American Shipbuilding Association

House and Senate Authorize Seven Ships

Prior to adjourning for the Memorial Day recess, the House and Senate passed their individual versions of the FY04 Department of Defense Authorization bill (HR 1588 and S 1050, respectively).  The Navy’s shipbuilding and conversion budget request included $8.5 billion for the procurement of five ships; one submarine, three destroyers, and one Amphibious Transport Dock (LPD).  The conversion account includes $2.79 billion, bringing the total SCN request to $11.3 billion.  This is roughly $2 billion higher than the FY03 appropriated budget, which provided $6.97 billion for the procurement of four ships and $2.1 billion in conversion for a total of $9.1 billion.  The procurement of two T-AKE’s are budgeted at $722 million in the National Defense Sealift Fund compared with one ship budgeted at $386 million in FY03. 

The House and Senate approved the President’s budget request for naval shipbuilding, conversion, and research and development.  The Senate added $21 million for DDG-51 modernization.  The House authorized multi-year procurement for seven SSN 774 submarines; added $200 million for LPD 17 advanced procurement from the FY04 authorized level of Tomahawk missiles if funding for such missiles is included in a supplemental appropriation; and added $10 million for research and development of a rapid Mobile Offshore Base.  Both the House and Senate added $35 million for littoral combat ship (LCS) mission module research and development, yet both expressed continued reservations about the operational requirements for the LCS.   

The American Shipbuilding Association remains very concerned with the low rates of naval ship production.  Seven ships a year will not sustain the present force level of 301 ships in the Navy’s fleet – much less a 375 ship Navy that the Nation requires.  Based on previously enacted budget requests, America’s naval fleet will continue to shrink to 250 ships as older ships are retired.  With current budget practices of providing an average of six ships a year, the fleet will shrink to 180 ships.  Production rates must be increased if the United States expects to ensure peace through strength.   

Additionally, the House authorized $40 million for the Navy to issue loan guarantees for the construction of two U.S. built fast cargo ships for Fast Ship (using the same terms and conditions of MARAD loan guarantees), conditional upon Fast Ship applying for a MSP operating agreement with the Department of Transportation.  

The House and Senate both rejected proposals by DoD in its Transformation Legislative Package that sought to waive the domestic manufacture laws for the construction of naval ships, the repair of naval ships, and the domestic manufacture of all defense systems and components.  ASA vigorously opposed these provisions and is pleased that these onerous proposals were rejected by both the House and Senate. 

In the FY04 Budget Submission, DoD also sought to waive essentially all laws requiring that defense systems and components be manufactured in the United States with respect to defense systems manufactured in twenty-one countries with which DoD has signed a Memorandum of Understanding for reciprocal defense procurement.  The House rejected this proposal, but the Senate embraced it as Section 833 of its bill.  The provision ws later amended on the Senate floor when Senator Mark Dayton (D-MN) offered an amendment to strike the provision from the Senate bill.  To counter this amendment, Senator John McCain (R-AZ) offered a secondary amendment that modified Section 833, limiting the number of countries from twenty-one to six.  The House, however, rejected DoD’s proposals and has sought to strengthen U.S. manufacture laws by requiring DoD to perform assessments as to the strength of the U.S. industrial base; identify critical items and components and the source of their production; encourage domestic manufacture of these critical systems and components; and eliminate “unreliable” foreign sources.

Maritime Security Program Included in House Mark

The HASC included in its mark of the DoD Authorization bill a reauthorization of the Maritime Security Program in FY06, when the existing program expires.  The program would authorize $2.6 million in operating subsidies per ship per year for 60 ships in the program.  This represents an increase of 13 ships above the current program of 47 ships, and is intended to be a 10 year authorization.  Five of the 13 ships would be required to be U.S. built clean product tankers.  Chairman Duncan Hunter (R-CA) authorized $250 million in FY05 for the construction of five clean product tankers, which were in short supply in the war with Iraq.   

