Navy to delay $4 billion contract for next carrier

By Tony Capaccio, Bloomberg News

© September 13, 2013

WASHINGTON

The Navy will delay by as much as a year awarding Huntington Ingalls Industries Inc. a contract for at least $4 billion to start construction on the second vessel in a new class of aircraft carriers, according to U.S. officials.

Award of the “detail design and construction” contract for the John F. Kennedy, designated CVN-79, was planned for this month until recently, said the officials, who asked not to be identified because the postponement hasn’t been announced.

The ship would be built at Huntington Ingalls’ Newport News Shipbuilding facility, the only place in the country that builds nuclear-powered carriers.

The Navy is grappling in a time of budget cuts with how to pay for a shipbuilding plan that anticipates spending$43 billion for three carriers in the new class, as well as $34 billion for 52 littoral combat ships and the costs, not yet estimated, for a 12-vessel nuclear submarine fleet to replace the Ohio-class subs.

Huntington Ingalls is operating under a $4.9 billion construction contract awarded in 2008 for the Gerald R. Ford, or CVN-78, the first vessel in the three-ship class. The Ford, already the costliest warship ever built, is projected to cost $12.8 billion when completed and fully equipped, 22 percent more than estimated five years ago.

Sean Stackley, the Navy’s assistant secretary for acquisition, made the decision to delay the Kennedy contract, the officials said. Also, the Pentagon’s independent Cost Assessment and Program Evaluation office hasn’t completed an analysis of total costs for the Kennedy, which is required before a contract award.

Cmdr. Thurraya Kent, a Navy spokeswoman, said in an email that the service continues to negotiate with Huntington Ingalls on the contract and, “until these negotiations conclude,” the Navy intends to extend funding on a current, smaller, construction-preparation contract to “avoid a costly production break.” The Navy awarded that $296 million contract to the shipbuilder last year.

Continued negotiations on the larger contract “will allow Huntington Ingalls and the Navy to account for construction process improvements and other cost-reduction opportunities,” she said.

Beci Brenton, a spokeswoman for Huntington Ingalls, said in an email that extension of the existing contract “will help ensure that the fragile supplier base and our shipbuilders remain working, minimizing delay to ship delivery and associated cost increases.”

“This extension also provides time for the Navy and industry team to implement lessons learned from CVN-78 construction, implement further construction process improvements, identify any government requirement reductions, and increase the maturity of government technologies in order to stay within a challenging budget,” Brenton said.

The Navy’s action wasn’t prompted by a recommendation made by the Government Accountability Office this month to delay the contract until deficiencies with systems on the Ford were corrected and tested, according to a Navy official.