American Shipbuilding Association

AMERICAN SHIPBUILDER

Volume 15, Issue 4                                                                                 July 2009

House and Senate Mark-up Navy Shipbuilding Budget  

On July 2nd, the Senate Armed Services Committee completed work on its version of the FY 2010 National Defense Authorization Act (S 1390).  The Senate bill authorizes $11.7 billion for seven naval vessels; one ship and $400 million below the Administration’s request.  The House version of the legislation (HR 2647), which passed the House of Representatives on June 25th, authorizes $12.3 billion for eight vessels, which is an increase of $220 million to the budget request. 

The respective House and Senate bills authorize the Administration’s procurement request for: one Virginia attack class submarine, one DDG-51 class multi-mission destroyer, three littoral combat ships (LCS), and one joint high speed vessel.  The House bill also authorizes funding for the two T-AKE combat logistics force ships requested by the Navy.  In contrast, the Senate bill cut the funding request for the T-AKE class by $400 million, reducing the FY 2010 procurement request from two ships to one.  The House added $100 million to the Administration’s request for the advance procurement of the DDG-51 program and grants the authority for the Navy to enter into multi-year procurement contracts for additional DDG-51 destroyers.  The House bill also adds $60 million each in advance procurement for the eleventh LPD-17 amphibious transport dock ship and the first Mobile Landing Platform (MLP) ship, which will be part of the Maritime Prepositioning Force of the Future.  Both the House and Senate bills also authorize funding to complete the third DDG-1000 destroyer, and the tenth LPD-17.  Both of these programs were split-funded by Congress last year, with the direction given to the Navy to budget for their completion in FY 2010.  The specific dollar amounts for the major shipbuilding platforms are listed below.   

The House and Senate bills grant the Navy’s request to temporarily reduce the aircraft carrier force structure from 11 to 10 carriers.  Following the deactivation of the USS Enterprise in FY 2013, the carrier force structure will fall to 10 until the USS Ford is delivered in 2015.  However, in the report accompanying the House bill, the House Armed Services Committee requested that the Secretary of Defense submit a report to Congress along with the FY 2013 budget submission outlining the risks associated with retiring the USS Enterprise.  The Secretary of the Navy is also required to report on the impact to national security and the shipbuilding industrial base associated with the Navy’s plan to move procurement of the Ford class carriers from every four years to every five. 
Senate Adds Funds for Coast Guard Ships

The Senate, on July 9th, passed its version of the FY 2010 Homeland Security Appropriations Bill (HR 2892, as amended by S 1298), providing $735 million for surface ships under the Coast Guard’s Deepwater program.  On June 24th, the House of Representatives passed its version of the bill (HR 2892), funding the budget request of $591 for surface ships. 

The Senate bill provides $389 million for the National Security Cutter (NSC), an increase of $108 million above the President’s request for the program.  The Senate’s recommendation will fully fund the 4th NSC, and provide for the procurement of long-lead time materials for the 5th NSC.  In the report accompanying the bill, the Senate disagreed with the Administration’s decision to delay funding the 5th NSC, and cautioned that any delays in adding new cutters to the fleet will further stress the old vessels in operation.  Many of these legacy assets are frequently out of service due to unscheduled maintenance and repairs, thereby impeding the Coast Guard’s ability to perform its missions. The Senate affirmed its support of the NSC program and encourages the procurement of one NSC per year until procurement of the 8 planned ships is complete.  Though the House did not provide advance funding for the 5th NSC in its bill, in the report accompanying HR 2892, House Appropriators expressed similar concerns with any delays in delivering the new class of cutters to the Coast Guard’s fleet.   The House has ordered the Coast Guard to submit its plans to put into place a contractual structure for the remaining NSCs in order to ensure timely delivery and avoid added expense to the taxpayer. 

