NOAA Fleet: Responses to Post-Hearing Questions (Correspondence,
03/22/99, GAO/GGD-99-60R).

Pursuant to a congressional request, GAO addressed congressional
concerns regarding the National Oceanic and Atmospheric Administration
(NOAA), focusing on: (1) the management challenges facing the Department
of Commerce in its administration of NOAA; (2) whether GAO reviewed the
latest available studies of NOAA's fleet and modernization efforts or
NOAA's fisheries research acquisition plan; (3) whether GAO examined the
cost efficiency or effectiveness of NOAA's ships or compared the costs
of NOAA's ships with those of private or other available ships; (4)
whether GAO reviewed NOAA's fisheries research ship replacement plans;
(5) why replacing the NOAA fleet is entwined with the issue of the NOAA
Corps; and (6) whether GAO reviewed NOAA's downsizing of the NOAA Corps.

GAO noted that: (1) GAO has concerns about the Department's
implementation of Office of Management and Budget Circular A-76,
performance of commercial activities, the adequacy of NOAA's ship cost
comparisons with private sector and other available ships, and its
inherent preference for operating its own ships, rather than contracting
out more with the private sector and other public entities and relying
more heavily on them to come up with the ships and marine data that NOAA
needs; (2) GAO has not had an opportunity to review the latest study of
NOAA's fleet modernization or NOAA's acquisition plans for fisheries
research and hydrographic missions; (3) GAO has not reviewed NOAA's
current cost claims; (4) GAO's work in the costs area, which is about 5
years old now, faulted NOAA for setting unrealistic conditions for its
evaluation of outsourcing alternatives and raised serious questions
about NOAA's claims and the basis on which NOAA founded those claims;
(5) GAO has found that, once federal assets like ships and airplanes
exist, it seems cheaper to operate them than to contract for services,
since the capital and associated fixed operating costs are already sunk;
(6) although GAO has not reviewed NOAA's construction plans or
supporting cost justifications, GAO understands that the Commerce
Inspector General (IG) has reviewed at least some of them; (7) the
Commerce IG has criticized certain NOAA rotational patterns as not
critical to or paid for by other NOAA missions; (8) if there were no
NOAA fleet, there would be no justification for the NOAA Corps as a
separate service; (9) in 1995, the National Performance Review, noting
that the NOAA Corps was the smallest uniformed service and that the
fleet it commanded was obsolete, recommended that the NOAA Corps be
gradually reduced in number and eventually eliminated; (10) GAO has not
reviewed NOAA's reported downsizing of its NOAA Corps; (11) however, in
1996, GAO: (a) reported on the anomaly of NOAA being paid military
benefits and allowances while not meeting the Department of Defense's
criteria and principles for a military compensation system; and (b)
compared the costs of the NOAA billets that existed at the time with
civilian pay and benefits for the same positions; (12) while GAO has not
reviewed NOAA's downsizing of the NOAA Corps and claimed cost savings,
the Commerce IG did review NOAA's 1997 plan and legislative proposal to
downsize and civilianize the NOAA Corps; and (13) the IG recommended
downsizing the NOAA Corps to achieve significant cost savings and
management efficiencies.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  GGD-99-60R
     TITLE:  NOAA Fleet: Responses to Post-Hearing Questions
      DATE:  03/22/99
   SUBJECT:  Cost effectiveness analysis
             Privatization
             Cost control
             Reductions in force
             Ships
             Oceanographic research
             Military pay
             Procurement planning
             Federal downsizing
             Officer personnel
IDENTIFIER:  National Performance Review
             
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Office Washington, D. C. 20548


Page 1 

GAO/GGD-99-60R
 Responses to NOAA Fleet Questions
Page 1   GAO/GGD-99-60R  Responses to NOAA Fleet Questions

GAO

General Government Division

B-282315 March 22, 1999 The Honorable Ken Calvert Chairman,
Subcommittee on Energy and Environment Committee on Science House
of Representatives

Subject: NOAA Fleet: Responses to Post- Hearing Questions On
February 24, 1999, we testified before your Subcommittee on two
National Oceanic and Atmospheric Administration (NOAA) issues
National Weather Service modernization and NOAA's fleet of
research and survey ships. 1 Both of these issues also were
highlighted in our recent performance and accountability series
report on the Department of Commerce. 2 In the NOAA fleet area,
NOAA continues to own, operate, and plan investments of hundreds
of millions of dollars in its aging fleet of 15 ships that are
used to support its programs in fisheries research, oceanographic
research, and hydrographic charting and mapping. NOAA's fleet is
managed and operated by a NOAA Corps of about 240 uniformed
commissioned officers who, like the Public Health Service Corps,
perform civilian rather than military functions but are covered by
a military- like pay and benefits system. For more than a decade,
our office and others have urged NOAA to aggressively pursue more
cost- effective alternatives for acquiring needed marine data.
While NOAA has increased its outsourcing for these services, it
continues to rely heavily on its aging in- house fleet of ships
many of which are costly and inefficient to operate and maintain
and lack the latest state- of- the- art technology and still plans
to replace at least some of these ships.

