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General Dynamics Gets Shot at $12 Billion Ship Program

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Feb. 12 (Bloomberg) -- General Dynamics Corp. has been awarded one of three initial contracts in a $12.1 billion U.S. Coast Guard ship program, with competitor Huntington Ingalls Industries Inc. shut out.

Huntington, the government’s No. 1 shipbuilder, had bid on the design contracts for the offshore patrol cutters, which will replace older ships. The Coast Guard’s decision is “a significant setback for Huntington Ingalls,” said Loren Thompson, a defense analyst with the Lexington Institute, an Arlington, Virginia-based research organization.

“It is also a significant breakthrough for General Dynamics, which is likely to ultimately build the next Coast Guard ship,” Thompson said in a phone interview. General Dynamics is the No. 2 shipbuilder for the U.S. government, according to Bloomberg Industries.

Huntington Ingalls is “disappointed by the Coast Guard’s decision,” said Bill Glenn, a spokesman for the Newport News, Virginia-based contractor.

The company “offered the Coast Guard a strong, fully compliant proposal to provide a very capable, cost-effective offshore patrol cutter design,” Glenn said in an e-mail. “Our proposal offered commonality in many systems and construction processes already proven in the National Security Cutter program.”

Patrol Cutters

A spokeswoman for Falls Church, Virginia-based General Dynamics didn’t immediately respond to an e-mail request for comment on the Coast Guard’s announcement.

General Dynamics was selected along with Bollinger Shipyards Lockport LLC and Eastern Shipbuilding Group Inc., both closely held. Each will receive design contracts valued at between $21 million and $22 million for the offshore patrol cutters.

Bollinger is building 58 Coast Guard fast-response cutters at $73 million a ship, while Eastern builds commercial vessels, according to Brian Friel, a Bloomberg Industries analyst.

The offshore patrol cutters will have increased range and endurance, larger flight decks and improved surveillance capabilities, according to the Coast Guard. They will be used in missions such as search and rescue, and to seize illegal drugs.

The new cutters will replace the 210-foot and 270-foot medium endurance cutters, which the agency has said are becoming obsolete.

To contact the reporters on this story: Kathleen Miller in Washington at kmiller01@bloomberg.net; Jonathan D. Salant in Washington at jsalant@bloomberg.net

To contact the editor responsible for this story: Stephanie Stoughton at sstoughton@bloomberg.net

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