Public vs. Private : Sectors Compete to Keep Vessels Shipshape, but Savings Disputed
Private shipyards are grabbing an increasing share of the warship repair and overhaul business from the Long Beach Naval Shipyard and its seven counterparts around the nation, a new federal study reports.
The study by the General Accounting Office casts doubt on the Navy’s claims that taxpayers have saved $200 million from competition between public and private shipyards. There are perceived savings, but just how much is difficult to estimate.
The difficulty is due to the possibility that public shipyards may have narrowed the cost margin by becoming more efficient. Their managers may have taken a few money-saving tips from another study completed two years ago. That study found that public shipyards are riddled with “excess or idle manpower.”
The public shipyards’ over-staffing is in stark contrast with private shipyards, which hire or fire based on the amount of work available, according to the study by the consulting firm of Coopers & Lybrand.
The two studies come as increasing attention is focused on whether to put warship overhauls up for grabs between public and private yards.
Long Beach Naval Shipyard, the city’s second-largest employer, faced the threat of losing work on three cruisers and a destroyer when their weapons upgrades were to be opened to competition earlier this year. After an outcry from local congressmen, the Navy restored work on three of the ships and left one for competition.
The GAO study was requested two years ago by Rep. Duncan Hunter (R-San Diego), whose district includes the private National Steel & Shipbuilding Co., and 12 other congressmen. Hunter said the studies bear out the need for more private contracting.
Greater Share of Work
“I think it’s obvious the Navy has been overly protective of the public yards,” Hunter said. The private shipyard business, which includes the once-giant Todd Shipyards facility in San Pedro, has been “perilously eroded.”
The GAO report, however, points out that more work is going to private yards. They are increasing their share of Navy repair work from 33% in fiscal 1985 to a projected 41% in fiscal 1989 at the cost of public shipyards.
The vast majority of that work is simply assigned without competition. About 10% of all overhaul and repair work over three years ending in 1989 will be bid, the GAO report states.
While the Navy believes that it saved $200 million through 21 competitions for warship repair contracts, the GAO found the figure inaccurate because public shipyards may be running more efficiently now than when the estimate was made last year.
To examine the effectiveness of public versus private yards, the Navy conducted a test in 1986 using the overhauls of two amphibious docks ships.
The Duluth was assigned to a private yard in Portland, Ore., and the Cleveland went to Long Beach Naval Shipyard. While the Navy decided against declaring a formal “winner,” it found that the cost of performing the work at Long Beach was about 8% higher overall than in the private yard. Both yards completed the work ahead of schedule with similar quality.
Public shipyards are insular to the ups and downs of the workload, the Coopers & Lybrand study found. Since the work force is relatively stable and “generally over-staffed,” supervisors can have trouble finding enough work for their employees, the report states.
Workers are assigned to complete a job without regard to productivity. Shipyard managers have no way of measuring productivity, the report charges, so there is no way to judge whether the yard is more efficient.
Gil Bond, spokesman for the Long Beach Naval Shipyard, said there is no over-staffing at the facility. He said the work force has steadily dwindled as less work has been available, from a high of 7,600 in 1984 to about 5,400 today.
Bond said productivity is carefully charted by computer analyses. He said a committee meets every workday to try to reduce overhead costs. The shipyard, he said, is making cutbacks so that it will be competitive with private outfits.
‘Terrible Imbalance’
But John Stocker, president of the Shipbuilders Council of America, which lobbies on behalf of private shipyards, said that the studies show the difference between the sectors because “in a private yard, you’re not going to hire more people than you need.”
He said the two studies point up a “terrible imbalance” between public and private yards. And while the public shipyards maintain large number of employees, he said that private shipyards on the West Coast have lost two-thirds of their work forces since 1982.
