2017-01-17 / Front Page

BIW angles for better destroyer deal

Report surfaces of Navy switching to rival shipyard for next generation vessel
BY NATHAN STROUT
Times Record Staff

BATH

Still in contract negotiations, the Navy is reportedly considering switching from Bath Iron Works to a rival shipyard to build the first of the next generation Arleigh Burke-class destroyers.

The Arleigh Burke-class destroyers have been a mainstay of BIW since the 1980s, providing jobs for thousands of workers. BIW also conducts lead shipyard services for the destroyers. But with the loss of the Coast Guard Offshore Patrol Cutter contract in September and only two Zumwalt-class destroyers left in production, soon the Arleigh Burke-class destroyers may be the only type of ship being built at BIW — making the ongoing negotiations all the more important.

According to Defense News, the Navy wants BIW to agree to a fixed-priced contract to keep costs down and quiet congressional critics. The trade publication states the Navy is considering switching to a rival shipyard, Mississippi-based Huntington Ingalls Industries.

Instead of a fixed-price contract, Defense News reports that BIW is seeking a more flexible cost-plus contract.

“For shipbuilding, cost-plus contracts have an important role in mitigating the shipbuilder’s risk of taking on a new contract for a fledgling naval ship — new shipbuilding programs mean the yard must retool, train new people, and gamble on the longer-term future of a program that is, very often, uncertain,” Craig Hooper, who writes about Navy shipbuilding on his blog, Next Navy, while studying national security challenges at Gryphon Scientific, told The Times Record.

The Arleigh Burke-class was supposed to be replaced by the highly advanced Zumwalt-class destroyers, which are built exclusively in Bath. However, rising costs and other concerns led to cuts to that program and the eventual “restart” of the Arleigh Burke-class destroyers. The current negotiations concern whether BIW will build the first Flight III destroyer, and the shipyard has stated previously that the shipyard will be submitting a bid for a multiyear contract for Flight III destroyers in early 2017.

According to Hooper, both sides have a point. On the one hand, the Navy can say that BIW has made dozens of Arleigh Burke-class destroyers and should be capable of making appropriate estimates. On the other hand, there are some major changes being made with the Flight III program, and the kinks have yet to be worked out. A report from the Government Accountability Office in August actually called for the Flight III program to be delayed in order to give the Navy time to increase design knowledge.

“The risks are high; the design isn’t ready to be built yet and the platform’s weight, power and space margins are slim enough that even a small design oversight could be catastrophic,” said Hooper. “But even given the risks, Bath’s request for cost-plus contract is a tough pill to force upon Washington, D.C. right now.”

General Dynamics spokeswoman Lucy Ryan told Defense News that the “history of Navy shipbuilding has shown significant risk to cost and schedule in starting construction when the detail design of the ship and ship systems is largely incomplete. With the current status of the design, we can’t accurately estimate the cost of constructing the ship at this time.”

Hooper argues that BIW could be pursuing a strategy to convince the Navy to take a second look at the Zumwalt-class destroyers. By pushing the Navy to adopt a more realistic (and more expensive) view of the Flight III destroyers, the more expensive yet more advanced Zumwalt-class destroyers could look more attractive.

“Such a strategy could be seen as a win-win for Bath — while a higher cost estimate reduces the overall risk to the yard posed by the Flight III, a higher price estimate would also allow policymakers to make better-informed comparisons between the next-generation DDG-1000 and the resurgent ‘DDG-1000 Killer,’ the DDG-51 Flight III,” said Hooper.

Ultimately, such a strategy may not pay off in the current atmosphere of Navy shipbuilding admits Hooper. What is clear is that with no new work on the horizon for BIW, securing a contract for the next round of Arleigh Burke-class destroyers is all the more important.

Navy vs. BIW

ACCORDING TO Defense News, the Navy wants Bath Iron Works to agree to a fixed-priced contract to keep costs down and quiet congressional critics.

INSTEAD OF a fixed-price contract, Defense News reports that BIW is seeking a more flexible cost-plus contract.

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