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TITLE X--GENERAL PROVISIONS

Subtitle B--Policy Relating to Vessels and Shipyards

JWNDAA Section

House Conference Report 109-702

(a) Assessment Required- The Secretary of the Navy shall conduct an assessment of each of the aspects of naval vessel construction specified in subsection (b) in order to determine--

(1) what inefficiencies exist in those aspects of naval vessel construction;

(2) what innovative design and production technologies, processes, and performance incentives are warranted to alleviate the inefficiencies so identified; and

(3) what action the Secretary intends to take to facilitate the adoption by the shipbuilding industry of the technologies, processes, and performance incentives identified under paragraph (2).

(b) Aspects to Be Assessed- Subsection (a) applies with respect to the following aspects of naval vessel construction:

(1) Program design, engineering, and production engineering.

(2) Organization and operating systems.

(3) Steelwork production.

(4) Ship construction and outfitting.

(5) Combat systems development, integration, and installation.

(c) Consideration of Prior Assessments- In making the assessments required by subsection (a), the Secretary shall take into consideration the results of--

(1) the study of the cost effectiveness of the ship construction program of the Navy required by section 1014 of the Ronald W. Reagan National Defense Authorization Act for Fiscal Year 2005 (Public Law 108-375; 118 Stat. 2041);

(2) the assessment of the United States naval shipbuilding industry required by section 254 of the National Defense Authorization Act for Fiscal Year 2006 (Public Law 109-163; 119 Stat. 3180); and

(3) any prior assessment performed by or on behalf of the Department of Defense.

(d) Special Contractor Incentives- In addition to the assessments under subsection (a), the Secretary shall conduct an assessment of the effectiveness of the use in naval vessel construction contracts of special contract incentives for investment by the contractor in facilities and process improvement projects. Such assessment shall include the following:

(1) A description of the intent of the use of such incentives in naval vessel construction contracts.

(2) A description of the process and criteria used by the Secretary for evaluation of proposed projects to receive such incentives in naval vessel construction contracts and for the selection among such proposed projects for inclusion of incentives in such contracts.

(3) For each facility or process improvement project for which funds were provided in a naval vessel construction contract during the five-year period ending on the date of the enactment of this Act (including the facility or process improvement project contract incentives incorporated in the Virginia-class submarine construction contract and in the CVN-21 construction contract)--

(A) a description of the facility or process improvement project proposed by the contractor;

(B) the amount expended (or to be expended) by the United States for the project under the contract; and

(C) the estimated or actual return on investment for the amounts referred to in subparagraph (B).

(4) The plans of the Secretary of the Navy to use similar contract incentives in ongoing and future shipbuilding programs.

(5) Any recommendation by the Secretary for the enactment of legislation that might increase the effectiveness of, or expand the use of, such contract incentives.

(e) Report- Not later than April 1, 2007, the Secretary of the Navy shall submit to the congressional defense committees a report on--

(1) the Secretary's assessments of naval vessel construction efficiencies under subsection (a), addressing each of the matters specified in that subsection; and

(2) the Secretary's assessment of the effectiveness of special incentives for contractor investment in facilities and process improvement projects under subsection (d).

The House bill contained a provision (sec. 1014) that would establish a program to provide grants and loan guarantees to U.S. shipbuilders to make capital investments in their shipbuilding processes and facilities. The provision would also require the Secretary of the Navy to perform annual assessments of the shipbuilding industrial base to determine where and to what extent inefficiencies exist and to what extent innovative design and production technologies, processes, and infrastructure can be developed to alleviate such inefficiencies.

The Senate amendment contained no similar provision.

The Senate recedes with an amendment that would require the Secretary to conduct an assessment of naval vessel construction to determine inefficiencies that exist; innovative design and production technologies, processes, and performance incentives that are warranted to alleviate those inefficiencies; and actions the Secretary intends to take to facilitate adoption by the shipbuilding industry of the technologies, processes, and performance incentives so identified. The amendment would also require the Secretary to conduct an assessment of the effectiveness of the use in naval construction contracts of special incentives for investment by the contractor in facilities and process improvement projects, including a description of the use of such incentives, a description of the process and criteria used for evaluation of and selection among proposed projects, progress in implementing selected projects, plans for applying similar contract incentives in future shipbuilding programs, and recommendations by the Secretary for enactment of legislation that might increase the effectiveness of, or expand the use of, such contract incentives. The amendment would further require that the Secretary submit a report on these assessments to the congressional defense committees not later than April 1, 2007. The conferees direct the Secretary to provide the congressional defense committees with an interim briefing on the findings of the assessments not later than March 1, 2007.

House Armed Services Committee Report 109-452

SECTION 1014--SHIPBUILDING INDUSTRIAL BASE IMPROVEMENT PROGRAM

This section would establish a program to provide grants and loan guarantees to U.S. shipbuilders to make capital investments in their shipbuilding processes and facilities to improve the efficiency, cost-effectiveness, and quality of U.S. ship construction and promote the international competitiveness of U.S. shipyards. This section would authorize the Secretary of the Navy to solicit and approve grant applications from shipbuilding companies to research and develop innovative technologies, processes and infrastructure to improve the efficiency and cost-effectiveness of naval vessel construction. This section would also authorize the Secretary of the Navy to provide loan guarantees to shipyards to purchase and implement a technology, a process or an infrastructure improvement that he determines will improve the productivity and cost-effectiveness of naval vessel construction. This section would also require the Secretary of the Navy to perform annual assessments of the shipbuilding industrial base to determine where and to what extent inefficiencies exist and to what extent innovative design and production technologies, processes and infrastructure can be developed to alleviate such inefficiencies. This section would also require that funding for the National Shipbuilding Research Program be separately identified and set forth in budget justification materials submitted to Congress for that fiscal year in support of that budget.