further, the
Navy’s airborne laser mine detection system, used to detect near-surface sea mines, had
challenges identifying such objects, but the Navy expects upgrades to improve performance.
The Navy’s plans for future increments may also be changing. For example, DOD has
concerns with the ability to tow the Organic Airborne Surface Influence Sweep, an increment
three capability, leading the Navy to cancel the system. The Navy plans to establish initial
operational capability in 2014, when it will have procured seven modules, and full
operational capability in 2018.
Surface Warfare (SUW)
The Navy has taken delivery of four modules, which do not yet meet requirements,
consisting of 30 millimeter guns, 11-meter small boats, and other capabilities. The Navy
replaced the canceled Non-Line-of-Sight Launch System (NLOS-LS) with the Griffin
missile. Compared to NLOS-LS’s proposed range of 21 nautical miles, the Griffin, which the
Navy plans to field in 2015, has an expected range of 3 nautical miles. The Navy plans to
conduct a full and open competition for a “Griffin-like” replacement with increased range to
provide the full capability by 2019.
Antisubmarine Warfare (ASW)
The Navy restarted development of an antisubmarine warfare module due to the failure of
the initial module, which the Navy purchased but then canceled as it would not deliver
enough capability over legacy assets. The Navy is currently analyzing this replacement
module and plans for initial delivery in 2016 and full operational capability in 2018. The
design is expected to include a variable-depth sonar—which, according to officials,
performed well in initial tests—and a towed array among other technologies. The maturity of
these technologies has not yet been independently assessed.
Other Program Issues
The Navy plans to purchase 30, and deliver 21, LCS seaframes by the time the first mission
modules reach full operational capability in fiscal year 2018. In October 2012, DOD
delegated future decision authority to the Navy and requested an acquisition program
baseline within 60 days. As of December 2012, the Navy had not provided the acquisition
program baseline.
Program Office Comments
According to the program office, the Navy is employing an incremental fielding acquisition
strategy that sequentially proves and incorporates technologies that will ultimately deliver
full capability with the fielding of the final increments. This approach has the benefits of
delivering capability early, while remaining technologies mature at a natural pace, providing
unmatched flexibility to move away from systems that fail to meet cost, schedule, or
performance needs. Recent testing of the initial MCM and SUW increments has been very
successful. The initial MCM increment has demonstrated end-to-end capability to detect,
localize, and neutralize mines. In fiscal 2012 the program completed some developmental
testing of the initial MCM increment on board LCS 2. The Navy plans to complete
developmental testing in fiscal 2013, in preparation for evaluation and operational testing
planned for fiscal 2014. The initial SUW increment has also completed some testing on LCS
1 and will continue testing in fiscal 2013 on LCS 3. The program office also provided
technical comments, which were incorporated where deemed appropriate.
GAO Response
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The Navy stated it is using an incremental approach to field mature systems and deliver
periodic improvements in capability. However, the Navy continues to buy systems that are
still in development, demonstrating significant performance issues, and not meeting all
requirements—a practice that we have previously shown increases costs.49
December 2012 DOT&E Report
Regarding technical risk in developing LCS mission packages, the December 2012 DOT&E
report states:
SUW Module
• Both variants:
—The Navy has not finalized how the ships will be utilized with the SUW mission module.
Additionally, the Navy has not completed the revised capabilities document defining the
incremental approach to fielding mission modules.
—The 30 mm guns and associated combat system exhibit reliability problems. The Navy
established a Failure Review Board to identify and correct deficiencies in 30 mm gun
performance.
• Freedom Variant: Performance deficiencies with COMBATSS-21 [combat system] and
TRS-3D [radar] affect tracking and engagement of contacts.
MCM Module
• Testing of the MH-60S Block 2 AMCM [airborne mine countermeasures] System revealed
significant shortfalls in performance.
—The MH-60S helicopter with the AQS-20A sonar is not operationally effective or suitable
because the helicopter is underpowered and cannot safely tow the sonar under the variety of
conditions necessary. The Navy cancelled the MH-60S helicopter mission to tow the AQS-
20A and OASIS. The cancellation of the OASIS mission creates a gap in LCS organic mine
sweeping capability that the Navy intends to address with the implementation of UISS
[unmanned influence sweep system] in Increment 3 of the MCM mission module.
—As observed during the OA [operational assessment] and developmental testing, the AQS-
20A does not meet some Navy requirements. Contact depth localization errors exceeded
Navy limits in all AQS-20A operating modes. False contacts also exceeded Navy limits in
two of three search modes. The Navy has implemented modified tactics intended to mitigate
these deficiencies; however, those tactics limit platform-level productivity (Area Coverage
Rate Sustained). Additionally, the Navy is developing a P3I [pre-planned product
improvement] program to correct these deficiencies.
—The analysis of test data collected during Phase A of the OA of the MH-60S and ALMDS
[airborne laser mine detection system] is still in progress. Preliminary evaluation of data
collected during the OA suggests that the ALMDS does not meet Navy requirements for
False Classification Density or reliability. DOT&E expects to issue a formal test report in

49 Government Accountability Office, Defense Acquisitions[:] Assessments of Selected Weapon Programs, GAO-13-
294SP, March 2013, p. 98.
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2QFY13 [2nd quarter of FY2013]. The Navy has implemented modified tactics intended to
mitigate this deficiency; however, those tactics limit platform-level productivity (Area
Coverage Rate Sustained). Additionally, the Navy is developing a P3I program to correct
this deficiency. Phase B testing was originally intended to provide early operational testing
insight into the operational effectiveness and suitability of AMCM systems when operating
from an LCS, and to identify risk to the successful completion of IOT&E [initial operational
test and evaluation]. However, the Navy’s postponement of Phase B testing will eliminate
these intended benefits.
• As reported by the Navy, the reliability of RMMV [remote multi-mission vehicle] version
4.1 grew as predicted by the program’s reliability growth curve. However, the observed
growth is predicated on limited test data collected in a minimally stressing operational
environment. The limited scope of testing prevents any meaningful conclusions about
operational availability of the RMS [remote minehunting system.
• As observed and reported by the Navy, during developmental testing (DT-B2), launch and
recovery of the RMS was problematic due to material deficiencies with launch and recovery
systems, manpower and training deficiencies, and compatibility with the operating
environment.50
Defense-Acquisition Policy Lessons of LCS Program
Another issue for Congress concerns what defense-acquisition policy lessons, if any, the LCS
program may offer to policymakers, particularly in terms of the rapid acquisition strategy that the
Navy pursued for the LCS program, which aimed at reducing acquisition cycle time (i.e., the
amount of time between starting the program and getting the first ship into service).
One possible perspective is that the LCS program demonstrated that reducing acquisition cycle
time can be done. Supporters of this perspective might argue that under a traditional Navy ship
acquisition approach, the Navy might have spent five or six years developing a design for a new
frigate or corvette, and perhaps another five years building the lead ship, for a total acquisition
cycle time of perhaps 10 to 11 years. For a program announced in November 2001, this would
have resulted in the first ship entering service in between late 2011 and late 2012. In contrast,
supporters of this perspective might argue, LCS-1 entered service on November 8, 2008, about
seven years after the program was announced, and LCS-2 entered service on January 16, 2010, a
little more than eight years after the program announced. Supporters of this perspective might
argue that this reduction in acquisition cycle time was accomplished even though the LCS
incorporates major innovations compared to previous larger Navy surface combatants in terms of
reduced crew size, “plug-and fight” mission package modularity, high-speed propulsion, and (in
the case of LCS-2) hull form and hull materials.
Another possible perspective is that the LCS program demonstrated the risks of attempting to
reduce acquisition cycle time. Supporters of this perspective might argue that the program’s rapid
acquisition strategy resulted in design-construction concurrency (i.e., building the lead ships
before their designs were fully developed), a practice long known to increase risks in defense
acquisition programs. Supporters of this perspective might argue that the cost growth, design
issues, and construction-quality issues experienced by the first LCSs were due in substantial part

50 Department of Defense, Director, Operational Test & Evaluation, FY 2012 Annual Report, December 2012, pp. 166-
167.
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to design-construction concurrency, and that these problems embarrassed the Navy and reduced
the Navy’s credibility in defending other acquisition programs. They might argue that the
challenges the Navy faces today in terms of developing an LCS concept of operations
(CONOPS),51 LCS manning and training policies, and LCS maintenance and logistics plans were
increased by the rapid acquisition strategy, because these matters were partly deferred to later
years (i.e., to today) while the Navy moved to put LCSs into production. Supporters of this
perspective might argue that the costs of the rapid acquisition strategy are not offset by very much
in terms of a true reduction in acquisition cycle time, because the first LCS to be equipped with a
mission package that has reached IOC (initial operational capability) will not occur until late
FY2014—almost 13 years after the LCS program was announced. Supporters of this perspective
could argue that the Navy could have avoided many of the program’s early problems and current
challenges—and could have had a fully equipped first ship enter service in 2011 or 2012—if had
instead pursued a traditional acquisition approach for a new frigate or corvette. They could argue
that the LCS program validated, for defense acquisition, the guideline from the world of business
management that if an effort aims at obtaining something fast, cheap, and good, it will succeed in
getting no more than two of these things,52 or, more simply, that the LCS program validated the
general saying that haste makes waste.
A third possible perspective is that the LCS program offers few if any defense-acquisition policy
lessons because the LCS differs so much from other Navy ships and the Navy (and DOD
generally) consequently is unlikely to attempt a program like the LCS in the future. Supporters of
this perspective might argue that the risks of design-construction concurrency have long been
known, and that the experience of the LCS program did not provide a new lesson in this regard so
much as a reminder of an old one. They might argue that the cost growth and construction delays
experienced by LCS-1 were caused not simply by the program’s rapid acquisition strategy, but by
a variety of factors (see “Reasons for Cost Growth” in Appendix A), including an incorrectly
made reduction gear53 from a supplier firm that forced the shipbuilder to build the lead ship in a
significantly revised and sub-optimal construction sequence.
Legislative Activity for FY2014
FY2014 Funding Request
The Navy’s proposed FY2014 budget requests $1,793.0 million for procuring four LCS sea
frames (LCSs 17 through 20), and $143.1 million in procurement funding for procuring LCS
mission modules.

51 A CONOPS is a detailed understanding of how to use the ship to accomplish various missions.
52 The guideline is sometimes referred to in the business world as “Fast, cheap, good—pick two.”
53 A ship’s reduction gear is a large, heavy gear that reduces the high-speed revolutions of the ship’s turbine engines to
the lower-speed revolutions of its propulsors.
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Appendix A. Cost Growth on LCS Sea Frames in
FY2007-FY2013 Budgets

This appendix presents details on cost growth on the first few LCS sea frames in the FY2007-
FY2012 budget submissions.
FY2007 Budget
The proposed FY2007 Navy budget, submitted in February 2006, showed that:
• the estimate for the first LCS had increased from $215.5 million in the FY2005
budget and $212.5 million in the FY2006 budget to $274.5 million in the
FY2007 budget—an increase of about 27% from the FY2005 figure and about
29% form the FY2006 figure;
• the estimate for the second LCS increased from $213.7 million in the FY2005
budget and $256.5 million in the FY2006 budget to $278.1 million—an increase
of about 30% from the FY2005 figure and about 8% from the FY2006 figure;
and
• the estimate for follow-on ships scheduled for FY2009-FY2011, when the LCS
program was to have reached a planned maximum annual procurement rate of six
ships per year, had increased from $223.3 million in the FY2006 budget to $298
million—an increase of about 33%.
The Navy stated in early 2006 that the cost increase from the FY2006 budget to the FY2007
budget was due mostly to the fact that LCS procurement costs in the FY2006 budget did not
include items that are traditionally included in the so-called end cost—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 the FY2006
LCS budget submission raised certain potential oversight issues for Congress.54

