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AUGUST 2008 ISSUE

BEATING THE PIRATES
What's the best way for a shipowner to avoid having a ship hijacked by pirates?

Reroute the ship even if it means a huge diversion
Stay within recommended safe limits and patrolled areas
Hire an on-board security team
Just hope for the best

September 24, 2008

Yes, there will be a third DDG 1000, maybe

There will be a third DDG 1000, it seems. Or maybe not.

House Armed Services Committee Chairman Ike Skelton (D-MO) announced today that the House and Senate Armed Services Committees have reached agreement on the National Defense Authorization Act for Fiscal Year 2009. It provides full funding for the third DDG-1000 class destroyer, but does so "without prejudice to any potential future Department of Defense decision to truncate the DDG-1000 class acquisition program in favor of a return to DDG-51 class destroyers."

Tucked way in the back of the bill are also various interesting items such as $193.5 million for the Maritime Security Program, $18 million for disposal of obsolete vessels from the National Defense Reserve Fleet and $30 million for the Title XI ship mortgage guarantee program

Here's what we found in a very quick plow through of literally hundreds and hundreds of pages released on the House Armed Services Commitee web page. If you think your elected representatives read and evaluate every word of this stuff before they vote on it--sure they do.

SHIPBUILDING

The agreement, which is expected to be considered this week in the House and the Senate, authorizes the following ships:

LPD-17 Authorizes $600 million advanced procurement for two ships;

VA-Class Submarine Authorizes one VA-class submarine and adds $300 million in advanced procurement and authorizes advance construction efforts of vessels contracted within multi-year procurement authority if the Secretary determines that the efforts would reduce overall construction costs;

T-AKE Class Authorizes two T-AKE class ships;

Surface Combatants Authorizes $2.5 billion for the DDG 1000 program without prejudice to a Navy initiative for a possible return to DDG 51 production and authorizes $350 million for the DDG 51 program to be used either for advanced procurement or to procure major equipment spares;

Littoral Combat Ship (LCS) Authorizes $920 million for two LCS vessels and shifts the start of the cost cap to ships built in FY10 or later

Joint High Speed Vessel (JHSV) Authorizes two JHSVs, one each for the Navy and the Army.

Integrated Nuclear Power Systems Adds assault echelon amphibious ships to the list of future classes required to have integrated nuclear power systems.

Domestic Ship Disposal Directs that any vessel owned or controlled by the U.S. government shall not be exported to a foreign country for the purpose of dismantling, recycling or scrapping.

Complex Refueling Overhaul (RCOH) of USS Theodore Roosevelt Authorizes the start of the overhaul in fiscal year 2009.

A joint explanatory statement issued by the two committees notes that he budget request contained $2.5 billion for the third DDG-1000 class destroyer, $103.2 million for close out costs associated with discontinuing the LPD-17 amphibious ship production line, and no funding for the DDG-51 class program which had ceased new production funding with the three ships bought in fiscal year 2005. Additionally, the budget request contained $920.0 million for two Littoral Combat Ships (LCS) and $348.3 million in the National Defense Sealift Fund (NDSF) designated for advance procurement for the first of a class of Maritime Preposition Force-Future (MPF(F)) aviation vessels.

The agreement would authorize full funding for the third DDG-1000 class destroyer without prejudice to any potential future Department of Defense decision to truncate the DDG-1000 class acquisition program in favor of a return to DDG-51 class destroyers.

However, the agreement would authorize $349.0 million for surface ship advance procurement which would permit the Navy to acquire major spares for DDG-51 destroyers or buy advance procurement should the Secretary of Defense determine that there is a validated requirement to produce more of these ships.

The agreement also would authorize $600.0 million in advance procurement to extend the LPD-17 amphibious acquisition program to a total of 11 ships. The Marine Corps considers the tenth and eleventh ships of this class to be vital to the future expeditionary force.

The agreement would authorize the budget request of $920.0 million for two LCS vessels. Elsewhere in the agreement, the committees recommend a provision that would delay implementation of the cost cap for the LCS program until fiscal year 2010. We note that the Navy has taken delivery of the first ship of this class and anticipates taking delivery of the second by the end of the calendar year. While these are significant milestones, we remain concerned that the Navy has not taken sufficient actions to control costs for follow-on vessels. Moreover, in repeated testimony before the Committees on Armed Services of the Senate and the House of Representatives, we have been told that a primary benefit of utilizing mid-tier shipyards is that such yards can easily balance commercial and government workload to ensure that the Navy does not have to pay overhead costs to maintain capability during periods of limited government funding. Nevertheless, the Navy has requested, for the second year in a row, an adjustment to the cost cap in order to preserve industrial capability because the Navy is unable to purchase a ship at or below its budgetary estimate and lacks a coherent acquisition strategy for the program. We strongly encourage the Navy to take steps to procure follow-on vessels with required warfighting capability, while prioritizing the aggressive management of cost and the most efficient utilization of the industrial base. Likewise, we direct the Secretary to develop and submit to the Congress a long-term acquisition strategy for LCS vessels with the submission of the fiscal year 2010 budget request.

