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STRATEGIES FOR OBTAINING SHIP SERVICES: ALTERNATIVES FOR NOAA Committee on Alternative Strategies for Obtaining Ship Service Marine Board s Commission on Engineering and Technical Systems National Research Council NATIONAL ACADEMY PRESS Washington, D.C. 1988

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NOTICE: The pro, eat that is the sub] ect of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the panel responsible for the report were chosen for their special competences and with regard for appropriate balance. This report has been reviewed by a group other than the authors according to procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. the National Academy of Sciences is a private, nonprofit, self- perpet~=ting society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Frank Press is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organi- zation of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. Robert M. White is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of . appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsi- bility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Samuel 0. Thier is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy's purposes of furthering knowledge and advis ing the federal government . Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered Jointly by both Academies and the Institute of Medicine. Dr. Frank Press and Dr. Robert M. White are chairman and vice-chair~an, respectively, of the National Research Council. The program described in this report is supported by Cooperative Agreement No. 14-12-0001-30360 between the Minerals Management Service of the U.S. Department of Interior and the National Academy of Sciences. Limited copies are available from: Marine Board Commission on Engineering and Technical Systems National Research Council 2101 Constitution Avenue Washington, DC 20418 Printed in the United States of America

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COMMITTEE ON ALTERNATIVE STRATEGIES FOR OBTAINING SHIP SERVICES WILLIAM S. GAITHER, Pennsylvania DAYTON L. ALVERSON. ROBERTSON P. DINSMORE Massachusetts Chairman , Roy F. Weston, Inc., Westchester, Natural Resources Consultants, Seattle, Woods Hole Oceanographic Institution, Woods Hole, Washington HUGH F. LOWETH, Office of Management and Budget (retired), Annandale, Virginia THOMAS D. McILWAIN, Mississippi Gulf Coast Research Laboratory, Ocean Springs, - -r r ROBERT C. MUNSON, National Oceanic and Atmospheric Administration (retired), Kerrville, Texas J. EDWARD SNYDER, JR., U.S. Navy (retired), McLean, Virginia DON WALSH, International Maritime, Inc., San Pedro, California ROBERT A. WETS, Amoco Production Company (retired), Government Liaison Northbrook, GARY HILL, U.S. Geological Survey, Reston Virginia CHARLES W. HUMMER, U.S. Army Corps of Engineers, Ft. JOHN McMILLAN, National Science Foundation. ROBERT L. SANDQUIST, Belvoir, Virginia Washington, D.C. NOAA/Pacific Marine Center, Seattle, Washington PATRICK A. WENDT, U.S. Coast Guard, Washington, D.C. ROBERT WINOKUR, Oceanographer of the Navy, Washington, D.C. Staff CELIA Y. CHEN, Staff Officer DELPHINE D. GLAZE, Administrative Secretary GLORIA B. GREEN, Senior Secretary

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MARINE BOARD WILLIAM C. WEBSTER, Chairman, University of California, Berkeley SIDNEY WALLACE, Vice-Cha~rman, U.S. Coast Guard (retired), Reston, Virginia ROGER D. ANDERSON, Cox's Wholesale Seafood, Inc., Tampa, Florida KENNETH A. BLENKARN, Amoco Oil Co. (retired), Tulsa, Oklahoma DONALD F. BOESCH, - ~ ~ -~ ~ ~ ~ ~~ ~ ~ -~~ Louisiana C. RUSSELL BRYAN, U.S. Navy (retired), St. Leonard, Maryland F. PAT DUNN, Shell Oil Company, Houston, Texas JOHN HALKYARD, Offshore Technology Corporation, Escondido, California EUGENE H. HARLOW, Soros Associates Consulting Engineers, New York, New York KENNETH S. KAMLET, A.T. Kearney, Inc., Alexandria, Virginia DON E. KASH, University of Oklahoma, Norman, Oklahoma DANA R. KESTER, University of Rhode ~ , _ WARREN LEBACK, Puerto Rico Marine Management, Jersey EUGENE K. PENTIMONTI, American President Lines California ERNEST L. PERRY, Port of Los Angeles (retired), Sun City, Arizona RICHARD J. SEYMOUR, Scripps Institution of Oceanography, La Jolla, California RICHARD T. SOPER, American Bureau of Shipping, BRIAN J. WATT, Consulting Engineer, Louisiana Universities Marine Consortium, Chauvin, Island Kingston, Rhode Island Inc., Elizabeth, New Ltd., Oakland. Kingston, Texas Staff CHARLES A. BOOKMAN, Director DONALD W. PERKINS, Associate Director CELIA Y. CHEN, Staff Officer ANDREA CORRELL, Staff Officer C. LINCOLN CRANE, Staff Officer DORIS C. HOLMES, Staff Associate JOYCE B. SOMERVILLE, Administrative Secretary DELPHINE D. GLAZE, Administrative Secretary AURORE BLECK, Senior Secretary GLORIA B. GREEN, Senior Secretary 1V Paramus, New Jersey

