MSC PAO 97-39
July 31, 1997
For more information, contact:
Marge Holtz or Nancy Breen
(202) 685-5055

MSC tries new contracting approach

Money is a great motivator. At least that's what the Navy's Military Sealift Command is banking on. The command awarded a $91 million contract to Maersk Line Limited in Norfolk, Va., for the operation and maintenance of eight large, medium-speed, roll-on/roll-off sealift ships, all newly constructed U.S. military cargo ships which will begin operation in 1998.

The deal was made a little sweeter with the addition of a nearly $7 million award fee--an optional, extra fee to encourage and reward high quality, cost-effective service by the contractor and civilian crew. In addition, the contract provides funding for reimbursable expenses such as fuel, maintenance and repair items and overtime and port services, estimated at $181 million over the life of the contract.

"Monetary incentives have worked extremely well in private industry, and I'm confident they'll work well for MSC, the ship operating company and the crew," said Vice Adm. Jim Perkins, the MSC commander. He added, "Any extra costs associated with the award fee will be more than offset by the added customer satisfaction and tremendous cost savings to MSC and the entire Department of Defense."

Maersk will be eligible to receive an award fee of up to $250,000 per ship per year based on how well they manage the reimbursable funds; how well they perform the mission, and how well they maintain the ship. Moreover, to provide an additional performance incentive at the deck plate level, the contract provides that a portion of the award fee must be distributed to the ships' crews. The huge 950-feet-long ships--nearly as long as an aircraft carrier--will be operated with a crew of fewer than 30 people.

USNS Bob Hope, the first ship to operate under this contract, will be delivered to MSC in January 1998, with the remaining seven to be added to the command by 2000.

The MSC ships Maersk Line Limited will be operating are eight new large, medium-speed, roll-on/roll-off, or LMSR, ships--four Bob Hope-class LMSRs being built by Avondale Industries, Inc., in New Orleans, La., and four Watson-class LMSRs being built by National Steel and Shipbuilding Company in San Diego, Calif. When completed, these ships will be loaded with U.S. Army wheeled and tracked vehicles and stationed at strategic locations around the world to enable the United States to respond quickly in the event of a contingency.

These eight ships--part of a 19-ship package consisting of 14 new-construction vessels and five converted ships--are being built to alleviate the shortage of strategic sealift capability identified following the Persian Gulf War, when the Defense Mobility Requirements Study recommended that the Department of Defense add 5 million square feet of sealift capability to ensure adequate at-sea prepositioning and surge shipping of U.S. military cargo.