GAO: Navy Seeing Improvements in Surface Ship Maintenance Costs, But Schedule is Still An Issue

By: Megan Eckstein

May 13, 2020 4:22 PM

• USNI.org

BAE Systems has received $170.7 million in contracts from the U.S. Navy to perform simultaneous maintenance and repair on two Arleigh Burke-class (DDG 51) guided-missile destroyers in its San Diego shipyard. Under the awarded contracts, the shipyard will tandem dry-dock the USS Stethem (DDG 63) and USS Decatur (DDG 73) in October. The synchronized two-ship docking will be a first for the company’s newest dry-dock in San Diego. The contracts include options that, if exercised, would bring the cumulative value to $185 million. BAE Systems photo.

The ship maintenance contracting strategy the Navy adopted in 2015 has addressed many quality and cost challenges the service had faced, but the Navy continues to see schedule overruns despite the other benefits of the Multiple Award Contract-Multi Order (MAC-MO) contracting approach, the Government Accountability Office found in a new report.

However, the Navy is in the midst of several efforts to address on-time delivery of ships from maintenance availabilities – which service officials have said could lead to 71 percent of surface ships coming out of private yard availabilities on time this year, up from about 30 percent just two years ago – and the GAO noted it would be watching to see the results of these efforts.

“In 2015, the Navy changed how it contracts for (surface ship) maintenance work, aiming to better control costs and improve quality. The new approach, called MAC-MO, generally uses firm-fixed-price contract delivery orders for individual ship availabilities competed among pre-qualified contractors at Navy regional maintenance centers,” the GAO wrote of the MAC-MO approach. In contrast, under the old Multi-Ship/Multi-Option (MSMO) strategy, one contractor might be awarded all maintenance work for cruisers in a particular homeport, for example, and would be paid based on cost incurred rather than an agreed-upon fixed price.

“Since shifting to the Multiple Award Contract-Multi Order (MAC-MO) contracting approach for ship maintenance work in 2015, the Navy has increased competition opportunities, gained flexibility to ensure quality of work, and limited cost growth, but schedule delays persist. During this period, 21 of 41 ship maintenance periods, called availabilities, for major repair work cost less than initially estimated, and average cost growth across the 41 availabilities was 5 percent. Schedule outcomes were less positive and Navy regional maintenance centers varied in their performance,” the report notes.

On the positive side, the GAO report noted improvements in cost performance at the three major regional maintenance centers: Southeast RMC around Mayport, Fla.; Mid-Atlantic RMC around Norfolk, Va.; and Southwest RMC around San Diego, Calif.

Overall, “between April 2015, when the Navy implemented the MAC-MO strategy, and April 2019, the Navy completed 41 CNO availabilities with an average cost growth per availability of 5 percent, or $1.7 million in fiscal year 2020 dollars. However, more than half of these availabilities (21 of 41) were completed at a lower cost than the Navy initially estimated. The cost growth of the remaining CNO availabilities (20 of 41) ranged between 1 percent and 78 percent and drove the aggregate average increase,” reads the report.

Specifically, five of seven availabilities in Mayport achieved cost savings, as did seven of 10 in San Diego and nine of 24 in Norfolk. One availability in Norfolk saw a 38-percent cost reduction compared to planned cost – though on the other side, an availability at Norfolk also came in at 78-percent higher than its planned cost, contributing to the slight cost growth for the average availability.

Schedule, though, remained an issue. Just three of 24 availabilities in Norfolk came out on time, along with three of seven in Mayport and six of 10 in San Diego. By ship type, only seven of 26 destroyers came out of maintenance on time, with the average DDG maintenance availability seeing 26 percent schedule growth. Two of six amphibious ships came out on time with a smaller schedule growth of 18 percent. For cruisers, three of nine CGs came out on time, but the class saw a 46-percent increase in the duration of maintenance availabilities compared to planned schedules.

“Navy officials stated that one potential source of delays is unplanned work, which consists of both growth work and new work. The Navy defines growth work as additional work that is identified or authorized after contract award that is related to a work item included in the original contract. We previously found that growth work contributed to cost and schedule increases, and it remains a contributing factor. Navy officials stated they expect some growth work in availabilities, as officials stated that certain tasks are difficult to fully scope within the original contract,” reads the GAO report.

The Navy has taken several steps to address the issue of growth work, which it recognizes as a key contributor to late deliveries, as well as other barriers to on-time delivery.

One change last year was awarding contracts 120 days ahead of the start of work instead of 60 days, and striving to have all material on hand 30 days before work starts. Where there are material challenges, RMCs are encouraged to look at materials from a regional perspective rather than a ship-set perspective.

“I’ll give you an example: if I have an availability that’s going on, and I need a certain valve, and that valve is late – but I have an availability that’s starting a little bit later and that valve’s already in the box – before, we weren’t going to that other box and taking the valve and using it” because ship sets were looked at individually instead of as assets for the whole RMC to tap into, Commander of Naval Regional Maintenance Centers Rear Adm. Tom Anderson told USNI News earlier this year. “So the focus we have on material is one part of” the drive to reach the 71-percent on-time maintenance goal this year.

