Much of the maintenance dredging the Corps  undertakes is cyclical in nature, with dredging needed annually or every  few years, according to Corps officials. Corps Data on Total Maintenance Dredging Contract Costs Are Unreliable, but Corps Officials Cited Multiple Factors That Likely Contributed to Cost Changes

Cost data in the Corps’ dredging database are unreliable and, therefore,  the total costs of maintenance dredging contracts during fiscal years 2004  through 2013 are unclear, but Corps officials report that multiple factors  likely contributed to cost changes during this period. The Corps relies on  data from its dredging database for assessing trends in maintenance  dredging contract costs over time, among other things, but we found that  many of the records in the database did not contain information on final  costs or actual quantities of material dredged. Specifically, of the 1,405 contract records in the database that  were marked as “complete,” we found that about 19 percent (264 out of  1,405) did not contain information on the final contract costs or the actual  quantity of material dredged. Federal internal control standards indicate that  managers should maintain quality information, including accurate and  complete operational and financial data, for the effective and efficient  management of their operations. Without  systematic quality controls at the district-office level to regularly verify the  completeness and accuracy of their maintenance dredging contract data,  the Corps risks undertaking analyses on incomplete information, and may  be drawing conclusions about cost trends based on unreliable  information. Corps  officials across many of the headquarters, division, and district offices we  spoke with, as well as representatives from the dredging industry, said  that during this period they believed the cost of dredging had increased  for many maintenance projects. Labor, fuel, and steel prices may represent a large portion of the cost  to a contractor in conducting dredging, and fluctuations in the market  prices for these costs may influence contractors’ bids for contracts. Material placement costs, which are influenced by nature of the  material, the type of placement method used, and the location where  the material is placed, may affect contract costs with farther  placement sites generally more costly because of additional time, fuel,  and equipment needed to transport the material. In general, Corps officials we interviewed said it is difficult to discern  which of these various factors may have led to specific cost increases for  a particular contract. Corps Districts Report Undertaking Various Approaches to Manage Contract Costs

Officials from Corps district offices we spoke with reported undertaking  various approaches to manage maintenance dredging contract costs,  largely on a project-by-project basis. Corps officials from 11 of the 12 district offices we interviewed said that  they have combined work under one or more projects that had historically  had separate contracts into a single contract in an effort to manage costs. Officials estimated that combining the hopper dredge work  across projects from several West Coast districts saved up to $7 million  annually by having a single hopper dredge mobilize and demobilize once  instead of multiple dredges for individual contracts. For example, because additional planning may be needed, it  may not be feasible to combine contracts for projects with time-sensitive  needs, according to the officials. For instance, Corps officials from a few  districts said that, in specifying the dredging requirements of a project,  they may emphasize performance requirements and not necessarily the  type of equipment needed to achieve those requirements. Recommendation for Executive Action

To help ensure the completeness and accuracy of cost and cost-related  data for maintenance dredging contracts in the Corps’ Dredging  Information System database, we recommend that the Secretary of  Defense direct the Director of Civil Works of the U.S. Army Corps of  Engineers to require that its district offices establish systematic quality  controls to regularly verify the completeness and accuracy of their  maintenance dredging contract data, including processes for ensuring  that corrections are made when errors or omissions may be identified,  such as through headquarters reviews. Appendix I: Objectives, Scope, and Methodology

This report examines (1) agency data available about the U.S. Army  Corps of Engineers (Corps) total costs of maintenance dredging  contracts, and factors that contributed to any changes, during fiscal years  2004 through 2013, and (2) approaches the Corps reports it has  undertaken to manage maintenance dredging contract costs. Additionally, to examine factors that contributed to any changes in  contract costs during fiscal years 2004 through 2013, we interviewed the  selected Corps division and district offices and reviewed a  nongeneralizable sample of four reoccurring maintenance dredging  projects.
Why GAO Did This Study

The Corps maintains the navigation for thousands of miles of waterways and hundreds of ports of harbors. The Corps conducts maintenance dredging primarily under contract with private industry to remove sediment from waterways. Maintenance dredging is often cyclical in nature, with dredging needed annually or every few years.
GAO was asked to review Corps' maintenance dredging contract costs. This report examines (1) agency data available about the total costs of maintenance dredging contracts, and factors that contributed to any changes, during fiscal years 2004 through 2013, and (2) approaches the Corps reports it has undertaken to manage maintenance dredging contract costs
GAO reviewed laws, regulations, and Corps guidance; analyzed cost data from the Corps' dredging database for fiscal years 2004-2013 and assessed the reliability of these data; reviewed a nongeneralizable sample of four projects selected to reflect geographic variation and a range of contract sizes; reviewed documentation on approaches to manage costs; and interviewed Corps officials from headquarters, divisions, and districts (selected for geographic variation and range of dredging work) and dredging industry stakeholders.

What GAO Found

Cost data in the U.S. Army Corps of Engineers' (Corps) dredging database are unreliable and, therefore, the total costs of maintenance dredging contracts during fiscal years 2004 through 2013 are unclear. In particular, about 19 percent (264 out of 1,405) of the contract records marked as "complete" did not contain information on the final contract costs or the actual quantity of material dredged. The Corps relies on cost data from its dredging database to assess trends in maintenance dredging contract costs over time, among other things, but its district offices do not have systematic quality control measures in place to ensure these data are complete and accurate. Federal internal control standards indicate that managers should maintain quality information, including accurate and complete operational and financial data, for the effective and efficient management of their operations. Without systematic quality controls at the district-office level to regularly verify the completeness and accuracy of their maintenance dredging contract data, the Corps risks undertaking analyses on incomplete information, and drawing conclusions about cost trends based on unreliable information.
Multiple factors likely contributed to changes in contract costs during fiscal years 2004 through 2013, according to Corps officials. Corps officials, as well as representatives from the dredging industry, told GAO that during this period they believed the cost of dredging had increased for many maintenance projects. However, Corps officials said that it is difficult to discern which factors may have led to specific cost increases for a particular contract given the many factors that influence the cost of a contract. Factors that Corps officials commonly cited as likely contributing to changes in contract costs over the 10-year period included the number of contractors available to bid on the work; fluctuations in the market prices for labor, fuel, and steel; and the costs for transporting dredged material to a placement site, with farther placement sites generally being more costly because of additional time, fuel, and equipment needed to transport the material.
Corps districts reported undertaking various approaches to manage maintenance dredging contract costs, largely on a project-by-project basis because of the unique nature of each project. For example, officials from 11 of 12 Corps district offices interviewed said they have combined work under one or more projects that had historically had separate contracts into a single contract to help manage costs. In combining contracts, Corps district officials estimated reducing total mobilization costs—the costs to transport dredge equipment—based on the need to mobilize dredge equipment once under a combined contract, instead of multiple times for individual contracts. For example, Corps officials estimated that combining dredge work across projects from several West Coast districts saved up to $7 million annually in mobilization costs. Corp officials pointed out, however, that combining contracts may not always be feasible, such as when projects have time-sensitive dredging needs. Additionally, officials from a few district offices said that, in specifying the dredging requirements for a project, they may emphasize performance requirements and not necessarily the type of equipment needed to achieve those requirements, which may result in an increase in the number of contractors available to bid on the work and, therefore, more competitive bids.

What GAO Recommends

GAO recommends that the Corps require that its district offices establish systematic quality controls to regularly verify the completeness and accuracy of maintenance dredging contract data. The Department of Defense concurred with the recommendation.