We need new ferries. So why don't we get them?

The state makes it almost certain that ferry bids will come in way over budget, in a misguided attempt to keep the jobs in state. Here are the latest sad figures.

While Puget Sound ferries are jammed, the state makes it hard to afford new ones. (Chuck Taylor)

While Puget Sound ferries are jammed, the state makes it hard to afford new ones. (Chuck Taylor)

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.


About the Author

An investigative journalist with the Evergreen Freedom Foundation, Scott St. Clair is based in Olympia. He can be reached at SStClair@EFFWA.org.

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Comments:

Posted Mon, Dec 15, 6:27 a.m. Inappropriate

If I remember correctly, there were a bunch of cost over-runs and changes orders on the last ferries built here. Poor workmanship/rework and construction delays were the norm.

Cameron

Posted Mon, Dec 15, 6:53 a.m. Inappropriate

Very little has been made of this policy of not allowing boats to be built out of state, and it is a real shame. Perhaps the state could learn a bit about free markets: if you artificially restrict the market (to, umm, one company), the price will go up.

I understand the state's claim that if they allow bids from other companies that jobs will go away, so here's a good solution: call up Oregon and California: create a compact with those two states that allows shipmakers from the three states to compete in all three states. That way, you get the best of both worlds -- keeping West coast jobs while creating competition.

jshindl

Posted Mon, Dec 15, 7:06 a.m. Inappropriate

Awesome idea St.Clair. More Washintonians out of work. That'll do wonders for the tax base you clowns are always bitching about.

Rujax

Posted Mon, Dec 15, 8:42 a.m. Inappropriate

The author might have benefited from actually talking to someone in the ferry construction business. If he had he would know that the Halter-built Island Home is significantly different than the ferry WSF wants built, that this ferry will have many design changes that drive up the price. He would know that there are a half dozen shipyards in Washington that could have bid on these ferries, and that the bids are submitted in secret, so no one knows how many shipyards knows are bidding, so the idea that more bidders will automatically drive down the price is absurd.

He would also know that the legislative consultant on ferries stated flatly that Todd's bid was reasonable in late of all the design changes, 18-month schedule, etc. And he would know that there are strict environmental standards and apprenticeship requirements for shipbuilders here, as opposed to in Mississippi and other gulf states, and these things also carry a significant cost, but does the author believe shipping jobs out of state and polluting elsewhere are okay, and that we shouldn't be training the next generation of shipyard workers?

Here's a novel idea: talk to someone who actually knows something about what you are writing.

Posted Mon, Dec 15, 9:28 a.m. Inappropriate

So tell all of the Taxpayers who will be paying the 30% higher than estimate bill, why the State took so long to get the bidding process done when the need for the replacements had been know for years? The short delivery timeline is due to the States mismanagement. The legislative consultant delivered the CYA just like he was paid to do.

Cameron

Posted Mon, Dec 15, 10:28 a.m. Inappropriate

Ferry construction as a welfare program. Brilliant. Why don't we go one better and have The Homeless build them? Sure, those boats would be death traps; but hey, we'd be helping The Homeless, and that's what really counts, isn't it? Ferry commuters and taxpayers be damned.

dbreneman

Posted Mon, Dec 15, 10:34 a.m. Inappropriate

Author: "Senator, the Civil War ended in 1865."

What's that all about?

I don't recall hearing anyone in the Legislature saying they didn't want the boats built in a southern state... they want them built here so that our tax dollars stay local and we keep skilled jobs in WA.

WWII is over too, Scott - why don't we build the boats in Germany or Japan? Savings are savings, and a bucks a buck, right?

And yes, building them locally is worth a premium. Dollars spent building locally will circulate throughout our economy many times and provide a regional economic stimulus that goes beyond the shipyards.

Sending that work out of state - anywhere out of state - means our tax dollars stimulate someone elses economy, and we may end up using even more tax dollars to provide economic support families and business that we could have provided with work instead.

Posted Mon, Dec 15, 1:37 p.m. Inappropriate

Crosscutfan,

The federal Jones Act prohibits having ferries built in Japan or Germany.

Tax policy, whether state or federal, shouldn't be about creating jobs - that's best left to the private sector. If you want to stimulate the economy, cut taxes to spur investment and savings.

