Click for next page ( 30


The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 29
4 COMPARISON OF NOAA-OWNED AND -OPERATED VESSELS VERSUS CHARTER VESSEL ALTERNATIVES: A METHODOLOGY The charge of this study included development of a methodology to compare all aspects of operating NOAA ships with the use of charter vessels. Chapter 4 contains the committee's attempt to design such a methodology. The first and most obvious step was to compare the costs of operation of NOAA vessels vs. charter vessels. A cost comparison demonstrated using project descriptions typical of NOAA's mission responsibilities and cost data from seven vessel charter organizations In addition to the cost comparison, the methodology includes discussion of other important "decision factors" that need to be addressed in order for NOAA to optimize the benefits of vessel chartering. Each decision factor is discussed in terms of its implications to vessel chartering and approaches for resolving each factor are suggested. EVALUATION OF DIRECT AND INDIRECT COSTS OF VESSEL OWNERSHIP AND OPERATION Direct and indirect costs of vessel operation consist of the costs of services, supplies, or financial arrangements (such as depreciation, overhead) and are identified in this chapter. The committee attempted to use cost as one criterion for comparison of NOAA-owned and -operated vessels with charter vessel alternatives. The procedure for evaluating direct and indirect costs consisted of three tasks: o identification of cost categories; o application of cost categories to specific projects; and o use of a computer model to aid comparison. Identification of Cost Categories Shipowners keep track of their costs in different ways. The committee developed a standard format to facilitate comparisons of cost among different shipowners. Aggregate values (such as charter rate, 29

OCR for page 29
30 subtotals for crew and equipment) were asked for as well as detailed cost factors (such as rations, fuel). Shipowners tended to fill out the forms in a manner that was most convenient to the way they viewed the situation. Direct costs are relatively easy to access whereas indirect costs may be more difficult for shipowners to measure when applied to a particular ship project. Direct and indirect costs were defined as follows: Direct Costs crew costs (ship and scientific staff)--salaries, benefits, overtime, travel, rations, and training; ship rents (such as port fees); contractual services; fuel; expendable supplies; 0 equipment; utilities; insurance; and maintenance. Indirect Costs ship depreciation and capital costs; general administration and overhead; and profit. Assumptions To obtain a valid comparison of costs from different shipowners? the following assumptions were applied to all examples: All costs are in 1987 dollars. No inflation is included in multiyear projects. In each year, each ship has 250 operating days (including transit time and down-time for the weather), 85 days alongside (with scientific party aboard), and 30 maintenance days (with full crew aboard). Application of Cost Categories Definition of Projects Five ship projects were defined in three mission areas. In the area of multibeam surveys, one project was described (see Appendix E). In the fisheries area, two projects were defined, a fish survey project in the Gulf of Mexico and a groundfish assessment in the Gulf of Alaska (see Appendix E). In the oceanographic area, two projects were developed, one a physical and chemical oceanographic project in the North Pacific Ocean and the other an assignment for a general-purpose, oceanographic vessel in the Atlantic Ocean (Appendix E).