54 These oversight issues included the following:
—Why were these costs excluded? Was this a budget-preparation oversight? If so, how could such an oversight occur,
given the many people involved in Navy budget preparation and review, 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?
—Did the Navy believe there was no substantial risk of penalty for submitting to Congress a budget presentation for a
shipbuilding program that, for whatever reason, significantly underestimated procurement costs?
—Do LCS procurement costs in the budget now include all costs that, under traditional budgeting practices, should be
included? If not, what other costs are still unacknowledged?
—Have personnel or other resources from other Navy programs been used for the LCS program in any way? If so, have
the costs of these personnel or other resources been fully charged to the LCS program and fully reflected in LCS
program costs shown in the budget?
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FY2008 Budget
On January 11, 2007, the Navy reported that LCS-1 was experiencing “considerable cost
overruns.” The Navy subsequently stated that the estimated shipyard construction cost of LCS-1
had grown to $350 million to $375 million. This suggested that the end cost of LCS-1—which
also includes costs for things such as Navy program-management costs and an allowance for
changes—could be in excess of $400 million. The Navy did not publicly provide a precise cost
overrun figure for LCS 2, but it stated that the cost overrun on LCSs 1 and 2 was somewhere
between 50% and 75%, depending on the baseline that is used to measure the overrun.
GAO testified in July 2007 that according to its own analysis of Navy data, the combined cost of
LCSs 1 and 2 had increased from $472 million to $1,075 million—an increase of 128%.55 CBO
testified in July 2007 that:
Several months ago, press reports indicated that the cost could well exceed $400 million
each for the first two LCS sea frames. Recently, the Navy requested that the cost cap for the
fifth and sixth sea frames be raised to $460 million, which suggests that the Navy’s estimate
of the acquisition cost for the first two LCSs would be around $600 million apiece....
As of this writing, the Navy has not publicly released an estimate for the LCS program that
incorporates the most recent cost growth, other than its request to raise the cost caps for the
fifth and sixth ships. CBO estimates that with that growth included, the first two LCSs would
cost about $630 million each, excluding mission modules but including outfitting,
postdelivery, and various nonrecurring costs associated with the first ships of the class. As
the program advances, with a settled design and higher annual rates of production, the
average cost per ship is likely to decline. Excluding mission modules, the 55 LCSs in the
Navy’s plan would cost an average of $450 million each, CBO estimates.56
FY2009 Budget
The proposed FY2009 budget, submitted in February 2008, showed that the estimated end costs
of LCS-1 and LCS-2 had increased to $531 million and $507 million, respectively—or to $631
million and $636 million, respectively, when OF/PD (outfitting and post-delivery) and FSD
MSSIT (Final System Design Mission Systems and Ship Integration Team) costs are included, or
to $606 million and $582 million, respectively, when OF/PD costs are included, but FSD MSSIT
costs are not included.
FY2010 Budget
The proposed FY2010 budget, submitted in May 2009, showed that the estimated end costs of
LCS-1 and LCS-2 had increased to $537 million and $575 million, respectively (or to $637

55 Defense Acquisitions[:] Realistic Business Cases Needed to Execute Navy Shipbuilding Programs, Statement of Paul
L. Francis, Director, Acquisition and Sourcing Management Team, Testimony Before the Subcommittee on Seapower
and Expeditionary Forces, Committee on Armed Services, House of Representatives, July 24, 2007 (GAO-07-943T),
pp. 4 and 22.
56 Statement of J. Michael Gilmore, Assistant Director for National Security, and Eric J. Labs, Senior Analyst, [on] The
Navy’s 2008 Shipbuilding Plan and Key Ship Programs, before the Subcommittee on Seapower and Expeditionary
Forces Committee on Armed Services U.S. House of Representatives, July 24, 2007, p. 18.
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million and $704 million, respectively, when OF/PD and FSD MSSIT costs are included, or to
$612 million and $650 million, respectively, when OF/PD costs are included, but FSD MSSIT
costs are not included). CBO reported on June 9, 2008, that:
Historical experience indicates that cost growth in the LCS program is likely. In particular,
using the lead ship of the FFG-7 Oliver Hazard Perry class frigate as an analogy, historical
cost-to-weight relationships indicate that the Navy’s original cost target for the LCS of $260
million in 2009 dollars (or $220 million in 2005 dollars) was optimistic. The first FFG-7 cost
about $670 million in 2009 dollars to build, or about $250 million per thousand tons,
including combat systems. Applying that metric to the LCS program suggests that the lead
ships would cost about $600 million apiece, including the cost of one mission module. Thus,
in this case, the use of a historical cost-to-weight relationship produces an estimate that is
less than the actual costs of the first LCSs to date but substantially more than the Navy’s
original estimate.
Based on actual costs the Navy has incurred for the LCS program, CBO estimates that the
first two LCSs could cost about $700 million each, including outfitting and postdelivery and
various nonrecurring costs associated with first ships of a class but excluding mission
modules. However, as of May 1, 2008, LCS-1 was 83 percent complete and LCS-2 was 68
percent complete. Thus, additional cost growth is possible, and CBO’s estimate reflects that
cost risk.
Overall, CBO estimates that the LCSs in the Navy’s plan would cost about $550 million
each, on average, excluding mission modules. That estimate assumes that the Navy would
select one of the two existing designs and make no changes. As the program advanced with a
settled design and higher annual rates of production, average ship costs would probably
decline. If the Navy decided to make changes to that design, however, the costs of building
future ships could be higher than CBO now estimates.57
FY2011 Budget
The proposed FY2011 budget, submitted in February 2010, showed that the estimated end cost of
LCS-1 remained unchanged from the previous year at $537 million, and that the estimated end
cost of LCS-2 had increased to $607 million. These two figures become $656 million and $736
million, respectively, when OF/PD and FSD MSSIT costs are included, or $631 million and $682
million, respectively, when OF/PD costs are included, but FSD MSSIT costs are not included.
The Navy’s FY2011 budget submission states that OF/PD and FSD MSSIT costs are non-end cost
items, and that FSD MSSIT costs for LCS-1 and LCS-2 “are not true construction costs and are
[instead] costs associated with design completion.”58
FY2012 Budget
The proposed FY2012 budget, submitted in February 2011, showed that the estimated end cost of
LCS-1 remained unchanged from the previous year at $537 million, and that the estimated end

57 Congressional Budget Office, Resource Implications of the Navy’s Fiscal Year 2009 Shipbuilding Plan, June 8,
2008, pp. 26-27.
58 Source: Department of Navy, Department of the Navy Fiscal Year (FY) 2011 Budget Estimates, February 2010,
Justification of Estimates, Research, Development, Test & Evaluation, Navy, Budget Activity 4
, Exhibit R-2A, RDT&E
Project Justification, PE 0603581N: Littoral Combat Ship (LCS), pages 34-35 of 46 (PDF pages 552-553 of 1054).
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cost of LCS-2 had increased to $653 million. These two figures become $670.4 million and
$808.8 million, respectively, when OF/PD and FSD MSSIT costs are included, or $645.4 million
and $754.8 million, respectively, when OF/PD costs are included, but FSD MSSIT costs are not
included. The Navy’s FY2011 budget submission states that OF/PD and FSD MSSIT costs are
non-end cost items, and that FSD MSSIT costs for LCS-1 and LCS-2 “are not true construction
costs and are [instead] costs associated with design completion.”59
FY2013 Budget
The proposed FY2013 budget, submitted in February 2012, showed that the estimated end costs
of LCS-1 and LCS -2 remained unchanged from the previous year at $537 million and $653
million, respectively. These two figures become $670.4 million and $813.4 million, respectively,
when OF/PD and FSD MSSIT costs are included, or $645.4 million and $759.4 million,
respectively, when OF/PD costs are included, but FSD MSSIT costs are not included. The Navy’s
FY2012 budget submission states that OF/PD and FSD MSSIT costs are non-end cost items, and
that FSD MSSIT costs for LCS-1 and LCS-2 “are not true construction costs and are [instead]
costs associated with design completion.”60
Reasons for Cost Growth
Various reasons have been cited for cost growth in the LCS program, including the following:
Unrealistically low original estimate. Some observers believe that the original
cost estimate of $220 million for the LCS sea frame was unrealistically low. If so,
a potential follow-on question would be whether the LCS represents a case of
“low-balling”—using an unrealistically low cost estimate in the early stages of a
proposed weapon program to help the program win approval and become an
established procurement effort.
Impact of Naval Vessel Rules (NVR). Navy and industry officials have
attributed some of the cost growth to the impact of applying new Naval Vessel
Rules (NVR)—essentially, new rules specifying the construction standards for
the ship—to the LCS program. The NVR issued for the LCS program
incorporated, among other things, an increase in the survivability standard (the
ability to withstand damage) to which LCSs were to be built. Building the ship to
a higher survivability standard represented a change in requirements for the ship
that led to many design changes, including changes that made ship more rugged
and more complex in terms of its damage-control systems. In addition, Navy and
industry officials have testified, the timing of the issuing of NVR created a
situation of concurrency between design and construction in the LCS program,
meaning that the ship was being designed at the same time that the shipyard was

59 Source: Department of Defense, Department of Defense Fiscal Year (FY) 2012 Budget Estimates, February 2011,
Navy Justification Book Volume 2, Research, Development, Test & Evaluation, Navy, Budget Activity 4
, Exhibit R-2A,
RDT&E Project Justification, PE 0603581N: Littoral Combat Ship (LCS), page 33 of 42 (PDF page 469 of 888).
60 Source: Department of Defense, Department of Defense Fiscal Year (FY) 2013 President’s Budget Submission,
February 2012, Navy Justification Book Volume 2, Research, Development, Test & Evaluation, Navy, Budget Activity
4
, Exhibit R-2A, RDT&E Project Justification, PE 0603581N: Littoral Combat Ship (LCS), pages 39 and 40 of 48
(PDF pages 491 and 492 of 940).
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attempting to build it—a situation long known to be a potential cause of cost
growth. This concurrency, Navy officials testified, was a consequence of the
compressed construction schedule for the LCS program, which in turn reflected
an urgency about getting LCSs into the fleet to meet critical mission demands.
Improperly manufactured reduction gear. Navy and industry officials testified
that cost growth on LCS-1 was partly due to a main reduction gear61 that was
incorrectly manufactured and had to be replaced, forcing a reordering of the
construction sequence for the various major sections of the ship.
Increased costs for materials. Some observers have attributed part of the cost
growth in the program to higher-than-estimated costs for steel and other materials
that are used in building the ships.
Emphasis on meeting schedule combined with cost-plus contract. Some
portion of cost growth on LCS-1 has been attributed to a combination of a Navy
emphasis on meeting the ship’s aggressive construction schedule and the Navy’s
use of a cost-plus contract to build the ship.62
Shipyard Performance. Shipyard performance and supervision of the LCS
shipyards by the LCS team leaders and the Navy has been cited as another cause
of cost growth.63
July 2007 GAO Testimony
GAO testified in July 2007 that:
We have frequently reported on the wisdom of using a solid, executable business case before
committing resources to a new product development effort....
A sound business case would establish and resource a knowledge-based approach at the
outset of a program. We would define such a business case as firm requirements, mature
technologies, and an acquisition strategy that provides sufficient time and money for design
activities before construction start. The business case is the essential first step in any

61 A ship’s reduction gear is a large, heavy gear that reduces the high-speed revolutions of the ship’s turbine engines to
the lower-speed revolutions of its propulsors.
62 The Senate Armed Services Committee, as part of its discussion of the LCS program in its report (S.Rept. 110-77 of
June 5, 2007) on the FY2008 defense authorization bill (S. 1547), stated:
Reviewing this LCS situation will undoubtedly result in a new set of “lessons learned”‘ that the
acquisition community will dutifully try to implement. However, the committee has previously
expressed concerns about the LCS concept and the LCS acquisition strategy. The LCS situation
may be more a case of “lessons lost.” Long ago, we knew that we should not rush to sign a
construction contract before we have solidified requirements. We also knew that the contractors
will respond to incentives, and that if the incentives are focused on maintaining schedules and not
on controlling cost, cost growth on a cost-plus contract should surprise no one. After the fact,
everyone appears ready to agree that the original ship construction schedule for the lead ship was
overly aggressive. (Page 98)
63 See Katherine McIntire Peters, “Navy’s Top Officer Sees Lessons In Shipbuilding Program Failures,”
GovermentExecutive.com, September 24, 2008; Christopher J. Castelli, “Audit Exposes Failed Management of
Troubled Littoral Warship,” Inside the Navy, February 4, 2008; Christopher J. Castelli, “Audit Reveals Both LCS and
Industry Teams Violated Management Rules,” Inside the Pentagon, July 10, 2008 (reprinted in essentially identical
form, with the same headline, in the July 14, 2008, issue of sister publication Inside the Navy).
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acquisition program that sets the stage for the remaining stages of a program, namely the
business or contracting arrangements and actual execution or performance. If the business
case is not sound, the contract will not correct the problem and execution will be subpar.
This does not mean that all potential problems can be eliminated and perfection achieved, but
rather that sound business cases can get the Navy better shipbuilding outcomes and better
return on investment. If any one element of the business case is weak, problems can be
expected in construction. The need to meet schedule is one of the main reasons why
programs cannot execute their business cases. This pattern was clearly evident in both the
LPD 17 [amphibious ship] and LCS programs. In both cases, the program pushed ahead with
production even when design problems arose or key equipment was not available when
needed. Short cuts, such as doing technology development concurrently with design and
construction, are taken to meet schedule. In the end, problems occur that cannot be resolved
within compressed, optimistic schedules. Ultimately, when a schedule is set that cannot
accommodate program scope, delivering an initial capability is delayed and higher costs are
incurred....
What happens when the elements of a solid business case are not present? Unfortunately, the
results have been all too visible in the LPD 17 and the LCS. Ship construction in these
programs has been hampered throughout by design instability and program management
challenges that can be traced back to flawed business cases. The Navy moved forward with
ambitious schedules for constructing LPD 17 and LCS despite significant challenges in
stabilizing the designs for these ships. As a result, construction work has been performed out
of sequence and significant rework has been required, disrupting the optimal construction
sequence and application of lessons learned for follow-on vessels in these programs....
In the LCS program, design instability resulted from a flawed business case as well as
changes to Navy requirements. From the outset, the Navy sought to concurrently design and
construct two lead ships in the LCS program in an effort to rapidly meet pressing needs in
the mine countermeasures, antisubmarine warfare, and surface warfare mission areas. The
Navy believed it could manage this approach, even with little margin for error, because it
considered each LCS to be an adaptation of an existing high-speed ferry design. It has since
been realized that transforming a high-speed ferry into a capable, networked, survivable
warship was quite a complex venture. Implementation of new Naval Vessel Rules (design
guidelines) further complicated the Navy’s concurrent design-build strategy for LCS. These
rules required program officials to redesign major elements of each LCS design to meet
enhanced survivability requirements, even after construction had begun on the first ship.
While these requirements changes improved the robustness of LCS designs, they contributed
to out of sequence work and rework on the lead ships. The Navy failed to fully account for
these changes when establishing its $220 million cost target and 2-year construction cycle
for the lead ships.
Complicating LCS construction was a compressed and aggressive schedule. When design
standards were clarified with the issuance of Naval Vessel Rules and major equipment
deliveries were delayed (e.g., main reduction gears), adjustments to the schedule were not
made. Instead, with the first LCS, the Navy and shipbuilder continued to focus on achieving
the planned schedule, accepting the higher costs associated with out of sequence work and
rework. This approach enabled the Navy to achieve its planned launch date for the first
Littoral Combat Ship, but required it to sacrifice its desired level of outfitting. Program
officials report that schedule pressures also drove low outfitting levels on the second Littoral
Combat Ship design as well, although rework requirements have been less intensive to date.
However, because remaining work on the first two ships will now have to be completed out-
of-sequence, the initial schedule gains most likely will be offset by increased labor hours to
finish these ships.
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The difficulties and costs discussed above relate to the LCS seaframe only. This program is
unique in that the ship’s mission equipment is being developed and funded separately from
the seaframe. The Navy faces additional challenges integrating mission packages with the
ships, which could further increase costs and delay delivery of new antisubmarine warfare,
mine countermeasures, and surface warfare capabilities to the fleet. These mission packages
are required to meet a weight requirement of 180 metric tons or less and require 35 personnel
or less to operate them. However, the Navy estimates that the mine countermeasures mission
package may require an additional 13 metric tons of weight and seven more operator
personnel in order to deploy the full level of promised capability. Because neither of the
competing ship designs can accommodate these increases, the Navy may be forced to
reevaluate its planned capabilities for LCS.64

