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Names can confuse. The San Francisco Navy Yard was located on Mare Island; the New York Yard at Brooklyn; the Philadelphia Yard, on League Island; the Boston Yard, at Charlestown; the Norfolk Yard, at Portsmouth, Va.; that of Portsmouth, Me., at Kittery; while those of Washington and Pensacola are where their names would indicate.

There are over 280 privately owned firms of varying capabilities, employing over 98,000 workers, involved in shipbuilding and ship repair in the United States. However, only 43 yards are capable of dry-docking vessels of 122 meters in length or over, and only 6 shipyards are building Navy combatant ships. Since 1980, major shipbuilding in the United States has been maintained predominantly by construction of Naval vessels, but with the end of the Cold War, the Navy's construction program has been significantly reduced.

The benchmark used to track the U.S. shipbuilding industry is the U.S. Major Shipbuilding Base (MSB). The MSB is defined as those privately owned shipyards that are open and have at least one shipbuilding position consisting of an inclined way, a launching platform, or a building basin capable of accommodating a vessel 400 feet or more in length. With few exceptions, these shipbuilding facilities are also major repair facilities with drydocking capability.

As of January 1, 1999, there were 19 major shipbuilding facilities in the United States. Employment in the U.S. shipbuilding and repair industry, as of December 1998, was 100,300, up 1,700 from 1997. The MSB shipyards employ about 60 percent of the total work force of the shipbuilding and ship repair industry. The remaining 40 percent were in the 550 smaller establishments with 10 or more employees. In addition, as of October 1998, 14,473 people were employed in the four USN and one USCG shipyards.

Shipbuilding History

From the years following the Civil War to the early 20th century, the U.S. shipping and shipbuilding industries declined dramatically. The small amount of trade that occurred was concentrated in the Great Lakes and coastal regions of the United States. The majority of the foreign trade market was left to the highly experienced and organized countries of Germany and Great Britain. From a military standpoint, the U.S. preferred to maintain small armed force units and remain uninvolved in foreign affairs and had little desire to establish a fleet of ships as part of national security.

Expansion of overseas markets lead to the Navy Act of 1883, which called for construction of steel cruisers and lead to the construction of the first armored ships of the U. S. Navy. However, the U. S. still embraced a defensive, nearshore strategy with little thought of a strong presence in distant water, hence a limited navy. Most ocean trade was carried by foreign vessels and the merchant marine remained small. In 1898, with the coming of the Spanish-American War and the acquisition of overseas territories, Congress further expanded the Navy and by the first years of the new century, the U.S. ranked as an oceanic power. However, the world in the early years of the new century found itself in a naval arms race as major world powers constructed newer and larger battleships with which to challenge each other on the high seas.

To strengthen the U.S. economically and militarily, Congress passed two acts authorizing swift construction of a maritime and wartime fleet in 1916 and 1917, respectively. The power of requisition was conferred on the President by chapter 29, 40 Stat. 182, approved June 15, 1917, known as the Emergency Shipping Act (Comp. St. 1918, Comp. St. Ann. Supp. 1919, 3115 1/16 d). The act empowered the President (a) to order from any person for government use ships or ship material of kind and quantity usually produced by such person; (b) to requisition contracts for the building of ships; (c) to require the owner of any shipbuilding plant to place at the disposal of the United States the whole or any part of the output of the plant; (d) to requisition any shipbuilding plant or part thereof; (e) to requisition any ship in process of construction; and compliance with all orders issued under the act was made obligatory. By executive order of July 11, 1917, he delegated these powers to the United States Shipping Board Emergency Fleet Corporation.

The government shipping program prompted the formation of several new shipbuilding companies throughout the nation that soon assembled a massive fleet of ships, the most ever produced in the world until that time. In October 1918 alone, the shipyards delivered 391,000 tons of vessels.

