The Department of Homeland Security on Friday granted relief to Eastern Shipbuilding Group (ESG) for the construction and delivery of the first four new Coast Guard medium-endurance cutters due to a setback the shipbuilder suffered at its facilities from Hurricane Michael in October 2018, but under terms of the settlement the Coast Guard plans to recompete the contract for additional Offshore Patrol Cutters (OPCs) to build out the planned buy of 25 ships.
Delivery of the first OPC has been delayed a year until 2022 and the Coast Guard and ESG will negotiate the final cost and schedule targets to move forward as quickly as possible under a modified contract, a service spokesman told Defense Daily on Friday.
The decision to reopen the competition sooner than planned stems from continued “uncertainties with the impacts of Hurricane Michael on ESG and ESG’s ability to ramp-up the workforce needed to support production of two OPCs per year,” the Coast Guard spokesman said. Transitioning quickly to a new competitive contract is necessary to maintain the program of record, he said.
The original plan called for ESG to build one ship a year for the first three OPCs before transitioning to construction of two per year.
The decision to “grant extraordinary contract relief” was made by Homeland Security Secretary Kevin McAleenan “on the basis that ESG’s performance on the OPC contract is vital to national defense,” DHS and the Coast Guard said in a statement.
A Request for Information is forthcoming from the Coast Guard to determine industry interest in building out the remainder of the OPC program and to form an acquisition strategy.
The Coast Guard plans to buy 25 OPCs to replace aging 210-foot and 270-foot medium endurance cutters that are increasingly costly to maintain. The OPC is the service’s top investment priority and will fill the mission space between the high-endurance National Security Cutter that operates in the open ocean and the Fast Response Cutter, which patrols closer to the littorals.
The purchase of 25 OPC is projected to cost between $10 billion and $11 billion. Under ESG’s contract, the company was expected to build the first nine OPCs with options for ships 10 and 11, after which time the Coast Guard planned to recompete the program. Still, if after nine, 10 or 11 ships were to be built, as the original shipbuilder, ESG would be expected to be the company to beat as it advanced along the learning curve.
The Coast Guard hosted a planned recompetition for its 154-foot FRCs after prime contract Bollinger Shipyards had built more than 30 of a planned 58 craft purchase, but the company was the sole bidder for the second and final competition.
In the OPC competition, ESG beat out bids from Bollinger and General Dynamics [GD]. In an earlier round, the Coast Guard eliminated Huntington Ingalls Industries [HII], which builds the NSC, and VT Halter Marine, which is building the service’s new heavy polar icebreakers, from the OPC bidding. VT Halter Marine is the U.S.-based shipbuilding business of Singapore-based ST Engineering.
In early January, ESG began cutting steel on the first OPC. The company has already received funding toward long-lead time material purchases for the second ship. Congress has provided the Coast Guard funding for long-lead purchases for the third OPC.
DHS and Coast Guard stressed that the new plan of action for the OPC is legal when “necessary to facilitate national defense,” and that the service and Navy reviewed ESG’s June 30 request for extraordinary relief given significant damages to the shipyard from the Category 5 hurricane.
Eastern Shipbuilding’s request for extraordinary relief was carefully considered,” Coast Guard Vice Commandant Adm. Charles Ray, said in a statement. “This review validated the essential contributions the OPC will provide to our national security and determined that limited relief, in parallel with immediate recompete, is the best option in this exceptional situation. Doing so is consistent with the law, fiscally responsible, and the most expeditious means to deliver this essential national capability.”