Audit Reports

The Maritime Administration (MARAD) provides ships from the National Defense Reserve Fleet as training vessels for cadets at the State maritime academies to become licensed mariners. In fiscal year 2015, MARAD began the design of National Security Multi-Mission Vessels (NSMV) to replace five training ships nearing the end of useful life. Congress directed MARAD to use an entity other than itself to contract for NSMV construction using commercial design standards and construction practices and has thus far appropriated approximately $1.3 billion for the NSMV program. Given this significant investment and MARAD’s support of national security, we initiated this audit. Our objective was to assess MARAD’s management of the NSMV Program, including oversight of the vessel construction manager (VCM) contract and use of commercial design standards and commercial construction practices consistent with the best interests of the Federal Government.

 

Vulnerabilities in MARAD’s NSMV program management may hinder achievement of program goals. Though it has taken some risk mitigation steps, MARAD’s program risk management is inadequate. Its risk assessment lacked complete analysis of important elements such as individual risk likelihood, consequences, and mitigation strategies. It also does not sufficiently update and monitor program risks. These deficiencies could affect the Agency’s ability to achieve timely and cost-effective vessels that meet its needs. Furthermore, MARAD has not reviewed complete versions of three required oversight plans that describe key areas of the VCM’s strategy for managing and overseeing NSMV design and construction. Incomplete plans impede MARAD’s ability to effectively oversee the VCM. Lastly, delays in the VCM contract and shipyard subcontract awards may increase MARAD’s exposure to program risks. Later-than-planned awards reduced the time between first vessel delivery and placement into service from 17 months to 1. This lost cushion increases the possibility that the VCM and shipyard will not have enough time to address issues and that contingency plans for late vessel delivery will be implemented, thus adding cost to the program’s billion-plus dollar investment.

 

MARAD concurred with both recommendations to improve its management of the NSMV Program.