The Closing and Reuse of the Philadelphia Naval Shipyard

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Letter from Department of the Navy regarding donation of Philadelphia Naval Shipyard transition and closure plan report, March The Final Cruise", undated. Cimarron , September Report and plans regarding salvage work done on Request , Use checkboxes to select any of the filters that apply to this item. Printed materials and ephemera. Measured drawings and ships plans. Powered by the DLA.

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Philadelphia Naval Shipyard collection Welles Henderson Archives and Library Title: Philadelphia Naval Shipyard collection Date [inclusive]: The celebrations of significant events such as Navy Day, Armed Forces Day, ship launchings, and retirement parties are also documented. Access Restrictions This collection is open for research use; however, please consult the Director of the Archives and Library for information regarding access to 'Series I.

Immediate Source of Acquisition note This collection is created from multiple accessions. Processing Information note The processing of this collection was made possible through generous funding from The Andrew W. Historical Society of Pennsylvania: National Archives and Records Administration: Separated Materials note Objects have been removed from this collection and placed with the Curatorial collections of the museum.

Conditions Governing Access note Please consult the Director of the Archives and Library for information regarding access to this series. Collection of letters documenting navy career of Robert Potts, December January. Muster book, construction and repairs log, Time study for United States Navy Boat building, Register of Navy boats, circa Bureau of Construction and Repairs, Schedule of wages, lists of employee wages, , , undated.

Invoices for spare parts, tools, and equipment, November Emergency call lists, lists of employees and departments, , , , , undated. Telephone directories, October, Visitors register, Office of the Shipyard Commander, Equipment operation qualification record card, February. Monthly apprentice performance and hours reports, January June. Handbook for riggers and handling weights, October 1. Monthly apprentice performance and hours reports, July August. School schedule for apprentice riggers, lists of employees and departments, , undated. Apprentice training program plans, machinist trade, 31 shop, circa Employee appreciation week highlights program, Welding manual and shipfitter handbook, March, undated.

Telephone directory, Naval Base, Philadelphia, Strategic plans for fiscal years, , Code supervisor codes, pager numbers, phone extensions, Corporate plan for fiscal years , January. Blank employee of the month certificate, undated. Illustrated glossary of shipbuilding terms and trade skill catalogue, undated. Instruction books for siren, undated. Instruction book for sprinkling pump, undated. Letter of appreciation, undated. Shift and identification badges, undated.

Shipyard construction, cranes hoisting propeller, assorted components, Navy Yard, ships at various stages of construction, unidentified staff, ceremonies, Navy Yard, assorted views, including dry dock 1 and aerial view, , , , undated. Transparency of draftsman working, September Transparency of machanist, September Unknown warehouse interior, September Metal shop, October 6. Metal workers, October 6. Shop 72, construction cranes hoisting ship components, , Cranes hoisting barges, Transparency of worker and ship with annotations, September Navy Yard, assorted views of yard and construction, , , undated.

Charlie Bradford retirement party, unidentified staff and waterfront, October, undated. Microfiche of unabridged Navy index of publications, November. Ammunition and supply depots, undated. Apprentice program graduation portraits and unidentified staff, undated. Men at work, undated. Color transparencies of cartoons, undated. Forklift and crane lifting blocks, undated. Hoisting propeller on Wisconsin , undated.

Valley Forge , undated. Printed materials and ephemera, Bulk, Philadelphia Navy Shipyard site proposal, Answers to Questions", Souvenir program book for Navy Day, September 5. Program and souvenir book for Navy Day, October Program flyer for Navy Day, October Invitations and tickets to launchings, Souvenir program book for Navy Day, October Launching programs and tickets, Scrapbook with assorted clippings, Launching invitations and tickets, Booklets regarding nomenclature of naval vessels, Commissioning programs and invitations and newsletters, Navy Day booklets, October Navy Day program booklet, October Program for Armed Services Day, May Souvenir program book for Armed Forces Day, Catalogs and bulletins of ship parts, , , , , , undated.

Apprentice School catalogs, , Occupational safety manual, rigging cargo gear, Transfer ceremonies program, May Student study guides, , Approval and procurement record for Navyships and Navyships , s, undated. NAVFAC negotiates with the community to determine the appropriate level of these types of services and pays a substantial portion of their costs until the property is transferred to the community. These offices, however, are minimally staffed and charged with maintaining facility property at a minimum level for a limited period of time. At sites where there is active reuse, local communities are expected to assume more of the burden for common expenses, such as physical security U.

