Washington State Ferries’ vessel-construction track record fits Albert Einstein‘s classic definition of insanity: doing the same thing over and over again and expecting different results. Witness Todd Shipyard’s recent bid to build two 64-car Island Home ferries for the Port Townsend-Keystone run. The bid was so far off the mark that drop-dead sticker shock from WSF officials resulted. That was sticker shock unseen since last March when they opened a Todd bid for a 50-car Steilacoom II, a boat that inadequately serves the run today. Both bids were largely driven by artificial, state-mandated price inflators that push costs through the roof.
Yet what has the state gone and done? Accepted Todd’s most recent bid, that’s what. In a December 1 press release, WSF announced its intention to proceed with the building of a single Island Home ferry at a cost of $65.5 million. The state originally estimated the cost for a single vessel to be just under $49.5 million, a difference of one-third.
The most glaring artificial inflator is the Washington Legislature’s requirement that WSF only purchase boats built within the state of Washington — a requirement that, despite legislation in 2001 and 2003 mandating the boats, hasn’t produced a new ferry since the Puyallup in 1999. Quoted in the WSF announcement, Gov. Christine Gregoire said, "Our economy and the people who depend upon this ferry route will greatly benefit from this contract. This award is expected to generate nearly 200 jobs.…The locally built ferry will provide reliable auto and passenger service on this critical route."
I see. Einstein didn’t know the half of it.
Washington’s finances are a mess. A looming $5.1 billion budget shortfall, declining tax revenues, and increasing private sector business failures add up to the state’s worst fiscal crisis since the Great Depression. Now, the governor rationalizes new ferries less for the need for them and more for the jobs they will create, which begs the question: If the economy was doing better and the state’s books were in good shape, would there be a justification from her office and the Legislature to build them at all?
And how is it, by the way, that red-ink Washington can bust the ferry-construction budget — we’ll get one boat for a few million less than the estimate for two — claiming, to borrow Martha Stewart’s words, “It’s a good thing"? The logical extension of this kind of thinking demands that the state continue its spending spree since that’s the only way out of the fiscal mess that was largely created by the spending spree itself. These 200 new “jobs” work out to $327,500 a piece — nice work if you can get it.
The problem is that thinking like this morphs transportation infrastructure policy and planning from a focus on how best to move people around to how big a pig can be created, since the bigger the pig, the more the pork. Extending the thinking further has it that if one ferry is good for jobs, two must be better, so why not build two? Or three? Or thirty-three? The sky’s the limit. Instead, shouldn’t we expect the governor and the Legislature to do everything they can to keep the costs of state projects as low as possible in order to minimize the impact on taxpayers’ wallets?
We can expect, but obviously the governor isn’t on board. Additionally, Sen. Mary Margaret Haugen, D - Camano Island, and chair of the Senate Transportation Committee, barely pays lip service to the notion, preferring instead to stifle competition for ferry construction work thus guaranteeing the eventual price tag that will be millions of dollars higher than necessary. In a recent Everett Herald op-ed, she said restricting ferry construction to in-state shipyards provides the best value for taxpayers. Oh really? A further look at the numbers and the historic reality debunks her assertion.
The state estimated the cost of two Island Homes at $95.9 million, while the Todd bid came in 30 percent higher at $124.5 million. Early this year, the state estimated the cost to build a Steilacoom II ferry at nearly $17 million, while the sole bid, again from Todd, came in over 50 percent higher at $26 million. Is there a pattern here — a pattern of woefully underestimating costs with construction timelines that are unrealistic? Or a pattern of overbidding since without real competition — Todd was alone both times — no incentives exist to bid closer to the estimates? Probably some of each, but the record shows much more of the former.
Documents obtained through public disclosure requests reveal acrimony between many in the local maritime community and WSF. For example, a letter from Todd CEO Stephen Welch to WSF accompanying the Steilacoom II bid outlined numerous WSF-generated issues that spiked the price. E-mails between ferry officials and legislators describe a WSF “hassle factor” that forces shipyards to pad bids to compensate for difficulties inherent in dealing with the agency. A report in The Seattle Times has CEO Welch openly stating that WSF’s hurry-it-up, 18-month construction schedule drove up the price, with WSF's new director, David Moseley, acknowledging as much.
At the root of the accelerated schedule, according to state-supplied records, is Sen. Haugen, who, against the advice of Moseley and his boss, Washington Department of Transportation Secretary Paula Hammond, pushed to shorten the bidding and construction process, a step that limited the ability of shipyards to fine tune their numbers. (With a budgetary friend like this, who needs enemies?)
The Legislature’s own consultants estimate that an out-of-state bidder such as VT Halter Marine of Pascagoula, Mississippi could shave 20 percent off the originally estimated tab. One WSF insider privately estimated the savings to be closer to one-third. Halter recently built an Island Home for a Massachusetts ferry system to complete customer satisfaction despite disruption from Hurricane Katrina. The project was so harmonious and Halter so efficient that it set the standard for how a ferry should be built.
Yet Sen. Haugen wants to arbitrarily slam the door in the face of this American company employing American workers building an American product in America, contending, instead, that to do so is “outsourcing,” and “cheaper isn’t always better.” Senator, the Civil War ended in 1865.
Gov. Gregoire and Sen. Haugen need to think outside the box, kicking WSF out of its comfort zone. Opening bidding to out-of-state firms will help. WSF and taxpayers will have more options, while local shipyards will be encouraged to sharpen their pencils. If the governor and the senator want the jobs here, then let the shipyards here bid competitively against other American yards to keep them here. While it would be great to give the business to someone local — bid ties can go to the home team — it doesn’t take Einstein to see that the higher priority must be value for the taxpayer.
The author has spent the past six months investigating and writing about Washington State Ferries, with more reports at the Evergreen Freedom Foundation website.. A version of this article appeared first in the Everett Herald.
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