Pentagon Halts Navy Winner-Take-All Destroyer Plan

(Reuters) - The Pentagon on Wednesday rejected for now a Navy plan under which Northrop Grumman Corp. and General Dynamics Corp. would compete for, rather than split, a potential $20 billion contract to build a new class of guided missile destroyer.

The action dovetails with moves in Congress aimed at blocking a winner-take-all approach, which the Navy has said could trim $300 million from the cost of each DD(X) destroyer. Any change to the existing production-sharing strategy "is premature at this time," Michael Wynne, the Pentagon's chief weapons buyer, said in a Defense Department statement.

Wynne authorized the Navy to seek additional input from Los Angeles-based Northrop and Falls Church, Virginia-based General Dynamics on any future change in acquisition strategy.

Wynne also gave the Navy a green light to separate the development of DD(X)-related systems and software from the overall ship design effort, a move designed to give the program new momentum. Such systems include the ship's dual-band radar, integrated power and computing environment.

Opposed to an early winner-take-all stance were all four senators from Mississippi and Maine - respectively home to Northrop Grumman's Ingalls shipbuilding unit in Pascagoula and General Dynamics' Bath Iron Works in Bath - the two yards scheduled to split at least the first six ships' production.

In a March 1 letter to President Bush, these four - joined by another 16 senators, Republicans and Democrats - had argued that picking a single winner would drive the loser out of the business. That would limit forever U.S. ability to build destroyers and cruisers "at any significant rate."

The Defense Department in effect has put off a decision "to see whether Congress will in the end make the question moot through legislation," said Ronald O'Rourke, a naval analyst at the Congressional Research Service. A provision in the Senate version of a war-related emergency spending bill moving through Congress would bar the Navy from holding a competition.

Northrop agrees that a change in the current strategy would be premature but does not shrink from competition, said Randy Belote, a company spokesman. "If there is to be competition, the design should be completed before that happens," he said.

General Dynamics considers Wynne's decision "positive news" and "a very thoughtful response to a complex issue," said Rob Doolittle, a company spokesman.

Bush's spending plan for fiscal 2006, starting Oct. 1, calls for cutting $3 billion and two ships from a year-old plan to buy up to seven DD(X) destroyers through 2011.

The Navy said it would use the contractors' further input to make sure Wynne's office "has appropriate information for a final decision on the DD(X) acquisition strategy."

"The Navy continues to seek a DD(X) acquisition strategy to best serve the interests of the Navy, the industrial base, and the American taxpayer," said Lt. Jon Spiers, a Navy spokesman.