Coast Guard to Re-Compete Multi-Billion Dollar Offshore Patrol Cutter Contract

 In GDI, Industrial, Land, Sea, Infrastructure, Air

An artist’s con­cep­tion of Eastern Shipbuilding’s Offshore Patrol Cutter design.

The Coast Guard is rec­om­pet­ing its poten­tial­ly $10.5 bil­lion Offshore Patrol Cutter con­tract because the pro­gram risks falling fatal­ly behind sched­ule due to hur­ri­cane damage to the ship­yard ini­tial­ly award­ed the con­tract.

The pro­gram has already slipped nearly a year behind sched­ule and could cost an addi­tion­al $659 mil­lion to finish the first four on nine con­tract­ed OPCs, accord­ing to a recent Congressional Research Service report. To reign-in costs and try get­ting the pro­gram back on sched­ule, the Coast Guard is now taking the extra­or­di­nary mea­sure of rec­om­pet­ing a con­tract to build six of the nine cut­ters first award­ed Eastern Shipbuilding Group in 2016.

The OPC fleet is intend­ed to replace the Coast Guard’s cur­rent fleet of 29 medium-endurance cut­ters, some of which were built during the Vietnam War. The Coast Guard pre­vi­ous­ly set a target cost of $310 mil­lion per cutter. The ser­vice is asking poten­tial bid­ders to pro­vide analy­sis com­par­ing their antic­i­pat­ed costs with this target for build­ing the six OPCs

Friday is the dead­line for con­trac­tors to pro­vide com­ments on an OPC indus­try stud­ies state­ment of work. The study, along with an indus­try day sched­uled for next Wednesday, is intend­ed to give the Coast Guard an assess­ment of the tech­ni­cal effort, cost risks and sched­ule risks asso­ci­at­ed with rec­om­pet­ing the OPC con­tract.

“These activ­i­ties will pro­vide fresh insight into the cur­rent state of the ship­build­ing indus­tri­al base and inform the Coast Guard’s way for­ward on a re-com­pete strat­e­gy to com­plete the OPC pro­gram of record,” Brian Olexy, the com­mu­ni­ca­tion man­ag­er for the Coast Guard Acquisition Directorate, told USNI News in an email.

The Coast Guard intends to pur­chase up to 25 OPCs making this the service’s largest acqui­si­tion pro­gram. However, the cur­rent prime con­trac­tor, Panama City, Fla.-based Eastern Shipbuilding Group, is having a hard time ful­fill­ing the con­tract due to damage caused in 2018 by Hurricane Michael.

Eastern Shipbuilding offi­cials could not be reached for com­ment at the time of this post.

In September 2016, the Coast Guard award­ed Eastern Shipbuilding Group a con­tract to build the future USCGC Argus (WMSM-915) with options to build up to nine OPCs. Eastern beat General Dynamics Bath Iron Works and Bollinger Shipyards to land the design and con­struc­tion con­tract.

The aver­age pur­chase cost for OPCs is about $421 mil­lion per ship, accord­ing to the CRS report. The first OPC, Argus, was funded in Fiscal Year 2018. The second OPC, the future USCGC Chase (WMSM-916) and long-lead-time mate­ri­als for the third OPC were funded in the FY 2019.

Eastern Shipbuilding was just about to start build­ing Argus and was gath­er­ing mate­ri­als to start build­ing Chase when Hurricane Michael hit the Florida pan­han­dle, USNI News report­ed in October 2018.

Workers evac­u­at­ed from the area and were slow to return. When they did, many took jobs rebuild­ing nearby Tyndall Air Force Base, which also suf­fered sub­stan­tial damage from the hur­ri­cane, accord­ing to a state­ment released by Sen. Marco Rubio (R.-Fla.). Rubio sup­port­ed a plan to modify Eastern Shipbuilding’s con­tract with the Coast Guard.

In October, the Coast Guard asked Congress for extra­or­di­nary relief from the con­tract, on behalf of Eastern Shipbuilding. The Coast Guard plan would allow Eastern Shipbuilding to con­tin­ue build­ing the first four OPCs but would move for­ward with seek­ing new bid­ders to build out the fleet, Adm. Karl Schultz, the com­man­dant of the Coast Guard, said during an event co-hosted by the Center for Strategic and International Studies and the U.S. Naval Institute.

Lawmakers, though, did not sound too recep­tive to the plan. Congressional lead­ers detailed their con­cerns in a bipar­ti­san letter to the Coast Guard sent Nov. 25, from Rep. Peter DeFazio (D‑Ore.); the chair of the House Committee on Transportation and Infrastructure; rank­ing member Rep. Sam Graves (R‑Mo.), Rep. Sean Patrick Maloney (D‑N.Y.), chair of sub­com­mit­tee on Coast Guard and Maritime Transportation; and rank­ing member Rep. Bob Gibbs, (R‑Ohio).

“We are skep­ti­cal that such truly extra­or­di­nary relief is jus­ti­fied given that this ‘crisis’ was fore­see­able and mostly avoid­able. Further, we are con­cerned that this relief sets a dam­ag­ing prece­dent that any cur­rent or future con­tract with the United States Coast Guard (Coast Guard or Service) could be rene­go­ti­at­ed out­side the Federal Acquisition Regulations,” their letter states.

The law­mak­ers are con­cerned the Coast Guard and Department of Homeland Security focused on “explor­ing options to resus­ci­tate [Eastern Shipbuilding Group] and pre­vent it from default­ing on the OPC con­tract with­out first com­plet­ing a trans­par­ent and objec­tive alter­na­tive analy­sis.”

The chief lob­by­ist for Eastern Shipbuilding is former com­man­dant of the Coast Guard, retired Adm. Robert Papp, who joined the com­pa­ny short­ly after being award­ed the ini­tial OPC con­tract. Papp is the first Washington lob­by­ist hired by Eastern Shipbuilding, accord­ing to a com­pa­ny state­ment.

“The veil of secre­cy regard­ing its analy­sis and the absence of any mean­ing­ful con­sul­ta­tion by the Coast Guard and DHS with the Committee, pro­vides us scant con­fi­dence that any revised OPC con­tract will not encounter a sim­i­lar fate as the orig­i­nal con­tract,” the con­gres­sion­al letter states.

Source: USNI

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