After the war, the US shipbuilding industry suffered from excess capacity and was mired in a worldwide shipping depression. In addition, in order to limit budget expenditures and believing that the naval arms race helped lead to World War I, major naval powers signed the Washington Naval Treaty in 1922, and the London Naval Treaty of 1930, limiting the construction of naval vessels. The industry survived by concentrating on ship repair and maintaining an active peacetime merchant marine.

By 1932 there was no shipbuilding in the US to speak of outside of naval shipbuilding. This is divided amongst the following shipyards (exclusive of the navy yards): Bath Iron Works, Bath, ME; Bethlehem's Fore River Plant, Quincy, MA.; Bethlehem's Union Iron Works, San Francisco, CA; Electric Boat Co., New London, CT;; Federal Shipbuilding, Kearny, NJ; New York Ship, Camden, NJ; Newport News Shipbuilding, Newport News, VA; and United Drydocks, Staten Island, NY. At that time these yards employed 19,000 men. There were 8 navy yards doing government building, employing 25,000 men.

In 1936, Congress created the US Maritime Commission (presently known as the Maritime Administration) through the Merchant Marine Act of 1936. The Maritime Commission embarked on an expanded ship construction program in the late 1930s and accelerated its efforts when U.S. involvement in the war appeared likely. In 1940, Congress enacted the Naval Expansion Act, which established a "Two-Ocean Navy". One year later, President Franklin D. Roosevelt authorized the construction of 200 ships in what was the start of the Emergency Program.

The United States ended World War II with a vast complex of shipyards to support its wartime program of naval and merchant construction. This complex included 9 government- owned and -operated shipyards and approximately 132 privately owned shipyards. The government invested over a billion dollars in this complex; half of the funds were provided by the Navy for 80 yards, the other half by the Maritime Commission for 43 yards. Ninety percent of the funding went into the 60 private yards in which the government had invested more than $5 million each for land and facilities. At its peak, the shipbuilding industry employed 1.7 million workers, up from 102,000 in 1940. The Navy shipyards, like the arsenals of the Army, tended to be all-purpose production facilities, able to handle any of the fleet' s needs, including new ship construction, the fabrication of components and equipment, repair, overhaul, and regular maintenance.

After World War II there was too little commercial business to keep private ship-yards open. Believing that the survival of the private yards was essential to America's military and economic strength, the government began directing more naval construction to those yards and away from the Navy shipyards. Between 1955 and 1961, of the 107 new warships were built by private yards. By fiscal year 1961, 60 to 70 percent of total funding for naval construction (warships and nonwarships) was directed toward the private yards. The Navy's own yards were primarily relegated to maintenance and repair, although the overhaul of auxiliary ships such as tankers was also assigned to private yards in the late 1950s.

By the 1960s, the Navy shipyards were under severe criticism for being more expensive than private yards. Complaints were persistent that their labor costs were higher than those in private yards -- which was not borne out by studies on the subject -- and claims were made that the latter could do the work of construction, maintenance, and repair more economically. The Navy defended the navy yard complex, arguing that if its yards were uneconomical, it was because they could not pick and choose the work they wanted to perform. Each yard maintained a full complement of facilities to perform all necessary tasks, and even if not used in peacetime, these facilities would be essential in an emergency, when private yards could not be counted on.

Ultimately, few navy yards were actually closed, probably because they were large establishments employing almost a hundred thousand people across the country in 1961 (13,000 at the New York Navy Yard alone) and, in many cases, they were critical to the local economy. The Navy did lose several shipyards during the 1960s and early 197Os, including Brooklyn and Boston, but these yards were old and their facilities too cramped and antiquated for the modern Navy. Other yards, including Portsmouth, were slated to be closed but later given a reprieve.

Private yards began enjoying their biggest peacetime boom in their history, thanks to the Merchant Marine Act of 1970. After having pleaded poverty to force the closure of three Navy shipyards and the end of new construction at the others, the private yards demanded more favorable terms from the government or refused Navy work altogether. The Navy did take delivery of the huge nuclear-powered Nimitz-class aircraft carriers starting in 1975, but with the closing of Boston Naval Shipyard and the privately owned New York Shipbuilding Corporation, only one yard in the country, Newport News Shipbuilding and Drydock Company in Virginia, had the facilities to handle such work.

