SCA Weekly Round-Up
June 4-8, 2012
House Approves Coast Guard Funding; White House Issues Veto Threat
This week the House passed the $46 billion Homeland Security Department spending bill that includes $938 million for Coast Guard vessels acquisition, $58.5 million (and two fast Response Cutters) more than the Administration requested. The White House issued a veto threat on June 6 against the House Appropriations Committee-approved funding bill for the Homeland Security Department, citing among other issues committee approval of incremental funding for the Coast Guard National Security Cutter program. The White House statement of administration policy (SAP) takes issue with committee language that would provide the Coast Guard with $66 million to procure long lead-time materials for a seventh National Security Cutter. The FY13 budget request included no funding for a seventh or eighth NSC in the coming fiscal year or in the 5-year capital expenditure plan. "The use of incremental funding rather than the full funding requested for FY 2013 undermines program stability and long-term cost discipline," the White House says. Coast Guard officials, by contrast, have pushed for authority to fund its recapitalization effort through multiyear funding, stating that it would allow the service to guarantee shipyards steady business and also reduce costs. The SAP can be read HERE.
House Appropriators Mark-up MARAD Funding Bill
The House Appropriations Transportation/HUD Subcommittee marked up their version of the annual transportation funding bill on Thursday. A copy of the committee bill can be read HERE. The legislation includes $338 million for the Maritime Administration, a decrease of $12 million below last year’s level and $7 million below the President’s request. Unlike the companion Senate appropriation bill (S. 2322) which was voted out of full committee on April 19, the HAC bill does not include any funding for the Small Shipyard Assistance Program - SAC provided $9 million - and only included $3.75 million for administrative expenses of the Title XI loan guarantee program - the SAC included the same amount for administrative expenses plus an additional $35 million for the loan program.
SASC Version of NDAA Filed
This week the Senate Armed Services Committee (SASC) filed its version of the FY 2013 NDAA, which should be available on Thomas within the next few days. The bill number is S. 3254, and the number for the accompanying committee report is S. Rept. 112-173. As does HASC, the SASC approves multi-year procurement authority for the DDG-51 and the VIRGINIA-class programs and includes additional AP for a second attack submarine in FY14. Senate Majority Leader Reid will likely look to the defense authorization bill to fill the Senate agenda the last week of the month, with passage before the July Fourth recess. The bill (S. 3254) can be read HERE and the report (S. Rept. 112-173) HERE.
Energy and Water Appropriations Bill Passes the House
This week the House passed its version of the fiscal 2013 Energy and Water Development spending bill, which contains funding for the U.S. Army Corps of Engineers (USACE). The House bill provides $4.8 billion for the USACE, $83 million more than was requested. The Senate has not set a date to take up its version of the bill, although an aide said yesterday it would not happen until at least July. The House adopted an amendment offered by Rep. Chip Cravaack (R-MN.) that would prevent any money from being used to develop or submit proposals to expand authorized uses of the Harbor Maintenance Trust Fund. Every year, Congress spends only about half of what the trust fund collects annually in ad valorem taxes on imported goods, usually around $750 million. The rest has been allowed to accumulate so as to offset deficit spending elsewhere. Lawmakers are seeking to force Congress to spend the full amount on its intended purpose: maintaining harbors, which lawmakers in port districts say are in need of overdue maintenance to ensure the nation's economic competitiveness. Cravaack's amendment aims to ensure that money goes solely toward harbor dredging and maintenance, as currently defined.
Republicans Want to Delay Budget Deals
Republicans are firming up plans for delaying the pending fiscal crisis by a full year. The Republican leadership has concluded their post-election political muscle won’t be strong enough to impose all of their fiscal will, either in the lame duck or early in the next Congress. Members, especially Democrats, are wary of beginning the next Congress by insisting on policies that could be blamed for a return to recession. A crucial number of Democrats may therefore be willing to join the GOP in calling for a one-year timeout in which Congress could come up with the first comprehensive tax code overhaul in more than a quarter-century — one that raises revenue not by raising income tax rates but by eliminating loopholes and deductions so that the base of people and businesses paying some measure of taxes is significantly expanded.
Defense Contractors Hint at Layoffs
The government’s largest defense contractors are starting to go public with the possibility that they will need to notify employees in the September and October time frame that they may or may not have a job in January, depending upon whether sequestration does or doesn't take effect. Defense industry officials said that they will have to notify employees of potential layoffs 60 or 90 days ahead of time, in line with The Worker Adjustment and Retraining and Notification Act, a federal law also known as the WARN act. Unless there is clear guidance from the government about what specific jobs and programs might be affected, hundreds of thousands of notices could go out to employees right before the November election. Sequestration would take effect on January 2nd; 60 days before January 2nd is November 2nd, and Election Day is November 6. The across-the-board cuts would also hit suppliers, which may have to be notified in advance that they may not have subcontracts early next year.