Additionally, a pilot program in U.S. Pacific Fleet is allowing maintenance dollars to be used for three years, rather than the one-year money the Navy typically has to work with for operations and maintenance activities. The GAO report elaborated on the challenges surrounding the one-year money, noting that “if an availability extends into a new fiscal year and needs more than $4 million in additional prior-year funding, both Navy and Defense Department approvals are required. GAO found this approval process took between 26 and 189 days based on Defense Department data. In December 2019, Congress established a pilot program that would potentially allow the Navy to avoid this process” and therefore save precious weeks and even months waiting on permission to spend maintenance money that expired.

Additionally, the Navy has promised to work with contractors, some of whom do not like the MAC-MO structure and would prefer the old MSMO setup. These repair companies have told USNI News that the MSMO strategy allowed them to know they’d have all the cruiser work in San Diego, for example – meaning they had the visibility into their future work to accurately order parts and hire to the right workforce levels, and they could invest in equipment and training to specialize in repairs for that particular ship class. Now, future workload is less certain and the yards don’t develop specialties in a ship class, making future planning a harder for them.

The Navy has said it would find ways to work to bundle availabilities – vertical bundles, as the GAO noted, where two concurrent availabilities are awarded, perhaps double-docking the ships as the SWRMC started doing with destroyers in San Diego – or horizontal bundling by awarding sequential availabilities to a yard.

U.S. Navy Deploys LCS to Contested South China Sea Well Site

USS Montgomery transits past the Seadrill-owned drillship West Capella, May 7 (USN)

BY THE MARITIME EXECUTIVE  05-08-2020 03:40:00 

U.S. Pacific Fleet recently deployed the littoral combat ship USS Montgomery to the worksite of the drillship West Capella in the South China Sea. West Capella is drilling a well for Malaysian oil and gas major Petronas in waters contested by Vietnam and Beijing, and her activity in the area has attracted attention - including an uneasy three-way (or four-way) military presence.

“We are committed to a rules-based order in the South China Sea and we will continue to champion freedom of the seas and the rule of law,” said Adm. John Aquilino, the commander of Pacific Fleet. “The Chinese Communist Party must end its pattern of bullying Southeast Asians out of offshore oil, gas, and fisheries. Millions of people in the region depend on those resources for their livelihood.”

It is not the first time that the U.S. Navy has conducted a freedom of navigation operation adjacent to West Capella. In mid-April, the USS America, USS Bunker Hill and USS Barry transited past the rig, along with the Royal Australian Navy frigate HMAS Parramatta.

Vietnam contests Malaysia's claim to the site, and Vietnamese forces and civilian auxiliaries have maintained a persistent presence during West Capella'soperations, according to defense analysts at AMTI. Chinese forces in the form of China Coast Guard cutters and the Chinese seismic survey ship Haiyang Dizhi 8have been frequent visitors as well. A rotating group of Chinese fishing vessels - likely members of China's extensive maritime militia - have been on scene for months, according to AMTI.  

China has laid claim to the vast majority of the South China Sea, including waters well beyond its UNCLOS territorial sea boundaries. Despite international pressure, it has reclaimed and militarized multiple land features in the Spratly and Paracel island chains, and it has consistently pressured neighboring states not to develop resources within their own internationally-recognized waters. Its new island bases in the Spratly archipelago have provided it with a logistics platform to sustain naval presence operations in the region. 

American forces have not confronted Chinese assets directly in the South China Sea, but the U.S. Navy conducts regular demonstrations of the right to navigate through Chinese-claimed waters without interference. According to Aquilino, American forces will "stand with regional friends and partners to resist coercion and oppose unlawful claims to international waters and resources."

The USS Montgomery's transit is also a sign of the Navy's new willingness to deploy the two variants of the Littoral Combat Ship class on high-profile missions. Both LCS series were temporarily sidelined in 2016 due to significant operational difficulties, and they have only recently resumed their deployments. Both LCS variants will be replaced by the new FFG(X) frigate in future serial production.

U.S. Sends Warships on Patrol Near South China Sea Standoff

By: Dzirhan Mahadzir

May 8, 2020 5:20 PM

USNI.org

USS Montgomery (LCS-8) conducts routine operations near Panamanian flagged drillship, West Capella, on May 7, 2020 in the South China Sea. US Navy Photo

KUALA LUMPUR — The U.S. Navy sent a pair of ships to patrol in the vicinity of a mineral rights dispute between Malaysia and China in the South China Sea for the second time in a month, U.S. officials told USNI News.

Littoral Combat Ship USS Montgomery (LCS-8) and replenishment ship USNS Cesar Chavez (T-AKE-14) conducted a presence operation in the South China Sea on Thursday near Panamanian-flagged drill ship West Capella. The drill ship is under contract to conduct surveying operations in Malaysia’s exclusive economic zone for Malaysian state oil company Petronas. Chinese People Liberation Army Navy (PLAN) warships and China Coast Guard vessels have also operated near the Malaysian-contracted drilling ship.

In late April, guided-missile cruiser USS Bunker Hill (CG-52) sailed with the Royal Australian Navy frigate HMAS Parramatta (FFG-154) before joining the amphibious assault ship USS America (LHA-6) and guided-missile destroyer USS Barry (DDG-52) to conduct combined exercises in the area where a Chinese government survey ship, Haiyang Dizhi 8, was said to be operating with an escort of several China Coast Guard ships.

On Friday, U.S. Pacific Fleet commander Adm. John Aquilino issued a pointed statement addressing Chinese operations in the region.

