DHS Terminates Coast Guard Shipbuilding Contract

The Department of Homeland Security (DHS) announced Friday the partial termination of a shipbuilding contract with Eastern Shipbuilding Group (ESG) for the U.S. Coast Guard’s Offshore Patrol Cutter (OPC) program, citing performance delays and financial inefficiencies.

The decision affects two of four OPCs previously under contract with ESG. According to DHS, ESG significantly exceeded its initial delivery schedule and reported it could not complete all four cutters without incurring financial loss. OPC 1, originally due in June 2023, is now projected for delivery no earlier than late 2026. ESG also missed its April 2024 deadline for OPC 2.

Work on OPCs 3 and 4 was suspended earlier this year after ESG informed the Coast Guard of its inability to fulfill the full order under current terms. DHS stated that funds from the canceled cutters will be reallocated to "support higher-priority Coast Guard modernization efforts."

In August 2024, Austal USA began production of the fifth OPC in Mobile, Alabama.  

The partial contract cancellation follows a broader review of procurement efforts aimed at improving delivery timelines and cost efficiency. A DHS official emphasized the need to ensure “modern, capable vessels” are delivered on time to meet national security and maritime safety demands.

Despite the cancellation, the Coast Guard states it remains committed to acquiring the full 25-cutter OPC fleet as originally planned. The OPCs are intended to replace aging Medium Endurance Cutters and are considered critical for missions including drug interdiction, migrant operations, and maritime domain awareness. The 270-foot and 210-foot medium endurance cutters that the OPC will replace are approximately 30 and 50 years old, respectively. 

The contract decision aligns with ongoing modernization initiatives under the Coast Guard’s “Force Design 2028” strategy, what DHS describeds as "Homeland’s plan to transform the Coast Guard into a more agile, capable fighting force."