Defense Economic Impact Report – Including Sequestration Impacts – Released
On Wednesday, the conservative think tankCenterfor Security Policy released an updated version of its "Defense Breakdown Economic Impact Reports." The reports now detail the potential effects of sequestration – on both jobs and revenue – on a State-by-State basis. The reports demonstrate the threat to national security and the economy through summary projections for all states that show the potential effects of 18% sequestration defense cuts on states, counties, cities, business types (ethnic/minority/women/veteran), congressional districts, and industries. The reports can be accessed HERE:
Bipartisan Examination of the Mechanics of the Sequester
The bipartisan Task Force on Defense Budget and Strategy this week released a white paper titled “Indefensible: The Sequester’s Mechanics and Adverse Effects on National and Economic Security,” which can be read HERE. The co-chairs of the study, Senator Pete Domenici, Secretary Dan Glickman, and General (ret.) James Jones, offer the white paper as a detailed analysis of the mechanics and effects of the sequester, primarily on defense. The working group recommends, given the sequester’s repercussions on national security and economy, that OMB release, beforeAugust 20 2012, an account-by-account analysis of the expected impacts of the sequester, and the likely ramifications to personnel, procurement contracts, operations and maintenance, and research, development, and training accounts and Congress begin taking serious action now.
SASC Includes Report Language on Impacts of Sequestration
Included in the Senate Armed Services Committee’s report, released this week, to accompany its version of the FY13 NDAA, is a special interest item that directs that the Secretary of Defense submit to the Congressional defense committees, byAugust 15, 2012, a detailed report on the impact of the sequestration of funds authorized and appropriated for fiscal year 2013 for the Department of Defense. The report is to include an estimate of the number and value of all contracts that will be terminated or re-scoped due to sequestration, including an estimate of the resulting costs, as well as an estimate of the number of civilian, contract, and uniformed personnel whose employment would be terminated due to sequestration.
McCain Files Sequestration Amendment to Farm Bill
Senator McCain filed an amendment to the five-year farm policy bill currently before the Senate that would require Defense Secretary Leon E. Panetta to outline any national security consequences of the budget sequestration required by last year’s debt limit law. McCain’s proposal would require the report by Aug. 15, an aggressive timeline that would need a quickly moving vehicle. It is unclear whether the House will bring a five-year farm bill to the floor before the August recess. The same provision is included in the Senate Armed Services Committee fiscal 2013 defense authorization bill. It is unknown whether or not Senator Reid will allow the amendment to be considered as part of the farm bill debate because it is not germane.
LEGISLATIVE AND POLICY UPDATE
House Passes Coast Guard Authorization Bill
On June 1, Chairman John Mica of the House Transportation and Infrastructure Committee introduced H.R. 5887, the Coast Guard and Maritime Transportation Authorization Act of 2012 that would fund the Agency through 2015. The legislation is a streamlined bill setting spending levels near identical to H.R. 2838, a separate Coast Guard reauthorization bill funding the Agency through 2014 which the House passed last year. HR 5887 is likely a political maneuver to highlight the inaction of the Senate, as rarely does the House pass back-to-back authorization bills. Recall, the Senate has failed to move its version of the legislation.
The pared down H.R. 5887 does include two provisions of note: Section 303, which would require the fulfillment of the approved program of record for the total acquisition of 180 Response Boat-Medium’s; and Section 304, which would require the Coast Guard to submit a report providing a business-case analysis of the options for and costs of reactivating and extending the service life of the USCG Polar Sea until the estimated date on which a new polar-class icebreaker is commissioned. The legislation does not include Jones Act waivers, or harsh language on the National Security Cutter program, both of which are included in HR 2828.
