Marine Log - January 2008 - (Page 12) INSIDEWASHINGTON Congress tackles rising shipbuilding costs C ongress is trying to do something about the bloated cost of Navy shipbuilding for Fiscal Year 2008. Tucked away in the conference report accompanying H.R. 1585, the National Defense Authorization Act, are a number of requirements aimed at finding out what’s wrong and what can be done about it. CAPITAL EXPENDITURES One issue of concern is the lack of capital expenditures to enhance the efficiency of naval ship construction. The conference report requires the Secretary of the Navy to perform a study to determine the effectiveness of current financing mechanisms for providing incentives for contractors to make shipbuilding capital expenditures, and to assess potential incentives that would lead to ship construction or life-cycle cost savings to the federal government. The study would examine potential improvements in design tools and techniques, material management, technology insertion, systems integration and testing, and other key processes and functions that would lead to reduced construction costs along with construction process improvements that would reduce procurement and life-cycle costs. A report on the study is to be submitted to the congressional defense committees no later than October 1, 2008, and would include: 1) An assessment of the shipbuilding industrial base, as measured by a 10-year history for major shipbuilders. 2) A description of mecha- nisms available to the government and industry to finance facilities and process improvements, including (a) Contract incentive and award fees; (b) Facilities capital cost of money; (c) Facilities depreciation; (d) Progress payment provisions; (e) Other contract terms and conditions; (f) State and federal tax provisions and tax incentives; (g) The National Shipbuilding Research Program. 3) A summary of potential shipbuilding investments that offer greatest reduction to shipbuilding costs. 4) The Navy’s strategy for providing incentives for contractors’ capital expenditures that would lead to ship construction or life-cycle savings, including identification of any specific changes in legislative authority required for the Secretary to execute this strategy. The study would build upon the results of the 2005 and 2006 Global Shipbuilding Industrial Base Benchmarking studies. Financial analysis associated with the report is to be conducted in consultation with financial experts independent of the Department of Defense. PRESERVING THE LABOR FORCE The conference report also expresses the sense of Congress that “the preservation of a robust domestic skilled workforce is required for the national shipbuilding infrastructure and particularly essential to the construction of ships for the United States Navy.” It calls for another study 12 MARINE LOG JANUARY 2008 www.marinelog.com http://www.wqis.com http://www.wqis.com http://www.marinelog.com
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