The standard to be used by NAVFAC is whether a private contract is necessary to facilitate the smooth transition of the facility from a military installation to a vital, contributing area of the local community. According to NAVFAC policy, compensation may be paid to the LRA for police and fire services until the expiration of the BRAC account or the date when the Navy determines that tax and license revenues generated from leased property are sufficient to cover the cost of such services U.

A key issue for police and fire services is legal jurisdiction, which may vary from location to location within a base and require adjustments over time to simplify law enforcement arrangements. Following the closure of the base in , the city gradually assumed some physical security responsibilities. The Navy, however, continues to retain a small fire-fighting capability to support its own facilities, and there is a reciprocal agreement between the city and the Navy to help each other in fighting fires.

All tenants are expected to reimburse the Navy for fire-fighting expenses incurred on their behalf. In addition, the Navy takes care of its internal police matters. Tenants are responsible for security at their own facilities e. Exclusive jurisdiction implies that all police and criminal investigative services are provided by federal authorities; local governments are not authorized to provide police powers or fire protection services other than under existing mutual support agreements.

Under partial jurisdiction the local government retains all legislative and judicial authority not ceded to the federal government. Concurrent jurisdiction permits both federal and local agencies to enforce both federal and local laws and statutes. Under proprietary jurisdiction, the local government is the principal police and fire authority U. In September , the shipTable 5. We did not independently validate the costs provided by the Navy. Of these, 1, were placed in other DoD or federal organizations under the PPP; had their functions transferred to other Navy activities; 1, chose incentives for early retirement; and 1, left the shipyard through normal attrition.

Only 1, employees were actually released through reduction in force RIF actions see Figure 5. The costs for these various functions are shown in Table 5. Other costs shown in Table 5. These costs are primarily associated with the management of Table 5. They include expenses for such things as the salaries and support of the personnel in the caretaker site office, gate and roving guards contracted , cutting grass, minor repairs of facilities, and the like. A detailed breakout of these costs is shown in Table 5.

The most prominent among them was Bernard Meyer, CEO and owner of Meyer-Werft, a private German shipbuilder with a year history and a 25 percent share in the profitable gas tanker and cruise ship market. Christine Whitman, Pennsylvania Gov.

Tom Ridge, and U. Arlen Specter and Rick Santorum all assigned staff members to work on the project of enticing MeyerWerft to Philadelphia. For his part, Bernard Meyer expressed his belief that the time was ripe for the United States to get back into commercial shipbuilding, or at least that part of the business that focused on specialized, technology-laden ships, such as the ones his company produced Holcomb, a, p.

He also faced severe limitations for future growth in his Papenburg, Germany, facilities. Such funds would cover major improvements at the shipyard, including a huge shed over the largest drydock, and other changes to make the yard comparable to operations in Papenburg Holcomb, a. Department of Labor and the EDA. However, the mix of funding sources was not clear at the time Fabey, , p. Worker Training Meyer-Werft initially expressed some concern about the ability of workers steeped in military yard practices to adapt to working in a private yard, which required employees to be less specialized in their skills and be willing to take on a variety of tasks Holcomb, a.

Department of Labor, as well as the support of Philadelphia-area educational institutions, to teach prospective employees the shipbuilding techniques the company had developed in its Papenburg shipyard Holcomb, g, p. Regional Politics The complexity of politics in the Philadelphia region delayed the negotiating process. Meyer-Werft 51 project depended on powerful Philadelphia Democrats and the new Republican administration in Harrisburg.

The cooperation of New Jersey political leaders from opposing parties was also important. On the plus side, the potential benefits of a Meyer-Werft deal would be spread over three states, a half-dozen congressional districts, 10 counties, scores of cities, and hundreds of businesses. Yet no single, powerful benefactor had an overwhelming reason to bring the deal to a close Holcomb, f, p. Working in parallel, regional labor leaders sought support from area congressmen and the U.

Nevertheless, this multifaceted lobbying effort could not prevent delays in the negotiation process. The slow pace of negotiations made it virtually impossible for Meyer-Werft to build ships for the customer that attracted it to Philadelphia in the first place, FastShip Atlantic. To get that contract, Meyer-Werft would have to complete its deal with the city in less than half the days envisioned by the city.

Otherwise, FastShip would miss the May 1, , deadline for obtaining critical federal assistance for the project Holcomb, c. Some feared the introduction of Meyer-Werft would make it even more difficult for U. Other arguments centered on the existing excess of shipbuilding capacity in the United States Holcomb, c. However, this potential deal breaker turned out to be a nonissue when the United States suddenly backed out of the agreement under pressure from the domestic shipbuilding industry, which feared that the treaty might jeopardize the subsidies it received for the construction of military vessels Philadelphia National, The leadership of Philadelphia supported the proposal, and it also won key support within Congress and the Clinton Administration, especially from Labor Secretary Robert Reich Holcomb, i, p.