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PREFACE The National Oceanic and Atmospheric Administration's (NOAA) Fleet of 23 vessels is operated by the Office of Marine Operations (OMO) in the National Ocean Service. NOAA vessels range in length from 86 feet to 303 feet and in displacement tonnages from 220 to 4033 tons. The vessels are classified by horsepower-tonnage into six classes (Classes I-VI) and support NOAA's fisheries, oceanographic, and hydrographic programs and projects. In the early 1800s the vessels of the NOAA Fleet were acquired to carry out the missions of the early Coast and Geodetic Survey. The fleet was expanded and modernized between 1962-1968, and NOAA was established as an agency in 1970. The following year, OMO was established and all NOAA vessels were placed under centralized fleet management. Later, in 1978, OMO was given responsibility for over- seeing all of NOAA's chartering activities. In the past, NOAA has used vessel capability in the private sector to meet agency requirements that extend beyond the budgeted capacity or capability of the NOAA Fleet. NOAA program offices have access to the NOAA Fleet to the extent that operating time is available. Beyond that capacity, the program offices are permitted to seek private vessel support and use program funds to pay for these charters through direct competitive procurements. Private sector vessels between 1983-1985 provided approximately 16 percent of all of NOAA's vessel support (GAO, 1986~. During those years most of the private sector support was obtained by the National Marine Fisheries Service, of which the Northwest and Alaska Fisheries Center contracted 61 percent of all the days-at-sea provided to NOAA by private vessels. To date, most of these charters have involved vessels smaller than NOAA vessels. The issue of chartering for NOAA vessel support has been addressed in government reports as early as 1978. In a 1978 GAO report (GAO, 1978), NOAA was criticized for the lack of effective centralized control over vessel operations within the agency as evidenced by incidents of charter vessel leasing without the knowledge of OMO. This problem was resolved soon afterward with a specific agency directive for better control of vessel leasing and charter management. In sub- sequent years chartering was discussed in various NOAA documents. A study by General Offshore Corporation (1979) proposed that NOAA use a v

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mix of gover~ment-owned ships and chartering to meet the projected future ship needs. In 1980, an A-76 cost comparison was conducted of in-house versus contract operation of the fishery vessel, the Chapman. The study (Management Analysis, Ince, 1980) concluded that in-house operation of the Chapman was less expensive. A study by Booz-Allen & Hamilton, Inc. (1981) reviewed NOAA ships to determine if contractors could operate these vessels. The study concluded that in most cases the costs would exceed existing staffing costs. A recent report pub- lished by Texas A&M University (1987), reviewed NOAA's missions and recommended future direction. This study concluded that a dedicated NOAA Fleet was a preferable method of meeting NOAA's ship requirements with chartering to augment when necessary. Most of these studies have been either contracted by NOAA or conducted by organizations affiliated with NOAA (such as the National Advisory Committee on Oceans and Atmosphere). For the past 4 years, the focus on the vessels of the NOAA Fleet has intensified. An annual report of the Federal Oceanographic Fleet Coordination Council (1986) points out that the NOAA vessels, which comprise one-third of the vessels of the Federal Oceanographic Fleet, are the only federal vessels in various stages of the A-76 review process.* Furthermore, the agency's budget requests over the past 5 years have proposed cost-cutting measures involving deactivation of significant portions of the NOAA Fleet. These proposals have all stated that required ship time could be obtained through private sector charters. The 1984 budget proposed to deactivate 10 of NOAA's vessels, including eight fisheries vessels, to achieve an estimated operating savings of $7.9 million and ship support savings of $3 million. The 1988 request proposed to deactivate seven vessels and reduce days-at- sea on seven other vessels pending the results of further study (this study). Each year, Congress has opposed these proposals and added the proposed budget savings back to NOAA's budget. On April 19, 1985, the chairman of the House Committee on Merchant Marine and Fisheries, along with the chairpersons and ranking minority members of four subcommittees, asked the GAO to conduct a study on the feasibility of this recurring budget proposal. The committee members contended that NOAA had "provided no evidence to support its claim that chartering vessels will result in increased savings to the govern- ment." The committee asked GAO to investigate vessel availability, cost comparisons, potential effects Of chartering on scientific research, and any existing findings to support the proposal to charter vessel services. GAO found that (1) views of NOAA officials on char- tering of private vessels differed regionally and by program area (the Northwest and Alaska Fisheries Center was the strongest proponent); (2) NOAA needed to develop better information on the actual interests *Office of Management and Budget (OMB) Circular A-76 specifies procedures for conducting cost comparisons between contractor operation and government operation. If the latter is determined to be a more expensive arrangement, the activity would be contracted out. V1