The state's transportation policy, including whether to build new ferries, should be about transportation. It should never be crafted as a job-creation measure since the net, net, net will be the killing of more jobs than you create.

The alleged circulation of dollars locally is a misnomer - what you really have is inefficient allocation of dollars already in circulation. Taxpayers, who provide those dollars, and whose judgement is thus supplanted by bureaucrats, deserve more respect.

If shipyards and shipyard workers want the business, let them compete and earn it, not have it handed to them as if it were a matter of right. If competition requires them to lower their prices, including wages and benefits, then welcome to the real world. What we don't need is to effectively bailout local shipyards the way some are trying to bailout Detroit's Big Three by insulating them from the consequences of their own actions and the realities of the marketplace.

The taxpayers of the State of Washington should be the ones whose interests are paramount - they pay, if you will, The Piper, so let them call the tune.

The Piper

Posted Mon, Dec 15, 1:47 p.m. Inappropriate

Open the project to all bidders and give Washingtons State Shipyards a 10% preference and a Waiver from State Sales Tax. If they are not within 10% of the rest of the market, the business goes somewhere else.

Cameron

Posted Mon, Dec 15, 3:41 p.m. Inappropriate

The federal Jones Act does at the national level exactly what the Legislature is doing at the state level - protectionism, pure and simple.

If you're so eager for the Legislature to change their policy, why aren't you at the same time calling for Congress to revoke the Jones Act?

Doesn't that fit with the idea of getting the best deal for the taxpayers?

Of course, that's not what we're really talking about here, is it? This is really about the union bashing agenda of the EFF.

Posted Mon, Dec 15, 3:59 p.m. Inappropriate

RichardinSeattle,

I have several sources within Washington State Ferries. And I have interviewed people both within the system and outside of it who are involved in vessel construction.

It is true that the WSF Island Home will differ from the Massachusetts Island Home. WSF's will be longer, won't have the hydraulic lift, the car-deck doors won't be there, and other things. But VT Halter has recent, harmonious, and successful experience building ferries, while Todd Shipyards does not.

When I interviewed the general manager of the Massachusetts ferry system, the SSA, he couldn't have been more positive about the relationship they had with Halter. The public record and published history on the relationship between WSF and shipyards generally goes 180 degrees the opposite direction. Witness the lengthy squabbles with J.M. Martinac and the fact that, while some six shipyards attended the WSF pre-bid meeting, it was again only Todd who actually bid...wink, wink, wink.

Flogging strawman ghosts of "polluting elsewhere" and "training the next generation of shipyard workers" won't get you home either. Try reading the Douglas Wolff paper, Tradition and Innovation: The Design of the Ferry Island Home, presented just over a year ago to the Society of Naval Architects and Marine Engineers. Wolff, of Elliott Bay Design Group, the firm who created the Island Home design, is pretty solid in his praise of Halter.

Without exception, WSF insiders with whom I'm in contact regard the build-it-in-Washington requirment as ridiclous and driven by legislative politics, not what's in the best interests of WSF. They're also not too crazy with the Island Home design itself - a good boat for Woods Hole to Martha's Vineyard, but not Port Townsend to Keystone - which is the subject of another article at another time.

Since nothing happens in a vacuum, including the building of new ferries, cold, hard budgetary and fiscal facts must dictate a coming to grips with reality: building ferries for millions and millions more than budgeted at a time when the state faces a looming budget deficit of $5.1 billion while less costly, more efficient alternatives exist is, in a word, foolish.

Tack this to WSF's failure to implement the big-ticket cost savings - in excess of $100 million over ten-years - disclosed in the 2007 performance audit conducted by the State Auditor's Office, and you've got some additional WSF budget busters.

Yet this isn't exclusively a WSF issue - the Washington Legislature, the erstwhile stewards of our collective purse, not only tolerate, but also encourage this behavior. If there is a desk upon which the ferry-buck stops, a good 50 cents of it stops on a legislative one.

Like Einstein, you don't know the half of it.

The Piper

Posted Mon, Dec 15, 4:16 p.m. Inappropriate

Controlling transportation expenditures is a tough question - witness, for one, the current Port of Seattle crisis.

