American Shipbuilding Association

House Authorizes the Procurement of 8 Ships

On May 17th, the House of Representatives passed its version of H.R. 1585, the FY 2008 National Defense Authorization Act. The bill provides $15.1 billion for the procurement of eight ships. The House bill was the first of four FY 2008 defense spending bills to be passed this year.    

The House bill fully funds the six ships contained in the Administration’s budget request, which includes one aircraft carrier, one Virginia class attack submarine, one amphibious transport dock ship, two littoral combat ships, and one combat force logistics ship in addition to funding for the completion of the first two multi-mission land attack destroyers. The Administration had initially requested funding for seven ships, but submitted an amended request to Congress asking that one of the three littoral combat ships be removed. In addition to the six ships requested, the House authorized the addition of one LPD-17 amphibious transport dock ship and one T-AKE combat force logistics ship to the budget. Renewing alarm that the U.S. attack submarine fleet will drop below the established minimum force structure of forty-eight submarines in 2020, the House Armed Services Committee added $588 million for the advance purchase of major components for a second Virginia class submarine in order to accelerate the procurement to two submarines per year prior to the Navy’s current plan to do so in FY 2012.

The report accompanying the House bill expressed the Committee’s concern that further disruption in the littoral combat ship (LCS) procurement plan may be counterproductive to efforts by the Navy and industry to control cost in the program.  The Navy was directed by Congress to submit a report analyzing the cost overruns on LCS and explain future procurement plans for the program

Congress Supports Domestic Manufacturer

The report accompanying H.R. 1585 expresses the need for this country to maintain a healthy U.S. shipbuilding industrial base, and the unease of Members of Congress regarding the increasing use of foreign-manufactured components on U.S. naval ships.  The report language urges the Navy to “consider the domestic industrial base for all significant components of ship construction when formulating shipbuilding programs and its long-term shipbuilding plan.”  

Shipyard Capital Investment Supported  

The House included legislation in the FY 2008 Defense Authorization Bill authorizing the Secretary of the Navy to provide capital expenditure incentives in shipbuilding contracts to encourage greater process and facility investments that will reduce the cost of shipbuilding programs. In March of this year, the House Seapower and Expeditionary Forces Subcommittee held a hearing examining ways to modernize U.S. shipyards and improve cost savings on naval ships.  Philip Teel, President of Northrop Grumman Ship Systems; Mike Toner, Executive Vice President of General Dynamics Marine Systems; and Cynthia L. Brown, President of the American Shipbuilding Association testified that while the shipbuilding industry is investing in facilities and improving efficiencies, industry is often limited from doing more because of low rates of naval ship production which fail to provide a return on corporate investments.

 To achieve greater facility investment, the House passed legislation encouraging the Navy to budget within each shipbuilding contract incentive fees for investment in facilities, processes, or training that will result in cost savings to the government. Annual reports are required to be submitted to Congress detailing any capital investment projects awarded and the anticipated cost savings to the government.

House Works to End Dependence on Foreign-Built Ship

Included in H.R. 1585 is legislation sponsored by Reps. Gene Taylor (D-MS) and Jo Ann Davis (R-VA) to stop the Department of Defense (DOD) from outsourcing America’s military sealift missions to foreign countries.  The provision would prohibit DOD from leasing a foreign-built ship for a period longer than two years.

DOD has been engaged in a practice of leasing foreign-built ships for one month shy of five-years.  These leases circumvent U.S. defense acquisition laws requiring that vessels for the Armed Forces be built in the U.S. and the Budget Enforcement Act of 1990, which limits the leases of capital assets.  There are presently six ships under leases of five years, minus one month.  Five of these vessels are on their second five-year lease contract.  Leases of almost ten consecutive years are evidence of a long-term, dedicated military requirement, which should dictate the construction and purchase of American-built ships.  By leasing foreign-built vessels rather than buying American-built ships, DOD is harming the U.S. defense shipbuilding industry, increasing the cost of combatant ships, and creating an unnecessary national security risk to Americans.

Under the House passed legislation, DOD would retain the power to lease foreign-built ships in an emergency or to satisfy short to medium term sealift requirements, but would be barred from entering into lease contracts that exceed two years in duration.   

Senate Urged to Support Limit Leasing Legislation

Senator Susan Collins (R-ME) is leading the effort in the Senate to stop the de facto purchase of foreign-built ships through long-term leases.  Senator Collins and fourteen of her colleagues have asked the Senate Armed Services Committee and Defense Appropriations Subcommittee to include the same limitation as that passed by the House of Representatives.