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and qualifications of the private sector to determine if the private sector could meet NOAA's program needs; and (3) NOAA needed to develop more complete cost data for different regions and different uses for private and NOAA vessels before determining whether NOAA or the private sector had an overall cost advantage. GAO recommended that NOAA develop more definitive information on the merits of vessel deacti- vation and chartering. In the meantime, NOAA could gradually increase the use of private vessels to obtain additional experience and data needed to justify the deactivation proposal. On August 29, 1986, a request was made to William C. Webster, chairman of the Marine Board, by Anthony J. Calio, administrator of NOAA. The Marine Board's assistance was requested "to assess the issues associated with chartering research vessel support from the private sector versus operating NOAA ships." The Marine Board was asked to assist NOAA in identifying the benefits and penalties associated with vessel chartering and in developing a methodology to compare all aspects of operating NO M ships with the use of charter vessels. The results of this study may have impacts on future budget proposals and A-76 activities pertaining to the NOAA Fleet. The information will also benefit other federal organizations in the process of conducting similar assessments. In response to NOAA's request, the National Research Council con- vened the Committee on Alternative Strategies for Obtaining Ship Services under the auspices of the Marine Board. The members of the committee were selected with regard for the expertise necessary for the assessment and also to ensure a spectrum of viewpoints. The expertise of the committee members spanned the fields of ship operations manage- ment, systems analysis in buy-lease operations, economic model develop- ment, and hydrography, fisheries, and oceanography acquisition opera- tions. Biographies of the committee members appear in Appendix A. The principle guiding the composition of the committee, consistent with the policy of the National Research Council, was to include the biases that might accompany expertise vital to the study in an effort to seek balance and fair treatment. Assistance was provided in the quanti- tative analysis of charter costs by Dr. Henry Marcus of the Massachusetts Institute of Technology. The committee was asked to identify the technical, operational, economic, and safety aspects of obtaining vessel support; identify the tasks associated with platform use to support NOAA's responsibilities in oceanographic research, fisheries, and hydrography; and develop a methodology for assessing all aspects of vessel platform use for both specialized and multipurpose platforms. The committee recognized that the choice of strategy for acquiring and operating vessels is influenced by a number of related issues beyond the scope of the study. Notable among these were changing requirements for research and survey vessels, the availability of vessels for lease, the effect of vessel support strategies on NOAA personnel requirements, the age and condition of the current NOAA Fleet, plans for vessel overhaul, modernization, and replacement, and new ship construction. e ~ V11

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While the committee was charged with comparing alternative strategies for obtaining ship services, it recognized that larger issues concerning the national need for oceanographic ships and the federal government's role in meeting that need are growing in importance, and remain unresolved. These important subjects were beyond the scope of this assessment. However, the committee did consider them to the extent necessary to understand NOAA's vessel needs within the Federal Fleet and the potential for fulfilling NOAA's needs through chartering. The committee identified several basic assumptions. First, NOAA's ability to meet its programmatic responsibilities should not be compromised in any of its proposed strategies for obtaining ship services. Second, a broad range of chartering strategies would be considered even if existing vessels or current contracting arrangements were not adequate or appropriate. Third,build-to-lease options would be considered. The study focused on NOAA's current and future vessel needs and the quantitative and qualitative factors that influence the selection of strategies for acquiring and operating vessels to meet those needs. In addition to addressing a broad range of chartering arrangements for all of NOAA'S programs, the committee also considered short-term versus long-term chartering and regional differences in vessel needs and availability. The committee met four times--three times at the National Academy of Sciences in Washington, D.C. and once at the Pacific Marine Center in Seattle, Washington. The committee boarded and spent 3 days on the NOAA vessels, the Davidson, the Oceanographer, and the Miller Freeman, observing operations in Puget Sound and off the coasts of Washington and Oregon. An additional site visit was made by one committee member to the Atlantic Marine Center in Norfolk, Virginia. Both visits to the marine centers provided the committee with an opportunity to observe NO M vessels and their operations. This report discusses the scope of present and future NOAA responsi- bilities and fleet activities in each of the three mission areas of hydrography, fisheries, and oceanographic research. A definition and description of chartering alternatives are given, and example opportunities of the types of NOAA missions conducive to chartering are identified. Important factors affecting the decision to own and operate or to charter vessels are described and organized into a methodology to aid decision making. Finally, the study presents a discussion of chartering experiences of other vessel-operating organizations, an assessment of chartering alternatives, and a strategy for obtaining ship services through vessel chartering. A fourth NOAA mission area, environmental assessment, has been treated with the last category of oceanographic research. .. . . vain

