By Jim McCaul, President, IMA Associates, Inc.
NAVY TO SPEND $5.9 BILLION OVER NEXT TWO FISCAL YEARS IMA has recently published the 17th in a series of business reports on U.S. Navy ship maintenance and modernization. These reports detail future ship maintenance plans and examine the impact of scheduled changes on the industry workload.
Excerpts from the latest report are provided in this article.
Planned Job Starts The U.S. Navy plans to spend $3.4 billion on ship depot maintenance in Fiscal Year 1990 and $2.5 billion in Fiscal Year 1991. Analysis of the most recent maintenance plan indicates the Navy has scheduled 17 percent fewer ship maintenance jobs in FY 1991 as a result of budget pressures and ship retirements.
Exhibit 1 shows the number of scheduled Navy ship maintenance job starts planned for FY 1990 and 1991. As shown, the Navy has scheduled 234 ship maintenance availabilities in FY 1990 and 194 availabilities in FY 1991. Importantly, 11 fewer overhauls and other major job starts are scheduled in FY 1991— work which is generally bid coastwise.
Geographical Distribution Of Future Work The total number of short duration jobs (i.e., less than six months) over the FY 1990-91 period will be divided roughly 50/50 between the East and West Coasts. The East Coast is expected to perform 186 short term availabilities over the two-year period, while the West Coast is scheduled to handle 187. A somewhat larger number of major availabilities will be performed on the East Coast over the two-year period. The East Coast is scheduled to perform 29 major jobs, while the West Coast is scheduled to handle 26.
However, cuts in FY 1991 will have an unbalanced geographical impact. As indicated in Exhibit 1, overhauls and other major ship repair jobs next year will be reduced by 39 percent on the East Coast, 27 percent on the West Coast. The number of short duration jobs will fall by 17 percent on the East Coast, 12 percent on the West Coast. Importantly, work requiring drydocking will fall 32 percent on the West Coast, 10 percent on the East Coast.
Homeport Restricted Work An important consideration is the extent to which future work will be restricted to homeport area shipyards.
The Navy generally restricts depot maintenance which can be completed within six months to shipyards in the homeport area.
Yards outside the homeport area are not invited to bid for the contract.
IMA's analysis indicates that the number of homeport restricted jobs requiring drydocking will fall 54 percent in the San Diego area. Short term scheduled drydockings in Pearl Harbor will fall 50 percent.
However, in contrast, homeport restricted scheduled drydockings will grow 10 percent in Norfolk, 17 percent in Charleston and 20 percent in Mayport.
Ship Retirements As a result of the ongoing DOD review of defense requirements, the Navy active fleet will be substantially downsized over the next several years. According to recent reports, DOD plans to reduce the number of aircraft carriers from 14 to 12—and reduce the size of the Navy deployable forces from 542 to 488 ships over the next five years.
Included in this reduction is the retirement of FF 1052 Class of frigates, 46 ships in all.
Exhibit 2 lists ship activations and retirements planned for FY 1990 and FY 1991. Additional retirements could take place in FY 1991 due to budget pressures. Particularly noteworthy are the planned retirements of two relative- ly modern attack submarines. The Navy, in 1991, plans to retire the 24- year-old Queenfish and 21-year-old Sea Devil. These submarines normally have a 30-year operating life.
IMA can provide an analysis of the future Navy ship repair market tailored to your specific requirements.
IMA has been tracking this business sector for 14 years—and has a unique capability to identify likely developments and assess their impact on a company's business base.
IMA's full 50-page July report on U.S. Navy ship maintenance and modernization is available for $200 and can be ordered by contacting IMA Associates, 2600 Virginia Avenue, N.W., Suite 901, Washington, D.C. 20037; telephone: (202) 333- 8501.