ESG Protests Award of Offshore Patrol Cutter Contract to Austal

Florida-based Eastern Shipbuilding Group has filed a protest over the U.S. Coast Guard's decision to award the next hulls in the Offshore Patrol Cutter series to a different yard, Austal USA's new steel shipbuilding division. 

In 2016, Eastern Shipbuilding Group won a contract for the first OPC hull and up to eight follow-on vessels, with potential to build up to 25 in total. The yard's bid of $420 million per unit helped it to win over higher-cost options from more established military shipbuilders. After a devastating Category Five hurricane swept over its facilities in 2018, the Coast Guard agreed to modify the contract timeline and recompete it after four vessels. ESG invested heavily in repairing and upgrading its facilities, and all four awarded hulls are in varying stages of construction. 

However, the Coast Guard announced in early July that it has awarded the contract for the next 11 OPCs to Austal USA, the Australian-owned aluminum specialist known for the Independence-class Littoral Combat Ship series. The decision effectively sunsets ESG's participation in the OPC program after the delivery of its first four vessels, while providing Austal a new long-term source of revenue as the LCS program nears its end.

Eastern has decided to appeal the $3.3 billion contract decision, citing several potential areas of concern. In a complaint to the Government Accountability Office, ESG highlighted the cost and performance record of certain previous Austal contracts, Austal's lack of prior experience in steel construction, and the potential cost/schedule program risk these factors might create for OPC. These considerations, according to ESG, should have outweighed Austal's lower bid price per unit, since the RFP for the contract put a heavier weight on schedule, risk and past performance than on price. 

"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," asserted ESG. 

ESG also protested an alleged Coast Guard leak of ESG's proprietary pricing data, as well as Austal's decision to hire a former Coast Guard commander with inside access to ESG's information to work on the Austal proposal-writing team.

In a statement, Austal said that it expects to prevail in the dispute. 

“We are confident in the integrity of the solicitation process and that the United States Coast Guard’s selection of Austal USA as the Stage II OPC shipbuilder will be upheld. We will remain focused on delivering world-class ships to our customers," a spokesperson for the firm said.