OCR for page 29
31 Table 4-1 shows the day rates submitted to the committee by NOAA and seven charter organizations. For the two fisheries projects in the Gulf of Alaska where only NOAA and one private firm provided data, the NOAA costs were lower. For the other four projects, a wide range of data exists with costs both above and below the NOAA costs. Some of these results are shown in Figures 4-2 to 4-11. The following observations can be drawn: Large variations in cost exist for a specific project and contract alternative. o As the length of a contract alternative increases, the costs either remain the same (if the same vessel is being used for all time periods) or decreases. Constant vessel costs over time assume that maintenance costs will not increase. Reductions in costs are a result of the following types of factors: amortization of specialized equipment over longer-time periods, smaller acceptable profit margin per year in return for a longer commitment, and construction of a new vessel to meet a specific 10-year project. For those alternatives where private firms submitted 10-year costs, at least one private firm was lower than the NOAA cost. ~ The lowest rates provided include both NOAA and private vessels. On a specific project and contract alternative, rate levels between the highest and lowest can vary by a factor of five. Possible reasons for variation include: low costs due to efficient methods devised by private firms to compete (such as custom-designed ships), high costs due to the need for expensive specialized equipment amortized over very short periods, and both high and low costs due to different interpretations of the same project description (for example, for the same project and contract alternative, specialized equipment costs varied from $200,000 to $3,180,000--for the multibeam survey/ 1-year charter--and scientific crew costs varied from $313,627 to $678, 000~. Results To obtain quantifiable costs in a standard framework for comparison, projects were defined with accompanying assumptions, a standard cost format sheet (Figure 4-1) was sent to several different parties for their response, and a computer model was utilized to tabulate and display the results. This exercise proved to be more difficult than expected. Some respondents interpreted the projects and assumptions in different ways or did not completely follow them. Even though all respondents filled out the same cost format sheet, they varied in the ways that they handled such factors as crew costs, specialized equipment, depreciation and capital costs, general administration overhead, and profit. Consequently, the value of comparing individual cost factors was limited. All respondents presented data on day rates (or information that was converted into day rates). However, the total number of respondents for a particular

OCR for page 29
32 TABLE 4-1 Ship Operations Cost Comparison ($000/day) Task Ground- Fish Ocean At- General Provider/ fish-- Survey-- mosphere Purpose Contract Ba thy/ Gulf of Gulf of (physical/ OAR Type Years Mapping Alaska Mexico chemical) Vessel NOAA Bare 1 -- -- -- -- -- boat 2 -- -- -- -- -- 10 -- -- -- -- Ship with 1 7.8 3.7 3.6 6.4 14.6 crew 2 7.8 3.7 3.6 6.4 14.6 10 7.8 3.7 3.6 6.4 14.6 Ship with con- tractor 2 10 - Company "A" Bare 1 1.0 1.0 1.0 1.0 boat 2 0.8 0.8 0.8 0.8 10 -- -- -- -- Ship with 1 6.2 6.0 6.0 6.0 crew 2 5.7 5.5 5.5 - 5.5 10 -- -- -- -- Ship with 1 10.6 8.2 8.2 8.2 con- 2 10.1 7.7 7.7 7.7 tractor 10 -- -- -- -- Company It B" Bare 1 -- -- -- -- boat 2 -- -- -- -- 10 -- -- -- -- Ship with 1 27.1 -- -- -- crew 2 22.1 -- -- -- 10 16.4 -- -- -- Ship with 1 28.8 -- -- -- con- 2 23.8 -- -- -- tractor 10 18.0 -- -- -- 37.9 29.0 20.4

OCR for page 29
33 TABLE 4-1 Continued Task Ground- Fish Ocean At- General Provider/ fish-- Survey-- mosphere Purpose Contract Bathy/ Gulf of Gulf of (physical/ OAR Type Years Mapping Alaska Mexico chemical) Vessel Company 'C" Bare boat Ship with crew Ship with con- tractor 2 10 1 2 10 1 2 10 10.9 8.8 6.4 12.9 10.8 8.3 Company D Bare 1 22.0 boat 2 11.0 10 2.2 Ship with 1 27.7 crew 2 16.7 10 7.9 Ship with 1 31.5 con- 2 20.5 tractor 10 11.7 Company ''E" Bare 1 -- boat 2 -- 10 -- Ship with 1 -- crew 2 -- 10 Ship with 1 -- con- 2 -- tractor 10 -- 6.6 10.9 8.8 6.4 12.9 10.8 8.3 6.4 5.6 5.6 9.1 8.3 8.3 10.9 8.8 6.4 12.9 10.8 8.3 6.4 5.6 5.6 9.1 8.3 8.3