Joining Sen. Collins in support of ending DOD’s reliance on foreign-built ships are Senators Sherrod Brown (D-OH), Maria Cantwell (D-WA), Robert Casey (D-PA), Thad CochranChris Dodd (D-CT), John Kerry (D-MA), Herb Kohl (D-WI), Mary Landrieu (D-LA), Joe Lieberman (I-CT),  Trent Lott (R-MS), Jack Reed (D-RI), Olympia Snowe (R-ME), David VitterSheldon Whitehouse (D-RI). .

House Authorizes $30 Million for Title XI  

The House of Representatives has authorized an appropriation of $30 million for the Title XI Ship Loan Guarantee Program.  The Authorization is the last in a series of multi-year authorizations first contained in the fiscal year 2004 Defense Authorization Bill.  That legislation provided $30 million each year from fiscal years 2004-2008.  In the report accompanying H.R. 1585, the House Armed Services Committee cited an excerpt from the Merchant Marine Act of 1936 regarding the importance to America’s national security and economy to maintain a fleet of U.S.-built commercial ships.  The Committee reiterated the importance of Title XI Ship Loan Guarantees to satisfy this national objective.  Title XI provides small and medium sized ship owners with a federal guarantee of their commercial shipbuilding loans.  Funding for new loan guarantees is required to reverse the decline in U.S. ship construction and rebuild the commercial fleet to serve America’s waterborne commerce.

The $30 million authorization by the House is a positive step given that the program has not received an appropriation since FY 2003.  There are presently no un-obligated funds remaining in the Title XI account to satisfy the growing demand for commercial ships.  An appropriation is needed this year to ensure America’s energy and commercial transportation needs can be met by providing for the replacement and expansion of the aging Jones Act fleet of ships.

Senators Pledge Their Support for Commercial Shipbuilding  

Senators Mary Landrieu (D-LA) and Trent Lott (R-MS) are rallying their colleagues in the Senate to support an appropriation of $60 million in new loan guarantees for the Title XI Ship Loan Guarantee Program. Last year the Senate included $30 million for new Title XI loan guarantees.  Unfortunately, no monies were ultimately appropriated in conference with the House

In a letter to Senate Transportation Appropriation Subcommittee Chairwoman Patty MurrayChristopher Bond (R-MO), Senators Landrieu and Lott, joined by fifteen of their colleagues, are urging the Senate to appropriate $60 million in the FY 2008 Transportation Appropriations Bill.  Joining Senators Landrieu and Lott in support of Title XI include:  Senators Daniel Akaka (D-HI), Barbara Boxer (D-CA), Maria Cantwell (D-WA), Susan Collins (R-ME), Christopher Dodd (D-CT), John Kerry (D-MA), Herb Kohl (D-WI), Joe Lieberman (I-CT), Barbara Mikulski (D-MD), Jack Reed (D-RI), Olympia Snowe (R-ME), David Vitter (R-LA), Jim Webb (D-VA), Sheldon Whitehouse (D-RI), and Ron Wyden (D-OR) .

Industry News  

Senator Collins to Receive Shipbuilding
Industry’s Highest Honor

The American Shipbuilding Association will award Senator Susan Collins (R-ME) with the Herbert H. Bateman Award on June 6th.  Established in 2000, and named for the late Congressman Herbert H. Bateman (R-VA), the award is presented to individuals who demonstrate “continued, outstanding, and inspirational leadership in support of a strong American shipbuilding industrial base.”

Partners Excel in Sea Power Ambassador Recruitment  

The American Shipbuilding Association recognizes five Partners for their active recruitment of Sea Power Ambassadors.  The Sea Power Ambassador Program is a grassroots initiative to educate the American public and elected officials on the need to make rebuilding America’s Navy and Coast Guard fleets a national priority.

The following companies are recognized for their 2007 recruitment efforts:  AMSEC, LLC located in Virginia Beach, VA and San Diego, CA; Dresser Rand, with operations in Olean, Painted Post, and Wellsville, NY, and Houston, TX; Henschel located in Newburyport, MA; SPD Electrical Systems of Philadelphia, PA; and Marotta Controls headquartered in Montville, NJ. 

Sea Power Ambassadors are a coalition of individuals from across the country working to raise awareness that America needs a larger naval fleet, and to maintain its sovereign ability to design and build the ships for our security.  Show your support by registering today at www.seapowerambassador.org. 

Well Said!  

“The U.S. Navy is the only branch of our government that routinely employs all the elements of national power – diplomatic, informational, military, and economic.”

Captain Michael P. McMahon
U.S. Navy
“World Disorder and the Decline of Pax Americana”
Proceedings
May 2007