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Innovations in Funding the Maritime Prepositioning Ships Program: a Case Analysis of the How and Why the Lease Option Was Successful

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Innovations in Funding the Maritime Prepositioning Ships Program: a Case Analysis of the How and Why the Lease Option Was Successful View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by Calhoun, Institutional Archive of the Naval Postgraduate School Calhoun: The NPS Institutional Archive Theses and Dissertations Thesis Collection 2004-12 Innovations in funding the Maritime Prepositioning Ships program: a case analysis of the how and why the lease option was successful Bailey, John Ryan Monterey, California. Naval Postgraduate School http://hdl.handle.net/10945/9887 NAVAL POSTGRADUATE SCHOOL MONTEREY, CALIFORNIA MBA PROFESSIONAL REPORT Innovations in Funding the Maritime Prepositioning Ships Program – A Case Analysis of the How and Why the Lease Option was Successful By: John Ryan Bailey, and Mark Escoe December 2004 Advisors: Lawrence R. Jones, Jerry McCaffery Approved for public release; distribution is unlimited THIS PAGE INTENTIONALLY LEFT BLANK REPORT DOCUMENTATION PAGE Form Approved OMB No. 0704-0188 Public reporting burden for this collection of information is estimated to average 1 hour per response, including the time for reviewing instruction, searching existing data sources, gathering and maintaining the data needed, and completing and reviewing the collection of information. Send comments regarding this burden estimate or any other aspect of this collection of information, including suggestions for reducing this burden, to Washington headquarters Services, Directorate for Information Operations and Reports, 1215 Jefferson Davis Highway, Suite 1204, Arlington, VA 22202-4302, and to the Office of Management and Budget, Paperwork Reduction Project (0704-0188) Washington DC 20503. 1. AGENCY USE ONLY (Leave blank) 2. REPORT DATE 3. REPORT TYPE AND DATES COVERED December 2004 MBA Professional Report 4. TITLE AND SUBTITLE: 5. FUNDING NUMBERS Innovations in Funding the Maritime Prepositioning Ships Program – A Case Analysis of the How and Why the Lease Option was Successful 6. AUTHOR(S) John Ryan Bailey and Mark A. Escoe 7. PERFORMING ORGANIZATION NAME(S) AND ADDRESS(ES) 8. PERFORMING Naval Postgraduate School ORGANIZATION REPORT Monterey, CA 93943-5000 NUMBER 9. SPONSORING / MONITORING AGENCY NAME(S) AND ADDRESS(ES) 10. SPONSORING / MONITORING N/A AGENCY REPORT NUMBER 11. SUPPLEMENTARY NOTES The views expressed in this report are those of the author(s) and do not reflect the official policy or position of the Department of Defense or the U.S. Government. 12a. DISTRIBUTION / AVAILABILITY STATEMENT 12b. DISTRIBUTION CODE Approved for public release; distribution is unlimited 13. ABSTRACT (maximum 200 words) The purpose of this project is to research, evaluate, analyze and provide written documentation of the details of how and why the U.S. Congress, the Department of Defense, and the Department of the Navy supported and appropriated funds for the leasing of Maritime Prepositioning Ships that would be used to position troops and equipment in strategic areas of the world. It will explain why the lease option was eventually approved when initially so many participants in the decision-making process objected to this type of financing for shipbuilding. The result of our work will provide a historical reference for the success of the lease program that can be used for future acquisitions by the United States Government. 14. SUBJECT TERMS 15. NUMBER OF Maritime Prepositioning Ships (MPS), Maritime Prepositioning Force (MPF), Operation DESERT PAGES SHIELD/STORM, Operation IRAQI FREEDOM, MPSRON, TAKX, Ship Leasing, Army 101 Prepositioning, Maritime Vessel, Auxiliary ships. 16. PRICE CODE 17. SECURITY 18. SECURITY 19. SECURITY 20. LIMITATION CLASSIFICATION OF CLASSIFICATION OF THIS CLASSIFICATION OF OF ABSTRACT REPORT PAGE ABSTRACT Unclassified Unclassified Unclassified UL NSN 7540-01-280-5500 Standard Form 298 (Rev. 2-89) Prescribed by ANSI Std. 239-18 i THIS PAGE INTENTIONALLY LEFT BLANK ii Approved for public release; distribution is unlimited INNOVATIONS IN FUNDING THE MARITIME PREPOSITIONING SHIPS PROGRAM – A CASE ANALYSIS OF THE HOW AND WHY THE LEASE OPTION WAS SUCCESSFUL John Ryan Bailey, Major, United States Army Mark A. Escoe, Lieutenant Commander, United States Navy Submitted in partial fulfillment of the requirements for the degree of MASTER OF BUSINESS ADMINISTRATION from the NAVAL POSTGRADUATE SCHOOL December 2004 Authors: _ __________________________ John Ryan Bailey ____________________ Mark A. Escoe Approved by: _____________________________________ Lawrence R. Jones _____________________________________ Jerry McCaffery _____________________________________ Douglas A. Brook, Dean Graduate School of Business and Public Policy iii THIS PAGE INTENTIONALLY LEFT BLANK iv