Tacoma uproar highlights a clash of strategies
Drama at the Port of Tacoma is showing the way to the future of management at ports throughout the Western Seaboard.
Executive director Tim Farrell (salary $220,000 plus the usual) is forecast to be searching Craigslist Jobs from this week, following the collapse of a project for a new terminal for prospective new customer NYK, which planned to start service in 2012. The line now says it will be using the APM terminal, after the port spent $200 million on planning and buying land for the site. The new terminal would have cost $1.2 billion, up from the $800 million when the project was unveiled in 2007.
NYK, reeling from a $200 million loss, fled at the thought of a $1 billion price tag, to be paid for by both parties.
As always happens with senior management, Farrell notched up a fair few enemies in his rise to the top, and they have wasted no time in gleefully yelling "Told you so," which is clouding judgment on how much he is responsible.
What is certainly apparent is the trend among port authorities to hitching commercial success to port management. The tradition of a skilled, seasoned maritime professional being in charge, such as an engineer or vessel and fleet captain, has been overturned. Now the emphasis is on commercial and business savvy, mixed with a sales knack.
Treating a port as just another business enterprise worries the industry. A port is an irreplaceable asset and essential service and not a supermarket or hotel that can be torn down or put to different use. Industry wisdom favors a professional at the head, earning a fixed salary, backed by commercial and sales specialists. If the governing board is so hell bent on getting more business, wages for the business development section should be coupled with a performance bonus.
A different path has been taken by Los Angeles, which has appointed environmental specialist Geraldine Knatz (who emphasizes her qualifications by shoving PhD after her name) as boss. Smart choice at the time, say the pundits, but when the clean air and trucks and what-have-you are sorted out it will be time to put a pro back at the helm, with Knatz kept on as a consultant.
Tacoma might be reaping the harvest of going for growth at the expense of all else. The
NYK deal was sealed when cargo was booming and everyone naively presumed everlasting good times. The cargo crash was not Farrell's fault.
Blame is less difficult to apportion over shortsightedness in environmental problems, both for the terminal and an associated project to build a rail cargo facility. Clean and pure neighborhoods are at the center of every port proposal in the country – witness LA – and Farrell should have been aware of that . So should have the harbor commissioners.
Cost overruns are a standard feature of capital projects but the extra 40 percent for the terminal is serious money. Farrell can't have been the only one who got it wrong – and if he did the harbor commissioners should have been on it early on.
But, remember also that NYK is a flighty and uncertain friend. The line was lured away from Seattle with the promise of its own terminal – and now has turned its back once again. The next prospective port partner is likely to demand a hefty non-refundable "commitment fee" before agreeing to build a new terminal.