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Defense, spending bills contain mixed news for shipbuilder Austal

A view of the stern of the Littoral Combat Ship that will enter service as the fifth ship to bear the name USS Mobile.

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By LAWRENCE SPECKER | Alabama Media Group, Birmingham | Published: December 18, 2019

BIRMINGHAM, Ala. (Tribune News Service) — The end of a Congressional logjam on 2020 military spending bills appears to hold some mixed messages for Mobile-based shipbuilder Austal USA: New orders for Littoral Combat Ships seem highly unlikely, while its other big Navy program has gotten a boost.

Austal has several years of work securely in hand to fulfill the contracts it already has in hand for two Navy shipbuilding programs. It’s what happens next that remains the big question.

The shipyard delivered its 10th LCS to the Navy in June. The 11th finished acceptance trials in November. The 12th was christened in June and the 13th, the future USS Mobile, aka LCS 26, was christened to great fanfare on Dec. 7. After that, five more ships – LCS 28, 30, 34, 36 and 38 – are either in construction or under contract.

Austal also builds a multipurpose catamaran called the Expeditionary Fast Transport or EPF. The 12th ship in the class was christened in November; contracts for the 13th and 14th ships in the class were awarded in March, with work on the 14th expected to begin in mid-2020.

The LCS program has been good for Austal: It racked up 19 contracts while the Lockheed Martin, building a separate version of the ship, got 16. Austal USA President Craig Perciavalle has cited that as a testament to the efficiency of Austal’s Mobile operation, where the orders in hand ensure that a workforce of around 4,000 will be fully engaged for at least couple more years.

But the freshly approved 2020 National Defense Authorization Act (NDAA) makes it very clear that Congress would prefer not to buy any more of the ships. The Navy’s plan is to follow the LCS with a new frigate class designated the FFG(X), with the first ship to be ordered in 2020. The program will be a plum for whichever shipyard wins the contract: Building the projected 20 frigates in the class will keep the winner busy past 2030.

Austal is one of four builders in the running, offering a beefed-up version of its LCS and promising that it’ll carry its established manufacturing prowess over to the new program. The other contenders are Fincantieri Marine Group, which would build in Wisconsin; General Dynamics, which would build in Maine; and Huntingdon Ingalls Industries, which would build in Pascagoula.

A final version of the 2020 NDAA, reconciling differences between the House and Senate versions, was approved by the Senate on Tuesday, the final step before going to President Donald Trump for his expected approval. The bill includes money for the first frigate but none for the LCS. And it goes further than that, including language saying that none of the 738 billion dollars in it can be allocated to building any LCSs beyond the 35 already on order.

The bill allows that under very specific circumstances, more LCS orders could be placed if it’s necessary to keep shipyards thriving while they compete for the frigate program. That won’t be necessary if the first frigate contract goes out as planned, so the clause seems to be an escape hatch: If the frigate program is delayed, more LCS work might be considered as a stopgap.

“We didn’t want to put an absolute on that,” said Sen. Doug Jones.

An Austal spokesperson said the company does not comment on the NDAA.

There’s another LCS footnote in the authorization act: A “sense of Congress” statement that “the Secretary of the Navy should ensure price is a critical factor” in the frigate selection.

Ala. Rep. Bradley Byrne has said he “secured” that language in the bill, in support of Austal’s bid.

If the end of the LCS program seems relatively clear, the future of the EPF is a little murkier. But the latest news from D.C. is good.

The transport is already a highly flexible vessel. It can carry anything from troops to vehicles and has a landing deck for a helicopter. Thanks to shallow draft and an articulated ramp, it can operate in small and less-developed ports. Austal has been pitching variants including a medical ship with a landing deck modified to handle the Osprey tiltrotor aircraft.

The NDAA does not include any money for a 15th EPF. It also does not include a $49 million allocation to convert EPF 14 into a medical ship. That is something the Navy had placed on a list of “unfunded priorities,” and it was something in the House version of the NDAA, but it didn’t make it to the final version.

However, the NDAA is only half the equation. It provides a spending plan, while a related appropriations act provides the money – with allocations that can be based on a different plan. On Monday Congressional leaders announced an agreement on appropriations. On Tuesday the House approved both a Consolidated Appropriations Act and a Further Consolidated Appropriations Act. If Senate approval and a presidential signature follow rapidly, as expected, the bills will fund government operations through fiscal 2020.

Ala. Sen. Richard Shelby chairs the Senate Appropriations Committee, and his influence seems to be reflected in the appropriations deal. It features a $23.9 billion shipbuilding allocation that includes $261 million for EPF 15 as well as the $49 million for the medical conversion of EPF 14.

This week Shelby described the appropriations package in glowing terms: “This legislation contains major victories for Alabama and the nation’s defense and aerospace sectors.” He said in a statement released Tuesday.

Byrne has been an Austal advocate. But on Tuesday he voted against the two spending bills, describing them as packed with last-minute pork. He was in the minority: The House passed the bills.

“Yesterday at 5 pm, 2,313 pages containing $1.4 trillion in new spending and unrelated measures were dumped on me,” Byrne said in a statement released Tuesday afternoon. “As I slept, hundreds more pages were added to these bills last night. Voting on these bills less than 24 hours later is the definition of the swamp.

“During a time of remarkable economic growth, we should be taking steps to reduce the deficit, not throwing billions of dollars in goodies attempting to make an irresponsible spending bill more palatable,” Byrne said. “It is ridiculous that the greatest country in the world is being run so haphazardly, and a day of reckoning is coming if we cannot restore sanity to our government spending process.”

Byrne’s office has not responded to a request for comment about whether he approves the additional money for Austal despite his vote against the bill.

The bottom line for Austal: The apparent end of LCS contracts comes as no surprise. Money to extend the life of the EPF program, and to give the proposed medical variant a trial run, is a bonus that’ll help keep that production line viable for the next few years.

But the long-term picture still hinges on the frigate program, a high-stakes decision that looms in the year ahead.

©2019 Alabama Media Group, Birmingham
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