Wednesday, May 04, 2005

Competition? We Don't Need No Stinkin' Competition!

U.S. Congress Rejects Navy's Winner-Take-All Plan for Destroyer

May 4 (Bloomberg) -- U.S. lawmakers refused to let the U.S. Navy stage a competition between Northrop Grumman Corp. and General Dynamics Corp. for its program to build the new DD(X) destroyer, a plan the service estimated would save $3 billion.

The U.S. House of Representatives agreed to a Senate proposal to prohibit the plan as part of an $82 billion spending measure for military operations in Iraq and Afghanistan. Negotiators announced their agreement on the measure yesterday, sending it to the two chambers for final votes.


The Navy plans to build 10 destroyers and the decision by Congress means the two contractors would take turns building them. The Navy could be billed for idle workers and other costs when one shipyard is waiting for the next ship.

Congressional delegations in Maine and Mississippi attacked the Navy's plan to have the contractors compete for the work, and the Senate passed a resolution in March condemning it. Senate Appropriations Committee Thad Cochran, a Mississippi Republican, sponsored an amendment to the war spending bill prohibiting funding for a competition. The House agreed, according to a committee press release issued yesterday.

"The bill contains language that would prohibit funds in this Act and prior Acts from being used to implement a winner- take-all strategy for the acquisition of DD(X), the next generation Navy destroyer,'' the press release said.
Jobs at Stake

Thousands of jobs would have been at stake at Northrop's shipyard in Pascagoula, Mississippi, and General Dynamics' Bath Iron Works in Maine.
Bath employs about 6,300 workers, while Northrop has about 20,000 workers at its shipyards where the DD(X) would be built. Bath builds only the DDG-51 Aegis class destroyer which is to be replaced by DD(X), while Northrop's yards also build transports and other ships.
The Navy in February proposed the competition because the current plan of alternating production between Northrop Grumman and General Dynamics was estimated to add as much as $300 million to the cost of each ship.

The Navy said it would save as much as $1 billion through 2011 by selecting only one contractor to build the first five warships. The savings would be $3 billion or 20 percent on the cost to build all 10, which the Navy estimates at $15 billion.

To share the work ``would be a horribly inefficient process for either yard,'' John Young, the U.S. Navy's assistant secretary for acquisition, said in an interview Feb. 28.
Still, ``whoever loses'' a competition for the work ``is going to have a tough time,'' he said. A competition for the DD(X) would "downsize the industrial base in the destroyer business.''
Shipbuilding Budget Cut

The U.S. shipbuilding budget is shrinking. The Pentagon in December cut two vessels and $3 billion from its fiscal 2006-2011 spending plan. Bath Iron Works ``faces an uncertain future'' if it loses a competition, Young said Feb. 28.

The DD(X) is intended to be a destroyer with an extremely small radar image and manned by about 100 sailors instead of several hundred. Its mission would be to support soldiers ashore with precision-guided cannon fire and missiles and also to launch Navy SEAL commandoes closer to shore than now possible.

Northrop leads the team doing preliminary design work on the ship under a three-year $2.88 billion contract awarded in 2002 that runs through this year.


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