"We're disappointed but we have to have it at a price we can afford," Navy Admiral Charles Goddard said at a press briefing at the Pentagon, the Associated Press reported.
The Bethesda, Md., defense contractor expressed disappointment at the loss of the Littoral Combat Ships contract. The Navy announced the action at the expiration of a 90-day stop work order imposed on the second ship in January to allow the service time to review costs associated with construction of the first LCS.
The stop work order came after cost estimates on the first ship, which is three quarters completed, soared to at least $350 million from a contracted $270 million. On March 15, Navy Secretary Donald Winter announced that the stop work order would be lifted only if Lockheed Martin agreed to accept a fixed price incentive contract for its second ship.
CEO Bob Stevens said Lockheed Martin submitted a restructured proposal, but it was turned down.
"We believe that our proposal was fully consistent with the secretary's stated desire to bring the benefits of increased competition to shipbuilding while holding the Navy's industrial partners accountable for cost performance within their control," he said.