Advance Appropriations for Naval Shipbuilding
Senator Olympia Snowe (R-ME), a member of the Senate Budget Committee, worked to ensure the inclusion of a provision in the Senate Budget Resolution to retain current scoring guidelines for Advance Appropriations of capital projects. This provision was crucial since the House Budget Resolution recommended that future Advance Appropriations of capital projects be scored in the first year. The Navy is seriously considering Advance Appropriations as a more cost-effective and efficient means to increase the rate of naval ship production.
On April 9th, Senators Trent Lott (R-MS), John Warner (R-VA), Richard Shelby (R-AL), Susan Collins (R-ME), Lincoln Chafee (R-RI), John Breaux (D-LA), Mary Landrieu (D-LA), Chris Dodd (D-CT), Diane Feinstein (D-CA) and Joseph Leiberman (D-CT) joined Senator Olympia Snowe (R-ME) in writing to Senate Budget Committee Chairman Pete Domenici (R-NM) urging him to sustain the Senate provision (section 201(b)) on Advance Appropriations in the upcoming budget conference on H. Con. Res. 83, and to reject section 13 of the House passed version.
The Navy has been exploring new ways to get more ships built with a limited budget in immediate years. One proposal under specific consideration has been Advanced Appropriations, as outlined in OMB circular A-11. Advance Appropriations is a full funding mechanism that is used by various government departments and agencies such as the Department of Energy, the Department of Transportation, and NASA to level fund capital projects. Advance Appropriations would enable the Navy to enter a contract with a shipbuilder and have dollars appropriated over several years during the ship’s construction. Advance Appropriations would help shipbuilders better plan and stabilize workload, and allow the Navy to put its money to work earlier, providing cost savings through economies-of-scale by ordering more ships up-front than is possible now. It would also eliminate annual budget spikes associated with one-year authorizations and appropriations.
Senate Hears State of Shipbuilding Industrial Base
On April 4th Senate Sea Power Subcommittee Chairman Jeff Sessions (R-AL) held a hearing on the shipbuilding industrial base. In his opening remarks Senator Sessions stated, “This nation must be a strong sea power and have the ability through warships and sealift capability to protect our national interests. Navy ships are vital to our national security and the shipbuilding industrial base is the means of providing those Navy ships.” The Chairman then explicitly asked the witnesses, “Are there initiatives, including funding alternatives, which could reduce the cost of Navy ships?”
All three witnesses at the hearing testified to the importance and need for a higher and stable funding level for naval ship construction. Bill Fricks, Chairman & CEO Newport News Shipbuilding, told the committee, “by allocating sufficient time and resources to the early planning and integration of the design and construction process, by reducing the number of changes in ship design, by increasing production rates, and by attaining stable production schedules and funding, we know that we can restrain the cost of constructing Navy ships.” Mr. Fricks explained that “the touchstones of a successful shipbuilding program can be reduced to three fundamentals. The first is stability of production, which allows for the planning of both facilities and workforce. The second is stability of design, which firmly defines the product being built without having to go back and make significant and costly changes. The third and final fundamental is a reasonable cost target, which allows for the planning of the entire program and provides incentives for continued performance improvements.”
John Welch, Senior Vice President of General Dynamics Marine Systems Group, echoed the call for stability and told the committee, “Higher production rates will bring industry to a more efficient level of production. It is as simple, and as complex, as knowing whether we are recapitalizing for a 300-ship Navy or a 220-ship Navy – this is the crucial metric for our future”
Jerry St. Pe’, COO of Northrop Grumman Ship Systems, added, “we understand that you are examining a number of different ship funding options. Advance material procurement, block buys, multi-year procurement, and advance appropriations, are all potentially useful tools you can employ to stabilize shipbuilding programs and reduce their cost.” Mr. St.Pe’ added, “We fully support funding approaches that lead to more ships being constructed, under stable procurement and production profiles.”
Congress Expresses Overwhelming Support Of Title XI Ship Loan Guarantee Program
Sixty-one Members of Congress joined Representative Randy “Duke” Cunningham (R-CA) in urging Chairman Frank Wolf (R-VA) and Ranking Member José Serrano (D-NY), of the House Commerce, Justice, State, Appropriations Subcommittee, to appropriate $100 million for the Maritime Administration’s Title XI Ship Loan Guarantee Program in FY ’02. The letter notes that the Title XI program “has been instrumental in reviving commercial ship construction and sustaining the defense shipbuilding industrial base of the United States.” The letter goes on to dispel the Administration’s claims that Title XI is a “corporate subsidy” by pointing out that, “Title XI [program] has generated roughly $150 million in revenue from fees charged to Title XI applicants since 1993.” The program has also resulted in cost savings to the taxpayer in lower priced naval ships.
