Detailed Information on the
Maritime Administration Ship Disposal Program Assessment

Increases in recycled steel prices have provided positive results in an increase in the number of vessels sold for disposal. The sale of more vessels has resulted in additional industry capacity. The issuance of the FY08 RFQ has provided the opportunity for new offerors to submit technical proposals which will increase capacity as well as foster better competition among qualified recyclers. We will continue to seek innovative ways to improve the ship scrapping process, increase domestic recycling capacity and pursue vessel export as a disposal option.

Measure: Number of obsolete vessels from the National Defense Reserve Fleet sites covered by contracts for subsequent disposal actions (disposal contract awards).

Explanation:This is a measure of the initial government action that results in the subsequent disposal of a ship. The linear progression of the vessel disposal process is award, removal, and disposal, with award the catalyst for the subsequent removal and eventual disposal. When dismantling contracts are awarded, the contractor must make the necessary preparations to remove the vessel from the government fleet location and tow the vessel to their disposal facility where they have the resources to structurally dismantle the vessel, recycle the metals and properly dispose of residual hazardous materials. In the case of other disposal actions, the vessel may be artificially reefed, donated to a non-profit organization, sold for reuse or placed in a Navy live fire exercise where it is sunk during weaponry training. As with dismantling contracts, each of these disposal options also involve contractual arrangements to remove the vessel by towing away from the government fleet site. Overall performance targets remain ambitious given recent outputs due to constraining factors that have developed since the original PART assessment of the program. The Maritime Administration repossessed six vessels that had previously been contracted for disposal and removed from Federal government custody due to unforeseen problems with certain dismantling contractor facilities and the 2008 target was adjusted to account for this unexpected development. Target levels for other years remain unadjusted despite performance levels consistently above targets because of projected costs of compliance with the Ballast Water Management Act and the National Invasive Species Act. Previously unforeseen compliance requirements now include the conduct of underwater biologic sampling of marine species on the vessel hulls and contracting for hull cleaning services to conform with Coast Guard enforcement standards for these laws for all vessels departing the fleet sites in tow to dismantling contractor facilities. Despite concurrence with the sufficiency of these compliance procedures in other jurisdictions associated with the program, legal action has enjoined further hull cleaning and subsequent vessel remove at the Suisun Bay, California fleet site based on alleged vioations of the Nationall Environmental Protection Act and the Clean Water Act, and no vessels have been removed from the Suisun Bay fleet site since January of 2007. When this issue is resolved and vessels are again avaible for removal from the Suisun Bay fleet site, program targets will be reassessed based on the condition of vessel hulls and the market for recylced steel.

Measure: Number of obsolete vessels removed from the National Defense Reserve Fleet sites for subsequent disposal. (r) = revised.

Explanation:The linear progression of the vessel disposal process is award, removal, and disposal. This performance output measures the removal action that precedes the eventual disposal of an obsolete ship. Disposal is dismantling, sinking as an artificial reef, or deep sinking for military training, and may occur up to three years after contract award. When dismantling contracts are awarded, the contractor must make the necessary preparations to remove the vessel from the government fleet location and tow the vessel to their disposal facility where they have the resources to structurally dismantle the vessel, recycle metals, and properly dispose of hazardous materials. In the case of other disposal actions, the vessel may be artificially reefed, donated to a non-profit organization, sold for reuse or placed in a Navy live fire exercise and sunk during weaponry training. As with dismantling contracts, each of these disposal options also involve contractual arrangements to remove the vessel by towing away from the government fleet site. Overall performance targets remain ambitious given recent outputs due to constraining factors that have developed since the original PART assessment of the program. The Maritime Administration repossessed six vessels that had previously been contracted for disposal and removed from Federal government custody due to unforeseen problems with certain dismantling contractor facilities and the 2008 target was adjusted to account for this unexpected development. Target levels for other years remain unadjusted despite performance levels consistently above targets because of projected costs of compliance with the Ballast Water Management Act and the National Invasive Species Act. Previously unforeseen compliance requirements now include the conduct of underwater biologic sampling of marine species on the vessel hulls and contracting for hull cleaning services to conform with Coast Guard enforcement standards for these laws for all vessels departing the fleet sites in tow to dismantling contractor facilities. Despite concurrence with the sufficiency of these compliance procedures in other jurisdictions associated with the program, legal action has enjoined further hull cleaning and subsequent vessel remove at the Suisun Bay, California fleet site based on alleged vioations of the Nationall Environmental Protection Act and the Clean Water Act, and no vessels have been removed from the Suisun Bay fleet site since January of 2007. When this issue is resolved and vessels are again avaible for removal from the Suisun Bay fleet site, program targets will be reassessed based on the condition of vessel hulls and the market for recylced steel.

Measure: Number of obsolete vessels disposed of from the National Defense Reserve Fleet sites (disposal process completions). (r) = revised

Explanation:The linear progression of the vessel disposal process is award, removal, and disposal. This performance output metric measures the final disposal action and typically involves dismantling the vessel infrastructure at a contractor site; but, may alternatively involve sinking the vessel as an artificial reef, or deep sinking the vessel as part of weaponry training for the U.S. Navy. Disposal may occur up to three years after contract award and in a fiscal year subsequent to year of removal. Overall performance targets remain ambitious given recent outputs due to constraining factors that have developed since the original PART assessment of the program. The Maritime Administration repossessed six vessels that had previously been contracted for disposal and removed from Federal government custody due to unforeseen problems with certain dismantling contractor facilities and the 2008 target was adjusted to account for this unexpected development. Target levels for other years remain unadjusted despite performance levels consistently above targets because of projected costs of compliance with the Ballast Water Management Act and the National Invasive Species Act. Previously unforeseen compliance requirements now include the conduct of underwater biologic sampling of marine species on the vessel hulls and contracting for hull cleaning services to conform with Coast Guard enforcement standards for these laws for all vessels departing the fleet sites in tow to dismantling contractor facilities. Despite concurrence with the sufficiency of these compliance procedures in other jurisdictions associated with the program, legal action has enjoined further hull cleaning and subsequent vessel remove at the Suisun Bay, California fleet site based on alleged vioations of the Nationall Environmental Protection Act and the Clean Water Act, and no vessels have been removed from the Suisun Bay fleet site since January of 2007. When this issue is resolved and vessels are again avaible for removal from the Suisun Bay fleet site, program targets will be reassessed based on the condition of vessel hulls and the market for recylced steel.

Measure: Average Cost/Ton for vessel disposal actions based on Disposal Actions Awarded in the Fiscal Year.

Explanation:Ninety percent of the obsolete vessels are disposed of via sale or service contract for recycling of metals by dismantling contractors. The annual program Cost/Ton metric includes the cost of recycling service contracts, the costs associated with other methods of disposal, and offsets from the proceeds derived from vessel sales. The impact of various disposal options on this metric is as follows: service contracts with dismantling contractors to recyce metals obligate appropriated funds to procure such services, the cost of which is the primary factor in overall cost per ton. Sales of ships for re-use or to dismantling contractors for recycling of metals generate sales proceeds that are deposited with in the U.S. Treasury and are calculated as offsets reducing overall cost per ton. When a vessel is used for artificial reefing, appropriated funds are obligated for the cost of compliance with environmental standards prior sinking at the reef site, and these costs factor into overall cost per ton. When a vessel is placed in the U.S. Navy's live fire training program for deep-sinking during a weaponry training exercise appropriated funds are obligated for the cost of compliance with environmental standards and these costs factor into overall cost per ton. When vessels are donated to non-profit organizations for historic preservation, no appropriated funds are used and the cost per ton is typically unaffected.