Following the February 1999 hearing, you asked us to respond, for
the hearing record, to several post- hearing questions regarding
the NOAA fleet. This letter responds to your questions. Our
responses are based on our prior work on NOAA fleet and NOAA Corps
issues, Commerce Inspector General (IG) reports and testimonies on
these issues, and our reviews of the Department of Commerce's
strategic and performance plans required by the Government
Performance and Results Act of 1993 (Results Act). Your questions
and our responses are contained in the enclosure to this letter.

1 Department of Commerce: National Weather Service Modernization
and NOAA Fleet Issues (GAO/ T- AIMD/ GGD- 99- 97, Feb. 24, 1999).
2 Major Management Challenges and Program Risks: Department of
Commerce (GAO/OCG-99-3, January 1999).

B-282315 Page 2 GAO/GGD-99-60R Responses to NOAA Fleet Questions

As agreed with your office, we will make copies of this letter
available to others upon request. If you have any further
questions or wish to discuss our responses, please call me at
(202) 512- 8676.

Sincerely yours, L. Nye Stevens Director, Federal Management

and Workforce Issues Enclosure

Enclosure Subcommittee Questions and Our Responses

Page 3 GAO/GGD-99-60R Responses to NOAA Fleet Questions 1. You
included the NOAA fleet in your recent performance and
accountability

series report as one of four performance and management challenges
facing the Department of Commerce. Could you briefly tell the
Subcommittee why GAO considers the NOAA fleet issue to be one of
Commerce's major challenges?

Answer: The NOAA fleet was first identified as a policy and
management problem more than a decade ago. At that time, most of
NOAA's fleet of research and survey ships were approaching or past
their 30- year life expectancies. Following reports by our office
and others, the Department of Commerce identified the NOAA fleet
as a material weakness in its Federal Managers' Financial
Integrity Act (FMFIA) report for fiscal year 1990. In 1993, the
National Performance Review (NPR) recommended that NOAA experiment
with public/ private competitions to help fulfill its minimum
number of days- at- sea requirements. However, NOAA has
experienced significant difficulties in its efforts to plan and
implement solutions, and the NOAA fleet remains one of the
Department's material weaknesses.

In a 1996 program evaluation report on NOAA's 1995 fleet
modernization plan, the Commerce IG recommended that NOAA
terminate its fleet modernization efforts; cease investing in its
ships; immediately begin to decommission, sell, or transfer them;
and contract for the required ship services. The Commerce IG
believes that NOAA's fleet remains a major management problem and
is concerned that NOAA may not be pursuing outsourcing strongly
enough or viewing the fleet issue in a broad enough,
governmentwide context. Also, the IG is concerned that NOAA's
fisheries research acquisition plan and strategy may not be the
best available option for acquiring these ships and may not be
fully consistent with the findings and recommendations in a recent
review done for NOAA by a retired Navy admiral. For these reasons,
the Commerce IG included the NOAA fleet issue as one of the 10
most serious management challenges facing the Department of
Commerce in its December 1998 report to the House leadership.

We have concerns about the Department's implementation of OMB
Circular A- 76, Performance of Commercial Activities; the
adequacy/ completeness of NOAA's ship cost comparisons with
private sector and other available ships; and its inherent
preference for operating its own ships, rather than contracting
out more with the private sector and other public entities and
relying more heavily on them to come up with the ships and/ or
marine data that NOAA needs. For example, Commerce has not done a
Circular A- 76 inventory of its commercial activities since 1983,
and congressional and other pressure accounted for the single A-
76 study it did of one of its ships last year. Over the years,
NOAA has been reluctant to give serious consideration to the many
innovative and more modern ways that the private sector and
University- National Oceanographic Laboratory System (UNOLS)
potentially could meet its basic marine data needs.

Enclosure Subcommittee Questions and Our Responses

Page 4 GAO/GGD-99-60R Responses to NOAA Fleet Questions 2. We
understand that there are several recent studies on NOAA's fleet

modernization and NOAA's plans for its hydrographic and fisheries
research missions. Has GAO reviewed the latest available studies
of NOAA's fleet and modernization efforts or NOAA's acquisition
plan for its fisheries research mission, and if so, what have you
found?