“We are committed to a rules-based order in the South China Sea, and we will continue to champion freedom of the seas and the rule of law,” Aquilino said in the release.
“The Chinese Communist Party must end its pattern of bullying Southeast Asians out of offshore oil, gas, and fisheries.”

In addition to the U.S., Royal Malaysian Navy (RMN) ships and Malaysian Maritime Enforcement Agency ships have also been quietly operating in the area, though Malaysia’s economic ties with China have resulted in little official public protests being made on China’s activities.

The United States is in the process of helping Malaysia build its own maritime domain awareness capabilities by providing 12 ScanEagle UAS systems and converting three Royal Malaysian Air Force CN-235 transport aircraft into maritime surveillance aircraft. The ScanEagles will be operated out of Kota Kinabalu in East Malaysia, which is also headquarters for Royal Malaysian Navy Eastern Fleet Command. Kota Kinabalu is near the same part of Malaysia’s South China Sea EEZ in which Chinese ships have been maintaining a presence and near the disputed Spratly Islands, where Malaysia maintains five military stations as part of its claims there.

In addition to the operations off of Malaysia, the U.S. has stepped up its freedom of navigation operations in the South China Sea.

Bunker Hill conducted a freedom of navigation operation through the Spratly Island chain near Gaven Reef in the South China Sea on April 29.

“Unlawful and sweeping maritime claims in the South China Sea pose a serious threat to the freedom of the seas, including the freedoms of navigation and overflight and the right of innocent passage of all ships,” reads the statement from 7th Fleet.
“This freedom of navigation operation upheld the rights, freedoms, and lawful uses of the sea recognized in international law by challenging the restrictions on innocent passage imposed by China, Vietnam and Taiwan.”

USS Montgomery (LCS-8), their embarked MH-60S Knight Hawk helicopter assigned to the “Wildcards’ of Helicopter Sea Combat Squadron (HSC) 23, and the Lewis and Clark-class dry cargo and ammunition ship USNS Cesar Chavez (T-AKE-14) conduct routine operations near Panamanian flagged drillship, West Capella, on May 7, 2020. US Navy Photo

Ticonderoga-class guided missile cruiser USS Bunker Hill (CG-52), front, and the Arleigh Burke-class guided-missile destroyer USS Barry (DDG-52) transit the South China Sea April 18, 2020. US Navy Photo

Huntington Ingalls Industries Execs ‘Disappointed’ Over FFG(X) Loss

By: Ben Werner

May 7, 2020 2:25 PM • Updated: May 7, 2020 3:50 PM

USNI.org

An artist’s concept of the HII Patrol Frigate.

This post was updated with a statement from Huntington Ingalls Industries.

Huntington Ingalls Industries executives are still smarting a week after the Navy awarded a potentially multi-billion-dollar frigate contract to rival shipbuilder Fincantieri.

HII has a backlog of work worth $45 billion, leaving the firm in a strong financial position, Mike Petters, chief executive of HII, told analysts during a Thursday morning conference call. However, there’s no denying the company wanted the FFG(X) design and construction award.

“We’re obviously very disappointed in the way it came out, but we’ll get a debrief from the Navy on what happened and how it could have gone better, and we’ll go forward from there,” Petters said.

On April 30, the Navy awarded a $795-million contract to Fincantieri to begin building the new class of guided-missile frigates. The frigate is the first new major shipbuilding program the Navy started in more than a decade. The contract with Fincantieri covers the detailed design effort and construction of the first ship in class, and it also includes options for nine more ships –which, if exercised, are worth up to $5.58 billion.

The Navy asked firms to base their proposals on mature ship designs that have been in service in the U.S. or allied navies. Other yards who submitted bids included Austal USA, a partnership of General Dynamics Bath Iron Works and Spanish shipbuilder Navantia, and Huntington Ingalls Industries. A fifth firm, Lockheed Martin, was thought to consider offering a bid but ultimately did not submit one.

“Recognize that everybody in the frigate competition was pricing different ships, so almost impossible to do an apples-to-apples comparison of price to what happened,” Petters said. “I think the Navy tried to run a best-value competition and they selected a winner.”

Throughout the competition, HII remained the most secretive about its design, routinely declining to comment to the media or analysts about the company’s bid. Following Thursday’s conference call, and after being asked by USNI News to provide more details about their frigate bid, Huntington Ingalls officials replied saying, “We are assessing and will have a complete response at a later time, when appropriate.”

There was a long-held belief that HII based its design on its Coast Guard National Security Cutter, according to a Congressional Research Service report. The NSC program is nearing the end of its appropriated production, adding to speculation the NSC was the parent design for Huntington Ingalls design.

“The Coast Guard continues to operate the NSC at a high tempo with lots of mission success and lots of very positive and favorable feedback to us,” Petters said. “And it has been a program that has been funded and supported both from the Coast Guard and from the Congress over the years.”

However, while there is support on Capitol Hill and across the Anacostia River at Coast Guard Headquarters for adding a twelfth NSC to the production line, Petters said Thursday the funding hasn’t yet materialized.

“Sure, there’s been a lot of talk about it (a twelfth NSC hull),” Petters told analysts during the call. “The question at this point is, you know, where does the budget go? And I think you know that is kind of the big question mark out there for everybody.”