Measure: Percent of obsolete non-retention merchant vessels in government custody classified as high disposal priority (ships with greatest potential to create an environemental hazard).

Explanation:This metric is employed by program managment to quantify risk of environmental hazard while these ships are in non-operational status and await disposal. The non-retention (obsolete, available for disposal) vessels in the National Defense Reserve Fleet (NDRF) are classifired as high priority, moderate priority and low priority based on risk factors including hull condition, hull leaks, quantity of oil on board, top side condition, interior condition, and paint condition. This measure is a reflection of the goal to minimize the environmental threat to water quality at the fleet locations and surrounding communities from an environmental hazard due to a hull leak, oil discharge or a hazardous material incident. Vessels in the high priority category pose a higher risk to the environment than do vessels in the moderate or low priority category. The program works to continuously evaluate the condition of all NDRF vessels, and when vessels are classified as high priority, remove them as quickly as possible, regardless of anchorage location. The program has developed numeric condition score range that defines vessel priority classification and continually adjusts this score range to ensure that the 5% target remains ambitious. As the overall fleet disposal priority mix improves over time, the target will be reassessed.

Measure: Ratio of ships removed to number of ships that are designated as obsolete and placed in the disposal queue on an annual basis (minimum removal rate).

Explanation:This metric is employed to quantify the annual and long-term progress made by the program to respond to the Congressional directive to reduce the overall size of the non-retention fleet and thereby reduce the environmental risks posed by these ships at the anchorage sites. A ratio of at least of 1.0 is the target for each year. A ratio of at least 1.0 indicates that the program removed at least one ship for every ship that is designated obsolete and is added to one of the fleet sites. Conversely, a ratio of less that 1.0 indicates that on average, fewer vessels were removed than were added to the fleet sites. This ratio is recalculated each year and reported as a moving average. Non-retention and obsolete are terms that are used interchangeably by the program to refer to the subset of vessels in custody of the Maritime Administration that are no longer militarily useful. They are so designated to differentiate them from retention vessels that are considered militarily useful and are kept in a state of readiness for future military sealift operations. Retention vessels are evaluated on a regular basis to determine their continued military usefulness to the Department of Defense ( DoD) for use in transporting military cargo and supplies. Vessels that no longer meet the DoD sealift requirements are declared surplus and are eventually classified as non-retention and then are placed in the disposal queue. From fiscal year 2000 through fiscal year 2007, on average, 12 ships were removed and 13 vessels entered the disposal queue on an annual basis. Targets will be evaluated and adjusted based on contractor performance, market conditions for recycled steel, projections for non-retention status designations and resolution of program contraints associated with the West Coast anchorage site.

Is the program purpose clear?

Explanation: The Maritime Administration serves as the U.S. Government's disposal agent for merchant type vessels of 1,500 tons or more. Section 3502 of the National Maritime Heritage Act requires the Maritime Administration, in consultation with the Secretary of the Navy and Administrator of the Environmental Protection Agency, to develop a program for the environmentally responsible disposal of obsolete merchant vessels. Maritime Administration is also required to submit a progress report to Congress within six months after enactment, and semiannually thereafter.

Evidence: SEC. 203 of the Federal Property and Administrative Services Act of 1949 40 U.S.C. 484, Disposal of Surplus Property SEC. 6 National Maritime Heritage Act (P.L. 103-451) as amended in U.S.C. 5405, 2002 SEC. 3502 Scrapping of National Defense Reserve Fleet Vessels (P.L 106-398) http://www.oig.dot.gov/StreamFile?file=/data/pdfdocs/ma2000067.pdf

Does the program address a specific and existing problem, interest, or need?

Explanation: This program was started in 2001 to address the need to dispose of an accummulation of obsolete merchant vessels in the Maritime Administration's National Defense Reserve Fleet. Until 1994, the Maritime Administration had disposed of hundreds of obsolete vessels, generally to foreign entities. In 1994, the sale of obsolete vessels to foreign entities was curtailed after the Environmental Protection Agency raised concerns about the export of polychlorinated biphenyls, and by 1998, this disposal option was eliminated by federal government moratorium. With vessel export no longer available as a disposal option, this program was established to pursue all viable disposal options, including: domestic dismantling/recycling, foreign dismantling/recycling, deep-sinking and artificial reefing. The Maritime Administration still has over 120 vessels scheduled for disposal and an average of eleven vessels are added to the program's non-retention inventory each year. A well managed program is needed on an ongoing basis to dispose of these vessels in an environmentally responsible way and to protect the environment from oil discharges and other hazardous materials until disposal occurs.

Evidence: Maritime Administration National Defense Reserve Fleet Inventory December 31, 2005 Maritime Administration Ship Disposal Vessel Condition Summary Report December 7, 2005 Maritime Administration Ship Disposal Domestic Contracts Awarde from FY 2001 Maritime Administration Ship Disposal Domestic Contracts Removed from FY 2001 Maritime Administration Ship Disposal Domestic Contracts Disposed from FY 2001 A Report to Congress on the Program for Scrapping Obsolete National Defense Reserve Fleet Vessels April 2001

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: Section 203 of the Federal Property and Administrative Services Act of 1949 provides the Maritime Administration with the authority to dispose of merchant- type vessels owned by the federal government that are 1,500 gross tons or more. In addition to vessels downgraded from the Maritime Administration's Ready Reserve Force, the disposal of merchant-type ships by the Maritime Administration includes vessels from all federal agencies including non-combatant ships from the U.S. Navy. Historically surplus Navy vessels have accounted for the majority of obsolete vessels to be disposed of through the Maritime Administration's disposal Program. Even though the U.S. Navy has a program for the disposal of its combatant vessels, the two programs are not redundant or duplicative, because the Navy's program is concerned with demilitarization of classified shipboard military technologies on their combatant vessels.

