U.S. Coast Guard Restructures Offshore Patrol Cutter Contract

The U.S. Coast Guard plans to reopen bidding on the contract for its new Offshore Patrol Cutter (OPC), the largest procurement order in the service's history and its highest acquisition priority. 

In 2016, Florida-based yard Eastern Shipbuilding Group won a contract for the lead OPC hull and up to eight follow-on vessels, with potential to build up to 25 in total. Its bid of $420 million per unit helped it to beat out higher-cost options from more established military shipbuilders, including Bath Ironworks and Bollinger. Under the terms of the new arrangement, ESG will still get to build the first four vessels in the series, but the program will now be restructured and reopened to competition for the rest of the hulls. 

Last October, just as Eastern was getting ready to begin construction on its first OPC, the Florida Panhandle was hit by a Category Five hurricane. The powerful storm damaged ESG's facility, disrupted the lives of its workers and created huge demand for skilled labor in local recovery efforts - just as ESG was attempting to staff up to meet the needs of the OPC contract. Although ESG worked hard to restart production as fast as possible, by the end of June 2019 it determined that the best course would be to ask the Department of Homeland Security for emergency relief. Former acting DHS Secretary Kevin McAleenan granted that request on Friday, his last day in office. 

After reviewing ESG's contract, the Coast Guard determined that the hurricane's effects on the yard and the surrounding community will likely last through the next decade. Due to the long-term challenges facing ESG and the importance of the OPC program to national security, the agency says that it will establish new cost and schedule targets with ESG for the first four hulls. Meanwhile, it will gauge industry interest in bidding on the rest of the series. Eastern will be eligible to join the re-bidding competition if it chooses. 

“Eastern Shipbuilding’s request for extraordinary relief was carefully considered,” said Coast Guard Vice Commandant Adm. Charles Ray in a statement. “This review . . . 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.”