Commercial shipbuilder Cammell Laird and BAE Systems will collaborate on the construction of the Royal Navy's future Type 31 frigates.
Under the terms of the agreement, Cammell Laird would be the prime contractor and BAE Systems would supply its warship design and combat systems expertise.
Cammell Laird is proposing an innovative frigate design, known as "Leander", based on existing BAE Systems' naval ship designs.
The Cammell Laird consortium will include the A&P Group of shipyards.
The first ships are expected to be in service by 2023, built under a price cap of £250 million (US$330 million) each for the first batch of five frigates.
The Type 31 frigate will replace five of the Royal Navy's Type 23 frigates.
The other eight Type 23s are already set to be replaced by the upcoming Type 26 class.