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Huntington Ingalls CEO ‘Concerned’ Over Delays in U.S. Navy Carrier Contracts

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A unit for the future aircraft carrier John F. Kennedy (CVN-79) rests on the assembly platen at Newport News Shipbuilding on March 5, 2014. US Navy Photo

A unit for the future aircraft carrier John F. Kennedy (CVN-79) rests on the assembly platen at Newport News Shipbuilding on March 5, 2014. US Navy Photo

Mike Petters — chief executive officer of Huntington Ingalls Industries (HII) — said delays in U.S. Navy contracts for the refueling and complex overhaul (RCOH) of USS George Washington (CVN-73) and construction contracts for the second Gerald Ford carrier John F. Kennedy (CVN-79) are causing the shipbuilder concern, during a Thursday call with investors.

Two-thirds of HII’s Newport News Shipbuilding unit business is based around building carriers and their mid-life refueling and complex overhaul (RCOH). Earlier this year Secretary of Defense Chuck Hagel said George Washington would be defueled and decommissioned if the Pentagon continued to operate under the sequestration funding restrictions as part of the 2011 Budget Control Act (BCA). HII is also waiting on budget approval for $1.3 billion of Fiscal Year 2015 (FY 2015) incremental funding for the $11.49 billion Kennedy.

HII CEO Mike Petters

HII CEO Mike Petters

“With this in mind, we are concerned that continued delays in award of the RCOH planning and execution contracts as well as delay of the detailed design and construction contract for CVN-79, John F. Kennedy, it is creating pressure on our programs at Newport News,” Petters said during the call following the company’s third quarter earnings report.

George Washington’s RCOH contract, in particular, has been a contentious political issue.

“The Navy has decided to continue planning efforts for [RCOH] of the George Washington and is working to reallocate investment across the future year defense plan to fund the RCOH air wing, manpower and support… Newport News was awarded a contract to begin planning of defueling work on George Washington as another positive step toward an anticipated contract for the full RCOH in Fiscal Year 2015 (FY 2015),” Petters said.

“However, the scope of work for planning the defueling work is only a small portion of the full planning effort we need to be performing to prepare for the RCOH.”

The Navy and its shipbuilders consistently stress the key to cost saving and preservation of the industrial base is predictability.

“Across the board in shipbuilding, our priority is the affordable solution, and the key to affordability is stability—in requirements, build rates, quality and wholeness for our fleet at sea through modernization and maintenance,” Sean Stackley, assistant secretary of the Navy, Development & Acquisition (RDA) said in an interview in Proceedings in 2013.

Aside from the carrier contracts, HII had a positive outlook with 39 percent increase in profit from the same quarter last year — from $69 million to 96 million, reported The Daily Press of Newport News, Va.

  • Jack Lawrence

    Pretty hard to be concerned about the feelings of investors whose profits depend on the largesse of the profits to be earned feeding at the public trough.

    • Ctrot

      You are confused, the public trough is where democrats buy votes from the welfare state voters.

    • old guy

      I second that. The large deck carrier has been a locked in revenue source which has stifled ANY innovation or economy in our major shipyards.

  • NavySubNuke

    If the lapse is long enough they have to actually start firing people the ripples could effect the Virginia class boats as well depending on the union rules for hiring and firing of the yard workers. Considering the VA class is consistently being delivered early and under budget the Navy might want to spend enough on carriers to make sure we don’t screw that up.

    • Curtis Conway

      Negative economic impact seems to be what this administration is about. Growth policies are not in the mix. Can wait for a conservative approach and growth policies that have worked every time they were tried in every recover prior to this one.

  • Rick Elkin

    I find it pretty hard to understand that the President of the United States, in light of the current unrest around the world, would allow the Navy to cut back to the point of decommissioning USS GEORGE WASHINGTON (CVN-73) and possible curtail the completion of the USS JOHN F. KENNEDY (CVN-79). It is already abundantly clear that we cannot cover the missions we already have with the number of carriers that are currently commissioned and available to the CNO.

