Navy Working with GD on DDG-1000 Prices

by: Matthew Potter
July 14, 2011

Category: Business Line, Companies, Congress, Contract Additions, Contract Awards, Department of Defense, development program, Events, Federal Budget Process, General Dynamics, Maine, missile defense, northrop grumman, Northrop Grumman Corp., production program, Restructuring, Services, States, U.S. Navy | RSS 2.0

The U.S.Navy had originally planned to begin mass production of the DDG-1000 class in the early part of this century. The new ship would begin to replace the AEGIS cruisers and destroyers built since the late Seventies. The DDG-1000 would offer a more stealthy design, new power plant and improved radar over the existing DDG-51 Arleigh Burke class.

The first of the new Zumwalt class of destroyers was built at General Dynamics’ (GD) shipyard in Maine operated by their subsidiary BIW. The Obama Administration due to budget issues and cost and schedule growth for the new ship decided to end production after the second was built. Congress in 2008 disagreed and added DDG-1003 to the budget. All three would be built at BIW.

Instead of entering series production of the new class the Navy would continue to order the substantially cheaper DDG-51 ships built not only at BIW but also at what is now Huntington Ingalls Industries (HII) at their yard in Pascagoula, MS. HII used to be part of Northrop Grumman (NOC) but they spun off their ship building arm into a separate company earlier this year. The Navy planned to continue competitive production of the new destroyers as in the past between the two companies.

Unfortunately for BIW the Navy and GD have yet to be able to negotiate a price and award the contract for DDG-1002 and 1003. This is delaying start of production of the two new ships and causing concern at BIW and in Maine that it may make it hard for them to compete for the new DDG-51 production that would follow the completion of the DDG-1000 ships.

Reportedly the two sides are quite far apart on the actual price for the two ships. The first cost almost $2 billion and these two due to the fact that they are follow on should be cheaper but the truncated production of only two more in the class will cause prices to rise due to the limited requirements for sub-contractors and suppliers.

There are also starting to be concerns that the latest planned “Flight III” of the Arleigh Burkes may not be large enough to carry all of the equipment the Navy desires. This includes a new radar, Air and Missile Defense Radar (AMDR), under development to support the missile defense mission of the ships. This might mean the need for a new destroyer or continued production of the DDG-1000 although that is well in the future.

The Navy faces a challenging ship building situation over the next several years. New ships have proven to be very expensive and the budget may be limited due to the U.S. financial situation. This may limit what can be built among the planned classes of aircraft carriers, destroyers, Littoral Combat Ships (LCS), amphibious warfare and support ships. The need for the Navy to get the best price possible for the DDG-1002 and 1003 is affecting the contract negotiations and may ultimately the whole destroyer program in the near term.

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