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3% Withholding Delayed for Defense Contractors

Tax requirement delayed, to the relief of companies
By Tom Shean
The Virginian-Pilot
Companies doing business with the federal government have a bit more breathing room from what some say is an onerous tax provision.
Earlier this month, the IRS delayed for another year a government plan for holding back 3 percent of the amounts paid to federal contractors.
The program, designed to cover contractors’ tax liabilities, originally was scheduled to take effect at the beginning of 2011. The date was pushed back two years ago to 2012. Now it’s Jan. 1, 2013.
Still, “it will be a cash-flow nightmare” for smaller defense contractors, especially those with modest profit margins, predicted Gregg N. Funkhouser, partner in charge of government contracting for the CPA firm Dixon Hughes Goodman.
While the average profit margin for his defense-contractor clients is 7 percent, the margins for some are as low as 1 percent, and these companies likely will suffer, Funkhouser said during a presentation in Norfolk last week.
Bigger defense contractors will be able to adapt to the withholding requirements, but smaller ones, including many in Hampton Roads, will feel the strain from having their cash flow reduced, he told members of the Hampton Roads Tax Forum, an organization of accountants, lawyers and other tax professionals.
“Let’s hope this goes away,” said Funkhouser, who works in Dixon Hughes Goodman’s Northern Virginia office.
The congressional requirement for withholding a portion of contractor payments arose from evidence that some contractors failed to pay significant amounts of the federal taxes they owed. In a 2004 report to Congress, the Government Accountability Office said 27,000 defense contractors owed $3 billion in unpaid taxes. In its audits and investigations of 47 contractors, it found instances of “abusive or potentially criminal activity,” the GAO said.
In a report to Congress three years later, the GAO said 33,000 federal contractors doing business with civilian agencies owed $3.3 billion in unpaid federal taxes and that 3,800 contractors working with the General Services Administration failed to pay $1.4 billion that they owed.
In some cases, the watchdog arm of Congress said, contractors hadn’t been paying payroll taxes, the funds withheld from employees’ wages for Social Security, Medicare and individual income taxes.
Meanwhile, the owners and officers of some contractors that weren’t paying federal taxes had significant personal assets, including a sports team, a high-performance airplane, commercial properties, multimillion-dollar homes and luxury vehicles, the GAO said in its 2007 report. Congress responded by including the 3 percent withholding in its Tax Increase Prevention and Reconciliation Act of 2005. The requirement applies to government payments for goods and services.
Scores of business groups immediately began fighting the measure on Capitol Hill but with limited success. A coalition of more than 120 associations representing shipbuilders, truckers, weapons manufacturers and other industries, has promoted bills that would repeal the withholding, including some pending in Congress.
In a March 30 letter to members of the Senate, the Government Withholding Relief Coalition contended that the 3 percent withholding “bears no relationship to companies’ taxable incomes, and will restrict cash flow needed for day-to-day operations and investments.”
On Thursday, the House Small Business Committee’s Subcommittee on Contracting and Workforce will conduct a hearing on a proposal to repeal the withholding provision.
Tom Shean, (757) 446-2379

tom.shean@pilotonline.com

Heavy Weather Planning, Bridge Closures

SECTOR HAMPTON ROADS
MARINE SAFETY INFORMATION BULLETIN
______________________________________________________________
BULLETIN NO: 11/005 TEL: (757) 638-6637, FAX (757) 483-8641