    • Michael Lepay

      Can’t pin this all on the President, it is also the just as much the fault of both parties and both houses of congress for enacting Sequestration as a way to force themselves to come to a comprimise before the Sequestration cuts actually kicked in. Now instead of worrying more about country they are more worried about party and politics.

      • Rick Elkin

        I beg to differ with you. The Congress went to sequestration due to the fact that the President would NOT negotiate a budget that made sense and which forced the Congress to take action to curtail spending which was getting completely out of hand.

        With the turmoil currently going on throughout the world, increasing the defense budget significantly should now be a priority!

      • Steve Skubinna

        The Sequester was the President’s suggestion.

    • Loog Moog

      Our current commander in chief has one mission in mind- the destruction of our beloved United States of America. This entails destroying our military, our economy, our relations with our traditional allies, and our entire political system along with progressive members of congress from both parties. And sequestration did not make any actual cuts in spending, it was all smoke and mirrors, ML.

  • Curtis Conway

    As a matter of policy the United States must preserve our
    shipbuilding capability and husband our shipyards capable of building large
    surface combatants, particularly aircraft carriers. The RICOH process is an absolute must that
    cannot be compromised. All RICOHs,
    including the USS George Washington (CVN-73), must happen on time. Emphasis on the large deck super carriers may
    require a stretch out and the US Navy embrace an F-35B Light Carrier approach
    to force buildup for a time for perhaps six units. The USS America (LHA-6) configured as a light
    carrier, equipped with F-35Bs, KV-22 Tankers, and a new EV-22 AEW&C
    aircraft, which could also be a boon for Bell/Boeing in the export market, is
    the affordable direction we should take.
    We can build the force more rapidly and bring on very capable assets
    that will cause our adversaries to pause before they act rashly, and exercise
    our F-35B combat system in a synergistic way providing a more than just
    credible proactive presence when we show the flag, or provide proactive
    presence around the globe.

    • James B.

      You are right that we failing to keep RCOH’s on schedule is extremely difficult to recover from, but your solution of light carriers needs some work.

      Operating an airwing of F-35Bs and Ospreys would result in an absurdly expensive airwing that wasn’t good at much of anything.

      The alternative would be doing the same thing for LHA-6 as they did to Essex-class carriers, give it an angled deck, which a smaller upgrade than it seems. This would produce a carrier roughly the size of the French Charles de Gaulle, which operates conventional fighters and E-2 Hawkeyes.

      • Curtis Conway

        I bet a new angle deck LHA-6 with cats and traps will cost more than $2.5 Billion. The greater the cost the longer the stretch out of the Big Flattops. I like the idea by the way, but feel that a pressurized V-22 VSTOL COD and AEW&C solution provides more versatility for every ARG and that development and construction would cost less than one new carrier. We are trying to save money, use what we have, and still be able to finish FORD and bring on the rest with time. The US Navy needs a new very capable, survivable, frigate that can perform ASW, defend itself and the force its with (if necessary) from a Theater Ballistic Missile, and we need 50. It’s a shame money doesn’t grow on trees.

        • James B.

          Turning LHA-6 into a small aircraft carrier would not be cheap, I grant you.

          A V-22 is an option for the COD requirement.

          Fitting a refueling bladder and kit in the back of a MV-22, like they do with KC-130s, is an idea so good that the Pentagon will probably not use it. I hate it when that happens.

          Now on the ideas which don’t work:

          The Navy spend a bundle of money developing the APY-9 for the E-2D, it works really well, and is far to large to fit on an Osprey’s back. You could build smaller systems into the V-22 frame, but this would be building to the available platform, not filling the Navy’s need.

          STOVL aircraft have inherent limitations, and high on that list is fuel load. I haven’t found a source to quote me an onstation time for the F-35B, and I’m doubting it is any better than Hornets. If you can’t fly longer cycles, a small airwing won’t be able to put enough jets up to provide air defense, and that is the difference between true carriers and amphibs.

          As for this frigate idea, I agree that we need more surface combatants, but you’re going to have to dramatically manage expectations. I favor a modular design, not roll-on-roll-off style, but with a standard list of options from the yard. The catch is that you could have an ASW frigate, or surface-warfare corvette, or a small air-defense ship, but not all in the same frame.

