BIW memo fuels speculation about DD(X) source

PORTLAND – A memo to shipbuilders from the president of Bath Iron Works is adding to speculation that the Navy is moving to have its next-generation destroyer built at a single shipyard.

On Tuesday, the head of Northrop Grumman’s Ingalls Shipyard in Mississippi told a business group that the Navy may shift to a winner-take-all approach to the design and construction of the DD(X).

The memo from BIW President Dugan Shipway that was circulated Wednesday to his yard’s 6,200 employees also indicated that the Navy wants to see Bath and Ingalls compete head-to-head to build all the ships.

“I believe the Navy now envisions a competition between [Northrop] and BIW for this work that would eliminate the need for a second source of supply, and that the Navy feels the cost associated with maintaining a second source of supply cannot be justified now that the anticipated build rate of the program has been reduced to one ship per year,” Shipway wrote.

President Bush’s proposed 2006 budget calls for a $586 million cut in the DD(X) program, with five of the ships to be built between 2007 and 2011.

BIW and Northrop are both involved in the Arleigh Burke destroyer program, which is winding down, and are looking to the DD(X) to keep production humming. While the Navy has indicated that it plans to change its acquisition strategy, it has yet to go into specifics.

“I have often stated over the past two years that some time we would be challenged to compete for future shipbuilding work at BIW. We have made significant progress in preparing for this eventuality and the yard is moving in the right direction,” Shipway wrote.

“Now I have to focus on ensuring any potential competition at this point in the DD(X) program is fair and equitable, and you have to help position BIW to win. I need you to continue to build ships for fewer hours and drive cost out of the business.”

Phil Dur, president of Northrop Ship Systems, said Navy cost-cutting pressures are driving the potential shift to a single source.

“Frankly, we just have to get about tightening up our arguments on why we are America’s shipyard and why we can do the best job for the Navy in building out this new class of ships and the ships that will follow,” he said.

A single-source move by the Navy is unlikely to favor BIW, said Loren Thompson, industry analyst for the Lexington Institute, a public policy research group in Arlington, Va.

“The most likely outcome of the Navy’s scheme is that Bath will lose its role in building the DD(X) destroyer,” Thompson said. “The Navy, for some time, has been trying to find a politically acceptable way of sending the production of warships to the [Gulf of Mexico] shipyards, and I think that’s really what this competition is all about.”