Lockheed under Navy scrutiny for troubled Littoral Combat Ship program

by Michael Hansen, Hawaii Shippers Council, May 10, 2016

Bloomberg published on May 9, 2016, an article, “U.S. Navy Dings Lockheed on Littoral Ship Quality Controls,” reporting that the U.S. Navy’s supervisor of shipbuilding issued three notices indicating deficiencies with three Littoral Combat Ships (LCS) constructed under contract to the Lockheed Martin Corporation (NYSE: LMT).

This is the latest in a litany of problems with the Navy’s L:CS program which is constructing a series of ships in two variants.

Lockheed is constructing the Freedom Class -- a steel mono-hull ship -- at the Marinette Marine Corp. shipyard in Marinette, Wisconsin. Marinette is majority owned by Fincantieri - Cantieri Navali Italiani S.p.A. (Fincantieri), an Italian shipbuilding company based in Trieste, Italy, with minority interest held by Lockheed. Lockheed -- headquartered in Bethesda, Maryland -- is principally engaged in the research, design, development, manufacture, integration and sustainment of advanced technology systems, products and services.

The other variant, the Independence Class LCS, is a aluminum hull trimaran designed and built by Austal USA Inc. in Mobile, Alabama. Austal is a wholly-owned subsidiary of Australian company, Austal Ltd.

Both LCS variant programs are well behind schedule in terms of delivering the contracted ships, but only Lockheed / Marinette have been issued deficiency notices.

The LCS program is indicative of the problems with U.S. shipbuilding both military and commercial with high costs, poor quality and an inability to deliver on schedule.

Key excerpts:

Lockheed Martin Corp. is under orders from the U.S. Navy to correct quality control failures in building its version of the Littoral Combat Ship, an issue that has delayed deliveries and resulted in three citations from the service’s shipbuilding inspectors.

The Navy’s supervisor of shipbuilding issued “Corrective Action Requests” in May, June and July of 2015, with one of the three withdrawn after the contractor’s plan to resolve the issue was accepted, Dale Eng, a spokesman for the service, said in an e-mail.

The quality questions, which hadn’t been disclosed previously, add to concerns about the $29 billion program that Defense Secretary Ash Carter has reduced to 40 vessels from 52. The citations also could hurt Lockheed’s chances in a future competition with Austal Ltd., which builds another version of the ship. No corrective action requests have been issued against Austal, according to Eng.

The Pentagon plans to choose one of the two companies by 2019 to build as many as nine ships in a new, heavier version intended to be more armed and survivable, like a frigate. The Littoral Combat Ship, intended for missions such as mine-clearing in shallow coastal waters, has been criticized as too vulnerable to attack in combat.

The Defense Contract Management Agency found Lockheed has “systemic quality deficiencies” at the Marinette Marine Yard in Wisconsin, where it builds the ships, agency spokesman Mark Woodbury said in an e-mail.

The citations to Lockheed were for inadequate oversight of vessel propulsion systems, an “inability to adequately control critical system cleanliness” on those systems for the USS Milwaukee and USS Detroit and a failure by the company and its subcontractor, the marine unit of Fincantieri SpA, “to ensure adequate subcontractor oversight,” according to Eng.

Lockheed’s quality shortfalls were the main cause of a three-month delay in delivering one of the ships, the USS Milwaukee, which was damaged during preparations for a trial at sea when the starboard propulsion shaft was “inadvertently operated without proper lubrication,” according to Eng.

Similarly, the Lockheed-made USS Fort Worth suffered extensive damage at dockside in Singapore in January when its crew failed to follow proper lubrication procedures.

Broader questions about the Littoral Combat Ship also persist. In a draft report stamped “For Official Use Only,” the U.S. Government Accountability Office recommended that Congress “consider not funding” either of the two vessels requested by the Pentagon for next year “because of unresolved concerns with lethality and survivability,” the Navy’s lack of funding “to make needed improvements and the current schedule performance of the shipyards.”

Aside from Lockheed’s quality issues, there have been “significant schedule delays” at its Wisconsin shipyard and at Henderson, Australia-based Austal’s facility in Alabama, according to the GAO draft. “Our analysis of Navy contracting and budget documents identified that actual or planned deliveries of almost all LCS under contract” through the 26th ship “were delayed by as much as 19 months” from their original delivery dates.

Three more of Lockheed’s Freedom-class vessels are already projected to be six or seven months each behind their original schedules, according to the GAO. Four Austal vessels are estimated to be as much as 15 months late, the GAO said.