Noem Cancels Two Coast Guard Vessel Contracts

On July 11, United States Department of Homeland Security (DHS) Secretary Kristi Noem announced the partial termination of two contracts with Panama City, Fla.-based Eastern Shipbuilding Group (ESG) to build two Coast Guard offshore patrol cutters (OPCs).

According to a statement by DHS, the cancellations were due to repeated delays and underperformance. ESG’s delivery of the first OPC, named Argus, was initially expected in June 2023, but the yard launched and christened it in October 2023. While the Coast Guard has possession of the Argus—a change of command ceremony was held last month in San Pedro, Calif.—DHS doesn’t expect the first-in-class OPC to be completed before “the end of 2026 at the earliest.” The Coast Guard stopped work on OPCs 3 and 4 after ESG notified the service earlier this year they could not fulfill their contractual duty to deliver all four OPCs without unabsorbable loss. In light of that, Noem partially canceled ESG’s contract for the latter two OPCs “because it was not an effective use of taxpayer money.”

The Coast Guard awarded the first OPC contract to Eastern Shipbuilding in 2016, but the yard suffered major damage—and subsequent production delays—from Hurricane Michael in 2018. While the Coast Guard eventually awarded the OPC 2, 3 and 4 contracts to ESG, the agency opted to pivot and award the next 11 OPC contracts to Austal USA in nearby Mobile, Ala., in June 2022, less than two months after the Eastern was awarded the contract for OPC 4. Eastern Shipbuilding Group challenged the awarding of the second batch of OPCs to Austal USA but lost that appeal.

DHS placed the decision to cancel the contracts for OPC 3 and 4 within the context of fiscal responsibility.

“This administration is unwavering in its commitment to the American taxpayer and to a strong, ready Coast Guard,” DHS said in a statement attributed to an unidentified senior homeland security official. “Our Coast Guard needs modern, capable vessels to safeguard our national and economic security, and we will ensure every dollar is spent wisely to achieve that mission. This action redirects resources to where they are most needed, ensuring the Coast Guard remains the finest, most-capable maritime service in the world.”

Eastern Shipbuilding Group declined to comment specifically on the canceled contracts. However, in June, when the Coast Guard ordered work to stop on OPCs 3 and 4, ESG CEO Joey D’Isernia said, “We share a common goal with the U.S. Coast Guard—to deliver the Offshore Patrol Cutters as quickly and efficiently as possible. We are actively working to reach an agreement that ensures the program is properly funded and can move forward without further delay. System light-offs on Hull 1 are currently underway, and despite the unprecedented challenges we’ve faced, we remain confident that our incredible workforce represents the most capable and reliable team to complete these vital national security assets.”

D’Isernia also told local press, “Next year, we’ll celebrate 50 years of shipbuilding excellence and a 99 percent on-time delivery record. Today, Eastern Shipbuilding Group is proud to be the largest private employer in northwest Florida, with a tremendous economic impact across the state. Our future is strong—we have a healthy pipeline of commercial work and were recently selected to build ferries for the largest passenger ferry system in the nation.”

D’Isernia added that he sees ESG playing a vital role in the Trump administration’s maritime strategy.

“Completing these ships is in the best interest of taxpayers—and our skilled workforce is ready to get the job done,” he said.

The Coast Guard still intends to procure 25 OPCs, DHS stated, adding, “The Coast Guard remains intent on acquiring and delivering the full OPC class as fast as possible to address the nation’s security and safety needs.”

The OPC fleet will complement the capabilities of the Coast Guard’s national security cutters, fast response cutters and polar security cutters as an essential element of the nation’s layered maritime security strategy. OPCs will be especially critical to the Coast Guard’s counter-drug and migrant interdiction missions along the southeastern border, DHS said.