Most Navy and Coast Guard professionals who have recently worked alongside the ship-repair industry know companies that have gone out of business. The media is taking notice of the industry’s contraction.1 As companies disappear, they lay off workers with unique skills who take difficult-to-replace facilities and specialized tools with them. This could affect federal agencies’ ability to access ship-repair services unless urgent action is taken. There are several ideas and tools of the past and present that could assure access to ship-repair services. However, there are advantages and risks for each.
As private U.S. shipyards cease repairing vessels or diversify their portfolios from government work, large ships lose access to repair services. But the Coast Guard, Navy, and other government agencies still need to find ways within fixed budgets to ensure access to affordable repairs. A spectrum of options presents varying financial costs and implementation challenges, from revamped industry engagement at the low end of cost and implementation, to the potentially highest cost and most difficult option of expanding the number of public shipyards. The hardest and most expensive option is not necessarily the best one. Decision-makers must carefully weigh future needs, resources, agency-specific legal authorities, and other constraints in determining what outcomes are optimal to support the federal fleet.
Depots to supply and equip vessels were established out of necessity during the Revolutionary War.2 The first federal public naval shipyards were conceived and constructed in part out of concerns over commercial ship construction and outfitting capabilities.3 In addition to actually providing ship-repair capacity, the public yards—the four naval shipyards, the U.S. Coast Guard Yard in Baltimore, and the Army Corps of Engineers Ensley Engineer Yard in Memphis—maintain specific technologies and labor skills.4 Public shipyards yield clear benefits but put funding, administrative, planning, training, and staffing burdens on the government. Thus, the starting point for expanded repair capacity should be the lowest-cost option—improved engagement and transparency with industry.
Improve engagement with industry. This option can provide expanded access to the ship-repair industry in several ways. First, the entire federal fleet—ships owned by the services, Department of Defense agencies, the National Oceanic and Atmospheric Administration, the Maritime Administration, and every other agency that operates large ships—should cooperate to benefit from economies of scale. Engaging in meaningful discussions about future workload through “industry day” events, written projections, and forecasts such as the Department of Homeland Security’s Acquisition Planning Forecast System may encourage industry to continue to compete for federal ship-repair work.5 Publicizing useful forecasts allows businesses to seek capital, invest, and prepare to compete for documented opportunities. If transparency of federal needs does not yield the desired access to ship-repair services, taking progressively direct actions could produce the desired outcome, at the cost of rebalancing the risks between the government and private industry.
Purchase critical equipment needed for federal ship repair and lease it to private industry. Ships have specific systems with little commonality with the nonmaritime focused businesses, such as propulsion shafting and propellers. Repairing some of these specialized systems requires dry docking the ships. If commercially owned dry docks, lathes, foundries, or other major equipment are unavailable or unsuitable for existing and future requirements, the government could procure its own equipment and lease it with conditions to private industry. A recent example is the former AFRD-10, a floating dry dock that was leased to the commercial sector to preserve capacity for surface-ship repair.6 This option would allow the government to own geographically distributed floating dry docks, improving federal access to ship-repair capacity.
The government would need a process to identify, fund, and procure the equipment, competitively select the leaseholder, conduct inspections, and ensure the equipment is appropriately maintained. The government would also need to guard against insolvent companies attempting to sell off leased equipment to pay off debts. If the leaseholder goes out of business, the government should not have to race bankruptcy creditors before the gates are locked or litigate to get its property back.
Move to a subscription-based model to ensure access to ship-repair services. This model would be similar to the digital publishing industry, in which consumers purchase access to a digital product for a set period of time.7 Subscription signals demand to the business in the form of a revenue stream, while ensuring the recipient receives the product for the subscription period. Government agencies would reserve access to ship-repair services a year prior, with flexibility for some changes. These changes would include the specific vessels to be repaired and negotiable proportioning of work across the labor trades. This option would likely require updated budgeting and procurement practices.
A subscription model would ensure shipyards a steady supply of paid work and could foster improved efficiency through facilities and workforce development investment. This option would also ensure the industry bears more risk in labor development and in procuring and maintaining capital equipment, among other core functions. Keeping such risks off the government would allow agencies to focus on planning, inspection, and testing of repairs, instead of running the shipyard.
Purchase an abandoned graving dock or recently shuttered commercial facility and restore it to operation. This would be much more affordable to the government than building and staffing an entire shipyard from scratch. The sunk costs of the existing infrastructure could be partially preserved, and a small cadre of experienced employees hired from industry, transferred from public shipyards, or both, who could staff the facility with a skeleton crew that could be expanded through local hiring. One staffing strategy could be to use government employees in management, procurement and contracting, and the dry dock operations staff, while subcontracting most or all other functions to private industry.
Relying on subcontracting, common to shipyard operations in Europe, could yield some benefits of a public shipyard, such as controlling priorities and schedule.8 It would also make possible some benefits of commercial competition, such as lower labor costs, as subcontracted work leverages economies of scale if the shipyard is among many clients. This places on the private sector the burden of subcontracted repair machinery procurement and maintenance, workforce development, and worker training. As landlord, the government would own issues unrelated to ship repair such as mowing the lawn and shoveling snow.
Build new public shipyards. This option is the most expensive and places most risks on the government, including environmental permitting, long-lead-time construction of dry docks and other capital infrastructure, developing a workforce with vessel-specific trades (boat joiners, shipwrights, marine machinists, etc.) that may not exist in local areas, cultivating an ecosystem of subcontractors and suppliers, and garnering support from the local community. Considering long budgeting and procurement lead-times, this would require years of planning, procurement development, and stakeholder engagement before the first ground was even broken. There are clear advantages to this course of action, such as interagency capacity-sharing, full control of priorities and operations, and alignment of shipyard operations and investments with government strategies. However, it would be hard to make a case for the government to carry all the risks and pay the costs to gain these advantages without exploring the preceding options along the spectrum.
As the United States maintains and invests in the federal fleet in the face of a changing commercial ship-repair landscape, teaming among agencies would create efficiencies, harness economies of scale, and protect against risks such as smaller agencies getting priced out of ship-repair capacity. Each option must be thoroughly assessed by experts in law, procurement and contracting, vessel operations, and lifecycle sustainers, including engineers and logisticians. Agencies may perceive different opportunities and risks based on their own capabilities, experience base, and legal authorities. Thus, they should partner together and explore a spectrum of options to ensure enough ship-repair capacity at the best value to the taxpayer.
1. David Axe, “Problem: America Can’t Build and Repair Ships Quickly Anymore,” The National Interest, 23 Oct 2019.
2. Charles B. Cross Jr., Virginia State Navy in the American Revolution, Virginia Bicentennial Commission, 1981.
3. Richard E. Winslow III, “Do Your Job!” An Illustrated Bicentennial History of the Portsmouth Naval Shipyard, 1800–2000 (Portsmouth, NH: The Portsmouth Marine Society, June 2000).
4. U.S. Army Corps of Engineers, Ensley Engineer Yard.
5. Department of Homeland Security, Acquisition Planning Forecast System.
6. Jennifer Sullivan, “WWII Dry Dock Leased by Todd,” Seattle Times, 25 August 2005.
7. Alyssa Gregory, “How a Subscription Business Model Works,” The Balance Small Business, 25 June 2019.
8. ECORYS Research and Consulting, Study on Competitiveness of the European Shipbuilding Industry, 8 October 2009.
