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UPDATE 1-U.S. Navy awards contracts to Lockheed, Austal for 4 more ships

WASHINGTON, March 10 (Reuters) - The U.S. Navy has awarded contracts worth nearly $1.4 billion to buy four more Littoral Combat Ships from Lockheed Martin Corp and Australia's Austal Ltd, the U.S. Defense Department said on Monday.

Lockheed won a contract valued at $699 million to build two more of its steel monohull-design ships, while Austal won a contract worth $684 million to build two more of its aluminum trimaran design, the Pentagon said in its daily digest of major weapons contracts.

Lockheed welcomed the contract, which covers the seventh and eighth ships it is building under a 10-ship contract awarded in December 2010, and said it was awaiting news of how the Pentagon planned to proceed with the LCS program.

Lockheed and Australia's Austal each build a different model of the LCS-class ships, which are designed to carry interchangeable equipment packages for mine-hunting, surface warfare or anti-submarine missions. General Dynamics Corp is a major supplier for the Austal version of the ship.

Defense Secretary Chuck Hagel announced last month that he wants to stop building the current configuration of ships after 32 ships, instead of building all 52 that were planned, and focus instead on ships with more firepower and protection.

The Navy is in the middle of executing separate 10-ship block buys with both Lockheed and Austal, which will bring the total number of LCS ships to 24.

Lockheed and Austal are waiting for details on how the Navy plans to procure the next eight ships that bring the total to 32 before shifting gear toward a more survivable ship.

Chief of Naval Operations Admiral Jonathan Greenert told reporters on Monday that he would set up task force to look at the issue in coming days, and hoped to get preliminary recommendations from the group by July, in time to help inform the Navy's fiscal 2016 budget planning process.

He said the task force would look at a variety of options, including modifying the current LCS ships, including possibly installing some mission equipment permanently on the ships, using a foreign design, or starting with a whole new design.

But new design would be costly and take a long time to execute, Greenert said. "It would be quite a challenge," he said, adding the Navy would have to use some "fairly mature" technologies to get the ships built in time.

Joe North, vice president of littoral ship systems at Lockheed, said that his company would be able to offer the best pricing to the Navy if it ordered the next eight ships as part of a block buy, rather than ordering them one year at a time.

North said he remained convinced that the LCS ships were the most cost effective ships in the Navy, and said Lockheed was standing by to learn about what additional capabilities the Navy wanted to add to the class in future years.

He said Lockheed continued to explore possible foreign arms sales of the steel monohull design it is building for the Navy.

The Pentagon said work on the next two Lockheed LCS ships would be completed by August 2018. The next two Austal ships would be completed by June 2018, it said.

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