State's ferry estimate doesn't add up

It was disappointing news for the maritime industry that Washington state elected not to award a contract for a new 50-car ferry for the Port Townsend-to-Keystone run because the price came in $9 million more than the state's estimate.

The only thing worse for our industry would have been if any shipyard had agreed to build the vessel for what the state's consultant estimated it "should cost" — as that estimate was surely based on little more than guesswork and hope. The number was so far off it lacked credibility.

In contrast to a consultant's estimate, as a shipyard we have to live with our bid numbers. If we can't, our business is lost.

How could a bid be so far off the consultant's estimate? To answer that we would need to see the analysis behind the Washington State Ferries' estimate, and that has not been released. I am certain it is much closer to a back-of-the-envelope calculation than the detailed bid documents Todd Pacific Shipyards prepared.

Todd prepared not one, but two independent estimates after a careful review of the state's specifications and contract. For the two main components of the price — materials and labor — we prepared detailed estimates. For materials, we obtained specific quotes from suppliers of steel, engines, generators, the propulsion system and other components. For labor, we started with the actual labor used to build the Pierce County ferry, Steilacoom II, and then adjusted for specific changes in labor content of the new boat.

It has been asserted that the vessel the ferry system wants is essentially a copy of the Pierce County ferry, and therefore it should be less expensive to build than a new design. While it is similar, the state has required significant design changes, each of which adds to the cost of the vessel.

But physical changes are a fairly modest percentage of the overall increased cost. The most significant difference comes from the changing circumstances under which the state wants this vessel built. These include greatly inflated material costs, a compressed schedule, more extensive state administrative requirements and other conditions that did not apply to construction of the Pierce County ferry.

For example, the state now requires 10 percent of the hours worked to be performed under an apprenticeship program. We support the training of a skilled work force for the future, but this is the first state ferry project to be built with this requirement and it carries a cost related to productivity, especially with a compressed schedule.

Essentially, our difference of opinion with the state's estimate is either in material or labor. We have received conflicting information on what the consultant assumed for hours of labor necessary to build the ferry. Let's assume the consultant used the higher of the two amounts we have heard, 140,000 hours. This is well below the actual labor-hour content of Pierce County's Steilacoom II.

It also means the consultant's estimate of material in the ferry differs from our market quotes by millions of dollars, which is difficult to understand since there is no discount superstore to buy steel at below market prices or magic process to remove the necessary steel and other materials required to build the boat.

It is a total mystery to us how the consultant who did the estimate came up with the number. No matter how you look at it, it doesn't compute.

We have been more than open with the state in explaining the complexities created by its various requirements. This includes a list of ideas which, if the state chooses to implement them, could save millions of dollars. Our hope remains that we will work with the ferry system to build the best possible vessels to meet the needs of Washington citizens.

Todd, our suppliers and other Northwest shipyards have given the ferry system tens of thousands of hours of free time over the past six years trying to find a way to build boats for a system that desperately needs new vessels. There has been a lot of talk and a great many ideas, but not a single boat has been built. This cancellation is just one more unfortunate step on that long road.

The history of ferry construction in Washington is littered with shipyards promising more than they can deliver. This is followed by years of litigation and finger pointing. Todd is not interested in continuing that history.

From the beginning, our intent has been to build a quality vessel, recover our costs and earn a modest and fair profit. We are neither asking the ferry system for a free lunch nor are we willing to provide one.