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ACKNOWLEDGMENTS The committee would like to express its gratitude to a number of individuals whose assistance has been invaluable in the development of this report. The committee thanks Dr. Henry Marcus for his guidance in assessing the factors necessary to consider in a decision-making methodology. Appreciation is also conveyed to Cantain James Middled. Mr. Bob Taylor, and Commander Don Spillman of the Office of Marine Or v Al, Operations for their assistance in providing a great deal of informa- tion on the National Oceanic and Atmospheric Administration (NOAA) Fleet and its operation. Also thanks to Rear Admiral Robert Sandquist and Rear Admiral Sigmund Peterson of the Pacific Marine Center and Rear Admiral Ray Moses of the Atlantic Marine Center for providing the committee with a firsthand view of the NOAA Fleet and its operations. The committee thanks the Office of the Oceanographer of the Navy and the committee liaisons, Captain Patrick Wendt from the Coast Guard, Mr. John McMillan from the National Science Foundation, and Dr. Gary Hill from the U.S. Geological Survey for providing information on the chartering experience of their respective agencies. Lastly, the committee extends its thanks to Mr. Edward Clausner of Tracor Marine, Mr. Neal Cramer of Western Geophysical, Mr. Jack Lane of Geophysical Service Inc., Mr. Gary Chouest of Edison Chouest Offshore, Mr. Ed Craig of SEACO of Science Applications International Corporation (SAIC), and Rear Admiral John Tierney (U.S. Navy, retired) of LSC Marine, Inc., for providing information on chartering costs and capabilities in the private sector. 1X

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CONTENTS EXECUTIVE SUMMARY 1 NOAA RESPONSIBILITIES AND FLEET ACTIVITIES Present Activities, 5 Future Trends in Vessel Use, 9 Ship Replacement, 11 Future National Needs, 12 .~ 2 CHARTERING ALTERNATIVES . . . . . . Platform and Mission Alternatives, IS Types of Vessel Charters, 17 Short-Term Versus Long-Term Alternatives, 20 3 SUITABILITY OF CHARTER VESSELS FOR NOAA PROGRAMS . Hydrographic and Bathymetric Mapping and Charting, Fisheries, 24 Oceanographic and Atmospheric Research, 26 . 21 COMPARISON OF NOAA-OWNED AND -OPERATED VESSELS VERSUS CHARTER VESSEL ALTERNATIVES: A METHODOLOGY . Evaluation of Direct and Indirect Costs of Vessel Ownership and Operation, 29 Discussion of Important Decision Factors, 34 5 CASE HISTORIES, ASSESSMENT OF ALTERNATIVES, AND GUIDELINES FOR CHARTERING . . . . . . . . Chartering Experience Based on Case Histories, 49 Assessment of NOAA Charter Alternatives, 50 Guidelines for Chartering, 53 6 FINDINGS AND RECOMMENDATIONS REFERENCES AND BACKGROUND MATERIAL . 15 . 21 . 29 X1 . 49 . . 55 . . 59

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APPENDIXES A. Biographical Information . C. NOAA1s Statutory Authority . . . . . . D. Case Histories of Chartering . . . . . Project Descriptions . . . . . . . . . F. Contracting Capability and Procedures. . . . . . . . . C. Procedures for Obtaining Ship Services Through Chartet . , X11 e e e e e e # e 61 65 67 71 81 95 97