Finally, consistent with a change in the definition of the vessels appropriately funded within the NDSF, the agreement would transfer $348.3 million from the NDSF to the Shipbuilding and Conversion, Navy (SCN) account to buy MPF(F) vessels which are non-combatant versions of assault echelon vessels of the Navy's amphibious force.

MARITIME ADMINISTRATION

The House bill contained a provision (sec. 3501) for the authorization of appropriations for the Maritime Administration of the Department of Transportation for fiscal year 2009.

The Senate bill contained no similar provision.

The agreement includes the House provision with clarifying amendments for capital improvements at the United States Merchant Marine Academy and maintenance and repair of school ships of the various State Maritime Academies.

Section 3501 provides "for expenses to maintain and preserve a United States-flag merchant fleet to serve the national security needs of the United States under chapter 531 of title 46, Unites States Code, $193,500,000, of which $19,500,000 will be available for costs associated with the maintenance reim16 bursement pilot program under section 3517 of the Maritime Security Act of 2003 (46 U.S.C. 53101)

It also provides "for expenses to dispose of obsolete vessels 20 in the National Defense Reserve Fleet, $18,000,000.

And it provides "for the cost (as defined in section 502(5) of the Federal Credit Reform Act of 1990 (2 U.S.C. 23 661a(5)) of loan guarantees under the program authorized by chapter 537 of title 46, United States 25 Code, $30,000,000."

5) For administrative expenses related to the implementation of the loan guarantee program under chapter 537 of title 46, United States Code, administrative expenses related to implementation of the reimbursement program under section 3517 of 6 the Maritime Security Act of 2003 (46 U.S.C. 7 53101 note), and administrative expenses related to the implementation of the small shipyards and mari9 time communities assistance program under section 10 54101 of title 46, United States Code, $6,000,000.

Limitation on export of vessels owned by the Government of the United States for the purpose of dismantling, recycling, or scrapping. (sec. 3502)

The House bill contained a provision (sec. 3502) that would place limits on the export of vessels owned by the United States government for the purpose of scrapping or recycling in foreign shipyards. The Senate bill contained no similar provision. The agreement includes the House provision.

Student incentive payment agreements. (sec. 3503)

The House bill contained a provision (sec. 3503) that would raise the maximum yearly incentive payment for students at the various state maritime academies from $4,000 to $8,000 per year. The Senate bill contained no similar provision. The agreement includes the House provision.

Riding gang member requirements (sec. 3504)

The House bill contained a provision (sec. 3504) that would amend section 1018 of the John Warner National Defense Authorization Act for Fiscal Year 2007 (Public Law 109-364) to require that riding gang members of vessels engaged in the carriage of cargo for the Department of Defense possess a merchant mariners' document issued under chapter 73 of title 46, United States Code, or a transportation security card issued under section 70105 of such title. In addition, the provision clarifies those personnel onboard such vessels at the direction of the Secretary of Defense shall not be classified as riding gang members under section 8106 of title 46, United States Code.

The Senate bill contained no similar provision.

The agreement includes the House provision.

Maintenance and repair reimbursement program for the maritime security fleet (sec. 3505)

The House bill contained a provision (sec. 3505) that would direct the Administrator of the Maritime Administration to seek to enter into agreements for the maintenance and repair pilot program as authorized by section 5301 of title 46 United States Code, as amended by section 3503 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163).

The Senate bill contained no similar provision.

The agreement includes the House provision.

Assistance for small shipyards and maritime communities (sec. 3508)

The agreement includes a provision that would repeal section 3506 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163) and add a new section in chapter 541 of title 46, United States Code, for assistance to small shipyards and maritime communities clarifying the program's intent to provide assistance to projects that would be effective in fostering efficiencies and enhancing employee technical skills.

Marine war risk insurance (sec. 3509)

The agreement includes a provision that would extend the authorities granted in section 53912 of title 46, United States Code, to December 31, 2015.

MARAD consultation on Jones Act Waivers (sec. 3510)

The agreement includes a provision that would require that the head of any agency responsible for the administration of the navigation or vessel-inspection laws to obtain a determination from the Administrator of the Maritime Administration, acting in the capacity as Director, National Shipping Authority, that sufficient United States flag capacity does not exist to meet national defense requirements prior to any waiver of those laws. Transportation in American vessels of government personnel and certain cargoes (sec. 3511)

The agreement includes a provision to amend section 55305 of title 46, United States Code, to clarify the requirements of that section with respect to the transportation of government personnel and cargo in American vessels.


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