Logistics 101 states shippers want reliable service at a competitive price. Trucks and trains have certainly met that need, but for a marine highways industry that’s starting from scratch with huge capital investment requirements, it’s a tall order to compete.
Now marine highway interests are finding an ally from an unlikely corner: the U.S. Navy. The military’s need for new sealift capacity coincides with the marine highways’ need for suitable vessels to operate in coastwise service.
The answer could be a commercial vessel that’s on call for military transportation, said Jonathan Kaskin, the Navy’s director of strategic mobility and combat logistics. For an industry struggling to secure financing of a single vessel, let alone a fleet, any Defense Department money would help defray the costs that, for a legitimate, difference-making service, could run in the hundreds of millions of dollars. When, how and how much of those DOD funds might be available are unknown, however.
Kaskin’s challenge is finding replacements for 35 aging roll-on, roll-off ships in the Ready Reserve Force. Owned by the Navy and maintained by the Maritime Administration, RRF ships are kept ready for service on five to 10 days’ notice. It’s costing the government $300 million a year to keep the Ready Reserve ready to sail.
Thirty of the RRF ro-ro ships were built overseas, mostly in the 1970s and early 1980s. Some of them will be 50 years old by the time their replacements are available.
Congress in 1996 ordered that any new sealift vessels be U.S.-built, putting the acquisition of new ships beyond the Navy’s budget. A Jones Act-qualified fleet for domestic service is more cost-effective, and the marine highways would benefit, Kaskin said.
“We’re on the hook to begin recapitalizing the reserve sealift fleet in the next 10 to 20 years. Congress made it too costly to recapitalize the RRF by directing new construction instead of buying foreign hulls,” he said. “Consequently, like Jones Act ships, we retain them much longer than other ships in the world, up to 60 years for some of the RRF. That’s because of the high cost of recapitalization.”
This is where civilian and military financial interests converge. The Defense Department and the Navy provide Marad with $480 million a year to pay for the RRF and the military sealift program. Some of the money already going to Marad could be used to invest in new vessels for the marine highways, Kaskin said.
In fact, commercial operators likely could get the vessels built for less than what the Navy would pay. Defense contracting rules don’t allow much leeway. Commercial buyers have much greater flexibility when negotiating with shipyards.
“It’s going to be less costly for the Navy if commercial interests build and operate them,” Kaskin said. “We are obligated to follow much more cumbersome procedures when it comes to major acquisition programs, what we can and can’t do. Commercial people are much more agile and are able to build commercial-type ships better than we can.”
Just what the new marine highway ships will look like is under discussion. Marad commissioned 15 designs that are being studied to find the best ones for short-sea service. Consultants also are developing analytical tools to find the right ship for a given combination of routes, costs and the needs of potential customers.
“We will pick the ones that look the most promising for the ro-ro capacity we want, and appear to be the most commercially viable,” Kaskin said. “We’ll do more detailed work on them to determine construction and operating costs. Then we will go out to the industry to see if there are people who would be interested in operating these ships.”
The process will take several steps, and it will take time to build the ships. Kaskin expects the Navy will need eight vessels by 2027 to match the capacity of RRF ships that will be retired.
“We’re trying to do a lot of the work a typical company would have had to do to choose which hull form would be best to support their trade route,” he said. “Remember, we don’t have any ships in these trades, other than some barges.
“What we’re trying to do, Marad and ourselves, is to do a lot of the homework, because there are a lot of obstacles that have to be overcome before people get into the industry.” Kaskin said. “One of them is the business plan they would have to develop based on a lot of the work that we’re doing, which would cost any company a considerable amount of money to develop on their own.”
Contact R.G. Edmonson at firstname.lastname@example.org.