Coast Guard Cutter Program Treading Water
Eastern Shipbuilding Group photo
The Coast Guard is in the process of replacing its fleet of aging ships through several shipbuilding programs. But the service’s top priority — a cutter that will eventually provide a majority of the Coast Guard’s offshore presence — is currently adrift as the contract is in dispute.
The Offshore Patrol Cutter is intended to bridge the capability gap the Coast Guard sees between its National Security Cutter — which patrols the open ocean — and the Fast Response Cutter — which operates closer to shore. Along with replacing its small fleet of icebreakers, the cutter is considered one of the most highly anticipated shipbuilding programs under development by the Coast Guard.
The Coast Guard is looking to acquire 25 ships over two decades for a total price tag of more than $12 billion, making the Offshore Patrol Cutter its highest investment priority and largest acquisition program, according to a 2020 Government Accountability Office report titled, “Coast Guard Acquisitions: Opportunities Exist to Reduce Risk for the Offshore Patrol Cutter Program.”
However, the program has been in a state of uncertainty since Eastern Shipbuilding Group — the builder of the first Offshore Patrol Cutters — filed a protest with the watchdog organization over the service’s decision to award second-stage contract to Austal USA.
The Coast Guard initially chose Eastern Shipbuilding Group of Panama City, Florida, to build the first Offshore Patrol Cutters based on the company’s 2016 design. At the time, the award covered the production of up to nine vessels with a potential value of up to $2.4 billion, the GAO report said.
The ships will be used in a variety of missions, including both homeland security and defense operations. As they are intended to replace the Coast Guard’s aging 270-foot and 210-foot medium endurance cutters, the Offshore Patrol Cutters are crucial for the service’s modernization efforts, said Joey D’Isernia, president of Eastern Shipbuilding Group.
“As far as comparison [to the medium endurance cutters], there hardly is one just because these Offshore Patrol Cutters are so much more mission capable than their predecessors — just top to bottom. It’s really a game changer,” he said.
Eastern’s design featured a 360-foot hull that can carry an MH-60R Seahawk or MH-65 Dolphin helicopter, small unmanned aerial vehicles and three over-the-horizon small inflatable boats. In addition, the vessel is outfitted with an advanced armament system and new command, control, communications, cyber, intelligence, surveillance and reconnaissance, or C5ISR, systems, D’Isernia said.
But three months before Eastern was scheduled to cut steel for the first Offshore Patrol Cutter’s hull, the Panama City shipyard was decimated by Hurricane Michael in 2018, he said.
The damage led the Coast Guard to revise the program’s budget and schedule in order to avoid any significant delays in delivery, according to the GAO report.
Under a new two-stage procurement strategy, the Department of Homeland Security granted Eastern $659 million in relief funding to help cover the costs of four Offshore Patrol Cutters and planned to award contracts for the remaining 21 ships after a second full and open competition.
Leading up to the new competition, the Coast Guard hosted an industry study in which eight shipyards were given the opportunity to review Eastern Shipbuilding Group’s original Offshore Patrol Cutter design and recommend revisions.
The study was intended to create consistency among the requirements of the first four cutters and the rest of the fleet, the GAO report said. The Coast Guard did freeze some elements of Eastern’s design — including the dimensions and lines of the vessel as well as its major propulsion system, D’Isernia noted.
At the end of the competition, the Coast Guard announced in June that Austal USA of Mobile, Alabama, had won stage 2 of the program. The $208.3 million contract covers the detail design and construction of the fifth Offshore Patrol Cutter.
The company could build up to 11 vessels for the Coast Guard for a potential $3.3 billion deal — representing a major win for Austal as it continues to break into the steel shipbuilding industry.
Eastern decided to protest the award because it believes its proposal is the most low-risk approach due to its experience building the first four cutters of the fleet, D’Isernia said.
“You can see it, you can touch it, it’s being built right before your eyes,” he said. “We put forth everything in the proposal that the Coast Guard needed and wanted, so obviously we feel strongly that they made a mistake.”
In a redacted copy of the company’s protest obtained by National Defense, Eastern said “Austal’s purported lower price is overwhelmed by the substantial risks associated with an award to Austal, a new entrant to the steel shipbuilding industry with a record of well-publicized cost overruns and performance issues.”
Austal previously only focused on building aluminum-based ships that include two programs with the Navy: the Independence-class littoral combat ship and the Spearhead-class expeditionary fast transport.