The answer is competition, and this suggests we don't have it now. The solution is long term - it requires State and Local government to dole out contracts in such a fashion that insures, statistically, a continuing crop of businesses. Basically that requires a pyramid distribution of contracts, a lot of smaller contracts, some of them, eventually, making it to the top. One way of doing this is to require the use of sub-contractors AND to allow those sub-contractors to begin prime for middle level sized contracts.

That said, on a related note, I hear the nickel funds for freeway projects are running out and not all projects can be done. Not sure of details, hopefully it's not all going into freeway lid mitigation on the 520 expansion...

http://motleytools.com/blog

Posted Mon, Dec 15, 5:59 p.m. Inappropriate


So, in Washington, don't question the unions or the democrats - they always know what they are doing ?

And, what again, is the projected size of the next states budget deficit ?

Vote democratic, it's easier than thinking .

Posted Mon, Dec 15, 8:27 p.m. Inappropriate

Hey everyone! Google the Evergreen Freedom Foundation. There you will find a right wing, anti tax, anti government, deregulating free market think tank. That dogma and those clowns are the ones that got us into this economic mess not the tax paying local shipyard workers who should benefit from this work.

My God Mr. Brewster, an EFF columnist in Crosscut? Oh the humanity!

Posted Mon, Dec 15, 8:29 p.m. Inappropriate

I don't know about everyone else, but Mr. St. Claire has a tone to his article and comments that is more of an agenda than reporters are supposed to take. What's going on with that, Mr. St. Claire?

I'm not defending the ferry service or the State - but your words bother me. PT/Keystone needs a new ferry fast - and the Jones Act won't be repealed fast, if at all. Fast = cost, no doubt about it, but the fact is, those 4 Steel Electrics that were pulled from service should have been pulled 30 or 40 years ago. The whole system should be privatized, or at least shared by the State & Feds. The ferries are highways, and interstate connectors at that. Why aren't they funded by the Federal highway system??

mikemcc

Posted Mon, Dec 15, 8:34 p.m. Inappropriate

And if you want to do a bit of real investigative journalism, Mr. StClair, dig into the unreliable local private shipyard that successfully leveraged the political/legal system and prevented the ferry system from proceding with their construction program years ago.

Posted Mon, Dec 15, 8:51 p.m. Inappropriate

Mikemcc,

No "e" at the end of my last name - say anything you wish about me, but please spell my name correctly.

Regular Crosscut readers know my...uhm...orientations from the articles I've written and the comments I've posted. That my leanings run against the grain causes you concern. I will wait for like comments against writers who go in your direction.

As far as the Steel Electrics are concerned, the decision to pull them was hasty. The Coast Guard, while insisting WSF pay close attention to their hulls, never demanded that they be pulled. In fact, USCG Certificates of Inspection remained in effect after the four boats were pulled until they expired.

Outside of management and without exception, the WSF personnel with whom I have discussed the Steel Electrics are convinced that at least a couple of those boats had enough life in them to bridge the time necessary for them to be replaced in an orderly manner. But they weren't - WSF bungled that badly. Legislation in 2001 and 2003 directing the building of new boats resulted in zip.

The Steel Electrics were never independently inspected by, say, the American Bureau of Shipping, an organization with specialized expertise in this area. Nor were they reviewed by a licensed structural engineer for the purposes of making a professional engineering evaluation as to their fitness. The decision to pull them was by gosh and by golly.

Why should Washington Taxpayers have to pay for decades of mismanagement at WSF - mismanagement that continues until today? And why is the entire construction effort of WSF focused on a run that carries only 3 percent of total annual ferry traffic?

Where is it written that WSF is an untouchable? Or that taxpayers should be forced to go on the hook for millions more than is reasonable and prudent? Since when do they exist to pay that much more to get that much less? Who speaks for them?

The Piper

Posted Tue, Dec 16, 5:27 a.m. Inappropriate

St. Clair: "And why is the entire construction effort of WSF focused on a run that carries only 3 percent of total annual ferry traffic?"

I don't know... why does WSDOT insist on plowing Stevens Pass when it snows?

Because it's a state responsibility, that's why!

Readers here should keep in mind that Scott IS NOT A "REPORTER!"