64 Defense Acquisitions[:] Realistic Business Cases Needed to Execute Navy Shipbuilding Programs, Statement of Paul
L. Francis, Director, Acquisition and Sourcing Management Team, Testimony Before the Subcommittee on Seapower
and Expeditionary Forces, Committee on Armed Services, House of Representatives, July 24, 2007 (GAO-07-943T),
pp. 8-11.
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Appendix B. 2007 Program Restructuring and Ship
Cancellations

The Navy substantially restructured the LCS program in 2007 in response to significant cost
growth and delays in constructing the first LCS sea frames. This restructuring led to the
cancellation of four LCSs that were funded in FY2006 and FY2007. A fifth LCS, funded in
FY2008, was cancelled in 2008. This appendix presents the details of the program restructuring
and ship cancellations.
2007 Program Restructuring
March 2007 Navy Restructuring Plan
In response to significant cost growth and schedule delays in the building of the first LCSs that
first came to light in January 2007 (see next section), the Navy in March 2007 announced a plan
for restructuring the LCS program that:
• canceled the two LCSs funded in FY2007 and redirected the funding for those
two ships to pay for cost overruns on earlier LCSs;
• announced an intention to lift a 90-day stop-work order that the Navy had placed
on LCS-3 in January 2007—provided that the Navy reached an agreement with
the Lockheed-led industry team by April 12, 2007, to restructure the contract for
building LCSs 1 and 3 from a cost-plus type contract into a fixed price incentive
(FPI)-type contract—or terminate construction of LCS-3 if an agreement on a
restructured contract could not be reached with the Lockheed team by April 12,
2007;
• announced an intention to seek to restructure the contract with the General
Dynamics-led industry team for building LCSs 2 and 4 into an FPI-type
contract—if LCSs 2 and 4 experienced cost growth comparable to that of LCSs 1
and 3—and, if such a restructuring were sought, terminate construction of LCS-4
if an agreement on a restructured contract for LCS-2 and LCS-4 could not be
reached;
• reduced the number of LCSs requested for FY2008 from three to two (for the
same requested FY2008 procurement funding of $910.5 million), and the number
to be requested for FY2009 from six to three; and
• announced an intention to conduct an operational evaluation to select a favored
design for the LCS that would be procured in FY2010 and subsequent years, and
to conduct a full and open follow-on competition among bidders for the right to
build that design.65

65 Source: Navy briefing to CRS and Congressional Budget Office (CBO) on Navy’s proposed LCS program
restructuring plan, March 21, 2007.
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April 2007 Termination of LCS-3
On April 12, 2007, the Navy announced that it had not reached an agreement with Lockheed on a
restructured FPI-type contract for LCS-1 and LCS-3, and consequently was terminating
construction of LCS-3.66 (The Navy subsequently began referring to the ship as having been
partially terminated—a reference to the fact that Lockheed was allowed to continue procuring
certain components for LCS-3, so that a complete set of these components would be on hand to
be incorporated into the next LCS built to the Lockheed design.) (The designation LCS-3 is now
being reused to refer to one of the two LCSs procured in FY2009.)
November 2007 Termination of LCS-4
In late September 2007, it was reported that the Navy on September 19 had sent a letter to
General Dynamics to initiate negotiations on restructuring the contract for building LCSs 2 and 4
into an FPI-type contract. The negotiations reportedly were to be completed by October 19,
2007—30 days from September 19.67 On November 1, 2007, the Navy announced that it had not
reached an agreement with General Dynamics on a restructured FPI-type contract for LCS-2 and
LCS-4, and consequently was terminating construction of LCS-4.68 (The designation LCS-4 is
now being reused to refer to one of the two LCSs procured in FY2009.)
Cancellation of Prior-Year Ships
Table B-1 below summarizes the status of the nine LCSs funded by Congress from FY2005
through FY2009. As shown in the table, of the nine ships, five were later canceled, leaving four
ships in place through FY2009—LCSs 1 and 2, and the two LCSs funded in FY2009. Ship
designations LCS-3 and LCS-4 are being reused as the designations for the two ships funded in
FY2009.

66 Department of Defense News Release No. 422-07, April 12, 2007, “Navy Terminates Littoral Combat Ship 3.”
67 Geoff Fein, “Navy Seeking To Negotiate FPI Contract With General Dynamics,” Defense Daily, September 24,
2007; Geoff Fein, “Navy, General Dynamics Meet To Discuss New LCS Fixed Price Structure,” Defense Daily,
September 27, 2007; Tony Capaccio, “General Dynamics Urged To Take Fixed Price On Warship Contract,”
Bloomberg News, September 28, 2007; Jason Sherman, “Navy, General Dynamics Discuss Fixed-Price Contract For
LCS,” Inside the Navy, October 1, 2007.
68 Department of Defense News Release No. 1269-07, November 1, 2007, “Navy Terminates Littoral Combat Ship
(LCS 4) Contract.”
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Table B-1. Status of LCSs Funded in FY2005-FY2009
FY
Navy hull
funded
designation Status
2005 LCS-1 Commissioned into service on November 8, 2008.
LCS-2
Commissioned into service on January 16, 2010.
LCS-3
Canceled by Navy in April 2007 after being placed under
contract due to inability to come to agreement with contractor
2006
(not the same ship as LCS-3 below)
on revised (fixed-price) contract terms for LCSs 1 and 3.
LCS-4
Canceled by Navy in November 2007 after being placed under
contract due to inability to come to agreement with contractor
(not the same ship as LCS-4 below)
on revised (fixed-price) contract terms for LCSs 2 and 4.
none
Canceled by Navy in March 2007 before being placed under
(ship canceled before being placed
contract as part of Navy’s LCS program restructuring; funds
under contract)
reapplied to cover other program costs.
2007
none
Canceled by Navy in March 2007 before being placed under
(ship canceled before being placed
contract as part of Navy’s LCS program restructuring; funds
under contract)
reapplied to cover other program costs.
LCS-5
Canceled by Navy following Congress’s decision in
(for a while, at least, although the ship September 2008, as part of its action on the FY2009 defense
was canceled before being placed
appropriations bill, to rescind the funding for the ship.
2008
under contract; the ship designation is
now being used for the first of the two
ships funded in FY2010)
LCS-3
Commissioned into service on August 6, 2012.
(not the same ship as LCS-3 above; the
ship designation is being reused)
2009
LCS-4
Under construction.
(not the same ship as LCS-4 above; the
ship designation is being reused)
Source: Prepared by CRS.
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Appendix C. Down Select Acquisition Strategy
Announced in September 2009

This appendix presents additional background information on the down select acquisition strategy
announced by the Navy on September 16, 2009.
DOD and Navy Background Information
A September 16, 2009, Department of Defense (DOD) news release on the proposed down select
strategy stated:
The Navy announced today it will down select between the two Littoral Combat Ship (LCS)
designs in fiscal 2010. The current LCS seaframe construction solicitation [for the FY2010
LCSs] will be cancelled and a new solicitation will be issued. At down select, a single prime
contractor and shipyard will be awarded a fixed price incentive contract for up to 10 ships
with two ships in fiscal 2010 and options through fiscal 2014. This decision was reached
after careful review of the fiscal 2010 industry bids, consideration of total program costs, and
ongoing discussions with Congress.
“This change to increase competition is required so we can build the LCS at an affordable
price,” said Ray Mabus, secretary of the Navy. “LCS is vital to our Navy’s future. It must
succeed.”
“Both ships meet our operational requirements and we need LCS now to meet the
warfighters’ needs,” said Adm. Gary Roughead, chief of naval operations. “Down selecting
now will improve affordability and will allow us to build LCS at a realistic cost and not
compromise critical warfighting capabilities.”
The Navy cancelled the solicitation to procure up to three LCS Flight 0+ ships in fiscal 2010
due to affordability. Based on proposals received this summer, it was not possible to execute
the LCS program under the current acquisition strategy and given the expectation of
constrained budgets. The new LCS acquisition strategy improves affordability by
competitively awarding a larger number of ships across several years to one source. The
Navy will accomplish this goal by issuing a new fixed price incentive solicitation for a down
select to one of the two designs beginning in fiscal 2010.
Both industry teams will have the opportunity to submit proposals for the fiscal 2010 ships
under the new solicitation. The selected industry team will deliver a quality technical data
package, allowing the Navy to open competition for a second source for the selected design
beginning in fiscal 2012. The winner of the down select will be awarded a contract for up to
10 ships from fiscal 2010 through fiscal 2014, and also provide combat systems for up to
five additional ships provided by a second source. Delivery of LCS 2, along with
construction of LCS 3 and LCS 4 will not be affected by the decision. This plan ensures the
best value for the Navy, continues to fill critical warfighting gaps, reduces program
ownership costs, and meets the spirit and intent of the Weapons System Acquisition Reform
Act of 2009....
The Navy remains committed to the LCS program and the requirement for 55 of these ships
to provide combatant commanders with the capability to defeat anti-access threats in the
littorals, including fast surface craft, quiet submarines and various types of mines. The
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Navy’s acquisition strategy will be guided by cost and performance of the respective designs
as well as options for sustaining competition throughout the life of the program.69
A September 16, 2009, e-mail from the Navy to CRS provided additional information on the
proposed down select strategy, stating:
The Navy remains committed to a 55 ship LCS program and intends to procure these ships
through an acquisition strategy that leverages competition, fixed price contracting and
stability in order to meet our overarching objectives of performance and affordability.
In the best interest of the Government, the Navy cancelled the solicitation to procure up to
three LCS Flight 0+ ships in FY10 due to affordability.
Based on proposals received in August, the Navy had no reasonable basis to find that the
LCS Program would be executable going forward under the current acquisition strategy,
given the expectation of constrained budgets.
In the near future, and working closely with Congress, the Navy will issue a new FY10
solicitation which downselects between the two existing designs and calls for building two
ships in FY10 and provides options for two additional ships per year from FY11 to FY14 for
a total of ten ships. The intent is for all of these ships to be built in one shipyard, which will
benefit from a stable order quantity, training and production efficiencies to drive costs down.
Both industry teams will have the opportunity to submit proposals for the FY10 ships under
the new solicitation.
To sustain competition throughout the life of the program and in conjunction with the
downselect, the Navy will develop a complete Technical Data Package which will be used to
open competition for a second source of the selected design in FY12, awarding one ship with
options for up to four additional ships through FY14, to a new shipbuilder.
Our FY10 solicitation will call for the prime to build an additional five combat systems to be
delivered as government-furnished equipment for this second source shipyard. Separating the
ship and combat systems procurement will enable bringing the LCS combat system into the
broader Navy’s open architecture plan.
In short, this strategy calls for two shipbuilders in continuous competition for a single LCS
seaframe design, and a government-provided combat system.
The revised strategy meets the full spirit and intent of the Weapon Systems Acquisition
Reform Act of 2009 by increasing Government oversight, employing fixed price contract
types, maximizing competition, leveraging open architecture, using Economic Order
Quantity and Block Buy strategies, and ensuring future competition for shipbuilding as
enabled by development of a Technical Data Package to solicit ships from a second shipyard.
We also continue to work closely with Congress on the Navy’s LCS procurement
intentions....
The Navy intends to continue with construction and delivery of LCS 3 and LCS 4, ultimately
for use as deployable assets. We will continue to explore all avenues to ensure this is an
affordable program.70

