National Defense > Blog > Posts > Navy's ship suppliers: Unstable shipbuilding programs hurt small businesses. Market is too unpredictable and financially risky, say small biz executives...

11/24/2009

Navy's ship suppliers: Unstable shipbuilding programs hurt small businesses. Market is too unpredictable and financially risky, say small biz executives...
PANAMA CITY, Fla. -- The Navy spends at least $10 billion a year on new ships. But the market is still not attractive to many companies -- particularly small  businesses -- because it is unpredictable and unstable, industry executives said during last week's Expeditionary Warfare Conference here.

Volatility in the Navy's shipbuilding plans is making it difficult for shipyard suppliers to stay ahead of rising costs and plan for future projects, one supplier said. “We need to have a very clear picture of the future,” said Tony Gioffredi, president of engine products and services at Fairbanks Morse Engine, headquartered in Beloit, Wis. The company provides propulsion systems for several classes of vessels, including the San Antonio-class amphibious transport dock ship (LPD-17). “Without that long-term picture, it's hard to adjust properly for the future,” he said. Lots of programs have been “up and down,” and small businesses such as Fairbanks need a significant amount of capital investment for engineering and equipment. Gioffredi said the company in the last seven years has invested more than $30 million in its facilities to accommodate Navy program requirements. But the Navy's shipbuilding programs have not offered enough financial stability for the company to get a payback for its investments, he said. “We cannot justify the investment for two or four engines' worth of components,” Gioffredi said.

The constantly shifting requirements for new construction programs, in particular, are causing headaches for small businesses that are trying to position themselves as subcontractors to major shipyards. Small businesses such as Fairbanks prefer long-term contracts so they can lock in prices for parts and components, he said. The Navy's practice of ordering one or two ships at a time makes it difficult to secure long-term prices. The industry is watching closely the developments in the Navy's littoral combat ship program. Originally, the construction of the 55-ship class was split between two designs -- Lockheed Martin Corp.'s monohull version and General Dynamics' trimaran hull. The Navy recently revamped its procurement plan as a result of rising costs, and will downselect to one design next year. The after-market service and support sector for ships also has been unpredictable. “Some of our ships are leaving port with very limited number of spare parts on them,” Gioffredi pointed out. The company later receives requests for overnight delivery of parts that require a long-lead time to supply. “We need better forecasting,” and the Navy needs to work closely with its contractors, he said. In the meantime, Fairbanks is seeking business elsewhere to keep its workforce busy. The company is looking to re-enter the commercial nuclear power generation market. About 40 percent of the nation's nuclear power plants run on Fairbanks' engines. “We're hoping to use that as a fill-in for us to continue to support the Navy in the long term.”
Posted at 11:02 AM by Grace Jean | Permalink | Email this Post | Comments (0)

Comments

There are no comments yet for this post.
Items on this list require content approval. Your submission will not appear in public views until approved by someone with proper rights. More information on content approval.

Name: *

eMail *

Comment *

Title

Attachments

Name: *


eMail *


Comment *


 

Refresh
Please enter the text displayed in the image.
The picture contains 6 characters.

Characters *

  

Legal Notice *

NDIA is not responsible for screening, policing, editing, or monitoring your or another user's postings and encourages all of its users to use reasonable discretion and caution in evaluating or reviewing any posting. Moreover, and except as provided below with respect to NDIA's right and ability to delete or remove a posting (or any part thereof), NDIA does not endorse, oppose, or edit any opinion or information provided by you or another user and does not make any representation with respect to, nor does it endorse the accuracy, completeness, timeliness, or reliability of any advice, opinion, statement, or other material displayed, uploaded, or distributed by you or any other user. Nevertheless, NDIA reserves the right to delete or take other action with respect to postings (or parts thereof) that NDIA believes in good faith violate this Legal Notice and/or are potentially harmful or unlawful. If you violate this Legal Notice, NDIA may, in its sole discretion, delete the unacceptable content from your posting, remove or delete the posting in its entirety, issue you a warning, and/or terminate your use of the NDIA site. Moreover, it is a policy of NDIA to take appropriate actions under the Digital Millennium Copyright Act and other applicable intellectual property laws. If you become aware of postings that violate these rules regarding acceptable behavior or content, you may contact NDIA at 703.522.1820.

 

 

Bookmark and Share