JHSV Contract Awarded Well Over Budget

On Nov. 13th, the JHSV contract was awarded by the DoD Naval Sea Systems Command to, "Austal USA, Mobile Ala., is being awarded a $185,433,564 modification to previously awarded contract (N00024-08-C-2217) for the firm quantity of one Joint High Speed Vessel (JHSV)..."

Recently, in September 2008, Congress passed the "DUNCAN HUNTER NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2009." That was the budget agreed to and passed by both houses of Congress and signed by Bush. Since then, the U.S. dollar has actually appreciated in value, and applicable commodity prices are less than at that time. In that Defense Authorization Act for FY2009, one JHSV is budgeted at Line Item #161, see page 425 (p. 453 of the .pdf). Bush requested $168,846,000 for the JHSV, and the House and Senate both authorized that exact same amount in law.

Back on April 26, 2007, The U.S. Navy PEO Ships made a presentation to industry on JHSV in which it was stated, "Cost is a critical consideration," and the "Cost Goal remains $150M for the lead ship, $130M for follow ships (FY08 dollars)." Relatively speaking dollars are actually worth more now than they were then and commodity prices are now lower.

But, when the actual JHSV Solicitation RFP N00024-07-R-2219 came out it became clear from it's wording that "cost would not be critical," that in fact low-bidders could be arbitrarily disqualified, and that there would be many exceptions to price/cost allowed.

It is interesting to compare that the total cost of each of the two similar designs recently completed by Austal, hulls A615 and A616 under MARAD were:

"XVII. Determined, in accordance with Recommendations XIV and XVI and pursuant to Sections 1101(f) and 1104A(e)(5) of the Act, that the total estimated Actual Cost of the Vessels subject to adjustments as determined by the Associate Administrator for Shipbuilding, is as indicated below:
------------------------------------------Vessel 1---------Vessel 2------------Total
Estimated Actual Cost (AC)----$88,446,592----$89,556,473----$178,003,065"

So, the recently awarded contract for 1 JHSV is almost $17 million more than Bush requested and both Houses of Congress authorized. But beyond that, it is $35 million over what PEOS indicated a little more than a year ago when dollars were relatively no more valuable and commodity material prices were higher. And this non-combatant JHSV would be more than TWICE the price of what it cost to build comparably designed civilian vessels built at the same location by the same workforce expected to build this JHSV.

It would be interesting to see what the cost proposals were from the other two competitors for the JHSV. A good guess is they were both less than $185,000,000.

This proposed JHSV is not quite as over budget as the LCS, but it is over budget by at least 10% (by Congressional authorization) to 20% (by prior DoD statements) and probably more when compared to the cost and easily altered efficacy of Austal hull A616.

$185,433,564 for one JHSV is pure and simple well over budget "gold-plating"

Aloha, Brad