The Corps Has Taken Actions to Address Our 2003 Recommendations but Does Not Collect All of the Recommended Data

		The Corps Collects Recommended Data on Urgent or Emergency Dredging but Does Not Consistently Collect Data on Certain Solicitations

In response to our 2003 recommendation to obtain and analyze baseline  data needed to determine the appropriate use of its hopper dredge fleet,  the Corps established a tracking log as part of its raise the flag procedure  to maintain and review urgent or emergency work its hopper dredges  carry out, but it does not consistently collect certain solicitation  information that we recommended. But by tracking and analyzing no-bid and high-bid solicitation data, the  Corps may be better positioned to identify gaps in industry’s ability to fulfill  certain dredging needs—such as during certain times of the year, in  particular geographic areas, or for particular types of projects—and avoid  or address any gaps identified. In our review of the Corps’ dredging database, we found that  one district office entered data on no-bid and high-bid solicitations. However, they have not provided written direction to the district  offices to help ensure data on these solicitations are consistently entered  into the database. The Corps Reviewed Data and Procedures for Performing Cost Estimates, but Some Information Remains Outdated

In response to our recommendation to assess the data and procedures  used to perform the cost estimate used when contracting dredging work  to the hopper dredging industry, the Corps took several actions to  improve its cost estimates, but some of the information it relies on  remains outdated, such as its dredge equipment cost information dating  back to the late 1980s. The Corps, however, has no plans for conducting such a  study. Statutory Restrictions on Corps Hopper Dredges Have Resulted in Additional Costs to the Corps, but Effects on Industry Competition Are Unclear

Since 2003, statutory restrictions on the use of the Corps’ hopper dredges  have resulted in additional costs, but it is unclear whether the restrictions   Restrictions  have affected competition in the hopper dredging industry.effectively limiting the number of days that Corps dredges can work have  resulted in additional costs to the Corps, such as costs to maintain the  ready reserve vessels while idle. On the other hand, the restrictions help  ensure the Corps’ ability to respond to urgent and emergency dredging  needs when industry dredges may be unavailable. The extent to which  restrictions on the use of the Corps’ hopper dredges have affected  competition in the dredging industry—as measured by the number of  companies with hopper dredges and the number of bidders and winning  bid prices for Corps projects—is unclear, based on our analysis of data  on industry bids per Corps solicitation and other factors. First, since 2003, the number of companies with hopper dredges in the  United States has not changed, although the number of industry hopper  dredges and the total size of these dredges have decreased. The Corps Faces Challenges Regarding the Fiscal Sustainability and the Future Composition of Its Hopper Dredge Fleet

Key challenges the Corps faces in managing its hopper dredge fleet are  (1) ensuring the fiscal sustainability of its hopper dredges and (2) making  decisions about the future of its hopper fleet composition, including the  utilization of its existing fleet, changes to its existing fleet—including  repairs, and the replacement or retirement of any vessels—and the  utilization of any new replacement vessels. In a 2012 study the Corps conducted on the fiscal  condition of its hopper dredges, it identified increasing ownership and  operating costs for its four hopper dredges, among other things, as a  cause for concern and stated that the dredges would become  unaffordable unless actions were taken. For example, based on the study, a corresponding July 2012  implementation memorandum, and our discussions with Corps officials,  the Corps  increased the daily rates all four of the Corps’ hopper dredges charge  to projects that use the dredges, beginning in fiscal year 2012; increased funding in fiscal years 2013 and 2014 budgets for projects  that use its hopper dredges to compensate for the vessels’  corresponding increases in daily rates; and formed a team to conduct a hopper dredge operating cost review  including, among other things, an evaluation of the affordability of two  hopper dredges, the Wheeler and the Yaquina, by June 30, 2014. Additionally, the Corps made  attempts to update the industry cost data it uses to prepare its cost  estimates for hopper dredging contracts. Recommendations for Executive Action

We recommend that the Secretary of Defense direct the Corps of  Engineers to take the following two actions:  To ensure the Corps of Engineers has the information it needs to analyze  and make informed decisions regarding future hopper dredging work,  provide written direction to its district offices on the importance of and  need to accurately and consistently populate the data fields in its  dredging database that track solicitations that receive no bids or where all  the bids received exceeded the Corps’ cost estimate by more than 25  percent. We agree that obtaining reliable and up-to-date data  are important for developing sound cost estimates, and our report  recommends that the Corps develop a written plan for conducting a study  to obtain and periodically update data on hopper dredging costs for its  cost estimates. Key contributors to this report are listed in  appendix V.

