Page 19: of Maritime Reporter Magazine (February 1986)

ports needed in a prolonged conflict but which no longer exist in the U.S. merchant marine fleet.

Declining shipyards correlate to declining workloads which empha- sizes the current importance of

Navy overhaul and repair work to the private sector. And as Navy con- struction work declines towards the end of this decade, its importance will become even greater.

Initiatives to Maintain

Maritime Resources

Adm. Fowler suggests there are legislative initiatives under way that could provide the environment for private industry to achieve the abili- ty to respond to an emergency re- quirement for a major and rapid maritime build-up, and that "these efforts must be vigorously sup- ported." These include such actions as cargo preference laws, a maritime redevelopment bank, restoration of construction differential subsidies and provision of Title VII funds for passenger car shipping vessels.

Nothing presently before the

Congress, however, could have as positive impact on the private sec- tor's stability and well-being as the initiative of privatizing the public shipyards. It would almost immedi- ately channel $ billions of additional work into these facilities and halt the dangerous trend now gaining momentum.

A practical approach would be to sell the two shipyards (Long Beach,

CA and Philadelphia) that do not have a nuclear power servicing capa- bility to private industry on a com- petitive bid basis. The remaining six facilities (Portsmouth, NH; Nor- folk, VA; Charleston, SC; Mare Is- land, CA; Puget Sound, WA; and

Pearl Harbor, HA) would remain under government ownership but be managed under government-owned/ contractor-operated (GOCO) agree- ments. Private industry would com- pete for these GOCO contracts which could be written to contain profit incentive and revenue sharing provisions.

The Benefits of Privatization

There would be many advantages to this course of action: 1) Work performed by private yards generates taxes, whereas work performed by public yards is paid entirely by taxes on the general pub- lic. 2) The need to keep shipyard fa- cilities and operating methods up to date technologically is fueled by the competitive market system. This dynamic does not prevail in govern- ment-owned operations which are protected from the rigors of price and demand interactions. 3) Savings realized by the Navy on repair work could be spent on alternate products and services, or

February 1, 1986 21 used in other high priority govern- ment programs. 4) By eliminating government functions and facilities redundant to those of the U.S. Shipbuilding

Industry, the prospects for balanc- ing the federal budget would be enhanced. 5) The government's capital in- vestment in the facilities could be partially recouped. In addition, pen- sion and other liabilities could be phased out over a measurable peri- od of time through normal attrition and transfer to the private sector. 6) By obtaining more and better naval and maritime products and (continued)

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