69 Department of Defense, “Littoral Combat Ship Down Select Announced,” News Release 722-09, September 16,
2009, available online at http://www.defenselink.mil/releases/release.aspx?releaseid=12984.
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The Navy briefed CRS and CBO about the proposed down select strategy on September 22, 2009.
Points made by the Navy in the briefing included the following:
• The bids from the two industry teams for the three LCSs requested in the FY2010
budget (which were submitted to the Navy in late July or early August 2009)71
were above the LCS unit procurement cost cap in “all scenarios.”
• Negotiations with the industry teams were deemed by the Navy to be not likely to
result in award prices for the FY2010 ships that were acceptable to the Navy.
• The Navy judged that the current LCS teaming arrangements “considerably
influenced costs” in the FY2010 bids.
• The Navy judged that it cannot afford more than a two-ship award in FY2010
within the amount of funding ($1,380 million) requested for LCS sea frame
procurement in FY2010.
• In response to the above points, the Navy decided to seek a new acquisition
strategy for LCSs procured in FY2010 and subsequent years that would make the
LCS program affordable by leveraging competition, providing stability to LCS
shipyards and suppliers, producing LCSs at efficient rates, giving industry
incentives to make investments that would reduce LCS production costs, and
increasing commonality in the resulting LCS fleet.
• Under the Navy’s proposed strategy, the winner of the LCS down select would be
awarded a contract to build two ships procured in FY2010, with options to build
two more ships per year in FY2011-FY2014. The contract would be a block-buy
contract augmented with Economic Order Quantity (EOQ) authority, so as to
permit up-front batch purchases of long leadtime components, as would be the
case under a multiyear procurement (MYP) contract. Unlike an MYP contract,
however, the block buy contract would not include a termination liability.
• The winner of the down select would deliver to the Navy a technical data
package that would permit another shipyard to build the winning LCS design.
• The Navy would hold a second competition to select a second LCS bidder. This
competition would be open to all firms other than the shipyard that is building the
10 LCSs in FY2010-FY2014. The winner of this second competition would be
awarded a contract to build up to five LCSs in FY2012-FY2014 (one ship in
FY2012, and two ships per year in FY2013-FY2014).
• The Navy would maintain competition between the two shipyards for LCSs
procured in FY2015 and subsequent years.
• The prime contactor on the team that wins the LCS down select (i.e., Lockheed
or General Dynamics) would provide the combat systems for all the LCSs to be

(...continued)
70 Email from Navy Office of Legislative Affairs to CRS, entitled “LCS Way Ahead,” September 16, 2009.
71 See, for example, Christopher P. Cavas, “LCS Bids Submitted to U.S. Navy,” DefenseNews.com, August 3, 2009,
which states: “Lockheed Martin announced its proposal was sent to the Navy on July 31, and rival General Dynamics
confirmed its plans were sent in by the Aug. 3 deadline.” See also Bettina H. Chavanne, “Lockheed Submits First LCS
Proposal Under Cost Cap Regulations,” Aerospace Daily & Defense Report, August 4, 2009: 5.
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procured in FY2010-FY2014—the 10 that would be built by the first shipyard,
and the others that would be built by the second shipyard.
• The structure of the industry team that wins the down select would be altered,
with the prime contractor on the team being separated from the shipyard (i.e., the
shipyard building the 10 LCSs in FY2010-FY2014). The separation, which
would occur some time between FY2010 and FY2014, would be intended in part
to prevent an organizational conflict of interest on the part of the prime contractor
as it provides combat systems to the two shipyards building LCSs.
• The current combat system used on the selected LCS design will be modified
over time to a configuration that increases its commonality with one or more of
the Navy’s existing surface ship combat systems.
• The Navy intends to complete the construction and delivery of LCS-3 and LCS-
4.
• The Navy believes that the proposed acquisition strategy does the following:
maximize the use of competition in awarding contracts for LCSs procured in
FY2010-FY2014; provide an opportunity for achieving EOQ savings with
vendors; provide stability and efficient production quantities to the shipyards and
vendors; provide an opportunity to move to a common combat system for the
LCS fleet; and provide the lowest-possible total ownership cost for the Navy for
the resulting LCS fleet, in large part because the fleet would consist primarily of
a single LCS design with a single logistics support system. The Navy also
believes the proposed strategy is consistent with the spirit and intent of the
Weapon Systems Acquisition Reform Act of 2009 (S. 454/P.L. 111-23 of May 22,
2009).
Regarding the Navy’s ability to sustain a competition between two LCS builders for LCS
construction contracts years from now, when the annual LCS procurement rate is projected to
drop to 1.5 ships per year (i.e., a 1-2-1-2 pattern), Under Secretary of the Navy Robert Work
reportedly stated:
“We are going to be able to compete those. We will be able to compete three [ships] every
two years and one of the yards will win two and one yard will win one. Sometimes, we’ll do
a five multi-year [procurement contract]. We have all sorts of flexibility in here,” he said.72
Potential Oversight Questions for Congress
Prior to the Navy’s November 3, 2010, proposal for a dual-award acquisition strategy, the
proposed down select strategy posed several potential oversight questions for Congress, including
the following:
• Did the timing of the Navy’s September 2009 announcement of the strategy—
very late in the congressional process for reviewing, marking up, and finalizing
action on the FY2010 defense budget—provide Congress with sufficient time to

72 Geoff Fein, “Official: Navy OK With Either LCS, New Acquisition Plan Adds Flexibility In Out Years,” Defense
Daily
, February 18, 2010: 3.
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adequately review the proposal prior to finalizing its action on the FY2010
defense budget?
• Does the Navy’s proposed strategy allow the Navy enough time to adequately
evaluate the operational characteristics of the two LCS designs before selecting
one of those designs for all future production?
• Does the Navy’s proposed method for conducting the LCS down select—the
Request for Proposals (RFP)—appropriately balance procurement cost against
other criteria, such as life-cycle operation and support (O&S) cost and ship
capability?
• What risks would the Navy face if the shipyard that wins the competition to build
the 10 LCSs in FY2010-FY2014 cannot build them within the contracted cost?
• How does the Navy plan to evolve the combat system on the winning LCS design
to a configuration that has greater commonality with one or more existing Navy
surface ship combat systems?
• What are the Navy’s longer-term plans regarding the two “orphan” LCSs that are
built to the design that is not chosen in the down select?
• What potential alternatives are there to this acquisition strategy?
Each of these questions is discussed briefly below.
Enough Time for Adequate Congressional Review of Navy Proposal?
One potential issue for Congress concerning the proposed down select strategy was whether the
timing of the Navy’s September 2009 announcement of the strategy—very late in the
congressional process for reviewing, marking up, and finalizing action on the FY2010 defense
budget—provided Congress with sufficient time to adequately review the proposal prior to
finalizing its action on the FY2010 defense budget. The announcement of the Navy’s proposed
acquisition strategy on September 16, 2009, came
• after the defense committees of Congress had held their hearings to review the
FY2010 budget submission;
• after the FY2010 defense authorization bill (H.R. 2647/S. 1390) and the
Department of Defense (DOD) appropriations bill (H.R. 3326) had been reported
in the House and Senate;
• after both the House and Senate had amended and passed their versions of the
FY2010 defense authorization bill, setting the stage for the conference on that
bill; and
• after the House had passed its version of the FY2010 DOD appropriations bill.
The timing of the Navy’s announcement was a byproduct of the fact that the Navy was not able to
see and evaluate the industry bids for the three LCSs that the Navy had originally requested for
FY2010 until August 2009. The September 16, 2009, announcement date may have been the
earliest possible announcement date, given the time the Navy needed to consider the situation
created by the bids, evaluate potential courses of action, and select the proposed acquisition
strategy.
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Although the Navy might not have been able to present the proposed down select strategy to
Congress any sooner than September 16, the timing of the Navy’s announcement nevertheless put
Congress in the position of being asked to approve a major proposal for the LCS program—a
proposal that would determine the basic shape of the acquisition strategy for the program for
many years into the future—with little or no opportunity for formal congressional review and
consideration through hearings and committee markup activities.
A shortage of time for formal congressional review and consideration would be a potential
oversight issue for Congress for any large weapon acquisition program, but this might have been
especially the case for the LCS program, because it was not be the first time that the Navy put
Congress in the position of having to make a significant decision about the LCS program with
little or no opportunity for formal congressional review and consideration. As discussed in
previous CRS reporting on the LCS program, a roughly similar situation occurred in the summer
of 2002, after Congress had completed its budget-review hearings on the proposed FY2003
budget, when the Navy submitted a late request for the research and development funding that
effectively started the LCS program.73

73 The issue of whether Congress was given sufficient time to review and consider the merits of the LCS program in its
early stages was discussed through multiple editions of past CRS reports covering the LCS program. The discussion in
those reports raised the question of whether “Navy officials adopted a rapid acquisition strategy for the LCS program in
part to limit the amount of time available to Congress to assess the merits of the LCS program and thereby effectively
rush Congress into approving the start of LCS procurement before Congress fully understands the details of the
program.” The discussion continued:
With regard to the possibility of rushing Congress into a quick decision on LCS procurement, it can
be noted that announcing the LCS program in November 2001 and subsequently proposing to start
procurement in FY2005 resulted in a situation of Congress having only three annual budget-review
seasons to learn about the new LCS program, assess its merits against other competing DOD
priorities, and make a decision on whether to approve the start of procurement. These three annual
budget-review seasons would occur in 2002, 2003, and 2004, when Congress would review the
Navy’s proposed FY2003, FY2004, and FY2005 budgets, respectively. Congress’ opportunity to
conduct a thorough review of the LCS program in the first two of these three years, moreover, may
have been hampered:

2002 budget-review season (for FY2003 budget). The Navy’s original FY2003 budget
request, submitted to Congress in February 2002, contained no apparent funding for
development of the LCS. In addition, the Navy in early 2002 had not yet announced that it
intended to employ a rapid acquisition strategy for the LCS program. As a result, in the early
months of 2002, there may have been little reason within Congress to view the LCS program
as a significant FY2003 budget-review issue. In the middle of 2002, the Navy submitted an
amended request asking for $33 million in FY2003 development funding for the LCS
program. Navy officials explained that they did not decide until the middle of 2002 that they
wanted to pursue a rapid acquisition strategy for the LCS program, and consequently did not
realize until then that there was a need to request $33 million in FY2003 funding for the
program. By the middle of 2002, however, the House and Senate Armed Services committees
had already held their spring FY2003 budget-review hearings and marked up their respective
versions of the FY2003 defense authorization bill. These two committees thus did not have an
opportunity to use the spring 2002 budget-review season to review in detail the Navy’s
accelerated acquisition plan for the LCS program or the supporting request for $33 million in
funding.

