U.S. Ship-Scrapping Program Scraping By.

• Author: Tiron, Roxana

Maritime Administration says funding for Navy vessel disposal is running low

The U.S. Navy kick-started a pilot program two years ago, to ensure that the dismantling of its ships complies with environmental and worker safety laws. Although this program has been successful so far, the Maritime Administration, which also is responsible for scrapping many Navy ships, does not have enough money to meet its obligations.

Before the Navy pilot program called Ship Disposal Project (SDP) started in 1999, the scrapping of conventionally powered warships was contracted out, via the Defense Reutilization and Marketing Service, said Capt. Lawrence M. Jones Jr., Naval Sea Systems Command (NAVSEA) inactive ships program manager. Companies would pay DMRS for the scrapping rights, but had to cover other costs, such as facilities, dismantling and environmental compliance, out of the revenue generated from the scrap and reusable equipment.

"This process encountered a number of problems, including defaulted contracts, and had not been successful in reducing the backlog of inactive ships in the Navy's inventory," Jones said.

A 1998 series in the Baltimore Sun disclosed that the Defense Department was turning over ships to a number of scrapping firms that were not financially sound and had been charged with crimes such as, fraud, bribing of government inspectors and failure to comply with environmental and safety regulations.

To address the problem, the Navy developed the SDP, "to investigate other options that could expedite the removal of inactive Navy ships in a cost effective and timely manner, while remaining in compliance with all environmental and safety laws," said Jones.

Now, the Navy is paying to scrap these ships and is overseeing the process, rather than selling the ships to the scrapping companies, he added. NAVSEA awarded contracts to four companies, on the East and West Coast, in 1999. Contractors for the pilot program were selected based on technical and cost proposals presented to the government. However, Jones said, the technical factors were significantly more important than the cost. In fiscal 2000, the program's budget was approximately $33.4 million.

So far, the Ship Disposal Project has successfully scrapped six ships with another 12 ships currently under contract, explained Jones. The Navy projects that another 27 inactive warships will need to be dismantled through 2007. The Navy requested $14.1 million for 2001, but the money has not been appropriated yet. The president's budget for 2002 requested $16.8 million for the program.

Meanwhile, the Transportation Department's Maritime Administration (MARAD)--which owns a fleet of cargo ships and...