Partnering for Better Options
Written by Henry Canaday
CGF 2011 Volume: 3 Issue: 6 (December)
Partnerships, joint ventures and teaming by private companies are extremely useful in support of Coast Guard procurement initiatives. These arrangements may be done to comply with procurement regulations, as is the case in set-asides for small businesses, where partnerships enable compliance with the law while obtaining the expertise and resources of larger firms. In such cases there are also business advantages, as the teaming combines the flexibility of small businesses with large-firm assets. Partnerships may also be arranged or proposed by private firms purely to meet support requirements most efficiently, as many large programs require products, services or expertise that cannot be supplied by a single firm. It is often easier for private firms, constantly in touch with industry colleagues, to integrate these different capabilities than to leave this task to a small and hard-pressed Coast Guard procurement staff. The total solution can be put together with less risk to the Coast Guard because of constant collaboration among the private partners.
Big Firm Advantages
Brunswick, a diversified firm with 15,000 employees, partnered with the small business Metal Craft Marine on its bid for the over-the-horizon Mark IV (OTHIV) cutter boat program partly just to be eligible under Coast Guard set-asides for small business, acknowledged Kelly Webb, Brunswick’s program manager for the Coast Guard. However, Webb considers the partnership as having a number of advantages for the participating firms, the potential customer and possibly other customers as well. Brunswick brings to the partnership its buying power and thus the ability to get good pricing on parts, pieces and follow-up services. With its worldwide dealer network, Brunswick can provide the life cycle support that is always critical in federal procurement; on the other hand, Metal Craft brings facilities and a business model that is designed for customizing government requirements for small numbers of aluminum boats. Webb explained that Brunswick and the other major ship builders run production lines very efficiently when producing large numbers of identical or similar hulls, but are ill-suited to customizing one-off or small production runs. “This is much easier for a small business to do,” Webb noted.
In partnering with Metal Craft for the OTH-IV cutter boat bid, Brunswick brought Coast Guard procurement experience to the table and helped draft the proposal; if awarded the contract, Brunswick would obtain good pricing both for the initial acquisition and for later support. The Coast Guard has recently down-selected the Brunswick-Metal Craft partners, along with other bidders, for final evaluation before the award of the OTH-IV contract. Under the Brunswick-Metal Craft bid, the Coast Guard would get a flexible firm that can customize existing hulls to meet requirements efficiently, even though only three to 11 boats may be built each year.
Most of the cutter boats would be built and outfitted by Metal Craft in New York, with Brunswick supplying parts and expertise. For multiple units, it is possible that Metal Craft would build up to the hull deck, which would then be transported to Brunswick’s facilities in Florida for outfitting. Having the two firms’ production facilities, one in the Northeast and one in the Southeast, also yields flexibility to hold costs down in the future, depending on delivery point and transportation costs, Webb said. “Metal Craft could build all the hulls and then ship them to Florida for fitting out if that is cheapest.”
Although this is Brunswick’s first successful partnership proposal to the Coast Guard, Webb likes the partnership and said that it is being applied to a Sentry line for law-enforcement and patrol boats. Depending on whether a future project is small business set-aside or not—in which it is generally required that the small business earn 51 percent of contract value—either Brunswick or Metal Craft might take the role as prime contractor, with the other as subcontractor. Webb said he is “absolutely” interested in working with the partnership approach in the future and hopes there will be other opportunities for Brunswick and Metal Craft to team up for Coast Guard and other work.
Other major firms see the procurement field similarly and have chosen to forge partnership approaches as well. Take for example Wärtsilä, a Finnish firm with a worldwide presence and billions of dollars in annual revenue. “Very few suppliers can fill all the requirements,” said Paul Glandt, director of business development for Wärtsilä Ship Power-Defense. Since government customers, especially the small Coast Guard, usually have limited resources to follow the latest technologies in ship building, “there might be holes in supplying particular installations, or an opportunity for growth or advanced items,” Glandt explained. “Private companies are well informed on what is out there and we can build a more complete solution.” Private partnerships are also able to manage and reduce risk when it comes to procurement. Glandt said one of the biggest risks in acquiring a new system is integrating different and new components, and private companies can manage this risk better than government procurement offices because private staff—not just the project managers but also engineers—are constantly exchanging information.
