BAE Systems will eliminate about 325 jobs with its departure from the surface ship repair business at its Pearl Harbor Naval Shipyard, officials said on Monday.

The defense contractor's Hawaii yard is the largest private sector ship repair facility in the state, and largely deals with submarine repairs. The company announced a "multi-ship, multi-option" modernization in 2014 to modernize and maintain destroyers and cruisers that use the Pearl Harbor naval base as a homeport.

A recent change to Navy contracting procedures, called multiple award contract-multi order, includes firm-fixed orders, indicating no adjustment for cost overruns. The change, and lower-cost competition from naval repair yards in San Diego, forced BAE Systems to exit the surface ship repair business after 10 years. The company can still bid on projects in the range of $50 million to $100 million, but smaller work of $1 million to $2 million is now unfeasible.

BAE's decision "resulted from a thorough analysis and careful consideration of the business environment in Pearl Harbor under a new contracting structure," spokesman Karl Johnson said.

About 260 BAE employees remain on the job and are working on repairs to the cruiser USS Port Royal and the destroyer USS Hopper.

Under the new Navy contract guidelines, small businesses will be earmarked "so the big guys like BAE cannot bid on the smaller work, which kept them busy between the big jobs," said John Stewart of the Ship Repair Association of Hawaii.

BAE's Hawaii Shipyard occupies a dry dock and piers at Naval Station Pearl Harbor. About 6,000 people, including military personnel and civilians working for various contractors and subcontractors, are employed at the facility.

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