Forging a Partnership on the Shop Floor

‘America’s cannon factory’ used a public-private partnership to save its skilled workforce from a postwar dip in demand and preserve a critical manufacturing capability in the Army’s organic industrial base.

by Ms. Mary Kate Aylward

DOD has only one source for large-caliber cannons: Watervliet Arsenal, in operation in Watervliet, New York, since 1813. As the home of Army-­designated “critical manufacturing capabilities,” which don’t exist anywhere else in the U.S. industrial base, Watervliet, its forges and the skilled workers who operate them are assets that a commercial supplier simply cannot replace. But the loss of that workforce is exactly what the arsenal faced in 2011 after the wars in Iraq and Afghanistan wound down. Revenue had dipped to $88 million, down from $133 million in 2009, as the Army required fewer of the high-tech, high-powered cannon, howitzer and mortar systems that Watervliet produces.

The arsenal saved its critical capabilities by forging a public-­private partnership with Electralloy, G.O. Carlson Inc., a privately held metals company, that lets Electralloy use Watervliet’s facilities—so its workload becomes the arsenal’s workload. Workers at the arsenal—all government employees—fulfill orders for DOD, but also for Electralloy and its customers. “Our workload alone couldn’t sustain this,” said Joseph Turcotte, the arsenal’s deputy commander.

Between 2002 and 2010 as the Army fought two wars, orders for gun tubes and armor kits for High Mobility Multipurpose Wheeled Vehicles (HMMWVs) kept the arsenal’s forges busy. But production declined when the wars and defense spending wound down, and the arsenal lost workers. Sequestration worsened the pain. “We had to furlough employees, and that prompted many to think about retiring, so that made skills retention even more urgent,” Turcotte said.

Operating the 1970s-era rotary forge that produces gun tubes (and other cylindrical objects) is “an expensive machining process,” Turcotte explained. It’s a unique piece of equipment with a high fixed cost of ownership, including salaries and training for specialized workers, maintenance and supplies, whether it’s producing 100 gun barrels or 1,000.

The jump in demand after 9/11 masked the deeper difficulty of keeping the forge running and retaining a skilled workforce independent of the cycles of conflict and peacetime. The skilled workforce is as much of an investment as the forge equipment, and a trained metal processor can’t be easily or cheaply replaced. It can take up to four years before a metal processor reaches full potential: 12 to 18 months to earn a forge operation certification, followed by welding certifications and specialized training from GFM, the company that made the rotary forge. Workers need advanced hand-foot-eye coordination and a fundamental understanding of metallurgy (how much heat a given metal or alloy can tolerate and at what stage), plus knowledge of welding, composite manufacturing and heat treatment.

In 2013, just five workers, all nearing retirement age, staffed the rotary forge at Watervliet. Today there are 20. The upgraded rotary forge is fed by new gas furnaces that are 20 percent more efficient. And while the fiscal environment has not materially changed, the arsenal’s future looks much brighter.

SUCCESS NOT GUARANTEED
How did they go about it? Turcotte and Tracy Rudolph, president and chief operating officer of Electralloy, both point to trust as the thing that made the partnership possible. The government had to clear regulatory hurdles that took years to navigate, and Electralloy had to be willing to invest “well over $10 million” up front, according to Rudolph. They credit “a real trust at the outset,” built on weekly supervisory meetings, consultations with employees and years of open, frank discussion as factors in overcoming the challenges that occurred as they set up the partnership. And in hindsight, it’s clear that the partnership could have fallen victim to any number of business-as-usual biases, from “that’s not how we do things” to “the government moves too slowly.”

In 2011, when negotiations began, public-private partnerships (P3s) were new territory for the Army. The arsenal was used to dealing with industry through direct sales, “but we weren’t real comfortable with sharing our processes and capabilities with a company,” Turcotte said.

Watervliet Arsenal also lacked the statutory authority to enter into such partnerships. The designation that allows an Army installation to be part of a P3 was granted only to depots until a 2013 rule change.

Additionally, arsenal workers were apprehensive about losing their jobs and protective of the equipment. “The fear was real at the employee level,” Turcotte said. “When Electralloy came to us and said, ‘We want to use your forge,’ the guys who run it, that’s their baby. They didn’t want to let anyone else use it [and possibly] damage it.”

The slow nature of government acquisition was another hurdle. “If I were to give one piece of advice to another company about to do this, I’d say it’s gonna take time,” Rudolph said. “No matter what. But if you’re going to get into it, you have to put skin in the game … you’re in it for the long haul.” Turcotte added, “I have 37 years in government, and I’m still continually surprised by how rules-bound the government is, especially in acquisitions.”

That government moves more slowly than private industry is hardly news, but it doesn’t have to be a deal breaker. Arsenal leadership kept Electralloy informed as the process moved through government wickets. Lesson learned: Being as specific as possible helped manage expectations. For example, “We’re not going to be able to do step X in two weeks; it’s more like three months,” as Turcotte recalled.

