Only $100 Million?

Additional information about the destruction of the Francis Scott Key Bridge became available to the public via two different paths last week. On September 19, 2024, a preliminary report was issued by NTSB regarding their detailed analysis of the equipment aboard MV Dali and the physical failure that triggered the entire incident. On September 20, 2024 the Department of Justice published a summary of a civil suit it is filing against the owner and operator of the vessel. The findings in the two separate documents are compatible with one another but the extra detail in the DOJ's explanation of its lawsuit trigger one obvious question…

Why only $100 million dollars in damages?

The Findings (So Far…)

The NTSB's update was published on September 11, 2024. A copy can be viewed online at this link:

https://data.ntsb.gov/Docket/Document/docBLOB?ID=17630891&FileExtension=pdf&FileName=Dali%20Shipboard%20Machinery%20Examination%20and%20Record%20of%20Electrical%20Testing-Rel.pdf

The crux of the NTSB finding is located at the end of the document on page 39, which illustrates two key elements on the "1" side of the power plant. A relay acts as a detector of high voltage for use in deciding whether the plant should run on the "1" side or "2" side. That relay has one connection acting as its sensor input and another connection that drives a vacuum controlled breaker (VCB) that actually trips out the stepdown transformer if high voltage is missing on the input to allow the "2" side to take over.

The NTSB update summarizes multiple days of diagnostic testing conducted with the ship's maker, Hyundai Heavy Industries (HHI), to review all of this circuitry. That testing encountered intermittent failures while attempting switchovers between the 1 and 2 sides. HHI found the the failovers did not function because the sensors were not correctly reflecting the actual state of the 1 and 2 sides of the power plant. After reviewing how the sensors were supposed to function and what was actually happening during these failures, HHI found a connector into that high voltage detector relay on the "1" side was faulty, leading the relay to trigger a switchover due to a low voltage condition that wasn't really occurring.

Sounds perfectly reasonable, right? A modular plug-in connector had a bad connection on one of the leads in the larger connector carrying a crucial signal. Or maybe the entire modular connector didn't tightly click all the way in during assembly in the factory prior to installation in the ship. Obviously, an unfortunate failure but in a giant, complex ship, freak accidents happen, right?

Well, to answer that, it is useful to read the details in the DOJ's claim document for its civil lawsuit against the owner and operator of Dali. The DOJ suit was filed on September 18, 2024. A copy of the announcement can be read via this link:

https://www.justice.gov/opa/pr/justice-department-files-lawsuit-against-owner-and-operator-vessel-destroyed-francis-scott

The actual claim document created by the DOJ can be read at this link:

https://www.justice.gov/opa/media/1369026/dl

The key points in the DOJ's filing are these:

• The ship was not seaworthy.
• Its operators were aware of consistent, heavy vibrations during operation which had led to repeated failures in the ship's electrical system. A flawed connection within a modular connector or an entire loose modular connector would be highly susceptible to extreme vibrations.
• Rather than fix the root cause of the vibrations, operators attempted to stabilize transformers in the electrical plant by welding braces made out of re-bar between the transformers and the floor or other equipment racks in an attempt to prevent the transformers from vibrating in sympathy with vibrations in the larger ship.
• Operators had DISABLED an automatic transfer mechanism between the two redundant sides of the power plant between the high voltage side (6600 volts) and low voltage side (440 volts). When vibrations triggered the TR1 stepdown transformer to fail, the switchover to the TR2 stepdown transformer had to be initiated manually rather than it occuring automatically. During the failure, there were no lights on the ship so crew had to complete that manual failover in complete darkness.
• Onboard lighting failed to recover automatically because the operator chose to equip the diesel generators providing power with "flush pumps" rather than "fuel pumps." A flush pump is only intended to purge fuel lines when switching from "shore diesel" (required for US emissions near our coasts) to "open ocean diesel" (much dirtier fuel). Those purging operations should only take place MILES from shore when the ship is nowhere near other ships or infrastructure if it loses power. As a result, "flush pumps" are not designed to maintain pressure after a power failure to maintain the flow required by a diesel running at full power. After the generators were manually restarted after the first power failure, this flaw led them to be starved of fuel, which stalled them, triggering the second power failure from which no recovery was possible.

In short, the collapse of the Francis Scott Key Bridge and the deaths of six highway workers wasn't the result of a random alignment of holes in the Swiss cheese of an enormously complicated, interconnected set of systems whose designers never contemplated this failure scenario. The disaster resulted from a company that:

• KNEW its vessel had an ongoing problem with extreme levels of vibration
• KNEW its vessel had repeated onboard power failures
• owned a vessel that used inadequate pumps to support its diesel power generators
• chose to operate the vessel with automatic power failovers disabled
• hired a captain who lied to the pilot brought on board to guide the ship from port to sea by telling him the ship was in working order

Only $100 Million in Damages?