Though ASA is pleased with the inclusion of a shipbuilding component to the Maritime Security Program, it stresses the need for additional funding for a tanker construction program and the expansion of the number of U.S. built ships in the fleet.  Only by ensuring a commercial fleet of ships – built, owned, and operated by Americans - can America’s security interests be met.    

SASC Orders Surface Combatant Industrial Base Study

Expressing concern about the surface combatant industrial base, particularly during the transition from DDG-51 destroyers to the new DD(X) destroyer in FY 2006-2008, the Senate Armed Services Committee report accompanying S. 1050 directs the Navy to deliver an updated surface combatant industrial base study to Congress by March 1, 2004. 

According to the Senate report, “the committee believes that the demands for surface combatants are expanding to a level in excess of the level which was identified in the QDR [Quadrennial Defense Review]”.  The Navy’s FY04 budget request included funding for three Arleigh Burke destroyers, and projects the purchase of three additional destroyers in FY05.  However, the budget request and future years defense plans include no plans to buy additional Arleigh Burke destroyers after FY05, and will buy only a total of four DD(X) destroyers in FY06-FY08. 

The study will primarily focus on Ingalls in Pascagoula, MS and Bath Iron Works in Bath, ME, the only two yards building DDG-51 destroyers, and the yards that will build the next generation of destroyers.  The Senate report requires three pieces of information to be included in the study:  a projection of the workload for shipyards engaged in the construction of surface combatants from fiscal years 2005-2010; an assessment of the risk for the financial viability of those same shipyards during the same aforementioned period; and a plan on how the Navy intends to sustain technical and production skills within the industrial base.

In the report accompanying the House Defense Authorization bill, the House Armed Services Committee directed the Department of Defense to commission eight studies of the Navy’s future fleet.  According to the report, “the committee is concerned that the Navy’s current vision of its future platform architecture may be, to a great extent, determined by inertia and momentum…”, making reference to the decision to start the Littoral Combat Ship program before alternative analyses were performed.

Believing that the Navy has not sufficiently explored alternatives, and therefore cannot adequately express objective views to Congress, the House seeks to achieve a clear vision of potential platform architectures for the future.  Each of the eight studies would present one or two possible platform architectures, to be described in terms of the numbers, kinds, and sizes of ships involved, numbers and types of associated manned and unmanned platforms, and the basic capabilities of these ships and platforms.  The studies are due by March 1, 2004. 

HASC Authorizes $39.5 Million for Title XI

The House Armed Service Committee authorized $39.5 million for the Title XI Ship Loan Guarantee Program, of which $35 million is for new loan guarantees.  With the exception of administrative expenses, the Administration requested no funds for Title XI in FY04.   

Title XI loan guarantees provide ship owners with a federal guarantee of their commercial bank loans for the construction of commercial ships in the United States. 

The vast majority of Title XI loan guarantees are for companies operating dry and liquid cargo ships that transport consumer goods and products along our coastline and through our inland waterway system.  Tankers and dry cargo ships are also critical in serving as a military auxiliary fleet to the Department of Defense (DOD) in times of mobilization.  During Operation Iraqi Freedom, the Military Sealift Command chartered one roll-on/roll-off ship and a total of six clean product tankers that were built in the late 1990’s and early 2000’s under Title XI loan guarantees.

VACCO Industries and Warren Pumps Join ASA

ASA welcomes VACCO Industries of South El Monte, CA and Warren Pumps of Warren, MA as new Partner Companies.  VACCO Industries designs and manufactures quiet and non-quiet air and water valves and manifolds for the Navy.  Warren Pumps is a major producer of pumps for nuclear submarines, aircraft carriers, cruisers, destroyers and amphibious assault ships. 

Well Said!

“It was the U.S. shipyards that were able to win the battle of the North Atlantic.”
Historian/Author Michael V. Gannon
Black May : The Epic Story of the Allies' Defeat of the German U-Boats in May 1943