DATE: June 1, 2011
Heavy Weather Planning, Bridge Closures
The Captain of the Port Hampton Roads advises all local mariners, vessels and facilities that provisions of the Virginia Department of Emergency Management (VDEM) Hurricane Response Plan may impact vessel traffic in the event the State’s mandatory evacuation plan is implemented.
According to the VDEM Hurricane Response Plan, the Virginia Department of Transportation (VDOT) may seek to lock down drawbridges on hurricane evacuation routes to ensure the safety of the bridge tender and to facilitate the evacuation of local communities when either the evacuation plan is implemented and/or 30 hours prior to the arrival of gale force winds (34 knots or 39 mph). This lock down will normally be timed to coincide with the implementation of lane reversal evacuation as directed and authorized by the Governor, and is designed to provide lane reversal evacuation for a full 24 hours prior to road closure. When locked down, bridges may not have the capability to open on demand for vessels. The affected drawbridges are: Berkley Bridge, I64 Bridge, James River Bridge (RT 17), Benjamin Harris Bridge (SR 106/156), and George P. Coleman Memorial Bridge (US 17/George Washington Memorial Hwy).
According to the Port of Hampton Roads Maritime Severe Weather Contingency Plan, developed by the Coast Guard in collaboration with port stakeholders, the port is closed to inbound vessels upon the setting of Port Condition Yankee, 24 hours prior to the arrival of gale force winds and then closed to all vessels upon the setting of Port Condition Zulu, 12 hours prior to the arrival of gale force winds. 
Based on these two plans, the potential exists that the port may remain open, or open with restrictions, after a State issued mandatory evacuation is in progress and the drawbridges have been locked down. This could adversely impact both vessels seeking to evacuate and those seeking shelter. The Captain of the Port Hampton Roads is working with VDOT and VDEM to maximize the evacuation of the local populace while protecting the maritime transportation system. According to the State evacuation plan, mandatory evacuation and lane reversal decisions are intended to occur 48 hours prior to the arrival of gale force winds. The Coast Guard has requested prompt notification of these decisions. Advanced notification will facilitate operational decisions prior to bridge closures should the closures not coincide with the setting of Port Condition Zulu.  
As we enter the 2011 hurricane season, effective communication and coordination between maritime stakeholders to identify and address concerns over port status and emergency preparations is essential. The Captain of the Port Hampton Roads requests all local mariners, vessels and facilities to review their heavy weather plans and procedures, and the State evacuation plan and determine its impact to operations should the bridges be locked down prior to the setting of Port Condition Zulu. Where necessary to protect the safety of life and property, heavy weather plans should be updated to allow sufficient time for vessel evacuations prior to anticipated bridge closures.
Comments and/or questions regarding this bulletin should be directed to LCDR Chris ONeal at (757) 668-5581 and/or via e-mail at Christopher.a.ONeal@uscg.mil. 
Federal regulations governing drawbridge operations for emergency vehicles and vessels and during natural disasters are contained in 33 C.F.R. §§117.31 and .33.
The VDEM Hurricane Response Plan is available online at: http://www.vdem.state.va.us/library/plans/hurrplan/index.cfm
The Port of Hampton Roads Maritime Severe Weather Contingency Plan is available online under local contingency plans at: http://homeport.uscg.mil/mycg/portal/ep/portDirectory.do?tabId=1&cotpId=26 
and http://www.vamaritime.com/pubs/hurricane-contingency-plan.pdf

Heavy Weather Mooring Plans

SECTOR HAMPTON ROADS
MARINE SAFETY INFORMATION BULLETIN
______________________________________________________________
BULLETIN NO: 11/004 TEL: (757) 638-6641, FAX (757) 483-8641
DATE: June 1, 2011
Heavy Weather Mooring Plans
In anticipation of hurricane season, the Captain of the Port Hampton Roads advises local mariners, vessels and facilities that all self-propelled vessels over 500 gross tons and all ocean-going barges with their supporting tugs that are currently in lay–up status, out-of-service, or reduced operational status, must submit a heavy weather mooring plan prior to June 20, 2011.
A vessel is considered to be laid-up if it is not operational or is undergoing repairs or contracted to commence repairs within 7 days of entering port. A vessel is considered out-of-service if it is unmanned, has invalid certificate(s) from the flag administration, or is not prepared to conduct cargo operations or sail within 14 days of entering port. A vessel is considered in reduced operational status if the vessel cannot leave the port under its own power within 24 hours of projected gale force winds. The heavy weather mooring plans will be reviewed by Sector Hampton Roads and your vessel and/or facility will be contacted if there are additional requirements needed in your plan. A “Remaining In Port Checklist” can be found in ANNEX A of the Hampton Roads Heavy Weather Contingency Plan currently posted on HOMEPORT at http://homeport.uscg.mil. Simply select the Port Directory Tab to select Sector Hampton Roads, scroll down to the Safety and Security box to find the Local Contingency Plans category to retrieve the plan.
Submit all heavy weather mooring plans to the Sector Hampton Roads Waterways Management Division via fax at (757) 668-5514 or email to Christopher.A.Oneal@uscg.mil. Contact LCDR O’Neal at (757) 668-5580 for further information. 