2003 budget-review season (for FY2004 budget). To support a more informed review of the
LCS program during the spring 2003 budget-review season, the conferees on the FY2003
defense authorization bill included a provision (Section 218) requiring the Navy to submit a
detailed report on several aspects of the LCS program, including its acquisition strategy. In
response to this legislation, the Navy in February 2003 submitted a report of eight pages in
length, including a title page and a first page devoted mostly to a restatement of Section 218’s
requirement for the report. The House and Senate Armed Services committees, in their reports
(continued...)
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Supporters of the idea of approving the Navy’s proposed down select strategy as part of
Congress’s work to finalize action on the FY2010 defense budget could argue one or more of the
following:
• The timing of the Navy’s proposal, though not convenient for Congress,
nevertheless represented a good-faith effort by the Navy to present the proposal
to Congress at the earliest possible date. The Navy conducted multiple briefings
with congressional offices starting in September 2009 to explain the proposed
strategy.
• The LCS program needed to be put on a more stable long-term path as soon as
possible, and if Congress did not approve the proposal as part of its work in
finalizing action on the FY2010 defense budget, another year would pass before
the LCS program could be put on a stable path approved by Congress.
• Although cost growth and construction problems with the LCS program can be
viewed as a consequence of past attempts to move ahead too quickly on the LCS
program, the Navy’s acquisition strategy does not risk repeating this experience,
because it does not represent another attempt to move ahead on the program at an
imprudent speed. To the contrary, the strategy seeks to reduce execution risks by
limiting LCS procurement to a maximum of four ships per year and providing a
stable planning environment for LCS shipyards and suppliers.
• If the proposed strategy were not approved by Congress as part of its action on
the FY2010 budget, the LCSs procured in FY2010 would be more expensive to
procure, since they would not benefit from economies of scale that would come
from awarding the FY2010 ships as part of a contract that also includes LCSs to
be procured in FY2011-FY2014.
Supporters of the idea of deferring a decision on the Navy’s proposed down select strategy until
the FY2011 budget cycle could argue one or more of the following:
• Navy briefings to Congress on the proposed strategy starting in September 2009,
though helpful, were not sufficient for Congress to fully understand the features
and potential implications of the Navy’s proposed acquisition strategy—much
less the relative merits of potential alternatives to that strategy.
• The risks of making a quick decision on the Navy’s proposed acquisition
strategy, with little time for formal congressional review and consideration, are
underscored by the history of the LCS program, which includes substantial cost
growth and construction problems that can be viewed as the consequence of past

(...continued)
on the FY2004 defense authorization bill, have expressed dissatisfaction with the
thoroughness of the report as a response to the requirements of Section 218. (For details, see
the “Legislative Activity” section of this report.) It is thus not clear whether the defense
authorization committees were able to conduct their spring 2003 budget-review hearings on
the FY2004 budget with as much information about the LCS program as they might have
preferred.
(See, for example, CRS Report RL 32109, Navy DD(X), CG(X), and LCS Ship Acquisition Programs: Oversight Issues
and Options for Congress
, by Ronald O’Rourke, updated July 29, 2005, pp. CRS-59 to CRS-60. This discussion was
carried through multiple updates of CRS reports covering the LCS program.)
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attempts to move ahead quickly on the program, without more-extensive
congressional review and consideration.
• The desire to avoid paying a relatively high cost for LCSs procured in FY2010,
though real, should not have been a controlling factor in this situation (i.e.,
should not have been “the tail that wags the dog”). Paying a higher cost for LCSs
procured in FY2010, though not optimal, would be an investment to buy time for
Congress to more fully review and consider the merits of both the Navy’s
proposal and potential alternatives to it. Problems avoided through a full
congressional review and consideration of the Navy’s proposal and potential
alternatives during the FY2011 budget cycle could eventually save the Navy a lot
more money than the Navy hopes to save on the LCSs procured in FY2010 by
procuring them as part of a contract that also includes LCSs to be procured in
FY2011-FY2014.
• Approving the Navy’s proposed acquisition strategy at a late juncture in the
annual congressional process for reviewing and marking up the defense budget
would set an undesirable precedent from Congress’s standpoint regarding late
submissions to Congress of significant proposals for large defense acquisition
programs, and encourage DOD to do the same with other large weapon
acquisition programs in the future in the hopes of stampeding Congress into
making quick decisions on major proposals for those programs.
Enough Time to Evaluate the Two Designs’ Operational Characteristics?
Another potential issue for Congress concerning the Navy’s down select strategy was whether the
strategy allowed the Navy enough time to adequately evaluate the operational characteristics of
the two LCS designs before selecting one of those designs for all future production. Potential
oversight questions for Congress included the following:
• Since LCS-1 as of September 2009 had been in commissioned service for less
than a year, and LCS-2 as of that date had not yet been delivered to the Navy,
how firm was the basis for the Navy’s determination that both LCS designs meet
the Navy’s operational requirements for LCS?
• By the summer of 2010—when the Navy plans to award a contract to the winner
of the down select—the Navy will have had only a limited time to evaluate the
operational characteristics of LCS-1 and LCS-2 through fleet exercises and use in
actual Navy deployments. Will the Navy at that point have a sufficient
understanding of the two designs’ operational characteristics to appropriately
treat the operational characteristics of the two designs in the down select?
The Navy and its supporters could argue that the Navy has chosen a preferred design for other
new Navy ships (such as the DDG-1000 destroyer) on the basis of paper designs only, and
consequently that the Navy would have a firmer basis for performing the LCS down select than it
has had on other shipbuilding programs. They can argue that the Navy has a good understanding
of the basic differences between the ships—that the Lockheed design, for example, may have
better features for supporting small boat operations (which are used for certain LCS missions),
while the General Dynamics design may have better features for supporting helicopter and
unmanned aerial vehicle (UAV) operations (which are used for certain LCS missions).
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Skeptics could argue that the Navy in the past has talked about performing an extensive
operational review of each design prior to settling on an acquisition strategy for follow-on ships
in the program, and that the innovative nature of the LCS—a modular ship with plug-and-fight
mission packages and a small crew—increases the risks associated with selecting a single LCS
design before performing such an extensive operational review. Skeptics could argue that the
Navy is depriving itself of the opportunity to better understand, through exercises and real-world
deployments, the implications for overall fleet operations of building all LCSs to one design or
the other before performing the down select.
Weight Given to Procurement Cost vs. Other Factors in Request for Proposals
(RFP)

Another potential issue for Congress concerning the Navy’s down select strategy concerned the
criteria that the Navy will use for selecting a winning design in the down select. Some observers,
particularly supporters of the General Dynamics LCS design, argued that the Navy’s proposed
method for evaluating the two LCS designs in the LCS down select—set forth in the Request for
Proposals (RFP) for the down select—focused too much on procurement cost and not enough on
other factors, particularly life-cycle fuel cost, other components of life-cycle operating and
support (O&S) cost, and ship capability. Other observers, particularly supporters of the Lockheed
LCS design, argued (as did the Navy) that the Navy’s proposed method for conducting the LCS
down select adequately took into account factors other than procurement cost. The issue was
viewed as having the potential for leading to a protest of the Navy’s down select decision by the
firm that is not selected.74
Regarding the role of life-cycle operation and support (O&S) cost in the Navy’s down select
decision, a February 2010 GAO report stated:
The Navy estimated operating and support costs for LCS seaframes and mission packages in
2009, but the estimates do not fully reflect DOD and GAO best practices for cost estimating
and may change due to program uncertainties. GAO’s analysis of the Navy’s 2009 estimates
showed that the operating and support costs for seaframes and mission packages could total
$84 billion (in constant fiscal year 2009 dollars) through about 2050. However, the Navy did
not follow some best practices for developing an estimate such as (1) analyzing the
likelihood that the costs could be greater than estimated, (2) fully assessing how the estimate
may change as key assumptions change, and (3) requesting an independent estimate and
comparing it with the program estimate. The estimates may also be affected by program
uncertainties, such as potential changes to force structure that could alter the number of ships
and mission packages required. The costs to operate and support a weapon system can total
70 percent of a system’s costs, and the lack of an estimate that fully reflects best practices

74 For examples of articles discussing this issue, see Sean Reilly, “Loser To Fight In LCS Deal?” Mobile (AL) Press-
Register
, March 28, 2010: 1; Cid Standifer, “Austal USA, GD Officials Criticize Navy’s RFP Criteria For LCS
Award,” Inside the Navy, March 29, 2010; Zachary M. Peterson, “Navy LCS Proposal Request Seeks ‘Qualitative’
Total Ownership Cost Figures,” Inside the Navy, March 22, 2010; Emelie Rutherford, “Navy Stands By LCS Due Date
As Hill Backers Of Each Bidder Swap Barbs,” Defense Daily, March 18, 2010: 2-3; Geoff Fein, “General Dynamics’
LCS Burns Less Fuel At Higher Speeds, Navy Documents Show,” Defense Daily, March 2, 2010: 1-2; Geoff Fein,
“Sessions Presses Navy Over Fairness of LCS RFP Evaluation,” Defense Daily, March 1, 2010: 6-7; Geoff Fein, “USS
Independence [LCS-2] Is The More Fuel Efficient of Two LCS Variants, Austal Official Says,” Defense Daily,
February 24, 2010: 2-3; Geoff Fein, “LCS RFP: Greater Emphasis Placed On Ship Price, Less On Life-Cycle Cost,”
Defense Daily, January 29, 2010: 5-7; Christopher P. Cavas, “RFP for LCS: Cost Main Factor in Winning Bid,”
NavyTimes.com, January 28, 2010.
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could limit decision makers’ ability to identify the resources that will be needed over the
long term to support the planned investment in LCS force structure. With a decision pending
in 2010 on which seaframe to buy for the remainder of the program, decision makers could
lack critical information to assess the full costs of the alternatives.75
A February 8, 2010, press report stated that “the Navy will draw up total life-cycle cost estimates
for both the Lockheed Martin and General Dynamics versions of the Littoral Combat Ship before
the program goes before the Defense Acquisition Board this year for its Milestone B. review. The
service included the announcement in a response to a Government Accountability Office report
that criticized LCS life-cycle estimates.”76
At the request of Senator Jeff Sessions, the CBO analyzed the impact of O&S cost and other
types of costs on the total life-cycle costs of the LCS and (for purposes of comparison) four other
types of Navy ships. The results of CBO’s analysis were released in the form of an April 28,
2010, letter to Senator Sessions. The letter states:
CBO projected the life-cycle cost of the LCS-1 under three different assumptions about the
average annual amount of fuel the ship will use over its 25-year life: low, moderate, and
high. In all three scenarios, procurement costs dominate the life-cycle cost of the LCS-1,
ranging from 58 percent to 66 percent of the total.… Personnel costs make up 14 percent to
16 percent of the LCS-1’s total life-cycle cost in the various scenarios, and fuel costs account
for 8 percent to 18 percent.
The low-fuel case assumes that the LCS-1 generally operates at relatively low speeds—10
knots or less 90 percent of the time it is under way and 30 knots or more only about 3 percent
of the time. That speed profile is based in part on how the Navy operated the LCS-1 between
March 2009 and March 2010. In that scenario, operation and support costs total 33 percent of
the ship’s life-cycle cost: 16 percent for personnel costs, 8 percent for fuel costs (assuming
that the ship consumes 25,000 barrels of fuel per year), and 9 percent for other O&S costs….
The moderate-fuel case—which CBO considers the most likely of the three scenarios—
assumes that the LCS-1 operates at 30 or more knots for about 5 percent of the time, at 14
knots to 16 knots 42 percent of the time (a range that might be typical when the ship was
traveling from its home port to a deployment location), and at less than 12 knots for the rest
of its time under way. In that scenario, O&S costs total 34 percent of the ship’s life-cycle
cost: 15 percent for personnel, 11 percent for fuel, and 8 percent for other O&S costs. The
moderate speed profile would result in fuel usage of about 35,000 barrels per year, slightly
less than the 37,600 barrels that the Navy assumed in formulating its 2011 budget request.
By comparison, the [Navy’s] FFG-7 class frigates consumed about 31,000 barrels of fuel per
ship in 2009.
The high-fuel case assumes that the LCS-1 operates at 30 or more knots for about 20 percent
of its time under way, an assumption based partly on a speed profile developed by the Naval
Sea Systems Command for the LCS program. In that scenario, O&S costs represent about 40
percent of the ship’s life-cycle cost—more than in the other scenarios for the LCS-1 but less
than for any of the other types of ships considered in this analysis. Personnel costs make up
14 percent of the life-cycle total; fuel costs, 18 percent; and other O&S costs, 8 percent.

75 Government Accountability Office, Littoral Combat Ship[:] Actions Needed to Improve Operating Cost Estimates
and Mitigate Risks in Implementing New Concepts
, GAO-10-257, February 2010, summary page.
76 Cid Standifer, “Navy Will Project Operation Costs Of Both LCS Models for DAB Review,” Inside the Navy,
February 8, 2010.
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Projected fuel usage in this scenario is about 67,000 barrels per year. That estimate is
unlikely to be exceeded in actual practice: It is twice the historical average for frigates and
about 80 percent of the amount used by the Navy’s destroyers (which do not have the
capability to speed at 40 knots, as the littoral combat ship does, but are three times larger
than the LCS-1).77
At a May 6, 2010, hearing on Navy shipbuilding programs before the Seapower Subcommittee of
the Senate Armed Services Committee, Senator Sessions questioned Sean Stackley, the Navy’s
acquisition executive (i.e., the Assistant Secretary of the Navy [Research, Development and
Acquisition]), regarding the role of fuel costs in the Navy’s evaluation of the two LCS designs.
Potential Risks If First Shipyard Cannot Build Ships Within Cost
Another potential issue for Congress concerning the Navy’s down select strategy concerned the
potential risks the Navy would face if the shipyard that wins the competition to build the 10 LCSs
in FY2010-FY2014 cannot build them within the contracted cost. The competition between the
two existing LCS industry teams to be the winner of the down select could be intense enough to
encourage the teams to bid unrealistically low prices for the contract to build the 10 ships.
The Navy and its supporters could argue that the Navy’s plan to award a fixed-price contract to
the winner of the down select would shift the cost risk on the 10 ships from the government to the
shipyard. They could also argue that the Navy plans to carefully evaluate the bid prices submitted
by the two industry teams for the down select to ensure that they are realistic, and that the
existence of the second LCS shipyard would provide the Navy with an ability to continue
building LCSs if production at the first yard were disrupted due to financial issues.
Skeptics could argue that even with a fixed-price contract, the Navy’s proposed strategy poses
cost risks for the government, because a shipyard could submit an unrealistically low bid so as to
win the down select, and then recover its losses on those 10 ships by rolling the losses into prices
for downstream ships in the program. Alternatively, the shipyard could present the Navy with the
prospect of going out of business and disrupting the LCS production effort unless the Navy were
to provide a financial bailout to cover the yard’s losses on the 10 ships. Skeptics could argue that
Navy decisions dating back to the 1970s to award multi-ship construction contracts to shipyards
that had not yet built many ships of the kind in question sometimes led to less-than-satisfactory
program outcomes, including substantial financial bailouts.
Increasing LCS Combat System Commonality with Other Combat Systems
Another potential issue for Congress regarding the Navy’s down select strategy concerned the
Navy’s plan to evolve the combat system on the winning LCS design to a configuration that has
greater commonality with one or more existing Navy surface ship combat systems. The Navy in
its September 16, 2009, announcement did not provide many details on this part of its proposed
acquisition strategy, making it difficult to evaluate the potential costs and risks of this part of the
strategy against potential alternatives, including an alternative (which Navy officials have
discussed in the past) of designing a new LCS combat system that would, from the outset, be
highly common with one or more existing Navy surface ship combat systems.