          • Curtis Conway

            Concerning AEW&C

            Yes the Navy did drop some dimes on the APY-9, and they did
            it for its unique capabilities. That is
            not the only radar out there that will go on the back of a V-22. All we need is enough surface area to get
            sufficient power out to see about twice the distance (and further if it will do
            it, and with AESA that is very possible) of an F-35’s AN/AGP-81. There are several candidate radars using MESA
            technology that can track air and surface targets, as well as Ground Moving
            Target Indicator (GMTI or JointSTARS capability) which is what the amphibious
            force will need as well. At this point
            altitude will be the determining factor for range and coverage. In a non-pressurized version of the V-22 the
            limits on coverage would not justify the cost, or provide the desired coverage.
            I remain optimistic. There are at least six customers for that
            very capable system expensive as it will be, and more to come in the future
            once F-35B shows here stuff.

            New Frigate

            Propulsion: The platform upon which I would build my system
            would be Hybrid Electric Drive (HED) with a DRS electric motor on the Main
            Reduction Gear (MRG) for when the LM2500+G4s are off line. Every surface combatant today has a spare GTG
            running, burning fuel, and it does nothing!
            Integrated Fight Through Power System (IFTPS) and the new energy storage
            capability (a UPS in effect) will enable that spare GTG to be turned off until needed.
            This HED system provides quiet and efficient
            propulsion for ASW operations, and saves maintenance time on the Prime
            Movers. The LM2500+G4s on each shaft
            will provide speed in a redundant fashion providing options to the ship’s
            captain and therefore the Battle Force Commander. I like Gas Turbines. They are reliable, have fewer moving parts,
            and operations and maintenance numbers are well understood. Diesels are less expensive and have many
            moving parts, vibrate more, and take longer to spin up to full power. In the new Directed Energy Weapon (DEW) and Electro
            Magnetic Rail Gun (EMRG) environment, we will need lots of power and in a few
            seconds, not in a couple of minutes.
            Combat system simply must move more to the passive environment and use
            the active environment only when necessary.
            That is why my EO/IR system would be planned on the hull (Mack) for
            future upgrades, or be on board at the start and upgraded with time. Right up front I would have the new EO/IR R2
            Units hanging (four providing quartering coverage overlapping with 120⁰ sectors,
            and two standing fore and aft providing maximum coverage -7⁰ Azimuth to Zenith). My upgrade would be an IR wideband detection
            and tracking system in a UPX-29 arrangement as high on the mast as I could get
            it. I would only go active when necessary,
            or when I was in a threat environment.
            Every platform needs an ASW capability inherent to hull design (hull
            mounted sonar) again just like everyone else in the fleet (AN/SQS-53 with
            rubber window).

            Combat System: The core of my system would be the smallest
            subset of AMDR components driving the SSDS Mk2 Command and Decision System,
            with all other systems integrated and a few consoles for air control, ASWCS and
            local control console for the gun. Put a
            real gun on the sea frame so we can employ those guided projectiles we have
            spent so much money on developing, with a SPQ-9B on top of the mast. This little frigate is going to look a little
            strange with the huge SQS-53 rubber window on the front, but have you looked at
            the KDDX & DSME proposals lately.
            Both have a version with huge sonar dome on the bow. The ASW capability will be very important for
            every platform in the future as it is now (CG-DDG?). Attach a towed sonar and the MH-60R Helo and
            we have ASW. All you need at this point
            is a console in CIC (ASWCS), and the radios which you will already have. Now the VLS magazine must contain the
            weapons. We must have enough to conduct
            ASW at range (VLA), defend ourselves (ESSM), and be able to defend ourselves
            from the primary threat to every surface combatant underway . . . Theater
            Ballistic Missiles (SM-2 BlkIV [endo-atmosphere], and SM-3 [exo-atmosphere]). The AMDR does the rest. With CEC and NIFC-CA you will have all you
            need. Which brings us to “everyone’s a
            shooter” SM-6s. The frigate
            traditionally (and that will continue in the future) to be out on the threat
            sector (skirmisher) usually conducting ASW away from all the noise of the force,
            and providing ESM and Radar Picket. A
            P-8A may be in the area, perhaps with an Advanced Airborne Sensor (AAS)
            on-board. The E-2D will be present and
            see IT coming long before anyone else.
            The politically imposed ROE is what is going to get us all killed. If we do not begin to attrite the enemy early
            in their ingress to our formation, we will lose.

