How can we pay for the engine to be ordered while the customer is still using the vessel?
(The following response is based on follow-up with the submitter.)
Placing the vessel under contract but keeping it under Government control (before the period of performance begins) could create legal complications if the condition of the vessel were to change while the Government continues to use it. Purchasing the engine and providing it as GFE could be an option, but FAR policy is that the Contractor furnish all property necessary to perform a contract unless an exception applies. See FAR 45.102 for further guidance.