As for the winner of the Navy’s frigate competition, Fincantieri based its design on its FREMM multi-mission ship already operated by the French and Italian navies. Fincantieri was perhaps the most public of the competitors on their ship design. The firm detailed its design’s strengths, arranged for an Italian navy frigate to visit the U.S. and openly discussed the $180 million in improvements made to the Marinette Marine shipyard in Wisconsin to accommodate a proposed two-per-year build tempo. In January, Fincantieri announced plans to spend an additional $80 million to $100 million on capital expenditures to improve its operations further.

General Dynamics Bath Iron Works and Spanish shipbuilder Navantia joined forces to offer a bid based on the F100 frigate design. As Fincantieri did, Bath Iron Works and Navantia were able to use working versions to tout the benefits of their design. A year ago, Spanish Armada guided-missile frigate ESPS Mendez Nunez (F-104) was integrated into the Abraham Lincoln Carrier Strike Group as it sailed around the world, as USS Abraham Lincoln (CVN-72) shifted homeports from Norfolk to San Diego.

Austal USA based its design on its Independence-variant Littoral Combat Ship. Austal was presumably counting on the Navy’s familiarity with operating the parent design and the capability of its Mobile, Ala., shipyard to be strengths of its bid.

While it remains a minor mystery what Huntington Ingalls Industries’ frigate bid looked like, Petters reminded analysts the company does have several programs in its production line. A Huntington Ingalls frigate would likely have been built at the Ingalls Shipbuilding yard in Pascagoula, Miss. Currently, the yard is building America-class amphibious assault ships, San Antonio-class amphibious transport docks, Arleigh Burke-class guided-missile destroyers and the Legend-class National Security Cutters.

“This is a disappointment, but you know, the thing about competition is you get up off the field and you go learn your lessons and you get better the next day. So that’s kind of the way we’re taking it,” Petters said. “The Navy is starting to think about what the future holds, and we’re going to be part of that future so, we’re excited about that.”

Fincantieri FFG Model mock-up

Report to Congress on Navy Force Structure

May 6, 2020 7:45 AM

• USNI.org

The following is the May 1, 2020 Congressional Research Service report, Navy Force Structure and Shipbuilding Plans: Background and Issues for Congress.

From the report

In December 2016, the Navy released a force-structure goal that calls for achieving and maintaining a fleet of 355 ships of certain types and numbers. The 355-ship goal was made U.S. policy by Section 1025 of the FY2018 National Defense Authorization Act (H.R. 2810/P.L. 115-91 of December 12, 2017). The Trump Administration has identified the achievement of a Navy of 355 or more ships within 10 years as a high priority. The Navy states that it is working as well as it can, within a Navy budget top line that is essentially flat in real (i.e., inflation-adjusted terms), toward achieving that goal while also adequately funding other Navy priorities, such as restoring eroded ship readiness and improving fleet lethality. Navy officials state that while the 355-ship goal is a priority, they want to avoid creating a so-called hollow force, meaning a Navy that has an adequate number of ships but is unable to properly crew, arm, operate, and maintain those ships.

The Navy states that its proposed FY2021 budget requests the procurement of eight new ships, but this figure includes LPD-31, an LPD-17 Flight II amphibious ship that Congress procured (i.e., authorized and appropriated procurement funding for) in FY2020. Excluding this ship, the Navy’s proposed FY2021 budget requests the procurement of seven new ships rather than eight.

A figure of 7 new ships is less than the 11 that the Navy requested for FY2020 (a figure that excludes CVN-81, an aircraft carrier that Congress authorized in FY2019) or the 13 that Congress procured in FY2020 (a figure that again excludes CVN-81, but includes the above-mentioned LPD-31 as well as an LHA amphibious assault ship that Congress also procured in FY2020). The figure of 7 new ships is also less than the 10 ships that the Navy projected under its FY2020 budget submission that it would request for FY2021, and less than the average ship procurement rate that would be needed over the long run, given current ship service lives, to achieve and maintain a 355-ship fleet.

In dollar terms, the Navy is requesting a total of about $19.9 billion for its shipbuilding account for FY2021. This is about $3.9 billion (16.3%) less than the Navy requested for the account for FY2020, about $4.1 billion (17.0%) less than Congress provided for the account for FY2020, and about $3.6 billion (15.3%) less than the $23.5 billion that the Navy projected under its FY2020 budget submission that it would request for the account for FY2021.

The Navy states that its FY2021 five-year (FY2021-FY2025) shipbuilding plan includes 44 new ships, but this figure includes the above-mentioned LPD-31 and LHA amphibious ships that Congress procured in FY2020. Excluding these two ships, the Navy’s FY2021 five-year shipbuilding plan includes 42 new ships, which is 13 less than the 55 that were included in the FY2020 (FY2020-FY2024) five-year plan and 12 less than the 54 that were projected for the period FY2021-FY2025 under the Navy’s FY2020 30-year shipbuilding plan.

The Navy’s 355-ship force-level goal is the result of a Force Structure Assessment (FSA) conducted by the Navy in 2016. A new FSA, referred to as the Integrated Naval FSA (INFSA), is to be published sometime during the spring of 2020. Statements from Department of the Navy (DON) officials suggest that the INFSA could result in a once-in-a-generation change in the Navy’s fleet architecture, meaning the mix of ships that make up the Navy. DON officials suggest that the INFSA could shift the fleet to a more distributed architecture that includes a reduced proportion of larger ships, an increased proportion of smaller ships, and a newly created category of large unmanned surface vehicles (USVs) and large unmanned underwater vehicles (UUVs). Such a change in fleet architecture could alter the mix of ships to be procured for the Navy and the distribution of Navy shipbuilding work among the nation’s shipyards.

