Maritime Security: Substantial Work Remains to Translate New
Planning Requirements into Effective Port Security (30-JUN-04,
GAO-04-838).
The Maritime Transportation Security Act of 2002, as implemented
by the Coast Guard, calls for owners and operators of about 3,150
port facilities (such as shipping terminals or factories with
hazardous materials) and about 9,200 vessels (such as cargo
ships, ferries, and tugs and barges) to develop and implement
security plans by July 1, 2004. The Coast Guard intends to
conduct on-site compliance inspections of all facilities by
January 1, 2005, and all vessels by July 1, 2005, to ensure plans
are adequately implemented. The Coast Guard estimated the act's
security improvements would cost $7.3 billion over 10 years--most
of it borne by facility and vessel owners and operators. GAO was
asked to assess (1) the progress towards developing, reviewing,
and approving plans by July 1, 2004, (2) the Coast Guard's
monitoring and oversight strategy for ensuring that plans are
implemented, and (3) the accuracy of the Coast Guard's cost
estimate.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-04-838
ACCNO: A10659
TITLE: Maritime Security: Substantial Work Remains to Translate
New Planning Requirements into Effective Port Security
DATE: 06/30/2004
SUBJECT: Counterterrorism
Facility security
Harbors
Inspection
Maritime law
Monitoring
National preparedness
Physical security
Ships
Border security
Cost estimates
Homeland security
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GAO-04-838
United States General Accounting Office
GAO
Report to Congressional Requesters
June 2004
MARITIME SECURITY
Substantial Work Remains to Translate New Planning Requirements into Effective
Port Security
GAO-04-838
Highlights of GAO-04-838, a report to congressional requesters
The Maritime Transportation Security Act of 2002, as implemented by the
Coast Guard, calls for owners and operators of about 3,150 port facilities
(such as shipping terminals or factories with hazardous materials) and
about 9,200 vessels (such as cargo ships, ferries, and tugs and barges) to
develop and implement security plans by July 1, 2004. The Coast Guard
intends to conduct on-site compliance inspections of all facilities by
January 1, 2005, and all vessels by July 1, 2005, to ensure plans are
adequately implemented. The Coast Guard estimated the act's security
improvements would cost $7.3 billion over 10 years- most of it borne by
facility and vessel owners and operators. GAO was asked to assess (1) the
progress towards developing, reviewing, and approving plans by July 1,
2004, (2) the Coast Guard's monitoring and oversight strategy for ensuring
that plans are implemented, and (3) the accuracy of the Coast Guard's cost
estimate.
GAO recommends that the Coast Guard evaluate its initial compliance
efforts and use them to strengthen the compliance process for its
long-term strategy. As part of this strategy, the Coast Guard should
clearly define inspector qualifications and consider including unscheduled
and unannounced inspections and covert testing. The Coast Guard agreed.
www.gao.gov/cgi-bin/getrpt?GAO-04-838.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Margaret Wrightson at (415)
904-2200 or [email protected].
June 2004
MARITIME SECURITY
Substantial Work Remains to Translate New Planning Requirements into Effective
Port Security
Owners and operators have made progress in developing security plans for
their port facilities and vessels. However, the extent to which the Coast
Guard will have reviewed and approved the approximately 12,300 individual
plans by July 1, 2004, varies considerably. About 5,900 plans were being
developed under an option allowing owners and operators to self-certify
that they would develop and implement plans by July 1, using
industrydeveloped, Coast Guard-approved standards and templates. These
individual plans will not be reviewed before July 1 unless owners or
operators choose to submit them for review. The remaining 6,400 plans went
through a review process established by the Coast Guard. Every plan
required revisions, some of which were significant. As of June 2004-1
month before the deadline for implementation-more than half of the 6,400
plans were still in process. The Coast Guard took steps to speed up the
process and to allow facilities and vessels to continue operating with
less than full plan approval after July 1, as long as the Coast Guard was
satisfied with their progress.
The Coast Guard's strategy for monitoring and overseeing security plan
implementation will face numerous challenges. Whether the Coast Guard will
be able to conduct timely on-site compliance inspections of all facilities
and vessels is uncertain because questions remain about whether the Coast
Guard will have enough inspectors; a training program sufficient to
overcome major differences in experience levels; and adequate guidance to
help inspectors conduct thorough, consistent reviews. Another challenge is
to ensure inspections reflect assessments of the normal course of business
at facilities and aboard vessels.
The accuracy of the Coast Guard's $7.3 billion estimate for implementing
security improvements is likewise uncertain. The estimate, while a
goodfaith effort on the Coast Guard's part, is based on limited data and
on assumptions that are subject to error. The estimate should be viewed
more as a rough indicator than a precise measure of costs.
Port facilities pose many security concerns, given their size,
accessibility, and attractiveness as terrorist targets. Facilities like
these must have a security plan in place by July 1, 2004.
Source: Coast Guard.
Contents
Letter
Results in Brief
Background
Extent of Coast Guard Review and Approval of Individual Plans
Varies Widely Strategy for Monitoring and Oversight of Plan Implementation
Faces Numerous Challenges Cost to Comply with MTSA Is Uncertain
Conclusions Recommendation for Executive Action Agency Comments
1
4 6
11
20 27 30 32 32
Appendix I Appendix II Appendix III Objectives, Scope, and Methodology
Required Security Plan Items
Analysis of Coast Guard's Compliance Cost Estimates
Estimates Required Assumptions about Many Important
Components Many Assumptions Carry Limitations Limited Time to Estimate
Costs Precluded More Extensive Data
Collection and Analysis of Uncertainty Cost Estimate Spans Only 10 Years
and Does Not Include All Costs Questions Remain about Adequacy of Public
Comments to
Validate Cost Estimate
35
41
42
42 46
47 48
51
Appendix IV GAO Contacts and Staff Acknowledgments 52
GAO Contacts 52 Staff Acknowledgments 52
Tables
Table 1: Progress of Facility and Vessel Security Plan Review Under Option
A as of June 2004 17 Table 2: Port Stakeholders GAO Contacted at Port
Locations Reviewed 37 Table 3: Coast Guard Assumptions about Extent of
Prior Security Preparation 46
Figures
Figure 1: Location of U.S. Ports 9
Figure 2: Overview of the Two Options for Developing Security
Plans 13
Figure 3: Distribution of Individual Security Plans by
Development
Option 15
Figure 4: Projection of Estimated Costs, 2012-2022 49
Abbreviations
AMSC Area Maritime Security Committee
ASP Alternative Security Program
IMO International Maritime Organization
ISPS International Ship and Port Facility Security Code
MARSEC Maritime Security Condition System
MTSA Maritime Transportation Security Act
SOLAS International Convention for Safety of Life at Sea
This is a work of the U.S. government and is not subject to copyright
protection in the United States. It may be reproduced and distributed in
its entirety without further permission from GAO. However, because this
work may contain copyrighted images or other material, permission from the
copyright holder may be necessary if you wish to reproduce this material
separately.
United States General Accounting Office Washington, DC 20548
June 30, 2004
The Honorable Don Young
Chairman, Committee on Transportation
and Infrastructure
House of Representatives
The Honorable Frank A. LoBiondo
Chairman, Subcommittee on Coast Guard
and Maritime Transportation
Committee on Transportation and Infrastructure
House of Representatives
Since the terrorist attacks of September 11, 2001, the nation's 361 ports
have increasingly been viewed as potential targets for future attacks for
many reasons. For example, security experts remain concerned about the
potential for using the maritime transportation system as a conduit for
smuggling weapons of mass destruction or other dangerous materials into
the country. Further, cargo and cruise ships present potentially desirable
terrorist targets, given the potential for loss of life, ecological
destruction,
or disruption of commerce. And ports often are not only gateways for the
movement of goods, but also industrial hubs and close to population
centers, presenting additional opportunities for terrorists bent on urban
destruction. Coordinating a security response for this myriad of potential
targets is a daunting proposition, in part because so many different
stakeholders are involved. These stakeholders include law enforcement
and other government agencies at every level (federal, state, and local);
vessel owners and operators; railroads; port authorities; factories and
other businesses; and people who work in port areas or live nearby.
Although perspectives may vary, the specter of further terrorist incidents
has led to widespread agreement that port security should be
strengthened-and soon.
The Maritime Transportation Security Act (MTSA)1 contains much of the
federal government's approach to addressing these security
vulnerabilities.
Enacted in November 2002 and largely administered by the United States
Coast Guard, an agency within the Department of Homeland Security,
1P.L. 107-295, 116 Stat. 2064, 2066 (2002).
MTSA is designed, in part, to help protect the nation's ports and
waterways from terrorist attacks through a wide range of security
improvements. One of its central maritime transportation security
provisions is a requirement that security plans be developed and
implemented for specific facilities (such as factories, cargo terminals,
and power plants); certain individual cargo and passenger vessels; and
entire ports.2 The basic aim of such plans is to address potential
vulnerabilities that could be exploited to kill people, cause
environmental damage, or disrupt transportation systems and the economy,
by developing measures to mitigate these vulnerabilities. The Coast Guard
established regulations determining which facilities and vessels were to
be covered by these security planning requirements3 and consistent with
MTSA, set a deadline of July 1, 2004, for facility and vessel owners and
operators to operate under an approved or self-certified security plan.
Further, the Coast Guard intends to conduct on-site compliance inspections
of all facilities by January 1, 2005, and all vessels by July 1, 2005, to
ensure that they have satisfactorily implemented their plans. This
aggressive timeline for both developing and implementing security plans
reflects the seriousness of the port security issue. However, the timeline
also creates a substantial and immediate workload for the Coast Guard and
for owners and operators who collectively must develop plans for thousands
of facilities and vessels. The Coast Guard estimated that the security
improvements imposed by these requirements would likely cost port
stakeholders $7.3 billion over 10 years-most of it borne by facility and
vessel owners and operators.4
You asked us to examine the efforts of stakeholders and the Coast Guard in
carrying out these security plan requirements. Our objectives were to
assess (1) the progress made to develop, review, and approve facility and
2The portwide security plan, called an Area Maritime Security Plan, is to
be developed by the Coast Guard's local Captains of the Port and a
committee comprised of federal, state, and local agencies; law enforcement
and security agencies; and other port stakeholders such as owners and
operators of facilities and vessels, trade and labor organizations, and
railroad and trucking companies among others. The plan is designed to
provide a framework for communication and coordination among port
stakeholders and law enforcement officials. Our review focused on plans
being developed by entities other than the Coast Guard, and we, therefore,
do not discuss these area plans in this report. We will, however, be
addressing aspects of these plans in a subsequent report.
3See generally 33 C.F.R. Parts 101, 104, and 105. Motorboats and other
pleasure craft, for example, are generally, not subject to security plan
requirements, as are a variety of other types of vessels below certain
prescribed lengths or weights.
4This is the present value of costs incurred from 2003 to 2012. Unless
otherwise noted, all cost figures cited are present values.
vessel security plans by July 1, 2004; (2) the Coast Guard's monitoring
and oversight strategy for ensuring that facility and vessel security
plans are implemented; and (3) the accuracy of the Coast Guard's estimates
of costs for complying with MTSA security planning and implementation
requirements.
