Posted on August 30, 2023
The U.S. Coast Guard’s “highest investment priority,” the $17.6 billion Offshore Patrol Cutter (OPC) program, faces additional delay. After blowing through a contractual delivery date of June 2023, governmental auditors are already suggesting that the new delivery estimate of late 2024, coming as Panama City-based OPC shipbuilder Eastern Shipbuilding Group inks an array of new commercial and governmental contracts, is optimistic.
The Coast Guard, in an emailed statement, now estimates that Eastern Shipbuilding Group will deliver the future Coast Guard Cutter Argus, the first of the Coast Guard’s much-needed OPCs, by September 30, 2024. The revised delivery target for the 360-foot vessel comes almost six years after the yard first cut steel for Argus back in January 2019.
The latest estimate is a big change from late 2016, when an optimistic Coast Guard awarded the OPC program to Eastern. Originally expected to arrive in late 2021, the Argus, since beset by a hurricane and production problems with the vessel’s shafting, has yet to launch and is struggling to make progress towards completion.
Even worse, the U.S. Government Accountability Office (GAO), in a recent report, warns that more delays may come. Estimates of completion are certainly in flux; according to the GAO, just five months ago, Eastern’s own schedule indicated that OPC 1 delivery was “planned for February 2024.” In addition, the shipyard has a lot of complex cabling and distributive systems work to complete aboard the ship, and the GAO apparently has low confidence in the fidelity of Eastern’s estimates and task tracking data.
Despite the hand-wringing, Eastern is soldiering on. In July, shafting approved for use aboard Argus arrived in the yard, and is currently being installed. A company spokesperson said, via email, “we have coordinated with the Coast Guard to mitigate schedule impact, and where feasible, advance production activities that would normally be conducted post-launch,” and that “we look forward to launching and delivering this important national security asset.”
As small shipbuilders grapple with the intricacies of government shipbuilding, delay is part of the operational playbook. First ships are always hard and, arguably, the OPC is a more complex vessel than Eastern has built before. The yard also had to rebuild after a hurricane. But, as the shipbuilders at Eastern now race to contract, build and deliver an array of new workboats, ferries and dredges for both commercial and government customers, the company’s slow progress in delivering the four Coast Guard cutters it has under contract is getting harder and harder to justify.
The shipyard notes that it is “well-documented and widely accepted that commercial shipbuilding can progress faster than government shipbuilding,” and was proud to be “uniquely positioned to successfully execute both commercial and government contracts.”
Juggling government and commercial contracts is a sign of shipbuilding strength, but Coast Guard needed the Argus available for testing years ago. For better or worse, the OPC design is a creature of compromise and there is a good chance it will arrive in service hampered by serious weight or other unexpected operational challenges. The drawn-out building process has prevented the Coast Guard from updating the design, flowing “lessons learned” from the lead ship into Eastern’s other three platforms, and risks hampering the development of the 11 “Stage 2” OPCs currently awarded to Alabama-based Austal USA.
Eastern has built and delivered three new Staten Island Ferries since Hurricane Michael
A Shipyard Of Contrasts
Eastern’s struggle with the OPC Program stands in stark contrast to the rest of the “on-the-move” shipyard.
Despite an enormously challenging environment for American manufacturers, the shipyard is executing on new business. In May 2023, almost three years after first cutting steel for the R.B. Weeks, a 356-foot trailing suction hopper dredge, the President of Eastern Shipbuilding Group, Joey D’Isernia, celebrated the project, telling press, “It’s our pleasure to once again deliver a quality vessel on time and on budget to our valued customers.”
Eastern was right to celebrate. The shipyard began building the new dredge in mid-2020, at the height of the COVID-19 crisis, when most manufacturers were in disarray. To get it done “on time and on budget,” the shipyard overcame daunting workforce shortages, incredible supply chain challenges and record inflation.