However, several concerns were raised by the state of Pennsylvania about the Meyer-Werft proposal. First Attempt at a Private Shipyard: Meyer-Werft 53 In May , Meyer-Werft changed its initial proposal to accommodate some of the concerns. For example, the company accepted the idea of a dramatically reduced role for the DRPA. The new one largely overcame the opposition to the original plan Holcomb, h, p. As a builder of large, technologically advanced ships, MeyerWerft needed large drydocks and steel fabrication facilities.

Its shipyard in Papenburg was constrained geographically for further expansion, and the Philadelphia Shipyard was one of only two private shipyards on the east coast of the United States to have such facilities. Finally, as a result of the Jones Act of , a section of the shipbuilding market—ships built to carry cargo and passengers between U. Prospects for new cruise ship orders in the United States were strong, and the faster ships in which Meyer-Werft specialized made it desirable for passengers to depart on cruises from mid-Atlantic ports, such as Philadelphia, rather than Miami Holcomb, d.

On the downside, Meyer-Werft disliked the idea of accepting a large debt in government-guaranteed loans in order to finance the reconstruction of the Philadelphia Shipyard. Meyer-Werft and its investors faced two additional risks. The first concerned the price that new cruise and specialty cargo ships would command in the future. At the time of the Meyer-Werft negotiations, marginal operators using worn-out vessels were keeping down prices for new ships. To Philadelphia and Pennsylvania Supporters of the Meyer-Werft deal in Philadelphia argued that its economic benefits could be substantial.

One study indicated that, by the end of , the Meyer-Werft shipyard could be providing 2, shipyard jobs, 2, supplier jobs, and 2, more indirect positions related to hotels, restaurants, and the like Philadelphia Inquirer, , p. Others argued that a MeyerWerft deal would have positive national as well as local repercussions. In addition, concern arose that the shipyard improvements Meyer-Werft proposed would be so specialized that First Attempt at a Private Shipyard: Meyer-Werft 55 only a limited number of tenants could make use of these facilities if Meyer-Werft went out of business or abandoned the yard Holcomb, j, p.

Epilogue The city of Philadelphia tried to salvage the Meyer-Werft deal. After intensive negotiations involving the commonwealth of Pennsylvania, city of Philadelphia, and the DRPA, which included discussions with the federal government—including then Vice President Al Gore—this provisional agreement was followed by a page contract that was formalized in a signing ceremony at the Philadelphia Convention Center on December 16, Kvaerner ASA, a; Gorenstein, c.

Its core business units included shipbuilding, oil and gas, construction, metals, and pulp and paper PIDC, undated pamphlet. At the time of the Philadelphia deal, Kvaerner had only been in the shipbuilding business for about 10 years. Nevertheless, it had put together a diverse and profitable shipbuilding division with expertise in many different types of ships.

Furthermore, the contract specified that Kvaerner ASA, the parent company of KPI, would provide, free of charge, its subsidiary with a number of existing, modern, and relevant ship designs. According to the Master Agreement, abandonment was deemed to occur if at any time KPI ceased shipbuilding activities at the shipyard for a period of nine consecutive months. December Lease signed January Begin design and engineering for renovations Fall Commence construction January Commence hiring and training of workforce June Start construction of first ship Fall Complete facility construction Early Launch first ship.

A Deal Is Struck 61 , p. Moreover, the agreement appeared to violate the international antisubsidy pact because even though the United States had not yet ratified this treaty, it had pledged, along with the other signatories, not to increase shipbuilding subsidies while the pact was still pending Sansbury, a, p. According to his assessment issued in August , the Pennsylvania Auditor General found that the Master Agreement imposed ambiguous obligations on Kvaerner and deferred the required performance of most of its obligations for several years, if ever.

More significantly, it granted Kvaerner the right to abandon the project and escape responsibility for operating the shipyard and building ships, after having earned fees for constructing the yard at taxpayer expense Phillynews. Rebuttal In response, Pennsylvania, Kvaerner, and Clinton Administration officials rose to the defense of the Kvaerner agreement.

The Closing and Reuse of the Philadelphia Naval Shipyard

Also, unlike in the Kvaerner agreement, cost overruns would have been billed to the state under the Meyer deal. In a press conference, Governor Ridge asserted that state money for the Kvaerner deal would only be spent on job training and improvements to the yard. They believed subsidies were necessary to build a new ship facility in the current market Gorenstein, c. For his part, the U. Transportation Secretary defended the subsidy aspects of the Kvaerner deal against those who criticized it as being in violation of the Organization of Economic Cooperation and Development OECD pact Sansbury, b, p.