Evidence: SEC. 203 of the Federal Property and Administrative Services Act of 1949 40 U.S.C. 484, Disposal of Surplus Property SEC. 6 National Maritime Heritage Act (P.L. 103-451) as amended in U.S.C. 5405, 2002 SEC. 3502 Scrapping of National Defense Reserve Fleet Vessels (P.L.106-398) Office of the Chief of Naval Operations Instructions 5090.1B CH-21 Ocean Dumping CH-21 October 17, 2002 Environment Protection Agency Toxic Substances Control Act "Transboundary Shipments of Polychlorinated Biphenyls for Disposal" (40CFR 761, Subpart f) http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=40&PART=761&SUBPART=f&TYPE=PDF Environmental Protection Agency "Transportation and Disposal of Vessels" (40 CFR 229.3) United States Coast Guard, DHS Ballast Water Regulations (33 CFT 151 USCG, DHS) SEC. 3512. Conveyance of Obsolete Vessels Under Title V, Merchant Marine Act, 1936 (P.L. 108-136) http://thomas.loc.gov/cgi-bin/query/F?c108:1:./temp/~c108ngLqMa:e1286327: Maritime Administration Authorization Act for Fiscal Year 2001 (Calendar No. 686 Report 106-45) SEC. 3516. Authority to Convey Obsolete Vessels to United States Territories and Foreign Countries for Reefing (P.L.108-136) FY 04 DOD Authorization Act Memorandum of Agreement between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy, Program Executive Office - Ships (PMS 333) October 14, 2003 Memorandum of Agreement between Department of the Navy and Department of Transportation (P.L.106-259), SEC 8136 October 20, 2000 Memorandum of Agreement between Department of the Navy and Department of Transportation February 28, 2003 (P.L. 108-7) Section 102 of Division M of the Consolidated Appropriations Resolution for Fiscal Year 2003 Memorandum of Agreement between the U.S. Maritime Administration and the Program Executive Office - Ships regarding Preparation and Use of MARAD Ships in Navy Fleet Sink Exercises September 2, 2003 (Appendix A -1 Agreement for specific ships August 22, 2005) Memorandum of Understanding between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy Supervisor of Shipbuilding, Conversion and Repair, Bath, Maine February 14, 2005 Agreement Between the Maritime Administration and the United States Environmental Protection Agency Export of National Defense Reserve Fleet Vessels that may contain Polychlorinated Biphenyls for Scrapping outside the United States October 27, 1997 Occupation Safety & Health Administration Memorandums of Agreement between the Department of Defense Navy and Defense Logistics Agency and the Department of Transportation US Maritime Administration and the Department of Labor Occupational Safety and Health Administration and the Environmental Protection Agency Office of Enforcement and Compliance Assurance on "Implementation of the Recommendations On Coordination and Information Sharing of the Report of the Interagency Panel on Ship Scrapping November 1999"

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The program design is free of major flaws due that would limit the program's effectiveness or efficiency. However, factors external to the program are limiting both effectiveness and efficiency. As documented many times during the last two fiscal years, the program will not meet the Congressional mandate to dispose of vessels on a best-value basis considering all disposal alternatives and all qualified facilities and without any predisposition toward foreign or domestic facilities, and to dispose of all obsolete vessels by September 30, 2006. Current environmental laws not only effectively eliminate foreign facilities and predispose the contracting process toward domestic disposal facilities. This lack of a foreign disposal option impacts program efficiency because it denies the program the opportunity to take advantage of cost-effective and in some cases no-cost proposals, which have been submitted to the Maritime Administration from qualified and potentially qualifiiable foreign facilities. Without regulatory relief from one or more environmental laws, at least on a temporary basis, the cost to dispose of surplus ships is, and will continue to be, much greater than originally anticipated when the program was designed. The lack of a foreign disposal option also significantly impacts program effectiveness. The rate of ship disposal is, and will continue to be, substantially slower than originally anticipated when the program was designed due to deficit capacity in the domestic market.

Evidence: A Report to Congress on the Program for Scrapping Obsolete National Defense Reserve Fleet Vessels April 2001. The Congressional mandated disposal date of September 30, 2006 for all Maritime Administration obsolete ships was overly aggressive and dependent upon projections for a domestic recycling capacity that never materialized. Some projections made in 2000 predicted a domestic industry of up to 12 qualified facilities nationwide that would have the industrial capacity to dispose of up to 73 ships per year. In 2001, the first year of the Program, only 3 qualified Gulf Coast facilities responded with cost-effective proposals. Environmental Protection Agency Toxic Substances Control Act "Transboundary Shipments of PCBs for Disposal" (40CFR 761, Subpart f) Report to Congress Progress of the Vessel Scrapping Program June 2002 Report to Congress on the Ship Disposal Competitive Procurement Process June 2004 Report to Congress on the Progress of the Vessel Disposal Program October 2004 Report to Congress on the Progress of the Vessel Disposal Program April 2005 Report to Congress on the Progress of the Vessel Disposal Program October 2005 United States Legal Challenge of the Export of Maritime Administration Ships to the United Kingdom for Recycling United Kingdom Legal Challenge of the Export of Maritime Administration Ships to the United Kingdom for Recycling

Is the program design effectively targeted so that resources will address the program's purpose directly and will reach intended beneficiaries?

Explanation: The program's purpose is effectively target so that resources will addrees the program's purpose. Program resources are assigned directly to contracts for the disposal of ships, to contracts for environmental oversight and worker safety and health oversight at the industrial facilities, and for project managemen and contract administration. Since 2003, the first year the program was directly funded, the percentage of funding resources that has been committed to direct ship disposal contracts and industrial facility oversight contracts is as follows: 2003 - 97.15%, 2004 - 94.15% and 2005 - 92.25%. The decrease from 2003 to 2004 is due to the decrease in appropriations from $31 million to $16 million. The decrease from 2004 to 2005 is due to a 550% increase in General Services Administration rents in 2005 charged to the Program. The balance of appropriations was applied to indirect costs associated with program management, contract administration and project management.

Evidence: Copies of all Maritime Administration Ship Disposal Domestic Contracts awarded since 2001 and copies of all accounting system expenditure reports for Ship Disposal appropriations as applied to those disposal contracts. (Note: due to the voluminous nature of these documents, they will be made available upon request).

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: At the inception of the Ship Disposal Program in October 2001, Congress mandated a long-term goal that was used to establish the Maritime Administration's initial primary performance measure. That goal was to dispose of 100% of non-retention National Defense Reserve Fleet vessels by September 30, 2006 on a best value to the government basis and to pursue all disposal options while using qualified facilities without predisposition toward foreign or domestic facilities. With a focus on viable disposal methods, the Maritime Administration established the following long-term performance goals: ?? To remove 100% of the vessels designated as high priority prior to the 30 September 2006 mandated deadline. From FY01 to present, a total of 40 ships have been designated as high priority. With the exception of 3 ships currently on donation/historical interest hold and not available for disposal, this goal has been accomplished. ?? The other initial long-term goal established was to remove 100% of the original 39 vessels listed as priority ships in the congressional mandate legislation, and which were in the Maritime Administration's inventory at that time. This goal has also been achieved with the removal of 37 of the 39 vessels listed. The exceptions are one ship that is not available for disposal due to being on donation/historical interest hold and one ship that was reassessed and determined to be low priority based on its condition. In FY 2006, with the high priority ships effectively eliminated, the Program established the following additional long-term performance measures in order to achieve an obsolete fleet size that poses minimal threat to the environment and while ensuring appropriated funds are expended on a best value to the government basis and avoiding the accumulation of deteriorating vessels: 1. Maintain the number of high priority vessels available for disposal, including those newly designated vessels on an annual basis, at a level that is less than 5% of the total number of obsolete vessels in the National Defense Reserve Fleet non-retention inventory. Further, the Maritime Administration will maintain this level by disposing of newly designated high priority vessels within 10 months of being designated as high priority. 2. Removal, based on a moving average of vessels designated as non-retention, of at least the same number of ships that enter the disposal queue on an annual basis. The moving average will be recalculated each year and the target ratios updated. The first goal focuses on minimizing the environmental risks by maintaining the highest risk ships at a very small number relative to the total inventory. The second goal focuses on ensuring that the inventory of total obsolete ships does not accumulate to an unmanageable number as it did in the 1990's.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: The Maritime Administration has established ambitious targets and timeframes for its long term measures. Initially, the two long-term performance goals were to remove 100% of the vessels designated as high priority prior to the Congress mandated deadline of 30 September 2006, and to remove 100% of the original 39 vessels listed in the congressional mandate as priority ships and in the Maritime Administration's inventory at that time. As explained in the answer to 2.1, these two initial long-term goals were achieved. With the two initial FY 2001 goals accomplished, in FY 2006 the Program established two additional long-term performance goals with timeframs as identified in the answer to 2.1. The two long-term goals are ambitious and must be accomplished in the presence of factors external to the program over which the Maritime Administration has little or no control, including: ?? The market price of recyclable steel. ?? Domestic industrial capacity and throughput performance of contractors. ?? The costs of environmental remediation of shipboard hazardous materials. ?? Legal challenges to program initiatives.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: The program has two annual performance measures, which are the same as the long term outcome measures. Baseline information for the measures dates back to FY 2000, enabling DOT to track performance against targets. The baseline information consists of the fundemental output measures shown below. They are reflective of the Program's short term decision making process in determining the award, removal and disposal of priority vessels and are reported to the Maritime Administration's leadership, the Department of Transportation, the Congress, The Office of Management and Budget, the press, and the public. 1. The number of ships awarded in disposal contracts. 2. The number of ships removed from the Maritime Administration fleet sites. 3. The number of ships disposed. 4. The disposal cost per ton, based on ship disposal contracts awarded.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 Maritime Administration Budget Estimates Fiscal Year 2007 Title XXXV Maritime Administration SEC. 3501 Authorization of Appropriations for Fiscal Year 2006

