The second step is to award ship recycling contracts for  specific ships to qualified contractors. These criteria include considering  how a contractor plans to dismantle ships and the extent that the site is  capable to support that effort. MARAD’s Best Value Process for Source Selection of Its Ship Recycling Contracts is Consistent with the Federal Acquisition Regulation

After becoming qualified, a contractor’s facility is eligible to compete for  ship recycling contracts, and does so by providing offers in response to  MARAD’s announcements on specific ships. This process  allows the government to accept an offer other than the best priced offer,  considering both price and non-price factors. MARAD uses the following  three evaluation criteria to determine which offers provide the best value  for the government: price, past performance. Figure 3  describes in more detail the steps MARAD uses in its best value source  selection for ship recycling contracts. MARAD Has Taken Steps to Clarify Its Source Selection Process, but Could Strengthen Its Communication Strategy

MARAD has made some efforts over the last year to clarify certain parts  of its source selection process; however, during our review, contractors  told us that they do not fully understand how it works. Standards for Internal Control in the Federal Government state  that management should ensure there are adequate means of  communicating with external stakeholders that may have a significant  impact on the agency achieving its goals. Improving its communication strategy with its contractors could help  MARAD maximize the transparency of its source selection process. As a result, we recommended that it develop a comprehensive approach  to manage its ship disposal program.comprehensive management plan, or strategic plan, which outlined short  and long-term strategies for the disposal of the agency’s obsolete ships;  however, several key elements are outdated or no longer applicable. Since then, however, it  has not updated its plan, because, according to program officials, the  principles of the plan remain relevant. MARAD was required, however, to  provide regular reports to Congress for several years, the last of which  was in March 2011. The reports provided information on the progress  made to address the backlog, and other activities accomplished since the   In 2006, MARAD issued a  last report, but did not provide the strategic short- and long-term direction  for the program. The 2006 strategy does not take into account current market conditions,  goals, and external risks. (See appendix II)
Further, MARAD officials expressed concern about maintaining the  supplier base to help ensure adequate competition among contractors as  the number of ships available for disposal decreases, a concern that is  not addressed in the 2006 plan. Competition is a cornerstone of federal  contracting and a critical tool for achieving the best return on the  government’s investment. An updated strategic plan that  reflects the current external environment and risks could better position  MARAD to identify challenges and opportunities confronting the future  management of the ship disposal program, including maintaining long- term participation in and competition within the industrial base for ship  disposal. Ship recycling contractors have been concerned whether  changes in their facility and processes are being approved by MARAD. Recommendations for Executive Action

To enhance MARAD’s transparency in its source selection processes or  other aspects of ship disposal and strategic direction for its efforts, we  recommend that the Secretary of Transportation direct the MARAD  Administrator to take the following two actions:  Improve MARAD’s communication strategy, such as by holding an  annual industry day or annual meetings with qualified contractors, to  transparently communicate information to qualified contractors and to  respond to their questions; and
Update MARAD’s 2006 comprehensive management plan, i.e. DOT  did not take a position on our recommendations, but generally agreed  with the facts presented. Appendix I: Objectives, Scope and Methodology

The Coast Guard and Maritime Transportation Act of 2012 mandated that  GAO conduct an assessment of the source selection procedures and  practices used to award the Maritime Administration’s (MARAD) ship  recycling contracts, including the process, procedures and practices used  for qualification of ship disposal facilities, whether MARAD’s contract  source selection procedures and practices are consistent with the law,  and best practices associated with making source selection decisions, as  well as any other aspect we deem appropriate to review. This report  assesses MARAD’s (1) source selection process; (2) communication  strategy with ship disposal facility contractors; and (3) long-term ship  disposal strategy.
Why GAO Did This Study

Timely and proper disposal of obsolete ships in the National Defense Reserve Fleet-older ships designated for use in national emergencies-is critical to protecting the environment. Because these ships often contain hazardous materials, members of Congress and others have raised issues about the environmental concerns. As part of the Department of Transportation, MARAD's Ship Disposal Program serves as the federal government's agent for competing and awarding contracts for recycling the ships' materials. Congress has required MARAD's ship disposal program to award ship recycling contracts to qualified ship recycling facilities on the basis of best value. The Coast Guard and Maritime Transportation Act of 2012 mandated that GAO review MARAD's source selection procedures and practices used to award ship recycling contracts.
In this report, GAO assessed MARAD's (1) source selection process; (2) communication strategy with ship recycling contractors; and (3) long-term ship disposal strategy. To complete this work, GAO reviewed and analyzed documentation on MARAD's qualification process, source selection procedures, and strategies; and interviewed MARAD and all of its qualified ship recycling contractors.

What GAO Found

The Maritime Administration (MARAD) uses a two-step source selection process, first by qualifying contractors and then awarding contracts for ship recycling services based on best value, consistent with the Federal Acquisition Regulation (FAR). In the first step, MARAD qualifies contractors' ship recycling facilities. The qualification process involves evaluating ship recycling facilities' proposals based on multiple criteria, including how a facility plans to dismantle ships and the extent to which the contractor-including its ability to meet local, state, and federal regulations-supports that effort. For the second step, MARAD awards ship recycling contracts for specific ships using a best value source selection process. The best value source selection process allows the government to accept an offer other than the best-priced offer, considering both price and non-price factors, that provides the greatest overall benefit to the government. MARAD considers three evaluation criteria-price, schedule and capacity, and past performance.
MARAD has made some efforts over the last year to clarify certain elements of its source selection process; however, MARAD could strengthen its communication strategy with its contractors. All of the qualified contractors GAO spoke with were confused about MARAD's source selection process-including how MARAD uses past performance to evaluate contractors' offers. MARAD has made an effort to clarify its past performance criterion by further explaining what is considered in its most recent solicitation. However other concerns remain. For example, some contractors expressed concern as to whether changes to their facility were approved by MARAD. GAO's standards for internal controls state that management should ensure adequate means of communicating with external stakeholders that may have a significant impact on the agency achieving its goals. Improving its communication strategy with its contractors could help MARAD maximize the transparency of its source selection process.
In 2006, MARAD issued a comprehensive management plan, or strategic plan, that outlined short- and long-term strategies for the disposal of MARAD's obsolete ships; however several key elements are now outdated or no longer applicable. According to program officials, MARAD was required to provide regular reports to Congress for several years, the last of which was in March 2011, on the progress made to address the backlog of obsolete ships. However, these reports did not provide the strategic short- and long-term direction for the program. Further, they indicated that the principles of the plan remain relevant; but the 2006 strategy does not take into account current market conditions, goals, and external risks. For example, concerns about maintaining the supplier base are not addressed in the plan. MARAD wants to maintain a supplier base to ensure competition for future ship recycling contracts, but has not fully considered risks and options to address this pending issue. Competition is a cornerstone in federal contracting and a critical tool for achieving the best return on the government's investment. An updated strategic plan that reflects the current external environment and risks could better position MARAD to identify future challenges and opportunities to help ensure the long-term participation and competition of the industrial base for ship disposal.

What GAO Recommends

GAO is recommending that the Department of Transportation improve its communication strategy and update its strategic plan. The Department agreed with the facts but did not take a position on our recommendations.