Thursday, April 24, 2014
WASHINGTON — When the U.S. Coast Guard announced last week the three finalists to build the agency’s next-generation cutter, industry observers noted with seemingly equal interest which shipyards weren’t on the list as those that were.
Bath Iron Works’ proposed design of a next-generation vessel for the Offshore Patrol Cutter program includes a helicopter landing pad and a bay for launching inflatable boats.
Artist’s rendering courtesy Bath Iron Works
In particular, Maine’s Bath Iron Works – a production giant of Navy ships and one of Maine’s largest private employers – was among the three competing for what could eventually be a $10 billion contract while BIW’s primary competitor, Huntington Ingalls Shipbuilding of Newport News, Va., did not make the cut.
“I think General Dynamics’ victory was not a huge surprise,” Loren Thompson, a defense analyst and chief operating officer of the Lexington Institute, said of BIW’s corporate owner. “But Huntington Ingalls’ loss was a huge surprise.”
Thompson noted that Huntington Ingalls makes the largest ship that the Coast Guard operates, so the notion that it didn’t snag one of the three berths was a bit of a shocker.
Landing the contract to build up to 11 of the Coast Guard “offshore patrol cutters” – with the possibility of 25 ships over the long term – would be a major coup for BIW and its roughly 5,000 employees. While BIW officials declined to estimate how many jobs the final contract might support, one of the competing shipyards, Eastern Shipbuilding Group in Florida, predicted “there will be upwards of 2,000 direct jobs created in northwest Florida” if it wins the design and bidding war.
As BIW representatives pointed out last week, there’s still a long way to go before the Coast Guard chooses whether to award its first design-and-build contract for the offshore patrol cutter to BIW, Eastern Shipbuilding or Bollinger Shipyards Lockport in Louisiana. Each received about $21.4 million for the initial design.
Bollinger already builds “fast response cutters” for the Coast Guard, and much-smaller Eastern Shipbuilding is known in the industry for producing commercial vessels at a lower cost. BIW, on the other hand, hasn’t built a Coast Guard ship in well over a generation. But shipyard spokesman Jim DeMartini said the new cutter was “right in our wheelhouse” in part because BIW built Navy frigates of a similar size for several decades.
“It’s going to be a fiercely competitive bid,” DeMartini said. “But it’s great news. It’s a morale booster internally.”
But BIW has something that the other two companies don’t: General Dynamics, a corporate parent and defense contracting behemoth that received $20.8 billion from the U.S. government in 2012.
Guy Stitt, president of the naval analyst firm AMI International, said that if he were in the Coast Guard leadership, he would want to involve deep-pocketed shipyards to make sure the offshore patrol cutter program doesn’t get the budget ax in Congress.
“This is a tough competition,” Stitt said. “I expect the Coast Guard welcomes having General Dynamics’ political support in this program to make sure it moves forward. And how (the company) can leverage that could be key.”
The competition for the Coast Guard contract is also a sign of the shipbuilding times as companies try to diversify in the face of political and financial uncertainties from Washington, D.C.
DeMartini said the Navy is buying fewer ships than it was during the 1990s, resulting in a significant volume reduction at the Maine shipyard. So BIW is always “looking to any opportunity” that fits the company’s business and financial strategies and can be incorporated into the shipyard without disrupting other work, he said.
The Lexington Institute’s Thompson agreed, to an extent.
The Navy will continue to turn to BIW for surface ships and General Dynamics’ Electric Boat in Connecticut for submarines for the foreseeable future, Thompson said. The question is how often, given the increasing competition for federal dollars.
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