Despite challenges with the Coast Guard’s 4-ship OPC contract, Eastern is steadily building an ever-larger book of government business. In late July, Eastern beat out two other bidders to win a $256.9 million contract award from the U.S. Army Corps of Engineers to build a new dredge. The dredge is scheduled for an August 2027 delivery, four years from now.
Eastern’s commercial business is growing as well. The shipyard is racing ahead on a 302-foot ferry for the Bridgeport and Port Jefferson Steamboat Company. Steel cutting began in January 2023 and delivery is set for 2024.
In July, the yard broke into the booming renewable energy market, winning a contract to convert an oil-field-oriented “offshore supply vessel” to a windfarm service operation vessel. That work is expected to complete in early 2025.
Eastern’s repeated successes in winning both government and commercial work offer an increasingly jarring contrast to the yard’s slow-moving Offshore Patrol Cutter program. The divergence is leading observers to wonder if the U.S. Coast Guard is doing enough to drive the shipyard towards delivering the behind-schedule cutters in a timely fashion.
With Hurricane Michael long past, the Coast Guard must prioritize OPC progress.
Focus On The Platform, And Just The Platform
Eastern approaches their thriving book of commercial business “as a complimentary business approach, not either-or,” that can help the Coast Guard. As an Eastern spokesperson explained, “For instance, when we maintain active lines of production on the commercial side, it reduces a manning risk for our government customers.”
The Coast Guard didn’t want to discuss how Eastern’s growing book of business might help or hinder the OPC Program, saying only that it was “aware of other commercial work underway at the shipyard,” and that it was focusing on “managing the Offshore Patrol Cutter program to deliver cutters that meet Coast Guard requirements.”
The Coast Guard statement may not be entirely accurate. According to the GAO, rather than press the shipyard to mature critical technology aboard ship or achieve a stable cutter design—prudent steps that enhance the chance the OPC Program would actually deliver cutters that met Coast Guard requirements—the Coast Guard, after initially accepting earlier guidance from the GAO, reversed course, defied the GAO, and, instead, authorized the shipyard to begin construction of the last two ships in Eastern’s four-vessel contract.
It was a risky move. In shipbuilding, commencing vessel construction before the design is finalized is a major risk, often resulting in delay, re-work or expensive future refits.
The Coast Guard justified their defiance of GAO recommendations by claiming that the service had to look beyond the technical risks of the program to help “manage the financial risks to the contractor.” Coast Guard Vice Admiral Paul F. Thomas, in recent Congressional testimony, related worries that Eastern and other shipyards “would go broke if we were not able to just begin construction with a well-developed design but not a fully developed design.”
Rather than manage the OPC program to deliver cutters that meet Coast Guard requirements, Coast Guard program managers appear to be juggling priorities that extend well beyond their particular platforms.
Prioritizing Eastern’s fiscal wellbeing has effectively disarmed the Coast Guard, making it far harder for the Coast Guard to obtain new, operationally-relevant cutters in a timely fashion. This is not a good precedent for the Coast Guard to set as Bollinger Shipyards, Austal USA and other busy Coast Guard shipbuilders juggle Coast Guard work with multiple yards, projects and other risks.
While commercial contractors have a variety of tough tools—fines or other penalties—to compel an on-time, on-budget delivery, the Coast Guard has been far more solicitous of program problems than the private sector might be.
Certainly, a customer with an understanding approach to waterfront fiscal challenges is a great asset for any shipbuilder. For Eastern, government contracts have been a lifeline. Help from the Coast Guard and the U.S. Department of Homeland Security saved Eastern after a hard hit by a 2018 hurricane, but, in the end, solid contracts—with both carrots and sticks—are what has likely helped the shipyard recover their commercial business and build upon what a company spokesperson described as “a 99% on-time ship delivery rate since 2002.”
Investigators portray the Coast Guard as a passive customer. The GAO, in their report, described how the Coast Guard accepted an apparently abrupt and risky 2017 proposal from the shipyard to use a new and unproven type of davit. For the OPC, built to safely get Coast Guard boarding teams into and out of the water multiple times a day, the davit, a type of crane built to hold and safely lower a small boat into the water, is, in essence, the heart of the ship. For the OPC to be a success, the davit must work in almost any weather or sea state.