Signing on to Representative Cunningham’s letter were the following Members of Congress: Duncan Hunter (R-CA), Tom Allen (D-ME), Gene Taylor (D-MS), Don Young (R-AK), Jim Oberstar (D-MN), Sonny Callahan (R-AL), Floyd Spence (R-SC), Rob Simmons (R-CT), Ander Crenshaw (R-FL), Eric I. Cantor (R-VA), Walter B. Jones (R-NC), Charles W. “Chip” Pickering, Jr. (R-MS), David Vitter (R-LA), Rodney Frelinghuysen (R-NJ), Curt Weldon (R-PA), Marcy Kaptur (D-OH), Chris Smith (R-NJ), Eliot Engle (D-NY), Nick Rahall (D-WV), Bob Clement (D-TN), James P. Moran (D-VA), Wayne T. Gilchrest (R-MD), Peter DeFazio (D-OR), W.J. “Billy” Tauzin (R-LA), Loretta Sanchez (D-CA), Darlene Hooley (D-OR), Bob Filner (D-CA), Susan A. Davis (D-CA), Ronnie Shows (D-MS), Virgil Goode Jr. (I-VA), Bobby Scott (D-VA), Tom Davis (R-VA), Robert Brady (D-PA), Frank A. LoBiondo (R-NJ), Ed Schrock (R-VA), Jim Saxton (R-NJ), Adam Smith (D-WA), John E. Baldacci (D-ME), Neil Abercrombie (D-HI), Jennifer Dunn (R-WA), James H. Maloney (D-CT), John B. Larson (D-CT), Jo Ann Davis (R-VA), William Jefferson (D-LA), Robert A. Borski (D-PA), Peter Deutsch (D-FL), Robert A. Underwood (D-GU), Robert E. Andrews (D-NJ), Richard Baker (R-LA), Lane Evans (D-IL), Bennie G. Thompson (D-MS), Eva M. Clayton (D-NC), Mike McIntyre (D-NC), Chaka Fattah (D-PA), Roger F. Wicker (R-MS), Norman D. Dicks (D-WA), Peter J. Visclosky (D-IN), Bart Stupak (D-MI), John P. Murtha (D-PA), Bob Goodlatte (R-VA), and Rick Boucher (D-VA).
Senator Collins Sounds Alarm on U.S. Naval Fleet
Senator Susan Collins (R-ME) went to the Floor of the Senate to remind her colleagues to, “take a hard look at the current naval shipbuilding rate and our shrinking industrial base.” “The numbers are astonishing,” she said. “The U.S. Navy has shrunk from a fleet of 594 ships in 1987 to 315 ships today, while during the same period, deployments have increased more than 300 percent. Regional Commanders-in-Chief have repeatedly warned that the fleet is stretched perilously thin and needs to be increased to 360-ships to meet present mission requirements.”
Senator Collins added, “At the current low rate of production, the cost per ship will go up and the efficiency at the yards will go down. The new Administration and this Congress will be faced with the challenge of rebuilding and recapitalizing the Nation's naval fleet. The numbers are just as clear as can be: At the present rate of investment our Navy is heading toward a 200-ship fleet, which is alarmingly inadequate.”
Congressman Skelton Calls For A Larger Navy
On Thursday April 5, Representative Ike Skelton (D-MO), Ranking Member of the House Armed Services Committee, spoke on the House Floor calling for an increase in the build rate for naval ships, “Demand for naval forces has not gone away with the Cold War; it has increased. Yet, at current build rates, the overall fleet will sink below 300-ships before the decade is out, on a course for Davy Jones’ locker. I am not much given to dramatic statements, Mr. Speaker, but let me say this clearly: America should rebuild its Navy, and we should begin now.”
Representative Skelton sighted the important role of, “American presence that helps to avoid war; presence in peacetime, at pier side, showing our allies tangible proof of American support and serving notice to all that America is not thousands of miles away, it is just over the horizon.” Representative Skelton urged the Administration to have a larger Navy in its budget this year and noted that, “with support in the Administration budget, Congress will follow.” The Congressman concluded his floor speech by saying, “To provide presence, we need hulls. To engage in the littorals, we need hulls. To do the job we ask the Navy to do, we need hulls.”
Congressman Taylor Defends the Jones Act
In a letter to Speaker of the House Dennis Hastert (R-IL), Representative Gene Taylor (D-MS) expressed his dissatisfaction with the recently passed H.R. 1098, Maritime Policy Improvement Act, because of the twenty-five (25) waivers to U.S. coastwise trading laws, commonly referred to as the Jones Act, contained in the legislation. Representative Taylor noted in his letter, “United States Maritime Law, specifically the Jones Act, is designed to preserve the American Shipbuilding and Maritime Industries. The law requires that every one of the vessels waived in H.R. 1098 should have been built in U.S. shipyards, which employ American citizens. The law requires that every one of them should be owned and crewed by Americans, which requires U.S. Coast Guard inspection and compliance with U.S. safety and environmental regulations. Instead today’s so-called Maritime Policy Improvement Act allows those vessels to skirt right past the Jones Act requirements.”
In an interesting turn of circumstance, after the House passed H.R. 1098, Transportation Secretary Norman Mineta made the Bush Administration’s first public statement on the importance of the Jones Act declaring that the law must be maintained as “an essential element of U.S. maritime policy that provides important economic and national security benefits to the nation, such as support of the U.S. shipbuilding and ship repair industries and the maintenance of a labor base of skilled American mariners.”
Industry News
Bath Iron Works To Invest In Waterfront
Allan Cameron, President of Bath Iron Works (BIW), announced that his company would invest the proceeds from the $3 million sale of its Portland dry dock back into the city’s waterfront. BIW agreed to put $2 million into the city’s new cruise ship terminal, an investment which is expected to generate additional private/public matching funds for the project. The remaining $1 million will be used for a revolving loan fund for pier maintenance and dredging along the waterfront.
Electric Boat To Supply Nuclear Repair Services
Electric Boat will set up and operate the Nuclear Regional Maintenance Department for U.S. Navy submarines at the New London Naval Submarine Base, Groton, CT. The one-year contract, worth $7 million, will provide project management, planning, training and radiological control services to support the maintenance and modernization of operational submarines.
Well Said!
“I don’t think we want to depend on shipbuilders in China to deliver our ships to keep this country and the ‘Free World’ free.”
Cynthia L. Brown, President, American Shipbuilding Association,
April 9, 2001 ABC WORLD NEWS TONIGHT Interview.
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