June 19, 2018
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Mississippi is on the verge of giving $45 million to Bath Iron Works competitor

Bath Iron Works | BDN
Bath Iron Works | BDN
The Bath Iron Works-built USS Michael Murphy, an Arleigh Burke-class destroyer, left Bath in September 2012 and was commissioned in October 2012.
By Beth Brogan, BDN Staff

BATH, Maine — The Mississippi state Senate has unanimously approved a bill to provide $45 million from state coffers to fund upgrades at Huntington Ingalls Industries, Bath Iron Works’ only competitor in securing U.S. Navy contracts to build Arleigh Burke-class destroyers.

If successful, the bill would add to a long list of competitive advantages enjoyed by the Pascagoula-based shipyard when bidding against BIW for multiyear contracts.

The bill would provide Ingalls the bond money over five years, beginning July 1, 2017, to allow the shipyard “to modernize … and keep it competitive with other shipyards.”

Following the Senate vote on Feb. 22, the bill was referred to the House Ways and Means Committee, MississippiWatchdog.org reported Wednesday.

According to the website, Huntington Ingalls received $45 million in state aid last year, $20 million in 2015, $56 million in 2008, $56 million in 2005 and $40 million in 2004.

“The company leases the land for its Pascagoula shipyard from the state and is exempt from property taxes,” journalist Steve Wilson reports. According to Wilson, Ingalls earned $7.1 billion in 2016 and has a $21 billion contract backlog.

Ingalls also secured $92 million last year from the state of Virginia and the city of Newport News, Virginia, where the company builds aircraft carriers and submarines.

BIW spokesman David Hench said the company receives a shipbuilding facility credit and benefits from a Tax Increment Financing district with the city of Bath that reduces property taxes on a new land-level transfer facility, but those are “nothing anywhere near the scale” of the Ingalls subsidies.

Among Ingalls’ major advantages in bidding for the DDG 51s are climate, labor rates, size and business mix, defense analyst Loren Thompson of the nonprofit Lexington Institute said Wednesday.

“BIW’s biggest advantages over Ingalls in recent years have been that it was better managed and its workers were more skilled,” Thompson said by phone. “But Ingalls’ management is better now than it used to be, even though its workforce remains unstable. Shipbuilding is extremely demanding in terms of skill requirements, so when you have a lot of turnover as Ingalls does it can seriously impact quality.”

Jay Korman, senior Navy analyst with the Washington, D.C.-based consulting firm The Avascent Group, said that while the funding appears to offer Ingalls an advantage, Maine likely offers other boosts.

“On the face of it, I would say any subsidy appears to put the competition at a disadvantage, but I am also confident that the other guys can point to the Maine delegation’s efforts to steer funding or subsidize BIW as their competitive advantage,” Korman said. “Whether expressed through contract modifications or training facilities or training grants with local colleges, it cuts both ways in the end. I’d be surprised if it isn’t close to a wash.”

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