To address the first two objectives, we analyzed Coast Guard documents and
spoke with officials at Coast Guard headquarters with responsibilities for
the security planning process. We also visited seven port areas around the
country, choosing locations that reflected diversity in strategic
importance, geographic location, and local characteristics.5 During our
visits, we spoke with Coast Guard Captains of the Port;6 numerous local
stakeholders in the private sector; and government officials at the local,
state, and federal levels, to understand what progress had been made to
develop and implement security plans. We visited Coast Guard officials and
contractor staff responsible for reviewing and approving MTSArequired
security plans and examined the review and approval process used by the
Coast Guard to determine what internal controls were in place to monitor
the consistency of the process and ensure compliance with pertinent MTSA
requirements. Our work did not include reviewing ports outside the United
States or any "foreign-flagged" vessels-vessels registered in countries
other than the United States. To address the third objective, we
interviewed Coast Guard staff in charge of creating estimates of
compliance costs and performed economic simulations to examine the impact
of changing the assumptions the Coast Guard used in making its estimates.
We asked Coast Guard officials responsible for these cost estimates what
steps they took to ensure the reliability of the underlying data on which
the estimates were based. We also reviewed the public comments provided to
the Coast Guard on its estimates. Our work, which was conducted from June
2003 through June 2004, was done in accordance with generally accepted
government auditing standards.
5Appendix I describes our scope and methodology in more detail and
contains a list of ports we visited and port stakeholders we interviewed.
6The Captain of the Port is a Coast Guard officer who provides direction
to Coast Guard law enforcement activities within the general proximity of
the port in which assigned. Captains of the Port enforce, within their
respective areas, port safety and security and marine environmental
protection regulations. There are 45 Captains of the Port nationwide.
Results in Brief
Although owners and operators have made progress in developing security
plans, the extent to which the Coast Guard will have reviewed and approved
the approximately 12,300 individual facility or vessel plans by July 1,
2004, varies considerably. Owners and operators are developing about 5,900
plans under an option allowing them to self-certify that the plans will be
developed and implemented by July 1. In doing so, they are using standards
and templates their trade association had developed and the Coast Guard
had approved. Owners and operators who chose this option did not have to
submit their plans for review and approval. The Coast Guard's first look
at many of these plans will likely not come until after July 1, when
inspectors begin compliance inspections to ensure that plans have been
implemented. The remaining 6,400 plans, which were not developed through
the self-certification process, underwent a detailed review process for
which the Coast Guard hired contractors with security experience. The
contractors conducting much of the review found that all of these plans
needed to be revised, some extensively, and the Coast Guard concurred with
the contractors' findings. As of June 2004-1 month before the
deadline--more than half of these plans were still in process. To speed up
the process, the Coast Guard added more personnel and began working more
directly with owners and operators. Nonetheless, many of these plans will
not be approved by July 1. Under MTSA and Coast Guard regulations,
facilities and vessels without approved plans would have to cease
operations. However, MTSA and the regulations also allow the Coast Guard
to grant permission to such facilities and vessels to continue operating
for up to 1 year after the plans are submitted on the condition that they
continue to make sufficient progress through the review process toward the
approval of their plans. The Coast Guard is currently allowing such
facilities and vessels to operate through October 31, 2004.
In late May 2004, the Coast Guard issued its strategy for ensuring that
facility and vessel owners and operators implement the security activities
identified in their plans. It is clear that this strategy will face
several challenges, both in the short and longer term. One challenge is
the sheer size of the immediate effort: between July and December 2004,
the Coast Guard plans to conduct on-site inspections of every facility and
as many vessels as possible to ensure that owners and operators are
complying with the actions called for in their security plans. Inspectors
will have to make decisions about whether owners and operators have
identified all vulnerabilities and adequately addressed them. These
decisions are complicated, in part because owners and operators have
considerable choice in how to mitigate vulnerabilities and because the
Coast Guard will be seeing many of these plans for the first time. Other
challenges include
ensuring that enough inspectors are available, training them adequately,
and equipping them with useful guidance for making on-site inspection
decisions. In the short term, these challenges are formidable, because the
Coast Guard expects to handle the added July-December inspection load
mainly by using reservists with widely varying degrees of training and
experience. In the longer term, when the Coast Guard plans to conduct
annual compliance inspections for the approximately 12,300 facilities and
vessels, it faces the challenge of ensuring that owners and operators
continue implementing their plans. In this regard, our work has shown that
there are options the Coast Guard could consider beyond regularly
scheduled visits, such as unscheduled, unannounced visits and covert
testing to help ensure owners and operators do not mask security problems
in ways that do not represent the normal course of business.
The accuracy of the Coast Guard's $7.3 billion estimate of maritime
industry costs for developing and implementing their security plans is
uncertain. An estimate's accuracy is often tied to such factors as the
complexity or straightforwardness of the issue, the quality of data and
validity of assumptions, and the length of time available to conduct the
work. The Coast Guard was heavily limited in all these factors. First, the
issue was complex: for example, facilities and vessels are very diverse
and they vary greatly in the degree to which they already have security
measures in place. Second, to account for such differences, the Coast
Guard was faced with having to develop many assumptions, and while the
Coast Guard used government and industry expertise to help make these
assumptions, it had limited data with which to work, and the potential
margin for error was considerable. Our analysis found that changes in the
Coast Guard's assumptions could raise or lower the estimate by more than
$1 billion. Third, the Coast Guard had only a few months to develop the
estimate. The Coast Guard vetted the estimate with stakeholders as a way
of testing its reliability, but stakeholders were basically in no better
position than the Coast Guard to generalize from their own specific
situations. The Coast Guard appeared to make a good-faith effort to
prepare an estimate and seek review of it from port stakeholders, but the
limiting factors discussed here indicate the result can be viewed more as
a rough indicator of costs, not a precise measure.
We recommend that the Coast Guard evaluate the compliance inspection
efforts it takes during the initial 6-month period after July 1 and use
the results as a means to strengthen its long-term strategy for ensuring
compliance. As part of this strategy, the Coast Guard should clearly
define inspector qualifications, link these qualifications to a
certification process, and consider including unscheduled and unannounced
inspections and
Background
covert testing. The Coast Guard reviewed our report and generally agreed
with the facts and recommendation.
MTSA mandated major changes in the nation's approach to maritime security.
The act called for a comprehensive security framework-one that included
planning, personnel security, and careful monitoring of vessels and cargo.
Among its specific provisions were the development of systems for tracking
vessels, identifying maritime workers, and assessing foreign ports for
security risks they posed for the United States. One of MTSA's central
components is a systematic approach to strengthening security throughout
the nation's port areas-a difficult task, given the tremendous size and
variety of activities and user groups involved. Ports present attractive
targets: they are sprawling, easily accessible by water and land, close to
crowded metropolitan areas, and interwoven with complex transportation
networks designed to move cargo and commerce as quickly as possible. They
contain not only terminals where goods bound for import or export are
unloaded or loaded onto vessels, but also other facilities critical to the
nation's economy, such as refineries, factories, and power plants.
Facilities and vessels can be vulnerable on many security-related fronts.
Facilities such as container terminals, where containers are transferred
between ships and railroad cars or trucks, must be able to screen vehicles
entering the facility and routinely check cargo for evidence of tampering.
Chemical factories and other installations where hazardous materials are
present must be able to control access to areas containing dangerous goods
or hazardous substances. Vessels, ranging from oil tankers and freighters
to tugboats and passenger ferries, must be able to restrict access to
areas on board the vessel such as the bridge or other control stations
critical to the vessel's operation. To reduce the opportunity for
terrorists to exploit these vulnerabilities, as well as to help minimize
the effects of accidents or natural disasters, facilities and vessels need
to take mitigation steps. For example, fences, security guards, and
monitoring cameras can all be used to reduce the potential for
unauthorized entry and help prevent vulnerabilities from being exploited.
Dealing with such vulnerabilities involves a careful balance between the
benefits of added security and the potential economic impacts of security
enhancements. While there is broad support for greater security, this task
is a difficult one because the nation relies heavily on a free and
expeditious flow of goods. Particularly with "just in time" deliveries,
which require a smooth and expeditious flow through the transportation
system,
delays or disruptions in the supply chain could have serious economic
impacts. Striking the right balance between increasing security and
protecting economic vitality of the national economy and individual port
stakeholders will remain an important and difficult task. It is also
important to keep in mind that total security cannot be bought no matter
how much is spent on it. It is difficult if not impossible to successfully
anticipate and thwart all types of potential terrorist threats that highly
motivated, well skilled, and adequately funded terrorist groups could
devise.
In this environment, MTSA required owners and operators of facilities and
vessels to conduct assessments that would identify their security
vulnerabilities and to develop security plans to mitigate these
vulnerabilities. Under the Coast Guard's implementing regulations, these
plans are to include such items as measures for access control, responses
to security threats, and drills and exercises to train staff and test the
plan. 7 The plans are "performance-based," meaning that the security
outcomes were specified, but the stakeholders were free to identify and
implement whatever measures they desired as long as these measures
achieved the specified outcomes. MTSA tasked the Secretary of the
Department of Homeland Security with responsibility for reviewing,
approving, and overseeing the implementation of these plans, and the
Secretary delegated this task to the Coast Guard.
MTSA imposed a specific date, July 1, 2004, for facilities and vessels to
begin operating in compliance with the plans. The Coast Guard decided to
adopt a schedule that would align the United States with ongoing
international improvements in maritime security as well as the act. In
December 2002, members of the International Maritime Organization (IMO)
adopted the International Ship and Port Facility Security (ISPS) Code, an
international agreement that called for security plans to be in
7The requirements for security plans are found in 33 C.F.R. Part 104,
Subpart D for vessels and 33 C.F.R. Part 105, Subpart D for facilities.
See appendix II for a listing of required security plan contents.
place by July 1, 2004.8 The Coast Guard had to decide which facilities and
vessels were subject to MTSA's requirements and develop an approach for
reviewing and approving the plans. The categories of facilities and
vessels were specified in implementing regulations, issued in final form
on October 22, 2003.9 Overall, approximately 3,150 facilities and 9,200
vessels operating in more than 300 ports around the nation were required
to comply with these requirements. The ports included not only those on
the Atlantic, Gulf, and Pacific coasts, but also ports in the Great Lakes
and various inland waterways like the Mississippi and Ohio rivers. (See
fig. 1.)
8IMO is responsible for improving maritime safety, including combating
acts of violence or crime at sea. The United States is a member. In
November 2001, the Commandant of the Coast Guard addressed IMO's General
Assembly, urging that body to consider an international scheme for port
and shipping security. Recommendations and proposals for comprehensive
security requirements, including amendments to International Convention
for Safety of Life at Sea, 1974, (SOLAS) and the new ISPS Code, were
developed at a series of intersessional maritime security work group
meetings held at the direction of IMO's Maritime Safety Committee.
9 Prior to issuing the final regulation, the Coast Guard issued an interim
final rule on July 1, 2003.
o By January 1, 2005, the Coast Guard intends to conduct on-site
inspections of each facility subject to the security plan requirements,
along with as many vessels as possible, to ensure that the steps called
for in the security plan are actually in place.10
o By July 1, 2005, the Coast Guard intends to complete the remaining
on-site compliance inspections for vessels it is not able to inspect by
January 1, 2005.
The Coast Guard took a number of steps to help stakeholders understand and
comply with requirements. The Coast Guard issued updated guidance and
established a "help desk" to provide stakeholders with a single point of
contact, both through the Internet and over the telephone. At the local
level, Coast Guard marine safety offices11 at the ports provided
stakeholders operating within their ports additional information and
assistance through forums, training sessions, e-mails, letters, and
telephone calls. The Coast Guard also hired two contractors12 to provide
expertise in reviewing the facility and vessel security plans.
In issuing the final rules, the Coast Guard also developed an estimate of
the cost to implement MTSA's port security provisions. The Coast Guard
estimated that implementing the various port and vessel security
provisions, including the security plans, would cost $7.3 billion over 10
10The Coast Guard also intends to complete on-site inspections of
"uninspected vessels" by December 31, 2004. These "uninspected vessels"
include some towing vessels, most fishing industry vessels, some freight
barges, and certain passenger vessels, among others that were not required
to submit a security plan but did so voluntarily.
