Superferry Builder Austal Receives $1.6 Billion Navy Contract to Build Ten More Ships Like the Superferry

When will people listen to me?

I’ve been saying for 2-3 years now, that the superferry(s) were just a prototype for future military ships.  Now Austal has confirmed my suspicions:

Austal USA has won a $1.6 billion contract to build up to 10 high-speed transport ships for the U.S. military, U.S. Sen. Richard Shelby, R-Tuscaloosa, announced Wednesday.

Neither Austal nor the U.S. Navy would confirm Wednesday’s announcement, but a staff member in another congressional office, speaking on condition of anonymity, said the contract is going to Austal…

…Maritime industry analyst Tim Colton, of Florida consulting firm Maritime Business Strategies LLC, said that if Austal is indeed the winner, it is likely that the company’s experience and ability to tackle the work made its bid superior. Australian parent Austal Ltd. is an expert at building high-speed fast ferries, and the U.S. shipyard is now putting finishing touches on the second of two such vessels for Hawaii Superferry Inc…

More Here

I’m not real good at math… but if my numbers are correct, this would make each one of those ships worth about $160 Million dollars each.

If Hawaii sold the two Superferries we currently will have to the military for say $150 Million each, then that $300 Million could be put to the losses that we have already incurred as well as pay off any debt that we might have towards the superferries at this point.

Especially if the thing isn’t going to work out in the long run.

I’m amazed the Unofficial Hisuperferry Blog hasn’t picked up on this. ;)

3 Responses

  1. Thursday, November 13, 2008

    “Here is the Contract…for 1 ship with NAVY Option for 9 more”

    Oh, that’s pricey, $185,433,564, more than twice what HSV’s have gone for in past and presumably will go for in the future. Notice the NAVY has the option of 9 more, or NOT.

    Here is the ‘scoop,’ the first accurate media report:

    From: http://www.bloomberg.com/apps/news?pid=20601081&sid=aq1LfQ6bI2Tg&refer=australia
    “Austal Wins $185.4 Million Navy Award for High-Speed Vessel” By Gopal Ratnam November 13, 2008 17:53 EST

    Nov. 13 (Bloomberg) — “Austal Ltd., the Perth, Australia- based shipbuilder, won a $185.4 million contract from the U.S. Navy to build a high-speed vessel that will transport troops and supplies, the Defense Department said.

    The work will be performed by Austal’s U.S. unit in Mobile, Alabama, the Pentagon said today on its Web site. The contract includes options to build as many as nine more ships…”

    Here is the actual DoD press release:

    From: http://www.defenselink.mil/CONTRACTS/CONTRACT.ASPX?CONTRACTID=3903
    U.S. Department of Defense
    Office of the Assistant Secretary of Defense (Public Affairs)
    FOR RELEASE AT 5 p.m. ET
    November 13, 2008

    CONTRACTS
    NAVY

    “Austal USA, Mobile Ala., is being awarded a $185,433,564 modification to previously awarded contract (N00024-08-C-2217) for the firm quantity of one Joint High Speed Vessel (JHSV) with options for up to nine additional ships and associated shore-based spares for the Phase II downselect of the JHSV Program. The JHSV Program will provide high speed, shallow draft transportation capability to support the intra-theater maneuver of personnel, supplies and equipment for the U. S. Navy, Marine Corps, and Army. Work will be performed in Mobile, Ala., and is expected to be completed by November 2010. Contract funds will not expire at the end of the current fiscal year. The Naval Sea Systems Command, Washington Navy Yard, D.C., is the contracting activity.”

    Aloha, Brad

    Labels: Austal, gold-plating, JHSV, Navy, Obama transition

  2. Damon/Shannon:

    We still have not heard from the Navy. Shelby put out his press release one day after the following appeared in the Boston and London papers:

    Please see the 5th paragraph + 3rd from end.
    http://www.iht.com/articles/2008/11/11/america/pentagon.php?WT.mc_id=glob_mrktg_lnk3&WT.mc_ev=click

    —————————————————————

    “Obama urged to scrap some Pentagon programs”
    By Bryan Bender The Boston Globe
    Tuesday, November 11, 2008

    WASHINGTON: “A senior Pentagon advisory group, in a series of bluntly worded briefings, is warning President-elect Barack Obama that the Defense Department’s current budget is “not sustainable” and that he must scale back or eliminate some of the military’s most prized weapons programs.

    The briefings were prepared by the Defense Business Board, an internal management oversight body. It contends that the nation’s recent financial crisis makes it imperative that the Pentagon and Congress slash some of the nation’s most costly and troubled weapons to ensure they can finance the military’s most pressing priorities.

    Those include rebuilding ground forces battered by multiple tours to Iraq and Afghanistan and expanding the ranks to wage the war on terrorism.

    “Business as usual is no longer an option,” according to one of the internal briefings prepared in late October for the presidential transition, copies of which were provided to The Boston Globe. “The current and future fiscal environments facing the department demand bold action.”

    The briefings do not specify which programs should be cut, but defense analysts say that prime targets would probably include the new F-35 fighter jet, a series of navy ship programs, and a massive army project to build a new generation of ground combat vehicles, all of which have been skyrocketing in cost and suffering long development delays.