            The goal is to embody capability, but not add to the
            training and logistics burden the Navy must support. For sailors this also provides us the ability
            of mutual support in tough times.
            Otherwise you are just catering to more manufacturers for the money
            exchange, and us sailors have to live with a lack of support in the field,
            mostly due to no money to buy the spares.
            Fewer spares, smaller logistics train, fewer schools . . . getting the
            picture. Otherwise the Industrial
            Military Complex serves itself, and the sailors wear the burden when the spares
            are not there and we just go die in combat. So . . . where is your heart . . . ‘for
            success of the mission’, or ‘getting the bucks’ . . . and it’s just too bad
            about those sailors. Looking for
            Patriots here! My boy’s a Ranger, and I
            can tell you he has the best equipment available at all times. Infusion of technology into surface combat
            systems is more complex, more expensive, and takes longer. That is why is must be an open architecture,
            COTS environment, with certified parts (not form China, [C-130 displays, Chinese
            processors in other equipment with interesting embedded software}).

            All of this will not fit in a National Security Cutter. It will however fit in a hull displacing
            5,000-5,500 tons. The hull must be
            survivable with battle damage, and the crew must be large enough to not only
            fight the ship, but perform damage control at the same time, and be able to
            perform all the preventative maintenance and still get some sleep. Just under 150 crew should do it. The hull must be all ocean capable, particularly
            in the Arctic which is heating up, pun intended.

            Are you getting the picture?
            This can fit and it’s doable, it just ain’t going to be cheap.

          • James B.

            We already have an expensive surface combatant, the Arleigh Burke DDG. We don’t have the money to just build an infinite number of them, or of smaller DDGs.

            Building a modular combatant to spread capability over multiple hulls would create an inexpensive corvette for all the low-intensity missions we do (counter-piracy, counter-drug, the Coast Guard), creating a single-purpose vessel to add specific capabilities to the fleet (ASW), and allow for one-off special mission vessels on an affordable platform.

          • Curtis Conway

            Hull and propulsion are key to any new combatant. A quiet, efficient, yet all-ocean capable hull must be the base of the spec regardless of the platforms mission. ASW capability is inherent at this point, its just a matter of installing the equipment. Perhaps a module IS in order. Also, and you have already made my case, the CG/DDG fleet can defend themselves and go anywhere! I was PRECOM Tico and a CSEDS Test Director, I know of what I speak!. To equip our surface combatants with anything less is irresponsible. Look at the capabilities of the FFG-7s (pre-Mk-13 removal). Every time I mention ‘Theater Ballistic Missile Defense’ everyone immediately goes to DDG-51 while the rest of the planet (with the exception of the Japanese and South Koreans and they have good reason because the Chinese are going there too) build something less that still has TBMD capability, or soon will be upgraded to it. If one steams on the Ocean Blue you are in range of someones Ballistic Missiles, and over 8,000 exist owned by other than large state sponsored enemies (China & Russia) of ourselves. So, in my ears your argument rings hollow. Spain, Norway, can do it but we can’t?! You are on a River in Egypt, have an agenda, and cannot (no refuses to) think in an innovative way. If we do not face reality and plan to win, you send our sailors, Marines, airman, soldiers, and coastguardsman to their death with malice of forethought. G-d Forbid. We cannot shrink from the task. Once we dropped that bomb on Hiroshima, we inherited the responsibility FOR ALL TIME, and G-d will not forgive you if you rationalize away the responsibility.

            So let us think clean sheet and come up with something new (HED hull that is very quiet, efficient and can be very fast, and can generate a lot of electrical power), unique (has an extremely capable PASSIVE detection/tracking, direction systems, that is strong in EO/IR and uses the unsung benefits of AESA radar (Very Sensitive Passive ESM and comms capabilities), Designate the spots for the addition of Directed Energy Weapons (DEWs), and EMRG with IFTPS already installed, The weapons will be here in less than a decade, perhaps five years. Locate the GTGs where they can be easily reconfigured to directly power the DEWs and EMRG in a casualty mode, The Mk41 VLS should be a given on every platform from this day forward due to NIFC-CA and the SM-6 capability, PARTCULARLY for our new Skirmishers (FFGs).