Initially, it would strive to become the leading producer of container and tanker ships for the U. Later, Kvaerner planned to expand into the cruise ship market FAS, , p. The following are the major components of this strategy as spelled out in a January KPI briefing: Nearly all the other components of the ship were manufactured and assembled by subcontractors and then delivered to the yard precisely when needed.

Within the shipyard, teams of highly trained workers were provided with first-class facilities and organized around core processes, rather than trade skills. Outside the shipyard, Kvaerner relied on teams of suppliers, selected for their innovative ideas and desire to enter into a partnership with the firm, rather than their low bid offers.

As with its in-house teams, Kvaerner expected its supplier teams to focus on their core competencies. In contrast to the typical acquisition system that involved one customer and many suppliers, the Kvaerner team approach involved a few prime suppliers, each having a manageable number of subsuppliers. Built during World War II, these drydocks can comfortably accommodate the construction of ships up to feet in length and up to feet in beam the maximum beam for a ship to traverse the Panama Canal is feet.

Furthermore, the advent of the Asian economic crisis had depressed the shipbuilding business worldwide. As a result of its review, Kvaerner ASA announced on April 13, , that it was getting out of the shipbuilding business to focus on engineering, contracting, and construction. Thus, Kvaerner was considering three alternative strategies: Although market strategists praised the Kvaerner restructuring plan—which was expected to generate annual cost savings of one billion kroner and raise 3.

On April 15, , Kvaerner indicated that the Philadelphia yard would be packaged for sale along with its four largest and best-performing yards in Finland, Germany, and Norway Warner, b. In fact, Kvaerner executives in London were already negotiating with two potential buyers, one that was subsequently identified as Aker Yards, the shipbuilding arm of the Norwegian holding company Aker RGI Barnard, c. A few days later, however, Kvaerner sought to reassure Philadelphians that, despite its desire to exit the shipbuilding business, it would continue to operate the Philadelphia yard so long as a buyer suitable to the city and state could not be found Holcomb, a.

Furthermore, the state had purposely structured the agreement to include Kvaerner ASA, and not just its Philadelphia subsidiary, to preclude the easy abandonment of the yard Warner, a. As subsequently reflected in the December contract, the scope of the construction project was defined as follows: The following factors largely accounted for the cost increase: This would have increased refurbishment costs. The soil conditions at Philadelphia were in fact much poorer than at Warnow and therefore required deeper 90 to feet and more pilings.

Two other changes, which were not part of the cost overrun, were funded separately. These were as follows: Aftermath of the Kvaerner Contract 69 authorities faced a dilemma: On the one hand, any attempt not to honor its contractual obligations would likely result in a government lawsuit that, if successful, could potentially bankrupt Kvaerner. On the other hand, if the government pushed too hard, Kvaerner might decide to walk away and take its chances in court.

Consequently, a compromise was reached. According to the Amendment to the Master Agreement, signed on July 30, , Kvaerner was authorized: Although the Amendment to the Master Agreement solved the immediate problem of the construction cost overruns and soothed differences between Kvaerner and its government partners, it provided further ammunition to critics of the Kvaerner Philadelphia Shipyard project.

In particular, Kvaerner officials took aim at typical U. Without a new kind of labor agreement, they claimed, Kvaerner could not be expected to achieve the productivity and profitability goals necessary to survive in the highly competitive shipbuilding industry. Under the agreement, which took six months to negotiate, workers with a specific skill would be hired and then provided training in related skills.

Blue-collar hiring was to begin in January For its part, the Metal Trades Council wanted former shipyard workers to be given priority. Although Kvaerner agreed to give PNSY workers first consideration, the company reiterated its right under the Master Agreement to hire any person it believed was qualified Gorenstein, a. All interested parties reacted positively to the fall labor agreement. The union contract was a very important element in reopening the yard. As for Kvaerner, it was pleased to land a single union contract with the Metal Trades Council rather than negotiate multiple deals with different unions Davies, More positively, labor officials agreed that the hiring process had proceeded fairly smoothly.

About 60 percent of blue-collar workers were ex—Navy shipyard employees. By fall , Kvaerner planned to increase its Philadelphia workforce to approximately before reducing the number to about If suppliers are included, the virtual blue-collar workforce may eventually be larger than it was in the naval shipyard. By early , the shipyard was about three-quarters complete, and work was under way to complete the structural steel and enclose the Grand Block Shop, enclose the Paint Shop, and complete the site work.

