1.) Cost Sharing Sponsors

Sponsors share in the costs of dam safety repairs based on original  congressional authorizations for dam construction or subsequent  sponsors’ agreements with the Corps. Cost sharing  percentages can range from under 1 percent, such as for small water  supply users, to over 50 percent, such as for hydropower users,  depending on a sponsor’s agreement with the Corps. The Corps Has Determined Cost Sharing Based on Ways in Which a Dam May Fail, but Has Not Applied One Provision That Reduces Sponsors’ Cost Share

		A Dam’s Potential Failure Mode Drives the Corps’ Decision on Cost Sharing

According to the Corps’ Safety of Dams regulation, during a dam safety  modification study, Corps district officials are to identify and analyze all  the potential ways that a dam could fail. The potential failure mode is the primary factor in  determining the applicable authority, in addition to consideration of policy  and statutory requirements:  Major Rehabilitation: According to Corps officials, this authority applies to  dam safety repairs associated with typical degradation of dams over time. Under this authority, sponsors are to pay their full cost share. The total estimated cost for these repairs is $5.8  billion. For 11 of the 16 dams the Corps applied its Major Rehabilitation  authority. Sponsors for these dams are to pay their full cost share, estimated at  $574 million of the total $4.2 billion in repairs. The Corps Did Not Apply One Provision of Its Dam Safety Assurance Authority That Reduces Sponsors’ Cost Share

While the Corps applied the Dam Safety Assurance authority to 5 of 16  dams in our review based on the availability of new hydrologic or seismic  data, it did not apply the Dam Safety Assurance authority’s state-of-the- art provision to any of these dam safety repair projects. Specifically, the 2014 regulation notes the difficulty of defining the state- of-the-art provision and states that because the state-of-the-art  “terminology makes it difficult to define the kinds of repairs that would be  applicable,  it is not used.” The same 2014 regulation states that use  of the state-of-the-art provision must be decided on a case-by-case basis  by the ASA(CW). Without clarifying the circumstances under which  the state-of-the-art provision applies and implementing the policy  consistently, the Corps is at risk of not applying the full range of statutory  authorities provided to it, thereby raising questions about the appropriate  allocation of federal and non-federal funding for dam safety repairs. Some Corps Districts Did Not Communicate with Sponsors or Engage Them Effectively, Potentially Reducing Payments Received from Sponsors

		The Corps Did Not Effectively Communicate Its Cost Sharing Determination, Contributing to Uncertainty Regarding Sponsor Payment

The Corps’ lack of clarity and a consistent policy position regarding the  state-of-the-art provision under the Dam Safety Assurance authority has  contributed to disagreements with a major sponsor and uncertainty  regarding sponsor payment. 2.) For example, the Corps determined that repairs to mitigate the  effects of seepage were needed at 9 of the 16 dams we reviewed, with a  total estimated cost of about $4 billion. Of the 16 dam safety  repair projects we reviewed, 9 had sponsors, and—as discussed  below—at 3 of the 9 dams the Corps did not communicate with the  sponsors in a manner that would ensure their meaningful involvement  and willingness to be cost sharing partners, as required by its regulation. Because the Corps does not have clear guidance to ensure  effective communications with sponsors, it did not adequately  communicate or reach agreements on cost sharing responsibilities with  these sponsors. As a result, these sponsors’ plans for paying their cost  shares are uncertain, leaving the recovery of federal outlays from these  sponsors similarly uncertain. Because the Corps has not always effectively communicated with  or engaged sponsors, some are deriving benefits from dams absent an  agreement with the Corps while other sponsors that have agreements  either have not been notified by the Corps of their final cost share  responsibility or dispute the Corps’ cost sharing determination and may  raise a legal challenge. Recommendations

To improve cost sharing for dam safety repairs, we recommend that the  Secretary of Defense direct the Secretary of the Army to direct the Chief  of Engineers and Commanding General of the U.S. Army Corps of  Engineers to clarify policy guidance: on the types of circumstances under which the state-of-the-art  provision of the Dam Safety Assurance authority might apply to dam  safety repair projects. for district offices to effectively communicate with sponsors to  establish and implement cost sharing agreements during dam safety  repair projects. For all dams, including the three dams named in the  report, this would involve communicating estimated and final cost  sharing amounts, executing agreements, and engaging sponsors to  ensure cost share payment. Not all  sponsors for the dams included in our review were available for interview.
Why GAO Did This Study