11Marine safety offices are located at coastal ports and on inland
waterways and are responsible for the overall safety and security of
maritime activities and for environmental protection in their geographic
areas.
12The Coast Guard hired Black and Veatch Corporation, an engineering
consulting and construction company with expertise in facility security,
to conduct the facility security plan reviews. The Coast Guard also hired
George G. Sharp, Inc., a maritime engineering, safety, and security
company with expertise in vessel security, to conduct the vessel security
plan reviews. The Coast Guard is reviewing the security plans with the
contractors in two locations: The National Facility Security Plan Review
Center in Overland Park, Kansas, and the Marine Safety Center (for
vessels) in Washington, D.C.
Extent of Coast Guard Review and Approval of Individual Plans Varies Widely
years.13 In fiscal years 2002-2004, the federal government awarded $516
million in grant funds for improvements in port security; in fiscal year
2005, the Department of Homeland Security expects another $50 million to
be made available through federal grants to implement security
improvements identified in the plans. However, the bulk of the cost burden
is likely to be borne by facility and vessel owners and operators.
While the Coast Guard expects owners and operators to implement the
approximately 12,300 facility and vessel plans by July 1, 2004, the extent
it will have reviewed and approved these plans varies widely, for two main
reasons. First, about 5,900 of these plans were developed under an option
that essentially deferred Coast Guard review of individual plans until
after July 1. Under this option, owners and operators self-certified that
their plans would be based on industry-developed, Coast Guard-approved
standards and templates. Owners and operators choosing this option did not
have to submit their plans for review. Second, while the remaining 6,400
plans did undergo detailed review, all of them had deficiencies, and many
are not likely to be corrected and fully approved by July 1. Under MTSA
and Coast Guard regulations, facilities and vessels without fully approved
plans would have to cease operations on July 1. However, the Coast Guard
has put procedures in place to allow such facilities and vessels to
continue operating after the deadline, provided certain conditions are
met.
Two Options for Developing Security Plans Varied in Key Respects
The Coast Guard established two options, referred to in this report as
options A and B, which owners and operators could follow in developing
their plans. (See fig. 2.) These options differed in the documents that
had to be supplied to the Coast Guard and the extent of review that would
be applied to individual plans by July 1.
o Option A: Owners or operators who chose this option had to develop
their own security plans according to the requirements in the final rules
and
13The estimate of $7.3 billion applies to compliance costs at Maritime
Security Condition System (MARSEC) Level 1. MARSEC is a three-tiered
system developed by the Coast Guard to communicate the prevailing threat
environment to the marine elements of the national transportation system,
including ports, vessels, facilities, and critical assets and
infrastructure. The levels align closely with DHS's color-coded Homeland
Security Alert System in the following way: MARSEC Level 1 applies when
threat conditions Green, Blue, or Yellow are set; MARSEC Level 2 applies
when threat condition Orange is set; and MARSEC Level 3 applies when
threat condition Red is set.
submit them to the Coast Guard for review by December 31, 2003. These
plans were then subject to detailed review by the Coast Guard and its
contractors.
o Option B: Owners or operators who were members of certain industry
groups could choose this option to develop plans by using Coast Guard
approved security programs established by their industry groups, such as
an association of chemical manufacturers or passenger vessel operators. To
accommodate widespread interest from owners and operators in being able to
use such standards to meet MTSA requirements, the Coast Guard allowed
trade organizations to submit security standards, including templates14
for developing security plans, for consideration as "alternative
security programs" (ASP). The Coast Guard then reviewed each
organization's application and approved those it determined would provide
an equivalent level of security to the standards being applied under
option A at all threat levels within the nation's Maritime Security
Condition System. Members of the industry or trade association then
selfcertified to the Coast Guard that they were using the standards and
templates to develop security plans for their facilities or vessels.
14 A template is a document that owners or operators can use to develop
and implement security plans by tailoring it to the specific circumstances
of their operation.
Figure 2: Overview of the Two Options for Developing Security Plans
Source: GAO presentation of Coast Guard data.
These two options both involved review by the Coast Guard, but there was
considerable difference in what was being reviewed before the start of the
compliance phase on July 1, 2004. Under option A, the Coast Guard and its
contractors would review the individual plans themselves; under option B,
Coast Guard review would center on the organization's standards and
templates and would not extend to the individual plans.15 These reviews
15Under both options, facilities also had to submit a "Vulnerability and
Security Measures Summary" (Form CG-6025), which lists the vulnerabilities
and specific security measures to be taken. Owners and operators
submitting plans under option A also had to submit a security assessment
report, a document based on background information and an on-scene survey,
identifying possible threats, vulnerabilities, consequences, and existing
protective measures. Those who chose option B did not have to submit this
report.
were not the same, in that industry standards and templates are a
framework for developing a plan, but are not analogous to individual
vessel or facility security plans. To adapt the standards and templates to
specific facilities and vessels, owners and operators still need to do
considerable work.
Coast Guard records indicate that 90 percent of facilities and vessels met
the December 31, 2003, deadline for complying with one of the two options.
Most owners and operators who did not meet the December 31 deadline
subsequently complied. However, the Coast Guard issued notices of
violation with a $10,000 penalty assessment against owners or operators of
67 facilities and 90 vessels who had not responded by February 1. Eight of
these owners or operators received a subsequent $25,000 penalty assessment
for not responding by March 1.
Nearly Half of All Plans Will Be Developed under the Option with No Review
of Individual Plans
In all, plans for 5,923 facilities or vessels are being prepared under
option B. Of these, 234 were facilities and 5,689 were vessels. The Coast
Guard granted approval to standards and templates submitted by nine trade
organizations, most of them vessel-related,16 and the plans being
developed under this option reflect the larger number of vessel-related
groups. Overall, about 7 percent of facility plans are being developed
under this option, compared with 62 percent of all vessel plans. (See fig.
3.)
16 Trade or industry organizations with approved "alternative security
programs" include: American Chemistry Council, American Gaming
Association, American Waterways Operators, Lake Carriers' Association,
Offshore Marine Service Association, and the Passenger Vessel Association.
Other organizations that received interim approval: the North American
Grain Export Association & National Grain and Feed Association, Greater
New Orleans Barge Fleeting Association, and Washington State Ferries.
Figure 3: Distribution of Individual Security Plans by Development Option
Number of plans 7,000
6,000 5,689
5,000
4,000
3,000
2,000
1,000
Facilities Vessels
Developed under option A Developed under option B Source: GAO analysis of
Coast Guard data.
The extensive use of option B meant that nearly half of the individual
plans were not directly reviewed by the Coast Guard before they were to be
implemented on July 1, 2004. Users of option B had to send the Coast Guard
a letter stating which alternative security program they planned to use.
The Coast Guard was to check to ensure that the owners or operators were
members of the organization that developed the program. Inasmuch as option
B reduced the number of individual plans to be reviewed, it lessened the
Coast Guard's review workload. However, option B also had the effect of
deferring review of these individual plans into the next phase of the
process-the on-site compliance inspections to be conducted starting July
1. For these facilities and vessels, the Coast Guard's first look
at the plans will occur when inspectors arrive to ensure that the plans
have been implemented.17
All Plans Undergoing Individual Review Had Deficiencies that Affected Final
Approval
For plans submitted under option A, the Coast Guard established a
comprehensive review and approval process that relies on contractors with
security planning expertise to review and evaluate the plans. Plans move
through a two-or three-stage process, depending on whether they are for
vessels or facilities. In stage I, at least two contract personnel
independently reviewed the plans to ensure they contain material covering
all required items such as measures for access control, responses to
security threats, and drills and exercises to train staff and test the
plan. Plans passing this stage move to stage II, where comprehensive
assessments are conducted as to whether the plans address all of MTSA's
requirements. Vessel plans are approved once the Coast Guard determines
they have passed this stage II review. Facility plans continue on to a
stage III review, in which the local Coast Guard marine safety office
verifies the information in the security assessment against the facility's
physical characteristics and determines whether the plan is adequate to
meet security needs. This last stage may include an on-site visit, but if
conducted, this verification review is not the same as the post-July 1
compliance inspection for determining whether the facility has implemented
the plan. Facility plans are approved once the Coast Guard determines they
have passed this stage III review.
This review and approval process flagged problems. Every one of the more
than 6,400 facility and vessel plans submitted under this option had
deficiencies that needed to be revised before the plan could be approved.
As table 1 shows, of the 2,913 facility plans and 3,505 vessel plans
submitted under option A, more than half were still undergoing the
detailed review as of June 2004. Most of these plans still in review were
facility security plans.
17The Coast Guard has issued guidance to Captains of the Port to encourage
them to "engage" with users of option B to review their progress prior to
July 1, 2004. However, these users are not required to agree to these
reviews.
Table 1: Progress of Facility and Vessel Security Plan Review Under Option
A as of June 2004
Stage I Stage II Stage III Approved Totals
Facility security plans 80 1,637 1,076 120 2,913
a
Vessel security plans 23 750 2,732 3,505
Source: GAO presentation of Coast Guard data.
Note: Facility security plan numbers are as of June 14, 2004; vessel
security plan numbers are as of June 4, 2004.
aVessel security plans are approved once the Coast Guard determines they
have passed stage II.
The problems identified through this process resulted from a variety of
deficiencies in the plans developed under option A. The most common
deficiency identified for both facility and vessel plans during stage I,
according to the Coast Guard, was the failure to address or inadequately
address all of the required security plan sections specified in
regulations. For example, some owners and operators simply restated the
text in the regulations or excluded some plan elements such as the
security assessment. Common stage II deficiencies for facility plans
included providing insufficient detail describing steps to be taken for
elevated MARSEC threat levels or security measures to be put in place for
control of access to the facility. For vessel security plans, common
deficiencies identified at this level were inadequate descriptions of the
steps for conducting security drills and exercises, insufficient measures
for controlling access, or inadequate descriptions of the qualifications
and responsibilities of those in charge of security programs.
Resolving such deficiencies has kept many plans at stage II of the review.
After reviewing the contactor's findings, the Coast Guard notified the
owner or operator about the deficiencies and any deadline for submitting
revisions.18 While owners and operators could correct some deficiencies
easily, such as adding a missing telephone number or name of a security
officer, other corrections required more work, such as providing more
detail about access control procedures or measures. Plans could not
proceed to the next stage until the Coast Guard was satisfied they were
complete-a process that has sometimes required repeated revision.
18 For revisions to facility security plans, 30 calendar days were allowed
for revisions to be made and resubmitted to the Coast Guard. No time limit
was specified for revisions to vessel security plans.
Correcting these deficiencies has taken longer than the Coast Guard
anticipated.19
Process Exists to Allow Facilities and Vessels with Unapproved Plans to
Continue Operating
Under MTSA and Coast Guard regulations, facilities and vessels can be shut
down if they have not complied with the requirements called for under
options A or B by July 1, 2004. Facilities and vessels with plans still in
revision under option A could thus face closure. To speed up the overall
process, the Coast Guard adopted a strategy called "compliance through
engagement." Instead of sending deficiency letters, the Coast Guard began
calling owners and operators directly to review deficiencies, explain
regulatory requirements, and answer questions. The Coast Guard also
advised Captains of the Port to encourage facility owners or operators
still in stage I to make needed revisions so the plan could pass to stage
II. Staffing was also increased at the center reviewing facility security
plans to help speed review.20 According to the Coast Guard, this strategy
significantly improved turnaround time for receiving revised plans from
owners and operators.
