U.S. Navy awards $5.5 billion 10-ship frigate contract to Italy's Fincantieri

WASHINGTON (Reuters) - The U.S. Navy said on Thursday it awarded a contract worth more than $5.5 billion to Italy's Fincantieri FCT.MI to build its newest class of warships, known as frigates.

FILE PHOTO: A view of Fincantieri shipyard is seen in Monfalcone near Trieste, in northest Italy, April 21, 2016. REUTERS/Alessandro Bianchi/File Photo

The contract is for detailed design and construction of the lead ship, with an option to buy nine more. If the navy exercised all options on the contract, delivery of the 10th ship would occur in the mid-2030s.

The ship will be built at Fincantieri's Marinette Marine shipyard in Marinette, Wisconsin, which currently makes the navy's Littoral Combat Ships, as does Austal ASB.AX, an Australian company with a shipyard in Alabama.

The navy estimated the lead ship’s cost at $1.281 billion, including design costs. The nine subsequent ship options, if exercised, would cost $781 million, on average, in 2018 constant dollars, navy officials said in a call with reporters.

Competitors for the contract included Austal, Huntington Ingalls Industries HII.N, and a team of General Dynamics GD.N and Spain's Navantia.

Plans call for the FFG(X), smaller than cruisers and destroyers, to be a multi-mission ship with a combat system, missile launch tubes and radars. But it will carry fewer weapons and have less design redundancy than larger ships in the fleet designed for sustained intense sea battles.

The navy may run another competition for an additional 10 frigates in the coming years, but leadership said a plan had not solidified.

Wisconsin Representative Mike Gallagher told Reuters in an interview, “This means the shipyard is alive for another 20 years, and not only alive, but thriving.”

Bryan Clark, a senior fellow at the Hudson Institute, said Fincantieri’s victory was “not surprising. Their frigate design has the most hulls already in the water and the longest track record.”

The Frigate design Fincantieri will modify for the U.S. Navy is in use by NATO allies France and Italy.

The industry will now watch for protests which could come from any number of the firms that had put forth a bid.

However, “the timing of the award could allow (the) navy to work through any protests before we reach the end of the fiscal year,” which ends on Sept. 30, Clark said.

Gallagher said that without the award layoffs at the shipyard were likely. “Without something to follow on from Littoral Combat Ship, it would have been hard to keep the shipyard alive, at least in its current capacity.”

Gallagher said that for Wisconsin the award “provides a much needed light at the end of the coronavirus tunnel.”

Reporting by Mike Stone and Alexandra Alper in Washington; Editing by Leslie Adler, Dan Grebler and Daniel Wallis