Wärtsilä has been involved in a number of partnerships over the years; for example, while Wärtsilä provides propulsion systems, it has used partners to bring in the best systems for bridge controls. “That way, captains can look at not just the ship, but at the environment and where they want to go,” Glandt explained. “They can see the weather and route information in a full suite on the bridge. That takes a load off the crew. They can drop off one engine and run the other more fuel-efficiently, saving fuel and still getting where they want to go on time.” So far though, Wärtsilä has provided mostly propulsion and seals to the Coast Guard. “We have not yet provided an integrated package but hope to in the future,” Glandt said. For other customers, Wärtsilä has partnered with firms that have expertise in emissions. “We know engines, they know emissions. That would benefit the Coast Guard in meeting emission requirements.”
Once the contract is fulfilled, in some instances the partnership may endure and be applied to continuing support. Wärtsilä often works with its competitors to supply parts under contracts with defense customers, noted Dave Smith, general sales manager for Wärtsilä Defense. It does this more frequently for Military Sealift Command but also sometimes for the Coast Guard in supplying shaft bearings along with Wärtsilä’s own shaft seals. “We are always open to partnerships,” Smith said. “For example, we have formed a partnership with a competitor, Cummins Engines,” as well as with diving companies, such as Phoenix, since work on shafts requires either dry docking the ship or making its shafts waterproof with divers. “They have the divers and diving equipment and can prevent water ingress. Phoenix has a fantastic reputation but we work with other divers on occasion,” noted Smith. Wärtsilä thinks highly of Phoenix as a diving partner but is willing to work with other companies. Additionally, Wärtsilä can provide a technical representative to help shipyards and the Coast Guard perform work themselves, or it can provide a turnkey service with Wärtsilä responsible for the entire job. In such turnkey solutions, partners are used, and Wärtsilä often works with Collins Machine on machining shafts and with Thermal Spray Solutions on spraying shafts.
Overall, “We try to look for local companies where we do the work,” Smith explained. “This enables us to provide the best package and the customer only has to go to one place.” This approach reflects a general policy: Wärtsilä’s mission statement says it wants to be the most valued partner for its customers and enable them to deal with only one supplier. “We want to provide a package and we are constantly putting more products into that package, like propeller repair, shaft repair, ballast water systems and bearings and seals,” Smith said. “We want to provide everything that can move a ship.”
Small Firm Benefits
Partnerships are also attractive from the other end, for smaller firms looking to get into new business lines. Here, too, there might be advantages for the Coast Guard.
For years, EPS Corporation has provided installation and training for the U.S. Army and other government agencies in telecommunications and information technology systems. The service-disabled veteran- owned small business conducts about $100 million per year in these areas, and chairman and chief executive officer Francesco Musorrafiti said his firm is now getting into ship building and looking for partnerships either with the Coast Guard or other private firms.
EPS has teamed with Spanish shipbuilding firm Dayfer and formed a partnership called EPS-Narwhal USA, which has bought a shipyard in Titusville, Fla. EPS-Narwhal USA has already built two 68-foot hovercraft for Saudi Arabia and can also make rigid hull inflatable boats for military, lifesaving and offshore markets. EPS-Narwhal’s special strength is in composite boats, Musorrafiti emphasized, which he thinks will be increasingly important in future boat building as there’s a catch-22 with popular aluminum boats. In order to keep weight down and carrying capacity up on aluminum boats, Musorrafiti said aluminum skins must be kept thin, which is what in turn makes these aluminum boats vulnerable to rust. “Advanced composites are much more robust and do not rust,” Musorrafiti stressed. However, he acknowledged one challenge in that international rules now favor aluminum boats, although he believes that will change over time as the advantages and strengths of composites become better known. “We have to make changes in the rules, and it will be a long process,” he noted.
EPS is used to partnering with defense customers. For example, it has a publicprivate partnership with Tobyhanna Army Depot on radios, allowing it to work as either a prime or subcontractor on government contracts. One future possibility is partnering with major firms that build glass cockpits for boats, while EPS provides its expertise in non-corrosive, fiber-reinforced advanced composites. “We are confident that the advanced composites that we work with are truly the wave of the future,” Musorrafiti emphasized. “Although the composite approach has been around for a long time, it has nevertheless been relegated to a second seat behind aluminum.” He asserted that a partnership relationship with the Coast Guard would enable mutual learning about the advantages of composites and create a forum for the exchange of ideas.
Longevity
Once private firms team up for a specific project, they become familiar with each other and grow acclimated to working together, which may lead to a continuing partnership on other similar projects. However, partnerships may also be ad hoc and temporary if they are necessary only to meet a one-time requirement. It all depends on whether Coast Guard or other defense or homeland security support requirements make the partnership arrangement an efficient solution for the firms and the customer. Once formed, the stability of these partnerships depends on circumstances: “They can grow or they can wither, depending on what the market needs,” Glandt concluded. ♦