An Offshore Patrol Cutter still under construction is at the Eastern Shipbuilding shipyard. (Photo courtesy of Eastern Shipbuilding.)

Updated 7/21/2022 11:29 AM ET with a comment from Austal.

WASHINGTON: Eastern Shipbuilding Group is officially protesting a Coast Guard shipbuilding contract worth the potential billions that was awarded late last month to Austal USA, in part because of what the ESG claims is an “unfair competitive advantage and conflict” among other issues.

The contract, the second stage of the Offshore Patrol Cutter program, was awarded to Austal among a crowded field of competitors, including Florida-based ESG, the incumbent supplier already building the first four vessels of the class. The second-stage contract includes the construction of up to 11 Heritage-class ships, with a total value that could reach $3.33 billion.

The OPC program is one of the Coast Guard’s top two acquisition priorities, alongside the Polar Security Cutter. The new Heritage-class cutters will eventually become the heart of the service’s fleet and will be tasked with a variety of missions both on the high seas and in coastal areas. ESG’s protest could have major ramifications for how quickly the Coast Guard can receive these vessels — and which two companies are vying for the right to manufacture them.

The Florida shipbuilder’s complaint alleges, among other things, that Austal gained an unfair advantage because the company employs a former Coast Guard officer who had previously worked on the service’s OPC program and was aware of ” useful non-public information” at the time, thereby giving Austal access to data not distributed to other bidders.

The complaint also alleges that the Coast Guard failed to properly meet the criteria of its own solicitation when reviewing the past performance of the two companies.

“ESG was rated higher and offered lower risk with strong and relevant past performance,” according to a redacted copy of the complaint obtained by Breaking Defense. “Austal’s purported lower price is overwhelmed by the substantial risks associated with pricing Austal, a new entrant to the steel shipbuilding industry with a record of well-known cost overruns and performance issues.”

The comment that Austal is a “newcomer” to steel shipbuilding refers to the fact that the Alabama-based shipbuilder has a long history of building aluminum vessels for the US Navy. Thanks to a 2020 agreement with the Pentagon, Austal was able to open steel shipbuilding facilities earlier this year and begin work on the Navy’s new tow, salvage and salvage vessels. Between the Coast Guard vessel, Navy auxiliary vessel and a floating drydock contract, Austal has won three steel shipbuilding contracts in the relatively short time since planning to enter steel shipbuilding.

“Given Austal’s new entry into the steel shipbuilding industry and its lack of relevant past performance, it is highly likely that Austal’s pricing was incomplete and unbalanced for critical items, especially where there are significant differences between steel and aluminum shipbuilding,” Eastern Shipbuilding states in its complaint.

ESG President Joey D’Isernia said in a statement to Breaking Defense that the decision to protest was “not taken lightly.”

“Our community is reeling from the decision to abandon our workforce and move the Coast Guard’s largest acquisition program from our successful production line to a high-risk situation. This begs the question, why? he said.

The Coast Guard did not respond to a request for comment by press time. In a post-release statement, an Austal spokesperson said, “We are confident in the integrity of the solicitation process and that the U.S. Coast Guard’s selection of Austal USA as a phased OPC shipbuilder It will be confirmed. We will remain focused on delivering world-class vessels to our customers. »

Bid protests, which are filed with the Office of Government Accountability, are a mechanism companies can use if they suspect that a public contract has been improperly awarded. Once filed, the watchdog’s attorneys review the claims and decide whether to “hold” or “deny” the protest.

The denial is simple. This means the GAO has sided with the government — in this case, the Coast Guard — and the contract will likely continue as planned. If the GAO supports a protest however, the watchdog will make recommendations on how the government can resolve the defects in a contract award.

But that comes with a catch. A GAO decision is not legally binding, which means federal agencies can completely ignore the watchdog’s opinion. The risk in doing this comes from running up against Congress, which gives great respect to GAO legal opinions — particularly when the opinion suggests that a home business has lost a lucrative contract.

Shortly after the Coast Guard contract was awarded, the Florida delegation quickly came to the defense of the ESG, led by Republican Senator Marco Rubio, who appealed the service’s decision. “myopic.”

Protests against the deals are notoriously hard to win for the industry. The watchdog in its verdicts often states that its job is not to substitute its judgment for an agency’s experts. Rather, the GAO narrowly decides whether the government has clearly defined its criteria and followed them appropriately.

If a protest against a GAO offer fails, another option for the industry is to take the matter to court. While a court ruling can force the government to act, it also comes with a negative public outlook to sue the customer.

Not surprisingly, ESG wants the watchdog to recommend the Coast Guard award them the contract.

But other than that, the GAO “should recommend that the USCG re-evaluate proposals, conduct clarification or discussion, re-evaluate revised proposals in accordance with [solicitation’s] criteria, assess Austal’s issues of conflict and unfair competitive advantage, and then make further liability and award decisions,” according to the complaint.