Military


Project America

In the wake of the events of 11 September 2001, the conferees on the FY2002 Defense Appropriations Bill expressed concern that future deployments of United States forces may expose personnel to the risk of terrorist attach similar to the bombing of Khobar Towers in Saudi Arabia and the Marine barracks in Beirut. Instead of building vulnerable fixed barracks for United States forces deployed in highly dangerous locations, the conferees believed the Navy should give the highest consideration to acquiring mobile, deployable assets, which could provide additional ``in situ'' hospital, housing, MWR, or command and control capability. The conferees recommended that the Navy expeditiously pursue the possibility of capitalizing MARAD loan guarantees for up to two multipurpose passenger ships presently under construction in a United States shipyard. The FY2002 Defense Appropriations Bill was passed by the Congress on 20 December 2001.

Though no names were mentioned, there are only two major shipbuilders in the US, and of the two, Northrop is the only one that builds cruise ships. The company's Ingalls Shipbuilding subsidiary, was acquired by Northrop in 2001 when it purchased Litton Industries. Ingalls had been building a pair of ocean liners for American Classic Voyages Inc. [AMCV]. AMCV, the largest US-flag cruise company, filed for bankruptcy-court protection in October 2001, citing the falloff in travel after the Sept. 11 terrorist attacks.

A key component of President Clinton's National Shipbuilding Initiative (NSI) was the Department of Defense's Maritime Technology Program (MARITECH), authorized by Congress in 1993 to facilitate advanced commercial shipbuilding in US yards and transition certain US shipyards from dependence on military construction to the commercial market. In 1994, Congress appropriated Department of Defense funds to develop designs for cruise ships that could be refitted for war, if needed. Under MARITECH, two cruise ship design projects were completed.

Ingalls began pursuing a return to the cruise ship market in 1995, when the company initiated a MARITECH (now known as the National Shipbuilding Research Program, or NSRP) project that developed a concept design and build strategy for a contemporary 2,000-plus passenger vessel.

The US-Flag Cruise Ship Pilot Project was enacted in October 1997, as Section 8109 of Public Law 105-56, the Department of Defense Appropriations Act for Fiscal Year 1998. The Cruise Ship Pilot Project Statute, sponsored by United States Senator Daniel K. Inouye (D-Hawaii). The Pilot Project was an extension of the National Shipbuilding Initiative (NSI), designed to jump start cruise ship construction in the United States, develop the US-flag cruise industry, and help reduce US shipyard dependence on Department of Defense construction.

The law creating the Pilot Project, formerly Great Hawaiian and later called Project America, provided that American Classic Voyages sign a binding contract with a US shipyard to construct at least two state-of-the-art, oceangoing cruise vessels, with required delivery of the first vessel by 2005, and the second by 2008. AMCV could temporarily re-flag an existing foreign-flag cruise ship for operation under the US-flag with US crews while the new ships are constructed in order to further develop market demand in the highly competitive Hawaii tourism market. This granted a legal 30-year monopoly for American Classic Voyages to operate as the only US-flagged operator among the Hawaiian islands.

Senator John McCain questioned the merits of the "Project America" at the time the special legislation was considered, and went as far as to introduce an amendment to the fiscal year 1998 Department of Defense appropriations bill to remove the monopoly language. Based on the information available at the time, he believed that the project was more likely to fail than to succeed, and he called the monopoly language an "egregious example of porkbarrel spending."

The US Department of Defense supported the US-Flag Ship Pilot Project. Commercial cruise ship construction under Project America will save the US Navy $40 million for each ship through reduced US shipyard overhead costs contributing to a more efficient and effective national defense, according to Secretary of the Navy Richard Danzig. Commercial cruise ship construction under Project America will save the US Navy "tens to hundreds of millions of dollars" through reduced US shipyard overhead costs, according to Deputy Defense Secretary John Hamre.

American Classic selected from three yards -- Avondale, Litton Ingalls and NASSCO -- based on preliminary design, shipbuilding strategies and price. On 09 March 1999 AMCV signed a contract with Ingalls Shipbuilding. Ingalls teamed with Finland's Kvaerner Masa-Yards for the project under a fixed-price contract, with Kvaerner Masa provided planning and design expertise. In what is believed to be another first for an American yard, these ships will be built to dual class under both Lloyd's Register and American Bureau of Shipping [ABS] rules. On 06 October 1998 American Classic Voyages, Inc. and Litton's Ingalls Shipbuilding division announced that the two companies were engaged in detailed negotiations for the construction of the cruise ships. These were the first major American built cruise ships in over 40 years and the largest ever constructed in the United States. The last passenger cruise ships built in the United States, the SS Brasil and the SS Argentina, were built by Ingalls and delivered to Moore McCormack Lines in 1958.