Does the program have baselines and ambitious targets for its annual measures?

Explanation: The Ship Disposal program targets for its annual measures are both ambitious and attainable. They must be accomplished in the presence of factors external to the program over which the Maritime Administration has little or no control, including: ?? The market price of recyclable steel. ?? Domestic industrial capacity and throughput performance of contractors. ?? The costs of environmental remediation of shipboard hazardous materials. ?? Legal challenges to program initiatives. The program's performance output measures of vessels awarded, vessels removed and vessels disposed of are direct measure as to the program's progress in disposing of obsolete ships and meeting the targets under the program's environmental stewardship responsibilities. Meeting annual performance output targets are subject to the same variables that are mentioned above as challenges to the annual outcome measures. Negative trends in any one or combination of those variables can significantly affect the attainability of the performance targets. The targets for each year are established during the annual budget request process a year and a half prior to the specified budget year.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 Maritime Administration Budget Estimates Fiscal Year 2007 Title XXXV Maritime Administration SEC. 3501 Authorization of Appropriations for Fiscal Year 2006

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: Government partners such as the Navy, Environmental Protection Agency and State Department commit to working toward higher level goals such as sharing resources and mitigating external factors that affect the Program's progress. The actions associated with that commitment such as the establishment of Memorandums Of Agreement, gaining regulatory exemptions, process teaming and joint assessments demonstrate significant federal-level interagency commitments to the program's annual and long-term goals. Ship disposal contractors ing the private sector are a niche industry operating in a limited market whose principal objective is to maximize profit. As described in the explanation to question 3.2, the program has policies and procedures in place to enhance contractor commitment to program performance, and internal analysis indicates that contractors often exceed scheduled performance targets. However, the program's efforts to acheive long-term goals has recently been hampered by some contractors seeking to protect their market by supporting public policies aimed at restricting government ship disposal contracting to domestic firms.

Evidence: SEC. 203 of the Federal Property and Administrative Services Act of 1949 40 U.S.C. 484, Disposal of Surplus Property SEC. 6 National Maritime Heritage Act (P.L. 103-451) as amended in U.S.C. 5405, 2002 SEC. 3502 Scrapping of National Defense Reserve Fleet Vessels (P.L.106-398) Office of the Chief of Naval Operations Instruction 5090.1B CH-21 Ocean Dumping CH-21 October 17, 2002 (SECS. 21-1 thru 21-) Environmental Protection Agency Toxic Substances Control Act "Transboundary Shipments of Polychlorinated Biphenyls for Disposal" (40CFR 761, Subpart f) Environmental Protection Agency "Transportation and Disposal of Vessels" (40 CFR 229.3) United States Coast Guard, DHS Ballast Water Regulations (33 CFT 151 USCG, DHS) SEC. 3512. Conveyance of Obsolete Vessels Under Title V, Merchant Marine Act, 1936 (P.L. 108-136) Maritime Administration Authorization Act for Fiscal Year 2001 (Calendar No. 686 Report 106-45) SEC. 3516. Authority to Convey Obsolete Vessels to United States Territories and Foreign Countries for Reefing (P.L.108-136) FY 04 Depart Of Defense Authorization Act Memorandum of Agreement between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy, Program Executive Office - Ships (PMS 333) October 14, 2003 Memorandum of Agreement between Department of the Navy and Department of Transportation (P.L.106-259), SEC 8136 October 20, 2000 Memorandum of Agreement between Department of the Navy and Department of Transportation February 28, 2003 (P.L. 108-7) Section 102 of Division M of the Consolidated Appropriations Resolution for Fiscal Year 2003 Memorandum of Agreement between the U.S. Maritime Administration and the Program Executive Office - Ships regarding Preparation and Use of Maritime Administration Ships in Navy Fleet Sink Exercises September 2, 2003 (Appendix A -1 Agreement for specific ships August 22, 2005 Memorandum of Understanding between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy Supervisor of Shipbuilding, Conversion and Repair, Bath, Maine February 14, 2005 Agreement Between the Maritime Administration and the United States Environmental Protection Agency Export of National Defense Reserve Fleet Vessels that may contain Polychlorinated Biphenyls for Scrapping outside the United States October 27, 1997 Occupational,Safety & Health Administration Memorandums of Agreement between the Department of Defense Navy and Defense Logistics Agency and the Department of Transportation US Maritime Administration and the Department of Labor Occupational Safety and Health Administration and the Environmental Protection Agency Office of Enforcement and Compliance Assurance on "Implementation of the Recommendations On Coordination and Information Sharing of the Report of the Interagency Panel on Ship Scrapping November 1999"

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Significant evaluation ship disposal by the federal government began in 1994, and increased in both scope and frequence beginning in fiscal year 2001. Recent independent evaluations of the program include two separate Government Accountability Office engagements, a review by the Department of Transportation Inspector General, and an independent evaluation by RAND in 2001 to evaluate disposal options available to both the Navy's and the Maritime Administration's ship disposal programs.

