Who Wants to Be a $40-Billionaire, Courtesy of the U.S. Navy?

The submissions are in, and the race is on!

A couple of weeks back, we acquainted you with U.S. Navy's program to design and build a new class of warship to fill the gap between today's coastal patrol vessels, and larger vessels -- destroyer-size and up. Dubbed the "Small Surface Combatant," no one's quite certain what the new vessel will look like. What is known, is that the project could mean billions and billions of dollars in revenue for the company chosen to build the ship.


The USS Chesapeake was one of the US Navy's original "six frigates." Its 21st Century variant will be a bit more advanced. Photo: Wikimedia Commons.

And now we know the names of the companies that might win the award. As confirmed last week by DefenseNews.com, the usual suspects submitted ideas for the new vessel.

Lockheed Martin (NYSE: LMT  ) , which is offering a larger variant of its Freedom-class monohull Littoral Combat Ship, or LCS, design, scaled up to frigate size.


Photo: Lockheed Martin.

Australia's Austal (NASDAQOTH: AUTLY  ) , which builds the Navy's trimaran-design Independence-class LCS, plans to submit a design in which the Independence's interchangeable weapons bays will be replaced with permanently installed weapon systems.


Photo: Austal.

Huntington Ingalls (NYSE: HII  )  is offering the military a scaled-up and armed-up variant of the National Security Cutter that it already builds for the U.S. Coast Guard.


Photo: Huntington Ingalls.

There are also a couple of surprise entrants in this competition.

General Dynamics (NYSE: GD  ) , which turned over shipbuilding responsibilities on the LCS to partner Austal (to focus on building the vessel's weapons systems), appears to be having second thoughts. General Dynamics is keeping mum on details of just what, precisely, it proposes to build for the Navy. However, the company was recently tapped to submit designs for a proposed new Offshore Patrol Cutter for the U.S. Coast Guard. The odds are pretty good, therefore, that whatever SSC design General Dynamics has offered the Navy looks a lot like this:


Illustration of what the new Offshore Patrol Cutter might look like. Source: U.S. Coast Guard.

Finally (at least for now), defense contractor Raytheon (NYSE: RTN  ) has responded to the Navy's request for information by submitting not a ship design, per se, but a suggested complement of weapons and sensor systems for outfitting whatever vessel the Navy ultimately decides to buy.


Illustration depicting the capabilities of Raytheon's new Air and Missile Defense S-Band Radar (AMDR-S), soon to be installed aboard all new Navy guided missile destroyers. Source: Raytheon.

And these are only the companies that responded to the Navy's request for information. Once the Navy decides on the specs it wants built into the SSC, and invites the submission of firm bids, we could see additional interest emerge from shipbuilders in Spain, Italy, and elsewhere. In fact, I'd be shocked if Britain's BAE Systems doesn't make a bid, considering the success it's enjoyed in international sales of its budget-priced, Khareef-class corvette.

What does it mean to you?
In short, these are still early days in what promises to be a years-long process of:

  • reviewing the data submitted in response to the Navy's request for information
  • issuing an official request for proposals
  • choosing one of these proposals, and picking a company to build the SSC, before finally getting the first prototype built

If it acts true to form, the Navy may even introduce an intermediary step in this process, "shortlisting" two or three of the companies bidding on SSC to firm up their designs, sharpen their pencils, and bid against each other for the right to build the best ship at the least cost to the taxpayer. So it's going to be quite some time before any of the companies named above, or any competitors yet to enter the competition, see much money (other than a handful of millions for development work) from the SSC program.

Still, when the big money does begin flowing, it should be a significant amount.

Experts who follow the progress of the SSC project now estimate that the likely cost of the program will be $700 million-$800 million per Small Surface Combatant vessel built. That's below the "line in the sand" initially drawn by the Navy, which warned defense contractors to steer far away from a ceiling price of $1 billion per ship. It still implies, though, a project value of anywhere from $14 billion (assuming about 20 or so ships are "bought") to perhaps as much as $41.6 billion (if the Navy buys SSCs in the same numbers as for the LCSs that it originally intended to acquire).

For now, let's round it off and call the SSC a $40 billion opportunity. That estimate will probably be close enough for government work.

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Read/Post Comments (7) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 01, 2014, at 6:58 PM, TheAncient wrote:

    First question. Why? What's wrong with the beercan hulled Littoral ships. Sounds like the military industrial complex found a new way of stealing more tax dollars while giving little in return. By the time the Navy goes through all the entries, then awards the contract, then modifies the contract repeatedly, delaying first ship launch each time we'll be in the 22nd century before the first ship enters service. Of course, $40 $50 Billion will already have been spent.

  • Report this Comment On June 01, 2014, at 7:23 PM, doawithlife wrote:

    This sounds so much better then F-35s, these boats are a step forward for our defense - F-35's are very shortly going to be the equivalent of a sword in a gun fight. Our current mobile defense grid (the same grid that is suppose to be adapted to these boats) can take down up to 18 incoming planes in a 3 sq mile radius every second (I think the new Raytheon system that is being proposed can track and fire upon up to 32 objects every second).

    These ships are our bullet proof vest, but we have not invented the gun yet.

    I just wish our government would stop spending so much on the sword. Russia is still using a hardened staff and China just invented the knife. We have a little breathing room.

  • Report this Comment On June 01, 2014, at 8:14 PM, Bryanbeachboy197 wrote:

    Using an up-sensored and up-armed version of the Coast Guard's cutter just makes sense. The Navy and Coast Guard can even split costs on development. Wouldn't take much; a switchover to the Navy's standard 5" gun, a CIWS or two, and maybe a small scale VLS. Maybe they could even install a small version of Aegis? Fly a small drone off the helopad? Apart from the war-fighting mission perhaps, the ship is intended as a patrol ship, why not bring in the experts in patrolling and interdiction to help build this thing?

  • Report this Comment On June 01, 2014, at 8:20 PM, darjo wrote:

    A one ship does all? Is that really a good idea? Ask any engineer what KISS means.

  • Report this Comment On June 01, 2014, at 8:25 PM, TMFMTHead wrote:

    I just hope it ends up being a bit more than the last few frigate were, more power and more sustainability. The Perry class could do some real damage if it hit you, but that was about it. The little pop gun amidships was about worthless.

  • Report this Comment On June 01, 2014, at 9:22 PM, MaxxTheKatt wrote:

    How will it be paid for? Our nation is BROKE! The U.S. is crushed with monstrous debt! Millions are long term unemployed with NO good times in sight. Our GDP is just about "Zero". Where will the billions come from to buy this junk. Our Navy has ships in port now that cannot go to sea due to lack of funding.

  • Report this Comment On June 01, 2014, at 9:39 PM, GregZD wrote:

    We are not going to have much of a military at all unless we get the people and leaders to support Ron Pauls plan to restore the economy and reduce the waste and unsustainability of all the overseas bases and deployments. We need a strong country and a strong homeland defense based military no troops want to be deployed in endless pointless wars with no public support and even if they did it could not be done without funding. We are debt junkies here in the U.S. and junkies are not known for intelligent long range plans let alone pulling though and getting results.

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