In addition to increasing the funding for NSC, the Senate added $8 million for the sustainment of the High Endurance Cutter fleet to ensure operational readiness until the National Security Cutters are delivered.  The Senate has directed that the increased funding be used for a pre-acquisition survey and design “to determine the requirements for a maintenance effectiveness project.”  A similar program is already in place for the Medium Endurance Cutter, which has increased “the fully-capable mission availability” of the fleet.  The Senate bill further adds $27 million to continue with the reactivation and extend the service life of the icebreaker USCGC Polar Star.  The Polar Star, one of only two heavy polar icebreakers owned by the Coast Guard, is not operational and has been in caretaker status since 2006.  In addition to reactivating the Polar Star, the Senate has directed the Coast Guard to use some of the funding to begin the survey and design for “either a new heavy polar icebreaker class or a major service life extension project for existing heavy icebreakers.”  The House did not provide any funding for polar icebreakers in its legislation. 

Secretary of Transportation Emphasizes Importance of U.S. Maritime Industry

On July 9th, the Congressional Shipbuilding Caucus, co-chaired by Representatives Gene Taylor (D-MS) and Rob Wittman (R-VA), co-hosted a meeting with Secretary of Transportation Ray LaHood to discuss the goals of the new Administration with respect to the U.S. maritime industry.  Other Members of Congress attending the meeting included Representatives Rodney Alexander (R-LA), Roscoe Bartlett (R-MD), Jo Bonner (R-AL), Madeleine Bordallo (D-GU), Henry Brown (R-SC), Joseph Cao (R-LA), Gregg Harper (R-MS), Walter Jones (R-NC), Steve Kagen (D-WI), Rick Larsen (D-WA), and Bobby Scott (D-VA). 

In his opening remarks, Secretary LaHood stressed the importance of America’s maritime transportation infrastructure, commenting that “the maritime industry is the economic engine of the country.”  He discussed some of the initiatives being pursued by the Department of Transportation, particularly investment in “America’s Marine Highway,” which he deemed a priority of the Administration.  The goal is to relieve congestion on the country’s surface highways and rail networks by shifting cargo transportation to America’s coastal and inland waterways.  Rep. Roscoe Bartlett applauded the initiative, noting the important role that the U.S. maritime industry plays in providing the lowest cost means of transportation.  Rep. Rob Wittman commented that while investment in the marine highway is a good idea, the role of shipbuilding must be factored into the program, and he stressed the importance of the Title XI ship loan guarantee program in financing ship construction. 

The Secretary acknowledged that while many maritime initiatives benefitted from the economic stimulus legislation enacted earlier this year, funding in support of commercial shipbuilding programs was omitted.  In order to elevate the importance of investing in America’s shipbuilding industrial base, the Secretary strongly urged Members of Congress to meet with the President’s economic advisors on the importance of shipbuilding as a tremendous engine for good-paying job creation across the country. 

Senators Support Title XI Funding

In a letter dated June 5th, Senators Mary Landrieu (D-LA) and Roger Wicker (R-MS), and fourteen other Senators sent a letter to Senators Patty Murray (D-WA) and Christopher Bond (R-MO), the Chairwoman and Ranking Member of the Senate Transportation Appropriations Subcommittee, respectively, urging support to include $60 million for Title XI loan guarantees in the FY 2010 Transportation Appropriations Bill.

The Title XI program is essential to providing affordable finance rates at reasonable terms and conditions to allow ship owners to replace and expand their fleets of ships to meet the nation’s energy transportation needs, domestic commerce requirements, and to serve as a military auxiliary fleet in times of emergency.  With the tightening of the credit market and hesitancy of lenders to agree to large commercial loans, the federal guarantee provided through Title XI has become even more important to rebuilding America’s transportation infrastructure.  Title XI will also play an instrumental role in America’s goal for energy independence.  For example, specialized vessels will also be required to construct offshore wind turbines and to service wind farms off America’s shores. 

In addition to Senators Landrieu and Wicker, the following Senators signed the letter in support of the Title XI loan guarantee program:  Senators Mark Begich (D-AK), Barbara Boxer (D-CA), Roland Burris (D-IL), Christopher Dodd (D-CT), Edward Kennedy (D-MA), John Kerry (D-MA), 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).

Well Said!

“…The strength and viability of our Navy depends on the American shipbuilder.  No one builds ships as capable or as tough as the American shipbuilder.”

Admiral Gary Roughead
Chief of Naval Operations
Testifying Before the Senate Armed Services Committee
June 2, 2009