Report to Congress on U.S. Navy Frigate FFG(X) Program

May 5, 2020 7:49 AM

• USNI.org

The following is the May 4, 2020 Congressional Research Service report, Navy Frigate (FFG[X]) Program: Background and Issues for Congress.

From the report

The FFG(X) program is a Navy program to build a class of 20 guided-missile frigates (FFGs). Congress funded the procurement of the first FFG(X) in FY2020 at a cost of $1,281.2 million (i.e., about $1.3 billion). The Navy’s proposed FY2021 budget requests $1,053.1 million (i.e., about $1.1 billion) for the procurement of the second FFG(X). The Navy estimates that subsequent ships in the class will cost roughly $940 million each in then-year dollars.

Four industry teams were competing for the FFG(X) program. On April 30, 2020, the Navy announced that it had awarded the FFG(X) contract to the team led by Fincantieri/Marinette Marine (F/MM) of Marinette, WI. F/MM was awarded a fixed-price incentive (firm target) contract for Detail Design and Construction (DD&C) for up to 10 ships in the program—the lead ship plus nine option ships.

The other three industry teams reportedly competing for the program were led by Austal USA of Mobile, AL; General Dynamics/Bath Iron Works (GD/BIW) of Bath, ME; and Huntington Ingalls Industries/Ingalls Shipbuilding (HII/Ingalls) of Pascagoula, MS.

Under the DD&C contact awarded to F/MM, Navy has the option of recompeting the FFG(X) program after the lead ship (if none of the nine option ships are exercised), after the 10th ship (if all nine of the option ships are exercised), or somewhere in between (if some but not all of the nine option ships are exercised).

All four competing industry teams were required to submit bids based on an existing ship design—an approach called the parent-design approach. F/MM’s design is based on an Italian frigate design called the FREMM (Fregata Europea Multi-Missione).

As part of its action on the Navy’s FY2020 budget, Congress passed two legislative provisions relating to U.S. content requirements for certain components of each FFG(X).

The FFG(X) program presents several potential oversight issues for Congress, including the following:

• the potential impact of the COVID-19 (coronavirus) situation on the execution of U.S. military shipbuilding programs, including the FGFG(X) program;

• the accuracy of the Navy’s estimated unit procurement cost for the FFG(X), particularly when compared to the known unit procurement costs of other recent U.S. surface combatants;

• whether to fund the procurement in FY2021 of one FFG(X) (the Navy’s request), no FFG(X), or two FFG(X)s;

• whether to build FFG(X)s at a single shipyard at any one time (the Navy’s baseline plan), or at two or three shipyards;

• whether the Navy has appropriately defined the required capabilities and growth margin of the FFG(X).

• whether to take any further legislative action regarding U.S. content requirements for FFG(X)s;

• technical risk in the FFG(X) program;

• the potential industrial-base impacts of the FFG(X) program for shipyards and supplier firms in the context of other Navy and Coast Guard shipbuilding programs.

Defense Industry Weathering COVID-19 Economic Slowdown

By: Ben Werner

May 1, 2020 4:35 PM

USNI.org

PALMDALE, Calif. – June 29, 2018 – A Northrop Grumman quality team performs final inspection of an F-35 center fuselage produced by the company at its Palmdale Aircraft Integration Center of Excellence. Northrop Grumman photo

The defense sector appears more insulated from the worst financial effects caused by the COVID-19-related economic slowdown when compared to other industries.

During the past week, as the largest defense contractors started reporting first-quarter financial results, a clear trend emerged: government-funded work continued, albeit with spotty supply-chain related slowdowns. Overall, defense work appeared to be the bright spot on first-quarter financial reports filed by several corporations, especially those with commercial business segments involved in travel.

Northrop Grumman’s experience with COVID-19 provides a typical example of the economic climate facing defense contractors. Northrop Grumman makes the Navy’s E-2D Advanced Hawkeye, fuselages for the F-35 Lightning II Joint Strike Fighter, electronic warfare equipment and unmanned aerial vehicles.

Additionally, Northrop Grumman produces composite fuselage stringers and frames for the Airbus A350 jetliner. With international travel restrictions in place as countries tried stopping the spread of COVID-19, demand for commercial airliners dropped.

“Our commercial aero work is actually spread over three different efforts, the largest of which is the A350,” Kathy Warden told analysts during a conference call earlier in the week.

Northrop Grumman expects to feel in the second quarter the full financial hit from COVID-19-related drops in demand for its commercial airline products. The drop in demand, though, will likely remain for the rest of the year. In response, the company is lowering its overall annual sales prediction.

“Commercial aerostructures represents about 1 percent of total company revenue, and demand has declined as global travel has been impacted by the pandemic,” said Dave Keffer, Northrop Grumman’s chief financial officer.

Northrop Grumman now predicts sales of between $35 billion and $35.4 billion for 2020, about 1 percent lower than its previous prediction.

“Our update to sales guidance reflects expected COVID-19-related impacts, primarily at aeronautics, including their exposure to commercial aerospace markets,” Warden said.

Textron, which makes the Navy’s Ship-to-Shore Connector and V-22 tiltrotor aircraft through its Bell subsidiary, also has a sizeable civilian jet and turboprop business. A significant first-quarter drop in business aircraft sales and deliveries caused the company’s leadership to cancel its earnings prediction for 2020.

