Austal and US Navy Revise Contract in Program Building First Steel Ships
Austal and the U.S. Navy reached an agreement to resolve a pricing issue related to the first steel hull ships Austal USA is building for the Navy. Nearly a year after the company filed a “Request for Equitable Adjustment,” it reports that they have agreed to build only three of the five contracted ships with limited alteration to the overall original contract value.
The program for the vessels known as T-ATS (Towing, Salvage, and Rescue Ship) was originally awarded to Austal in September 2021 and was largely seen as a trial for the builder, which had worked in aluminum to convert to the Navy’s plan to move back to entirely steel construction. The initial contract was for two vessels valued at $145 million and followed an initial $3.6 million for the functional design of the class.
Austal noted at the time that it was seeking other steel construction projects and won support from the U.S. Navy for the construction of its new steel capabilities in Mobile, Alabama. The U.S. Navy expanded the project with two more hulls in July 2022, adding $156 million to the contract price. A fifth vessel was added to the contract in June 2023 at an additional $79 million. The total project was valued at approximately $380 million.
The shipbuilder reports it had been in discussions with the U.S. Navy for an adjustment due to the additional costs incurred in the program. It says the program “experienced significant challenges, primarily due to late receipt of technical data and design discrepancies.”
Rendering of the new class which is Austal USA's first steel ships (Austal)
The T-ATS is an ocean-going tug, salvage, and rescue ship designed to support the United States Navy’s fleet operations, with a multi-mission common hull platform capable of towing heavy ships. The ships are designed to support a variety of missions, including oil spill response, humanitarian assistance, search and rescue, and surveillance.
Work began on the program in July 2022. The first vessel, named USNS Billy Frank Jr., was floated out in Alabama in June 2025.
While work was proceeding with the program, Austal and the USN had agreed to suspend work on vessels T-ATS 14 and T-ATS 15, the last two of the five-ship order. As part of the new agreement with the Navy, those two hulls are being canceled. The company reports it does not expect a material financial impact on its business.
T-ATS 11, Billy Frank Jr., is being prepared for its prepare for her next major milestone, the engine light off, as she gets ready for sea trials and delivery.
While it is the first steel construction for Austal, the prize was a $3 billion contract for seven ocean surveillance ships for the U.S. Navy awarded in 2023. In addition, after committing to its steel capability, Austal also received a contract for the Navy’s Auxiliary Floating Drydock Medium (AFDM) and, in a contested decision, Austal beat out Eastern Shipbuilding to secure follow-on hulls for the U.S. Coast Guard Offshore Patrol Cutter (OPC) program.