At approximately 840 feet and 71,000 gross tons [gross tons measure the entire internal cubic capacity of the ship expressed in tons of 100 cubic feet to the ton], the ships were projected to carry 1,800-2,000 passengers and 570 crew. The AMCV ships were planned to be PANAMAX vessels (the largest able to transit the Panama Canal). Because the maximum beam for the ships passing through the canal is 32.31 meters, the generally specified beam is 32.2 meters [104.5 feet]. Ship with this beam are called Panamax vessels. The maximum draft for ships passing through the canal is approximately 12 meters [39 feet]. The ship design incorporated five Fire Zones, incorporated 18,000 LT [long tons] of steel and provide accomodation for 6,300 LT deadweight [deadweigh is the total lifting capacity of a ship expressed in tons of 2240 lbs, the difference between the displacement light and the displacement loaded]. The structural weight is in the order of 50% of the vessel's Lightship weight, of which a third can be superstructure.

On 12 April 1999 the Maritime Administration (MARAD) of the US Department of Transportation committed to guaranteeing as much as $1.1 billion, or 87.5 percent of the total cost of construction of three vessels, should American Classic Voyages exercise its option to have Ingalls build it a third liner. Under the Title XI program -- formally known as the Federal Ship Financing Guarantee Program - the Maritime Administration provides debt guarantees to build ships in American shipyards. Under the program, shipbuilders can borrow from investors at low cost and with little risk. Project America involved more than $1 Billion in Title XI loan guarantees, eclipsing by almost a factor of five the previous largest Title XI project. The Maritime Administration (MARAD) has provided financial assistance to US shipowners for over 40 years through the Federal Ship Financing Guarantee Program (Title XI) and the Capital Construction Fund (CCF).

On 10 October 2000 the keel was laid for "Project America Hull #1" at Litton Ingalls, part of the Litton Ship Systems Group. Under the Project America initiative, Ingalls was building two 1,900 passenger, 72,000-ton cruise ships, with an option for a third. The three ships were worth a total potential value of $1.4 billion. The first two ships were to begin cruising in 2003 and 2004.

The design of the state-of-the-art luxury cruise ships, 840 feet long, embraces all the amenities of modern cruise ship luxury. With 950 cabins and a crew of approximately 650, the ships are designed for 1,900 passengers. Each vessel will feature a five-deck-high atrium, a 1,060-seat dining room, an 840-seat theater, a 590-seat cabaret lounge, and a uniquely Hawaiian outdoor performance stage. The ship will have 85,850 square feet of open deck space. To aid in the efficient construction of the cruise ships, Ingalls engaged in a $130 million construction project at the shipyard. In addition to covering some 300,000 square feet of assembly space, the shipyard will add a mammoth crane capable of 600-ton lifts. The crane, which will hover over the shipyard, will be 411 feet wide and 329 feet high.

During the first year of construction, Project America fell a year to a year-and-one-half behind schedule. The project faced a number of challenges, including delays in completion of the 600 ton crane [causing module blocks to be built smaller than planned], steel delivery problems, compatibility of Scandinavian equipment into an American vessel, and the requirement that all measurements be in Imperial (US standard) units.

In 2001 the Bush administration proposed ending funding for the Title XI Maritime Guarantee Loan Subsidy Program, calling it a corporate subsidy that everyday taxpayers should not have to support. But in June 2001 a bi-partisan group of 38 senators, including ten members of the Senate Appropriations Committee, signed a letter circulated by Senator Lott calling for a three-fold increase in funding for the program. The budget goes to a reserve fund which allows the government to guarantee about $20 in loans for every $1 in the reserve.

By July 2001, the first ship was more than 20 percent complete, with more than 4,500 tons of steel erected on-ship. In August 2001, the company successfully reached an agreement with Northrop Grumman on the continuation of construction of the Project America cruise ships. Delivery was to be a year later than planned -- The two Project America ships were to be added to AMCV's United States Lines' fleet in 2004 and 2005. And the price per ship increased by $19 million [from the original $440 million] to cover changes in the interior finish [interior work constituted 35% of the total cost].

On 21 September 2001, under the Settlement Agreement between AMCV and Northrop Grumman's Ingalls Shipbuilding, MARAD agreed to assume the outstanding Title XI debt of $185 million on the first of the two cruise ships under construction at Ingalls in the event of an AMCV bankruptcy, and to complete the vessel after the issue of the remaining Title XI debt of $350 million.

On 19 October 2001 American Classic Voyages announced that it had filed a voluntary petition for reorganization under Chapter 11 of the US Bankruptcy Code. The petition listed total assets of $37.4 million and total liabilities of $452.8 million. The cruise line's reorganization petition indicated it has more than 1,000 creditors, including the Department of Transportation. At that time AMCV said it intended to work with Northrop Grumman Corporation and the US Maritime Administration with the goal to maintain construction on the two Project America ships.