INNOVATIONS IN FUNDING THE MARITIME PREPOSITIONING SHIPS PROGRAM – A CASE ANALYSIS OF THE HOW AND WHY THE LEASE OPTION WAS SUCCESSFUL ABSTRACT The purpose of this MBA project is to research, evaluate, analyze and provide written documentation of the details of how and why the U.S. Congress, the Department of Defense, and the Department of the Navy supported and appropriated funds for the leasing of Maritime Prepositioning Ships that would be used to position troops and equipment in strategic areas of the world. It will explain why the lease option was eventually approved when initially so many participants in the decision-making process objected to this type of financing for shipbuilding. The result of our work will provide a historical reference for the success of the lease program that can be used for future acquisitions by the United States Government. v THIS PAGE INTENTIONALLY LEFT BLANK vi TABLE OF CONTENTS I. EXTENSION OF PROPOSAL...................................................................................1 A. OBJECTIVES ..................................................................................................1 B. BACKGROUND ..............................................................................................1 C. PROBLEM IDENTIFICATION ....................................................................2 D. DATA ................................................................................................................2 E. ANALYSIS .......................................................................................................2 F. ACCOMPLISHMENTS..................................................................................3 G. RESEARCH QUESTIONS.............................................................................3 H. SUMMARY ......................................................................................................3 II. THE NEED FOR A PREPOSITIONED FLEET .....................................................5 A. FUNDING ROLES AND RESPONSIBILITIES OF AGENCIES (USN, USMC, TRANSCOM, MSC)...............................................................6 B. FINANCING DILEMMA ...............................................................................8 C. CAPABILITIES, OPERATIONS, AND DEPLOYMENT TIMELINES.....................................................................................................9 D. MARITIME PREPOSITIONING SHIP SQUADRONS (MPSRON) ......10 E. MAINTENANCE AND EQUIPMENT OF MPS SHIPS...........................11 1. How Often Maintenance is Required...............................................11 2. Where Maintenance is Performed....................................................11 3. Typical Equipment Carried..............................................................12 F. CONTRIBUTIONS OF MARITIME PREPOSITIONING SHIPS TO: ..................................................................................................................12 1. Operation DESERT STORM ...........................................................12 2. Operation IRAQI FREEDOM..........................................................13 3. Other Exercises ..................................................................................15 a. COBRA GOLD........................................................................16 b. BRIGHT STAR .......................................................................17 c. DYNAMIC MIX ......................................................................17 III. FROM IDEA TO REALITY – LEASING MARITIME PREPOSITIONING SHIPS..........................................................................................................................19 A. INTRODUCTION..........................................................................................19 B. THE DEPARTMENT OF THE NAVY CASE FOR LEASING...............19 1. The Leveraged Lease .........................................................................20 2. Lease vs. Purchase, a Present Value Analysis .................................20 C. LESGISLATIVE HEARINGS .....................................................................22 1. The Navy Testimony..........................................................................23 2. Congressional Concerns on Leasing.................................................26 D. REFLECTIONS ON THE DECISION TO LEASE...................................28 vii IV. THE STRATEGIC ENVIRONMENT AND INTERESTS OF THE MAJOR STAKEHOLDERS ....................................................................................................31 A. INTRODUCTION..........................................................................................31 B. THE STRATEGIC ENVIRONMENT.........................................................31 C. THE INTEREST OF THE MAJOR STAKEHOLDERS ..........................33 1. Office of the Secretary of Defense ....................................................33
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