Evidence: RAND, Disposal Options for Ships 2001 http://www.rand.org/pubs/monograph_reports/MR1377/ Federal Surplus Ships: Government Efforts to Address the Growing Backlog of Ships Awaiting Disposal (Letter Report, 10/22/98, GAO\NSIAD-99-18) http://www.fas.org/man/gao/nsiad-99-018.htm Reported Agency Actions and Plans to Address 2001 Management Challenges And Program Risks (Government Accountability Office-03-225, October 2002) http://www.gao.gov/new.items/d03225.pdf United States Government Accountability Office Report "Maritime Administration Improved Program Management Needed to Address Timely Disposal of Obsolete Ships" (Government Accountability Office-05-264) March 2005 Follow-up Information Needed for Ship Disposal Alternatives Government Accountability Office Engagement Report (350655) November 29, 2005 Follow-up Information Needed for Ship Disposal Alternatives Government Accountability Office Engagement Report (350655) January 2006 Maritime Administration Environmental Liability Calculation Report Period Ending December 23, 2005 Office of Inspector General Audit Report on the Program for Scrapping Obsolete Vessels Report Number: MA-2000-067 March 10, 2000 Top Management Challenges Department of Transportation Repprt Number: PT-2003-012 January 21, 2003 http://www.oig.dot.gov/item.jsp?id=977

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: Budget requests are based annual output targets and actual output performance in prior fiscal years. Long-term perfomance measures have not previously been considered in budget requests and the fiscal year 2007 budget was lacking tranparency with regard to the relationship between resource needs and the significant unobligated balance carried forward from fiscal year 2006 into fiscal year 2006. See the explanation for question 3.3 for a more detailed discussion of the unobligated balance carry forward.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 Maritime Administration Budget Estimates Fiscal Year 2007 Title XXXV Maritime Administration SEC. 3501 Authorization of Appropriations for Fiscal Year 2006 United States Government Accountability Office Report "Maritime Administration Improved Program Management Needed to Address Timely Disposal of Obsolete Ships" (GAO-05-264) March 2005 http://www.gao.gov/new.items/d05264.pdf Follow-up Information Needed for Ship Disposal Alternatives Government Accountability Office Engagement Report (350655) November 29, 2005 Follow-up Information Needed for Ship Disposal Alternatives Government Accountability Office Engagement Report (350655) January 2006

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: The strategic planning challenges facing the program, especially those related to external environmental regulation and legal challenges, continue to be significant in that they have a profound affect on both the rate of ship removals/disposals and the cost-effectiveness of the program's disposal activities. The Program has taken meaningful steps to maximize both the rate of ship disposal and the return on the resources available to the Program. This is best demonstrated by the long-term and annual performance goals and measures developed to gage program progress and peformance. These goals and measures are presented in detail in the explanations to questions 2.1 and 2.3, respectively. These goals are also supportive of the Comprehensive Management Plan and support a long-term goal to eliminate the backlog of vessels from the 1990s, a long-term goal for removal of all high and medium priority vessels and a long-term goal for maintaining only low priority vessels in the vessel inventory in the long-term.

Evidence: Memorandum of Agreement between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy, Program Executive Office - Ships (PMS 333) October 14, 2003 Memorandum of Agreement between Department of the Navy and Department of Transportation (P.L. 106-259, SEC 8136) October 20, 2000 Memorandum of Agreement between Department of the Navy and Department Of Transportation (P.L. 108-7, SEC 102 of Division M of the Consolidated Appropriations Resolution for Fiscal Year 2003) February 28, 2003 Memorandum of Agreement between the U.S. Maritime Administration and the Program Executive Office - Ships regarding Preparation and Use of Maritime Administration Ships in Navy Fleet Sink Exercises September 2, 2003 (Appendix A -1 Agreement for specific ships August 22, 2005) Memorandum of Understanding between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy Supervisor of Shipbuilding, Conversion and Repair, Bath, Maine February 14, 2005 Agreement Between the Maritime Administration and the United States Environmental Protection Agency Export of National Defense Reserve Fleet Vessels that may contain Polychlorinated Biphenyls for Scrapping outside the United States October 27, 1997 Occupation Safety & Health Administration Memorandums of Agreement between the Department of Defense Navy and Defense Logistics Agency and the Department of Transportation US Maritime Administration and the Department of Labor Occupational Safety and Health Administration and the Environmental Protection Agency Office of Enforcement and Compliance Assurance on "Implementation of the Recommendations On Coordination and Information Sharing of the Report of the Interagency Panel on Ship Scrapping November 1999" Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 (Section VII - External factors and Mitigation Plans)

Has the agency/program conducted a recent, meaningful, credible analysis of alternatives that includes trade-offs between cost, schedule, risk, and performance goals, and used the results to guide the resulting activity?

Explanation: RAND's 2001 report includes estimated costs of ship disposal alternatives along with a comprehensive analysis of each option and its feasibility. Program management has used this analysis to guide subsequent contracting and planning activity. The Maritime Administration's October 2005 Report to Congress on the ship disposal program includes an exhaustive list of ship disposal alternatives listing potential and actual problems, trade-offs, costs, scheduling conflicts and performance goals issues. Similarly, the Maritime Administration Comprehensive Management Plan lists disposal options, qualifying each with challenges and cost information (when available). Moreover, as explained in the explanation to question 3.3, many of the external factors that affect the industry and signifanctly affect the program's effectiveness are dynamic and not easily predictable, particularly for timeframes beyond one year. Therefore, program managers also conduct analysis on an ongoing basis of all alternatives, factors and variables to guide resulting disposal actions. This ongoing analysis occurs on two levels: (1) the feasibility/availability of disposal alternatives, and (2) the awarding of disposal contract based on "best value". Trade-offs of cost, schedule, risk and performance are considered at both levels in order to make decisions that lead to environmentally sound, cost-effective and expedited ship disposal.

Evidence: RAND, Disposal Options for Ships 2001 http://www.rand.org/pubs/monograph_reports/MR1377/ Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 (including Quarterly Executive Summaries and Ship Specific Disposal Recommendations) - This annual plan is developed by the Ship Disposal Program and reviewed and approved by the Maritime Administrator as a cost-effective and feasible short and long-term strategy for the disposal of Maritime Administration's obsolete ships that is in agreement with Maritime Adminstration policies. Strategy and performance elements of this plan are updated and presented to the Administrator as a quarterly executive summary of the Program's progress and status relative to this plan. The quarterly plan is necessary in order to stay current with the many variables that affect the selection and award of ships for disposal. In addition to the annual plan and the quarterly updates, ship specific disposal recommendations are developed throughout the year for the Administrator's review and concurrence prior to the award or transfer of any vessels for disposal via the various disposal alternatives pursued by and available to the Program. Program Office Award Recommendations to the Office of Acquisition - Award recommendations, in the case of fee-for-service and vessel sales, are developed by the Program Office and submitted to the Contracting Officer. The recommendations are based on the best-value to the government in the case of fee-for-service awards and based on best price for vessel sales. Best-value determinations consider cost, schedule, past performance, production throughput and capacity. Federal Surplus Ships: Government Efforts to Address the Growing Backlog of Ships Awaiting Disposal (Letter Report, 10/22/98, GAO\NSIAD-99-18) http://www.fas.org/man/gao/nsiad-99-018.htm Reported Agency Actions and Plans to Address 2001 Management Challenges and Program Risks (Government Accountability Office-03-225, October 2002) http://www.gao.gov/new.items/d03225.pdf

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: Performance information is collected from all partners responsible for the disposal of obsolete National Defense Reserve Fleet ships, regardless of the disposal method, during the proposal, bidding and performance phases of each disposal project. At the individual project level, contractual performance issues are frequent and varied and; historically, domestic ship recycling contractors have had difficulty completing the Maritime Administration dismantling projects within the agreed upon period of performance. Program management uses the contractor' biweekly progress report to guage the success of individual projects. If schedule slippage or another performance issue of concern is indicated, management can initiate oversight activities to induce improved performance. Performance information collected from contractors also supports management decision-making related to the number and location of vessels to be bid, the timing of bid requests, and efforts by the Maritime Administrtion to increase the number of qualified domestic contractors available from which to solicit bids. It is noteworthy that the number of qualified domestic contractors has been increased from a total of three in 2001 to seven in 2006.

