Bollinger Shipyards

Background Established 1946 Family owned and operated Headquarters in Lockport, LA 2200 employees Facilities 8 Repair 2 New Construction 1 Logistics Support 1 Engineering Support Beemar 4 DPII vessels under construction (270’-300’)

Business Overview Leading provider of New Construction & Repair Conversion services to the energy, commercial and U.S. government markets Strong commitment to quality & safety that stands behind our product Strong customer/vendor relationships Experienced workforce

Bollinger Lockport New Construction Located on Bayou Lafourche Bulkhead Length: 3000’ Water Depth: 14’ Crane Capacity: 300 tons Full engineering staff Major new build fabrication Lift boats, patrol boats, OSVs barges, and tugs Covered fab shops: 461,000 sq. ft.

We had the luxury of building multiple vessels for many of these classes of boats. 10 – 234 class vessels for BeeMar 10 – 180 class vessels for Rigdon 30 – 145 class vessels for various owners In total we have built 75 OSV’s in the past 15 years.

We have built approximately 20 tugs and towboats over the past 15 years We have built approximately 80 barges in that same timeframe. The barges are a variety of barges that range from 150,000 BBL Ocean tank barges, to small 28,000 BBL Inland tank barges. We have also built a variety of deck barges, hoper barges and crane barges.

We built 49 of the 110’ Island Class cutters for the USCG We built 14 of the Cyclone Class cutters for the USN We built 77 of the 87’ Costal Patrol Boat class cutters for the USCG We are under contract to build 8 of the 154’ Fast Response cutters for the USCG, with options to build up to 34.

Bollinger Lockport New Construction Bollinger Introduction video Corporate Video.mpg FRC Rollout/Launch http://www.bollingershipyards.com/PageDisplay.asp?p1=5461 FRC Sea Trials http://www.bollingershipyards.com/PageDisplay.asp?p1=7070

USCG OPC Program Phased acquisition approach (Phase 1 & 2) Phase 1 Final RFP Release Date (September 2012) Phase 1 Proposals Due (January 2013) Phase 1 Award (NLT September 2013) Phase 1 – 18 month Preliminary Design & Contract Design ($22M FFP) Phase 2 – 24 month Detail Design & 36 month Construction ($310M steady state boat 6-9 average) Up to 11 vessels in initial acquisition

USCG OPC Acquisition Timeline

Bollinger New Construction Projects BLN FRC – 12 under contract delivered 3 BMF NYC Sludge Ships – 3 ea Crowley Tugs – 4 ea, 2 delivered Terrebonne Parish Floodgate BeeMar PSV’s 2 ea 276’, 2 ea 300’

NSRP Projects Bollinger has participated in 22 NSRP projects to date with a total investment including industry cost share of approximately $17M. Of the 23 projects Bollinger has successfully implemented 16 fully, 2 partially and 4 that did not get implemented for one reason or another.

Eliminating Non-Value Added Activities in Shipbuilding SNAME Annual Meeting & Expo November 4, 2010 Panel 2: “How do we improve performance in shipyards irrespective of numbers and types of ships being built?” René J. Leonard Vice President – Engineering Bollinger Shipyards, Inc.

Overview Why did we see a need to change our business process How do we operate today What are the challenges associated with implementing a new business process I have approximately 20 slides to review with you today The four areas that I want to address in this presentation are A brief overview of the products we have produced at Bollinger over the past 20 years to help you understand my perspective Background on why we decided to change our business processes several years ago A brief overview of how we operate today And lastly a review of some of the challenges that we faced while attempting to implement our new business processes

Transition in Philosophy Why did we see a need to change our production philosophy? The company was founded in 1946 and had a very successful New Construction Division We followed a traditional production process similar to many other U.S. shipyards We believed we had an opportunity to reduce cost by eliminating non-value added activities

Transition in Philosophy Eliminate the “Learning Curve” Non-value added activities Due to the recent quantity of multiple vessel contracts we had the “luxury” of experiencing large learning curves frequently. We typically did not achieve our best performance until vessel 7 or 8 in a series production run. By definition the labor below the learning curve is non-value added, so we focused on items in the shaded area above. With a single vessel contract you could have 25% - 30% non-value added activities

Defining a Strategy We asked ourselves “How do we optimize our processes to eliminate 25% - 30% of the work content?” Do employees weld faster on boat eight than they did on boat one? No. Do they figure out how to eliminate variation and standardize their work? Yes. On a lead ship, we typically fabricated most, if not all, pipe onboard the vessel. For follow on vessels we took measurements and began to fabricate pipe spools in the shop near the vessel. By the 2nd or 3rd vessel we might set-up a work table. On later vessels we might move common inventory and consumables near that work table, until finally by boat 7 or 8 the work area is optimized. But once this series of vessels in complete this whole process begins again for the next lead ship. Fabricating pipe in a controlled environment at a fixed workstation vice onboard a vessel eliminates a lot of non-value added activities.

Define your strategy We decided that if we were going to eliminate our learning curve we had to switch to a “manufacturing” approach of vessel construction. Bring in panels in through the side doors in the shop, erect assemblies in the center of the shop, then move them toward either end to fabricate hull modules. The materials flow from one workstation to the next while the people remain fixed at their workstations (move work to people, not people to work). Install foundations and pipe in the overhead while assembly is inverted so welding is performed in the down hand position. For other vessel types this process would be similar. We wanted to capitalize on moving the work to our people rather than moving the people to the work. Always perform like work in the same location.

