Navy orders 2 more Littoral Combat Ships

[unhappycamper]

unhappycamper note: Since the ‘Pentagon’ (DoD? Gannett?) has ‘requested’ that I only post one paragraph from articles on Army Times, and Airforce Times, To keep in that same (new) tradition, I will also do the same for for articles on Navy Times, Marine Corps Times, stripes.com and military.com.
To read the article in the military's own words, you will need to click the link.

Read all about Fair Use here. It sure is beginning to smell like fascism.

unhappycamper summary of this article: Riddle me this, Batman: why did LCS #1 cost $584 million dollars and why did LCS #2 cost $704 million dollars?

How come these same guys can now make them for about half the cost?




Navy orders 2 more Littoral Combat Ships
By Christopher P. Cavas - Staff writer
Posted : Friday Mar 18, 2011 10:02:13 EDT

The contracts are far below the congressional cost cap of $480 million for LCS ships. Sean Stackley, the Navy’s top acquisition official, said at the time of the December contract award that the average per-ship target price for Lockheed ships is $362 million, with a goal of $352 million for each Austal ship.

[old mark]

1. Link-information on Littoral Combat Ships...

http://en.wikipedia.org/wiki/Littoral_combat_ship

sounds like something the Marines and SEALS would use...

mark

[FBaggins]

2. Why they cost less

If you only order one of a thing... the entire cost of the program is carried on that first price tag. Order another and you aren't paying for the cost to design (etc) the first model.

That's an oversimplification, but it is what happens. Let's say that you order 100 new X-93 stealth planes and the entire run is expected to cost $10 Billion (which would work out to $100 million per plane). Three billion of those dollars go to designing and developing the plane and building/converting the factory that's going to make them. Oversimplifying again, you're paying $3.1 Billion for the first plane, and $70 Million for each additional plane.

If Congress cancels the order after 20 planes, we will have paid $4.5 Billion. That looks like $225 million per plane... but the problem was that you designed an aircrarft and built a production facility for too few planes.

[unhappycamper]

3. I understand the mechanics of how cost is allocated across all products made.

Using your scenario, I would have expected the cost of the F-35 Lighting to drop. That didn't happen and it won't.

[FBaggins]

4. I said it was oversimplified. Let's take it to the next level

Production costs aren't really allocated onto that first unit. They TRY to figure out the total guranteed run and base the price on that.

If congress was orders twenty of something for a given year when the original expectaion was 100... the price per unit is going to go up. Changes in FUTURE order expectations matter too. Changing your mind part-way through an order gets very expensive.

So it's like a stock price that cares not just for how the company did this quarter, but for how the guidance changed for coming quarters.

There have been a number of significant changes to the F-35 program over the years. Give the company a firm order for a large number of aircraft and you could get the price to come down, but Congress/pentagon play games with the program constantly.

[Orrex]

5. That's littorally the most disgusting thing I've read this morning

Well, not really. I've read some of your other posts about whopping price tags today, and those are pretty disgusting as well.

K/R.

[blindpig]

6. Gunboats.

Every empire needs 'em.