Evidence: Sales Contract between the United States of America and ESCO Marine, Inc. for the Sale of the Obsolete Vessel Meacham October 8, 2004 Fee-For-Sales Contract for the Vessel Santa Lucia August 18, 2005 ESCO Marine Inc. Vessel Tioga County Bi-Weekly Report Period December 11 - December 24, 2005 ESCO Marine Inc. Vessel Tioga County Closeout Report January 4, 2006 Ship Disposal Program Dismantling Desk Guide for Ship Disposal Project Managers Ship Disposal Program Environmental, Safety & Health Project Desk Guide

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: Program managers are evaluated in their performance plans, in part, on program performance. Further accountability is present on continious basis with the program's formal semi-annual reporting requirements to the Congress and even more frequent inquiries from Congressisonal members and their staffs as to progress toward perfomance goals and other specific program issues. Memorandums of agreement developed and executed with the U.S. Navy, Environmental Protection Agency, and Occupational Safety and Health Administration document federal government partners accountabilities for performance results. The Maritime Administration holds its contractor partners accountable for their performance under ship disposal contracts and applies contract sanctions as remedies to contractor schedule overruns and performance shortfalls. These sanctions include issuance of quality deficiency notices/reports, application of liquidated damages, and decreases in contract payments. In addition, historical contractor performance is documented and becomes a consideration in future contract award decisions, in contract requirements related to performance bonds, in contract requirements related to payment bonds and in amount of contract holdback or retainage.

Evidence: Memorandum of Agreement between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy, Program Executive Office - Ships (PMS 333) October 14, 2003 Memorandum of Agreement between Department of the Navy and Department of Transportation (P.L. 106-259, SEC 8136) October 20, 2000 Memorandum of Agreement between Department of the Navy and Department Of Transportation (P.L. 108-7, SEC 102 of Division M of the Consolidated Appropriations Resolution for Fiscal Year 2003) February 28, 2003 Memorandum of Agreement between the U.S. Maritime Administration and the Program Executive Office - Ships regarding Preparation and Use of Maritime Administration Ships in Navy Fleet Sink Exercises September 2, 2003 (Appendix A -1 Agreement for specific ships August 22, 2005) Memorandum of Understanding between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy Supervisor of Shipbuilding, Conversion and Repair, Bath, Maine February 14, 2005 Agreement Between the Maritime Administration and the United States Environmental Protection Agency Export of National Defense Reserve Fleet Vessels that may contain Polychlorinated Biphenyls for Scrapping outside the United States October 27, 1997 Occupaton Safety & Health Administration Memorandums of Agreement between the Department of Defense Navy and Defense Logistics Agency and the Department of Transportation US Maritime Administration and the Department of Labor Occupational Safety and Health Administration and the Environmental Protection Agency Office of Enforcement and Compliance Assurance on "Implementation of the Recommendations On Coordination and Information Sharing of the Report of the Interagency Panel on Ship Scrapping November 1999" Sales Contract between the United States of America and ESCO Marine, Inc. for the Sale of the Obsolete Vessel Meacham October 8, 2004 Fee-For-Sales Contract for the Vessel Santa Lucia August 18, 2005 Ship Disposal Program Dismantling Desk Guide for Ship Disposal Project Managers Ship Disposal Program Environmental, Safety & Health Project Desk Guide Maritime Administration Ship Disposal Quality Deficiency\Concern Notice for the Vessel General Walker October 27, 2005 Marine Metal Inc. increase in payment withholding for the Vessel General Darby December 14, 2005 NAVY\Maritime Administration Ship Disposal Meeting June 7, 2005 Agenda NAVY\Maritime Administration Disposal Meeting June 7, 2005 Minutes Request to the Eenvironmental Protection Agency and Occupational Safety & Health Administration requesting facility compliance history for the period 2001-2005 Maritime Administration Contractor Performance Report

Are funds (Federal and partners') obligated in a timely manner, spent for the intended purpose and accurately reported?

Explanation: Program funds are obligated consistently with the overall program plan; however, in the most recent fiscal year, 67% of appropriated funding remained unobligated at year end. This is partially the result of the program's transition to a different procurement services method recommended by the Government Accountability Office, a six-month period during which no contract were awarded. Market condititions always affect program outputs and contributed to the magnitude this unobligated balance. Domestic competition was robust with continued strong prices in the international scrap steel market. This resulted in significantly lower the cost-per-ton disposal rates in the contracts awarded, with contracts were awarded for the disposal of twenty ships, 33% more than the target of fifteen. The $13 million unobligated balance will be carried over and will allow the Maritime Administation to level their workload by awarding contracts for additional obsolete ships in the first and second quarters of FY 2006 while awaiting the FY 2006 appropriation. See the explanation to question 1.5 supra for additional detail on the percentage of funding spent directly on ship disposal contracts and the explanation to question 3.6 below for additional detail regarding financial management and reporting procedures.

Evidence: Fee-For-Sales Contract for the Vessel Santa Lucia August 18, 2005 Marine Metal Inc. increase in payment withholding for the Vessel General Darby December December 14, 2005 ESCO, Marine Inc. Letter of Default Bay Bridge, LLC Invoice for the Vessel Preserver January 6, 2006 Maritime Administration Contractor Final Evaluation Report for Marine Metals, Inc. June 24, 2004 - April 18, 2005

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: Fee for service (recycling) procurements and vessel sales for recycling are both accomplished through competitive sourcing with associated cost comparisons. Fee-for-service awards are made on a best-value to the government basis to pre-qualified disposal facilities. Vessel sale awards are made to the highest qualified bidder. All proposals and bids, whether fee-for-service or vessel sales, are submitted utilizing the Maritime Administration's Virtual Office of Acquisition, an electronic system that is accessed through the internet. The system provides a complete start-to-finish documented audit trail of all proposals, bids, proposal evaluations (price, technical & environmental, safety & health) and award notifications. The system ensures fair and accurate competitive sourcing and cost-comparisons. Fee for service procurement also considers past performance, production throughput capacity and schedule. Contractor incentives are built into the fee-for-service and the sales contracts including a provision that proceeds from the sale of recyclable steel are retained by the contractor, an incentive to maximize production throughput and schedule to take advantage of favorable prices for recycled steel. Cost competitive sourcing measures enable the program to measure and achieve cost effectiveness (rate of vessel removal) and efficiencies (cost-per-ton) within the limited domestic market. Recent data shown the Performance Measures Section indicate a decreasing trend in cost per ton of actual verses target and demonstrate the efficacy of the procedures herein described, as well as the impact of market conditions on program performance.

Evidence: Virtual Office of Acquisition cite: https:\\voa.marad.dot.gov\ Ship Disposal Standing Quotation Price Analysis August 4, 2005 MARSHFIELD VICTORY, PAWCATUCK, PRESERVER, SANTA LUCIA, WACCAMAW Program Office Award Recommendation to the Office of Acquisition for Vessels CONNECTICUT, NEMASKET, MONTICELLO & TALUGA July 26, 2005

Does the program collaborate and coordinate effectively with related programs?