            What do you say? Think Ingalls is up to it. Risk some money and make the commitment. This one can pay off big.

          • James B.

            I clearly don’t worry about ballistic missiles the way you do.

            I don’t care the exact technologies used to build a frigate/corvette class, virtually anything can be integrated if it is designed to standardized specifications.

            What I do care about is the fundamental concept of ship procurement; an all-high strategy is not workable.

            There are low-threat areas in the world, and sending our highest-tier combatants to hunt pirates off Somalia or drug smugglers in the Carribean is simply a waste.

            As power diffuses around the world, there will be even more areas where sea lines of communication are threatened, but that do not require an Aegis warship

          • Curtis Conway

            “As power diffuses around the world” . . . I am no longer in a position to receive my daily intel traffic stack, but I can tell you I know what is out there, and the capabilities of our enemies. With the information that I digest daily from sources I have developed it is easy to analyze the threat and it is real and must be met.

            As for every platform being an Aegis platform, you and others are going to have to understand what data fusion is, and provide real options to the underway combat commander. Aegis is not just a collection of the boxes on Aegis platforms. It’s an F-35 cockpit on a ship with more weapons and more people. Its battle-short capability. Its multiple redundancy in anticipation of battle damage. Develop the non-rotating radar, ESM, Comms, and Display, Command and Decision system (SSDS) you have your Aegis lite platform. We have spent a lot of money on SSDS lately. Give it a little better non-rotating AESA sensor and you have it.

            The non-rotating radar is a non negotiable item. There are things one can do with a non-rotating radar the rotating radar will never do because its SLAVED TO ROTATION. The new AESA radars have many capabilities that are impossible with a rotating radar (like a persistent track on an engaged target), though I will admit that SPQ-9B is a good alternative. Its been developed to the Nth degree.

            Learn from HiStory or you are bound to repeat it. Your argument about light cheap combatants has been made several times in US HiStory followed by atrocious events at sea with everyone asking why. After sending FFG-7s into harms way several times, after saying we would not do that, we conducted quite a few upgrades, and that’s after we adopted taking the 5″ gun away form frigates because they built such a CHEAP light platform that would not handle the stresses. Couldn’t send them to the Arctic for any period of time. I hear $ for blood. I hope the blood is not kin to you and aboard that ship.

            Commonality, smaller logistics train via standardization (see – we agree there), less schools via common weapons systems (2 to 3 module AMDR Lite?), common sonar, and how about that HED propulsion system. I note that the argument is avoided by all. Our primary enemies will use their submarines to take out as much of our logistics train as they can before we get them. One tanker missing in the Pacific changes the entire underway equation in real time. GIVE our commanders more options! HED should have been already tested and being back-fitted to the destroyers before now and the new FLT III should have had it as standard equipment. IFTPS and the new energy storage devices should have already become a standard for all new hulls and an SOA of 12-15 knots adopted as a standard unless we had an emergency and had to go faster. You are talking about a lot of cheap hulls to make more money on each while our sailors will go to sea basically disarmed, and they will be sent into the Lions Den. Mark my words, been there done that. Pro-activity not re-activity is the name of the game. You get what you pay for. Aegis WORKS. Make a smaller lighter less expensive version. If you need someone to review the design and conduct the test give me a call. In the mean time stop living on a River in Egypt, and making arguments to fill your pockets justifying sending our sons and daughters into harms way without the tools they need.

          • Curtis Conway

            James B have you ever served at sea on a surface combatant?

          • James B.

            I’m a Hawkeye NFO, so I have flown off carriers, but no small-boy experience. I am very familiar with the strengths and limitations of datalink networks.

            What I do know very well is the best way to defeat the enemy is confusion; don’t make it clear where you are, and if they figure that out, clutter their picture so they don’t have a clear shot. This is the principle of swarm tactics, and it takes lots of combat-ID effort to combat it.