OCR for page 29
34 TABLE 4-1 Continued Task Ground- Fish Ocean At- General Provider/ fish-- Survey-- mosphere Purpose Contract Ba thy/ Gulf of Gulf of (physical/ OAR Type Years Mapping Alaska Mexico chemical) Vessel . Company tt Ftt Bare 1 boat ~ 10 Ship with 1 crew 2 10 Ship with 1 con- 2 tractor 10 Company G Bare boat 1 10 Ship with 1 crew 6.8 2 -- 6.8 10 -- 6.8 Ship with 1 14.1 con- 2 14.1 tractor 10 14.1 2.7 6.0 7.2 11.0 6.0 7.2 11.0 6.0 7.2 11.0 comparison was small. Given a matrix of 15 squares made up of 5 tasks by 3 contract alternatives, the number of respondents for each square varied between 0 and 5, with most squares having less than 3. The value of the exercise appears to be in showing the wide range of values that exist, both above and below the NOAA cost data (see Figures 4-2 to 4-119. This range of data implies that the charter alternative deserves further consideration in certain instances. DISCUSSION OF IMPORTANT DECISION FACTORS In many published reports by NOAA and other federal agencies, common concerns are raised by users of government-owned and -operated vessels with regard to chartering vessel services. These concerns with contractor operations fall into several areas:

OCR for page 29
35 VESSEL COST CATEGORIES PROJECT: COST CATEGORY CHARTER VESSEL CHARTER COST A. SHIP'S OPERATING CREW Salaries Benefits Overtime Travel Rations Training Total B. SCIENTIFIC CREW Salaries Benefits Overtime Travel Rations Training Total TOTAL SALARIES AND WAGES C. SPECIALIZED EQUIPMENT OTHER SHIP-OPERATING EXPENSES Rents (Port fees, etc.) Contractual Services Fuel (assume $1.OO/gal) Expendable supplies Equipment Utilities Insurance SHIP MAINTENANCE COST DEPRECIATION/CAPITAL COSTS GENERAL ADM. OVERHEAD PROFIT TOTAL COST CATEGORIES ABOVE COST ADJUSTMENTS--TABLE A TOTAL OPERATING COSTS (TOC) OPERATING DAYS Assume: YEARS 1 2 - A. 250 operating days (includes transit time and down-time for weather). B. 85 days alongside (with scientific party aboard). _ 30 maintenance days (with full crew aboard). FIGURE 4-1 Standard cost format sheet. 10

OCR for page 29
36 30 28 26 24 22 _ 20 8 18 - Or: 16 14 12 10 o - - _ . - - - - - - NOM . . . . COMPANY A COMPANY B COMPANY C COMPANY D - - - - - ~ _ 1 YR 2 YRS 10 YRS CHARTER DURATION FIGURE 4-2 Bathymetry/mapping--day rate for ship with crew. 30 28 26 24 22 O 20 o 18 - ~ 16 a: 14 12 10 _ _ . 8 _ 6 _ 4 _ 2 _ 0 _ NOM COMPANY A O COMPANY B COMPANY C COMPANY 1 YR . 2YRS 10 YRS CHARTER DURATION FIGURE 4-3 Bathymetry/mapping--day rate for ship with crew.

OCR for page 29
37 8 to to o 5 I* tr: 4 3 2 1 o FIGURE 4-4 8 7 6 - o to o I* - NOM COMPANY A COMPANY F COMPANY G 1 YR 2YRS 10 YRS CHARTER DURATION 5 4 _ 3 _ 2 _ 1 _ O _ Gulf of Mexico fish survey--day rate for ship with crew NOM COMPANY A COM PANY F COMPANY G ,,\`,,,``,, `''~ '\i':'., 1 YR 2 YRS 10YRS CHAPTER DURATION "COMPANY" FIGURE 4-5 Gulf of Mexico fish survey--day rate for ship with crew.

OCR for page 29
38 8 6 - g 5 - - 4 3 2 1 o NOAA COMPANY A COMPANY E COMPANY G E 1 , , 1YR 2YRS 10YRS CHARTER DURATION FIGURE 4-6 Gulf of Alaska groundfish--day rate for ship with crew NOM COMPANY A COMPANY E 8 7 6 o o o _ - CC 4 2 1 o COMPANY G 2 YRS 1 YR CHARTER DURATION 10 YRS FIGURE 4-7 Gulf of Alaska groundfish--day rate for ship with crew. .