The United States shipbuilding industry has made progress in its reemergence as an active participant in the commercial shipbuilding market. The National Shipbuilding and Conversion Act of 1993 and the expanded Title XI Federal Ship Financing Program provide one of the primary stimuli for this evolution of the U.S. shipbuilding industry and its ability to aggressively enter and compete in the market. As of May 1999, the U.S. Maritime Administration (MARAD) had applications for 17 projects pending, including three shipyard modernization projects - as well as projects for tankers, ferries, various offshore vessels, barges, and tug/supply vessels - for an estimated cost of $1.3 billion, with Title XI guarantees totaling $1.1 billion.

The US government and the shipbuilding industry have made great strides in their efforts toward industry revitalization and market transformation. The small or mid-sized shipyards continue to build an assortment of vessels for use on the inland and coastal waterways, as well as for foreign markets. The major change has been the surge in activity relating to the offshore exploration, drilling, and servicing sectors. These shipyards are expected to continue to prosper for the next decade.

The termination of the US construction-differential subsidy program in 1981 significantly curtailed the ability of US shipyards to compete successfully for international commercial shipbuilding contracts with foreign shipyards, many of which are heavily subsidized by their governments. The effects of the elimination of these subsidies were largely offset, however, by the initiative to expand the US Navy fleet to 600 ships.

In late 1993, Congress amended the loan guarantee program under Title XI of the Merchant Marine Act, 1936, to permit the US government to guarantee loan obligations of foreign vessel owners for foreign-flagged vessels that are built in US shipyards. Enabling shipowners to obtain financing on more favorable terms than those currently offered by other countries having similar guarantee or subsidy programs, these 1993 amendments attracted foreign owners and created foreign and domestic commercial shipbuilding opportunities for US shipyards.

A December 1994 trade agreement among the United States, the European Union, Finland, Japan, Korea, Norway and Sweden (which control over 75% of the market share for worldwide vessel construction), negotiated under the auspices of the Organization for Economic Cooperation and Development (the "OECD Agreement") seeks to eliminate government subsidies provided to commercial shipbuilders.

Merchant Marine Act of 1920, as amended [the "Jones Act"] requires that ships engaged in coastwise trade must be owned by a US company, crewed by US citizens and built by a US shipbuilder. Legislation seeking to rescind or substantially modify the provisions of the Jones Act are introduced in Congress from time to time, although it is unlikely the Jones Act will be rescinded or materially modified in the foreseeable future.

There are principally six private US shipyards that compete for contracts to construct or convert military vessels. By 2000 two of these companies were subsidiaries of much larger corporations that have substantially greater resources than the independent shipyards. The reduced level of shipbuilding activity by the US Navy during the 1990s resulted in significant workforce reductions in the industry, but almost no infrastructure consolidation. The general result has been fewer contracts awarded to the same fixed number of large shipyards.

As of 2001, there were eight active shipbuilding yards in the United States. Six of those shipyards, referred to as the Big Six, were the primary builders of large U.S. Navy and commercial vessels. Those shipyards are Avondale Industries in New Orleans, Louisiana; Bath Iron Works in Bath, Maine; Electric Boat in Groton, Connecticut; Ingalls Shipbuilding in Pascagoula, Mississippi; National Steel & Shipbuilding Company in San Diego, California; and Newport News Shipbuilding in Newport News, Virginia. In 1998, the Big Six accounted for two-thirds of the industry's total revenue (over $6.7 billion), and performed nearly 90 percent of all military work. Ninety-five percent of the revenues of these shipyards were defense-related. The Big Six also accounted for about 11 percent of the industry's commercial revenues from 1996 to 2000.

By 2005 two companies owned the Big Six shipyards. In 2001, Northrop Grumman purchased Newport News Shipbuilding and Litton Industries, which included the Avondale and Ingalls shipbuilding yards. General Dynamics owns Electric Boat, Bath Iron Works, and National Steel & Shipbuilding Company.