Explanation: Since the establishment of the Maritime Administration's Program in 2001, the Maritime Administration has coordinated effectively with the U.S Navy's ship disposal program including quarterly meetings to discuss best management practices and to explore ways to share resources and resolve problems. These collaborative meetings produces several memorandums of agreement to address artificial reefing, deep-sinking and project level oversight of common contractor facilities. Program management also initiated the formation of the Federal Reefing Team in collaboration with the Environmental Protection Agency, U.S. Navy, U.S. Coast Guard and other federal agencies for the purpose of streamlining the review and approval process for applications to use Maritime Administration and Navy ships as artificial reefs.

Evidence: Memorandum of Agreement between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy, Program Executive Office - Ships (PMS 333) October 14, 2003 Memorandum of Agreement between Department of the Navy and Department of Transportation (P.L. 106-259, SEC 8136) October 20, 2000 Memorandum of Agreement between Department of the Navy and Department of Transportation (P.L. 108-7, SEC 102 of Division M of the Consolidated Appropriations Resolution for Fiscal Year 2003) February 28, 2003 Memorandum of Agreement between the U.S. Maritime Administration and the Program Executive Office - Ships regarding Preparation and Use of Maritime Administration Ships in Navy Fleet Sink Exercises September 2, 2003 (Appendix A -1 Agreement for specific ships August 22, 2005) Memorandum of Understanding between the U.S. Department of Transportation Maritime Administration and the U.S. Department of the Navy Supervisor of Shipbuilding, Conversion and Repair, Bath, Maine February 14, 2005 Agreement between the Maritime Administration and the United States Environmental Protection Agency Export of National Defense Reserve Fleet Vessels that may Contain Polychlorinated Biphenyls for Scrapping outside the United States October 27, 1997 Occupational Safety & Health Administration Memorandums of Agreement between the Department of Defense Navy and Defense Logistics Agency and the Department of Transportation US Maritime Administration and the Department of Labor Occupational Safety & Health Administration and the Environmental Protection Agency Office of Enforcement and Compliance Assurance on "Implementation of the Recommendations On Coordination and Information Sharing of the Report of the Interagency Panel on Ship Scrapping November 1999" Navy\Maritime Administration Ship Disposal Meeting Agenda June 7, 2005 Navy\Maritime Administration Ship Disposal Meeting Minutes June 7, 2005 Draft National Guidance: Best Management Practices for Preparing Vessels Intended to Create Artificial Reefs June 24, 2004

Does the program use strong financial management practices?

Explanation: The Ship Disposal Program uses segragation of responsibilities, frequent recycling facility visits, bi-weekly data collection from disposal facility contractors, and other internal control policies and procedures to ensure that funds are being used appropriately and payment amounts are timely and accurate given the services rendered. Payments are made on a monthly basis as defined in each disposal contract and are based on the percentage completed as determined at bi-weekly progress meetings, on-site inspections at and assessments of reports and schedules required by the contract. Each contractor submits a monthly progress bill detailing and certifying the amount of services rendered for the month. These bills are processed through the program's Contracting Officer's Technical Representative and Senior Program Analyst to verify that the stated work was accomplished and the accuracy of the payment requested. Progress billings then to the Administrative Contracting Officer for payment approval payment and then to the Funds Control Officer to authorize payment to the contractor against the appropriate accounting code for ship disposal. Independent evaluations by the Government Accountability Office and audits/reviews by the Department of Transportation Inspector General, including those cited as evidence to the explanation for question 2.6, supra, have not reported material weaknesses in either internal controls or other aspects of financial management and reporting. In addition, the Department Of Transportation Inspector General tracks Maritime Administration's ship disposal contract values in order to determine the Department's environmental financial liability, which is based on the projected costs of disposal of the ships remaining in Maritime Administration's non-retention fleets that are not under contract for disposal.

Evidence: Maritime Administration Environmental Liability Calculation report Period Ending December 23, 2005 Fee-For-Sales Contract for the Vessel Santa Lucia August 18, 2005 Maritime Administrative Order 400-10 "Cash Management" December 21, 1981 Maritime Administrative Order 400-10 "Cash Management Amendment 1" August 16, 1999 Maritime Administrative Order 410-1 "Control of Funds June 17, 1983 Maritime Administrative Order 420-1 "Processing and Controlling Disputed Receivables and Claims" March 10, 2000

Has the program taken meaningful steps to address its management deficiencies?

Explanation: A Government Accountability Office (GAO) report issued in 2005 recommended some procurement and administrative changes to the program. While program management did not completely concur with the GAO's findings and recommendations, the program did change its method of procurement to the use of simplified commercial procedures. The program also developed an annual comprehensive management plan and leadership concurrence procedures to address the GAO's concern regarding the adequacy of documentation of the Maritime Administration's ship disposal strategy and plans, and the documentation of the Maritime Administration leadership's concurrence in the execution of those plans. While the Maritime Administration did not concur with the GAO's conclusion that documentation of its integrated disposal strategy and plans was inadequate, the Maritime Administration did agree that additional documentation would provide those not closely involved with the program a greater insight and understanding of the Maritime Administration's ship disposal strategy and plans.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 United States Government Accountability Office Report "Maritime Administration Improved Program Management Needed to Address Timely Disposal of Obsolete Ships" (Government Accountability Office-05-264) March 2005 Leadership Concurrence Record "Ship Specific Disposal Recommendations"

Is the program managed by maintaining clearly defined deliverables, capability/performance characteristics, and appropriate, credible cost and schedule goals?

Explanation: Congress has clearly defined the program's long-term deliverables and goals. The Maritime Administration has translated those into plans, procedures, short-term goals, and partnering agreements that have resulted in cost-effective ship disposals. Individual contracts are awarded for each vessel to be disposed. The program pays a firm-fixed price for each vessel disposed of under fee-for-service contracts. Ship disposal contracts clearly delineate deliverables and performance requirements set to project milestones and production schedules defined in the contracts. The Maritime Administration manages its contracts and projects through the use of assigned Marine Industrial Specialists, who also act as Contracting Officer's Technical Representatives, for each project to ensure that deliverables and other performance elements such as physical progress, costs and schedules are adhered to.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 Sales Contract between the United States of America and ESCO Marine, Inc. for the Sale of the Obsolete Vessel Meacham October 8, 2004 Fee-For-Sales Contract for the Vessel Santa Lucia August 18, 2005 ESCO Marine Inc, Vessel Tioga County Bi-Weekly Report December 11 - December 24, 2005 ESCO Marine Inc. Vessel Tioga County Closeout Report January 4, 2006 Ship Disposal Program Dismantling Desk Guide for Ship Disposal Project Managers Ship Disposal Program Environmental, Safety & Health Project Desk-Guide Program Office Award Recommendatons to the Office of Acquisition