HASC Prepares FY12 DOD Mark-Up

DEFENSE WATCH
May 31, 2011
Budget Boom. The HAC-D is set to mark up a FY '12 Pentagon appropriations bill today that is 1.7 percent below the Pentagon spending amount President Barack Obama is requesting for the budget that starts Oct. 1. Obama wants $538.9 billion for the base defense budget, and the subcommittee proposes to cut that amount by $8.9 billion, down to $530 billion. Today's HAC-D markup will be closed, and followed by an open defense-bill-writing session by the full HAC on June 14. The Department of Defense is the only one of the 12 federal agency budgets the HAC wants to increase in FY '12 over FY '11 levels, with a $17 billion boost for military spending, according to the so-called 302(b) allocations for the federal budget the HAC approves May 24. "The bills this year will include double-digit reductions for virtually every non-security area of government, while providing additional resources for the nation's critical and urgent needs--such as our national defense," HAC Chairman Hal Rogers (R-Ala.) says May 24.
Improper Defense. The Pentagon "has a strong program to identify, report, eliminate and recover improper payments" Comptroller Robert Hale tells a subcommittee of the Senate Homeland Security and Government Affairs Committee May 25. "Based on our current reporting methods, we estimate that 1 (percent) to 2 percent of our payments are classified as improper and most of those are recovered--say, probably 85 (percent) to 99 percent of them are recovered often quite quickly."  Hale says the Pentagon is working to further improve its improper payments program, which he notes the White House's Office of Management and Budget has not flagged as being a concern. Sen. Tom Carper (D-Del.), chairman of the Federal Financial Management subcommittee, is concerned about reports from the Department of Defense Inspector General and GAO say the Pentagon's improper payment estimates have not been complete or accurate.
Moving Up. The Navy is ahead of schedule in developing a replacement for its Whidbey Island-class of amphibious warships, service acquisition chief Sean Stackley tells Congress. Testifying before the Senate Armed Services Seapower subcommittee last week, Stackley said the Navy has ramped up planning for the LSD-41 replacement by two years, expecting to deploy the new warship by 2017. As part of that plan, Navy requirements officials will kick off an analysis of alternatives for the LSD(X) within the next few months, with an eye toward strengthening the shipbuilding industrial base, according to Stackley. "We keep a close eye on the industrial base, when we build the shipbuilding plan..in the near term we're doing everything we can to address the rise in the budget and the types of ships that we build," he says.
Looking Ahead. As the Defense Department prepares to do some budget belt-tightening over the next few years, Chairman of the Joint Chiefs of Staff Adm. Mike Mullen warns that the Pentagon must be ready to build its capabilities back up, once the nation's fiscal situation improves. 'We need to be ready to do more again" once America is able, Mullen says during a speech at a Woodrow Wilson International Center for Scholars luncheon in Washington last week. Currently, DoD is conducting a wide-spanning roles and missions review, in order to identify where to trim $400 billion over the next decade. The effort is part of the White House's deficit reduction plan, announced by President Barack Obama in April.
Ownership. The various service chiefs need to take on a larger oversight role in the acquisition and procurement programs within their organizations, to ensure big-ticket programs do not spiral out of control, Marine Corps Commandant Gen. James Amos says this week.  Citing his day-to-day role in overseeing development of the service's variant of the Joint Strike Fighter and its Expeditionary Fighting Vehicle replacement, known as the Assault Combat Vehicle, Amos says service chiefs have let such oversight backslide in recent years. That disengagement has led to unrealistic cost and schedule estimates, as well as instances of requirements creep.
Sub Gap. The Navy needs to extend the lifespan of its current fleet of tactical and nuclear submarines, or face a fleet shortfall within the next 20 years. Due to the cycle of sub retirements, coupled with the development of the Ohio-class replacement, the SSBN(X), the sea service will have a sub force of 39 boats in the 2030 timeframe, Navy acquisition chief Sean Stackley tells Congress last week. That's of deep concern to us. And so when we look at what that potentially means . . . [it] means that we have to stay right on top of the maintenance plan" for the sub fleet, in particular the Virginia-class boats, he says before a Senate Armed Services Seapower Subcommittee hearing. While keeping the Virginia-class subs afloat longer will be key, the Navy may have some trouble funding the shipyard upgrades needed to do that life extension work.
SNEP-ing Forward. Weapons manufacturer Lockheed Martin is moving ahead with plans to outfit Saudi Arabia with a tranche of new MH-60 rotorcraft, in support of the kingdom's naval expansion plans, according to a company officials. Talks regarding potential involvement of American industry in the Saudi Naval Expansion Program II has been ongoing between Washington and Riyadh, with DOD recently submitting formal price and availability data to the Saudis for a number of weapons systems, including the S and R versions of the MH-60. The proposal covers a multi-aircraft buy, with Lockheed Martin supplying the Middle Eastern nation with 35 R models and 25 S models, the official said. The deal, along with other proposals involving a possible sale of the company's Littoral Combat Ship, are still under review, according to the official.

