Thursday, April 1, 2010

Fidley Watch: Foreign Aid

In May of last year, the National Science Foundation (NSF) announced the awarding of a contract to build the Alaska Region Research Vessel (ARRV), a 242-foot research ship designed to operate in seasonal Arctic sea ice and open waters surrounding Alaska.

The Foundation touted the project, funded by NSF through the University of Alaska Fairbanks (UAF), as its first major award under the American Recovery and Reinvestment Act, which, the foundation website notes, “…is an unprecedented effort to jumpstart our economy, create or save millions of jobs, and put a down payment on addressing long-neglected challenges so our country can thrive in the 21st century.”

The vessel is to be built at an American shipyard in the Midwest, utilizing American labor, thereby stimulating the economy of that part of Wisconsin.

On the West Coast, Seattle’s Markey Machinery is interested in providing the package of winches and scientific handling systems for the vessel. Markey has manufactured and sold deck machinery for more than 100 years, and has been working on the NSF project since 2005, in close partnership with a Seattle-based Naval Architecture Firm.

Baline Dempke, president of Markey, believes the company was the front runner to win the order, worth more than $3 million, until last fall, when a foreign manufacturer “…waltzed in at the 11th hour and somehow convinced the shipyard to go with their equipment.”

In October of last year, Marinette asked Markey to consider submitting a revised (less expensive) bid, to which Markey agreed. Two days later, the shipyard changed its mind, telling Markey, “We have no issues with the current technical-commercial offer at this time.” Markey nevertheless submitted an unsolicited best-and-final reduced price offer.

Last month, Dempke received a letter from Marinette Marine, informing him that Marinette had removed Markey from the submittal to the client, selecting the foreign manufacturer “based on …considerable risk analysis.” Marinette assured Dempke that “MMC understands the importance of the American Reinvestment Recovery Act and has engaged in considerable review and dialog with our integrator and UAF on the topic of Buy American.”

While the foreign manufacturer who has been assigned the contract maintains an office and service facility in the United States, all of the company’s engineering and manufacturing is performed in Europe and Asia.

“I don’t mind losing orders on price,” says Dempke. “But in this specific instance, being funded by the US taxpayer, and seeing this money go to a foreign firm, is just beyond my comprehension.” This raises the question of whether there was ever the intention to use a US systems integrator for the Alaska Region Research Vessel. “I can’t help but feel that if the competition had been conducted in such a way that we had an equal opportunity at a best-and-final offer we may well have won the work based on price alone,” he says.

The damage doesn’t end there, Dempke notes. “The systems required for this project are developmental, meant to set the stage for systems to come. It would have been developmental for us, and also for the foreign manufacturer… so now in a way the American taxpayer is funding a foreign company’s research and development.”

Dempke has contacted his elected representatives, including Senators Murray and Cantwell, with no meaningful response.

“In the mid 1990’s Senator Cantwell used Markey Machinery’s vacated factory at 79 South Horton Street in Seattle as the backdrop for a news conference about the decline of manufacturing in America,” says Dempke, from his newly renovated 20,000 Square foot facility. “Markey Machinery is currently midway through a Lean Manufacturing process, which will be followed by the process necessary to become ISO-9001 Certified,” he says. “We are expanding and creating jobs during a time when nobody else is. We feel that this particular project could serve as the turning point for our future as suppliers to the Oceanographic market, and we believe that if we lose this work that we will suffer lasting negative effects to our basic business model and ability to provide jobs for American workers.”

Dempke says, “While Marinette’s inclusion of foreign deck-machinery may meet the contractual requirements of the ARRA, it most definitely must not meet the intent of the Act.” He notes that at least three other American companies could have been tasked with the Research and Development to create the systems for the project, and wonders why this group of American suppliers wasn’t part of a competitive group used to further American technology, while also achieving the lowest possible price? Of note is the fact that, as of January 1st, 2009, Marinette Marine has become a wholly owned subsidiary of the Italian enterprise Fincantieri-Cantieri Navali Italiani S.p.A.

“Of at least four possible US suppliers of this equipment, only we were solicited to participate, says Dempke. “And then kicked to the curb.”

Chris Philips, Managing Editor