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State selects Ketchikan shipyard for role in building new state ferry

Work may be steered to local company to keep construction dollars in state

Posted: September 20, 2011 - 12:04am
Alaska Ship and Drydock, Inc., which operated the state-owned Ketchikan Shipyard, is building a new five-story, covered construction area. The Ketchikan company has been selected to manage the $120 million Alaska-class ferry project.  Provided by Alaska Ship and Drydock, Inc.
Provided by Alaska Ship and Drydock, Inc.
Alaska Ship and Drydock, Inc., which operated the state-owned Ketchikan Shipyard, is building a new five-story, covered construction area. The Ketchikan company has been selected to manage the $120 million Alaska-class ferry project.

Alaska state officials Monday announced a deal they hope will lead to the newest state ferry being built in Ketchikan, and likely even lead to future business for the state-owned shipyard there.

The potential $120 million arrangement is structured to boost the chances of privately owned Alaska Ship & Drydock, which operates the state-owned Ketchikan Shipyard, to get the final construction deal.

Alaska Department of Transportation & Public Facilities Commissioner Marc Luiken announced Monday that ASD had been selected as the construction manager and general contractor for the new Alaska-class ferry for the Alaska Marine Highway System.

It will help design the vessel, which will give ASD a leg up on construction as well. ASD said that’s likely to mean 129 full-time, year-round shipyard jobs, along with another 79 with suppliers and contractors in the local community, state officials said.

“By participating in the design, ASD will have thorough knowledge of the vessel and what it will take to construct it,” Luiken said. “ASD can then submit a bid to build the vessel.”

Alaska state officials and legislators had helped arrange the deal to boost ASD’s chances.

“Today’s announcement shows Alaska’s ferries can be built here in Southeast Alaska,” said Sen. Bert Stedman, R-Sitka, who represents the area and helped secure money for the vessel.

What may make it possible for the new ferry to be built locally is use of the new construction manager/general contractor, or CM/GC, process, in which a company is selected to oversee the project for the state.

It’s a process that’s been used by the state for buildings, but never before for a ferry, said Mike Neussl, deputy commissioner for the Alaska Marine Highway System.

It’s different from the more common design-bid-build or “low bid” process, said Neussl.

If the federal government was providing funds to build the ferry, federal procurement rules would require use of the low-bid method, Neussl said.

Any new ferry running between U.S. ports must be built in the United States, according to the Jones Act, but because it is using only state money Alaska can use the process that gives a local builder the best chance, he said.

Past history suggests that ASD would likely have difficulty winning the contract on a low-bid basis.

Federally funded overhauls of AMHS vessels have always gone to Lower 48 shipyards with low bids, Neussl acknowledged.

As part of the CM/GC contract, ASD will work together with the state’s ship designer, Elliot Bay Design Group, the state’s architect and engineering contractor.

The benefits to the state from using the CM/GC process are significant, but not always easy to measure, Neussl said.

First, if the new ferry does get built in Ketchikan, it will be built at a shipyard right next door to the Alaska Marine Highway System headquarters.

“Personally, I see a lot of advantages to having the shipyard that’s going to construct it right next door,” Neussl said.

The biggest benefit, however, is in the alignment of interests. With the low-bid method, shipyards are motivated to cut costs during bidding, but once the deal is signed they then use change orders to boost the total price.

“It sets up an adversarial relationship that we’re trying to avoid here,” Neussl said.

The CM/GC process has the state, the builder and designer all working together for a successful project, he said.

And because the builder knows exactly what was designed, the state is unlikely to get a bad surprise when the bids are opened.

“It avoids the sticker shock on bid opening that can happen with the low bid process,” he said.

Monday’s action doesn’t guarantee ASD the work, Neussl said, but it does put them in a position to win it.

If Ketchikan does get to build the new Alaska-class ferry, it may pay even more dividends in the long term as ASD becomes more skilled and competitive, Neussl said.

“What this does is level the playing field, and the likelihood of needing another Alaska-class ferry is probably pretty high,” he said.

• Contact reporter Pat Forgey at 523-2250 or at patrick.forgey@juneauempire.com.

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