“We’ve suspended our earnings guidance for the year due to the uncertainty around the COVID-19 pandemic,” Scott Donnelly, the chief executive of Textron, told analysts during a conference call earlier this week.

During the first three months of 2020, Textron reported revenues of $2.7 billion, a $332-million or 11-percent drop from the $3.1 billion in revenues reported a year ago. Textron’s aviation segment – including its business aircraft – accounted for nearly 80 percent of the year-over-year revenue drop.

At the same time, Textron’s Bell subsidiary saw revenues increase, mostly due to increased military sales.

“Bell military is obviously very solid for the quarter,” Donnelly told analysts.

General Dynamics officials told analysts its defense business was the bright spot for the company. Government contracts continued paying and demand remained as expected. The company’s commercial side suffered because its Gulfstream subsidiary was not able to deliver completed aircraft to customers.

“The cash performance in the quarter was impacted by the COVID-19 outbreak, most notably at Gulfstream due to delayed customer payments associated with the net 11 airplanes we weren’t able to deliver,” Jason Aiken, the chief financial officer of General Dynamics, told analysts.

Companies are also taking advantage of changes to how government contracts are paid to help lessen the COVID-19-related financial blow to suppliers. In many cases, smaller suppliers produce parts to both the defense and non-defense manufacturers. Ensuring a steady cash flow to these smaller companies is seen as a way to keep the supply chain running, even as other business sectors slow down or halt operations.

“We are advancing approximately $30 million of payments per week to critical, small and mid-sized suppliers, and we expect these payment advances will exceed $200 million,” Warden said during the Northrop Grumman call.

Fincantieri Wins $795M Contract for Navy Frigate Program

By: Megan Eckstein

April 30, 2020 5:09 PM • Updated: April 30, 2020 7:21 PM

USNI.org

Fincantieri FFG(X) Design based on the FREMM. Fincantieri Image

This post has been updated to include additional information from the Navy.

The Navy awarded a $795-million contract to Fincantieri to begin building a new class of guided-missile frigates, in the first new major shipbuilding program the service has started in more than a decade, the Navy announced today.

Fincantieri beat out what was originally four other competitors, who were asked by the Navy to take a mature parent design and evolve it to meet the Navy’s needs for potential high-end warfare. Fincantieri, which will build its frigate at its Marinette Marine shipyard in Wisconsin, based its FFG(X) design on the FREMM multi-mission frigate already operated by the French and Italian navies.

The detail design and construction contract covers one ship in the current Fiscal Year 2020 and options for as many as nine more ships, for a total value of $5.58 billion if all options are exercised.

“The Navy’s Guided-Missile Frigate (FFG(X)) will be an important part of our future fleet,” Chief of Naval Operations, Adm. Mike Gilday said in a Navy statement.
“FFG(X) is the evolution of the Navy’s Small Surface Combatant with increased lethality, survivability, and improved capability to support the National Defense Strategy across the full range of military operations. It will no doubt help us conduct distributed maritime operations more effectively, and improve our ability to fight both in contested blue-water and littoral environments.”

“I am very proud of the hard work from the requirements, acquisition, and shipbuilder teams that participated in the full and open competition, enabling the Navy to make this important decision today,” James Geurts, assistant secretary of the Navy for research, development and acquisition, said in the statement.
“Throughout this process, the government team and our industry partners have all executed with a sense of urgency and discipline, delivering this contract award three months ahead of schedule. The team’s intense focus on cost, acquisition, and technical rigor, enabled the government to deliver the best value for our taxpayers as we deliver a highly capable next generation frigate to our warfighters.”

“When we began this journey nearly two years ago it was with the belief that there was a place for new ideas, new platforms and new partners in an already talented U.S. shipbuilding industry,” Fincantieri Marine Group CEO Dario Deste said in a statement. “Today’s announcement validates that thinking.”

The Navy has spoken about its frigate program as the model of how it would like to approach ship acquisition in the future. By bringing together a FFG Requirements Evaluation Team (RET) that included the acquisition community, resource sponsors, the budget community, fleet representatives, technologists in and out of government and both shipbuilders and others in industry, the Navy was able to figure out early on how it might balance capability with cost. The service has said this approach shaved six years off the program, compared to what it might have looked like under more traditional approaches.

Navy leadership in 2017 determined that a new frigate program was needed beyond what could be modified on the Littoral Combat Ship program, which had been the sole small combatant in future fleet plans. The frigate would be more lethal and survivable than an LCS, they said, and the service stood up the FFG RET. Based on the RET’s work, the service approved top-level requirements in October 2017 and kicked off a conceptual design phase that spanned 16 months and included five industry teams. With confidence that industry would be able to meet the requirements, the Navy then validated its capability development document in February 2019, and the request for proposals for the detail design and construction contract was released in June.

The Navy also sped up the process and reduced risk to the program by relying heavily on government-furnished equipment, ensuring the frigate would use existing systems already fielded on other surface combatants in the fleet. These systems include an Enterprise Air Surveillance Radar (EASR), Baseline 10 Aegis Combat System, Mk 41 Vertical Launch System, and other communications and defensive systems with hot production lines and proven performance in the fleet. This not only speeds up the frigate design and construction effort but also has benefits for the cost of procuring these as GFE, maintaining a common inventory of spare parts and training sailors to operate the same system across multiple ship classes.

