Bath Iron Works has lost out on an estimated $10.5 billion contract to build a new generation of cutters for the Coast Guard, in a major blow for the Maine shipyard that could cost as many as 1,000 jobs.

The Coast Guard awarded the contract to Eastern Shipbuilding Group in Panama City, Florida, after a three-way design competition that also included Bollinger Shipyards in Louisiana.

BIW spokesman Matt Wickenheiser confirmed Thursday night that the Bath shipyard did not get the contract.

“We plan to meet with the Coast Guard to understand their selection decision,” Fred Harris, the president of General Dynamics-Bath Iron Works, said in a prepared statement. Wickenheiser declined further comment on the Coast Guard contract.

The decision represents a significant loss for BIW and its workforce as the shipyard tries to diversify beyond the Navy destroyer contracts that account for nearly all of the yard’s work. Citing an anticipated slowdown in Navy projects, BIW officials warned last year as they were preparing to negotiate a new labor contract that the shipyard might have to cut as many as 1,000 jobs in the coming years if it didn’t win the Coast Guard work.

BIW is one of Maine’s largest private employers, with more than 5,500 workers, and a significant player in the state’s economy.

“It would be devastating to the community,” said Susan Seigars, who has worked at The Cabin, a restaurant across the street from BIW’s south gate, for 30 years. “In one way or another, everyone is tied to the business at BIW. It all trickles down.”

The company faced stiff competition for the Coast Guard work from two smaller, leaner and non-unionized shipyards on the Gulf Coast. But BIW officials and labor union leaders engaged in long – and painful – negotiations to reduce costs to better compete for the contract to build as many as two dozen offshore patrol cutters for the Coast Guard.

Rich Nolan, president of Machinists Union Local S6 of the Industrial Union of Marine and Shipbuilding Workers of America, the largest union at the shipyard, didn’t think any layoffs were imminent but admitted that losing the Coast Guard contract was bad news.

“It used to be that we stood on our quality alone. The government was willing to pay a little extra for the quality that we delivered. In an ever-changing economy, you don’t see that so much anymore,” Nolan told the Associated Press Thursday night.

With its slogan “Bath built is best built,” BIW is one of the Navy’s top shipyards and has produced the majority of the Navy’s guided-missile destroyers patrolling the globe’s oceans. And just last week, the largest and most technologically advanced destroyer ever built for the Navy, the $4 billion Zumwalt, sailed down the Kennebec River from Bath en route to its commissioning ceremony in Baltimore next month.

But BIW has not built a ship for the Coast Guard since the 1930s and faced different criteria from those used by the Navy.

Sens. Susan Collins and Angus King of Maine pledged to scrutinize the Coast Guard contract.

“We are deeply disappointed by the Coast Guard’s announcement and believe that Bath Iron Works, with its outstanding shipbuilding record, would have delivered nothing but the best, highest-quality cutters to the Coast Guard,” Collins and King said in a joint statement. “We intend to evaluate the details of the award to ensure that the Coast Guard properly met all of its decision criteria, and we will continue to do all that we can to support the highly skilled men and women at BIW who do so much to support our nation’s security.”

The initial contract for up to nine cutters was valued at $2.4 billion. The Coast Guard plans to build 25 offshore patrol cutters, which will replace the fleet of 210-foot and 270-foot medium endurance cutters, some of which have been in service for more than 50 years.

“The Offshore Patrol Cutter acquisition is the Coast Guard’s highest investment priority, and we are proud to announce this important milestone,” Coast Guard Commandant Adm. Paul Zukunft said in a statement. “The Offshore Patrol Cutter will replace our aging medium endurance cutters and provide the majority of offshore presence by the Coast Guard’s cutter fleet.”

BIW had bid on the Coast Guard contract to make up for Navy work that will be winding down over the next few years.

The shipyard now has contracts to build two types of destroyers: the stealthy Zumwalt-class ships and the Arleigh Burke-class destroyers that are among the workhorses of the U.S. fleet. But the Navy only plans to build three Zumwalt-class destroyers – the last two of which are under construction in Bath – and BIW shares construction of the Arleigh Burke-class destroyers with rival Ingalls Shipbuilding in Mississippi.

Last December, the majority of the members of Local S6 ratified a new four-year contract containing concessions on work rules, pay, pensions and health benefits. Although unpopular with union members, the concessions were aimed at making the company more competitive.

BIW is listed as Maine’s fourth-largest private employer. Beyond the direct jobs it supports at the yard and two manufacturing/fabrication plants in West Bath and Brunswick, the company spent $64 million with hundreds of other Maine companies in 2014.

It also drives the local economy.

At Midcoast Pizza, manager Dominic Gagne estimates half of his business comes from BIW employees. The booths were mostly empty by 8 p.m. Thursday, but Gagne said the restaurant hosted a retirement party for a shipyard employee earlier in the evening.

“If they start losing their jobs, we would start losing business,” said Gagne, who has worked at the restaurant down the street from BIW for 14 years.

Other businesses in Bath and its surrounding towns lean on the shipyard as well, he said.

“A lot of workers come from all around,” he said. “It would affect others, too.”

At The Cabin, Seigars said she’s seen two strikes and plenty of layoffs in her three decades working across the street from the shipyard.

“They’ve managed before,” she said.

But she expressed concern for recent hires.

“Anyone that’s newly hired should have some concern,” she said. “When you’re newly hired, you’re last in and first out.”

Florida Sen. Bill Nelson cheered the news for Eastern Shipbuilding and predicted the contract could support thousands of jobs in the Panama City area.

“This is a big win for the people of northwest Florida,” Nelson, the top Democrat on the Senate Commerce Committee that oversees the Coast Guard, said in a prepared statement. “The 2,000 new jobs that this contract will create will provide a significant boost to the local economy.”

Staff Writer Megan Doyle contributed to this report.