The U.S. Navy plans to award contracts before the end of the first quarter to Lockheed Martin Corp and Australia's Austal for its next three Littoral Combat Ships (LCS) as well as money to buy materials for a fourth, Navy officials said Thursday.

Navy acquisition chief Sean Stackley told reporters the Navy was in talks with both companies and expected to award contracts before the pricing in the current proposals expired at the end of March.

Rear Admiral Brian Antonio, program executive officer for the LCS ships, said one of the companies would be awarded a contract for two ships while the other would receive funds for one plus money to start buying material and components for a second.

Both men spoke with reporters after speeches at the annual conference of the Surface Navy Association.

The Navy had hoped to award contracts for two ships to each company but Congress cut funding for one of the ships given a reassessment of the vessels' capabilities completed late last year.

Antonio said adding the advanced procurement funding would help the company that received only one ship order this year to avoid any associated breaks in production.

Stackley said the Navy was finalizing its plans to upgrade the next 20 LCS ships, which will be redesignated as frigates, beginning in fiscal 2019.

He said the Navy also planned to retrofit many of the first 32 ships in the LCS class with the planned improvements but said details had not been worked out. He said the goal was to at least add survivability upgrades to all the LCS ships.

Antonio said the Navy favored competition and had not decided whether to proceed with one or both of the LCS designs when it moved ahead with the modified LCS ship, or frigate. He said a decision likely be made around 2018.



(Reporting by Andrea Shalal; Editing by James Dalgleish)