Baltimore Marine Industries Inc.

An employee operates an automatic burning machine at Baltimore Marine Industries Inc. at the former Bethlehem Steel Corp. shipyard at Sparrows Point. BMI cited foreign competition as one reason for filing for federal bankrupcty protection in June. (Sun file photo / October 9, 1997)

The recent award of a $17.8 million military contract that eventually went to a British ship scrapyard is under fire at home and abroad -- with environmentalists warning against leaky old ships trolling across the Atlantic Ocean and American companies charging that they were not given a fair chance to bid on the deal.

Yet those accusations -- denied by the U.S. Maritime Administration (Marad), the federal agency ultimately responsible for the contract -- are drawing renewed attention to the way the United States disposes of its ships and could in the long run help struggling domestic companies get more work, say U.S. industry advocates.

Much of that work has the potential to be done in Baltimore, they say -- provided that government agencies and local lawmakers work to get financing and avoid problems that have contributed to the recent bankruptcy of Baltimore Marine Industries Inc.

BMI, the Sparrows Point shipyard that filed for bankrupcty protection in June, was among four companies participating in a five-year U.S. Navy pilot program -- now winding down -- designed to help the government get rid of old ships.

While the company's financial problems were not a direct result of a lack of government work, observers say the situation may have been a contributing factor.

BMI officials did not return repeated telephone calls seeking comment.

"Part of the work they were counting on was doing scrapping of some of the Marad and U.S. Navy ships," said Ande Abbott, director of the of the International Brotherhood of Boilermakers' shipbuilding and marine division in Washington. The union, with welders and other members who worked at BMI, represents employees at 43 shipyards nationwide.

"The Maritime Administration just didn't want to pay anybody to do the scrapping," Abbott said. "The strange part of this is, they're willing to pay the Brits."

Democratic Rep. Solomon Ortiz of Texas said he has asked the General Accounting Office, the Congressional investigative agency, to audit the transaction. He said he also wanted the GAO to review Marad's ship-dismantling program in general and "let all of us know exactly how much money was wasted in this bad decision."

"The current deal the U.S. made with Great Britain was a bad deal for U.S. taxpayers," Ortiz said. "We are paying more for a job that needs to be done; we are paying people in another country to do it while our industry in the U.S. is deeply hurting -- and could have done it cheaper; and we are risking damage to the enviroment by dragging oily, leaky ships across the Atlantic."

Disposing of 'ghost fleet'

The Navy shares ship-scrapping responsibilities with the Maritime Administration. The Navy is responsible for disposing of old combat ships, while Marad oversees the dismantling of other vessels, such as merchant ships and supply tankers. The pilot program began in 1999.

According to a Navy spokesman, a warship can be completely dismantled in six to 12 months, at an average cost of $2 million to $3 million apiece, with the price declining as a shipyard gets more work. Between 70 and 120 people can work on a ship during various stages of the dismantling process, the spokesman said.

Marad currently has 108 ships available for disposal, while the Navy has 55, the Navy spokesman said. Known as the U.S. "ghost fleet," the ships are moored throughout the United States with about 70 of them in the James River in Newport News, Va.

The vessels generally are polluted with asbestos, toxic polychlorinated biphenyls (PCBs) -- banned in the 1970s -- and varying quantities of heavy marine diesel oil. Some of the ships served in the Korean War and have been rotting for years.

"We have over a million tons of ships to be scrapped right now, and over the next 10 years, another million tons," Abbott said.

'Offered the best value'

In July, Marad awarded the $17.8 million scrapping contract to Post-Service Remediation Partners, an affiliate of New York real estate firm Pyne Cos. Ltd., which is subcontracting the work to Able UK Ltd. The plan is to send 13 ships to a demolition dock in Teesside, England.

To get them abroad, they would have to be towed from Newport News and through the English Channel, one of the world's busiest shipping lanes. This has raised concerns among British politicians and environmentalists.