He is an essayist for a right-wing think tank - and there's nothing wrong with that. There are essayists pushing left-wing agendas here too...

Scott's role isn't to be objective - it's to push the agenda of the EFF, which is conservative, anti-union, anti-regulation and anti-government...

Nothing wrong with that either - just something to keep in mind...

Posted Tue, Dec 16, 7:02 a.m. Inappropriate

Crosscutfan,

True, DOT plows Stevens pass...but it also plows other passes, roads, and highways at the same time.

When it comes to building ferries, however, DOT, the parent agency of WSF, is close to abandoning plans to build ferries for any run EXCEPT one that carries but 3 percent of ferry traffic.

Cedar River Group, the legislature's consultants on ferry construction, is now recommending abandoning plans to build up to three 144-car boats, regarded by many as the future of the Ferry System, for 10-years. This will have the net effect of leaving the system bereft of new boats, other than the 64-car Island Home, for over 20-years, from 1999, which saw the Puyallup, to well past 2019.

You claim I'm here to push an agenda, yet you do not dispute the truth of anything I've written. My job is to dig into the mess at Washington State Ferries and report what I find. That is exactly what I have done. That I do so for Evergreen Freedom Foundation, a non-profit, non-partisan, free-market oriented think tank, seems to drive you and some others apoplexic. To this my response can only be: So what?

The truth knows no ideology, and the facts are the facts - they do indeed speak for themselves. An open mind evaluates them on their own merit without insisting that they first be filtered through an acceptable ideological source.

The Piper

Posted Tue, Dec 16, 7:43 a.m. Inappropriate

No, I don't dispute the truth of anything you've written - just your selection of which "truths" you select to highlight, and which you select to ignore.

Again, I don't think that there's anything at all with someone writing an article or essay to push an agenda - I just think that readers should keep that perspective in mind.

Posted Tue, Dec 16, 8:04 a.m. Inappropriate

Crosscutfan,

What truths have I ignored?

And again, I don't investigate and report to push an agenda, I do so because the public both needs to know and has a right to know what is happening in an agency that ostensibly exists only to serve them - all of them.

The Piper

Posted Tue, Dec 16, 2:05 p.m. Inappropriate

You don't push an agenda? You're a liar, Scott, and not even a good one. Every single thing I have ever read from you online is pushing your agenda.

ivan

Posted Tue, Dec 16, 5:34 p.m. Inappropriate

And you are what Ivan? Do you have an agenda? You are nothing but a little johnny one note on these blogs.

Cameron

Posted Tue, Dec 16, 5:39 p.m. Inappropriate

Nice article, Scott. I actually mean that, no snark.

I've had firsthand experience with state bidding and hiring rules from my days in the academic world, and despite the good intentions behind them, they generally served to financially undermine the University, and were typically a nuisance to be worked around.

It sounds like these restrictions have effectively made Todd a monopoly with no competition to keep prices in check. I'm all for favoring in state companies, but in cases where there is only one, bidding should be opened up to out of state companies to prevent this kind of gouging.

Sean

Posted Wed, Dec 17, 2:44 p.m. Inappropriate

Scott, how about doing an investigation on who is funding the "non-partisan" EFF? Because the public both needs to know and has a right to know what is happening in a group that ostensibly exists only to serve the public interest.

Froz

Posted Wed, Dec 17, 9:31 p.m. Inappropriate

Like FUSE helping to fund the the MBA suit with Ireland and Utter? Now there is an investigation worth doing.

Cameron

Posted Mon, Dec 29, 3:19 p.m. Inappropriate

Froz,

53% of EFF's funding comes from individuals, 38% are research grants, 5% are corporate and business trade association contributors, and 4% are miscellaneous. You can view more information on EFF's funding sources here: http://www.effwa.org/main/page.php?number=21⊤=6 Or just go to our homepage and click on "About Us."

Here is more information on EFF's finances from Charity Navigator: http://www.charitynavigator.org/index.cfm?bay=search.summary&orgid;=10131

You should be able to access our 990 information there, which has information on EFF's financial records and top-paid employees.

EFF has a donor privacy policy that prevents us from disclosing names and information of individual donors. Some charities sell or trade donor information, so our privacy policy serves to prevent that. This is consistent with laws governing non-profit activities.

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