American Manufacturing Competitiveness Bill
On Thursday the Commerce, Manufacturing and Trade Subcommittee of the House Energy and Commerce Committee marked up and approved H.R. 5865, the “American Manufacturing Competitiveness Act of 2012.” The bill requires the President, not later than April 1, 2014and April 1, 2018, to submit to Congress a strategy to promote growth, sustainability, and competitiveness in the Nation’s manufacturing sector, create well-paid, stable jobs, enable innovation and investment, and support national security. The bill also requires the establishment of an American Manufacturing Competitiveness Board on the first day of each of the next two Presidential terms. The Board will consist of Public Sector members and ten Private Sector members, to include a representative of the defense industrial base. The Speaker of the House and the Majority Leader of the Senate will each appoint three private sector members to the Board, and the Minority Leader of the House and the Minority Leader of the Senate will each appoint two private sector members to the Board. One of the Board’s responsibilities it to conduct a comprehensive analysis of the U.S. national manufacturing competitiveness strategy, to include determining the value and role of manufacturing in the Nation’s economy, security, and global leadership and the adequacy of the industrial base for maintaining national security. A copy of the bill can be read HERE:
Eleven lawmakers who serve on the congressional defense committees or are leaders on defense issues have decided to retire, and at least a dozen others are in tight races to keep their seats in Congress or have lost in the primaries. These personnel changes could add to the chaos in which important budget decisions must be made this winter. Rep. Norm Dicks, D-WA, ranking member on the House Defense Appropriations Committee, is retiring, along with a number of other defense heavyweights, including Sen. Jim Webb, D-VA.; Rep. Jerry Lewis, R-CA; and Sen. Joe Lieberman, I-CT. There will be several new members on the defense committees in the next Congress, and new people have the opportunity to step in and take on new roles.
Port Security Bill Marked Up
The Committee on Homeland Security met on Wednesday to mark up H.R. 4251, the “Securing Maritime Activities through Risk-based Targeting for Port Security Act" or "The SMART Port Security Act.” The bill contains language requiring the secretary of Homeland Security, before initiating the acquisition of any new boat (under 65 feet in length) asset, to coordinate across the agencies of the Department to identify common mission requirements before initiating a new acquisition program; and to standardize equipment purchases, streamline the acquisition process, and conduct best practices for strategic sourcing to improve control, reduce cost, and facilitate oversight of asset purchases prior to issuing a Request for Proposal. The bill also requires a report analyzing the threat of, vulnerability to, and consequence of an act of terrorism using a small vessel to attackUnited States vessels, ports, or maritime interests.
JONES ACT UPDATE
British Naval Power, Then and Now:
1953: The Spithead Review Marking Queen Elizabeth II’s Coronation
The U.K. Telegraph article “The Queen No Longer Rules the Waves” (found HERE) is an eye-opening history of the decline ofBritain as a naval power. British naval reviews have been held since 1415, but Lord West, a former First Sea Lord, the professional head of the Navy, says an attempt to stage a review today would result only in national humiliation. “I suppose now we could get a couple of submarines out and five or six frigates and destroyers, but it would be very small and not very splendid,” he says. “That gives one a feel for how things have changed. Because the number of ships has reduced so dramatically the event would be too small to make a meaningful and sensible fleet review.”
Ship-to-Shore Connector Program Remains Stalled
The Ship-to-Shore Connector (SSC), planned to be awarded earlier this year, still has no timeline for award. The SSC will replace aging Landing Craft-Air Cushion (LCAC) vessels. The program is slated for initial operational capability in 2020, with full operational capability nine years later. The Navy had originally intended to award the SSC contract last October. There is a significant gap in the planned surface connector inventory from fiscal years 2017 to 2026 that will limit the capacity for amphibious assault, according to a recent report of the Marine Corps’ Amphibious Capabilities Working Group. It is possible the Navy is awaiting for a resolution of the sequester before moving forward with the program.
STUDIES AND REPORTS
GAO Releases Analysis of USCG Fleet Studies
The Government Accountability Office (GAO) issued the report of its analysis of the U.S. Coast Guard's fleet studies. There have been three recent fleet studies: (1) Fleet Mix Phase One; (2) Fleet Mix Phase Two; and (3) the DHS Cutter Study. Fleet Mix Phase One found that the planned program of record for future cutter acquisitions does not fully meet long-term strategic goals and the Coast Guard requires a fleet that could cost as much as $65 billion to acquire, which is about $40 billion more than the $24.2 billion program of record. Fleet Mix Phase Two considered two different funding scenarios and indicated that there may be opportunities to improve affordability of the program of record by reducing capability, but would still require an optimistic level of funding. The DHS Cutter Study primarily demonstrated that the performance of the Coast Guard's future fleet is dependent upon the "effective presence" of the assets, which means having the right assets and capabilities at the right place at the right time. The report makes no new recommendations at this time, in part because the Department of Homeland Security has not implemented the recommendations made by GAO following the separate analyses of the three individual reports. The report can be read HERE .
Bipartisan Examination of the Mechanics of the Sequester
See summary under SEQUESTRATION UPDATE.
Defense Economic Impact Report – Including Sequestration Impacts – Released
See summary under SEQUESTRATION UPDATE.
