The fallout from the Navy’s order to halt production on Lockheed Martin’s littoral combat ship will have a ripple effect across the Washington region. The Bethesda-based defense contractor is being taken to task for its cost overruns and local subcontractors working on the project are holding their breath as the Navy investigates.
Five companies with headquarters or offices in the Washington region are listed as subcontractors on Lockheed’s Littoral Combat Ship, or LCS, program. The five local companies, along with 14 others throughout the U.S. and the world, will also have to stop work that is related to the project.
The Navy ordered an immediate 90-day stop-work order Friday because the project had gone significantly over budget. Lockheed Martin, and Falls Church-based General Dynamics are each building two littoral combat ships for the Navy. Of the four ships under contract, however, the Navy has only halted production on one.
Argon ST, a Fairfax-based systems engineering firm; Angle, Inc. a computer modeling and analysis company in Springfield; EADS, a global aerospace and defense company with North American headquarters in Arlington; Terma, an Arlington-based company that provides high-tech solutions for combat situations; and BAE Systems in Arlington, which makes combat vehicles, artillery and other combat-related products, were all listed as subcontractors on Lockheed Martin’s Web site.
“Anytime that there is an interruption … there’s impact. No company likes to see that happen,” said Darrell Campbell, director of business development for Argon ST.
Argon’s contract with Lockheed Martin is valued between $500,000 and $750,000. Campbell said, for now, the biggest impact will be shifting employees from the LCS project to others within the company. Argon has worked with Lockheed Martin before and the halt in production will not change its view of the defense contracting giant, Campbell said.
“We have a very good relationship with Lockheed Martin,” he said. “That’s the nature of this business. Contracts get started and sometimes they get terminated. But Lockheed is very big in this business.”
But the fact that Lockheed is one of the biggest players in the defense industry could also mean the misstep could turn into an uphill image battle, said DanielGoure, vice president of The Lexington Institute, an Arlington-based think tank that follows the U.S. military.
Lockheed has been working to broaden its reach beyond aerospace and the LCS project was one of its most high-profile departures.
“It is extraordinarily important to make this program successful not only for (Lockheed’s) image, but also for its future business,” Goure said.
However, he said, while the stop work order is unusual, cost overruns on a ship are not.
“This is not a body blow,” he said. “This is a problem. They can solve it. Don’t count them out yet.”