Anticipating that plans for some facilities and vessels would still be in
process on July 1, the Coast Guard also took steps to allow most of them
to continue operating as allowed by MTSA and the regulations.21 The steps
vary depending on whether the plan covers a facility or vessel and how far
along it is in the process.
o Facilities that have received an initial stage II review can receive
interim approval of their plan through October 31, 2004, pending final
approval of the security plan. Rather than waiting to conduct on-site
verification reviews until plans move to stage III, the Coast Guard
advised Captains of the Port to have their inspectors begin visiting all
facilities that had received a stage II review, regardless of whether the
facility had revised
19Some owners or operators with plans undergoing the review process have
commented that the Coast Guard's contractors have been unnecessarily
"nitpicky" or have gone beyond regulations, resulting in what the owners
or operators consider to be excessive deficiencies. While we did not
evaluate the validity of these comments, Coast Guard officials have
publicly defended the quality of the contractors' performance.
20The Coast Guard is reviewing the facility security plans with the
contractor at the National Facility Security Plan Review Center in
Overland Park, Kansas.
21MTSA allows the Coast Guard, under certain circumstances, to grant
permission to facilities and vessels with plans still in process to
continue operating for up to 1 year after the plans were submitted.
the deficiencies identified through the review. During these visits, Coast
Guard personnel are to verify that (1) the plan accurately reflects the
facility and its operations, (2) the proposed security measures are
realistic, and (3) deficiencies will either be addressed by July 1 or
satisfactory interim measures will be in place. If these conditions are
met and the changes to the plan are administrative in nature, the Coast
Guard may issue interim approval allowing continued operations.
o Vessels that have received an initial stage II review can receive
similar interim approval of their plans through October 31, 2004. The
Coast Guard Marine Safety Center reviewing vessel plans can issue such
approvals provided they are satisfied that the plans are sufficiently
complete and any needed changes are administrative in nature.22
o Facilities and vessels that are not far enough along to receive
interim approval of their plans-for example, still making substantial
revisions to their plans-can also receive permission to continue
operations. The process is much the same as that described earlier for
interim approval. For facilities, after an on-site visit the Captain of
the Port may issue a letter to the owner or operator, identifying the
areas of the plan requiring significant revision and allowing the facility
to continue operations through October 31, on the condition that temporary
security measures are implemented while the security plan continues to be
reviewed. For vessels, the Marine Safety Center reviewing the plans may
similarly issue a letter authorizing a vessel to continue operating, as
long as conditions specified in the letter are met while review of the
plan continues.
o These approaches do not extend to facilities or vessels that have not
completed stage I of the review process. The Coast Guard will not allow
those facilities and vessels to operate after June 30, 2004. Thus, owners
or operators who have not submitted a complete facility plan for Coast
Guard review are to be shut down. According to the Coast Guard, MTSA
provides the Coast Guard with the necessary legal authority to shut down
any facilities or vessels in this situation, if necessary.23
22Vessels in international trade were given priority since all vessels
subject to the SOLAS/ISPS codes must be in compliance with an approved
security plan by July 1, 2004.
23In addition, the Captain of the Port has the authority under 33 C.F.R.
Part 6 to establish security zones and prevent access to any vessel or
facility whenever he or she believes such action may be necessary to
prevent damage or injury.
Strategy for Monitoring and Oversight of Plan Implementation Faces Numerous
Challenges
In late May 2004, the Coast Guard issued its strategy for monitoring and
overseeing the implementation of security plans after July 1.24 It is
clear that this strategy faces a number of challenges both in the short
and longer term. The first challenge is the amount of work required to
conduct the initial review of compliance inspections. Between July and
December, the Coast Guard plans to inspect every one of the 3,147
facilities and as many of the 9,194 vessels as possible to ensure that
owners and operators are complying with the actions called for in their
security plans.25 These inspections will need to determine whether vessel
and facility operators have identified all vulnerabilities and adequately
addressed them-a task made more difficult by the fact that most of the
5,923 plans developed under option B will not have received detailed
review. Other challenges facing the Coast Guard include ensuring that
enough inspectors are available, training them appropriately, and
equipping them with sufficient guidance to make difficult judgments about
whether owners and operators have taken adequate steps to address
vulnerabilities. The Coast Guard's attention has been understandably
focused on how to meet these challenges in the immediate "surge" of
monitoring activity between July and December.26 However, in the longer
term, when the Coast Guard plans to conduct annual compliance inspections
for the more than 12,300 facilities and vessels, it faces the challenge of
developing a strategy to ensure that owners and operators continue
implementing their plans.
24The guidelines for this strategy were contained in Navigation and Vessel
Inspection Circulars (NVIC), an approach the Coast Guard uses to provide
detailed guidance about enforcement or compliance with certain federal
marine safety regulations and Coast Guard marine safety programs.
25The Coast Guard plans to complete all vessel inspections by July 1,
2005, and as soon after July 1, 2004, as possible. Each vessel will
receive a security compliance inspection concurrently with its annual
Certificate of Inspection visit conducted by the Coast Guard between July
1, 2004, and July 1, 2005. However, under three situations vessels will
receive inspections earlier. First, all inspections for SOLAS vessels
(i.e., U.S. registered vessels operating internationally) must be
completed by July 1, 2004. Second, at the discretion of the Captain of the
Port, certain vessels of interest will be inspected shortly after July 1,
2004. Finally, the Coast Guard will inspect any vessel whose owners or
operators request an early security compliance inspection.
26The Coast Guard refers to this initial 6-month period as a surge effort
because of the amount of work demanded in a short time frame. The Coast
Guard regards the facility compliance inspections, which must be completed
in full within this period, as particularly time-consuming.
Workload for Compliance Inspections Is Substantial, Potential Exists for
Finding More Vulnerabilities, and Assessing the Adequacy of Security
Preparation Is Difficult
The initial volume of compliance inspections to be done is large and time
is limited. The Coast Guard expects to complete the first round of on-site
inspections of all 3,147 facilities, as well as the inspection of as many
vessels as possible, by January 1, 2005. During these compliance
inspections, inspectors are to assess the steps that each port stakeholder
has taken to put a security plan into place, such as the extent to which
access controls like fences, guards, gates, and cameras are in place, or
the extent to which the security drills written in the plan are actually
being conducted.27 Since most of the 5,923 plans developed under option B
were not reviewed by the Coast Guard or its contractors, inspectors will
also have to consider not only whether these plans have been implemented
but also whether they adequately identify relevant vulnerabilities and
specify sufficient steps to address them.
One reason for caution with regard to the adequacy of option B plans is
that there are indications that some owners and operators using option B
may not be fully aware of what they have to do to develop sufficient
plans, or, if they are aware of it, may be slow in complying. For example:
o According to the Coast Guard's MTSA security plan program manager, the
agency's interactions with option B users showed that some of them
erroneously believed that membership in an industry or trade organization
with approved standards and templates satisfied their obligation to
implement a security plan.
o In some cases, the use of option B appeared to be a way of postponing
the completion of a security plan. For example, after being advised by the
Coast Guard that he missed the deadline for submitting a security plan,
one stakeholder joined an industry organization for the sole purpose of
using option B to avoid having to immediately write a security plan.
Another vessel operator we visited 2 weeks before the deadline to submit
security plans said he was using option B as a means to gain an extra 6
months to complete the security plan.
Even among plans developed and reviewed under option A, there are
indications that the inspections may reveal additional vulnerabilities or,
27A drill is a training event that tests at least one component of the
vessel or facility security plan and is used to maintain a high-level of
security readiness. According to the Coast Guard regulations, at least one
security drill is to be conducted by owners and operators every 3 months.
for cost reasons, the disparity between actions prescribed in the plans
and actions actually implemented. For example:
o An official at a major port told us that more security vulnerabilities
were known than were included in the facility security plan, these
vulnerabilities were not included because money was not available to
address them. This port official said the port would await the Coast
Guard's review to see if the Coast Guard would identify any of these
vulnerabilities and require mitigating actions.
o Several owners and operators of facilities and vessels also told us
that funding was a major challenge. Although they did not indicate that
they omitted vulnerabilities from their plans, these owners and operators
told us that it would be difficult to obtain the financial resources to
fully mitigate their known vulnerabilities.
Compliance inspections will also be challenging because they involve
subjective evaluations about the adequacy of security measures. The
facility and vessel plans created by port stakeholders are
performancebased, meaning the Coast Guard has specified the outcomes it is
seeking to achieve and has given port stakeholders responsibility for
identifying and delivering the measures needed to achieve these outcomes.
While this approach provides flexibility to owners and operators in
designing and implementing their plans, it also places a premium on the
skills and experience of inspectors to identify deficiencies and recommend
corrective action. For example, inspectors will have to determine if the
security measures outlined in the approved security plan adequately
address the security vulnerabilities identified in the security
assessment, which the Coast Guard regards as by far the most difficult
step in the compliance inspection process.
Whether Sufficient Inspection Personnel Will Be Available Is Not Clear
Another challenge the Coast Guard faces is ensuring that it has enough
qualified inspectors to complete all the inspections required during the
surge period. The Coast Guard estimated the need for and then allocated an
additional 282 positions, or "billets," to local marine safety offices to
supplement existing inspectors during this period. The Coast Guard did not
have a great deal of workload data to use in making this estimate; as we
have pointed out in other reports, the agency does not have a system in
place for determining how much time its personnel are spending on
specific duties.28 The Coast Guard told us that it made its determination
of how many additional positions would be needed by using working groups,
expert panels, available data, and information about resources in port
security missions since the September 11, 2001, terrorist attacks.29 While
the Coast Guard thus had some basis for determining how many more staff it
should assign to complete the work on time, the approach stops well short
of providing demonstrable evidence of its validity. The Coast Guard based
its projection in part on past experiences with environmental and safety
inspections, but whether those types of inspections are analogous is
unclear. Further, the Coast Guard could not provide documentation of the
approach it used, limiting its ability to assess the adequacy of its
decision.
The Coast Guard also faces challenges in ensuring that it has the right
mix of skills and experience among these additional personnel. The Coast
Guard's staffing estimate does not specify what rank or type of personnel
are required to complete the surge inspections. According to Coast Guard
documents, none of the job functions for the additional 282 personnel
working on compliance inspections have been detailed. Further, of the
additional 282 positions, about 75 percent are reservists who are
scheduled to be available for only a limited time. Most are scheduled for
deactivation in October 2004 - in the middle of the surge period - though
the Coast Guard has the ability to extend their tour of duty. All of these
challenges - the uncertainty of the estimate, the lack of specificity
about what personnel are needed, and the reliance on personnel who may
become unavailable - increase the overall challenge of ensuring that the
first round of compliance inspections is effective, especially given the
subjective evaluations that are required.
Training Will Need to Overcome Disparity in Skills and Experience among
Inspectors
The skills and prior inspection experience of the reservists who will be
assigned to supplement existing inspectors varies widely. Some have
graduate degrees in security management, while others have no formal
security training or prior experience. For example, in New Orleans, 1 of 7
reservists assigned to support local inspectors had previous inspection
experience, while in New York, at least 9 out of 19 reservists assigned to
28U.S. General Accounting Office, Coast Guard: Relationship Between
Resources Used and Results Achieved Needs to Be Clearer, GAO-04-432
(Washington, D.C.: March 22, 2004).
29The working groups were comprised of Coast Guard headquarters, area,
district, and field office staff. The historical information came from the
Coast Guard's implementation of the Oil Pollution Act of 1990, Public Law
101-380, 104 Stat. 484 (1990).
this task had previous inspection experience. The disparity in experience
levels raises the possibility that personnel with little inspection
experience will be less able or equipped to identify deficiencies or
assess the adequacy of security efforts. This has implications for
creating variation in the rigorousness with which inspections are
conducted from location to location and port to port.
