In 2005, when the Pearl Harbor shipyard was threatened with closure by the Pentagon, it was rated fourth out of four Navy yards for quality of work, cost and getting work out on time.

Now it’s rated No. 2, and Hawaii officials want to make it No. 1 in 2012.

The scare that accompanied the possible loss of the state’s largest industrial employer led to a dramatic turnaround, and shipyard commander Rear Adm. (Select) Gregory Thomas — then a captain — was handpicked in 2007 to shepherd improvements.

The shipyard has a combined civilian and military work force of about 4,800 and an operating budget of $563 million.

About 450 shipyard workers, Navy personnel, business community members and Gov. Linda Lingle were at Pearl Harbor yesterday to bid farewell to Thomas as he prepares to take on another reclamation project: command of the troubled Norfolk Naval Shipyard.

Capt. Brian Osgood took command of Pearl Harbor yesterday and Thomas will take over in Norfolk after Capt. William Kiestler, commanding officer of Norfolk Naval Shipyard for less than a year, was fired June 30.

The Navy Times quoted a Norfolk spokesperson as saying there had been a "failure to ensure critical maintenance work was being performed according to procedure and loss of situational awareness with respect to the status of ongoing submarine projects."

As commander at Pearl Harbor, Thomas improved efficiency to return ships and submarines to the fleet and developed a 25-year shipyard modernization plan.

Thomas was expected to be at Pearl Harbor into 2011.

Thomas "without a doubt earned his star for his leadership at the Pearl Harbor Naval Shipyard," U.S. Sen. Daniel Inouye, D-Hawaii, said in March. "Whether it was preparing for the Virginia-class submarines or working on a capital improvement plan for the yard, Greg Thomas executed every task with diligence and distinction."

Thomas received the Legion of Merit award, which states that he "led the most dramatic turnaround in the shipyard’s performance in the past 20 years."

"The past three years under Greg Thomas’ watch have been terrific," Vice Adm. Kevin McCoy, commander of Naval Sea Systems Command, said yesterday at the change of command.

Performance significantly improved, and union-management relations "are the best I have observed at this yard in the 15 years that I’ve been coming here," McCoy said.

"His leadership, what he (Thomas) did was he instilled value with the work force," said Don Bongo, president of the Hawaii Metal Trades Council, which represents most of the 4,350 civilian workers in the shipyard. "They felt a sense of value — this is our shipyard."

Bongo, who has worked in the shipyard for 29 years, said during his tenure there was never a commander who was as engaged as Thomas in understanding workers’ concerns.

"He really took their ideas," Bongo said. "The credit he gets is the ability to get everyone to be one team."

Bongo added: "He’s very passionate, you gotta admit, about God and country. He’s very passionate about the Navy and what our role is for civilians and the military."

When it was his time to speak, Thomas said: "Today, to paraphrase my wife, it’s not about me. Today is about thanking all of you for supporting our shipyard over the past three years."

He then proceeded to thank, by name, more than 100 people across the spectrum of shipyard duties.

McCoy said he had "full confidence that we’ve picked the right person for the job" in Osgood as a replacement for Thomas.

At Pearl Harbor, Osgood served as project superintendent for several submarine maintenance jobs from 2000 to 2003. More recently, he served as operations officer from May 2006 to August 2009.

"Brian’s performance in all of his undertakings, including (recently) having served as the waterfront operations officer right here at this shipyard and having served on the (chief of naval operation’s) maintenance staff back in Washington, have marked him as a leader who knows how to get the job done," McCoy said.

McCoy told those assembled that the Pearl Harbor shipyard will become more important as the U.S. increases its presence in the region.

Pearl Harbor was selected as a hub for the Navy’s newest class of attack submarines, the Virginia class, and the third so far, the USS North Carolina, will arrive next month.

The shipyard has identified the need for nearly $1 billion in modernization projects through 2035, in part to update infrastructure built for World War I- and II-era needs and to remain competitive with other Navy yards.

The shipyard has undertaken or is soliciting bids on about $50 million worth of projects over the past three years and is looking at $8.5 million to $14 million in work next year, officials said.

Next year also will bring a $50 million project to completely overhaul the cruiser USS Chosin, according to officials.