Each shipbuilder has been awarded £5m to develop their plans for the construction of five new Type 31e warships in the UK.
In August, the UK Ministry of Defence (MoD) relaunched a tender for the development of the £1.25bn Type 31e programme.
According to the MoD, construction on the ships will begin within three years of the programme launch.
The preferred bidder for design and manufacture of the warships will be announced by the end of 2019.
UK Defence Procurement Minister Stuart Andrew said: “This is the first frigate competition the UK has run in a generation, and today we are funding three shipbuilding teams with extremely exciting concepts to continue developing their plans.
“Next year, we will announce the winning bidder, and one of these designs will go on to bolster our future fleet with five new ships, creating UK jobs and ensuring our Royal Navy maintains a truly global presence in an increasingly uncertain world.”
Plan for the procurement of the Type 31e ships was included in the National Shipbuilding Strategy, unveiled in September 2017.
The Babcock-led team includes French company Thales Group, Northern Ireland-based shipbuilding firm Harland & Wolff, naval designer BMT Group and marine engineer Ferguson Marine.
While the team led by BAE Systems comprises shipbuilding and conversion specialist Cammell Laird and BMT.
In addition, the third team reportedly consists of Atlas Elektronik UK and Thyssenkrup Marine Systems.
The five new ships will be the next generation of the Royal Navy fleet and replace the existing fleet of five Type 23 vessels.
The first Type 31e frigate is expected to be in service by 2023.