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SCA Weekly Report | September 12-16, 2022

Shipbuilders Council of America

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SCA Weekly Report | September 12-16, 2022







Registration for the 2022 SCA Fall Membership Meeting is still open. The meeting will be held at the Warwick Rittenhouse Square in Philadelphia, PA on October 12-13, 2022. Register Here.




The exhibition hall encourages greater interaction between SCA shipyard and partner members, offering the opportunity for members to demonstrate their product or services directly to potential customers.


If you are interested in exhibiting at this event, please review the Exhibitor Packet HERE.




Senate Commerce Committee Advances Coast Guard Authorization Bill

On Wednesday, the Senate Commerce Committee advanced a modified version of the FY23 Coast Guard Authorization bill. The bill will now head to the Senate floor.


The bill would authorize $841 million for the third Polar Security Cutter and $20 million to establish the Arctic Security Cutter program office. Additionally, the bill would provide $350 million for the acquisition of a Great Lakes icebreaker, $172 million for the design and acquisition of 12 Pacific Northwest heavy weather boats, $650 million for the continued acquisition of the Offshore Patrol Cutter and $650 million for the 12th National Security Cutter.


Additionally, more than $3 billion was authorized to support Coast Guard shoreside infrastructure and additional $400 million was authorized to help improve the Coast Guard yard in Maryland and $236 million was authorized for the acquisition of a new floating dry dock at the facility.


You can read more from the Committee on the bill HERE.


Lawmakers Prepare Stopgap Spending Bill

Energy permitting negotiations have created confusion around a measure to avert a shutdown at the end of month, as key lawmakers say they don’t know whether the House or Senate will take the lead in moving a stopgap government funding bill.


The upcoming continuing resolution, expected to fund the government until mid-December, hinges on talks to add a federal permitting bill sought by Sen. Joe Manchin (D-WV). The measure faces objections from Senate Republicans who don’t like that it was secured as a side-deal to Democrats’ recently enacted tax, climate, and drug-pricing bill, and from House Democrats who say the measure is a giveaway to fossil-fuel interests.


Lawmakers have just two weeks before government funding lapses, and the lack of support for Manchin’s measure highlights the tricky path to avoiding a shutdown in October.


Luria: OSD’s Topline Process is Roadblock to Bigger Navy Fleet

Amidst unclear targets for the Navy's fleet size, Rep. Elaine Luria (D-VA) cites the process of distributing the Defense Department's budget among the three services as a major hindrance for the Navy if it wants to build a bigger fleet. Rep. Luria, a member of the House Armed Services seapower subcommittee and a former surface warfare officer, argued that the Defense Department’s objectives must drive requirements.


“More of the resources need to go to the Navy and the Air Force,” Luria said. “I don't think we need a standing Army of 485,000 right now -- in light of the threats that we see in the Pacific and our constrained resources.”


But despite hopes that the service will get a bigger piece of the pie, Luria said that the Navy has yet to provide Congress with a rationale behind the number of ships that it needs.

“None of these plans that the Navy has brought to us have really come with that justification of here's what we need to do, this is the fleet we need to build, here's why we need to build it and here's the risk if we don't do it,” Luria said this week.


In July, the service sent Congress a Battle Force Ship Assessment and Requirement report that determined a battle force of 373 ships -- 75 more than the fleet has today -- is required to meet future campaigning and warfighting demands. The Navy is expected to complete a second assessment later this year, that will reflect new analytic work, changes to force design and the impacts of the National Defense Strategy released in March. However, the 373 number is higher than any of the three procurement profiles laid out in the service’s 30-year shipbuilding plan released in April, leading to confusion about how many ships the Navy needs and how it will achieve those numbers.




LaPlante Seeking New Policies to Grant Defense Contractors Inflation Relief

Pentagon acquisition chief Bill LaPlante said today he is planning to soon release updated policy guidance aimed at "loosening" contracting regulations to provide inflation relief to defense contractors, especially small suppliers working under firm, fixed-price contracts.


LaPlante, who spoke this week at a conference said his new inflation guidance is currently being vetted by military service acquisition executives and is expected to be released in the coming days, thus updating the department’s position on FFPs, which are currently not eligible for “economic price adjustments.”


“I mean, you can’t read the news and not believe that if you are a 50-person company and you have an FFP contract you signed in 2020 that you’re hurting right now,” he said. LaPlante said he is especially concerned about small companies in the defense supply chain operating under FFPs, which includes many of the Pentagon’s development programs.


LaPlante said his office is looking to “loosen or broaden the definition” of what an economic price adjustment clause can be used for if DOD takes into consideration the “extraordinary circumstance” of ongoing inflation. “This is not typical inflation,” he said. “This is something different. We’re not at the answer yet but we need to get there.”

LaPlante said the Defense Department still needs data from defense business associations and funding from Congress before truly substantive action can be taken.


Pentagon Accelerates Red Hill Defueling by Six Months

The Department of Defense projects the Red Hill Bulk Fuel Storage Facility will be defueled six months earlier than previously announced, according to an update to the June 30 plan submitted Wednesday. The DoD previously submitted a defueling plan to the Hawaii Department of Health on June 30, which called for Red Hill to be defueled by the end of 2024. However, the Hawaii Department of Health rejected the plan due to a lack of specificity and detail, adding that it awaited details expected in September. The health department has not said whether the supplement to the June 30 plan addressed its concerns.


The updated plan now moves the date for defueling to be finished to July 2024, according to supplement to the June 30 plan. The supplement adds details for the defueling process, including how the DoD plans to drain pipes of fuel currently in them, which is slated to begin in October. There is approximately 1,080,000 million gallons of fuel left in the pipes, according to the supplement.