77 Letter dated April 28, 2010, from Douglas W. Elmendorf, Director, CBO, to the Honorable Jeff Sessions, pp. 3-5.
The letter is available online at http://www.cbo.gov/ftpdocs/114xx/doc11431/04-28-SessionsLetter.pdf.
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Navy’s Longer-Term Plans Regarding Two “Orphan” Ships
Another potential issue for Congress concerning the Navy’s down select strategy concerned the
Navy’s longer-term plans regarding the two “orphan” LCSs built to the design that was not
selected in the down select. The Navy stated that it planned to keep these two ships in the fleet
because they will be capable ships and the Navy has an urgent need for LCSs. These two LCSs,
however, will have unique logistic support needs, potentially making them relatively expensive to
operate and support. At some point, as larger numbers of LCSs enter service, the costs of
operating and supporting these two ships may begin to outweigh the increasingly marginal
addition they make to total LCS fleet capabilities. Potential alternatives to keeping the ships in the
active-duty fleet as deployable assets include selling them to foreign buyers, converting them into
research and development platforms, shifting them to the Naval Reserve Force (where they would
be operated by crews consisting partially of reservists), or decommissioning them and placing
them into preservation (i.e., “mothball”) status as potential mobilization assets. Potential
questions for Congress included the following:
• Does the Navy intend to keep the two orphan LCSs in the active-duty fleet as
deployable assets for a full 25-year service life?
• If so, how would be the life-cycle operation and support (O&S) costs of these
two ships compare to those of the other LCSs? In light of these O&S costs,
would it be cost-effective to keep these two ships in the active-duty fleet as
deployable assets for a full 25-year service life, particularly as large numbers of
LCSs enter service?
• If the Navy does not intend to keep the two orphan LCSs in the active-duty fleet
as deployable assets for a full 25-year service life, when does the Navy anticipate
removing them from such service, and what does the Navy anticipate doing with
them afterward?
Potential Alternatives to Navy’s September 2009 Strategy
Another potential issue for Congress concerning the Navy’s down select strategy concerned
potential alternatives to that strategy. A variety of alternatives can be generated by changing one
or more elements of the Navy’s proposed strategy. One alternative would be a strategy that would
keep both LCS designs in production, at least for the time being. Such a strategy might involve
the following:
• the use of block-buy contracts with augmented EOQ authority, as under the
Navy’s proposed acquisition strategy, to continue producing both LCS designs,
so as to provide stability to shipyards and suppliers involved in producing both
LCS designs;
• the use of Profit Related to Offer (PRO) bidding between the builders of the two
LCS designs, so as to generate competitive pressure between them and thereby
restrain LCS production costs;78 and

78 Under PRO bidding, the two shipyards would compete not for LCS quantities (because each shipyard would know
that it was going to build a certain number of LCSs over the term of their block-buy contracts), but rather for profit,
with the lowest bidder receiving the higher profit margin. PRO bidding has been used in other defense acquisition
programs where bidders do not compete for quantity. The Navy, for example, began using PRO bidding in the DDG-51
(continued...)
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• designing a new LCS combat system that would have a high degree of
commonality with one or more existing Navy surface ship combat systems and
be provided as government-furnished equipment (GFE) for use on both LCS
designs—an idea that was considered by the Navy at an earlier point in the
program.
The Navy’s November 3, 2010, proposal for a dual-award LCS acquisition strategy is broadly
similar to the notional dual-award approach outlined above. This notional dual-award approach
has been presented in this CRS report as an option for Congress since September 27, 2009, when
the report was updated to incorporate the Navy’s September 16, 2009, announcement of its
proposed down select strategy. The discussion below concerns the notional dual-award approach
outlined above.
Supporters of an alternative like the one outlined above could argue that it would
• provide stability to LCS shipyards and suppliers;
• use competition to restrain LCS production costs;
• permit the Navy to receive a full return on the investment the Navy made in
creating both LCS designs;
• reduce the life-cycle operation and support costs associated with building two
LCS designs by equipping all LCSs with a common combat system;
• allow the Navy to design an LCS combat system that is, from the outset, highly
common with one or more of the Navy’s existing surface ship combat systems;
• achieve a maximum LCS procurement rate of four ships per year starting in
FY2011 (two years earlier than under the Navy’s proposal), thus permitting more
LCSs to enter service with the Navy sooner;
• build both LCS designs in substantial numbers, thereby avoiding a situation of
having a small number of orphan LCS ships that could have potentially high
operation and support costs;
• preserve a potential to neck down to a single LCS design at some point in the
future, while permitting the Navy in the meantime to more fully evaluate the
operational characteristics of the two designs in real-world deployments; and
• increase the potential for achieving foreign sales of LCSs (which can reduce
production costs for LCSs made for the U.S. Navy) by offering potential foreign
buyers two LCS designs with active production lines.
Supporters of the Navy’s proposed acquisition strategy could argue that an alternative like the one
outlined above would, compared to the Navy’s proposed strategy
• achieve lower economies of scale in LCS production costs by splitting
production of LCS components between two designs;

(...continued)
destroyer program it in the 1990s.
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• achieve, at the outset of series production of LCSs, less bidding pressure on
shipyards, and thus higher LCS production costs, than would be achieved under
the Navy’s proposed strategy of using a price-based competition to select a single
design for all future LCS production;
• miss out on the opportunity to restrain LCS costs by using the level of efficiency
achieved in building an LCS design at one shipyard as a directly applicable
benchmark for gauging the level of efficiency achieved by the other shipyard in
building the same LCS design;
• increase Navy LCS program-management costs and the burden on Navy
program-management capabilities by requiring the Navy to continue managing
the construction of two very different LCS designs;
• achieve lower economies of scale in LCS operation and support costs because the
two LCS designs would still differ in their basic hull, mechanical, and electrical
(HM&E) systems, requiring the Navy to maintain two separate HM&E logistics
support systems;
• receive only a limited return on the investment the Navy made in developing the
two current LCS combat systems (since LCSs in the long run would not use
either one), and require the Navy to incur the costs and the technical risks
associated with designing a completely new LCS combat system;
• require the Navy to build some number of LCSs with their current combat
systems—which are different from one another and from other Navy surface ship
combat systems—while awaiting the development of the new LCS combat
system, and then incur the costs associated with backfitting these earlier LCSs
with the new system when it becomes available;
• send to industry a signal that is undesirable from the government’s perspective
that if the Navy or other parts or DOD begin producing two designs for a new
kind of weapon system, the Navy or DOD would be reluctant to neck production
down to a single design at some point, even if government believes that doing so
would reduce program costs while still meeting operational objectives; and
• miss out on the opportunity that would be present under the Navy’s proposed
acquisition strategy to increase the potential for achieving foreign sales of LCSs
by offering potential foreign buyers an LCS design that, through U.S. production,
enjoys significant economies of scale for both production and operation and
support.

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Appendix D. Dual-Award Acquisition Strategy
Announced in November 2010

This appendix presents additional background information on the dual-award acquisition strategy
announced by the Navy on November 3, 2009.
November 4, 2010, Navy Point Paper
A November 4, 2010, Navy point paper on the dual-award strategy proposed on November 3,
2010, stated the following (this is the full text of the point paper):79
Littoral Combat Ship Proposed Revised Acquisition
Dual Ten Ship Awards
• In summer 2009 Navy received bids for three FY10 ships from Lockheed
Martin/Marinette Marine/Bollinger and General Dynamics Bath Iron Works/Austal
USA industry teams. These bids did not reflect competitive pricing and well exceeded
the Congressional Cost Cap. In order to reverse cost trends on the program, the
acquisition strategy was revised to the current down select strategy.
• The Navy’s Littoral Combat Ship acquisition strategy to down select to a single design
has resulted in a highly effective competition between the industry bidders. Navy is on
the path to down select in accordance with the terms of the current solicitation.
• The industry response to the competitive acquisition strategy has resulted in has resulted
in reduction in cost for the LCS ships relative to the previous bids. These competitive
bids, coupled with Navy’s desires to increase ship procurement rates to support
operational requirements, has created an opportunity to award each bidder a fixed price
ten-ship block buy—a total of 20 ships from Fiscal Year 2010 to Fiscal Year 2015. A
comparison between the two strategies of which ships are included in a down
select/second source versus dual 10 ship block buy appears in the table below.
• The current NDAA [national defense authorization act] language permits the Navy to
procure up to 10 ships in a block buy. In order to execute a dual ten ship award, Navy
believes Congressional authorization is required.
• If Congressional support for this approach is granted, Navy will work with industry to
revise the ship procurement schedules within current proposal pricing (FY10 – FY15
vice FY10 – FY14).
• Navy is continuing on the path to down select and absent authorization, we will proceed
to down select by mid-December 2010.
• There are numerous benefits to this approach including stabilizing the LCS program and
the industrial base with award of 20 ships; increasing ship procurement rate to support

79 Source: Navy point paper on proposed alternative LCS acquisition strategy dated November 4, 2010.
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operational requirements; sustaining competition through the program; and enhancing
Foreign Military Sales opportunities.
• The Navy intends to procure the Technical Data Package for both designs and if
necessary a second source for either or both designs could be brought into the program.
• Either approach will ensure the Navy procures affordably priced ships.

FY10
FY11
FY12
FY13
FY14
FY15
TOTAL
Winner
2
2
2
2
2
4
Downselect
Second Source
1
2
2
19
TOTAL
2
2
3
4
4
4
Contractor A
1
1
2
2
2
2
Dual Award
Contractor B
1
1
2
2
2
2
20
TOTAL
2
2
4
4
4
4

Near-Term Issue for Congress
The Navy’s proposed dual-award strategy posed a near-term issue for Congress of whether this
strategy would be preferable to the down select strategy, and whether Congress should grant the
Navy, by December 30, the additional legislative authority the Navy would need to implement the
dual-award strategy.
December 14 Senate Armed Services Committee Hearing
On December 14, 2010, the Senate Armed Services Committee held a hearing to review the
Navy’s proposed dual-award strategy. The witnesses at the hearing included Navy leaders and
representatives from CBO, GAO, and CRS. The committee’s web page for the hearing80 contains
links to the prepared statements of the GAO and CRS witnesses, and states that the Navy and
CBO witnesses did not submit their prepared statements in electronic form. (The CBO witness
asked in his opening remarks that CBO’s December 10, 2010, letter report on the relative costs of
the down select and dual-award strategies81 be entered into the record for the hearing. CBO’s
letter report is available from the CBO website.) The committee’s web page for the hearing also
contains a link to the transcript of the hearing.
Some General Observations
General observations that could be made on the Navy’s proposed dual-award strategy included
but are not limited to the following:

80 http://armed-services.senate.gov/testimony.cfm?wit_id=9812&id=4897.
81 Congressional Budget Office, letter report to Senator John McCain on LCS acquisition strategies dated December 10,
2010, 7 pp.
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• The dual-award strategy would avoid, at least for now, the possibility of a
contract protest being filed against a Navy down select decision.
• Although the dual-award strategy includes the possibility of the Navy at some
point bringing a second source into the program for either or both LCS designs,
the dual-award strategy does not include the guaranteed opportunity present in
the down select strategy for shipyards not currently involved in building LCSs to
compete for the right to become the second LCS builder.
• The Navy’s November 4, 2010, point paper on the dual-award strategy does not
outline the Navy’s intentions regarding the currently different combat systems
(i.e., the built-in collections of sensors, weapons, displays, and software) on the
two LCS designs.
• The dual-award strategy would require each LCS contractor to build 10 ships
over a period of six years (FY2010-FY2015) rather than five years (FY2010-
FY2014), but at the same price that was bid for the five-year schedule. In
addition, LCSs built under the dual-award strategy would incorporate combat
systems that would be built by combat system manufacturers in smaller annual
quantities than would be the case under the down select strategy, possibly
increasing the costs of these combat systems. Factors such as these could, at the
margin, alter the profitability for each contractor of building its respective group
of 10 ships.
It could also be noted that the Navy’s proposed dual-award strategy is broadly similar to a
notional dual-award approach that was presented in this CRS report as an option for Congress
(see Appendix C) since September 27, 2009, when the report was updated to incorporate the
Navy’s September 16, 2009, announcement of its proposed down select strategy.
Potential Oversight Questions for Congress
Potential oversight questions for Congress in assessing whether the proposed dual-award strategy
would be preferable to the down select strategy, and whether to grant the Navy, by December 30,
the additional legislative authority the Navy would need to implement a dual-award strategy,
included but were not limited to the following:
• Did the timing of the Navy’s proposal provide Congress with enough time to
adequately assess the relative merits of the down select strategy and the dual-
award strategy? Given that the contractors submitted their bids by about
September 15, could the Navy have notified Congress of the proposed dual-
award strategy sooner than November 3, giving Congress more time to seek
information on and evaluate the proposal? Should the Navy have asked the
contractors to extend their bid prices for another, say, 30 or 60 or 90 days beyond
the original December 14 expiration date, so as to provide more time for
congressional review of the Navy’s proposal?82 (As mentioned earlier, on