The Coast Guard has acknowledged this disparity and is taking steps to
address it, but these steps still carry challenges:
o The Coast Guard developed required training for all staff who would be
conducting port security compliance inspections. This training lasted for
5 days and consisted of computer-based instruction, classroom training
from security experts, and other coursework.30 It could be completed
either by attending program sessions at various locations or through
tutoring from other staff who had attended the training. As of mid-June,
the Coast Guard reported that more than 500 persons had completed this
training. Whether this training will be sufficient to overcome the skill
and experience disparities among inspection staff remains uncertain,
particularly since some inexperienced staff may receive the training
second-hand. Coast Guard officials said that one reservist with little
experience might be sent to the training, while another with similar
experience might be taught by a fellow reservist who attended. Thus, a
challenge the Coast Guard faces is to discern the extent to which each
inspector has mastery of the subject matter.
o To emphasize on-the-job-training and to try to improve the consistency
during the compliance inspection process, the Coast Guard plans to pair
inspectors with little previous experience with more experienced
inspectors. This will be especially critical when reviewing the 234
facilities and 5,689 vessels using option B plans, since those plans did
not undergo a detailed review. However, the time that reservists will need
for such onthe-job experience before they can contribute to the inspection
process is unknown and could affect the quality of the inspections and the
Coast Guard's ability to complete all of the inspections during this surge
period.
30The first 2 days of the 5-day training were not required for those
personnel with prior inspection experience because the first 2 days
covered "basic" elements of conducting inspections.
Developing Inspection Guidance for a Performance-Based Inspection Process Is
Difficult
A concern consistently raised by stakeholders is that if enforcement of
the security requirements varies from port to port, there will not be a
uniform standard of security across the nation. This inconsistency has two
main effects: First, it may create the potential for disparities in
stakeholder compliance and gaps in security. Second, aside from the
potential implications on security, stakeholders operating in a port where
enforcement is more rigorous could be put at a competitive disadvantage,
in that they may have to spend more money implementing security measures
than required of similar stakeholders in other locations. Stakeholders are
concerned that such disparities could affect competitiveness among
companies in the same industry or, on a broad level, competition among
ports themselves.
The Coast Guard is aware of this issue, and its preparations include ways
to make the security inspection process more uniform. In addition to the
training program, the Coast Guard issued an inspection guide that all
inspectors will use during on-site inspections.31 The primary tool in the
guide is a checklist that inspectors can use as a "roadmap" to ensure that
all areas of the security plans are covered when inspecting a facility or
vessel. The guide also provides inspectors with scalable recommended
penalty measures to consider, given the severity and nature of the
deficiencies found during an inspection.
While a compliance guide is likely to provide some assistance to the
inspector, a key challenge to its usefulness during this surge inspection
period is the performance-based nature of the evaluation, which makes it
difficult to cover all the circumstances an inspector may encounter.
Inspectors will not check for compliance with a specific procedure;
instead, they will have to make a judgment about whether the steps the
owner or operator has taken, considered together, provide adequate
security. Although the security plans are required to contain similar
elements, they do not have to be identical, nor do they need to address
security vulnerabilities using the same mitigations. Facilities and
vessels may have different - yet reasonable - methods for addressing the
same vulnerability. This subjective nature of the evaluation process has
raised concerns among port stakeholders. Given their experience with
existing Coast Guard safety and environmental inspection programs, several
local
31The inspection guide, checklists, and other enforcement guidance were
included in a series of NVICs issued by the Coast Guard. The NVICs that
included the inspection guides were issued in May 2004.
port stakeholders we spoke with said they did not think the Coast Guard
had been consistent in its administration of regulations across inspectors
and offices. These port stakeholders said they did not think the same
standards had been applied to other, similar operations as were applied to
their own organization. We did not assess the validity of these concerns,
but the Coast Guard regards this issue as the greatest implementation
challenge the agency faces.
Lessons Learned during Surge Period Should Help in the Development of
Strategy for Longer-Term Monitoring and Oversight Responsibilities
While the Coast Guard is understandably focused on the initial surge
period for compliance inspections, it will soon need to decide how to
staff and conduct inspections on a longer-term basis. Accordingly, what
Coast Guard officials learn during the surge phase should help them
determine how to staff and conduct effective compliance inspections. Many
of the elements of this longer-term strategy will likely have to deal with
the same basic challenges faced during the surge period: ensuring that
enough personnel are available, training them well, and equipping them
with necessary guidance. These challenges will be particularly important
to overcome considering the frequency with which Coast Guard personnel
rotate to new positions within the Coast Guard.32 Port stakeholders told
us that the discontinuity caused by these rotations creates gaps in
expertise among personnel, which ultimately leads to inconsistent
application of the regulations. According to Coast Guard officials,
becoming a fully proficient inspector takes time, and when inspectors do
become proficient they often face reassignment.
To address MTSA requirements and coordinate with its other annual
inspections, the Coast Guard plans to conduct security plan compliance
inspections annually for each of the more than 12,300 facilities and
vessels. MTSA requires that facility and vessel owners and operators
update and resubmit their security plans to the Coast Guard every 5 years
or whenever a substantial change is made to their facility or vessel. As
another component of its longer-term compliance strategy, the Coast Guard
stated in its recently issued guidance that Captains of the Port may
verify continued compliance with the security plans at any time through
intervening inspections between the required annual inspections. This
critical responsibility of providing effective national maritime security
32Every 2 to 4 years, the Coast Guard rotates its staff among various duty
stations, such as search and rescue, high-and medium-endurance cutters,
and buoy tenders. The Coast Guard also rotates its staff within duty
stations, such as moving facility security inspectors to noninspection
duties within a marine safety office.
through monitoring and oversight emphasizes the importance of a sound
longer-term strategy.
While the strategy has yet to be implemented, it is important that
challenges be overcome in order to help ensure detection of noncompliance
with MTSA requirements. As the Coast Guard continues to enhance its
strategy, there are other options it can consider besides regularly
scheduled annual compliance inspections and the intervening inspections.
For example, our work assessing other areas such as airport security and
regulatory compliance33 has identified approaches for ensuring compliance
and improving and strengthening security such as unscheduled and
unannounced inspections, on weekends or after normal working hours,34 and
covert testing.35 In fact, Coast Guard officials responsible for facility
and vessel inspections indicated that unscheduled inspections would be a
positive component of a longer-term strategy because informing owners or
operators of annual inspections can allow them to mask security problems
by preparing for inspections in ways that do not represent the normal
course of business.
Cost to Comply with MTSA Is Uncertain
Although the Coast Guard made a good-faith effort in preparing its
estimate of $7.3 billion for maritime industry compliance with MTSA
security-related requirements, the estimate needs to be viewed with some
caution, because (1) the Coast Guard had to assume values for a number of
cost factors for which there was incomplete data and (2) it had limited
time to prepare the estimate. The Coast Guard was unable to gather further
information to ensure the accuracy of these values or to determine how
other values for these same factors would affect cost.
The $7.3 billion estimate covers a 10-year period of time (2003-2012) and
more than 90 percent of it is for the costs to be incurred by vessel and
facility owners to increase security. The Coast Guard estimated the cost
of
33U.S. General Accounting Office, Aviation Security: Further Steps Needed
to Strengthen the Security of Commercial Airport Perimeters and Access
Controls, GAO-04-728 (Washington, D.C.: June 4, 2004).
34Since facilities and vessels are often staffed differently on weekends,
evenings, and nights, this approach is intended to allow inspectors a
better opportunity to identify the actual operating conditions of
facilities and vessels.
35Covert testing would involve Coast Guard agents working undercover to
evaluate, among other things, the effectiveness of security processes and
procedures.
securing facilities at $5.4 billion and the cost of securing vessels at
$1.4 billion. (The remaining portion of the estimate was for outer
continental shelf facility security, area maritime security, and automatic
identification system requirements.) Appendix III explains how the Coast
Guard developed these estimates.
The accuracy of an estimate is often tied to such factors as the
complexity or straightforwardness of the issue, the quality of data and
validity of the underlying assumptions, and the length of time available
to do the work. The Coast Guard faced a number of challenges in dealing
with each of these factors. Major challenges included the following:
o Limited opportunity for expert involvement. Although the Coast Guard
worked with a panel of experts to develop the estimate, Coast Guard
officials said that time limitations precluded making the panel as widely
representative of industry and government as possible. They also said that
time limitations precluded an extensive set of meetings over the course of
many months, which would have allowed the expert panel to make more useful
contributions.
o Limited opportunity to analyze data or to test the uncertainty of
estimates. The Chief of the Standards Evaluation and Analysis Division,
who was the official responsible for developing the estimate, said that if
more time had been available, the Coast Guard would have analyzed more
data. Moreover, he said, the Coast Guard would have conducted a
sensitivity analysis of the estimate to determine how changes in the
underlying assumptions would affect the size of the estimate. Analyzing
uncertainty in this way is consistent with best practices for preparing
benefit-cost analysis of significant regulatory actions called for by
Executive Order No.12866, which applies to the Coast Guard's analysis.36
For illustrative purposes, we conducted such an analysis and found that
the Coast Guard's cost estimate of $7.3 billion could be more than $1
billion higher or lower, using generalized assumptions about cost
uncertainty. That is, the estimate of $5.4 billion for securing facilities
could range from $4.5 billion to $6.4 billion, and the estimate of $1.4
billion for securing vessels could range from $1.2 billion to $1.5
billion.
36A significant regulatory action is defined as likely to result in, among
other things, a rule having an annual effect on the economy of $100
million or more or other serious effects. The Coast Guard has estimated
that its rule for facilities and vessels will have an annual cost of $832
million in real, undiscounted dollars.
o Questionable validity of some key assumptions. The estimated $5.4
billion for securing facilities-the single biggest item-depends on key
assumptions, which the Coast Guard has acknowledged are of questionable
validity. For example, facilities are likely to vary in the extent to
which they already have adequate security measures in place, and since no
comprehensive data existed on the security preparations in place, Coast
Guard officials had to make an educated guess about the extent of progress
and the amount of additional security steps that would need to be taken.
This is significant because the Coast Guard assumes facilities have
already spent $17 billion on these security measures before MTSA
requirements take effect. Thus, variation in these percentages can
potentially have a sizable effect on costs. Another example is the Coast
Guard also assumed that one-third of all facilities will have to spend
about 60 percent more on security equipment than the remaining two-thirds
of facilities will have to spend. However, some of the facilities in the
lowercost group will expand in the future to handle additional cargo
resulting from economic growth, requiring more security and, therefore,
placing more facilities than currently assumed in the higher-cost group.
This can also have a substantial effect on costs. For example, assuming
that 40 percent, rather than 33 percent, of all facilities fit in the
higher-cost category, adds over $350 million to the costs of implementing
these rules.
o Limited span of time included in the analysis. The Coast Guard's
estimate covers a 10-year period beginning in 2003 and ending in 2012.
However, MTSA security-related requirements are not limited to a 10-year
period. Extending the period of analysis is also consistent with best
practices for preparing economic analysis of significant regulatory
actions called for by Executive Order No.12866.37 Extending the Coast
Guard's analysis by 10 years to 2022 raises the estimate of total costs by
nearly 50 percent to $10.7 billion. Total costs continue to rise past 2012
because another $884 million in operation and maintenance, equipment
replacement, and security guard costs are incurred with each additional
year.38
o Some potential costs not considered. The Coast Guard's estimate does
not include costs associated with possible delays in moving goods through
more secure facilities, or account for higher prices for goods and
services
37Guidance on implementing this executive order notes that the ending
point of the analysis should be far enough in the future to encompass all
the significant benefits and costs likely to result from the rule.