In addition, the Goliath Gantry Crane, the slewing cranes, and other shipbuilding equipment were being tested and commissioned. Key production machinery includes: Shipbuilding Having sought and been denied a second delay in the start of ship construction, Kvaerner stuck to its revised contract and began building its first ship on March 31, Kvaerner had planned its first ship to be about half that size, but carriers hauling cargo between U.

If all goes as planned, the first CV will deliver in summer Holcomb, d.

Foreign Purchases For the past two years, regional politicians have criticized Kvaerner for going outside the United States for many of the required goods and services necessary for the reconstruction of the Philadelphia Shipyard. In response, Kvaerner indicated that the company had made every effort to buy American but would turn to the international market when necessary to transform the yard into a global competitor.

Although this list appeared suspiciously long to some, shipbuilding experts have not found it surprising. Rather, they say, it is a clear indication of how far behind U. Although most any shipbuilding component can be found in the United States, it may not necessarily be competitively priced, state of the art, or accepted as industry standard Sansbury, ; Baldwin, For their part, Totem executives claimed that they had been cooperating closely with National Shipbuilding for five years under a federal ship-design program devised to help revive commercial shipbuilding Holcomb, b, p.

However, Kvaerner also requested at the time that regional officials allow the company, if necessary, to purchase two large container ships instead of the three smaller vessels stipulated in the contract. His temporary replacement was a London lawyer. After discovering that National Steel and Shipbuilding Co. If so, the Philadelphia yard would move much more quickly than expected toward building cutting-edge vessels designed to carry 76 The Closing and Reuse of the Philadelphia Naval Shipyard cargo twice as fast as conventional ships. By summer , Kvaerner had all but abandoned its plan to sell its major Finnish, German, and U.

By January , the company had disposed of only five of its 13 yards, even though it had hoped to be entirely out of the shipbuilding business by that time. Still, Kvaerner was anticipating the imminent sale of its biggest yard, Kvaerner-Masa Yards in Finland, which accounted for more than 50 percent of its shipbuilding production. As for the Philadelphia Shipyard, a newspaper report in February indicated that two major shipbuilding firms from Singapore and Norway were in serious negotiations to take over KPI. Although committed to its decision to exit the shipbuilding business, Kvaerner appears to see Philadelphia as a shipyard with significant potential value.

No decision has been made regarding a buyer for Philadelphia, Warnow, or the two Masa yards that remain.

Aftermath of the Kvaerner Contract 77 Audit Report To make matters worse, on August 9, , the Pennsylvania Auditor General released an audit of the Kvaerner Philadelphia Shipyard accusing the firm of wasteful spending, among other infractions. One argument was that Pennsylvania companies received less than half of the construction dollars awarded as of October , less than 2 percent of the equipment contract dollars as of November , and none of the Information Technology contract dollars Phillynews.

Reportedly, shipyard workers had for some time quietly grumbled about perks given to the foreign executives of Kvaerner ASA. However, their unhappiness turned to anger when the report charging that public funds had been spent for expensive luxuries appeared. At the root of this anger was the fact that foreign executives appeared to be faring very well while many workers were earning far less than they had when the U.

Navy had owned the shipyard. Unfortunately for Kvaerner, this rising resentment among its employees was coming at a time when it was beginning to attract 78 The Closing and Reuse of the Philadelphia Naval Shipyard the interest of potential shipyard buyers and the company needed to hire new workers to meet its construction schedule Holcomb, g, p.

Although many of the current tenants at the base have moved to the base from other parts of the Philadelphia area, more than half of them are either start-up companies or arrived from outside the region. As a result, Metro has amended its lease and currently leases Drydocks 2 and 3 as well as Piers 5 and 6. In addition to the repair work, Metro is also engaged in a ship dismantling demonstration project for the Navy.

Northrop has a manufacturing facility that may relocate to a larger site at PNBC for the manufacture of this engine. Thus it also hoped to become a major supplier to the Kvaerner Philadelphia Shipyard. Prime Plate Enterprises, Inc. Prime Plate occupies the former Building in the Girard Point complex. It receives steel plate from Bethlehem Steel and then prepares and primes the plate for delivery to Kvaerner on a just-in-time basis. It will employ to workers. The story has not yet reached a conclusion.

Although the overall process of closing, transferring, and reopening the shipyard was difficult at times and faced a number of obstacles, there is hope that the result will benefit the Navy, the city of Philadelphia, and the people of the region. The Navy has transferred a large portion of the former PNSY to the city of Philadelphia thereby eliminating the cost of maintaining excess ship repair capacity.