PUTTING ‘SKIN IN THE GAME’
The team reassured workers early on that the partnership represented job security since it brought much-needed workload. It then opened a broader discussion with employees. To address concerns about wearing out the equipment, Rudolph and Electralloy suggested establishing a baseline for “what level we’ll maintain [equipment] at, what parts do we need to keep on hand, and so on, and then once we all agree on the baseline, we’ll assume responsibility for maintenance.” The government, from the line employees to arsenal leadership, needed to see that Electralloy had skin in the game, and gathering employee input first demonstrated that commitment. “Our employees saw that and said, ‘Hey, this company is good for us efficiency-wise and safety-wise,’ ” Turcotte recalled.

If the deal had reduced the number of government employees, as public-private cooperation sometimes does, fears of job loss could have been harder to allay. But the government insisted that the workers at the forge be government employees. This highlights another lesson learned: Know what problem you want the P3 to solve, and let that guide where you can give and where you can’t. Because the core problem was retaining a skilled government workforce (and not, for example, growing revenue), this wasn’t a point where the arsenal could compromise. “That was a key factor in our negotiation,” Turcotte said. “Tracy had to get comfortable with the idea that he’d have employees under government control.” The arsenal found a way to compromise and ease Electralloy’s apprehensions on that score, by making some of its cannon-forging processes similar to Electralloy’s solid-steel processing. Thus, work for DOD and work for Electralloy have more in common, and the risk of errors as employees switch between tasks is lower.

LEAVING THE COMFORT ZONE
Another lesson learned? The government needs to think outside the box. When Electralloy first expressed interest in the arsenal’s capabilities, Watervliet had basically one way of dealing with industry, as Turcotte describes it. “We wanted to treat it like a direct sale: We’ll process your work and here’s what we’ll charge for it. That wasn’t working. Tracy came back to us and said, ‘We’d like to truly partner.’ That’s when we had to work through the authorities and think outside the direct-sales box.”

Getting the authority to formally enter into a partnership was a greater challenge. The U.S. Army Materiel Command (AMC), the arsenal’s higher headquarters, tried for several years to get the Army’s Center for Industrial and Technical Excellence (CITE) designation, which recognizes that an installation has a technical capability not found elsewhere and confers authority to join a P3 to preserve that capability. Until 2013, only depots could earn this designation. AMC repeatedly proposed making arsenals eligible, starting in 2008.

While they waited for the CITE designation, the partners took a leap of faith and signed an agreement with an understanding that it would be renewed every five years.

Thinking outside the box also means being willing to take suggestions from the industrial partner. For example, arsenal personnel used to be employed under narrowly specific job descriptions: crane operator, welder, heat treater. Rudolph “prodded” the government, as Turcotte put it, to use more multitalented job categories. Now all employees are classified as metal processors and are cross-trained in all the critical skills to operate the forge, creating a flexible, diversified pool of workers less vulnerable to individual departures.

Being open to the changes and compromises that a full partnership demands has yielded other benefits for Water­vliet. The arsenal’s equipment has been upgraded and is maintained by a partner with equal incentive to keep it in shape, and can move faster to keep it up to date. “Electralloy can make investments much more readily than we can,” ­Turcotte noted. And since becoming an on-site presence at one part of the arsenal, Electralloy has identified other equipment that wasn’t being used. “Now we’re looking at expanding work downstream on machining,” Turcotte said, which means even more skills retained and work gained. “That’s a totally unexpected benefit that wasn’t in our analysis [of the initial proposal].”

CONCLUSION
In 2015, the arsenal renewed the partnership with Electralloy for 20 years. DOD recognized the Watervliet-Electralloy partnership as a “best of breed” exemplar of public-private cooperation at the 2015 DOD Maintenance Symposium in Phoenix, Arizona. Both are strong indicators that the partnership is working well for both sides.

The key indicator, though, is that the partnership solved the skills-retention problem, with the jump from five to 20 employees and increased workload. The arsenal’s headquarters, however, initially evaluated the success of the partnership based on its effect on the arsenal’s revenue. Revenue did go up, but that wasn’t the main goal. So higher-ups weren’t getting the full picture of the partnership’s success. Turcotte and Rudolph are working to change that.

“After we won the DOD best of breed [award], we told everyone who would listen that this wasn’t a revenue thing,” Turcotte said. Watervliet’s headquarters has recently started to evaluate the partnership based on its effect on skills sustainment and readiness—harder to quantify, but in the end the most important measure.

For more information, contact John Snyder at john.b.snyder.civ@mail.mil or visit the arsenal on Facebook at https://www.facebook.com/WatervlietArsenal.

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MS. MARY KATE AYLWARD provides contract support to the U.S. Army Acquisition Support Center (USAASC). A writer and editor at SAIC with eight years’ experience in communications, writing and editing on foreign policy, political and military topics, she holds a B.A. in international relations from the College of William & Mary.

This article was originally published in the July – September 2016 issue of Army AL&T magazine.

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