“Many of the things that tend to trip up lead ships, we took proactive steps and lessons learned to retire the risk there. Every lead ship is hard, I’m not denying that, but I think we set ourselves up really well for success on this program,” Program Executive Officer for Unmanned and Small Combatants Rear Adm. Casey Moton told reporters in a Thursday evening press briefing on the contract award.

Geurts, the Navy acquisition chief, said during the media call that “all this was done with an intense focus on cost, acquisition and technical rigor so that we got the best value for our warfighter and the taxpayer.” He added that the ability to rapidly improve the production line to bring the cost per ship down was part of the selection criteria, and “I think you’re going to see an aggressive cost curve, particularly on the shipbuilder side.”

There will be some opportunity to lower costs on the GFE side, too, he said. On the radar, for instance, the frigate’s EASR will be based on the SPY-6 Air and Missile Defense Radar that Raytheon designed for the Flight III Arleigh Burke destroyer configuration. Geurts said that both programs could benefit as Raytheon’s production line matures to support both radars.

“Our goal in the Navy again is to maximize commonality of these combat systems software and hardware across the fleet. That helps us not only from a cost perspective but helps us in training, maintenance, sustainability,” he said, adding that it will also mean timely updates to capability in the future as defense contractors upgrade the Aegis Combat System or the Surface Electronic Warfare Improvement Program (SEWIP), for example.

Going forward, the detail design phase will begin immediately, and construction will begin no later than April 2022. The first ship of the class – still yet to be named, despite an effort by outgoing Acting Secretary of the Navy Thomas Modly to name the frigates the Agility class – will deliver by 2026 and reach initial operational capability by 2030. The lead ship will cost $1.281 billion, with $795 million of that covering the shipbuilder’s detail design and construction costs and the rest covering the GFE, including the combat systems, radar, launchers, command and control systems, decoys and more.

For the rest of the class, the total ship cost – contractor costs and GFE – has dropped. The Navy previously said it was aiming for an average cost of ships 2 through 20 of $800 million in constant year 2018 dollars, with a requirement to stay below $950 million in CY 2018 dollars. Now the service has the average follow-on cost pegged at $781 million in constant year dollars.

Geurts said the Navy has not committed to an acquisition strategy for frigates beyond these first 10. Shipbuilding and acquisition plans call for a class of 20, but the Navy is increasingly interested in a small combatant that will be more capable than today’s LCSs and can relieve destroyers of many of their missions around the globe, serve as convoy escorts, and provide more high-end presence in more places as part of the distributed maritime operations concept. Once the final of these first 10 frigates is awarded, likely in FY 2025, the Navy could award another 10 to Fincantieri, or it could choose to bring in a second yard to build the same ship and increase the frigate’s footprint in the fleet even faster. Under the contract, the Navy has rights to the technical data package for the ship and could compete the program down the road.

In selecting between the four remaining competitors – Fincantieri and its FREMM design; Austal USA, which builds the Independence-class LCSs; General Dynamics Bath Iron Works and Navantia, who builds the F100-class frigates for the Spanish Navy; Huntington Ingalls Industries, who has not revealed details of its bid – the Navy was balancing cost with non-cost factors to get to a best value. Design and design maturity were weighted equal to performance and the ability of the ship to meet the Navy’s warfighting needs as outlined in the National Defense Strategy and other documents. Schedule, production approach and facilities were weighted lower, with data rights being the lowest-weighted non-cost factor. The Navy was not looking for a straight price shoot-out but instead wanted the companies to compete for the best capability for the best value. Lockheed Martin, who builds the Freedom-variant LCS at Fincantieri’s shipyard in Wisconsin, had been part of the group of five in the conceptual design phase but dropped out of the competition.

Fincantieri previously told USNI News that the company had spent about $180 million to upgrade its Wisconsin yard and planned to spend another $80 to $100 million if it won the competition so that it could reach a two-a-year production rate. If the Navy chose to build three or four a year, as some have suggested, a second yard would likely have to be brought into the program.

It is unclear what will happen at the other yards that did not win the competition. Bath Iron Works is wrapping up its work on the Zumwalt-class destroyer program but is one of two yards that build the Arleigh Burke-class destroyers and has a healthy backlog of work on DDGs. Ingalls Shipbuilding has the other half of the DDG program, as well as amphibious ships. Austal USA, though, is nearing the end of its contracted work on the LCS program and its Spearhead-class expeditionary fast transport (EPF) ships. The company has been trying to pitch the EPF to serve as an ambulance ship or other auxiliary, but the Navy is still early in deciding what it wants its common auxiliary hull, called CHAMP, to look like.

Bath Iron Works said in a statement that “BIW’s FFG(X) team — including Raytheon, Navantia and our supplier base — produced an exceptional concept design and put forward the best bid possible. We look forward to the Navy’s debrief to us. We will continue to focus our energy on meeting the needs of the U.S. Navy by delivering Lyndon B. Johnson (DDG 1002) and the 11 Arleigh Burke-class destroyers we currently have under contract. The DDG-51 is a proven design that has shown its ability to evolve and deliver increased capabilities to the fleet. We look forward to seeing our workforce prove that they can deliver these ships on schedule and oversee the maintenance and modernization of destroyers currently deployed in the fleet.”