OCR for page 29
39 38 36 34 32 30 28 26 - - 24 22 20 18 16 14 12 10 8 6 4 - - - - - - - - - NOM COMPANY B COMPANY C COMPANY D COMPANY G - - - - - - 1 YR 2 YRS 10 YRS CHARTER DURATION FIGURE 4-8 General purpose oceanic and atmospheric research (OAR) vessel--day rate for ship with crew. 40 35 30 25 w 20 10 5 o NOM COMPANY B COMPANY C ~3 COM PANY D COMPANY G 1 YR 2 YRS 10 YRS CHARTER DURATION FIGURE 4-9 General purpose oceanic and atmospheric research (OAR) vessel--day rate for ship with crew.

OCR for page 29
40 11 10 o to o 8 FIGURE 4-10 with crew. 11 10 9 8 to to - - to 'I: 7 5 3 2 1 o . . - - - - . 1 YR 2YRS 10 YRS CHARTER DURATION Oceanographic and atmospheric study--day rate for ship NOM / - COMPANY A O COMPANY C 1~1 COMPANY D 1= COMPANY G 1~ _ it 1 YR 2YRS 10 YRS CHARTER DURATION FIGURE 4-11 Oceanographic and atmospheric study--day rate for ship with crew.

OCR for page 29
Product--quality of data will deteriorate. ~ Price--it will be more expensive. Service--agency will lose control of setting and changing priori- ties and operating procedures; the right kind of ships will not always be available. Integration of data sets--different data formats from different contractors will be a problem. Public image--there will be a negative effect on NOAA when joint surveys with foreign governments are proposed. These concerns are important factors to consider prior to making chartering decisions. Certain factors take on more importance depending on the mission area, charter alternative, and time frame. Most of these are difficult to quantify directly and require additional evaluation. The relevant issues are discussed in the remainder of this chapter. General Considerations In examining the concerns associated with chartering, the committee believes that the majority of them, if not all, can be resolved through one of three approaches; NOAA policy, cost analysis, or contract specification and procedures. Each decision factor is listed below under one of three approaches: NOAA Policy It is NOAA's responsibility to establish a clear policy on charter vessel use. Once established, a number of the listed decision factors will be resolved or clarified. These factors include: variable charter market; data continuity; contracting capability and procedures; and personnel. Cost Analysis Factors amenable to cost analysis have been segregated and guidance for methodology suggested. These factors include: vessel deactivation and activation; installation and removal of equipment; charter contract administration; and equipment needs.

OCR for page 29
42 Contract Specifications and Procedures Certain decision factors can be resolved through contract specifi- cations and procedures. In its examination of case histories the committee found that many problems arise due to a lack of clear standards and tolerances for scientific work and clear contract language. Factors that could be addressed in this manner include: 0 quality assurance and data continuity; contract default and termination; vessel flexibility; safety requirements; equipment; and national emergency. Each of these decision factors is expanded on below. NOAA Policy Variable Charter Market As a consequence of local and seasonal variability in the charter vessel market, NOAA's ability to conduct its missions may be adversely and permanently affected if suitable vessels cannot be chartered. Examples of this situation would be if NOAA attempted to meet (1) a short-term data acquisition need connected with a transient and non- recurring phenomenon, or (2) a need to acquire a data set that was part of a time series. The impact of the uncertainty of the vessel charter market on agency and organization planning should be minimal for bathyme try and general oceanography charters. NOAA should not layup any of its ships for these services until long-term charters have been secured. If long-term chartering appears to be a viable alternative, an initial modest reduction in NOAA's fleet would be prudent to permit an evalua- tion of chartered operations and costs before replacing NOAA ships with additional chartered vessels. If chartering vessels for fisheries' research is structured on a short-term basis, planning problems could arise . Data Continuity Each type of mission requiring a charter vessel (fisheries, general oceanography, or bathymetry) will have peculiar challenges to ensure data continuity. While this is a technical issue, a generic solution would be to require that vessels be fully equal to the NOAA vessel replaced in capability and instrumentation. A time period could be budgeted for the chartered vessel to be ''calibrated" against the NOAA vessels) that had been used to acquire previous data sets. Assurance of data continuity could be addressed by assigning cost as extra