The shipyard’s davit proposal-which moved the Coast Guard away from their focus on accepting only low-risk, proven technology-hasn’t worked out well. But, after sending no less than eight “letters of concern” over systemic problems with the high-tech davit between 2018 and 2022—at a pace of two letters a year—the Coast Guard has “not yet taken any further contractual action” to push forward davit development. Given the davit’s critical contribution to the vessel’s success, the Coast Guard’s ongoing failure to drive this matter to a successful conclusion is difficult to understand, and suggests that there is so little weight and space trade space left that reverting to a less risky, albeit a likely heavier, more maintenance intensive davit might cause the whole cutter design to unspool.
The Coast Guard’s instinct to help is built into the Service’s DNA. But the line between considerate and a push-over is a thin one. At some point, the Service must start demanding excellence, pushing cutter-builders out of their day-t0-day comfort zones and towards ever-better performance—executing their Coast Guard work with the same rigor and vigor as their commercial shipbuilding efforts.
The Coast Guard’s mid-sized cutters are being pushed to the limit.
Progress On The Cutters Is Slow
The Coast Guard needs to move the OPC forward, faster.
One month after Eastern’s show of shipbuilding acumen with the R.B. Weeks, the shipyard missed their June contractual milestone for the delivery of the Argus. The Coast Guard, after repeated questions, refused to acknowledge the apparent contractual breach, saying, via email, merely that it “was notified of a delay to OPC #1 delivery ahead of the contract delivery date and has received a preliminary plan for re-baselining from the contractor.”
Eastern was up front about the challenges, stating in an email that “force majeure events outside of the shipbuilder’s control caused significant delays in receiving propulsion shafting,” and that a shafting issue, previously reported by Forbes, “has delayed the launch of the first OPC by over a year.”
But the Argus still seems stuck in a mire. In April 2022, D’Isernia said the ship was “approximately 70% complete.” Fifteen months later, the Coast Guard reported, via email, that the first Offshore Patrol Cutter was “about 81% complete.”
A fifteen-month build rate of less than 1% a month, all while other Eastern projects race ahead to completion, suggests the yard is facing labor allocation issues or other problems with the Coast Guard project that extend beyond shafting. To get the ships done in three years, Eastern should be building about 3% of each ship every month.
The slow rate of work is hard to explain. Work on electrical cabling and other distributive systems—complex tasks flagged by the GAO as “among the top 10 work categories with the highest estimated remaining number of labor hours to OPC 1 completion as of October 2022”—could certainly proceed while the ship is ashore, progressing as the shafting issue was ironed out. It would be more cost-effective as well, as distributive systems are, generally, more efficient to install before the ship hits the water.
The slow build rate has also impacted other cutters in the yard that should be far less constrained by the shafting challenge. The second Offshore Patrol Cutter, the future Coast Guard cutter Chase, has progressed from 50% to 62% in fifteen months. The third and fourth Offshore Patrol Cutters have only exhibited a marginally faster build rate of a little more than 1.6% a month since October 2022.
If sustained, the building pace puts the Eastern-built OPC Cutters on, essentially, a 5-year build cycle, with OPC-4 delivering sometime in 2027—and likely after all of Eastern’s recently signed contracts deliver.
It is time for the Coast Guard and the Department of Homeland Security to inject some measure of urgency into the mix. With U.S. security challenges multiplying, and the Coast Guard’s mid-sized cutters getting pushed to the limit, the Coast Guard needs to stop being quite so nice and get some tough-but-fair personnel in place who, while partnering over the long-term with vessel production yards, can also incentivize the yards to focus their primary efforts on their Coast Guard business.
At a minimum, the Coast Guard can try, as a goal, to build future OPCs faster than Huntington Ingalls Industries moves the U.S. Navy’s 9,200 ton, 509-foot long Flight III Arleigh Burke class destroyers from keel laying to delivery.
