Bath Iron Works’ president says months-long production delays and workforce inefficiencies helped thwart the shipbuilder’s bid to build a new line of Navy warships and could challenge one of the state’s largest employers as it prepares for the future.

In a rare interview, Dirk Lesko said the shipyard has to find ways to work more nimbly and catch up on a backlog of work to compete for defense contracts.

“The thing we really need to focus on is, as we look at what comes after the work we currently have under contract, how do we do those things, meet those customer needs – quality, schedule and affordability – better than we are doing now,” Lesko said. “There is no simple answer, but we know what to do, we know how to do it. We have to go work on that together and collaboratively with the Navy, collaboratively with the workforce.”

This month, BIW lost its bid for a $5.5 billion contract for 10 guided-missile frigates for the Navy. The shipyard partnered with a Spanish firm to develop a ship design, but an Italian shipbuilder won the contract to build the frigates at a Wisconsin shipyard. Located in Bath, BIW is a subsidiary of global aerospace and defense company General Dynamics.

It is the second time in four years that BIW failed to win new work for the shipyard. In 2016, losing a contract for Coast Guard cutters to a Florida firm raised concerns about the shipyard’s dependence on building and maintaining DDG-51 Arleigh Burke-class destroyers. Those ships have been the shipyard’s mainstay for decades, but it received fewer ships in the Navy’s last order than its main competitor, Huntington Ingalls Industries in Pascagoula, Mississippi.

Losing the frigate work was discouraging, Lesko said. BIW has years of destroyer construction ahead of it, but is at least six months behind schedule. Production delays were a concern even before the coronavirus pandemic slowed work further as many employees chose to stay home instead of risking exposure to the virus on the shipyard.

BIW will have to change procedures and become more efficient to prove to the Navy that it can handle new shipbuilding contracts, Lesko said.

“From the Navy’s evaluation, they say you are six months behind or more, that is a risk for me going forward on everything you have under contract and certainly a risk for anything new you would start,” he said.

Digging a way out of that hole presents a set of new challenges for the shipyard. It’s sprawling workforce, about 6,800 in total, is undergoing tumult as experienced workers retire and are replaced by a new generation.

About 70 percent of BIW’s manufacturing workforce, including supervisors, has been at the yard two years or less, Lesko said. The shipyard has had a major hiring push and anticipates bringing on thousands of new workers.

Many of those workers have no relevant experience. While there is raw skill there, it is difficult to predict the number of specialized workers the shipyard will need at a given time, Lesko said. Shifting workers from one job to another is complicated by labor contract rules and logistical troubles such as parking and facilities.

“When I say I need 1,000 people, I need 1,000 people broken into 15 different categories at a precise moment at time,” he said. “If you miss a step, it ripples through, then you have to reshuffle resources, and that reshuffling of resources is very complicated.”

The shipyard has filled some gaps with subcontractors, moves that have riled its largest labor union, the International Association of Machinists and Aerospace Workers Local S6. Lesko said only a small number of contractors have been used, and that the overall objective is to hire full-time shipyard workers.

“You have to have ways to dealing with variability, those have to be things you are able to do quickly or you make the problem harder for yourself,” he said. “I think we will be playing catch-up for a while.”

BIW lost the frigate contract just weeks before it is due to begin bargaining a new contract with the union. Local S6 President Chris Wiers said he expects “many challenges” during negotiations.

Workers gave up annual pay increases over the course of the last four-year contract and provided management ways to improve flexibility and efficiency, Wiers said.

“Even with those concessions, we are further behind schedule than we ever have been,” Wiers said in a written statement. “The answer to BIW’s lack of ability to manage is to subcontract our hard-working members’ work to out-of-state workers. We at Local S6 are committed to bringing BIW’s reputation back to what it once was – the gold standard of employment in Maine.”

The Navy expects some work delays, especially on new ships such as the DDG-1000 Zumwalt-class destroyer BIW started building in 2008, said Bryan Clark, a defense industry analyst at the Hudson Institute in Washington, D.C.

But more than 60 Arleigh Burke-class destroyers – BIW’s bread and butter – have been built since the mid-1980s. Extended production delays on such a mature line of ships is a red flag for the Navy, Clark said.

“The expectation is that BIW should have a good handle on how to build the Arleigh Burke class,” Clark said. “The fact that they are routinely behind schedule signals there is a problem with the shipyard.”

BIW is small and has constraints on its production workforce compared with Huntington Ingalls in Mississippi, the other location that builds Navy destroyers, Clark added.

Building three Zumwalt-class destroyers also took time and energy the shipyard could have put into other ship work, Clark said. The shipyard adjusted its workforce and facilities in anticipation of building up to 32 of the advanced warships, but the Navy wound up cutting the order to just three ships.

The shipyard is currently building the last Zumwalt-class ship. Completing that project could free up workers and space so it can catch up on its delayed work and make a play for additional frigates if the Navy orders them, Clark said.

“They will do a lot better once the Zumwalt class is past them; they can focus on job No. 1, which is Arleigh Burke production,” he said.

For now, there is still plenty of work on deck for BIW. The shipyard is under contract to build 12 ships over the next eight years, it said.

But it needs to begin thinking about its future now, and the options are limited. The Navy could order more destroyers, BIW could build some new frigates, or the Navy could ask for a new surface combat ship, Lesko said.

“It would be irresponsible to have my job and say you’re not concerned, but I would tell you I remain optimistic about our future,” he said. “That doesn’t mean it is not without challenge or it doesn’t require change, but I have an unshakable faith in the workforce of Bath Iron Works to persevere and continue for a very long time.”

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