38The $884 million is in real, undiscounted dollars.
that could result if the maritime transportation industry tries to pass
along higher security costs to its customers. For example, higher shipping
rates could mean reduced water transportation services and reduced
consumption and production of goods dependent on those services and
associated economic losses.39
In the absence of complete data, the Coast Guard relied on public and
stakeholder comments to determine if its estimate was valid. The Coast
Guard held seven public meetings to discuss its estimate and said it
received few negative comments. Given the limited time available, relying
on such comments to identify large errors makes practical sense. There
likely are limitations, however, in the extent to which the various
stakeholders were in a position to comment on the validity of the
estimate. For example, large cost differences between individual
facilities or vessels could make it difficult to judge the accuracy of the
Coast Guard's estimates of average facility or vessel costs.
The net effect of these limitations on the Coast Guard's estimate is
unknown. However, it should also be pointed out that enhancing security
could lower costs to society at large if implementing MTSA foils a
terrorist attack and thereby prevents a costly disruption. For example, in
2002, U.S. ports handled $764 billion in international trade, or more than
$2 billion per day. An event that disrupts this trade could have a
substantial effect on the flow of goods, as well as a substantial impact
on the larger economy.
The vulnerability of the nation's ports and the importance of addressing
these vulnerabilities cannot be overemphasized. Since MTSA's enactment in
November 2002, the Coast Guard has worked hard to address these
vulnerabilities by spurring the development of meaningful security plans
for thousands of facilities and vessels in the nation's ports. Progress
has been made, though the extent to which all facilities and vessels will
have adequate plans ready to implement as of July 1, 2004, is still
unclear. This is particularly true for the thousands of self-certified
plans. The Coast Guard has approved the guidelines and templates for these
plans, but in most instances it has not seen the plans themselves.
As hard as the Coast Guard has worked to ensure that plans are developed,
the most important part of the process still lies ahead because
Conclusions
39The net effect of these considerations on overall costs is unclear.
plans mean little if they do not actually produce better security. Many
challenges lie ahead as the Coast Guard attempts to develop a complete
picture of the security environment at the nation's seaports and take
whatever actions are needed, when they are needed to protect those ports.
The uncertainty about whether the Coast Guard will be able to meet its
timeframes for conducting on-site compliance inspections of the more than
12,300 facilities and vessels and questions about whether it will have
enough staff and a sufficient experience base to handle so many
inspections will undoubtedly challenge management and staff to effectively
implement the strategy. In addition, the complexity of compliance
inspections that call for sophisticated judgments about vulnerabilities
and the actions taken to address them will likely create the need for
up-to-date training and guidance to help ensure that such decisions are
thorough and consistent. During the initial surge period, these challenges
make it important for the Coast Guard to carefully evaluate its efforts,
so that problems or inadequacies can be identified. In the longer term,
the Coast Guard can benefit from the lessons learned from this evaluation
and use them to refine its long-term inspection strategy.
Several points stand out in particular as important in this evaluation
effort.
o First, the inspection program the Coast Guard has established is an
important feature of its strategy to improve port security. Having
qualified inspectors is key to this effort. While the training the Coast
Guard has adopted is an important step to build inspector skills and
compensate for differences in their skills and experience, training alone
does not provide assurance that those who conduct inspections are
qualified. Nor does it substitute for policies on the professional
development standards inspectors must meet. Filling these gaps takes on
added significance given the criticality of inspectors' roles and the
discretion they are anticipated to exercise.
o Second, the long-term strategy also needs to reflect a way to ensure
that the security inspections assess conditions that represent the normal
course of business at facilities and aboard vessels. One way to do this is
to include conducting unscheduled and unannounced inspections and covert
testing to provide additional information that, taken together with the
results of annual compliance inspections, should provide better assurance
that MTSA requirements are being implemented effectively.
Recommendation for Executive Action
o
Agency Comments
To better ensure that MTSA requirements are being implemented effectively,
we recommend that the Secretary of Homeland Security direct the Commandant
of the Coast Guard to
conduct a formal evaluation of compliance inspection efforts taken during
the initial 6-month surge period, including the adequacy of security
inspection staffing, training, and guidance, and use this evaluation as a
means to strengthen the compliance process for the longer term. As part of
this strategy, the Coast Guard should clearly define the minimum
qualifications for inspectors and link these qualifications to a
certification process. The Coast Guard should also consider including
unscheduled and unannounced inspections and covert testing as part of its
inspection strategy to provide better assurance that the security
environment at the nation's seaports meets the nation's expectations.
We provided a draft of this report to the Department of Homeland Security
and the Coast Guard for their review and comment. The Coast Guard
generally agreed with the facts presented in the report and with the
recommendation we made. The Coast Guard said our recommendation was
reasonable and that the Coast Guard should certainly study its progress
and make changes when necessary. Coast Guard officials also provided a
number of technical clarifications, which we incorporated to ensure the
accuracy of our report.
In its response, the Coast Guard raised one area where it disagreed with
our presentation. This disagreement focused on how to characterize the
Coast Guard's review of the Option B plans, which the Coast Guard refers
to as "alternative security programs." The Coast Guard contended that its
work on ASPs amounted to an approval of the plans themselves. The Coast
Guard's comments in this regard were as follows:
"GAO states ASPs provide a `template' and `framework' for a plan, but not
an actual plan. The ASPs were developed in the months leading up to the 31
December 2003 plan submission deadline, and hundreds of personnel-hours
were spent working with the many industry associations used to ensure the
template, when properly completed with appropriate details for a specific
vessel/facility, would be a viable security plan to mitigate
vulnerabilities for the vessel or facility type identified by the industry
association. In fact, more hours were dedicated to each ASP than any
individual plan, and as a result, the ASP templates produced a repeatable
security plan precluding the need to have each completed template
individually review by 1 July. Indeed, the CG considers them as approved
security plans that must be implemented by 1 July. Primary burden is on
the owners to comply with all applicable regulations. Our role is to
ensure it is being done; `Trust, but Verify'."
While we agree that the Coast Guard spent considerable time and effort
reviewing and approving the templates and that this approach was
understandable given the limited time available, we disagree with the
Coast Guard's view that its actions should be considered as reviewing and
approving the 5,900 individual Option B plans. The Coast Guard did not
individually review and approve these plans; it reviewed and approved only
the templates. The Coast Guard notes that Option B security plans would be
viable only when "properly completed with appropriate details for a
specific vessel/facility". Since the Coast Guard did not individually
review the Option B plans; it does not know whether the plans have been
properly completed.
This is more than a technical issue: We believe the distinction is
important because the missing reviews add to the challenges the Coast
Guard will face in its post-July 1 workload. The Coast Guard's extensive
review of the 6,400 individual Option A plans found deficiencies in every
single plan, raising concerns about how complete the 5,900 individual
Option B plans are likely to be when Coast Guard inspectors arrive to
conduct their inspections. Our discussions with Coast Guard officials and
our visits to seven ports around the country provided indications that
some owners and operators using Option B may not be fully aware of what
they have to do to develop sufficient plans, or if they are aware of it,
may be slow in complying. For example, the Coast Guard program manager
stated that interactions with Option B users showed that some of them
erroneously believed that membership in an industry or trade organization
with approved standards and templates satisfied their obligation to
implement a security plan. During our site visits, some port stakeholders
told us that they were using Option B as a means to avoid preparing a
security plan until July 1 while remaining in compliance with Coast Guard
requirements. For all of these reasons, we chose not to change this aspect
of our report.
If you or your staffs have any questions about this report, please contact
me at (415) 904-2200 or at [email protected] or Steve Calvo, Assistant
Director, at (206) 287-4800 or at [email protected]. Key contributors to this
report are listed in appendix IV. This report will also be available at no
charge on the GAO Web site at http://www.gao.gov.
Margaret T. Wrightson Director, Homeland Security and Justice Issues
Appendix I: Objectives, Scope, and Methodology
Our first two objectives involved the security plans being developed for
facilities and vessels. Specifically,
o assessing the progress made to develop, review, and approve the
security plans for facilities and vessels by July 1, 2004.
o assessing the U.S. Coast Guard's monitoring and oversight strategy for
ensuring that all necessary port security improvements are implemented.
We conducted a variety of work to assess key steps in the Coast Guard
process for developing, reviewing, approving, and overseeing the
implementation of security plans. These key steps in the process included
the following:
o Identifying all the vessels and facilities that are subject to the
requirement to develop plans.
o Ensuring that all identified parties have submitted plans for Coast
Guard review.
o Reviewing all plans, identifying any deficiencies and ensuring their
correction, and approving the completed plan.
o Establishing resources and an action plan to monitor implementation
and compliance with requirements.
We carried out part of our work at Coast Guard headquarters or in
consultation with headquarters officials. In this regard, we reviewed
pertinent legislation, guidance, rules, and implementation documents to
identify the purpose, objectives, process, enforcement strategy, and
resources required to review and approve the security plans. We spoke with
headquarters officials and reviewed relevant documentation to determine
the management and methodology being used to address the implementation of
the Maritime Transportation Security Act (MTSA). We met with MTSA's
program manager and team to determine how they expected to review and
approve the security plans before the July 2004 deadline, what resources
and action plans are in place to oversee implementation after July 2004,
what training program was needed to produce capable staff to perform
inspections, how the staffing estimate for MTSA implementation was made,
and what guidance would be provided to local inspectors and Captains of
the Port to carry out MTSA implementation.
Appendix I: Objectives, Scope, and Methodology
As part of our work in evaluating the process for reviewing security
plans, we visited the Coast Guard's contractors at the Marine Safety
Center in Washington, D.C., and the National Facility Security Plan Review
Center in Overland Park, Kansas. During these visits, we also talked with
contractor management and staff to determine how the review process
worked, what reviewers were finding in the plans during their reviews, how
deficient plans were dealt with, and what internal controls and quality
assurance mechanisms were in place to ensure consistency during the review
process. We also interviewed Coast Guard staff with the contractor staff
at the review centers to determine the extent of their oversight roles and
responsibilities in monitoring the contractors' performance.
We reviewed more site-specific planning and implementation activity
through work conducted at seven specific maritime port areas. We selected
these seven ports to provide a diverse sample of security environments and
perspectives, basing our selections on such matters as geographic
location, varying levels of strategic importance, and unique local
characteristics. The seven ports and some of our reasons for choosing them
are as follows:
o Corpus Christi, Texas: a Gulf Coast port that is a major port for
military loadouts and important site for petroleum refining and chemical
production.
o Huntington, West Virginia: a major inland river port and has a
significant presence of critical chemical and petroleum producers.
o Los Angeles/Long Beach, California: the largest container port in the
country.
o San Diego, California: a port that includes many military facilities
and installations.
o Seattle/Tacoma, Washington: the third largest container traffic port
in the country, and the port with the country's largest passenger ferry
system.
o New Orleans, Louisiana: a large river port with many types of
industrial and other facilities.
o New York, New York: another of the nation's largest container ports,
and the site of the September 11th terrorist attacks.
Appendix I: Objectives, Scope, and Methodology
During each of our visits to these seven ports we met with port
stakeholders, Coast Guard marine safety offices, and Captains of the Port.
The specific stakeholders we talked with at each port are listed in table
3. When we met with these stakeholders, we discussed the security
assessments they had conducted, the facility or vessel security plans they
were developing, any problems they had in developing those plans, and any
assistance provided by the local Coast Guard during the process. When we
met with Captains of the Port and marine safety offices, we discussed the
extent to which they had identified all facilities and vessels under MTSA
regulations within their port area, the outreach they provided to help
stakeholders meet the statutory deadlines and understand MTSA
requirements, the process they will use to ensure compliance after July
2004, and their general perspectives on MTSA requirements. We also
attended several meetings put on by local marine safety offices, including
a MTSA stakeholder forum, Area Maritime Security Committee (AMSC)
meetings, and AMSC subcommittee meetings.