82 A December 6, 2010, press report states: “Lockheed officials have indicated that they could extend the pricing in
their proposal for a short while beyond Dec. 14, to allow time for Congress to approve the change. Lockheed Chief
Financial Officer Bruce Tanner told an investment conference last week that Lockheed could extend the prices it
offered for a day or two, but not indefinitely…. Analysts said they expected both companies to show some flexibility
on the expiration of their pricing, given that each firm stood to win a contract valued at around $5 billion.” (Andrea
(continued...)
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December 13, it was reported that the two LCS bidders, at the Navy’s request,
had extended the prices in their bids for 16 days, to December 30. At the
December 14 hearing, Navy witnesses expressed strong doubts about the
willingness of the bidders to extend their bid prices for any significant additional
amount of time, since agreements with their parts suppliers and other
arrangements on which the bids are based would no longer be valid.)
• What role, if any, did a desire by the Navy to avoid a potential contract protest
against the Navy’s down select decision play in the Navy’s decision to propose
the alternate dual-award strategy? For example, how concerned, if at all, was the
Navy that the announcement of an LCS down select decision might lead to a
contract protest and controversy somewhat like what has been experienced in the
Air Force’s KC-X aerial refueling tanker acquisition program?83 A December 13,
2010, press report on the LCS program stated: “One high-level Navy source
recently said that without the dual-ship approach, ‘there is 100 percent chance of
a protest.’”84
• What are the potential relative costs of the down select and dual-award
acquisition strategies, including development costs, procurement costs, and life-
cycle operation and support (O&S) costs? Did the Navy fully and accurately
estimated these costs—including potential costs for developing, procuring, and
installing a common combat system for both LCS designs—and reported all
these potential costs to Congress?
• What are the potential relative risks of the down select and dual-award
acquisition strategies, including development risks, production cost risks,
production schedule risks, and life-cycle O&S risks? Did the Navy fully and
accurately estimated these risks, and reported all these potential risks to
Congress?
• What are the Navy’s intentions, under the proposed dual-award acquisition
strategy, regarding the currently different combat systems on the two LCS
designs? Does the Navy intend to leave them unchanged, adopt one of the
combat systems as the common system for both designs, or develop a new
combat system for both designs? If the Navy intends to pursue the second or third
of these paths, what is the Navy’s plan (including schedule) for doing so? If the
Navy does not have a definite plan regarding the combat systems for the ships,
how well can the potential costs and risks of the dual-award strategy be estimated
and compared to those of the down select strategy?
• What are the potential industrial-base impacts of the dual-award strategy,
including impacts on the two LCS contractors, on shipyards that could, under the

(...continued)
Shalal-Esa, “U.S. Navy Hopeful Congress Will Approve Ship Buys,” Reuters.com, December 6, 2010.) Another
December 6, 2010, press report that was posted online on December 3, 2010, stated: “Theoretically, Lockheed Martin
and Austal could likely agree to extend the price deadline, but the Navy has not asked them to do so yet, [Navy
spokeswoman Captain Cate] Mueller said.” (Cid Standifer, “Stand-Alone Bill May Be Needed To Approve LCS Dual
Block Buy Plan,” Inside the Navy, December 6, 2010.)
83 For more on the KC-X program, see CRS Report RL34398, Air Force KC-46A Tanker Aircraft Program, by
Jeremiah Gertler.
84 Christopher P. Cavas, “Deadline Looms For U.S. Navy’s LCS,” Defense News, December 13, 2010: 1.
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down select strategy, bid for the right to become the second LCS builder, and on
combat system manufacturers?
• What impact, if any, might the Navy’s proposal to shift from its down select
strategy to the dual-award strategy have on the ability of the Department of
Defense (DOD) to implement down select strategies for other acquisition
programs? For example, will the Navy’s proposal to shift to the dual-award
strategy cause contractors bidding for other acquisition programs to treat with
increased skepticism stated DOD intentions to carry out down selects? If so,
could that reduce the benefits of competition that DOD might hope to achieve
through the use of down select strategies?
Enough Time for Adequate Congressional Review of Navy
Proposal?

Regarding whether the timing of the Navy’s proposal provides Congress with enough time to
adequately assess the relative merits of the down select strategy and the dual-award strategy, it
can be noted that this was the third time in the history of the LCS program that the Navy
presented Congress with an important choice about the future of the LCS program late in the
congressional budget-review cycle, after Congress had completed its spring budget-review
hearings and some of its committee markups. The first instance was in mid-2002, when the Navy
submitted an amended request to Congress for FY2003 funding to get the LCS program started
using a rapid acquisition strategy.85 The second was in September 2009, when the Navy
announced its proposed down select strategy for the LCS program (see the discussion of this issue
in Appendix C).
In light of the third instance—the Navy’s proposal of November 3, 2010, for using a dual-award
strategy rather than a down select strategy—a potential issue for Congress are the implications for
the LCS program and congressional oversight of defense acquisition programs in general of
proceeding with the LCS program in part on the basis of policies originally presented as
proposals to Congress late in the congressional budget-review cycle, after Congress had
completed its spring budget-review hearings and some of its committee markups. The Navy’s
November 3, 2010, notification to Congress of the proposed dual-award strategy, combined with
a request by the Navy that Congress act on that proposal by December 30, provided relatively
little time for Congress to collect cost and other information from the Navy (including
information that Navy might not offer in initial briefings to individual congressional offices), for
Congress to solicit cost and other information from independent sources such as CBO and GAO,

85 The Navy’s original FY2003 budget request, submitted to Congress in February 2002, contained no apparent funding
for development of the LCS. In addition, the Navy in early 2002 had not yet announced that it intended to employ a
rapid acquisition strategy for the LCS program. As a result, in the early months of 2002, there may have been little
reason within Congress to view the LCS program as a significant FY2003 budget-review issue. In the middle of 2002,
the Navy submitted an amended request asking for $33 million in FY2003 development funding for the LCS program.
Navy officials explained that they did not decide until the middle of 2002 that they wanted to pursue a rapid acquisition
strategy for the LCS program, and consequently did not realize until then that there was a need to request $33 million in
FY2003 funding for the program. By the middle of 2002, however, the House and Senate Armed Services committees
had already held their spring FY2003 budget-review hearings and marked up their respective versions of the FY2003
defense authorization bill. These two committees thus did not have an opportunity to use the spring 2002 budget-review
season to review in detail the Navy’s accelerated acquisition plan for the LCS program or the supporting request for
$33 million in funding.
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for CBO and GAO to develop such information and provide it to Congress, for Congress to hold
hearings at which all this information might be discussed in a group setting, with multiple parties
present, and for congressional offices to then form their evaluations of the Navy’s proposal.
Relative Costs
Regarding the relative costs of the down select and dual-award acquisition strategies, there were
at least three significant cost elements to consider: ship procurement costs; costs for possibly
modifying the combat systems on LCSs so as to achieve more commonality in combat system
equipment among all LCSs, and between LCSs and other Navy ships; and operational and
support (O&S) costs.
Ship Procurement Costs
Navy Estimate
Regarding ship procurement costs, the Navy estimates that procuring LCSs under the dual-award
strategy would cost $1 billion less through FY2016, and $600 million less through FY2015, than
procuring them under the down select strategy. The Navy states that the $1 billion in savings
through FY2016 translates to $910 million in net present value terms, and that the $600 million in
savings through FY2015 translates to $496 million in net present value terms.86
The Navy estimates that ship procurement costs will be lower under the dual-award strategy than
they would have been under the down select strategy due to the following cost factors, which are
not listed in any particular order:87
Costs due to the second source under down select strategy building its first
LCS. The Navy estimates that certain ship procurement costs would be higher
under the down select strategy because the second source under the down select
strategy—that is, the unknown shipyard that would have been chosen in the
second-stage competition that would have occurred under the down select
strategy—would be building its first LCS. These higher costs include the
following:
Tooling, jigs, fixtures, etc. The second source under the down select strategy
would incur costs for the purchase of LCS-specific tooling, jigs, fixtures, etc.
Marinette and Austal have already paid for these things.
Engineering and support services. The Navy’s estimate includes a higher
cost for engineering and support services at the second source under the
down select strategy, because these costs typically are higher for a lead ship
at a shipyard than for subsequent ships at that yard.
Learning curve position. In estimating the amount of labor hours required
to build the first ship covered under the second source’s block-buy contract,

86 Source for $496 million figure: Navy briefing to CRS and CBO, March 30, 2011.
87 Source for these points: Navy information paper dated April 12, 2011, as clarified and elaborated in a telephone
conversation with CRS on April 21, 2011.
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the Navy’s estimate takes into account the fact that the second source under
the dual-award strategy has already built LCSs (i.e., the yard is already some
way down its LCS production learning curve), whereas the second source
under the down select strategy would be building its first LCS (i.e., the yard
would be at the top of its LCS production learning curve).
Change orders. The Navy budgets a 10% allowance for change orders (i.e.,
design changes) for a lead ship built at a shipyard, compared to 5% for
subsequent ships built at that yard.
Rework. The Navy’s estimate includes a higher cost for rework at the second
source under the down select strategy because lead ships typically experience
higher rework rates.
Slope of shipyard learning curve. The Navy estimates that the second source
under the dual-award strategy will achieve a steeper production learning curve
(i.e., a greater amount of ship-to-ship reduction in shipyard labor hours required
to build each ship) than would have been achieved by the second source under
the down select strategy. In making this estimate, the Navy cites facilities
improvements at Marinette and Austal that the Navy believes will permit
Marinette and Austal to achieve learning curves of a certain steepness.
Shipyard labor rates. The Navy estimates that the second source under the dual-
award strategy will feature labor rates that are lower than those that would have
occurred at the second source under the down select strategy.
Vendor material costs. The Navy estimates that the second source under the
dual-award strategy will obtain lower material prices from vendors than the
second source under the down select strategy would have obtained because the
second source under the dual-award strategy can seek bids from vendors on
materials for a 10-ship contract, while the second source under the down select
strategy would have sought bids from vendors on materials for a 5-ship
contract.88
Profit rates. The Navy estimates that the profit rates earned by second source
under the dual-award strategy are lower than those that would be earned by the
second source under the down select strategy, due to aggressive bidding by
Marinette and Austal during what these yards thought was the first-stage
competition under the down select strategy—a competition that was to have
chosen the one LCS design to which all future LCSs would be built.
In evaluating the Navy’s treatment of the above cost factors, potential questions include the
following:
• How reasonable is it for the Navy to estimate that the second source under the
dual-award strategy would have a steeper shipyard learning curve, lower
shipyard labor rates, and a lower profit rate than the second source under the
down select strategy would have had? Given the number and capabilities of

88 The Navy also adjusted its cost estimate to account for differences in production quantities of scale for LCS combat
systems that would occur under the down select and dual-award strategies. Under the down select strategy, one combat
system maker would make combat systems for all LCSs. Under the dual-award strategy, two combat system makers
would each make combat systems for one-half of the LCSs.
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shipyards that might have participated in the second stage competition under the
down select strategy, the potential intensity of a competition among these yards
to win a share of a large Navy shipbuilding program, and the uncertainty about
which specific yard might have won that competition, how certain can the Navy
be that the second source that was chosen under that competition would have a
shallower learning curve (and that it would not make facility investments to
achieve a steeper curve), higher labor costs, and a lower profit rate than the
second source under the dual-award strategy?
• How reasonable is it for the Navy to estimate that the second source under the
down select strategy would have higher vendor material costs, given that this
second source might have been a builder of other Navy ships and consequently
might have been able to bundle its LCS material purchases together with those
for its other Navy ships, so as to achieve increased economies of scale in material
production? Navy officials in recent years have encouraged shipyards to achieve
cross-yard economies of scale of this kind.
• If the second source under the down select strategy were instead estimated to be
equal to the second source under the dual-award strategy in terms of shipyard
learning curve slope, shipyard labor rates, vendor material costs, and profit rates,
how much would this reduce the Navy’s estimate of the savings in ship
procurement costs that would occur under the dual-award strategy?
CBO Estimate
In contrast to the Navy, which estimated that ship procurement costs would be lower under the
dual-award strategy, CBO in its December 10, 2010, letter report estimated that ship procurement
costs would be $740 million higher more through FY2015 under the dual-award strategy. CBO’s
letter report included several cautionary statements about its estimates relating to limits on the
information available to CBO in developing its estimates. The Navy and CBO estimates of ship
procurement costs through FY2015 are summarized in Table D-1.
Table D-1. Navy and CBO Estimates of Ship Procurement Costs Through FY2015
Under Down Select and Dual-Award Strategies
For the period FY2010-FY2015, in current (i.e., then-year) dollars
Acquisition approaches
Estimated Cost
Navy estimate
19-ship down-select plan
10,400 million
20-ship dual-award plan
9,800 million
Difference between two plans
Dual-award plan costs $600 million less