Appendix I: Objectives, Scope, and Methodology

This report examines (1) the actions the Corps has taken to address our  2003 recommendations for improving the information needed to manage  its hopper dredging program and develop cost estimates for industry  contracts; (2) the effects since 2003, if any, of the statutory restrictions  placed on the use of the Corps’ hopper dredges; and (3) key challenges,  if any, the Corps faces in managing its hopper dredge fleet. "The Corps has made no such determination.
Why GAO Did This Study

The Corps is responsible for dredging sediment from waterways to maintain shipping routes important for commerce. One dredge type, a hopper dredge, performs much of the dredging in ports and harbors, and the Corps uses its own fleet of hopper dredges and contracts with industry to carry out the work. In 2003, GAO examined the Corps' hopper dredging program and made recommendations to improve its management. GAO was asked to review changes to the program.
This report examines (1) actions the Corps has taken to address GAO's 2003 recommendations for improving the information needed to manage its hopper dredging program and develop cost estimates for industry contracts; (2) effects since 2003, if any, of the statutory restrictions placed on the use of the Corps' hopper dredges; and (3) key challenges, if any, the Corps faces in managing its hopper dredge fleet. GAO reviewed laws, regulations, and policies governing the Corps' use of hopper dredges, and related Corps reports. GAO analyzed dredging contract and financial data for fiscal years 2003-2012, assessed the reliability of these data, and interviewed Corps and dredging stakeholders.

What GAO Found

The U.S. Army Corps of Engineers (Corps) has taken actions to address GAO's 2003 recommendations for improving information related to hopper dredging, but some data gaps remain. First, in response to GAO's recommendation to obtain and analyze data needed to determine the appropriate use of its hopper dredge fleet, the Corps established a tracking log to document urgent or emergency work its dredges carry out. The Corps also modified its dredging database to track solicitations for industry contracts that received no bids and bids exceeding the Corps' cost estimate by more than 25 percent, referred to as high bids. Corps district offices, however, do not consistently enter data on these solicitations, and Corps headquarters has not provided written direction to the district offices to ensure data are consistently entered. Tracking and analyzing no-bid and high-bid solicitation data could enable the Corps to identify and address gaps in industry's ability to fulfill certain dredging needs as the Corps plans its future hopper dredging work. Second, in response to GAO's recommendation, the Corps took action to assess the data and procedures it used for developing cost estimates when soliciting industry contracts. However, certain industry cost data the Corps relies on remain outdated. For example, some of the data it uses on hopper dredge equipment date back to the late 1980s. A senior Corps official stated that a study could be conducted to update the data, but the Corps has no plans to conduct such a study. Having a plan for obtaining updated data is important for developing sound cost estimates.
Statutory restrictions on the use of the Corps' hopper dredges since 2003 have resulted in costs to the Corps, but the effect on competition in the hopper dredging industry is unclear. Restrictions limiting the number of days that Corps dredges can work have resulted in additional costs such as costs to maintain certain Corps dredges while they are idle; the Corps incurs many of the costs for owning and operating its hopper dredges regardless of how much they are used. The restrictions, however, help ensure the Corps has the ability to use these dredges to respond to urgent or emergency dredging needs when industry dredges are unavailable. It is not clear to what extent restrictions have affected competition in the dredging industry. The number of U.S. companies with hopper dredges has not changed, but the number and size of these dredges have decreased since 2003. In addition, GAO did not find evidence of increased competition based on the number of bidders and winning bid prices for Corps hopper dredging projects since 2003.
Key challenges facing the Corps in managing its hopper dredge fleet are (1) ensuring the fiscal sustainability of its hopper dredges and (2) determining the fleet's appropriate future composition. In 2012, the Corps determined that because of increasing ownership and operating costs, among other things, its hopper dredges would become unaffordable unless actions were taken, including increasing the daily rates charged to projects using the Corps' dredges. Factors such as the aging of the Corps' fleet and the effect on industry of possible changes to the Corps' fleet make it difficult for the Corps to determine the best fleet composition. In studies it conducted in 2011 and 2012, the Corps identified actions that could help address these challenges, such as reviewing the operating costs of hopper dredges to evaluate the affordability of certain dredges.

What GAO Recommends

GAO recommends the Corps provide written direction to its district offices on consistently populating its database with no-bid and high-bid solicitations and develop a written plan for a study to obtain and periodically update certain hopper dredging cost data for its cost estimates. The Department of Defense concurred with the recommendations.