Austal USA’s $3.3 billion contract win last week for the next 11 ships of the Coast Guard’s offshore patrol cutter (OPC) will lead to growth for the company after work for some Navy ships the past few years has declined.
Based in Mobile, Ala., Austal USA is continuing to build one Independence-class littoral combat ship (LCS) and one expeditionary fast transport (EPF) vessel a year, with final deliveries in 2024. The company is under contract for a new expeditionary medical ship, which is an extension of the EPF, that is slated for delivery in October 2025.
The Coast Guard expects the first delivery of the first OPC under the Stage 2 award to Austal USA in the second quarter of fiscal year 2027 although the contractual schedule still needs to be negotiated. The company will build up to 11 of the 360-foot medium endurance cutters, which are ships 5 through 15.
Austal, the Australian-based shipbuilder and parent of Austal USA, said that the first OPC the company is building is scheduled to start construction in 2023.
Eastern Shipbuilding Group (ESG), which is passed in Panama City, Fla., is building the first four OPCs having won the original design and construction contract in 2016 for up to 11 ships. Unfortunately for the shipbuilder, its facilities were slammed by Hurricane Michael in October 2018, leading it to seek contract relief, which was granted a year later by the Department of Homeland Security but at a price. The Coast Guard would reopen the program to competition beginning with the fifth ship.
ESG was just one of the losing bidders for the Stage 2 award, which could still come under protest this month.
“We are extremely disappointed in this decision and are evaluating our options,” Joey D’Isernia, ESG’s president, said in a June 30 statement, not long after the award to Austal USA was announced that evening.
Sen. Marco Rubio (R-Fla.) last Thursday blasted the award decision, calling it “short-sighted,” and added that despite the hurricane, “They have proven they can do the job and do it well. This decision will cost taxpayers more money and slow down the delivery of these critical vessels.”
Under a revised contract, ESG was due to deliver the first OPC this year, a one-year delay, but that has slipped another 10 months to June 2023 due to a recent contract modification for installation of the Athena combat weapons system and multi-mode radar system during the construction phase of the first four ships instead of after the cutters are delivered as originally planned. This action was taken to reduce risks related to post-delivery installation.
The fourth OPC is scheduled to be delivered in the second quarter of FY ’26, nearly a year later than planned due to the contract modification.
With the LCS and EPF programs having reached peak production of two vessels annually several years ago before ramping down to one per year currently, combined with a loss for the Navy’s new frigate program, Austal USA realized it needed to establish a steel-shipbuilding capability, Larry Ryder, the company’s vice president of business development and external affairs, told Defense Daily on July 1. The LCS and EPF are built with aluminum.
With the Coast Guard’s decision to reopen the competition for the OPC program sooner than expected, Austal USA thought it was “an ideal opportunity” to pursue the program as it built up its steel production capabilities, Ryder said. He also described the OPC as similar in size and complexity as the LCS and EPF vessels, making it a good fit for the company.
Through a $50 million investment via a Defense Production Act grant and $50 million ponied up by the company, Austal USA has established the capability to build steel ships in addition to aluminum hulls, he said.
The Coast Guard contract, the first for Austal USA with the service, is the third for the company for steel platforms. Last fall, the company won a contract for the design and construction of two Navy Navajo-class towing, salvage and rescue (T-ATS) ships with five planned, and in June it won a contract to build the Navy Auxiliary Floating Dry Dock Medium. Construction of the first T-ATS begins July 11.
The Stage 2 OPC award is Austal USA’s largest steel shipbuilding contract.
Ryder said that despite the LCS and EPF contracts winding down over the next few years the company doesn’t have a workforce gap ahead of the OPC start but over the next few months will “gradually” ramp up its workforce.
The company’s “proven record in serial production” with a combined four LCS and EPFs per year at one point was likely a competitive advantage in the OPC competition, Ryder said, adding that the facilities are “ready to go.” The serial production line is “fully enclosed,” which means less impact to production from weather, good working conditions, and makes for a “repeatable” process, he said.
Under the Stage 2 OPC contract, the Coast Guard is planning to increase production to two ships per year beginning with OPCs 8 and 9 in FY ‘30, which will be the fourth and fifth vessels built by Austal USA. Before the contract relief granted ESG under the Stage 1 OPC award, the company was expected to increase production to two ships per year beginning with hulls four and five.
The Coast Guard’s program of record is 25 OPCs, which are replacing aging 210-foot and 270-foot medium endurance cutters and will serve as a bridge on the open seas between the 154-foot coastal fast response cutters and the 420-foot high-endurance national security cutters.
The Coast Guard plans to recompete the program again beginning with OPC 16 for the final 10 ships.
For the Stage 2 effort, the Coast Guard requires commonality with the Stage 1 ships in hull and propulsion systems but gave bidders flexibility for new design elements to improve life-cycle costs, production, operational efficiency and performance. Ryder said that Austal USA is staying “as close to the current design as possible” to make it easy for crews to move between platforms, adding that there will be operational enhancements and reductions in life-cycle costs.
The OPCs have a range of 10,200 nautical miles at 14 knots and a 60-day endurance.