The Navy awarded six of its next Arleigh Burke-class destroyers to Ingalls Shipbuilding and four to General Dynamics Bath Iron Works, in a combined $9-billion purchase right at the end of the fiscal year.
The two companies had been competing for work in a five-year multiyear procurement (MYP) deal that would cover at least 10 Flight III destroyers. The contracts span Fiscals Years 2018 – which ends on Sunday – through 2022.
“These contract awards are further evidence of the Navy’s continued delivery of lethal capacity to the nation with a sense of urgency while ensuring best value for the taxpayer,” Navy acquisition chief James Geurts said in a Navy news release.
“The Navy saved $700 million for these 10 ships by using multiyear procurement contracts rather than a single year contracting approach. We also have options for an additional five DDG 51s to enable us to continue to accelerate delivery of the outstanding DDG 51 Flight III capabilities to our Naval force. We executed this competition on a quick timeline that reflects the urgency in which the Navy and our industry partners are operating to ensure we meet the demands of the National Defense Strategy.”
Ingalls Industries’ contract is worth $5.1 billion and covers two ships in FY 2018 and one a year in FY 2019 through 2022. It also includes options for additional ships, which may be subject to a future competition with BIW.
Bath Iron Works’ contract is valued at $3.9 billion and covers one ship a year in 2019 through 2022 – and none in the short-term in 2018.
According to the Navy statement, “each shipbuilder’s contract contains options for additional ships in FY18/19/20/21/22, providing the Navy and/or Congress flexibility to increase DDG 51 build rates above the 10 MYP ships in the Navy’s FY 2018 budget request, if appropriated.”
Lawmakers in the House and Senate armed services committees have pushed for faster acquisition of the destroyers, and in the FY 2018 National Defense Authorization Act they authorized the Navy to enter into a multiyear procurement contract with the two builders for as many as 15 destroyers – three a year, compared to the previous shipbuilding rate of two a year.
The lawmakers on the appropriations committees only provided money to buy two ships in 2018, but they did fund three DDGs in the 2019 spending bill, which the Senate passed last week and the House passed this week. It is unclear if that third ship in FY 2019 would have to be competitively awarded or if the Navy would be allowed to select a shipyard based on schedule, performance or other factors – the contract announcement notes the options “may” be subject to a competitive process. Program officials had been mum during the competition on their acquisition strategy and how to handle options for additional ships.
All the ships covered under this pair of contracts is for the Flight III configuration, which is built around the powerful AN/SPY-6(v) Air and Missile Defense Radar.
“This procurement will efficiently provide Integrated Air and Missile Defense capability for our future fleet while strengthening our critical shipbuilding and defense industrial base,” DDG-51 program manager Capt. Casey Moton said in the news release.
“The Navy is proud to be working alongside the dedicated shipbuilders at BIW and Ingalls to continue to deliver these warships to the fleet.”
Moton told USNI News in a December 2017 interview that the contracts would be structured in such a way that additional ships – beyond the previous two-a-year rate – could be added easily if the Navy deemed it a priority in its spending request or if lawmakers wanted to add in more funding.
With this contract award, the two shipyards – who, for a time after the production line had restarted remained neck-and-neck on contract awards and deliveries – will further diverge. Ingalls Shipbuilding was awarded a contract in June 2017 to begin work on its first Flight III ship, DDG-125. Two months later, Bath Iron Works was awarded a contract that would have the yard build DDG-126 with a Flight III configuration but DDG-127 in the older Flight IIA design, like the rest of the ships in the previous multiyear procurement contract.
Though Navy and congressional officials would not comment while the competition was occurring, Bath Iron Works had been challenged to balance the Arleigh Burke-class program and the DDG-1000 Zumwalt-class destroyer program. Keeping DDG-127 – which Congress incrementally funded in FY 2016 and 2016 – at the Flight IIA design would help ease the yard into Flight III production. The yard will not be building any new destroyers in FY 2018, according to the contract announcement, whereas Ingalls will take on two Flight III ships.