Soaring costs for steel, a surge in demand at shipyards, a shortage of skilled labor and the Steamship Authority’s own limitations all played their parts in the boat line’s failure to accurately estimate the cost of converting its recently-acquired oil field vessels for use as freight ferries, SSA officials told the governing board last week.

After spending more than $21 million to purchase three boats last year, the authority is now facing shipyard costs nearing $27 million to convert the first two — significantly higher than the originally estimated $8 to $9 million per vessel conversion costs.

“There are several factors that entered into the financial differential from the estimates initially presented to the board,” said chief operating officer Mark Higgins, reporting to the board on June 29 after an internal SSA audit of the estimates.

Mr. Higgins, who was hired for the new position earlier this year, told the board that both naval architecture firm Kirilloff and Associates and Steamship Authority management had undershot the mark by providing estimates to the board before the full scope of the work was known.

“Several items were not included in the original cost basis, and were only identified after more detailed engineering was conducted,” he said.

Most significantly, he said, the original estimate failed to include more than $1.7 million in bulkhead work that is required under federal law for passenger-carrying vessels.

Structural fire protection added another $165,000 to the tab, while the dry docking process also was more costly than estimated.

The additional engineering design added 12 weeks to the project timeline, putting the SSA at a disadvantage when bidding packages went out to shipyards earlier this year, Mr. Higgins said.

“The backlog of work in the U.S. shipyards led to a small number of bidders,” he said, noting that the diversifying energy industry is propelling a greater demand for vessels to serve offshore wind installations as well as oil and gas platforms.

“There's also a smaller pool of skilled tradespeople that contributes to the smaller number of bids, because the shipyards do not have the personnel,” Mr. Higgins said.

The Steamship Authority also relied on past contracts to estimate the work, as well as by holding back some of the shipyard’s pay, Mr. Higgins reported.

“The SSA’s bonding requirement that holds 5 per cent of the final contract price for 12 months places the Steamship Authority at a competitive disadvantage [in] bidding for any construction and maintenance work,” he said.

More than two dozen shipyards originally requested information on the freight ferry conversions, but only two companies submitted bids with the lowest bidder, Alabama Shipyard of Mobile, Ala., initially proposing $20 million per vessel.

After negotiations, the boat line board voted in May to award the shipyard a $27 million contract to convert the first two vessels, renamed M/V Aquinnah and M/V Barnstable. Work began this spring.

To guard against further estimating snafus, future bidding for shipyard work will follow a written procedure Mr. Higgins is developing, he told the board.

“I’ll own this process,” Mr. Higgins said.

General manager Robert Davis acknowledged the missteps.

“Obviously, we're not pleased that we missed this," he said. "With another set of eyes here and another set of procedures, in terms of how we do this going forward … the goal would be to be coming back with a much tighter estimate on any future projects.”