Boat Cuts

Federal funds for small-boat construction are shrinking.

There was a time early this century when the market for under 50' high-performance craft was booming. Seemingly overnight, this esoteric workboat sector populated by engineers and procurement specialists became critical to national security. While refueling in Yemen in 2000, the USS Cole was attacked by suicide bombers in a small boat, exposing a large hole in naval security. The next year, 9/11 would turn “homeland security” into a new cabinet-level department. As a result, the Navy and Coast Guard, along with a myriad of law enforcement agencies and first responders, sought small, light, fast boats to assist in their missions both at home and in the two wars that were underway in Iraq and Afghanistan. This added up to big spending on these boats, which became faster, more complex and more expensive. In 2009, the Department of Homeland Security issued grants totaling $388 million for port security alone. BUDGET CUTS Fast-forward to today and the climate has cooled considerably. Port security grants totaled only $100 million this year. Significant budget cuts in military and government boat spending have tightened competition for the remaining contracts. The past five years have settled into a new normal as government buyers are dealing with limited resources. “We have seen an equalizing over the past several years, where funding has dropped off and leveled out for government boat contracts,” said Matthew Velluto, director of business development for Marblehead, Mass.-based Ribcraft USA. “The reality is, there are more players and fewer contracts.” “Opportunities are fewer and fewer in the small boat world,” agreed Hartwell Champagne, vice president and general manager at Safe Boats International, Bremerton, Wash. Safe Boatslanded one of the few opportunities in the form of two contracts in 2012 and 2014 worth over $70 million for the Navy’s next generation of patrol boat, the Mark VI. The contracts are for 10 boats with an option for two more. It’s estimated that the Navy plans on building upward of 50 Mark VIs. The first Mark VI was delivered in August 2014. The final nine boats are scheduled for delivery by March 2018. Safe Boats has built a new Large Craft Production Facility at the Port of Tacoma, Wash., to construct the Mark VI and added 100 new employees to support the program. “The boat is designed to be flexible,” said Champagne. The 85' aluminum hull with waterjet propulsion will support the Coastal Riverine Force, running in both littoral waters and in open oceans. Champagne said the boats have ballistic protection for the hull and crew quarters and carry two Mark 38 weapon mounts and various other configurations depending upon the mission. “This really is the state of the art when it comes to Navy patrol craft. It is a complex high performance boat that will serve the next generation of the Navy,” said Champagne. CROWDED FIELD Anaheim, Calif.-based Willard Marine also captured a significant Navy contract late last year to supply shipboard rigid inflatable boats (RIBs) for five years. The 7-meter (23') RIBs will be deployable lifeboats for search-and-rescue missions onboard Navy ships. The RIBs have a 254-hp Steyr diesel engine with a Bravo Two X MerCruiser sterndrive. Twenty-four vessels have already been ordered under the contract and delivery began in the spring. Willard, a longtime producer of RIBs for the military, is in a “lean forward mode” in the face of increased competition for less work in the sector, according to director of marketing Karen Jacquelin. “The increased emphasis on price is putting pressure on the vendors and margins are being squeezed,” said Jacquelin. “We will always be in the military market, but we are certainly looking beyond it.” Willard is diversifying its offerings by licensing designs from SeaArk Marine. The Monticello, Ark., aluminum builder was a casualty of the market contraction, closing its doors in 2011. Willard is also licensing designs from Crystaliner, a California company credited with building the Navy’s first 16' fiberglass rescue boat in 1956. The company, which built surf and rescue boats, went out of business in 2012. “Adding these designs to our portfolio gives us a very diverse line of products,” said Jacquelin. “We have also expanded our sales force into the commercial and professional markets." Ribcraft also snagged a piece of the Navy 7-meter RIB action with its own five-year contract. Sixteen RIBs have been ordered under the contract’s first initial release with the first Ribcraft RIB also delivered in the spring. The Willard-Ribcraft contracts, called Indefinite Delivery and Indefinite Quantity (IDIQ) contracts, provide for an indefinite quantity of services for a fixed time, in this case over five years. These contract types are used when the U.S. General Services Administration can’t determine, above a specified minimum, the precise quantities of boats or services that the government will require during the contract period. This can lead to uncertainty for the contractor, said Willard Marine's Jacquelin. “How does a small business plan for this sort of contract? Do you have the staff, do you have the room?” While it gives the government flexibility in times of uncertain budget allocation, it makes it tough for vendors, she said. On the other hand, Chris Allard, president of Metal Shark Aluminum Boats, who arguably holds the largest IDIQ contract in the form of a Coast Guard deal worth $250 million over seven years, said that the security is worth the extra work. “For a small- to medium-sized company, there is definitely extra effort involved, but the stability for the long term is worth it,” he said. The Jeanerette, La.-based yard entered the government boat market in 2005 and is looking to diversify. Metal Shark opened a new facility in Franklin, La., last year and is “going after larger military boat contracts as well as expanding into the commercial market,” said Allard. One manufacturer of small boats, Brunswick Commercial and Government Products (BCGP), is being squeezed out of the competition for small-boat contracts for being too big. “Federal government contracting for small boats has witnessed a dramatic shift since 2009. More specifically, a majority of contracts are no longer awarded under open competition and instead are listed under small business set-aside,” said Jeremy Davis, vice president of sales at BCGP. Small business is a category BCGP does not fall into. Davis said there are multiple instances where BCGP had the product to meet the bid specifications but was unable to submit a proposal due to the dramatic increase in the use of GSA small business set-asides. “In fact, there have been multiple instances when the spec was based off a BCGP product yet we still could not bid on the project,” said Davis. This loss of eligibility has caused BCGP to diversify toward a global marketing strategy, which includes a wide body style with a 12' beam on its 10-, 11- and 12-meter RIBs that can accommodate up to four outboards and adds room for customized configurations. BCGP is marketing directly to foreign government customers instead of using the Foreign Military Sales program. Another builder that markets directly to foreign governments is Gladding-Hearn Shipbuilding. The Somerset, Mass., yard has landed a contract with the Colombian navy to provide seven patrol boats based on a pilot boat design. The boats will perform various non-military duties. “We have hired an agent in Colombia and are learning a lot. This is a good project. We are branching out,” said the yard’s president, Peter Duclos. Gladding-Hearn has also continued its long relationship with the New York City Police Department by providing five patrol/rescue boats to NYPD’s Harbor Unit. Three of the vessels are 61-footers and two are 69-footers. The third 61'×17' vessel was delivered last year and the first 69'×19' vessel was delivered in April. The 69', 3,840-hp waterjet-powered vessels are designed for anti-terrorism duties, will carry SWAT teams, and have ballistic protection in case of a dirty bomb attack. “These are complicated boats,” Duclos said. It’s always a challenge when building boats for the government, be it county, state, federal or foreign. “Every boat requires compromises,” said Duclos. “The customer needs to identify what’s most important for them. A private entity can do that quickly. But with government boats, it is a different story.”