Also, the two large drydocks remain in use and could be available if a national emergency requires the need for such scarce facilities.

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The city of Philadelphia now owns a large industrial facility that not only contains the most advanced shipbuilding capability in the United States but also has numerous buildings and other facilities. Various tenants have been leasing a portion of the former shipyard, resulting in revenue to the city. These tenants also provide new employment opportunities that result in demands for local support services as well as income and wage tax revenue.

They also procure utilities from the local providers. The new Kvaerner facilities represent the most modern shipbuilding capability in the United States. Spinoff opportunities, such as Prime Plate, have resulted as the Kvaerner supplier network progresses. This last chapter provides some overall observations on the closure and reuse of the former PNSY. It discusses the lessons for future studies on the costs to shut down, maintain, and reestablish major shipbuilding facilities and equipment; the impact on the workforce 81 82 The Closing and Reuse of the Philadelphia Naval Shipyard of closing and then reconstituting shipbuilding activities; and the commercial shipbuilding philosophy of Kvaerner.

It concludes with a short discussion of the future of the former PNSY. This actual data point would prove useful in estimating the costs of various shipbuilding industrial base options that involve the temporary closing or mothballing of excess facilities and equipment. When examining the costs for this case study, it is important to keep in mind the following: Some of the buildings at the PNSY were old and obsolete and the shipyard commanding officer realized there was little potential for their effective reuse.

Some of the older buildings were ultimately demolished to make way for the new ultramodern shipbuilding facilities. Private enterprises would have likely demolished any obsolete facilities to reduce the overhead costs associated with closure and maintenance. The actions they took to preserve equipment and facilities, and the resulting costs, may have been very different if the Navy had a plan for their reuse.

For example, minimal preservation efforts were expended on the drydocks and such heavy equipment as cranes. Larger efforts and costs would have been expended on the drydocks and heavy equipment under the original plans of the BRAC to close and preserve portions of the shipyard for future use. This new function for the shipyard required new facilities and equipment. Even with these caveats, valuable lessons and data can be gleaned that should prove helpful in future analyses of shipbuilding contraction and expansion.

Costs of Shutting Down the Shipyard At the time of its closure, the PNSY occupied approximately acres of land with 25, linear feet of berthing space; five drydocks; 34 fixed, floating, or tracked cranes; and facilities, including 23 fully equipped production shops. Of the facilities, 52 were retained by the various Navy organizations that remained at the location and were subsequently transferred to the city of Philadelphia. The vast majority of the buildings and facilities were built during World War I or World War II and many were in poor physical condition.

As shown in Tables 5. We will discuss the workforce-related costs shortly. Here, we concentrate on the equipment and facility costs, assuming these are the types of costs that a private shipyard would expend in closing down a portion of its facilities with a goal of future reuse. Preparing the shipyard for closure involved preserving the equipment for potential reuse, removing excess equipment that the city did not want, and laying up the buildings according to BRAC and NAVFAC standards.

A strenuous effort was required to organize and catalog a wide array of hand tools, minor equipment, and other items used for the repair and maintenance of naval ships. This included a substantial amount of household furnishings, including linens, used to support the crews of ships at the PNSY for long-term maintenance, such as the SLEPs. Much of the excess tools, equipment, and personal property were donated to local governments, technical schools, or charities.

Although not a trivial sum, the costs of placing the facilities and equipment in a dormant state were relatively minor given the number of facilities and their combined square footage. However, as mentioned previously, the closure actions were not driven by the objective of future reuse by the Navy. For example, minimal preservation efforts were expended on the drydocks and cranes, with much of the major equipment receiving only a light coating of oil as a preservative.

A private shipyard would likely have spent more time, effort, and cost in the preservation of major equipment intended for reuse. Nevertheless, the costs of closing down and preserving a portion of a shipyard are relatively minor. Of these costs, approximately 40 percent were for caretaker personnel, their support, and facility security with the remaining 60 percent for the maintenance of the buildings and equipment.

Again, the magnitude of these costs is relatively minor. In addition to this data point for the costs of maintaining a portion of the shipyard in a dormant state, NAVFAC has a set of definitions and guidelines for the actions necessary to maintain facilities at various levels depending on the time frame of their intended reuse see Table 5.

NAVFAC developed cost standards relating closure and maintenance costs to various measures, such as dollars per square foot or dollars per estimated value, to help planners estimate the costs for facility maintenance under different reuse assumptions. These standards, along with NAVFAC experiences, are a useful starting point for estimating the cost of future shipbuilding industrial base actions.