The Maritime Minute - 5/27/2011

U.S. MILITARY SAYS AMERICAN MARITIME LAWS ESSENTIAL FOR STRONG MERCHANT MARINE:  A top U.S. military leader has again emphasized the need for a strong U.S. merchant marine.  At a National Maritime Day luncheon hosted by the Propeller Club in Washington, USAF General Duncan J. McNabb, Commander, U.S. Transportation Command, said U.S. maritime laws have been vital to the strength of the U.S. maritime industry.  “I obviously think cargo preference, [the Maritime Security Program], the Jones Act – all of those things are absolutely essential for having a very strong merchant marine,” declared General McNabb. National Maritime Day, which was observed on Sunday, May 22, recognizes the men and women of the United States Merchant Marine for their contribution to American trade and the U.S. military.  

AMERICAN MARITIME PARTNERSHIP PRAISES MERCHANT MARINE ON NATIONAL MARITIME DAY:  The American Maritime Partnership marked the 78th anniversary of National Maritime Day by crediting the strong U.S. Merchant Marine for helping to support national, homeland security and economic security.  “A strong U.S. maritime industry has been critical for America in times of war and peace, from the civilians who defended freedom in 1775 to merchant mariners who support military and humanitarian efforts throughout the world today,” said James Henry, President of the Transportation Institute and Chairman of the Board of Directors of the American Maritime Partnership.  “On National Maritime Day, we can look back on the extraordinary achievements and contributions of our merchant marine as well as focus on keeping our industry strong so we can continue to support the American economy and our national security in the 21st century.”  Click here to read more. 

NEW JERSEY-BASED CONSTRUCTION CONTRACTOR INVESTING $125 MILLION IN TWO NEW DREDGES:  125 new and permanent jobs will be created when two dredges ordered by Weeks Marine Inc. (WMI) enter service in 2011 and 2013 respectively.  The Cranford, N.J.-based company is building an ocean-class dredge in an Ohio River shipyard that will be delivered by year’s end.  The keel for an even larger dredge will be laid this October.  Construction of that vessel will stretch into 2013.  When both dredges are in service, WMI will have invested more than $125 million to double its hopper dredge capacity.  (Hopper dredges are self-propelled vessels that excavate material from the ocean or river floor with drag arms and pump the sediment into the vessel's hopper.)  “Both the growth of international trade and the U.S. seaport industry, and the wide acceptance of beach nourishment and coastal restoration as the shore protection of choice, call for new energy efficient tools to be brought into the marketplace,” said Richard S. Weeks, President of WMI.  “The expansion of our dredging fleet demonstrates our commitment to better serving our customers, particularly the U.S. Army Corps of Engineers and U.S. Navy.” 

DID YOU KNOW?  When the Jones Act was enacted in 1920, the record for an iron ore cargo carried on the Great Lakes in a U.S.-flag vessel in one trip was 15,691 tons.  Ninety-one years later, the reigning record for a U.S.-flag “laker” is 72,300 tons.  That one cargo will make enough steel to build more than 60,000 cars, the production of which will keep a large auto plant running full out for 100-plus days.

American Maritime Partnership ("AMP") is the voice of the U.S. domestic maritime industry, a pillar of our nation‘s economic, national, and homeland security. More than 40,000 American vessels built in American shipyards and crewed by American mariners ply our waters 24/7, and this commerce sustains nearly 500,000 jobs, $29 billion in labor compensation, and more than $100 billion in annual economic output according to a study by PricewaterhouseCoopers for the Transportation Institute. So efficient are these vessels that they carry a quarter of the nation‘s cargo for only 2 percent of the national freight bill, and being American owned, built and crewed helps make America more secure.

OSHA Recordkeeping Advisor

The U.S. Department of Labor has issued the OSHA Recordkeeping Advisor, (http://www.dol.gov/elaws/OSHARecordkeeping.htm) a new Web tool to help employers understand their responsibilities to report and record work-related injuries and illnesses.  
The OSHA Recordkeeping Advisor helps employers quickly determine whether an injury or illness is work-related, whether a work-related injury or illness needs to be recorded, and which provisions of the regulations apply when recording a work-related injury or illness. The Advisor is written in plain language to help employers, especially small business employers, understand OSHA’s recordkeeping requirements.  The Advisor is not, however, a substitute for compliance with the OSHA’s recordkeeping regulations.  For more information, see OSHA’s Recordkeeping Web page.

Maritime Minute ... 5/17/2011

MARITIME INDUSTRY BLANKETS WASHINGTON; LAUDS CONTRIBUTIONS TO ECONOMIC, NATIONAL AND HOMELAND SECURITY:  Hundreds of U.S. maritime industry representatives visited Capitol Hill this spring to highlight the critical role the industry plays in boosting America’s economic, national and homeland security.  Three broad grassroots education events: the Shipbuilders Council of America (SCA) Spring General Membership Meeting; the American Waterways Operators “Barge-In;” and the “Sail-In” brought representatives of shipyards, mariners and companies from throughout the country to Washington, DC.  “Hundreds of industry representatives from throughout the nation, including ship operators, shipbuilders and mariners, discussed how the U.S. shipping industry provides safe, efficient waterborne commerce and a merchant marine that supports our military throughout the world,” said James Henry, President of the Transportation Institute and Chairman of the Board of Directors of the American Maritime Partnership.  Click here to read more.
  