Defining a Strategy Establish a pace for the facility and have all workstations match that pace. Assume that your panel line can produce 50 tons of steel a week, and you have optimized your facility to handle modules that weigh 200 tons. You can produce one hull module every four weeks. If your vessel weighs 800 tons your throughput will support the delivery of a vessel every 16 weeks. Based on this you have to produce pipe spools and prefabricated outfit items for a module every four weeks. Once you establish a pace you can quickly determine the frequency at which you can deliver vessels based on the vessel steel weight.

Defining a Strategy Engineering Guiding Principles Minimize Number of Parts Standardize Material Types and Parts Minimize Lifting and Handling of Parts Minimize / Optimize Welding Simplify Layout Process Simplify Engineering Deliverables Minimize Fabrication / Assembly Complexity Minimize number of parts – it is easy to produce an assembly with a lot of parts, but much harder to develop a simple design with minimal parts. Mast fabricated with 28 parts verses 10. Standardize parts – Analyze a complete BOM for a past project and look at how many parts have a quantity of one or two, and determine if you can combine these odd components with existing standard parts. Minimize lifting and handling of parts – all material handling is non-value added so optimize the design and production processes to minimize material handling Minimize welding – scallop flange plate foundations to eliminate double continuous welding. Simply layout process – we will see this on the next two slides Simplify engineering deliverables – produce drawings that match the exact method the vessel will be built. If pipe spools are going to be installed in a module the A&D should be produced per module. Minimize fabrication complexity – if you accomplish the above items you will achieve this one.

With etching capabilities that are available today adding part numbers, stiffener position lines, weld details, and other reference marks are easy and efficient. Significantly reduces layout and fit-up errors. Remember all rework is non-value added.

ShipConsrtuctor model with side shell removed ShipConsrtuctor model with side shell removed. All structure, piping and outfitting components have been located in the model.

Same model with just piping visible

Hydraulic piping (mostly ½ tubing) routed and spool drawings produced for lead ship

Alignment of Business Processes Our existing processes were aligned, but not effective. Once we decided to transition to a modular manufacturing style of production it caused conflict with practically every business process that we had established in our facility. We formerly built vessels in one module starting at the bow and working our way aft to the stern. To support this construction technique we issued production drawings by system that contained all information for the entire vessel. We also populated our Bills of Material by system for the complete vessel, which in turn led to our purchasing department buying material by system. We also planned our work and collected cost by system across the entire vessel. As mentioned before, these processes were aligned and this business model worked, it just was not as effective as we would have liked. What we desired was to create a new direction that shifted all processes to align with our new desired culture.

Alignment of Business Processes When we decided to change our production approach we had to reinvent all processes in our shipyard and evolve our corporate culture 180 degrees. Desired Company Culture Design Production Supervision Build Strategy Planning Work Orders & Budgets Procurement When we decided to build the vessel in modules, we knew we had to change our engineering approach. We decided to produce our structural assembly drawings per module and have them reflect the panels, assemblies, and modules just as the person on the shop floor would see them. However we did not see the immediate benefit of changing the way we developed our piping and outfit drawings. So they were still developed to reflect the scope of work for an entire system for each vessel. This allowed purchasing and planning to still follow their previous processes of purchasing and planning work by system, but did not reflect the way production intended to build the vessel as they planned to prefabricate and install all piping and outfitting by module. We also did not modify the way we managed our production workforce, although we expected them to significantly change the way they were building vessels. What resulted was a weak company culture that looked like the following figure.

Alignment of Business Processes Our modular manufacturing approach caused conflict with practically every business process and initially we did not properly modify those processes to match our desired production approach. So a change had to occur and we began developing all production drawings for the vessel by module. We also began developing BOM’s per module per system. This also had an added benefit of allowing us to further break up the work packages into logical groups of work related to prefabrication, installation, testing, etc. Planning and progressing of work completed then became much simpler, and more reliable. This resulted in a much more robust system. Once we changed our approach to fabricating vessels and began performing structural, and piping hot work, in addition to outfitting in the same workstation we realized that we had to change our production supervision philosophy. It no longer made sense to have three separate supervisors with potentially different goals overseeing the work of a small number of people in the same workstation. So we have since transitioned to an approach of workstation managers who are responsible for managing schedule and budget for all work content in their work station, regardless of the skill set of the employees working in that workstation. This eliminates a lot of conflict between trades that previously occurred due to schedule overrun, or rework caused by one craft when the individual supervisors had different goals they were trying to meet.

Alignment of Business Processes “It is easier for companies to come up with new ideas than to let go of old ones.” Peter Drucker When implementing this type of change you must have commitment from the top of the organization. Whoever is responsible for conflict resolution must be engaged and understand the philosophy of the process that you are implementing. You will have employees who talk about how well the system worked in the old days, but forget about all of the problems the old system caused. You can not implement this type of change in philosophy by pushing from the ground up. It has to come with clear direction from the top down, and that person at the top has to clearly understand the philosophy and be responsible for conflict resolution between crafts.

Why Bollinger? In business for 65 years Globally renowned for safety, efficiency and versatility Provide complete marine services Skilled workforce Deliver quality products on time and on budget Bollinger Shipyards is the "First to Call" Why Bollinger?