The DOJ's news release states that the $100 million dollar judgement sought in the lawsuit is intended to recover costs the federal government incurred in coordinating the federal response in sync with Maryland entities, dredging temporary channels to re-open shipping lanes into the port and providing one-time economic aid to the region while the port was closed. Even though the bridge carried Interstate 695, the bridge itself was constructed and owned by the state of Maryland so the DOJ suit is leaving actual reconstruction costs as a collection item in any state litigation against the parties involved with the ship.

On August 29, Maryland's Transportation Authority Board announced it had signed a contract for $79 million to begin detailed project planning for construction of a new bridge. While earlier estimates for replacement costs were as high as $1.7 billion dollars, the August announcement referenced an expected price tag of $1.2 billion. If there is anything rarer than seeing any construction project completed on budget, it is seeing a construction firm LOWER previous estimates by 29 percent. When your potential client has been acclimated to a higher price you are still not likely to meet, why volunteer a lower bid to trigger more acrimony later when you finally complete the project for $2.4 billion?

While the DOJ's $100 million dollar lawsuit won't be the only collection attempted from those responsible, the $100 million dollar figure is an order of magnitude off from even the lowball $1.2 billion reconstruction estimate for the bridge. Is there any chance of the full costs being collected from the parties at fault? Based on past history, the odds do not look good. The real concern is whether the eventual collection amounts will be enough to alter the incentives facing owners and operators to change their risk-taking behavior. The root cause of this accident was not purely random bad luck but an inevitable consequence of shaving MULTIPLE corners within MULTIPLE layers of a ship's power plant that require full A/B redundancy to operate in proximity to other vessels and infrastructure.

On April 1, four days after the incident, the owner filed a petition in federal court attempting to limit their liability to $43.6 million dollars. This is actually a routine petition filed after maritime accidents that cites the Limitation of Liability Act of 1851 which limits damages collected from the owner to the combination of the cost of the vessel and the cost of the cargo. The protection provided under that law has one crucial restriction -- for an owner to gain protection under this law, the loss of the vessel must be due to events beyond the owner's control. At the time in 1851, events beyond the control of the owner typically involved pirates and bad weather.

In 2024, Dali's owner faces a serious hurdle in using this law to its advantage. The owner was aware of the history of problems with vibration in the ship and with repeated failures of its electrical plant. The captain employed by the owner's operator was aware of electrical failures while in port yet chose to leave port and lie to the pilots brought onboard to guide the ship out to sea by stating the vessel was seaworthy.

On April 12, only sixteen days after the incident, the owner filed a "general average declaration" which is a mechanism by which costs to salvage a vessel and its cargo are spread across both the owner AND all of the shippers with containers aboard the vessel. That seems to be a business process unique to maritime shipping. Imagine owning a factory that makes $3000 table saws and shipping a saw to a customer for $140 dollars via truck. Now imagine that truck somehow triggering a bridge collapse while enroute to the customer . Now imagine having the owner of the truck knock on your factory door expecting you to chip in on the cost of replacing their truck, all the other cargo in the truck and the bridge destroyed by the truck.

The incentives created by that model seem flawed to say the least. For any owner trying to operate their capital well past its safe lifespan to continue hauling goods, being able to spread the costs of any damage created if that vehicle or vessel fails catastrophically on some pro-rated basis based on the value of the goods being hauled weakens the incentive of the owner to invest in a new vehicle or vessel. It's easy for a truck worth $3000 dollars to carry goods worth $1 million dollars. It's easy for a ship worth $1,000,000 as scrap to carry $42 million dollars in goods. Does that allow the owner to spread 99.7% of the cost of the truck accident to his shipping customers or 97% of the cost of the ship accident to his shipping customers? In modern commoditized shipping, I doubt any shipper actually selects the vessel that will carry their outbound shipment from port A to port Z. And the CARGO didn't cause the accident. It was the carrier's choice of vessel and operating practices that caused the accident.

The economic goal of holding owners financially liable for these disasters is not to create incentives to drive all owners and carriers out of business for fear of being stuck with an unreasonable liability for a freak accident. The goal is to ensure predictable costs from known bad practices can be applied directly to those using bad practices to alter their behavior. What would the average owner prefer?

1. Retiring a decrepit, rusting carcass for $1 million in scrap and buying a new $35 million dollar ship and amortizing it over the next 30 years
2. Sending that rusting carcass out for one too many voyages, having it destroy a bridge that will cost $1.2 billion to replace and getting hit with a $300 million dollar settlement

The applicable laws need to create incentives aligned with option #1. As they stand right now, it is clear nearly every carrier is operating in an option #2 mode.

WTH