With respect to commercial vessels that must be constructed by a US shipyard under the Jones Act, there are approximately 20 private US shipyards that can accommodate the construction of vessels up to 400 feet in length. Because of the current overcapacity at US shipyards, the current small volume of commercial work available, and the fact that most contracts are awarded on the basis of competitive bidding, price competition is particularly intense. Since 1977, the number of privately owned major shipbuilding yards in the United States has fluctuated between 17 and 32. This includes combined statistics for active shipbuilders and shipyards with build positions. As of 2001 a total of 17 of the shipyards reported on had not constructed a major ocean-going vessel in the previous 2 years.

Ship Repair

The naval shipyards under the headquarters command of the Naval Sea Systems Command (NAVSEASYSCOM) provide the organic industrial base to the Navy for the repair, overhaul, alteration, and modernization of surface ships and submarines of the Fleet. This capability is used primarily to overhaul vessels on a scheduled availability basis to ensure that the highest state of capability and readiness is maintained in the Fleet. The naval shipyards also provide the foundation upon which to mobilize, and are therefore an essential part of the Fleet's readiness for war. Additionally, the naval shipyards perform depot repairable work and serve as engineering planning yards for applicable ship classes.

The government-owned Puget Sound West Coast shipyard could refuel nuclear-powered carriers if it made substantial investments in its facilities, personnel, and training. The Portsmouth government-owned US East Coast shipyard is presently involved in nuclear refueling, overhauling, and de-activation of Los Angeles-class submarines.

The Fleet Modernization Program is a multi-billion dollar per year program for installing alterations and modernizing the US Navy's active and reserve ships. As the defense department has downsized both budgets and resources in the 1990s, the fleet has been reduced from a high of nearly 600 ships in the mid-80's to 260 ships worldwide. One avenue to maintaining the US Navy's sea power is ongoing modernization and continual improvement of the fleet's ships and equipment. The levels of management necessary to coordinate the FMP are spread across various organizations. These include CNO, NAVSEA, and the Fleet Commands.

During the late 1990s there was a significant amount of consolidation within the US ship repair industry [taking the situation to the extreme, one might wonder if one company would ultimately own all the shipyards in the United States]. This merger activity raises important issues in terms of contingencies, competition and quality. Corporate change can have a major impact on product quality. Often times there are important efficiencies to be realized through consolidation.

The US private-sector shipbuilding industrial base comprises 36 Master Ship Repair Agreement (MSRA) holders and 116 holders of Agreements for Boat Repair (ABRs) as of 2001. The ship-repair companies with MSRA/ABR certifications from the SUPSHIPs are fully capable of conducting all aspects of shipboard work with the capability and expertise the 21st-century fleet requires.

Master Ship Repair Agreement (MSRA) and Agreement for Boat Repair (ABR) are generic contractual documents, intended to ensure that only eligible bidders compete for repair work, and to reduce the effort required to produce individual work specification packages.

These documents are issued by NAVSEA 071 to qualified firms after an audit / survey board visit. MSRA/ABR certification does not automatically ensure a contractor can handle a particular repair package. The Procuring Contracting Officer will often require a pre-award survey to verify the firm's capabilities.

Master Ship Repair Agreement (MSRA) apply to shipyards that have management capability and facilities capable of overhauling a FFG or larger, performing 55% or more of the job with their own work force and facilities, and having access to a Navy certified dry-dock within the firm?s immediate geographic area.

Agreement for Boat Repair (ABR) apply to firms that have the ability to schedule and control boat/craft repairs, including repair of steel, aluminum, fiberglass or wood-hulled vessels, and can dry-dock the craft. ABR holders can also perform repairs on larger ships, including the RAV, TAV, PRAV, or component or pier side repairs.

The board thoroughly examines all aspects of each MSRA/ABR candidate and points out shortcomings needed for certification/removal. The intent is to help the firm meet the requirements rather than disqualify, so as to increase ship repair competition.

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Page last modified: 05-07-2011 02:51:01 ZULU