Table 2: Port Stakeholders GAO Contacted at Port Locations Reviewed
Port area Stakeholders
Corpus Christi, Texas United States Coast Guard Marine Safety Office
Corpus Christi
The Port of Corpus Christi
Occidental Chemical Corporation
Sherwin Alumina Company
Valero Refining-Texas, LP
Aransas-Corpus Christi Pilots
Kirby Inland Marine, LP
Union Pacific Railroad
United States Bureau of Immigration and Customs Enforcement
Boyd-Campbell Company
Flint Hills Resources, LP
Huntington, West Virginia United States Coast Guard Marine Safety Office
Huntington
West Virginia Department of Transportation, Public Port Authority
Union Carbide Corp.
Sunoco, Inc. (Haverhill, OH)
American Electric Power (Columbus, OH)
Bayer CropScience
Appendix I: Objectives, Scope, and Methodology
Port area Stakeholders
Marathon Ashland Petroleum, LLC (Catlettsburg, KY)
United States Army Corps of Engineers
West Virginia Office of Emergency Services
Kirby Inland Marine, LP
Los Angeles, California United States Coast Guard Marine Safety Office
Los Angeles/Long Beach
The Port of Los Angeles
The Port of Long Beach Marine Exchange of Southern California
Long Beach Container Terminal, Inc.
Crowley Marine Services, Inc.
APL Limited
Union Pacific Railroad
San Diego, California United States Coast Guard Marine Safety Office San
Diego
Port of San Diego
United States Navy
California Highway Patrol
San Diego Harbor Police
National Steel and Shipbuilding Co.
Continental Maritime
San Diego Harbor Excursion
United States Customs and Border Protection
Puget Sound, Washington United States Coast Guard Marine Safety Office
Puget Sound
Port of Seattle
Port of Tacoma
Washington State Ferries
Cruise Terminals of America
Husky Terminal & Stevedoring, Inc.
New Orleans, Louisiana United States Coast Guard Marine Safety Office New
Orleans
Port of New Orleans
Port of South Louisiana
Union Carbide Corporation
Upper St. Rose Fleeting Co.
Plaquemine Parish Ferry Department
Zen-Noh Grain Corporation
Appendix I: Objectives, Scope, and Methodology
Port area Stakeholders
Chalmette Refining, L.L.C.
Shell Exploration and Production Company
P & O Ports North America, Inc.
United States Bureau of Immigration and Customs Enforcement
New York/New Jersey United States Coast Guard Activities New York The Port
Authority of New York & New Jersey General Chemical Staten Island Ferry System
Lincoln Harbor Yacht Club Maersk, Inc. Howland Hook Container Terminal, Inc.
Maher Terminals, Inc.
Source: GAO.
We also met with officials from industry trade groups such as the American
Chemistry Council, American Association of Port Authorities, and the
Association of American Railroads to determine their perception of MTSA
requirements and the extent of interaction between port stakeholders and
Coast Guard nationwide.
Finally, we followed-up with all the ports we visited to collect updated
information on their respective progress in regard to our objectives. We
then compared the information gathered through interviews and document
analysis against pertinent criteria specified in MTSA, the final rule, and
other Coast Guard guidance to determine the progress being made to develop
vessel and facility maritime security plans and determine the sufficiency
of Coast Guard resources and action plan to ensure that security plans are
completed, reviewed, approved, and implemented in a timely manner.
Our third report objective was to determine the accuracy of the Coast
Guard's estimates of the cost to comply with MTSA security planning and
implementation requirements. To address this objective, we reviewed cost
spreadsheets prepared by the Coast Guard documenting how cost estimates
were developed. We identified key cost assumptions and the basis for the
values assumed. Based on information about the basis for these assumed
values, we conducted Monte Carlo simulations to determine the sensitivity
of costs for facilities and vessels to generalized assumptions about cost
uncertainty. As part of this review, we interviewed Coast Guard analysts
responsible for these cost estimates. Besides
Appendix I: Objectives, Scope, and Methodology
reviewing the cost spreadsheets, we reviewed documentation provided by the
Coast Guard to support its choice of assumed values. We also asked Coast
Guard officials responsible for these cost estimates what steps they took
to ensure the reliability of the underlying data on which the estimates
were based.
Our review was limited to security plans for facilities and vessels
operating in domestic ports and did not include foreign ports, foreign
flagged vessels, or the other security programs called for under MTSA.
We conducted our work from June 2003 to June 2004 in accordance with
generally accepted government auditing standards.
Appendix II: Required Security Plan Items
Vessel security plans Facility security plans
A vessel owner or operator must ensure A facility owner or operator must
ensure that his or her plan consists of the that his or her plan consists
of the individual sections listed below: individual sections listed below:
(1) Security organization of the vessel.
(2) Personnel training.
(3) Drills and exercises.
(4) Records and documentation.
(5) Response to change in MARSEC
level.
(6) Procedures for interfacing with
facilities and other vessels.
(7) Declarations of Security.
(8) Communications.
(9) Security systems and equipment
maintenance. (10) Security measures for access control. (11) Security
measures for restricted areas. (12) Security measures for handling cargo.
(13) Security measures for delivery of
vessel stores and bunkers. (14) Security measures for monitoring. (15)
Security incident procedures. (16) Audits and Vessel Security Plan
amendments. (17) Vessel Security Assessment Report.
(1) Security administration and
organization of the facility. (2) Personnel training. (3) Drills and
exercises. (4) Records and documentation. (5) Response to change in MARSEC
level. (6) Procedures for interfacing with
vessels. (7) Declaration of Security. (8) Communications. (9) Security
systems and equipment
maintenance.
(10) Security measures for access control, including designated public
access areas.
(11) Security measures for restricted areas. (12) Security measures for
handling cargo. (13) Security measures for delivery of
vessel stores and bunkers. (14) Security measures for monitoring. (15)
Security incident procedures. (16) Audits and security plan
amendments. (17) Facility Security Assessment Report.
(18) Facility Vulnerability and Security Measures Summary (Form CG-6025).
Source: 33 C.F.R. 104.405 and 33 C.F.R. 105.405.
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
The Coast Guard estimated the maritime transportation industry will spend
$7.3 billion to develop and implement security plans through the year
2012.1 Of this amount, the estimate for owners and operators of facilities
was $5.4 billion, and the estimate for owners and operators of vessels was
$1.4 billion. The remainder-about $500 million-was for outer continental
shelf facility and area maritime security and automatic identification
system requirements. This appendix focuses on how the estimates for
facilities and vessels were derived.
To make these estimates, the Coast Guard had to make a variety of
assumptions about such matters as how many facilities and vessels would be
affected, how extensive the planning and implementation efforts would have
to be, and how much of a security framework was already in place that
would go towards meeting MTSA requirements. The Coast Guard had to develop
its estimates within a relatively short time, and it had limited amounts
of data on which to base many of these assumptions. Factors that need to
be kept in mind in considering the estimates include the uncertainties
inherent in many of these assumptions, over what time period the costs
were calculated, and the extent to which industry stakeholders had
sufficient knowledge of their own to comment meaningfully on the Coast
Guard's results.
Several basic pieces of information were needed to compute the cost of
developing and implementing security plans for facilities and vessels, and
deriving these basic pieces of information involved making a variety of
assumptions. The nation's ports and waterways are sprawling and diverse,
and the facilities and vessels that are affected by MTSA requirements vary
greatly in size and complexity. Facilities, for example, include not only
port-operated docks and intermodal transfer stations, but also
petrochemical facilities, power plants, and factories with hazardous
materials. Developing the estimates involved making educated guesses about
such things as how much effort they would have to expend on developing
plans, what equipment and manpower would be called for in their plans, and
how far along they already were.
Estimates Required Assumptions about Many Important Components
1This estimate is based on costs to maintain security at MARSEC Level 1,
which encompasses the Low (Green), Guarded (Blue), and Elevated (Yellow)
designations of the Homeland Security Advisory System. The Coast Guard
estimated that meeting a more extensive threat level, which the Coast
Guard defined as two 21-day periods at MARSEC Level 2, the equivalent to
the Department of Homeland Security's Advisory System's orange threat
level (high risk of terrorist attack) each year, would cost an additional
$5 billion.
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
Number of Facilities and Vessels
The Coast Guard first needed information on how many facilities and
vessels would be affected by the regulation. The Coast Guard counted 4,965
facilities and 10,234 vessels affected by the regulation and assumed this
tally would remain constant during the 10-year period of analysis from
2003 to 2012. According to the Coast Guard, these numbers were based on
its Marine Safety Management System database, U.S. Army Corps of
Engineer's waterborne statistics data, and a Department of Transportation
database on ferries and terminals. The Coast Guard cited two previous
studies to support its assumption that the number of facilities and
vessels remain constant. First, in studying response plans for oil spills,
the Coast Guard said it had found little yearly variation in facility
numbers, because purchasing land and negotiating permits is time-consuming
and prohibits significant numbers of facilities from entering and leaving
the population. Second, in analyzing fire suppression on towing vessels,
the Coast Guard reported very few vessels entering the domestic fleet,
with the limited numbers largely being offset by vessels exiting the
fleet.
Extent of Security Planning and Implementation Efforts
The Coast Guard next needed to determine how long it would take for
facilities and vessels to complete security plans and what types of
security measures they would need to take. Given the diversity of
facilities and vessels, the Coast Guard assumed that some would require
much more planning time and security measures than others. For facilities,
the Coast Guard assumed that one-third of the total (1,638 of the 4,965
facilities) would require more time to draft security assessments and
plans and would implement more security measures than the remaining 3,327
facilities. For example, the Coast Guard assumed that the 1,638 facilities
would take 160 hours, on average, to draft security assessments and plans,
compared with 80 hours for 3,327 other facilities.2 Regarding the security
measures that would need to be taken, the largest differences were in
assumptions about the number of security guards. The Coast Guard tailored
requirements for eight different facility types, such as container or
break bulk facilities, hazardous substance facilities, and ferry and
passenger terminals. For container or break bulk facilities, for example,
the Coast Guard assumed that those facilities that had greater security
needs would have 15 security guards, on average, compared with 4 security
guards for those facilities with less extensive security needs.
2Not counting the number of hours spent annually on these documents.
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
Similarly, the Coast Guard assumed different types of vessels will require
varying amounts of time to draft security assessments and plans and
varying amounts of security measures. All told, the Coast Guard tailored
security requirements by 26 vessel types. For these various types of
vessels, the Coast Guard established estimates for the amount of planning
time involved, the number of security personnel that would be needed, and
average requirements for such security equipment as metal detectors,
intrusion alarms, hand-held radios, locks, and lights. The Coast Guard
also assumed nontowing vessels will need more security than towboats and
barges and that companies with more than 10 vessels will need more
security than companies with 10 or fewer vessels.
To establish many of these facility and vessel security requirements, the
Coast Guard convened a self-described informal expert panel of economists,
program managers, and other Coast Guard personnel with extensive field
experience, including personnel currently stationed in field units. This
group estimated the type and number of pieces of equipment and number of
personnel required to comply with the requirements based on the type and
configuration of a vessel or facility, locations of facilities, the
average crew size aboard vessels, and how the Coast Guard envisioned
vessels and facilities complying with the requirements. Because its
requirements do not mandate specific equipment or personnel but set
performance standards, the Coast Guard reported that it had to make broad
assumptions about how industry would comply with these regulations.