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: The Maritime Administration's strategy has been to dispose of as many high prioirty ships as possible given the resources available and the disposal options available. The desired outcome of this strategy was to mitigate the environmental threat represented ships with the most deteriorated hulls accumulated in the non-retention fleet 1990's and prior. This strategy was successful notwithstanding 72 additional ships being downgraded and added to the disposal queue. Progress can be seen with the Maritime Administration's first two long-term goals, which were established in FY 2001, and are: ?? To remove 100% of the vessels designated as high priority prior to the 30 September 2006 mandated deadline. From FY01 to present, a total of 40 ships have been designated as high priority. With the exception of 3 ships currently on donation/historical interest hold and not available for disposal, this goal has been accomplished. ?? To remove 100% of the original 39 vessels listed as priority ships in the congressional mandate legislation, and which were in the Maritime Administration's inventory at that time. This goal has also been achieved with the removal of 37 of the 39 vessels listed. The exceptions are one ship that is not available for disposal due to being on donation/historical interest hold and one ship that was reassessed and determined to be low priority based on its condition. The Maritime Administration established a long-term performance goal in 2006 to maintain the level of high priority vessels to not more than 5% of the fleet. To date, in FY 2006, the Maritime Administration is exceeding the 5% goal. The final actual percentage will be computed at the end of FY 2006 but it is currently at less than 1%. The Maritime Administration also established a long-term performance goal to remove at least the number of ships that are designated as obsolete and enter the disposal queue on an annual basis. This measure is based on a moving annual average of vessels designated as non-retention in the Maritime Administration's vessel inventory. The target for each fiscal year is the ratio of incoming vessels to the number of vessels removed. The moving annual average is recalculated each year and the target ratios updated accordingly. A coefficient of 1.0 is the established target for each year with actuals < 1.0 indicating more vessels were removed than entered the program and > 1.0 less vessels. For FY 2006, to date, the program has exceeded the target coefficient of 1.0. Presently, the actual coefficient is .75 and for the balance of the year, the actual can only remain the same or improve because no additional vessels will be received this year.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 Maritime Administration Budget Estimates Fiscal Year 2007

Does the program (including program partners) achieve its annual performance goals?

Explanation: The Maritime Administration's annual performance goals are developed to cost-effectively maximize the number of ship disposal awards, ship removals and ship disposals given the resources available and tempered by external factors such as industrial capacity, market price of scrap steel and disposal options available to the program. The established annual performance goals are as follows: ?? The number of contract awards for the removal of obsolete vessels from the National Defense Reserve Fleet sites for subsequent disposal. ?? The number of obsolete vessels removed from the National Defense Reserve Fleet sites for subsequent disposal. ?? The number of obsolete vessels disposed of (completions) from the National Defense Reserve Fleet sites. The Maritime Administration has significantly exceeded its annual award and removal goals in four of the last five years and its disposal goals in three of the last five years. Further the Maritime Administration has significantly exceeded its efficiency measure of "cost-per-ton" for the last four years. Further, as shown in the data presented in the PART Performance Measures Section the total of the annual goals for all three performance measures over the last five years shows the "actuals" have significantly exceeded the "targets".

Evidence: Number of obsolete vessels awarded, removed and disposed from the National Defense Reserve Fleet sites for subsequent disposal as listed in the PART Performance Measures Section.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: The Ship Disposal Program uses a cost-per-ton efficiency measure that indicates improved cost-effectiveness in achieving program goals for the period 2001 through 2005. Though influenced by market conditions, such as the price of scrap steel, improved disposal rates are also due to program management efforts to take advantage of those market conditions and to increase compitition. During the last five years, the program has qualified three additional contractors for ship disposal awards and vigorously pursued vessel export as a disposal option. In 2003, within a week after the award of a contract to a firm in the United Kingdom became public, cost proposals from domestic facilities were reduced by 50% and have remained at that level or lower ever since.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 (Section VII - External factors and Mitigation Plans) Maritime Administration Budget Estimates Fiscal Year 2007

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: The most comparable program to the Maritime Administration's is the U.S. Navy's Inactive Ships program. The purpose of both programs is to cost-effectively dispose of its obsolete ships -- the Navy its combatant ships and the Maritime Administration its merchant-type ships. The evidence below shows the number of ships awarded and average cost-per-ton for recycling by the Maritime Administration from program inception through 2005 and the Navy from 1999 through 2005. Recycling is the predominate method of disposal for the Maritime Administration and one of two primary methods of disposal for the Navy. While there are inherent differences between combatant and merchant ships in terms of construction, and a notable degree of difference in construction materials that significantly impacts recycling costs, those differences do not entirely reconcile the large disparity in cost-per-ton between Navy and Maritime Administration ships. The comparison in recycling costs between the two programs reflects favorably on the Maritime Administration's ability to cost-effectively dispose of its obsolete ships.

Evidence: Navy Cost PerTon: 1999, Ships Awarded (4) Cost Per Ton ($1226); 2000, Ships Awarded (2) Cost Per Ton ($934); 2001, Ships Awarded (13), Cost Pert Ton ($796); 2002, Ships Awarded (5), Cost Per Ton ($657); 2003, Ships Awarded (6), Cost Per Ton ($426); 2004, Ships Awarded (6), Cost Per Ton ($426); 2005, Ships Awarded (8), Cost Per Ton ($37). Total Awarded (44). Maritime Administration: 2001, Ships Awarded (6), Cost Per Ton ($253); 2002, Ships Awarded (2), Cost Per Ton ($127), 2003, Ships Awarded (24), Cost Per Ton ($133); 2004, Ships Awarded (13), Cost Per Ton ($103); 2005, Ships Awarded (20), Cost Per Ton ($109). Total 65.

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: The Department of Transportation Office of Inspector General issued the results of their audit in "Report on the Program for Scrapping Obsolete Vessels" in March 2000. The objectives of this review were to evaluate the Maritime Administration's progress in meeting a legislative mandate to dispose of obsolete vessels in the National Defense Reserve Fleet by 30 September 2001; to identify what action was taken toward meeting the mandate; and to identify potential alternatives to assist the Maritime Administration in meeting its goals. The Inspector General's Office was satisfied with the progress made. The DOT IG had also listed the Ship Disposal Program on the Department of Transportation's top ten management challenges in 2001 and 2002; hovever, in their January 2003 report, the program was removed due to the significant progress achieved. The Government Accountability Office recognized the Maritime Administration's progress in disposing ships through recycling and noted in particular the progress in disposing of the majority of the highest priority ships which present the greatest threat to the environment in their March 2005 report.

Evidence: Federal Surplus Ships: Government Efforts to Address the Growing Backlog of Ships Awaiting Disposal (Letter Report, 10/22/98, GAO\NSIAD-99-18) http://www.fas.org/man/gao/nsiad-99-018.htm Reported Agency Actions and Plans to Address 2001 Management Challenges and Program Risks (GAO-03-225, October 2002) http://www.gao.gov/new.items/d03225.pdf Follow-up Information Needed for Ship Disposal Alternatives Government Accountability Office Engagement Report (350655) January 2006 Maritime Administration Environmental Liability Calculation Report Period Ending December 23, 2005 Office of Inspector General Audit Report on the Program for Scrapping Obsolete Vessels Report Number: MA-2000-067 March 10, 2000 Top Management Challenges Department of Transportation Report Number: PT-2003-012 January 21, 2003 http://www.oig.dot.gov/item.jsp?id=977

Were program goals achieved within budgeted costs and established schedules?

Explanation: The Maritime Administration has achieved its program goals shown in Section II, supra, within budgeted costs and established schedules. Since being directly funded in FY 2003, the Maritime Administration has exceeded its annual goal of contract awards, which is the ouput measure that is directly linked to the expenditure of the program's annual appropriated funds.

Evidence: Report to Congress on the Progress of the Vessel Disposal Program October 2005 Comprehensive Management Plan for the Disposal of Maritime Administration Non-Retention Vessels FY 2006 Maritime Administration Budget Estimates Fiscal Year 2007