The Steamship Authority (SSA) is recommending new ways to estimate the cost of work to boats following the fallout of the two freight boats’ conversions, work that was significantly underestimated.
The recommendations included increasing cost estimates for projects to consider inflation.
Even with the proposed changes, board members were frustrated with how much the Steamship misquoted the original cost to convert the ferry service’s two new vessels, the Barnstable and the Aquinnah.
The SSA had initially estimated that each ferry would cost $9 million to convert. The authority was able to negotiate down the conversion costs from $20 million per vessel to $13 million per vessel with Alabama Shipyard, but the SSA board still requested an audit be done to determine why the prices increased so much.
“There are several factors that entered into the financial differentials that were initially presented to the board,” SSA COO Mark Higgins said during the Thursday, June 29, meeting.
Higgins that Kirloff & Associates was performing the work, the same company that designed the previous generation of SSA freight ferry conversions. Higgins said the cost differentials appeared only after more “detailed engineering” was done.
From the initial estimates presented in 2022, the “most significant” increases came from the tonnage bulkhead, which increased $928,000; the subdivision bulkheads increased $790,000, and structural fire protection increased $165,000.
Higgins said the initial costs were given from the SSA’s internal estimates, which were based on historical cost averages alongside preliminary estimates from vendors. The largest among the cost increases for conversion services included docking, which went up $1.5 million; blasting and coating went up $450,000; midbody work went up $366,000, and hydraulic steering went up $59,000.
A part of the reason why the costs shot up was due to time, according to Higgins. The original project timeline greatly increased through the bidding process, with 12 additional weeks of engineering. The SSA also significantly underestimated the timeline, leading to an additional 12-week construction period.
“The backlog of work in the U.S. shipyards led to a smaller number of bidders,” Higgins said. “This was mainly because you have a large number of conversions going on in the energy sector right now, as well as the introduction of wind support vessels.”
Contributing to the lack of bidders was a smaller pool of tradespeople shipyards could rely on for work, Higgins said. Other issues leading to a cost spike Higgins mentioned included a SSA bonding requirement that “withholds 5 percent of the final contract price for 12 months,” and places the authority at a “competitive disadvantage” when bidding for construction and maintenance work.
Additionally, Higgins said a 2022 report stated that to extend the “useful life” of a vessel, a “time-consuming and expensive maintenance program” would be needed. The report also recommended several vessels to be replaced within five or seven years.
Higgins made several recommendations for the SSA to pursue for future vessel conversions and related work, one of which was a thorough review process that took into account several factors, like inflation affecting shipyards, and other types of market analysis. Project recommendations will also be made by two naval architects making initial estimates, and the SSA’s director of marine operations and the COO will also include a written assessment. Other recommendations included adding a 15 percent increase to steel prices budgeted for each dry-docking and developing a contingency for the SSA’s bonding requirement.
Additionally, Higgins said in the scenario that the SSA decides to purchase the HOS Polestar from Hornbeck Offshore Services LLC, a review should include the possibility of being powered by hybrid electricity with stored power. The HOS Polestar is a sister ferry to the Aquinnah, and Hornbeck gave the SSA the right of first refusal for it until October.
“This would be the initial vessel in the Steamship Authority modernization plan to meet the clean energy and climate plan for 2050,” he said.
Some board members were worried about what they heard.
Falmouth representative Peter Jeffrey expressed concern over nearly $2 million of engineering design work being left out from the Kirloff & Associates estimates. He asked who was responsible in the SSA for the misestimates. He added that a written process should be created for project proposals to the board, which Higgins said will be developed in the future.
“I’m not necessarily convinced all of the recommendations will keep this from happening again,” Jeffrey said. “We’ve lost a lot of public trust and a lot of my own confidence in voting on these things in moving forward.”
Martha’s Vineyard representative Jim Malkin agreed, pointing out that there were also “items that we completely missed.”
“A protocol, a checklist, I hope we have that going forward, because if we do get our bonding limit worked on and we do get a fourth vessel, we have to have real numbers,” he said.
SSA general manager Robert Davis said he “owns this process.” “That’s on me at this point,” he said.
“I’m not pleased that we missed this,” Davis said. “Obviously, now with another set of eyes here and another set of procedures in terms of how we do this going forward, the goal would be coming back with much tighter estimates on any future projects.”