Costs of Reconstituting the Shipyard The costs of reconstituting the Kvaerner portion of the shipyard far outweighed the costs related to facilities and equipment of closing Observations 85 the shipyard and maintaining it in a dormant state. Some specific reconstitution actions include the following: The shop includes state-of-the-art shipbuilding equipment such as plasma cutters, robotic cutters and welders, bending machines, and more than 20 cranes with capacities ranging from 10 to tons.

It is important to note that very little money was spent on refurbishing the two drydocks. Because these are the types of facilities likely to be placed in a dormant state if private shipyards temporarily close down facilities with the intent of future reuse, this data point is useful.

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There are two important caveats with the costs of reconstituting the Kvaerner portion of the old PNSY. First, the basic functions of this portion of the shipyard made the transition from ship repair to ship construction. This transition accounted for the large reconstitution costs. Although a private shipyard involved in building ships might have expenditures for some new equipment when reconstituting a portion of its shipyard, it would unlikely have the degree of new construction required by Kvaerner.

Second, the existing buildings and facilities at the former PNSY were very old and in poor shape. As it 86 The Closing and Reuse of the Philadelphia Naval Shipyard turned out, Kvaerner decided to demolish most of the existing buildings rather than attempt to refurbish them. The other, non-Kvaerner, portions of the shipyard also required some fairly substantial expenditures to make the facilities suitable to new tenants.

Some of the required actions and their costs include the following: The building was approximately 50 years old and in very poor condition. Similar caveats are important here—the buildings were very old and, in some cases, in poor physical condition and new tenants are often using the facilities for purposes other than those they were originally designed and built for.

The costs presented are in some cases the actual costs expended to refurbish buildings and equipment and in other cases are estimates of the costs required. We did not independently validate the actual costs or estimates. Observations 87 taining buildings and equipment. Costs will be greater if the facilities are old and have not been maintained properly and if the new uses for the buildings and equipment are very different from the original uses.

Workforce-Related Costs of Closing the Shipyard The impact on the civilian employees of the shipyard was greatly reduced by the concerted efforts of the shipyard commander, NAVSEA, and the local and federal government. When the shipyard finally closed, fewer than 2, of the more than 7, employees were left unemployed. Many of those 2, had employment opportunities that they declined.

These grants covered the workforce at the naval complex, not just the shipyard. However, a portion of this grant money was included in the package of incentives provided to Kvaerner for workforce training. We will discuss these funds in the next subsection on retraining the workforce.

The costs associated with separating the workforce could have been higher if not for two factors. First, the growth in the overall economy of the United States and of the region during the mids and late s was fairly robust, providing employment opportunities for the displaced shipyard workforce. Unemployment rates in the United States were approximately 4. Philadelphia and the 88 The Closing and Reuse of the Philadelphia Naval Shipyard five surrounding counties had a higher 9.

A second mitigating factor was the new opportunities created by other BRAC actions that retained or relocated several Navy organizations to the shipyard property. These Navy organizations offered employment opportunities for approximately 2, civilians. Also, new tenants at the shipyard employed several hundred people. Reconstituting and Retraining the Workforce Kvaerner faced several obstacles when reconstituting the workforce at the shipyard. First, the former shipyard employees, although highly skilled, were experienced in ship repair not in shipbuilding. In ship repair, much of the work is directed at removing, repairing, and replacing components and subsystems or at the repair of relatively small portions of the ship structure.

In shipbuilding, especially in the Kvaerner approach to shipbuilding, much of the work is directed at the construction of large assemblies or blocks, which are then joined to construct the hull, mechanical, and electrical portions of a new ship. Subcontractors perform much of the subsystem or component work i. A second hurdle was the union rules that guided the skills and workforce relationships in U. The Kvaerner approach to shipbuilding required its employees to learn a variety of skills and to work within a structure that emphasized detail, efficiency, and cooperation.

The shipyard would hire people with specific skills, but training would be provided in related skills to lead to a multiskilled workforce. Finally, the employment market at the time of the Kvaerner agreement was such that many of the former shipyard workers had new Observations 89 jobs and jobs they were happy with. Unemployment was low both in the Philadelphia region and throughout the United States. The plan for this training was to send 30 employees per year for three months to Europe starting in the third quarter of The overseas training program was to last for five years.

As of this writing, new employees have received overseas training. This training started toward the end of with production workers from Warnow brought to Philadelphia for periods of six months to a year. The training will be provided for approximately employees through technical courses of two to five days in duration taken five times per year. The objective of this training is to enhance the skills gained through overseas and technical training through the process of building ships at the new shipyard.