OCR for page 29
43 charter days, cost of duplicate test series, or other appropriate means. It should be noted, however, that there are special concerns with regard to gear comparability between different fisheries survey vessels. Attempts at performing such calibrations have not always been successful and, at the very least, require a great deal of vessel time. This decision factor is discussed further in "Quality Assurance and Data Continuity" in the section on contract specifications and procedures. Contracting Capability and Procedures Long-term leasing can be undertaken by agencies with annual appropriations (see Appendix F). Contracts are written with federal payments subject to the availability of funds. For this reason contractors will expect a cancellation penalty payment provision in the lease. In some instances, none but the largest contractors will be able to take part in government contracts if unlimited liability provisions are imposed by the government. The congressional attitude about leasing is mixed. In any event NOAA would at least need to gain approval from its authorization and appropriations committees to proceed with leasing--in as much as this is a significant policy issue. Personnel NOAA shipboard personnel (NOAA Corps plus civil ~service) are not only technically competent in charting, mapping, fisheries, and oceanography and meteorology but have demonstrated their competence in - the art of going to sea, that is, they are experienced mariners. This combination within a federal agency should ensure the cooperation among crew, scientists, and engineers so necessary to the successful accom- plishment of an at-sea scientific or technological mission. This capability is diminishing if not disappearing within the federal (including naval) establishment. NOAA maintains a central cadre of technical personnel within NOAA capable of supporting at-sea charting, mapping, fisheries, and specialized equipment. If the NOAA commissioned corps strength is based on numbers of NOAA ships, reduction of numbers of ships due to replacement of NOAA vessels with contractor-operated ships would adversely affect NOAA programs dependent on officers with specialized experience. However, this reduction of corps strength would not be as critical an issue with bare-boat or time charter arrangements where NOAA would maintain responsibility for the scientific mission.

OCR for page 29
44 Cost Analysis Vessel Deactivation and Activation Both initial and continuing costs for inactive NOAA vessels in reserve status must be recognized. Annual costs of $100,000 per year might be expected to maintain a Class I vessel alongside in a reserve status. Other options include sale or scrap. Crew layoff costs must also be considered. When a NOAA vessel is returned to service after a period of deactivation, special one-time costs will be incurred. If annual maintenance is continuous while the vessel is deactivated, these costs may be modest. If annual maintenance is minimal and systems deterioration within the vessel is allowed to occur, the reactivation cost may be orders of magnitude higher. Personnel recruiting and training will also need to be included in cost of reactivation. Installation and Removal of Equipment NOAA vessels are outfitted with suites of oceanographic equipment that differ on each vessel. A chartered vessel, particularly for short-term use, may not provide comparable equipment even though day rates included in this report attempt to cover the costs. Costs connected with special installation must be considered. Charter Contract Administration If charter vessel use becomes more prevalent, NOAA will be required to hire people capable of contract administration and technical program monitoring. Space costs must also be recognized in this analysis. Such shore-based costs will typically be 7 to 10 percent of charter vessel costs. Onboard quality assurance costs would be additional. Equipment Needs NOAA mission areas clearly pose differing equipment requirements. Bathymetric surveys, perhaps, require the most specialized--and consequently costly--outfitting. Echo-sounding systems are a major installation requiring a careful selection of a vessel's acoustical characteristics. Fisheries surveys, utilizing fully found commercial fishing vessels, might require the least permanently installed equipment, but laboratory space becomes significant. Oceanographic research will make the greatest demands in terms of winches, cranes, laboratory space, shipboard power, and specialized arrangements. Cost is a significant factor in ship outfitting. Current estimates of a precision echo-sounding system are $1.75 million, a suite of modern winches and cranes is $1.6 million, and an integrated navigation system

