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American merchant mariners. Today, the active fleet numbers 45 ships, employing 2,600 mariners. Similarly, in 1980 there were 22 shipyards engaged in the construction of oceangoing commercial and naval ships

employing 140,000 people. Today, there are just eight shipyards

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Today, ninety-nine percent of the ships in the MSP fleet are

foreign-built, and 87 percent are foreign owned. It is just a matter of

time until there will be only two - and quite possibly - just one company

left in this fleet. These companies are Neptune Orient Lines of

Singapore and Maersk of Denmark.

The current MSP program has not achieved the intended

objectives. By all measurement, the U.S. merchant marine is worse off

today than 10-20 years ago.

If Congress reauthorizes the existing MSP program, the Department of Defense will have no say in the types of ships these companies enroll in the MSP program. They may have little or no military utility, and there will be no assurance that when the going gets tough that these ships will be available to the Department of Defense.

To address these serious deficiencies in the Maritime Security

Program, we propose that the Department of Defense pay for the design and construction of ships over a multi-year construction period. The

general types, tonnage, and numbers of each ship type would be

identified by the Transportation Command, in consultation with the

Maritime Administration, to meet DOD sustainment lift requirements.

Under this program, DOD would request proposals annually from

U.S. citizen ship operators for commercial ships meeting the general description and functionality required by DOD. The U.S. citizen

operator would enter into a contractual agreement with DOD, based on the design selected by the operator, to lease the commercial vessel over a twenty-year period. DOD would then pay for the construction of that ship in a U.S. shipyard. Lease payments by the operator to DOD would commence on the date of delivery of the vessel.

The lease payments to DOD would be based on the international bareboat charter rate for a comparable vessel. Lease payments to DOD could be made on a monthly basis. While the contractual length of the lease would be for 20-years, the contract could either be at a fixed rate for 20 years, or alternatively, provide for an annual adjustment of the lease payment to reflect any increase or decrease in international charter



This program is a win-win-win for commercial U.S. ship operators, DOD, U.S. crews, and U.S. shipbuilders. U.S. operators, which are

financially hard pressed to invest in new ships - no matter where they are built -- would have access to ships at international prices, without having to finance the up-front capital investment.

Under this program, the Department of Defense would own the ships ensuring their utility and availability in times of emergency. This program would strengthen the U.S. defense shipbuilding and repair industrial base, and create thousands of long-term jobs for skilled craftsmen essential to building both commercial and naval ships.

While DOD would have to finance the construction of the fleet, it

would realize savings in the costs of naval ships. Shipbuilding generated by this program would enable us to achieve series production in our shipyards and supplier base. Increased production would drive down the unit cost of ships and ship systems under this program as our workforce becomes more efficient with each ship of the same design we produce. This building program would foster insertion of commercial technologies and manufacturing processes in naval shipbuilding

programs. These commercial practices, combined with quantity production would drive down the cost of naval ships.

The lease payments from U.S. operators would be deposited into the National Defense Sealift Fund of DOD to defray the up-front

acquisition of MSP eligible ships. The contractual terms and conditions of the voluntary intermodal sealift agreement of DOD would still apply to U.S. operators participating in the program.

A renewal of the existing MSP, under its existing construct or MSP shipowner proposed changes, would place the Department of Defense at the mercy of foreign shipowners to take whatever ship types those owners make available to DOD -- regardless of their military utility.

This was the case when the MSP program was enacted in 1996, and MSP owners have already indicated that they plan to bring 5,000 TEU containerships into a reauthorized program. While TRANSCOM may question the military usefulness of such large containerships, they will have no say in the matter.

DOD has normally needed ships that can enter a majority of the world's ports, rather than just those few that can handle extra large

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