Citing Industry Capacity, CNO Gilday Throws Cold Water on Three Destroyers Per Year

During a Defense One conference this week, Chief of Naval Operations Adm. Michael Gilday today suggested the shipbuilding industry isn’t prepared to build three destroyers per year. “Right now, we are not at a point where the industrial base is supporting three destroyers a year,” the CNO said. “Right now, there’s somewhere between two and two and a half. And so we want to make sure if we’re going to put that money down against shipbuilding, that the capacity is actually there so that money is well spent.”


In coming months senators and representatives will negotiate their respective Pentagon policy bills. Both chambers have advanced texts that allow for a new, multi-year procurement deal including up to 15 Arleigh Burke-class destroyers, potentially bought at a rate of three ships per year. As a matter of policy, both chambers of Congress look poised to green light such a contract, but whether the service actually buys three destroyers per year is an issue to be resolved through individual budget requests — and the willingness of congressional appropriators to provide enough funding. Currently the proposed Senate defense spending bill provides funds for three DDGs; the House bill provides funding for two.


Marine Corps, Navy Remain Split Over Design, Number for Future Light Amphibious Warship (LAW)

The Marine Corps and Navy remain at an impasse over the future of the Light Amphibious Warship, as skepticism about the program’s viability mounts due to the internal division, sources familiar with the program have told USNI News. While the Marines remain committed to their plan for nearly three-dozen beachable ships that can ferry units between islands and shorelines in the Pacific, the Navy wants fewer. Chief of Naval Operations Adm. Mike Gilday’s 2022 navigation plan, unveiled in late July, calls for 18 LAWs.


“It’s obviously a big battle within the Marine Corps on where the Marine Corps’s headed and whether the Navy really supports LAW or not,” said one person familiar with the discussions on LAW.  But as recently as last week, the Marine Corps said it wants as many as 35 LAWs to achieve its vision for operations in the Indo-Pacific, which would include smaller units moving between islands and setting up ad-hoc bases from where they could fire anti-ship missiles off of the chassis of a Joint Light Tactical Vehicle.


The disconnect between the two services on LAW comes after a contentious budget cycle in which the Navy and Marine Corps presented two different views on the future of larger amphibious ships. The most recent Fiscal Year 2023 submission also delayed the purchase of the first LAW out from that fiscal year to FY 2025, a move Marine Corps officials have repeatedly argued is a risky one for the service and its strategy in the Pacific. READ MORE HERE




Biden Eyes Additional Offshore Wind Development in Deeper Waters

The Biden administration is seeking to develop additional offshore wind energy in deeper waters and will auction off leases to spur such energy development by the end of the year.


Typically, offshore wind turbines are attached to the sea floor in shallower waters, but the administration announced on Thursday that it will also pursue lease sales in deeper waters that rely on floating platforms to hold up the turbines.


The administration set a new goal of hitting 15 gigawatts of floating offshore wind — which it says would produce enough energy to power more than 5 million U.S. homes — by the year 2035. It estimated that this will prevent 26 million metric tons of carbon emissions each year. That’s the equivalent of the emissions from nearly 26 coal-fired power plants.


The administration also has a separate goal of deploying 30 gigawatts of offshore wind in general — which may or may not include floating offshore wind — by 2030.


“Floating wind has incredible potential. It can establish the United States as a global leader in advancing new technology, and thus new projects, and it can help us achieve our climate and economic goals,” Interior Secretary Deb Haaland told reporters on Thursday.




American Consumers Continue to Buy Despite Inflation

American consumers are continuing to spend their money on retail goods despite persistent inflation and rising interest rates, the National Retail Federation said Thursday. Jobs and higher wages helped to ease some of the pressure of rising prices, with overall retail sales in August increasing 0.3 percent from July and up 9.1 percent year-over-over, according to U.S. Census Bureau numbers. That compared with a month-over-month decline of 0.4 percent and a year-over-year increase of 10.1 percent in July. On a three-month moving average, sales were up 9.3 percent year over year. Strong consumer spending throughout the pandemic has fueled record imports that have overwhelmed U.S. ports, causing freight rates to soar and contributing to inflation.


U.S. Emergency Oil Reserves Tumble to Lowest Since 1984

U.S. emergency crude oil stocks fell 8.4 million barrels last week to 434.1 million barrels, their lowest since October 1984, according to U.S. Department of Energy (DOE) data released on Monday.


The release from the Strategic Petroleum Reserve (SPR) in the week ended Sept. 9 was the steepest draw since May. It comprised of about 6.3 million barrels of sweet crude and around 2 million barrels of sour crude. President Joe Biden in March set a plan to release 1 million barrels per day over six months from the SPR to tackle high U.S. fuel prices, which have contributed to soaring inflation.


The Biden administration is weighing the need for further SPR releases after the current program ends in October, Energy Secretary Jennifer Granholm told Reuters last week.


Fincantieri Bay Shipbuilding Breaks Ground on New Workshop

Fincantieri Bay Shipbuilding has broken ground on a new addition to its yard in Sturgeon Bay, Wisconsin. Late last week, the shipyard officially began work on a new 19,000 square foot, 300-foot-long machine shop to support its ship repair business. The facility will have twin overhead cranes and a tool room, with enough space to bring many outdoor projects in out of the weather. The shop may also provide some support for Fincantieri Marinette Marine, the government-focused shipyard located across Green Bay from FBS.




If you have any questions, please do not hesitate to contact the SCA staff.