What is clear, though, is the role the frigate will play in the surface navy. Vice Adm. Jim Kilby, the deputy chief of naval operations for warfighting requirements and capabilities (OPNAV N9), said during the media call that the FREMM-based frigate design had significant margin to grow as the threat picture evolves in the coming years and the Navy matures new technologies to deal with those threats.

The frigate must be able to accommodate one manned helicopter and one unmanned air vehicle, he said, but the margin built into the design will allow the frigate to operate the full range of manned and unmanned vertical lift aviation, to support the wide range of missions the frigate will be expected to conduct. He also noted that the ship currently has vertical launch missile tubes as part of its defense package, but the ship has the space and power to take on laser weapons in the future to provide point defense, freeing up those VLS tubes for offensive weaponry instead.

“This frigate, though it’s classified as a small surface combatant, really falls nicely in between our small surface combatants and our large surface combatants, and I see it doing multiple things,” Kilby said.
“This is going to be a real workhorse for the United States Navy supporting distributed maritime operations in the future. So we are super excited about this ship, and I can’t think of a better asset to a strike group or strike group commander to give them the flexibility to do what we need to do in the future.”

Marinette shipbuilders infected with virus

Posted: April 30, 2020 11:45 AM

by Associated Press

MADISON, Wis. — The new coronavirus has infected at least four workers at Fincantieri Marinette Marine. WBAY-TV reports the company reported its first employee infection on April 23 and announced this week that three more employees have since tested positive.

The first worker hasn’t been at the shipyard since April 17. The others haven’t been at the shipyard since last week. The company believes about a dozen workers in Wisconsin and Michigan may have been exposed to the first patient.

Those workers have been quarantined. The company has set up a website for people to track possible cases in employees and for information for employees who may be sick.

Shipyards Continue to Balance COVID-19 Mitigation With Efficient Operations

By: Ben Werner and Megan Eckstein

April 28, 2020 5:20 PM

USNI.org

Gregory Rarnor assembles an access hatch for Massachusetts (SSN-798). Newport News Shipbuilding

It’s still too early to say if the COVID-19-related economic slowdown is significantly disrupting the production of major programs, the Navy’s top weapons-buyer said during a media call Tuesday.

At the shipyards, the near-term priority work is on track. However, the Navy is still watching how COVID-19-related restrictions and supply-chain problems are disrupting the mid- and long-term work, James Geurts, the assistant secretary of the Navy for research, development and acquisition, said Tuesday.

Asked about continuing operations while the virus hits or threatens shipyards and manufacturers, Geurts said, “we are seeing less [disruption] than in the first couple weeks, but we are still learning and studying hard what the potential downstream impacts could be.” He added the Navy and its industry partners were only about five weeks into the pandemic and so it would be hard to draw any larger conclusions yet about impacts to specific programs or sectors.

On March 20, Ellen Lord, the undersecretary of Defense for acquisition and sustainment, announced the Department of Homeland Security declared the defense industrial base as a critical infrastructure sector. Doing so meant many defense contractors could continue operations.

However, these companies are not immune from COVID-19, and the industry was forced to adapt its operations during the pandemic. Some companies had disruptions and are just now coming back as workers recover, Geurts said. Geographic and temporal elements to the pandemic mean not everyone is affected the same.

The best-case scenario is zero infections, Geurts said. But the reality is everyone – the Navy and its contractors – recognize COVID-19 is present and must focus on understanding how to operate within the Centers for Disease Control and Prevention guidelines while also accomplishing the mission.

Protecting the workforce from COVID-19 has meant remaining flexible when creating a prevention plan for shipbuilder Huntington Ingalls Industries. During the past several weeks, the shipbuilder has steadily adapted its process by instituting an evolving set of preventative measures.

In March, HII stressed the importance of hand-washing, but as CDC guidelines changed, the shipbuilder added measures such as wearing face masks, increasing social distancing and encouraging telework.

“We have, I can say we have about 10 times as many people working remotely today as we did six weeks ago,” Mike Petters, HII’s chief executive, said during the shipbuilder’s virtual annual meeting Tuesday morning.

Roughly 10,000 employees are now teleworking, Beci Brenton, a Huntington Ingalls Industries spokeswoman, told USNI News after the meeting.

During the meeting, Petters did not provide details about the company’s operations this year. More information is expected to be discussed next week during a planned conference call with analysts to discuss the company’s first-quarter financial results.

During the past several weeks, though, Huntington Ingalls Industries did report employees testing positive for COVID-19 at both of its primary shipbuilding facilities – 30 employees at Ingalls Shipbuilding in Pascagoula, Miss., and 34 employees at Newport News Shipbuilding in Newport News, Va., as of last weekend.

Throughout the industry, shipyards are increasing their screening efforts, including checking employees every day using temperature readers, Geurts said. Workers with fevers are told to stay home or directed to seek medical attention. Companies are also adjusting how workers enter yards so temperatures can be taken remotely without too many people queueing up together.

Ingalls Shipbuilding just started temperature checks as workers arrived. Anyone with a temperature of 100.5 or higher is directed to get a recheck. If the second check is still 100.5 or higher, the employee is sent to get a COVID-19 test and quarantine as necessary. Newport News Shipbuilding will start a similar process next week, Brenton said.

“My sense right now is it is stabilizing and we are learning how to operate more and more efficiently in the midst of [the disease], as opposed to strictly trying to avoid having any infections,” Geurts said.