Eastern also claims that one of Austal’s employees is a former Coast Guard officer who previously worked on the Offshore Patrol Cutter program and therefore had classified knowledge of the company’s design. Eastern alleges this gave Austal an “unfair competitive advantage and conflict.”
While the ongoing protest could impact the timeline for future Offshore Patrol Cutter deliveries, there are millions of dollars on the line for the shipbuilders that have already upgraded their facilities to accommodate new vessel’s construction.
Austal has converted half of its aluminum production lines to accommodate steel shipbuilding as a response to growing interest in the material from the military, said Larry Ryder, Austal’s vice president of business development and external affairs.
“As the world and requirements have shifted a little bit and the Navy started leaning into steel heavier, we looked out and saw that change and made the commitment to bring steel shipbuilding capability to our shipyard,” Ryder said.
Austal’s new steel facility, which opened its doors earlier this year, was funded by a $50 million grant through the Defense Production Act and the company’s own $50 million investment, he said.
Construction on Austal’s first steel-based vessels — two towing, salvage and rescue ships for the Navy — began on the new production line in July, Ryder said. He noted that the facility was built around the Offshore Patrol Cutter’s design while the competition was ongoing, which gave them an edge over other shipbuilders for the program’s stage 2 recompete.
“We went out and looked at all the best equipment that was out there and wound up putting together probably the most modern steel panel line in the industry right now,” he said. “We had the luxury of buying the most modern equipment, a lot of robotics, a lot of automation, while also looking at the optimal flow.”
Eastern Shipbuilding Group also made substantial investments in its production facilities to accommodate the new cutters.
When the company began rebuilding its shipyard after Hurricane Michael, it integrated a number of infrastructure improvements designed to optimize production of the vessel, D’Isernia said. The company leveraged more than $50 million in grants from the state of Florida and the Triumph Gulf Coast non-profit organization, as well as insurance funds, to upgrade the facilities.
“The infrastructure improvement projects that we put in place were always planned, but they did change a little bit as a result of the hurricane,” he said.
One of those improvements is the company’s onsite C5ISR production facility, which is designed to support the building, integration and testing of the Offshore Patrol Cutter’s electronic capabilities before they’re installed onto the ship. D’Isernia called the new facility an “extreme risk mitigator.”
“Not only can we test the full suite of C5ISR electronics packages in one spot and buy down the risk, but it’s also co-located with our ship construction with the Coast Guard Project Resident Office,” he said. “It’s very accessible on immediate notice for the benefit of the Coast Guard, and it’s paid off with very big dividends so far.”
Eastern will also now install the vessel’s Athena combat weapons and multi-mode radar systems at the company’s Panama City facilities during the production phase. The Coast Guard announced a modified contract with Eastern in May to move into the production phase the installation of the systems, which are provided to the service by the Navy, according to a Coast Guard press release.
Not only does having these systems installed during the vessel’s production phase reduce risk, it could save the Coast Guard years in getting the Offshore Patrol Cutter fully functional, D’Isernia said. If the weapons and radar systems were added by the Coast Guard after the ship’s delivery, it would have added two years to production time, he said.
“We were able to drastically reduce the overall time frame and reduce the cost of getting that integrated into the ship,” he said. “In reality, the ship would not have been able to conduct its missions effectively without the installation and integration of these two systems.”
While the added workload did result in a timeline extension, D’Isernia asserted that Eastern remains on track to deliver its contracted four Offshore Patrol Cutters.
Eastern expects to christen the first ship this year and plans to deliver the vessel to the Coast Guard in 2023, D’Isernia said. The second and third hulls are being built at the company’s shipyards in Florida, while the fourth is slated to begin construction this fall, he added.
After Hurricane Michael, the company “did everything we could to get our facilities operational. We made it a goal that we were going to cut steel on time in January of 2019, and that’s exactly what we did. I think that really set a precedent,” he said.
Although Ryder declined to provide in-depth comment on either Austal’s Offshore Patrol Cutter design or the ongoing protest with the GAO, he said the company is confident in its proposal and the integrity of the Coast Guard’s process.
No matter what the outcome of the protest is, the company has a variety of ships queued up to move down both its established aluminum production line and the new steel production facility, he said.
“The balance between steel and aluminum gives us the ability to offer the optimal solution to the Navy, Coast Guard or other customers based on their requirements,” he said.
The Coast Guard — which did not respond to multiple requests for comments — must now wait for the Government Accountability Office’s ruling.
The GAO has until Oct. 24 to decide whether it agrees with Eastern’s protest. If it chooses to sustain it, the watchdog will recommend corrective actions to the Coast Guard.