            Putting all your systems onto a few hulls and radiating powerful radars on all those ships guarantees that they will know where you are. At that point, you have bet your survival on being able to defeat all the inbound cruise missiles. Some threat nations don’t own that many missiles, but some have far more than we could ever shoot down.

            While we’re on the subject of things that should terrify you, torpedoes and mines. HMS Conqueror sank ARA General Belgrano (I believe the largest vessel to sink in combat since World War II) in 1982 with straight-running torpedoes, and in doing so drove the entire Argentine navy to port. The key reason this happened was a lack of ASW coverage.

            If the USN does not improve our ASW with dedicated frigates, sooner or later somebody will do this to us. Fitting a sonar dome to every small boy is an option, but this still creates ships that are expected to be doing two things at once, possibly doing neither well.

            If you want to make life easy on the enemy, give them one ship to watch. If you want to make their lives truly miserable, give them five or ten to keep tabs on.

      • Curtis Conway

        Another thought . . . two of the new Lockheed nuclear fusion power plants would be an excellent power source. We have to learn how to do this, train operators and maintenance people, before the technology can be introduced to the general public. This new power plant will enable us to go into space in a big way. Better start thinking about your Space Dock! Going to have to build large “Pure Space” vehicles in about a decade Lord let us live that long.

        • old guy

          Lockheed does NOT have a practical fusion power plant, nor does anyone else. The OBNLY fusion approach that has had a positive power output (however small) is from an outfit called Emc2 in Ca.Others are claiming, but none are producing. I wish that I was wrong on this, but I’ve seen nothing.

          • Jack Lawrence

            Agree

            I was 15 when the AEC came to our school and claimed commercial fusion was 25 years away
            I was 67 last month.

          • Curtis Conway

            And your point ? . . . we have made no progress? I find you faith shallow Sir.

          • Jack Lawrence

            Point?
            My point is that this is a chimera,
            notional science at best. There have bee no breakthroughs in the last 52 years. There is nothing promising in the future. In the 1920’s science used to tout nuclear energy with comments like there is enough energy in a teaspoon of coal to power a ship around the world (enter your number here) times. The energy is still I’m the teaspoon
            Nuclear ships have arrived and they still just boil water. It is not that I have no faith
            I simply have lived through the first half century of failure.
            Regards,
            Jack

          • old guy

            Concur. I am an Aero engnr, who was a program mgr for the ASP (Atomic Seaplane) and Project Farside (Nuclear powered Dirigible). Mr. Conway has many valid points to present, but his position on this matter and LHAs is dead wrong. Further, the V-22 is expensive junk which will be superseded by a faster, less expensive, more survivable, compound helo, if we can kick the politics out of its procurement.

          • Jack Lawrence

            Yeah. Notice that nobody is buying the V-22. It was a grounbreaker but more if a test bed.

          • old guy

            You may not have noticed but the looneys are now trying to sell a FOUR rotor (bedstead type) QUAD-LIFTER. They never quit. Maybe this time brains will prevail.

          • old guy

            Further, on the ASP we used the GE Direct Air Cycle AC-110. No steam. However, the project died when some smart guy realized that if we had a failure in flight we might irradiate the immediate world. So, viva steam.

  • CaptainParker

    How about Huntington Ingalls taking a little less profit – in the national interest? Since they have a lock on these carrier contracts a display of patriotism might be refreshing. There is no sympathy for squealing investors who already make out like bandits.

    • James Hasik

      In 2013, HII increased its gross operating margin to 8.3%. Apple makes about 38%. How is investing in building warships “making out like bandits”? @jameshasik @defindustrial

      • CaptainParker

        Guaranteed customer and guaranteed profit – where’s the competition? This illustrates the problem with the entire government contracting process for Defense – the country is essentially a hostage to handful of providers.

        • airider

          So your comment begs the question…why are we letting these contracts with private industry if there is no competition? Deregulation has failed where there is no competition. The same applies for defense purchases. Perhaps the Navy should in-source the work and control the labor costs. They have several public shipyards.