However, within days MARAD pulled its loan guarantees and work on the ships stopped. The Maritime Administration made a proposal to Northrop Grumman that would have allowed continued Title XI funding, with a restructuring of financial arrangements to provide greater protection for taxpayers in light of the bankruptcy, but the Northrop Grumman Corporation rejected this proposal. AMCV filed bankruptcy before the remaining Title XI debt of $350 million was issued. Otherwise, MARAD would have been legally obligated to complete the vessel at an additional loss to the taxpayers. On October 29, MARAD formally announced that it was not legally required to fully fund the construction of the first ship at Ingalls Shipbuilding. Ingalls then suspended work on the ships and furloughed about 1,250 workers [of the 1,600 workers on the project].

The Maritime Administration has $182 million in government guaranteed debt on five existing American Classic Voyages vessels that were in service in Hawaii, the East Coast, and the Northwest Coast, and $185 million so far on the first of two ships currently under construction at the Ingalls Shipyard.

The Project America Ship I was variously estimated at between 37 percent and 50 percent completed by late 2001. When construction halted in October 2001, parts for Project America Ship II had been ordered, including engine and drive shaft, but the keel hadn't been laid. As of mid-2002 the hull of the first ship was not floatable; it had neither a completed bow or stern.

In early 2002 the Navy began reviewing the possibility of using the ships as floating command-and-control centers, in response to the December 2001 Congressional guidance.

Although the idea of converting a cruise ship into a Command Ship has a high giggle factor ["Navy Loveboat"], and although the proposal has the appearance of a corporate bailout by the government, this idea is not entirely without merit.

Under the Joint Command Ship (JCC(X)) the Navy was already planning to build several new command ships to replace existing ships of this type, and these plans called for constructing the new replacement ships in the same timeframe as the Project America ships could be completed for the military. Under previously discussed plans, the new JCC(X) ships would have been modified version of the LPD-17 San Antonio class ships, already under construction at Ingalls. Consequently, the question is not so much whether Ingalls would be building new Command Ships, but rather what hull design would be used as the platform for these new ships.

The existing Project America hull design would certainly require modifications, to include provisions for large military helicopters and associated support hangar accomodations. Other interior spaces would have to be modified as well to support Command ship functions. There are no firm estimates as to the projected unit cost of the JCC(X) class based on the LPD-17 San Antonio hull. However, the LPD-17 San Antonio itself is presently estimated to cost about $800 million. This suggests that the $450 million cost of the Project America hull, even assuming addition modification costs, would be no more expensive than a fully equiped JCC(X) based on the LPD-17 hull.

The Project America hull has an overall length of 840 feet, versus the 684 foot length overall of the LPD-17 San Antonio class. Either ship would be larger than the existing Command Ships, which range in length from 521 Feet [AGF-3 USS La Salle] to 634 feet [LCC 19 Blue Ridge class], but the Project America hull is obviously significantly larger. The additional size might either represent an opportunity for future growth in capacity, or a penalty in operating costs associated with excessive size. However, the frequently cited 72,000 gross tons of the Project America design, a measure of the total volume of the ship, is not directly comparable to the 25,000 ton displacement of the LPD-17, which is a measure of the total weight of the ship, not volume. Although the Project America design is larger than the LPD-17, it is not three times larger, as might be surmised by comparing gross tonnage with displacement tonnage.

One issue to be addressed by the Navy would be the construction standards of the Project America design, which was built to Joint ABS/Lloyds Classification standards rather than US Navy military standards. The use of conmmercial standards to build military ships has been the focus of some debate within the shipbuilding industry, particularly in the United Kingdom. In the United States, the practice has been that Military Sealift Command ships are built to commercial standards, while US Navy warships are built according to military design standards. It is not evident, however, that the relatively benign operating evironment normally associated with Command Ship operations would require military standard damage control provisions, or that the existing Project America design could not be modified to meet such requirements.

In April 2002 it was reported that Chief of Naval Operations Adm. Vernon Clark had concluded that the Navy was not interested in the two cruise ships. The Navy reached the decision after examining the half-built cruise ship that Northrop was building at Pascagoula.

Representative Gene Taylor, the Mississippi Democrat whose Congressional district includes the Pascagoula shipyard, led the push during 2002 for the Navy to buy at least the ships. Taylor, a senior member of the House Armed Services Committee, proposed using the ships as a floating military barracks. Rep. Taylor claimed that converting AMCV's two unfinished cruise ships to military barracks could save the government millions of dollars in rent when troops are deployed overseas. "When you have a contingency," he said, "it makes sense that rather than build temporary buildings you're going to leave behind, to float a ship in there and use it as a barracks." Taylor said the Department of Defense has chartered either cruise ships or quarters barges for military units on almost a continuous basis since 1990. The cruise ship would offer more space and better facilities than overseas barracks, and could provide a quick escape if anti-American sentiment erupted.

Subsequent to the demise of "American Classic Voyages" the ship was purchased by Norwegian Cruise Line and has been lengthened and completed at a German Shipyard.



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