GAO: CORPS? MANAGEMENT OF HOPPER DREDGE FLEET NEEDS UPDATING

GAO: CORPSÆ MANAGEMENT OF HOPPER DREDGE FLEET NEEDS UPDATING    The U.S. Government Accounting Office recommends the Army Corps of Engineers conduct a comprehensive analysis of the costs and benefits for operating its remaining hopper dredge fleet.
   Congress requested the GAO review of the Corps’ hopper dredge fleet under the 2002 Conference Report for the Energy and Water Development Appropriation Act.
   In 1978, Congress passed legislation to encourage private-sector participation in dredging, which resulted in the Corps reducing its hopper dredger fleet from 14 to four vessels. Corps remaining hopper dredges are the 'Wheeler,' 'McFarland,' 'Essayons' and 'Yaquina.'
   Since then, five private sector dredging firms have accumulated a fleet of 16 hopper dredges. These firms perform 78 percent of the nation’s hopper dredging maintenance work.
   While there are different types and sizes of dredges, the hopper dredges perform much of the deepening of the nation’s ports, harbors and access channels for deepwater maritime traffic.
   In GAO’s interviews with private-sector dredge operators, it was agreed that the Corps needs to retain at least a small hopper dredge fleet to:
   * Provide additional dredging capacity during peak demand years.
   * Meet emergency dredging requirements.
   * Provide an alternative when industry provides no bids or when its bids exceed the government cost estimates by more than 25 percent.
   The GAO, however, found the Corps’ cost estimation process is “based on some outdated contractor cost information and an expired policy for calculating transit costs.”
   “The restrictions on the use of the Corps’ hopper dredge fleet that began in fiscal year 1993 have imposed costs on the Corps’ dredging program, but have thus far not resulted in proven benefits,” the GAO said.
   The Corps estimates that it spends $12.5 million a year to maintain the 'Wheeler' in ready reserve, of which about $8.4 million is needed to cover costs while the vessel is idle.
   “A possible benefit of restrictions on the Corps’ vessels is that they could eventually encourage existing firms to add dredging capacity or more firms to enter the market, which, in turn, may promote competition, improve dredging efficiency, and lower prices,” the GAO said.
   “Although there has been an increase in the number of private industry hopper dredges since the restrictions were first imposed, the number of private firms in the hopper dredging market has decreased,” the agency said. “In addition, during the same time period, the number of contractor bids per Corps solicitation has decreased, while the number of winning bids exceeding the Corps’ cost estimates has increased.”
   The Alexandria, Va.-based Dredging Contractors of America generally agrees with the GAO’s findings. However the industry group “strongly disagrees that reducing the scheduled use of Corps hopper dredges has not resulted in proven benefits.”
   “Available information and data show that benefits have resulted,” the group added. “In particular, benefits and competition have been increasing since the Corps hopper dredge Wheeler was placed in ready reserve.”