The OJT is considered the most important part of the training program and the best way to achieve the objectives of the training program and to monitor and document that achievement. This training started with the construction of the first ship in March The total cost of the training program pays the salaries of employees and funds the other costs incurred in connection with the training program. Kvaerner currently employs more than local workers, more than half of whom are blue-collar workers and the remaining are engineers, designers, planners, or support workers.

Approximately 40 percent of the current Kvaerner employees approximately 60 percent of blue-collar workers are former PNSY employees. Direct 90 The Closing and Reuse of the Philadelphia Naval Shipyard employment by Kvaerner is planned to increase to approximately 1, by the first quarter of Employment projections by function for year six of the Master Agreement are shown in Table 9.

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The Kvaerner endeavor will be closely watched to see if the United States can once again become competitive in the international shipbuilding market. Over these years, the yards have tailored facilities, processes, tooling, and technology to suit the needs of their primary customer. Navy has accepted these initiatives as meeting its specifications and price expectations, there does not exist the same competitive atmosphere that drives shipbuilding in world commercial markets.

There is a niche in the Jones Act and Passenger Vessel Services Act markets, as described earlier, for ships engaged in trade between U. Those Acts require the construction of these ships in U. Ship owners in those markets have been very leery of building in U. This is in spite of the fact that the ships in those trades are aging and in need of replacement.

The shipbuilding division of Kvaerner AG—in particular, its Kvaerner Masa Yards and Warnow Yard—has been very successful delivering competitively priced ships to the world market. Each of the factors discussed below enhances yard productivity. Multiskilled Workforce In the Kvaerner system, workers are trained to handle a variety of related skills and are expected to work cooperatively with other 92 The Closing and Reuse of the Philadelphia Naval Shipyard craftsmen.

This concept is vastly different from the traditional strict union job boundaries in U. The overall concept at Kvaerner is to develop a flexible workforce in which an individual who is expert in one area is trained to be a generalist capable of working in several related areas. Process, or work, teams are composed of these multiskilled workers with each team responsible for one segment of the overall construction process. Special relationships have been established with suppliers to ensure careful adherence to delivery schedules in Philadelphia, Kvaerner has established such a relationship with Prime Plate Enterprises, Inc.

The plate storage yard in Finland is a fraction of the dimensions of typical plate storage yards in the United States. Material Flow While it is common practice for U. By taking the best in facility design from all its yards particularly Masa and Warnow and by employing lessons learned, it has designed and constructed a steel fabrication facility from scratch that might rightfully claim to be the best in the world. Designed originally to accommodate a throughput of 25, tons of steel per year, changes made during construction of the facility now make it possible to handle a throughput of 40, tons per year.

Observations 93 Automation Based on its experience in Europe, Kvaerner has learned that overautomation can be counterproductive. This intelligent use of automation has made it possible for insertion of manual fitting and welding where it can do the most good. Provision has been made to assemble steel pieces in the fabrication facility, move them to a large hall for assembly into modules, and transfer the modules by a ton gantry crane into the drydock.

Preoutfitting and outfitting proceed as the modules and blocks take shape. For the initial build of container ships, a very high percentage of outfitting will be accomplished sequentially, in the fabrication facility, the assembly hall, and under the gantry crane, before the large blocks are moved to the drydock. Use of Prefabricated Components Kvaerner makes maximum use of prefabricated parts and components. Kvaerner will use prefabricated, circular, insulated ventilation ducting and prefabricated joiner bulkhead panels. It also uses prefabricated joiner doors and ceiling panels.

These are assembled into crew and passenger staterooms. Modular, prefabricated washrooms and heads that are prepiped and prewired are also widely used. For instance, the outfitting of the bridge is turned over to a contractor who specializes in the integration of ship control and navigation equipment. The contractor is responsible for the purchase, installation, and test of all the bridge equipment, components, and furnishings.

He will agree to a start and completion date that is integral with the overall schedule for the total ship construction. Similarly, the galley and messing areas are turned over to a turnkey contractor. In fact, the entire electrical installation from generators to switchgear to switchboards to loads is turned over to a specialized electrical contractor.

The European approach to ship construction relies on subcontractors to accomplish as much as 70 percent of the labor hours. A network of qualified subcontractors has evolved to meet the needs of the European shipbuilders. The labor force is receiving, and will receive as it builds up, adequate training to utilize these facilities under the aegis of European managers. What remains to be fully implemented is a network of subcontractors fully able to take on the large tasks of providing 70 percent of the labor and material on a turnkey basis that it takes to build a ship.

Fortunately, Kvaerner Philadelphia is beginning with the construction of container ships, with relatively straightforward outfitting.

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