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When Good Things Go Bad Part 1 of 3

Published Dec 18, 2012 10:04 AM by Nichole Williamson

American Recovery Act Funds Foreign Manufacturing

As the U.S. economy melted down throughout 2008, leaving millions of Americans unemployed and businesses struggling to survive, the federal government stepped in and passed the “American Recovery and Reinvestment Act of 2009.”

The $787 billion stimulus package was intended to create new jobs and save existing ones and spur economic growth and invest in long-term growth. Furthermore, the Act was explicit about fostering new levels of accountability and transparency in government spending. The government allotted $275 billion for contracts, loans, and grants, of which $102 billion or 37 percent has already been released into the economy.

Unfortunately, while the Act was meant to directly benefit the American people and American businesses, it is extremely frustrating to witness a ‘stimulus project’ purposely overlook an American company by awarding the manufacturing of critical components to a foreign company.

Here are the facts: Section 1605 of the Recovery Act specifically designates that all “iron, steel, and manufactured goods” must be produced in the U.S. under the “Buy American Provision.” A simple provision meant to simulate business and “create new jobs or help save existing ones.” For those not familiar with the Act, please go to the official site at www.recovery.gov and look for Section 1605.

The National Science Foundation (NSF) received an enormous funding under the Act, and awarded funding to a number of research projects. An award of $148 million went to the University of Alaska Fairbanks (UAF) to build a 242-foot high-tech Alaska Region Research Vessel (ARRV).

UAF awarded Marinette Marine Corporation, which is a wholly owned subsidiary of the Italian company Fincantieri Marine, the contract to build the ARRV. Let’s be clear, many U.S. companies are owned by foreign entities and Marinette Marine is in Wisconsin and it employs American workers. But, $3 million worth of winches and handling systems were awarded to Rapp-Hydema, a Norwegian based company. Rapp-Hydema only has an office in the US for sales and service, and the components for the vessel will be built overseas. Also, bidding on the components was a 100-year old American company named Markey Machinery based in Seattle, Washington.

Why Marinette Marine Corp. was able to award the contract to Rapp-Hydema, in the face of the “Buy American Provision,” is a question worth pursuing. First and foremost, it is the responsibility of the NSF and UAF to ensure that Marinette Marine complies with all provisions of the Act, including the buy American caveat. Rapp-Hydema manufactures its products in Europe and Asia, and while it only has a sales and service office in the states, the Act is clearly states that “iron, steel and manufactured goods’ must be produced in the US.

If Marinette Marine awarded the contract to Rapp-Hydema based on price, then an American company was subjected to unfair costs considerations, because the playing field was not level. The fact is, Markey Machinery submitted a competitive bid and was denied consideration based on price. Blaine Dempke, Markey’s CEO, told the MarEx that his company even lowered the bid when Marinette asked. And after the last round of re-bidding, the shipyard told Dempke no other bids were necessary. So, Markey believed its last bid was acceptable.

But, a month later Dempke was told by the shipyard that Rapp-Hydema had been awarded the project. Understandably, Dempke was shocked, especially since his company has supplied equipment on nearly every NSF, Navy, and university oceanographic research vessel in operation today. More importantly, over the last eight years, Markey has been a huge contributor in the development of specifications for “Scientific Handling Systems Integrators” on the research vessels.

The American taxpayer and Markey have been left to wonder why a project funded under the American Recovery and Reinvestment Act was awarded to a foreign company that manufactures overseas. The MarEx sent questions to both the NSF and UAF officials, but has yet to receive an answer from anyone involved with the project. With all due respect to foreign companies competing in the US for commercial projects funding by banks and corporations, the 2009 stimulus package was meant to stimulate American jobs and manufacturing opportunities.

University of Alaska Fairbanks (UAF) Alaska Region Research Vessel (ARRV) is not only an aberration of the intent of the Act, but the award by the shipyard to a foreign company when the products could have been manufactured right here in the US is in complete violation of the Act. Without question, Markey Machinery has been injured. So, what are we going to do about it?

Stay tuned as the MarEx continues its investigation in Part 2 of 3.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.