It was a matter of money, not politics, that directed a contract for up to $10.5 billion in Coast Guard cutters to a shipyard in Florida and away from Bath Iron Works.
That was the explanation by politicians and industry observers as to why a yard with no apparent military ship-building experience – but with a U.S. senator who serves on two military committees – won a contract that will supply it with years of work. During the initial phase of the contract, Eastern Shipbuilding of Panama City, Florida, will construct nine cutters, and has the potential to build 25 over the long term.
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COMPANIES AT A GLANCE
BATH IRON WORKS
Founded: 1884
Location: Bath
Chief executive: President Fred Harris
Estimated employees: More than 6,000
Incorporation: Subsidiary of General Dynamics
Primary products: Military ships
Portfolio: 245 military ships, 160 commercial vessels
EASTERN SHIPBUILDING GROUP
Founded: 1976
Location: Panama City, Florida
Chief executive: President Brian D’Isernia
Estimated employees: 1,800
Incorporation: Privately held corporation
Primary products: Commercial vessels
Portfolio: 150 commercial vessels
Source: Each company’s website
The Florida shipbuilder on Thursday beat out BIW and a Louisiana shipyard for the lucrative contract with the lowest bid, although the bids have not been made public. BIW leaders have said previously that if they didn’t win the contract, there could be 1,000 or more layoffs at the Maine shipyard that employs more than 6,000 workers building ships for the Navy.
“Some people are surprised, but in this budget-conscious environment, cash is king,” said Bryan McGrath, assistant director of the Hudson Institute’s Center for American Seapower, a Washington public policy think tank.
McGrath said Eastern Shipbuilding, which was established in 1976, has decades of experience in commercial shipbuilding and that performing to military specifications will be a different, but not insurmountable, challenge. He said Eastern Shipbuilding doesn’t have high name recognition in Maine, but is known in the shipbuilding industry.
“I have heard of Eastern Shipbuilding for 25 years, and I don’t have any reason to believe that they aren’t capable of doing the work,” McGrath said.
Representatives for Eastern Shipbuilding did not return a call seeking comment on Friday.
McGrath said the civil servants in the defense department are protected by law from political influence, and that decisions are made by a complex scoring process.
“The award of contracts in the Department of Defense is one of the cleanest processes in U.S. government,” McGrath said. “It’s a fair process.”
Sen. Angus King of Maine also doesn’t believe politics were a factor in the awarding of the Coast Guard contract.
King serves on the Armed Services Committee with Sen. Bill Nelson, D-Florida. Nelson is also the top-ranking Democrat on the Senate Commerce, Science and Transportation Committee, which oversees the Coast Guard.
DELEGATION POSES QUESTIONS
King said while the U.S. Navy is concerned about the shipbuilding industry as a whole and often awards contracts to multiple shipyards, the Coast Guard has a much narrower focus. Its ships are less complicated to build, and it operates with a much smaller budget than the Navy. These cutters are expected to be built for $480 million each. By comparison, the Navy’s Arleigh Burke-class destroyers come in around $1.7 billion and the newest generation of Navy destroyers, the stealth Zumwalt-class ships, carry a price tag exceeding $4 billion.
Because the Coast Guard needs fewer and simpler ships, it can focus on the bottom line.
“I think they see this as a ‘one-off’ contract,” King said.
But there still will be some political points to be scored.
Susan MacManus, a political science professor at the University of South Florida, said she doesn’t know whether Nelson had any undue influence on the selection process, but it’s beneficial to have large government contracts awarded in advance of campaigns.
“Nelson is up for election in two years, and I’m sure he will be talking about this every chance he gets for the next two years,” MacManus said.
King and other members of Maine’s congressional delegation were in Portland on Friday morning to talk about efforts to thwart a European Union ban on American lobster proposed by Sweden. But they took the opportunity to promise they will scrutinize the Coast Guard contract.
“I want to be sure (Eastern) can fulfill the contract to the terms that they agreed to,” said King, who was joined by Reps. Chellie Pingree and Bruce Poliquin at a news conference at Ready Seafood on the waterfront.
“The best destroyers in the world are made at BIW. Period,” said Poliquin, a Republican. “This is very disappointing.”
King doesn’t dispute that Eastern Shipbuilding submitted the low bid, but he worries that there could be a lot of changes to the contract that would end up costing the Coast Guard more than if it had selected Bath Iron Works at the outset. BIW has far more experience building military-grade ships than Eastern Shipbuilding, which has a history of building commercial vessels such as ferries, fire boats and fishing boats, at its Panama City facilities.
FLORIDA YARD CITES ITS RECORD
Joey D’Isernia, Eastern’s president, said in a news release the Florida company was awarded the contract based on “technical, management, producibility and price factors” and noted the company’s on-time track record of delivering commercial ships.
“We believe that the Coast Guard is going to get the best value for its money and the finest vessels to succeed in its mission,” D’Isernia said.
Pingree, a Democrat, said there are not many shipbuilding companies left in the United States, and it’s important to keep the industry thriving in case the country ever needs to ramp up production to prepare for war.
“We need strong shipbuilders for the nation as a whole,” Pingree said. “This is not a parochial Maine issue.”
That thinking has been the cornerstone of a strategy used by the Department of Defense to split contracts for Navy destroyers. Throughout the 1990s and into this century, contracts for Arleigh Burke-class destroyers alternated between BIW and Ingalls Shipbuilding in Pascagoula, Mississippi.
McGrath said the Navy splits contracts to maintain the viability of competing shipyards and to prevent defense contractors from closing. He said having multiple contractors helps the Navy in the long run because the competition helps keep prices in check. If too many defense contractors went out of business, there could be only one bidder remaining, which would drive up costs.
Yet politics undoubtedly play a role in both defense contracting decisions and how much money flows into specific defense programs.
Members of the Maine and Mississippi congressional delegations have fought hard over the years to ensure that the Navy continues to award contracts to both shipyards and have fought Navy efforts to switch to a single-source system for destroyers.
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