Maritime Administration:

Improved Program Management Needed to Address Timely Disposal of Obsolete Ships

GAO-05-264: Published: Mar 7, 2005. Publicly Released: Mar 7, 2005.

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The Maritime Administration (MARAD) has more than 100 obsolete and deteriorating ships awaiting disposal that pose potentially costly environmental threats to the waterways near where they are stored. Congress, in 2000, mandated that MARAD dispose of them by September 30, 2006. While MARAD has various disposal options available, each option is complicated by legal, financial, and regulatory factors. In this report, GAO assesses (1) whether MARAD will meet the September 2006 disposal deadline for these ships and, if not, why not; (2) the extent that MARAD has used alternative disposal methods other than scrapping, and barriers to using other methods; (3) the appropriateness of MARAD's methods for procuring ship disposal services; and (4) the impact of foreign competition and other factors on reducing disposal costs.

MARAD is unlikely to meet its statutory deadline of September 30, 2006. As of September 2004, MARAD had disposed of 18 ships from its inventory, with over 100 ships left to dispose of by the deadline. MARAD's current approach is not sufficient for disposing of these remaining ships within the next 2 years. MARAD's slow progress is due primarily to program leaders not developing a comprehensive management approach that could address the myriad of environmental, legal, and regulatory challenges that the program faces. MARAD's approach lacks an integrated strategy with goals, milestones, performance measures, and a mitigation plan for overcoming anticipated impediments. In the absence of this comprehensive approach, MARAD's ship disposal program lacks the vision needed to sustain a long-term effort. Consequently, MARAD has not been able to assure Congress that it can dispose of these ships in a timely manner to reduce the threat of a costly environmental event, nor has it clearly articulated what additional congressional assistance, such as funding, may be needed. While MARAD has considered alternative disposal methods to scrapping, it has made limited use of these methods because of a number of environmental, financial, and legislative barriers. Since fiscal year 2001, MARAD has disposed of 17 ships through scrapping, but only 1 through artificial reefing. MARAD has not disposed of ships using deep-water sinking and donations to historic organizations. MARAD has taken positive steps to reduce barriers limiting its use of these methods but still may be years away from increasing the number of disposals using these alternative methods because it has not developed an overall plan for expanding their use. Consequently, MARAD may be losing opportunities that could expedite the disposal of the obsolete ships in its inventory. Since fiscal year 2002, MARAD has relied almost entirely on an inappropriate procurement method--Program Research and Development Announcements (PRDA)--to acquire ship scrapping services. The Federal Acquisition Regulation and the Competition in Contracting Act of 1984 generally require that MARAD use other methods for acquiring these types of services. PRDAs may only be used to contract for research or development. According to MARAD, PRDAs provide greater flexibility and allow firms to propose innovative solutions to ship disposal. GAO found, however, that MARAD was not contracting for research or development but instead was acquiring ship scrapping services. MARAD's use of PRDAs has also resulted in a lack of transparency in the contract award process and has raised concerns among firms as to the fairness of MARAD's processes. While GAO was unable to isolate the specific impact of foreign competition and other factors on reducing ship disposal costs, MARAD attributes the decrease in ship disposal prices almost exclusively to foreign competition. However, other factors, such as larger annual program funding and increases in the scrap value of steel, may have also played a role.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary of Transportation should direct the MARAD Administrator to regularly communicate MARAD's plan, required resources, and any impediments that require congressional assistance in the mandated reports to Congress.

    Agency Affected: Department of Transportation

    Status: Closed - Implemented

    Comments: In GAO's March 2005 report on the Maritime Administration's (MARAD) management of its ship disposal program (Maritime Administration: Improved Program Management Needed to Address Timely Disposal of Obsolete Ships, GAO-05-264, Mar. 7, 2005), GAO recommended that the Secretary of Transportation direct the MARAD Administrator to (1) develop a comprehensive approach to manage MARAD's ship disposal program; and (2) regularly communicate MARAD's plan, required resources, and any impediments that require congressional assistance in the mandated reports to Congress. In response to these recommendations, the Department of Transportation (DOT) confirmed that it has implemented corrective actions in response to these recommendations. Specifically, DOT confirmed that, in response to GAO's first recommendation, it developed a comprehensive plan for the management of MARAD's ship disposal program in June 2006 and provided it to the Congress. In addition, in response to GAO's second recommendation, DOT confirmed that it currently submits annual reports to the Congress outlining updates to MARAD's ship disposal plan, required resources, and any impediments that require congressional assistance. DOT provided GAO a copy of its July 2008 report that it submitted to the Congress on the progress of MARAD's vessel disposal program.

    Recommendation: The Secretary of Transportation should direct the MARAD Administrator to change MARAD's contracting approach for acquiring ship scrapping services from the use of PRDAs to an appropriate method.

    Agency Affected: Department of Transportation

    Status: Open

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Transportation should direct the MARAD Administrator to develop a comprehensive approach to manage MARAD's ship disposal program that would (1) identify a strategy and an implementation plan to dispose of all existing obsolete ships and future transfers in a timely manner, maximizing the use of all available disposal methods; (2) determine the needed resources, the associated funding plan, and specific milestones for this disposal; (3) establish a framework for decision making that would delineate roles and responsibilities and establish guidance and procedures; (4) identify external factors that could impede program success and develop plans to mitigate them; and (5) annually evaluate results and implement corrective actions.

    Agency Affected: Department of Transportation

    Status: Closed - Implemented

    Comments: In GAO's March 2005 report on the Maritime Administration's (MARAD) management of its ship disposal program (Maritime Administration: Improved Program Management Needed to Address Timely Disposal of Obsolete Ships, GAO-05-264, Mar. 7, 2005), GAO recommended that the Secretary of Transportation direct the MARAD Administrator to (1) develop a comprehensive approach to manage MARAD's ship disposal program; and (2) regularly communicate MARAD's plan, required resources, and any impediments that require congressional assistance in the mandated reports to Congress. In response to these recommendations, the Department of Transportation (DOT) confirmed that it has implemented corrective actions in response to these recommendations. Specifically, DOT confirmed that, in response to GAO's first recommendation, it developed a comprehensive plan for the management of MARAD's ship disposal program in June 2006 and provided it to the Congress. In addition, in response to GAO's second recommendation, DOT confirmed that it currently submits annual reports to the Congress outlining updates to MARAD's ship disposal plan, required resources, and any impediments that require congressional assistance. DOT provided GAO a copy of its July 2008 report that it submitted to the Congress on the progress of MARAD's vessel disposal program.

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