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Marine Log

December 17, 2007

Todd Pacific gets WSF design contract

As Washington State Governor Chris Gregoire crafted a solution to the problem of replacing Washington State's aging Steel Electric ferries, progress was also being made on Washington State's much-challenged plan to build a class of up to 144-vehicle ferries.

Todd Shipyards Corporation (NYSE:TOD) announced last week that its wholly owned subsidiary, Todd Pacific Shipyards Corporation has signed a contract with the Washington State Ferries, a division of the Washington State Transportation Department ("WSF"), for the design phase of the project to build up to four 144-vehicle ferries. The design contract is a firm fixed price contract for $2,369,561 with a duration of nine months. Once the design is completed the parties will negotiate the price and delivery schedule for construction of the ferries.

These vessel's will be too large to serve on one key route served by the Steel Electrics, necessitating the separate $100 million plan for a class of smaller vessels reported earlier.

The state legislature initially authorized the144-vehicle ferry program in 2001, but the proposed funding plan was defeated in a referundum. Fresh fundingwas found in 2003 , from a so-called "nickel package" that added 5c a gallon to the state's gasoline tax.

The procurement process became mired in a legal challenge in 2005. The Superior Court dismissed the protest in March 2007.

In the 2007 legislative session, Governor Gregoire made it a priority to break through the logjam so that procurement could proceed, contractors could get to work building boats and the Washington State Department of Transportation (WSDOT) could begin the process of replacing its aging fleet.

Governor Gregoire worked closely with the chairs of the House and Senate Transportation committees on a bill that allowed the three prequalified shipyards (Todd, J.M. Martinac and Nichols Brothers Boat Builders) to present a joint proposal.

The shipyards agreed that Todd Shipyards would act as the prime contractor and Martinac and Nichols Brothers would participate as subcontractors.

"Unfortunately," notes a policy brefing from Gregoire's office, "Nichols Brothers is facing its own difficulties, so its participation in the consortium is unclear. The state's contract with Todd leaves open the opportunity for Nichols Brothers to participate as a subcontractor."

Signing this contract allows the consortium to move to the last phase of the procurement process. The department will proceed with actual construction only if it can negotiate a reasonable price per vessel that fits the state's financial plan. Assuming these negotiations are successful, the construction program should begin in late summer 2008.