SCA to Congress: Block Bundled Navy Repair Contracts

Friday, July 18, 2003
In a letter to the House Small Business Committee, the Shipbuilders Council of America (SCA) urged Congress to block the Navy from consolidating all mid-Atlantic region surface ship maintenance into two contracts. This anti-competitive and risky scheme, called Multi-Ship/Multi-Option (MS/MO) repair contracts, would destroy the modern competitive ship repair industry, lower Navy readiness and harm small business.

The contracts proposed by the Navy will lead to higher repair costs without improving quality. With competition between repair yards enables the Navy to secure the best repair value at the lowest possible price, this rivalry exists because small and mid-sized repair yards provide the Navy with a wider range of repair options thereby putting downward pressure on pricing.

This problem would be further exacerbated if the Navy goes forward with its plan to move to a MS/MO contract for other vessel classes. Fewer surviving yards positions the taxpayer at the mercy of the winners of the first MS/MO contracts. The result will inevitably be higher costs because the survivors will have a stranglehold on the customer. The Navy will, in essence, be sole sourcing its ship repair work.

"SCA strongly opposes the Navy proposal," said SCA president Allen Walker. "The Navy’s current east coast ship repair contracting has created a highly competitive ship repair industry.

Consolidating repair contracts disrupts that competition and will result over the longer term in higher costs for the Navy. Because very few shipyards have facilities large enough to bid these bundled contracts, the highly efficient small and medium sized industry, dependent on Navy work for its survival, will be forced out of business if this proposal is implemented."

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