OCR for page 29
represents $0.7 million. However, specific costs can be assigned and calculated for many of these equipment needs. Contract Specifications and Procedures Quality Assurance and Data Continuity A danger of reducing the quality of data exists if different vessels are used for each survey. Different vessels have different characteristics, depending on length, width, horsepower, size of winches, and so on. Data quality is especially a potential problem when large surveys are undertaken with multiple vessels. All efforts should be made to calibrate each of the vessels involved in the survey. It is therefore imperative to be as specific as possible when writing vessel specifications, and if there is a need to change vessels, there should be rigorous vessel calibration between the two vessels. This is particularly true for long time-series studies in which integrity of long-term data sets would be lost with improper calibration. Every effort should be made to use the same vessel for these type studies. There can be an impact on the quality of data supplied by a contractor if collection systems vary between charters. Potential exists for a negative impact on data quality if the charter vessel crew is not sensitive to the requirements for acquiring high-quality data. Contractor Default and Termination While provision may be made in the contract for charter vessel default, collection of damages by NOAA may be difficult due to the relative insolvency of the charter vessel owner or the political focus that may be brought to bear on NOAA. Prior investigation of vessel-owner solvency will minimize this problem. Contractors with records of default should be excluded from future bidding on charter contracts. Furthermore, provisions for early termination of a charter by NOAA for unsatisfactory performance should be included in each contract. Vessel Flexibility In the case of oceanographic research and fisheries surveys, there is concern that NOAA scientists aboard charter vessels will be under the operational control of the contractor for the project. They may not have the flexibility they do aboard NOAA vessels to make changes at sea that are not in accordance with the terms of the contract. Chartering can lead to a degree of inflexibility with regard to scientific work. However, to the extent possible, the vessels chartered for NOAA missions will be under the complete control of NOAA, will be equipped to NOAA's technical specifications, and will likely be

OCR for page 29
46 operating on a day-rate basis. The provisions in the contract between NOAA and the contractor dealing with work schedules and compensation should address this matter. The terms of the contract must be written to include a complete description of the requirements for: ancillary projects, scientific laboratory space, scientific personnel accommodations, and any other contractor-furnished items needed but not specified in the primary project requirements. Safety Requirements The safety of NOAA personnel is a primary concern while onboard the contractor's vessel. The contract will specify the necessary Coast Guard and NOAA safety regulations, including those dictating fire detection systems, life rafts, survival suits, carbon dioxide systems, and diving equipment and procedures. The regulations will be in effect for all of the charter alternatives, that is, bare boat, time charter, and turnkey. Equipment The contract specifications must describe, in detail, the oceano- graphic, bathymetric and, fisheries data acquisition equipment and associated data-processing systems to be sure the equipment is state of the art and compatible with the shore-based processing systems. In some cases, where contractors will be able to provide NOAA with compatible state-of-the-art equipment not otherwise available, NOAA should attempt to incorporate the new technologies while upgrading its own. The contractor will be responsible for the installation and removal of government-owned equipment and any damage resulting from the transfers. The government assumes this responsibility on those charters in which the government furnishes, installs, and removes the equipment. The contract specifications should define the equipment down-time that the government will tolerate without penalty. The allowable down-time should be reasonable and expressed as hours per trip or project, for example, 30 hours per 25-day project (5 percent of total duration). NOAA-furnished and -maintained equipment on a charter vessel would be the government's responsibility. The bare-boat and time charters should require the scientists to provide their own specialized equipment. The vessel project time may have to be extended to allow for staging, installation, and de-staging of the specialized equipment. This must also be specified in the contract. National Emergency During those rare occasions of a national emergency, there is con- cern that the charter vessel might not be able to respond in as short a

OCR for page 29
47 time period as a NOAA ship. Some of the emergencies that the Coast and Geodetic Survey or NOAA ships have been called on to support on short notice were World War II, the Great Alaskan Earthquake of 1984, and the IXTOC oil well blow-out in the Gulf of Mexico. However, vessel response to national emergencies could be specified as a requirement in the contract of a charter vessel also.

OCR for page 29