Actions Needed to Further Improve Management of Hopper Dredging

The U.S. Army Corps of Engineers has taken actions to address the Government Accountability Office’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 However, certain industry cost data the Corps relies on remain outdated.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:

– ensuring the fiscal sustainability of its hopper dredges;

– 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.

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Source: gao.gov, May 14, 2014