    Pentagon insiders and defense budget specialists say the Pentagon has been on a largely unchecked spending spree since 2001 that will prove politically difficult to curtail but nevertheless must be reined in.

    “The forces arrayed against terminating defense programs are today so powerful that if you try to do that it will be like the British Army at the Somme in World War I,” said Winslow Wheeler, director of the Straus Military Reform Project at the Center for Defense Information in Washington. “You will just get mowed down by the defense industry and military services’ machine guns.”

    Since the terrorist attacks of Sept. 11, 2001, funding has grown for both the annual defense budget and emergency spending for the wars in Iraq and Afghanistan. The latest Pentagon budget, for the fiscal year that began Oct. 1, is an estimated $512 billion, not including more than $800 billion in additional war spending that has been allotted since 2001.

    But a series of forces are now at play that make such large expenditures untenable, according to the Defense Business Board, the Pentagon oversight group that includes about 20 private-sector executives appointed by the secretary of defense.

    The board, which meets at least four times a year, has a full-time staff and is an official government body. Because the board’s report has not been made public, a Pentagon spokesman would not comment on it.

    One factor is historical: Since the end of World War II, there have a been four periods of significant increases in U.S. defense spending; all were followed by significant decreases in funding from Congress, the group says.

    Added pressure on the Pentagon budget comes from what the briefing calls “fiscal constraint in a tough economy” that is saddled with rising deficits and growing support for increased government spending in other areas.

    Exacerbating the problem, according to the advisory group, are the rising costs of military personnel, their health care, and overhead. The documents estimate that more than half the annual defense budget now goes to “people costs,” including $60 billion a year for the health care of service members and retirees.

    They will almost certainly grow, even with a reduction in U.S. troops in Iraq, given that the Pentagon has said it would increase ground forces by more than 70,000 troops over the next few years.

    That leaves dozens of weapons systems and other equipment under development as prime areas for savings, according to Steven Kosiak, vice president of budget studies at the nonpartisan Center for Strategic and Budgetary Assessments in Washington.

    “The areas most likely to get cut are acquisition and procurement,” Kosiak said. “As long as the administration is committed to increasing troop strength you have to pay those people costs, and there is not a lot of flexibility when it comes to benefits.”

    A recent analysis by the Government Accountability Office, the investigative arm of Congress, assessed the Pentagon’s 95 largest weapons programs and found that as of March 2008 they had collectively increased in cost by nearly $300 billion over initial estimates.

    “None had proceeded through development while meeting the best-practice standards for mature technologies, stable design and mature production processes – all prerequisites for achieving planned cost and schedule outcomes,” the GAO said in documents published last week to help guide the presidential transition.

    It added: Over the next five years, the Defense Department “expects to invest more than $357 billion on major defense acquisition programs. Much of this investment will be used to address cost overruns rooted in poor planning, execution, and oversight.”

    All the branches of the military are in a similar situation. The army plans to invest an estimated $160 billion in the coming years on a set of new combat vehicles collectively known as the Future Combat System. But its capabilities “are still early in development and have not yet been demonstrated,” according to the GAO.

    The navy, meanwhile, has continued to bust its budget for shipbuilding. The service’s six most recent ship designs have experienced cumulative cost growth of $2.4 billion over original estimates, according to the GAO. Their delivery has also been delayed, on average, by 97 months.

    The air force’s portfolio for new equipment, meanwhile, “will demand unprecedented levels of funding,” according to the GAO transition materials. Its development costs have increased nearly 50 percent above original estimates, and eight separate programs have had to report cost breaches to Congress.

    The F-35 Joint Strike Fighter – designed for the air force, navy and Marine Corps and the most costly aircraft procurement effort in history – ‘faces considerable risks stemming from its decision to reduce test assets and the flight-test program to pay for development and manufacturing cost increases,’ according to the GAO.”

    There is some great high-level gamesmanship going on between the likes of Shelby and expectations of the new Administration.

    Aloha, Brad

  3. Well there are so many things to blog. It’s hard to blog it all instantly, but you make an interesting point:

    “Austal USA has won a $1.6 billion contract to build up to 10 high-speed transport ships for the U.S. military, U.S. Sen. Richard Shelby, R-Tuscaloosa, announced Wednesday. Neither Austal nor the U.S. Navy would confirm Wednesday’s announcement…”

    “I’m not real good at math… but if my numbers are correct, this would make each one of those ships worth about $160 Million dollars each.”

    “If Hawaii sold the two Superferries we currently will have to the military for say $150 Million each, then that $300 Million could be put to the losses already incurred as well as pay off any debt…”

    Very interesting point, Shannon or is it Damon? The $1.6 Billion seems way too high for the past budget projections of the JHSV program.

    This program is expected to build 1 ship per year, maybe they are figuring on a lot of inflation on the US Dollar to eventually get it up to more than $160 million for each ship later in the program.

    But you are correct, Shannon/Damon, right now, $160 million is almost twice what each of these first two finished ships cost to build. If some of the difference could be realized between the reported JHSV contract price and what the first two ships (A615 and A616) cost to build, then that could cover all debts and losses, and this whole thing would start to make a lot more sense for the investors, if not the State. Except that at $1.6 Billion for only 10 ships, the Federal Government would be paying almost twice (that’s 2 times) what these ships are really worth.

    Wonder why the Navy still has not made any announcement on this?

    Aloha, Brad

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