Navy Terminates Lockheed Martin LCS Contract

The U.S. Navy Thursday said it was canceling a widely criticized Lockheed Martin Corp. contract to build a next-generation combat ship after negotiations to control cost overruns failed. Lockheed Martin Corporation expressed disappointment over the U.S. Navy's decision to terminate its contract for construction of the second of two new Littoral Combat Ships (LCS.) The Navy announced the action at the expiration of a 90-day stop work order imposed on the second ship in January to allow the service time to review costs associated with construction of the first LCS. On March 15, Navy Secretary Donald Winter announced that the stop work order would be lifted only if Lockheed Martin agreed to accept a fixed price incentive contract for its second ship.

Lockheed Martin's LCS team – including naval architect Gibbs & Cox and shipbuilders Bollinger Shipyards and Marinette Marine – was one of two industry groups competitively selected in May 2004 to each design and build two ships for evaluation by the Navy. The Lockheed Martin team was cleared to commence detailed design and construction of the first ship in December 2004; the keel for LCS 1, FREEDOM, was laid in June 2005 at Marinette Marine in Wisconsin, where the ship was christened and launched in September 2006. In June 2006, the Navy awarded the Lockheed Martin team a cost plus incentive fee (CPIF) contract to commence work on its second ship, LCS 3, at Bollinger Shipyards in Louisiana.