Big Changes in the Sealift World
Keynote Speech Summary from the 2018 NDTA-USTRANSCOM Fall Meeting
KEYNOTE SPEAKER: RADM Mark H. Buzby, USN (Ret.), Maritime Administrator, US Maritime Administration (MARAD)
RADM Buzby began by noting that things are beginning to change in a big way in the sealift world. Big decisions from both sides of that Sealift equation—the organic government fleet and the commercial fleet—remain ahead. On the commercial side, the 60-ship Maritime Security Program (MSP) provides us with reliable access to militarily useful US-flag tonnage, as well as the global logistics and distribution networks that they operate in day to day. He estimated that if the government had to own and operate these ships, the budget to do so would be close to $60 billion—something the US could not afford.
Buzby continued by stating that just as important as those ships and those networks, are the highly skilled mariners and crew the ships provide as a source to man, not only the MSP fleet, but government ships as well. The MSP is authorized by Congress out to 2025. That is not that far off so MARAD is working with industry now to lay out what that next generation of MSP should look like in terms of capacity, capability, ship type, and participation. Currently the ships are all dry cargo with two tankers. However, there’s a potential need for other types of ships with differing capabilities.
We also need to acknowledge that the cost differential is only getting larger between US and foreign-flag ships, he said. Adding that according to a recent study, operating costs now average around $6.7 million per year. Work to look at the new MSP has begun with participation from MARAD’s industry partners, USTRANSCOM and the Navy—and they are committed to getting it right.
Buzby then acknowledged that a nearer term cliff was quickly approaching in 2022, when the current $5 million a year MSP stipend slips back to $3.7 million—a fact that clearly has to be addressed. This is definitely on MARAD’s scope and something currently being worked on. “We also need to be looking at the role that cargo preference plays going forward, along with MSP, to ensure that we have a viable peace time fleet that will be there if we call them in time of crisis,” he said. “You know, we’ve heard it loud and clear from industry that cargo, not just stipends, are necessary to make this thing work.”
The government’s Sealift fleet is not getting any younger, with an average age of 43 years. The cost of maintaining this “antique” fleet is sky-rocketing and it must be re-capitalized soon. Buzby told the audience that he had recently made the difficult decision to take a ship, one of his Ready Reserve Force ships, out of class because he could not afford to dock her for the repairs she needed. He had to apportion the funds to hire priority ship maintenance. Admiral Mewbourne at MSC, Buzby said, was facing similar challenges with his 15 sealift ships.
The Navy, USTRANSCOM and MSC have come up with a new deal on re-capitalization called “Sealift That the Nation Needs.” The plan has three parts: They will invest money into some of the ships to extend service life out to almost 60 years; acquire some newer used vessels out of market (potentially out of the current MSP fleet); and build some new ships down the road. However, funding across the period of time that this plan is being contemplated comes at a time when the Navy will be challenged with a number of high-priority, ship procurement programs, such as replacing the Nimitz-class carriers which are not cheap. On top of that, is the entire Ohio-class ballistic missiles submarine replacement program which are not cheap. And, he said, there are other big-ticket items needed. This will all require some difficult decisions to be made by the Navy. The silver lining to all of this, if one exists, is the attention it has garnered from Congress, The White House staff, the Government Accountability Office, and the press, said Buzby. The more attention, he surmised, the more everyone is pushed into taking action.
He then shared that on a positive note, MARAD is building a new ship—a multi-mission training vessel. By means of introduction, he showed a video about the ship to the audience. The ship, he said, was fully funded for the first ship in fiscal year 2018. Regarding the procurement, MARAD is not going to contract directly for this ship and the government is not going to contract directly for this ship. Instead, a vessel construction manager, likely a Jones Act carrier that has recently built a large Jones Act ship, will be hired to superintend the building of the ship. The construction manager will actually contract with a building yard, build the ship, then when the ship is completed and has completed its trials, it will then be transferred to the government.
This unique way to procure a vessel will utilize commercial standards and commercial practices. If it goes well, it could serve as a model for emulation for other procurement processes for the government in the future. Buzby ended by noting that more than just a sealift that our nation needs, we need to have sealift that our nation can afford—and this may be a path to get there.