The Corps operates over 700 dams, which are aging and may require major repairs to assure safe operation. At some dams, sponsors that benefit from dam operations share in the cost of operating and repairing these dams based on original congressional authorizations for dam construction or subsequent agreements with the Corps. Since 2005, the Corps initiated an estimated $5.8 billion in repairs at 16 dams with urgent repair needs; sponsors are to share repair costs at 9 of these dams.
GAO was asked to examine cost sharing for Corps dam safety repairs. This report examines how, over the last 10 years, the Corps (1) determined cost sharing and (2) communicated with sponsors regarding cost sharing. GAO reviewed relevant laws and Corps regulations; analyzed dam safety projects' documentation for the 16 dams the Corps selected for repairs since 2005; conducted site visits to a non-generalizable sample of three dams based on cost share determinations and range of sponsors; and interviewed Corps officials and sponsors.

What GAO Found

The U.S. Army Corps of Engineers (Corps) determined sponsors' (such as water utilities and hydropower users) share of costs for dam safety repairs pursuant to regulations, but did not apply a provision in a statutory authority that reduces sponsors' share. The Corps determined these cost shares based on analyses of the potential ways each dam could fail, and in consideration of statutory requirements regarding which type of cost sharing arrangement, or authority, would apply given these possible failure scenarios.
The Corps applied its Major Rehabilitation authority at 11 of the 16 dam safety repair projects GAO reviewed for repairs associated with typical degradation of dams, such as embankment or foundation erosion through seepage. Under this authority, sponsors are to pay their full agreed-upon cost share of the repair.
The Corps applied its Dam Safety Assurance authority at 5 of the 16 dam safety repair projects GAO reviewed for repairs that resulted from the availability of new hydrologic or seismic data. Under this authority, sponsors' agreed-upon cost share is reduced by 85 percent.
The Corps did not apply one provision of its Dam Safety Assurance authority—related to repairs needed due to changes in state-of-the-art design or construction criteria (state-of-the-art provision)—since the enactment of the enabling legislation in 1986. Since that time, the Corps has not provided guidance on the types of circumstances under which the state-of-the-art provision applies and has not had a consistent policy position regarding the provision. For example, the Corps' latest regulation states in one section that the state-of-the-art provision will not be applied because of the difficulty in defining terminology, while another section allows for consideration on a case-by-case basis. Without clarifying the circumstances under which the state-of-the-art provision applies, and implementing the policy consistently, the Corps is at risk of not applying the full range of statutory authorities provided to it, contributing to conditions under which, as discussed below, sponsors have taken actions opposing the Corps.
In GAO's review of 9 dams with sponsors, the Corps did not communicate with or effectively engage all sponsors. For example, a federal sponsor that markets hydropower generated at two dams disagreed with the Corps' decision to not apply the state-of-the-art provision of its Dam Safety Assurance authority, which, if used, would reduce this sponsor's cost share by about $410 million. This sponsor has proceeded to set its power rates in anticipation of paying the reduced cost share, creating uncertainty for the recovery of federal outlays for repairs. In addition, GAO found the Corps was not effective in reaching agreement with other sponsors on cost-sharing responsibilities at three dams because it did not have clear guidance for effectively communicating with sponsors. For example, the Corps did not engage a sponsor to ensure cost share payment at one dam and, at another dam, delayed executing agreements that would ensure sponsors' cost shares. Because the Corps did not effectively engage these sponsors, some are deriving benefits absent agreements with the Corps, while others that have agreements have not been notified of their final cost-sharing responsibility. As a result, these sponsors' cost share payments (about $3.1 million) are uncertain.

What GAO Recommends

GAO recommends that the Corps clarify policy guidance on (1) usage of the state-of-the-art provision and (2) effective communication with sponsors to establish and implement cost sharing agreements for all dams, including the three named in this report. The Department of Defense concurred with GAO's recommendations.