CBO estimate
19-ship down-select plan
11,080 million
20-ship dual-award plan
11,820 million
Difference between two plans
Dual-award plan costs $740 million more
Source: Table prepared by CRS based on data presented in Congressional Budget Office, letter report to
Senator John McCain on LCS acquisition strategies dated December 10, 2010, Table 2 on page 5.
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December 14, 2010, Hearing
At the December 14, 2010, hearing on LCS acquisition strategy before the Senate Armed Services
Committee, the Navy witnesses defended the Navy’s estimate, stating that it was based on actual
bid data from the two LCS bidders, and that CBO’s estimate did not reflect full exposure to these
bid data, because the data were proprietary and were being closely held by the Navy pending a
potential announcement by the Navy of a down select decision (if the dual-award strategy were
not pursued).
As discussed in the previous section, however, the Navy’s estimate was also based on certain
assumptions about the unknown shipyard that would have been chosen under the second-stage
competition that would have occurred under the down select strategy. The Navy’s assumptions
about this unknown yard compared to the second source under the dual-award strategy accounts
for some portion of the Navy’s estimated savings.
Potential Changes in Costs of Other Ships Not Accounted For
Under the down select strategy, shipyards competing to become the second LCS builder could
include yards that currently build other ships for the Navy, such as, possibly, General Dynamics’
Bath Iron Works (GD/BIW) of Bath, ME, Northrop Grumman’s Ingalls shipyard of Pascagoula,
MS, or General Dynamics’ National Steel and Shipbuilding Company (NASSCO) of San Diego,
CA. If such a yard were to be selected under the down select strategy to become the second LCS
builder, it could reduce the cost of other Navy ships being built at that yard by more fully
spreading the fixed overhead costs of that yard. The Navy and CBO estimates in Table D-1 do
not account for possible changes in the costs of other Navy ships that might be occur as a
consequence of changes in the spreading of shipyard fixed overhead costs.
Combat System Modification Costs
Any savings the dual-award strategy might realize relative to the down select strategy in terms of
costs for procuring LCSs could be offset by potential additional costs under the dual-award
strategy for modifying the combat systems on LCSs so as to achieve more commonality in
combat system equipment among all LCSs, and between LCSs and other Navy ships. Prior to its
September 2009 announcement of its proposed down select strategy, Navy officials on some
occasions had spoken about the possibility of modifying the combat systems of one or both LCS
designs so as to achieve more commonality in combat system equipment among all LCSs, and
between LCSs and other Navy ships.89
A November 29, 2010, press report stated that “the Navy intends to keep separate the combat
systems of the Lockheed and Austal USA versions of the Littoral Combat Ships for its dual buy
strategy, but will ‘procure the tech data package to allow for consideration of [a] common combat
system in the future,’ according to Navy spokeswoman Capt. Cate Mueller.” The report also
quoted an industry official as saying that the Navy is likely “still strategizing as to how they’re
going to single up on a combat system.”90

89 See, for example, Christopher P. Cavas, “Two LCS Designs, One Big Dilemma,” Defense News, December 13,
2010: 22.
90 Andrew Burt, “Navy Open To Combining Combat Systems On Both Littoral Combat Ships,” Inside the Navy,
(continued...)
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At the December 14 hearing, the Navy stated the following regarding the issue of potential
combat system modification costs:
The current [LCS] acquisition strategy does not call for the changeout of the [LCS] combat
system.
Let me describe some characteristics of the combat system. As it was mentioned earlier, the
total cost for the [LCS] combat system is on the order of about $70 million. When we think
of the combat system, we break it down into a couple key components—weapons, sensors,
and command and control [aka command and decision, or C and D] system. We have in fact,
on the weapons side of the combat system, commonality [between the two LCS designs].
Both ships’ 57-millimeter Bofors guns, both ships we’re looking at RAM–CRAM [sic: RAM
or SEARAM] weapons systems. So the weapon system is already common both between
them and also with other ships in the inventory.
Now, on the sensor side, we have contemplated moving towards a common sensor, and
inside of this solicitation the Navy asked for priced bids for a new sensor to consider for the
future. In total, the cost for bringing a new sensor—that’s both common for LCS and with
the rest of the fleet—is about $20 million nonrecurring and about $2 million a ship
difference.
So weapons are common. If the Navy chose to go to a common system for performance
reasons, the cost impact would be about $20 million nonrecurring and a couple million
dollars a ship.
Then on the C and D side, which is largely the software system and displays and processors,
the Navy does not have a drive right now to go towards common C and D for this class either
in the down-select or dual-award. It is something that we could consider in the future.91
A January 17, 2011, press report stated:
“The median class size in the Navy is about 12 to 14 ships, so we have a lot of 12-ship
classes that have their own combat system,” [Rear Admiral David Lewis, the Navy’s
program executive officer for ships,] said, “so we have no plans on changing the combat
system on the ships. They're effective. At this point, they meet the requirements, and so I
don't see any appetite in the Navy for changing those.”…
Lewis admitted that the business case could change after the two 10-ship contracts have run
their course, but said he was skeptical it would make more sense to change combat systems
then than now.92
An August 18, 2011, press report stated:
[Rear Admiral James] Murdoch [head of the program executive office], said the Navy has
not yet decided on whether both classes should have the same combat system or whether the

(...continued)
November 29, 2010. Material in brackets as in original. The Austal USA version of the LCS is the version developed
by the General Dynamics-led LCS industry team.
91 Transcript of spoken testimony of Sean J. Stackley, Assistant Secretary of Navy for Research, Development, and
Acquisition.
92 Cid Standifer, “Rear Adm. Lewis: Navy Has ‘No Appetite’ To Change LCS Combat System,” Inside the Navy,
January 17, 2011.
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program should shift to a single system. There was no timeframe for a decision and the Navy
was awaiting feedback from the two firms, he said.
“I'm not going to prejudge that,” he said, adding he did not expect any changes in the
“immediate term.”93
A March 17, 2013, press report states that “the Navy has been strongly considering a downselect
to a single LCS combat system in 2015, doing away with one of the program’s most glaring
inefficiencies. Consideration of a downselect to a single design also has been underway.”94
The Navy testified on May 8, 2013, that it is
aggressively pursuing commonality between the two variants, with particular focus on
weapon systems, sensors, and C4I equipment. There are several on-going studies that will
identify non-recurring integration costs, insertion points, and total ownership costs in order
to assess the optimal insertion points.95
Life-Cycle Operation and Support (O&S) Costs
Any savings the dual-award strategy might realize relative to the down select strategy in terms of
costs for procuring LCSs could also be offset by potential additional life-cycle operation and
support (O&S) costs of operating significant numbers of two different LCS designs. A December
8, 2010, GAO report states: “According to the Navy, [estimated savings in LCS procurement
costs under the dual-award strategy] would be offset, in part, by an additional $842 million in
total ownership costs, which the Navy equates to a net present value of $295 million.”96 The
Navy confirmed this figure at the December 14 hearing, and stated that this estimate was
carefully prepared and consistent with past Navy analyses on this question.
GAO’s December 8 report states:
Navy officials expressed confidence that their cost estimate supporting the dual award
provides details on the costs to operate and support both designs. However, since little actual
LCS operating and support data are available to date, the Navy’s estimates for these costs are
currently based on data from other ships and could change as actual cost data become more
available. These estimates are also based on new operational concepts for personnel, training,
and maintenance that have not been fully developed, tested, and implemented. For example,
the Navy has not yet implemented a comprehensive training plan, and it is possible that the
plan could cost more or less than the training costs currently accounted for by the Navy.97

93 Mike McCarthy, “LCS-5, -6 Will Keep Separate Combat Systems, PEO Says,” Defense Daily, August 18, 2011: 3-4.
94 Christopher P. Cavas, “U.S. Navy Weighs Halving LCS Order,” DefenseNews.com, March 17, 2013.
95 Statement of The Honorable Sean J. Stackley, Assistant Secretary of the Navy (Research, Development and
Acquisition) and Vice Admiral Allen G. Myers, Deputy Chief of Naval Operations for Integration of Capabilities and
Resources and Vice Admiral Kevin M. McCoy, Commander, Naval Sea Systems Command, Before the Subcommittee
on Seapower of the Senate Armed Services Committee on Department of the Navy Shipbuilding Programs, May 8,
2013, p. 13.
96 Government Accountability Office, Navy’s Proposed Dual Award Acquisition Strategy for the Littoral Combat Ship
Program
, GAO-11-249R, December 8, 2010, Table 1 on page 3.
97 Government Accountability Office, Navy’s Proposed Dual Award Acquisition Strategy for the Littoral Combat Ship
Program
, GAO-11-249R, December 8, 2010, p. 6.
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CBO’s December 10 letter report states:
Operating and maintaining two types of ships would probably be more expensive, however.
The Navy has stated that the differences in costs are small (and more than offset by
procurement savings), but there is considerable uncertainty about how to estimate those
differences because the Navy does not yet have much experience in operating such ships.98
Resulting Net Costs
Using the above information, it appears that the Navy estimates that, compared to the down select
strategy, the dual award strategy might save a net total of $615 million (net present value) through
FY2016, or $201 million (net present value) through FY2015. This figure includes $910 million
(net present value) in savings in ship procurement costs through FY2016, or $496 million (net
present value) in ship procurement costs through FY2015, less $295 million (net present value) in
additional ship O&S costs.
This figure does not account for possible changes in the costs of other Navy ships that might be
occur as a consequence of changes in the spreading of shipyard fixed overhead costs. The
estimated net savings of $615 million (net present value) through FY2016 ($201 million [net
present value] through FY2015) would be reduced by any LCS combat system modification
costs. Navy testimony at the December 14 hearing suggests that combat system modification
costs might range from zero (no modifications) to a few tens of millions of dollars (changing the
radar on the ships).
Using CBO’s estimate rather than the Navy’s estimate for relative ship procurement costs (see
Table D-1) would make the dual-award strategy more expensive than the down select strategy. As
mentioned earlier, the Navy witnesses at the December 14 hearing defended the Navy’s estimate
of ship procurement costs, stating that it was based on actual bid data from the two LCS bidders,
and that CBO’s estimate did not reflect full exposure to these bid data, because the data are
proprietary and being closely held by the Navy pending a potential announcement by the Navy of
a down select decision (if the dual-award strategy is not pursued).
Relative Risks
Regarding the potential relative risks of the down select and dual-award acquisition strategies, the
December 8 GAO report states that “a second ship design and source provided under the dual
award strategy could provide the Navy an additional hedge against risk, should one design prove
problematic.”99 It might also be argued that the dual-award strategy avoids the construction risks
present under the down select strategy of having LCSs built by a shipyard that has not previously
built LCSs.
On the other hand, it might be argued that if there is a substantial risk of an LCS design proving
problematic, then the LCS program should not be put into series production in the first place, and
that if there is not a substantial risk of an LCS design proving problematic, then the value of

98 Congressional Budget Office, letter report to Senator John McCain on LCS acquisition strategies dated December 10,
2010, p. 3.
99 Government Accountability Office, Navy’s Proposed Dual Award Acquisition Strategy for the Littoral Combat Ship
Program
, GAO-11-249R, December 8, 2010, p. 4.
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hedging against that risk would be negligible. It might also be argued that managing the
construction of two very different LCS designs could place increased demands on overall Navy
program management capacities and on the Navy’s Supervisor of Shipbuilding (SUPSHIP)
capabilities for on-site monitoring of the construction of Navy ships—factors that might increase
the chances of program-management challenges in the LCS program or of the Navy not detecting
in a timely manner construction-quality problems that might occur in one or both LCS designs.100

Author Contact Information

Ronald O'Rourke

Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610


100 Limits on Navy SUPSHIP capacities may have been a factor in the delayed discovery by the Navy of construction
quality problems on Navy San Antonio (LPD-17) class amphibious ships. For a discussion of LPD-17 class
construction quality problems, CRS Report RL34476, Navy LPD-17 Amphibious Ship Procurement: Background,
Issues, and Options for Congress
, by Ronald O'Rourke.
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