RHODE ISLAND COULD GAIN 1,000 NEW MARITIME JOBS SAYS STUDY:  A just-released study finds Rhode Island could gain 1,000 new jobs and $70 million in personal income if the state’s three major port areas can capitalize on opportunities in auto import/export, offshore wind farms, container feeder and breakbulk.  The study by the highly-respected firm of Martin Associates, LCC also projects that expanded maritime commerce would bring $127 million in business revenue, $10 million in local purchases and $8.1 million in state and local tax revenues.  Click here to read the report.
 
DID YOU KNOW?  Barges serve 87 percent of all major U.S cities, carry 20 percent of the nation’s coal (which in turn produces 10 percent of the electricity we use annually) and move $8.5 billion worth of grain exports, or 60-plus percent of the nation’s total.
 
American Maritime Partnership ("AMP") is the voice of the U.S. domestic maritime industry, a pillar of our nation‘s economic, national, and homeland security. More than 40,000 American vessels built in American shipyards and crewed by American mariners ply our waters 24/7, and this commerce sustains nearly 500,000 jobs, $29 billion in labor compensation, and more than $100 billion in annual economic output according to a study by PricewaterhouseCoopers for the Transportation Institute. So efficient are these vessels that they carry a quarter of the nation‘s cargo for only 2 percent of the national freight bill, and being American owned, built and crewed helps make America more secure.

SMALL SHIPYARD GRANTS AVAILABLE

DEPARTMENT OF TRANSPORTATION
Maritime Administration
Assistance to Small Shipyards Grant Program; Catalog of Federal
Domestic Assistance Number: 20.814
AGENCY: Maritime Administration, Department of Transportation, Office
of Shipyards and Marine Engineering.
ACTION: Notice.
-----------------------------------------------------------------------
SUMMARY: There is currently $9,800,000 available for grants for capital
and related improvements for qualified small shipyard facilities that
will be effective in fostering efficiency, competitive operations, and
quality ship construction, repair, and reconfiguration.

DATES: Key Dates: The period for submitting grant applications, as
mandated by statute, commenced on April 15, 2011 and will terminate on
June 14, 2011. The applications must be received by the Maritime
Administration by 5 p.m. EDT on June 14, 2011. Applications received
later than this time will not be considered. The Maritime
Administration intends to award grants no later than August 15, 2011.
Details can be found in Small Shipyard Grant Program from the Federal Register.

OSHA Publishes New Shipyard Safety Rules UPDATE

 

As expected, today OSHA published the final Subpart F Rule: General Working Conditions in Shipyard Employment. The rule becomes effective and enforceable on August 1, 2011, except for the provisions in § 1915.89 (Lockout/Tagout), which become effective and enforceable on October 31, 2011.

Find the new rule here: http://edocket.access.gpo.gov/2011/pdf/2011-9567.pdf   You can also find Subpart F FAQ's on their website at http://www.osha.gov/dts/maritime/standards/general_working_conditions_faqs.html .

Recall, this rulemaking clarifies, adds to and consolidates the sections of 29 CFR 1915, including sanitation, medical devices, motor vehicle safety, and housekeeping among others. The largest change adds a lockout/tagout section to shipyard employment. SCA worked hard over the past 4 years to ensure many issues with the initial proposed rule were properly addressed. Nevertheless, it is imperative that each of you carefully review each section of the new rule to make sure you are familiar with new changes and in compliance at the effective date.

OSHA will be providing VSRA with hard copies for us to distribute. As soon as they are received, we will inform the VSRA-OSHA Partnership.

5th Annual Lego Winners!

Hunter B. Andrews Middle School from Hampton, VA took the top prize of $500.00 in the VSRF 5th Annual Lego Competition on April 28, 2011 at Nauticus. Second place went to the Home School team from the Virginia Air & Space Center; with two-time Champion team Blair Middle School securing the Third Place. These teams first competed in Preliminary Rounds at the Mariner's Museum in Newport News, VA and the Virginia Marine Science Center in Virginia Beach before advancing to the finals. The event involved more than a dozen ship repair companies in volunteer roles as judges, exhibit guides and technical advisors. Funding support was provided by Ameri-Force, Marine Chemist Service and Epsilon Systems.