INTERNATIONAL NEWS OF INTEREST
Korean Shipbuilders Struggling
According to the 'Korea Times,' the prolonged global economic downturn has ship owners killing orders or requesting a postponement on deliveries as they struggle to cope with the financial squeeze. Korean shipbuilders say they are struggling to cope with a growing inventory of unsold ships, which they put up for resale at below market prices but still struggle to get off their hands. Daewoo Shipbuilding and Marine Engineering (DSME) is scrambling to find takers for two crude carriers after Taiwan’s Today Makes Tomorrow (TMT) withdrew the orders for the ships it ordered for in 2007. Requests for delaying delivery are another headache for local shipbuilders. Early this month, Israeli ship owner, Zim Line made another request to Samsung Heavy Industries to push back its delivery of nine container carriers, each worth $170 million. Zim Line signed the contract with Samsung in 2007 and originally wanted the ships by 2009. Now, Samsung has asked to deliver them in 2018 when its Israeli client believes it will be less affected by money problems. Analysts say the European financial crisis could make the situation worse.
Day of the Seafarer – June 25
The International Maritime Organization (IMO) has designated 25 June 2012 as the Day of the Seafarer. The day provides an opportunity to raise awareness of the vital role that seafarers play in the world economy. Some 90% of global trade is transported by sea at some stage during the journey from its place of origin to its final destination. The objective for the Day of the Seafarer is to help the general public to become aware of this and to thank seafarers for their contribution. The Day of the Seafarer was first celebrated in 2011 and has now been included in the annual list of United Nations Observances.
National Oceans Month – June
President Barack Obama signed a Proclamation designating June 2012 as National Oceans Month. He asks that, during this month, Americans celebrate our heritage as a seafaring nation by instilling an ethic of good ocean stewardship. A copy of the Presidential Proclamation can be read HERE.
Navy and industry held the 5th MSMO Summit in Fort Worth, TXlast week. It was clearly the best one we've had. Both industry and Navy spent a great deal of time preparing for the meeting, developing issues and presentations. The goal is to reduce the number of lost underway days due to maintenance availabilities. Industry put issues up for discussion and made recommendations to improve the process. RDML Gale accepted all of industry's recommendations for follow up actions. You can see a marked up agenda and all of the briefs, both Navy and industry, HERE. The minutes and list of action items will be posted when available.
Ship Depot Maintenance Funding for FY2013
Here is the status of Ship Depot Maintenance (SDM) and modernization funding for FY 2013:
- The House Armed Services Committee (HASC) defense authorization bill passed by the full House added $68M to SDM and $84M to CG Modernization for the retention of three cruisers.
- The House Appropriation Committee (HAC) defense appropriation bill approved by the full Appropriations committee added $68M to SDM and $506.6M to CG Modernization for the retention of three CGs. The higher number for CG Modernization includes non-recurring engineering for BMD upgrades and a far higher number for modernization then the HASC. They cut DDG Modernization by $40M.
- The Senate Armed Services Committee (SASC) defense authorization bill approved by the full committee made no changes to maintenance or modernization allowing for the retirement of the three cruisers the House would retain.
- The Senate Appropriations Committee Defense Subcommittee (SAC-D) continues to hold budget hearings.
VSRA Announces 2012 Tradesmen of the Year
The Virginia Ship Repair Association (VSRA) honored their 2012 Tradesmen of the Year on May 15th, 2012. The Junior Tradesman of the Year went to Christopher Ziarek from the AMSEC Elevator Support Unit. The Senior Tradesman of the Year went to Craig Mallory from Tecnico Corporation. SCA would like to congratulate both tradesmen on their accomplishments. To read the full press release, click HERE.
SHIPYARD PHOTOS NEEDED FOR NEW SCA WEBSITE
SCA would like to feature pictures of member shipyards on our new website. Photos of shipyard workers and ships during all phases of construction, repair and maintenance are requested. Additionally we’d like to feature aerial and panoramic photos of yards and facilities.
Please send all photos to email@example.com. To send copies of photos on a CD, please mail to our address:
Shipbuilders Council ofAmerica
ATTN: Paula Reever
655Fifteenth Street, NW
Canadian Shipbuilding Program
An announcement, found HERE, was received from the US Commercial Service for those of you interested in the Canadian Shipbuilding Program
Support Joe Courtney
Come out to support Congressman Joe Courtney (D-CT-2) on Tuesday, June 19, 2012. For more information, click HERE.
SAVE THE DATE
SCA’s Fall General Membership Meeting will be held October 15-17th, 2012. Mark your Calendars!