Costs for Security Planning and Implementation
To translate the planning and implementation steps into a cost estimate,
the Coast Guard also needed to establish assumptions about labor costs for
each hour spent on security assessments and plans and costs per unit for
each type of security measure. According to the Coast Guard, salaries for
some personnel were based on previous analyses for salvage and marine
firefighting and requirements for mechanical recovery and dispersants.
Costs for security guards and other security personnel for facilities were
based on national data from the Bureau of Labor Statistics along with a
"loaded" labor factor to account for fringe benefits to these personnel.
Equipment costs were based on product research and limited data received
from industry during comment periods.
When these cost factors were applied, the results indicated that the
onethird of facilities assumed to have more extensive planning and
security needs would spend about 60 percent more on security equipment
than the
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
lower-cost group. Similarly, spending for security equipment varied
considerably between vessel types.
Extent to Which Adequate Security Measures Were Already in Place
Another important assumption deals with the extent to which facilities
would already have security measures in place and, therefore, would not
incur additional costs to comply with MTSA requirements. Among facilities,
the Coast Guard assumed the level of prior investment varied
substantially, both by type of facility and by type of equipment.
According to the Coast Guard, many facilities, such as oil terminals,
cruise terminals, and those dealing with hazardous materials, were already
required to implement security measures under preexisting regulation by
states or various federal agencies. Table 3 presents the Coast Guard's
assumptions about the percentage of facilities that would need to purchase
or enhance their security measures. For example, the Coast Guard assumed
that most ferry terminals would need improvements with regard to gates,
fencing, and number of security guards, but that no ferry terminals would
need to improve their communications system.
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
Table 3: Coast Guard Assumptions about Extent of Prior Security Preparation
Percentage of facilities needing to purchase or enhance security measures
Communications
Type of facility system Gates Radio CCTV Lights Fencing Guards
Container or break 5 30 5 5 5 5
bulk
Dry bulk 0 70 70 10 60 20
Hazardous bulk 5 10 5 5 5 5
liquid
Hazardous substance 5 5 5 5 5 5
(other)
Nonhazardous bulk 10 10 10 10 10 10
liquid
Fleeting areas 5 0 5 10 0 0
Ferry terminals 0 60 5 10 10 50
Group A
Ferry terminals 0 80 5 10 10 50
Group B
Passenger terminals 5 5 5 5 5 5
Many Assumptions Carry Limitations
Source: GAO analysis of Coast Guard data.
Many of these assumptions carry limitations that need to be kept in mind
in assessing the reliability of the estimate. For example, the assumptions
reflected in table 3 above are based on incomplete data and a response
rate from Coast Guard field units that the Coast Guard acknowledges
seriously limit the reliability of any results. This is significant
because the Coast Guard assumes facilities have already spent $17 billion
on these security measures before MTSA requirements take effect. Thus,
variations in the percentages shown in table 3 can have a potentially huge
effect on costs. Actual costs to comply with the final rules could thus
differ substantially from what the Coast Guard estimated because of
simplifying assumptions that had to be made in the absence of complete
data. In a number of cases, the Coast Guard cannot say if the value it
assumed for a particular cost factor is the most likely one to occur, or
likely to be too low or high.
Even relatively small changes in some of these assumptions can have a
substantial effect on results. One example can be seen in changing the
assumption about the percentage of facilities needing more extensive
security measures. The Chief of the Standards Evaluation and Analysis
Division said that some facilities would likely expand in the future to
handle additional cargo resulting from economic growth. This expansion,
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
Limited Time to Estimate Costs Precluded More Extensive Data Collection and
Analysis of Uncertainty
in turn, could require more security and potentially place more facilities
than currently assumed in this higher-need group. For example, assuming
that 40 percent of facilities should be in this higher-need group rather
than the current 33 percent increases the cost estimate by over $350
million.
According to Coast Guard officials, the agency had only a matter of weeks
to prepare its cost estimate, and the estimate had to be prepared without
the benefit of extensive background research, vendor surveys, and field
inventories. The Chief of the Standards Evaluation and Analysis Division,
the Coast Guard official responsible for estimating costs, explained that
had the Coast Guard more time they would have analyzed more data.
Likewise, while the Coast Guard took the step of working with an expert
panel, Coast Guard officials said this effort was not as extensive or
sustained as under ideal circumstances. Time permitting, Coast Guard
officials said, they would have convened an expert panel that included
members of industry, nongovernmental organizations, and other government
agencies, and this panel would have met multiple times over the course of
many months, if not years.
Coast Guard officials also said that if time had permitted, they would
have analyzed uncertainty in their estimate by conducting sensitivity or
other analyses to determine how variations in these assumptions would
change the cost estimate. Analyzing uncertainty in this way is consistent
with best practices for preparing economic analysis of significant
regulatory actions called for by Executive Order 12866, which applies to
the Coast guard's analysis.3 For illustrative purposes, we conducted a
Monte Carlo analysis using the Coast Guard's cost models for facilities
and vessels.4 We found that the Coast Guard's cost estimate of $7.3
billion could be more than $1 billion higher or lower using generalized
assumptions about cost uncertainty. This results from finding that the
Coast Guard estimate of
3A significant regulatory action is defined as likely to result in, among
other things, a rule having an annual effect on the economy of $100
million or more or other serious effects. The Coast Guard has estimated
that its rule for facilities and vessels will have an annual cost of $832
million in real, undiscounted dollars.
4Our analysis was conducted using what is called Monte Carlo simulation,
which uses random numbers to measure the effects of uncertainty. Because
the Coast Guard was unable to provide additional information, our
simulation is based on some general assumptions about the probability
distributions characterizing values used by the Coast Guard for cost
factors.
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
Cost Estimate Spans Only 10 Years and Does Not Include All Costs
$5.4 billion to secure facilities could range from $4.5 billion to $6.4
billion, and its estimate of $1.4 billion to secure vessels could range
from $1.2 billion to $1.5 billion.
The Coast Guard has estimated it will cost $7.3 billion to develop and
implement security plans from 2003 to 2012, but MTSA security related
requirements are not limited to a 10-year period. Extending Coast Guard's
analysis by 10 years to 2022 raises total costs by nearly 50 percent to
$10.7 billion. Extending the period of analysis is consistent with best
practices for preparing economic analysis of significant regulatory
actions called for by Executive Order 12866.5
Figure 4 shows the trajectory of total costs as the time period of
analysis is extended, holding the number of facilities and vessels
constant. Total costs continue to rise past 2012 because another $884
million in operation and maintenance, equipment replacement, and security
guard costs are incurred with each additional year.6
5 Guidance on implementing this executive order notes that the ending
point of the analysis should be far enough in the future to encompass all
the significant benefits and costs likely to result from the rule.
6 The $884 million is in real, undiscounted dollars.
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
Figure 4: Projection of Estimated Costs, 2012-2022
Billions of dollars
11.0
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Year
Present value discounted at 7% Source: GAO analysis.
The Coast Guard's estimate also does not include several types of costs:
o The estimate does not extend to costs beyond the maritime
transportation industry. For example, it does not include costs associated
with possible delays experienced by users in gaining access to more secure
port facilities and the services they provide. It also does not include
incremental costs borne by the Coast Guard to develop and enforce these
new requirements.
o The estimate does not address higher prices for goods and services as
the maritime transportation industry tries to pass along higher security
costs to its customers. For example, higher shipping rates could mean
reduced water transportation services and reduced consumption and
production of goods and services dependent on those transportation
services and associated economic losses.7
7The net effect of these considerations on overall costs is unclear.
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
o The Coast Guard has also estimated an additional $5 billion to meet an
elevated threat level, which is not included in its $7.3 billion
estimate.8 It assumed a code orange alert occurs twice a year, with each
elevated alert lasting 21 days. Increased personnel time is the primary
cost. For example, vessel security officers and key crewmembers are
assumed to work 16 hours per day during each elevation. For facilities,
the number of security guards is doubled.
While the points noted above would add to the cost estimate, it should
also be noted that other considerations could have the opposite effect.
For example:
o Some facility and vessel owners may take steps to exempt themselves
from the requirements, thereby lowering total costs. For example, some
passenger vessel operators could elect to transport fewer people, placing
their vessels into categories that do not have to comply with MTSA
requirements. Other vessel operators could choose to no longer transport
certain types of cargo and thus similarly become exempt. However, these
mitigating actions on the part of vessel and facility owners may not be
costless. For example, restrictive actions like those described may result
in added costs to users of these transportation services.
o On the facilities side, companies will have an incentive to
collaborate in designing collective security systems where opportunities
exist to enhance security at less cost than if each company acted alone.
For example, adjoining facilities may have opportunities to exploit
possible cost economies in surveillance, access control, and
communications. Moreover, because requirements to develop and implement
security plans incorporate a performance-standard approach, there is
flexibility in how a facility or vessel can comply, which could encourage
lower-cost solutions than assumed by the Coast Guard. In addition,
re-examining existing security arrangements as a result of the new
requirements could lead to replacing some older, less cost-effective
measures.
o Steps to enhance security could also lower costs to society at large
if implementing security plans foils a security incident and prevents much
larger costs. For example, in 2002, $764 billion in international trade
was handled by U.S. ports, or more than $2 billion per day. Disruptions to
this trade could have a large impact on the economy. In addition, security
8At MARSEC Level 2, which is the equivalent to the Department of Homeland
Security's Advisory System orange level.
Appendix III: Analysis of Coast Guard's Compliance Cost Estimates
Questions Remain about Adequacy of Public Comments to Validate Cost Estimate
improvements from implementing security plans could have collateral
benefits such as reducing nonsecurity related risks from theft and fire.
Finally, if better security enhances demand for maritime transportation
services, facility and vessel owners have positive incentives to comply.
In the absence of complete data, the Coast Guard relied on public comments
to validate its cost estimate of $7.3 billion and ensure reliability of
data used in that estimate. The extent to which the public comment process
was up to this task is debatable. For instance, the Coast Guard
acknowledged that on a vessel-by-vessel or facility-by-facility basis, its
cost assumptions probably carry a large margin of error. Coast Guard
analysts said the problem in estimating costs for facilities is that there
is no typical facility. In turn, large cost differences for individual
vessels and facilities could make it difficult for individual stakeholders
to judge the accuracy of Coast Guard's estimates of average facility and
vessel costs. In addition, the Coast Guard acknowledged that a key cost
driver in the facility estimate-the national percentage of facilities
requiring higher rather than lower costs to ensure security-is likely to
rise over time. These issues call into question the adequacy of public
comments to validate the estimate and ensure data reliability. However,
given the limited time the Coast Guard had to gather data and make an
estimate, relying on public comments to identify large errors made
practical sense.
The Coast Guard vetted its cost estimate in seven public meetings and said
it received few negative comments. For instance, some stakeholders
commented that foreign-flag vessels should be included in the cost
analysis, but, according to the Coast Guard, foreign-flag vessels are
already required by the International Ship & Port Facility Security Code
to meet these security requirements. On the other hand, the Coast Guard
revised its cost values for portable vapor detectors and operations and
maintenance for equipment after receiving comments that these values were
too low. To help validate cost assumptions, the Coast Guard also
established a proprietary docket where industry could provide it with cost
data without worrying about disclosure in the public domain. However, not
much data were submitted.
Appendix IV: GAO Contacts and Staff Acknowledgments
GAO Contacts Margaret Wrightson (415) 904-2200 Steven Calvo (206)
287-4800
Staff In addition to those named above, Chuck Bausell, Jason Berman,
Geoffrey Hamilton, Christopher Hatscher, Nicholas Larson, and
Acknowledgments Stan Stenersen made key contributions to this report.
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