‘The sun is shining’ at Philly Shipyard as hundreds of jobs return this year, CEO says

Nearly two years ago, when the Philly Shipyard bid farewell to a massive container ship it constructed, the workforce was dwindling and the pressure to find new orders was growing.

A yard that typically employed 1,200 workers had fewer than 100 in 2019 and 2020. Would it bounce back?

Then, last April, the winds shifted, bringing a welcomed announcement: The shipyard won a contract from Tote Services, which is overseeing the building of up to five vessels for the U.S. Maritime Administration.

Now that project is ramping up and hundreds of laborers will be back on the job in 2021, says the company’s CEO, Steinar Nerbovik.

About 200 employees, largely in engineering, purchasing, finance and planning roles, are at the shipyard now, Nerbovik said. He’ll gradually increase the production workforce. “We expect to be at 800 by the end of the year” and closer to 1,400 people working in 2022.

So far, the government has requested four ships, formally known as “national security multi-mission vessels,” which are destined as training ships at state maritime academies, but can also be used in disaster relief operations. On Tuesday, the shipyard announced finalized orders for the third and fourth vessels, in what is expected to be a $1.5 billion program. The average cost for each ship, which can hold 600 cadets, comes to about $300 million.

“We saw the clouds in ’18, ’19 and’ 20,” Nerbovik said, “but now the sun is shining.”

Over the last two decades, Philly Shipyard, located in the Navy Yard, built a series of container ships and tankers for the commercial market. By law, ships that transport goods between two points in the United States must also be constructed in the U.S. — but that market is only so big, and building demand has peaks and valleys.

So the shipyard’s fortunes have now intersected with a federal government project more than a decade in the making, and one that officials at the U.S. Department of Transportation see as a vital investment in the American maritime industry.

Some training ships at the country’s maritime academies are more than 50 years old. Graduates from those schools go onto careers not only at sea, but also in logistics and supply chain management, and at ports and shipyards.

“We owe it to our youth to give them the most modern training platforms,” said Kevin Tokarski, associate administrator for strategic sealift at the Maritime Administration.

The new vessels, he said, will “ensure that we’ve got people that are going into, what I would say is, the critical lifeline of our nation’s economy, that support our trade and the ability to move goods and products in and around the country.”

The Maritime Administration is hardly a high-profile federal agency. Housed within the Transportation Department, the agency supports industry and infrastructure for American shipping.

As part of that mission, the agency runs a fleet of 41 “ready reserve” ships that transport military cargo and help FEMA in delivering disaster relief. The agency also provides ships to six state maritime academies that train merchant marines.

The academies long had made do with hand-me-down ships. But in 2008, agency officials started making a case to build new, state-of-the-art vessels. So began an odyssey of navigating the proposal through Washington.

“There were a lot of people who said, ‘it’ll never happen,’” Tokarski said, because “we’ve never invested in shipbuilding like this for this purpose.”

The concept ultimately came together during the Trump administration, with backing from then-Transportation Secretary Elaine Chao.

Pennsylvania members of Congress on both sides of the aisle, along with labor leaders for the metal trades, championed the shipyard as its order book remained empty – and pushed for the funding of the Maritime Administration ships on Capitol Hill.

“Everybody wanted to preserve the manufacturing footprint of the Philadelphia Navy Yard, and the question was how to get it done,” said labor leader Jimmy Hart, president of the metal trades department at the AFL-CIO. He invited workers down to Washington and walked them around the halls of Congress.

“When people see a human side of this, the legislators, it gets their attention,” Hart said. “And that’s the best you can do in Washington is get somebody’s attention.”

Many pieces had to fall into place, Hart said, to secure both congressional appropriations and jobs in Philly: a bipartisan coalition in the U.S. Senate, support from the White House, and a competitive price offered by the shipyard. “Steinar and his team, they never gave up hope, and they worked very hard on their end to make sure the numbers came in,” Hart said.

Hourly wages for union workers at the yard range from $16 at entry level, to $31 or more, according to Lou Agre, president of the Philadelphia Metal Trades Council. “A thousand blue-collar jobs is very important to the economy of the city,” he said.

Nine trades with a union contract at the shipyard include boilermakers, sheet metal workers, iron workers, painters, plumbers, electrical workers, asbestos workers, laborers, and operating engineers. With each phase of building a ship, more people get called back.

The government contract itself is a new model that shifts day-to-day management of the project to private industry. The Maritime Administration contracted with Tote Services to oversee building as the “vessel construction manager,” and Tote hired Philly Shipyard through a competitive bidding process.

That model is meant to keep costs down, through a fixed-price contract that includes penalties for delays.

For Philly Shipyard, the project is helping to diversify its business. While Nerbovik is by no means ruling out a return to building commercial ships, he is looking to win more government business.

Between the U.S. Navy and the U.S. Coast Guard, “the government has huge needs for various types of ships,” Nerbovik said. With construction for the Maritime Administration fleet, “we are now taking the first step in that direction.”

Seeing Philly Shipyard set up for future success would also be a win for the Maritime Administration.

“My wish is that when we get done here with this fleet, they’ve got work that’s in the order books,” Tokarski said, “and that’s going to keep going, and people have seen and learned that the shipyard can do good government shipbuilding.”