T-AH 19 Mercy Class - Program History

Both Mercy Class hospital ships are converted San Clemente-class super tankers. The 89,700 ton deadweight San Clemente Class Tankers were built by the National Steel and Shipbuilding Co built in the years between 1974 and 1978. A total of 13 were constructed built for Aeron Marine Shipping Co, Third Group Inc, Chestnut Shipping Co, Overseas Shipholding Group. The Overseas Shipholding Group owned and operated 4 San Clemente class tankers (Overseas New York, Overseas Chicago, Overseas Washington and Overseas Boston).

The USNS Comfort was built at the National Steel and Shipbuilding Co. under her original name the S.S. Rose City (MA-301). The Rose City was one of the first San Clemente Class Tankers built, many called them the "super tankers". The Rose City keel plates were laid down on May 1975, and she was ready for service in 1976. USNS Mercy was originally the SS Worth, launched in 1976.

Mercy was delivered in 1986 and Comfort in 1987. This acquisition was founded in the important study in the late 1970s by the CNO called "Feasible Alternatives to Dedicated Hospital Ships" [ADHOS]. The ADHOS study provided a valuable, detailed outline of the characteristics that make a medical platform effective, as well as a methodology for comparison of alternative platforms. In addition, the ADHOS study provides details about the amount of space needed to provide definitive levels of medical care under various casualty-flow scenarios and specified evacuation policies.

Initially, planners studied the possibility of acquiring and converting the luxury liner SS United States to a hospital ship, but concluded the ship would not be adequate. Then the Navy approached the US shipbuilding industry, outlined its requirements for a hospital ship, including number of beds, surgical and laboratory facilities and overall space requirements, and solicited proposals.

But in March 1981, the Defense Department announced the cancellation of 16 RDT&E programs totaling $209 million, which had been in the previous administration's 1981 and 1982 budgets. In its October revision, DOD claimed credit for eliminating an additional seven Procurement programs and five RDT&E programs valued at approximately $1.6 billion. This included $10 million in Advance Procurement for the TAH hospital ship. The House and Senate Committees on Armed Services had recommended terminating or substantially reducing most of these programs. This, in conjunction with what the Appropriations Committees were likely to recommend, suggests that the impetus of these cancellations came from the Congress. In addition, two of the projects were not really being canceled; alternatives to the TAKX prepositioning ship and TAH hospital ship were to be pursued.

The Naval Sea Systems Command, to fulfill a stated need for a 2000 bed floating hospital facility, entered into a negotiated procurement for hospital ships, to be newly constructed or converted from existing vessels. Two ships were considered necessary, although the navy's initial plans, due to funding limitations, was to purchase one ship and retain an option for the second. Final contract award was to be made on a fixed-price basis, with compensation adjustments.

In 1982, the Navy set aside a total budget of $560 million for the acquisition and conversion of the two tankers into hospital ships. After an initial qualifying round, the Navy requested two offerors to submit design proposals for the hospital ships. Both offerors had proposed to provide ships converted from existing commercial vessels. Each case, the vessels proposed for conversion were originally built with construction-differential subsidies (CDS) given under authority of Title V of the Merchant Marine Act of 1936, 46 u.s.c. Secs. 1151-1161.

The T-AHX design (Phase II) solicitation included price proposal requirements, although the Navy would not request price proposals until after reviewing each offeror's designs. The original solicitation, issued January 27, 1983, required offerors to describe any Maritime Administration subsidies against the unconverted ships, to "separately identify *** the purchase price of the unconverted ships using the formula set forth in 46 U.S.C. Sec. 1212," and to certify that price proposals do not include amounts for unconverted vessels "in excess of the limits set forth in 46 U.S.C. Section 1212." These requirements were all deleted by solicitation amendment no. A001, march 15, 1983. The revised solicitation expressed the view that the navy, in accepting delivery of a hospital ship, would not be taking delivery of a CDS vessel, because of the vessel's altered form. The Navy alternatively expressed the view that section 802 of the Merchant Marine Act of 1936 (36 U.S.C. Sec. 1212) was not applicable to this particular procurement.

By letter dated march 25, 1983, the Commander of the Naval Sea Systems Command requested the opinion of the General Accounting Office on whether Section 802 of the Merchant Marine Act of 1936, as amended, 46 U.S.C. Sec. 1212, restricts the amount that the Navy may pay for hospital ships converted from existing vessels. Section 802 specifies a formula, to be included in maritime construction-differential subsidy contracts, limiting the amount that the government may pay for the "purchase or requisition" of vessels for which construction-differential subsidies have been given. GAO concluded that the restrictions of section 802 do not govern the Navy's purchase of the ships in question.

The final decision resulted in a contract award to the National Steel and Shipbuilding Company to convert two San Clemente class supertankers to U.S. Navy hospital ships. Tankers had the added advantage of a low center of gravity, which reduces roll, a benefit to patients and crew alike. The conversions cost $208 million per ship and took 35 months. USNS Mercy, formerly supertanker SS Worth, was accepted by Military Sealift Command on Dec. 19, l986. USNS Comfort, formerly SS Rose City, was accepted by MSC on Dec. 1, l987.

MSC issued an RFP to determine whether it would be more economical to contract for operation and maintenance of the hospital ships or to have the services performed by in-house personnel. The solicitation requested proposals to operate and maintain the ships for a period of 3 years. MSC found that Bay Tankers had submitted the low, technically acceptable commercial offer but that, based upon a comparison of Bay Tankers' proposal with the most efficient organization (MEO) cost for MSC, the work could be performed by government personnel for a total evaluated cost of $8,147,255, or $6,284,039 less than Bay Tankers' evaluated cost of $14,431,294.

Bay Tankers then administratively appealed the agency's determination. Although the agency appeals board found some errors in the comparison, the consequent adjustments only reduced the estimated advantage of in-house performance to $3,943,986. Bay Tankers thereupon filed this protest with the General Accounting Office, alleging that MSC underestimated the cost of in-house performance in several respects that had a cumulative cost impact of $6,580,172.

Bay Tankers alleged that the size of the ships' crew specified in the in- house cost estimate is insufficient to perform required maintenance and repair tasks. Specifically, Bay Tankers maintains that that MSC's estimate was understated because it was based on the manning of the Fast 8ealift Ships (FSS), a class of freighters operated and maintained under commercial contracts with MSC, rather than on the Performance Work Statement (PWS) for the hospital ships. The protester maintains that the preventive maintenance required for the FSS ships is approximately only 50 percent of the preventive maintenance required for the hospital ships, and calculates that MSC thereby understated the cost of maintenance and repair by at least $2,642,034.

MSC denied that the proposed maintenance and repair effort is insufficient. Although MSC concedes that it took into consideration the staffing under the contracts to operate the FSS ships, the agency maintains that its estimate was based first of all on an analysis of the requirements of the PWS. Moreover, MSC defends considering its experience with the FSS ships, pointing out that because it did not have any prior experience in operating the newly converted hospital ships, the FSS ships provided the most relevant data due to similarities in ship and operating characteristics.

The determination of the number of employees required to accomplish the PWS is largely a management decision involving subjective judgments that generally are inappropriate for GAO review. The protest was denied.