Answer: We have not had an opportunity to review the latest study
of NOAA's fleet modernization or NOAA's acquisition plans for its
fisheries research and hydrographic missions. We asked NOAA for
these studies and plans to prepare for the Subcommittee's February
24, 1999, hearing. However, NOAA did not give us access to these
studies and plans because it said that they were still under
review at the Office of Management and Budget (OMB) and had not
yet been made public. We do take some encouragement from the fact
that, according to its fiscal year 1999 and 2000 performance
plans, NOAA now envisions meeting at least one- half of its
hydrographic data needs from private sector and UNOLS resources.
Also, it should be noted that NOAA's long- term plans seem to rely
more heavily on its own ships in the fisheries research area,
where the availability and suitability of other alternatives is
the least apparent, and to outsource for most of its data
requirements in the oceanographic and mapping/ charting areas.

3. NOAA claims that its ships are cost competitive with those of
the private sector and other public entities and that, in many
cases, its ships are less costly to operate than private charter
ships and ships belonging to the University- National
Oceanographic Laboratory System (UNOLS). Has GAO examined the cost
efficiency or effectiveness of NOAA's ships or compared the costs
of NOAA's ships with those of private or other available ships?

Answer: We have not reviewed NOAA's current cost claims. Our work
in the costs area, which is about 5 years old now (Research Fleet
Modernization: NOAA Needs to Consider Alternatives to the
Acquisition of New Vessels, GAO/RCED-94-170, Aug. 3, 1994),
faulted NOAA for setting unrealistic conditions for its evaluation
of outsourcing alternatives and raised serious questions about
NOAA's claims and the basis on which NOAA founded those claims.
The Commerce IG has done more current and in- depth work in this
area. In a 1996 report, the IG compared the costs of operating
specific NOAA ships with the costs of charters available from the
larger UNOLS fleet and from the even more extensive resources of
the private sector. The IG's report made a convincing case that
the outsourcing alternatives at that time were less expensive.

As a general proposition, we have found that, once federal assets
like ships and airplanes exist, it seems cheaper to operate them
than to contract for services, since the capital and associated
fixed operating costs are already sunk. In the federal civilian
passenger- carrying aircraft area, for example, OMB guidelines
require only that federal agencies compare the variable costs of
operating those aircraft with the costs of commercially available
alternatives

Enclosure Subcommittee Questions and Our Responses

Page 5 GAO/GGD-99-60R Responses to NOAA Fleet Questions

in justifying the flight- by- flight use of the government- owned
aircraft. Also, the more government- owned ships or aircraft are
used, the more cost- effective they appear to be because usage
lowers their average hourly or daily cost. Thus, the key question
is whether to acquire the assets in the first place.

4. The President's budget for fiscal year 2000 proposes $52
million for construction of a new replacement NOAA fisheries
research ship and indicates that NOAA plans to spend a total of
$185 million for four new replacement fisheries research ships
over the 5- year period ending in 2004. Has GAO reviewed these
construction plans or the supporting NOAA analyses that were used
to justify these new acquisitions, and if so, what have you found?

Answer: We have not reviewed these plans or analyses. NOAA told us
in February 1999 that these plans and analyses were still under
review by OMB and therefore not available for our review. As
stated earlier, we had hoped to review these plans and analyses to
help us prepare for the Subcommittee's February 24, 1999, hearing.

Although we have not reviewed NOAA's construction plans or
supporting cost justifications, we understand that the Commerce IG
has reviewed at least some of them. In any event, it seems to us
that the key questions are (1) how does NOAA treat or consider
capital costs in comparing the cost competitiveness of its in-
house ships with those available on an outsourcing basis from
private industry or UNOLS and (2) does NOAA express its marine
data needs in terms that allow the private sector and other public
entities to apply more efficient technologies and different ship
configurations.

5. Your statement says the issue of replacing the NOAA fleet is
entwined with the issue of the NOAA Corps. Please explain how
these issues are interrelated.

Answer: The NOAA Corps is something of an anachronism, dating back
to the 19 th century when mapping and charting by government
mariners were peacetime functions of the Army and the Navy. Today,
the NOAA Corps exists primarily to manage and operate NOAA's
inhouse fleet of research and survey ships. NOAA Corps officers
also do rotational shore duty in NOAA's five line offices. The
rotational pattern of NOAA Corps officers is one- third of their
career at sea, one- third on shore duty related to ship support,
and one- third assigned to other NOAA billets. It should be noted
that the Commerce IG has criticized the latter rotational pattern
as not critical to or paid for by other NOAA missions.

If there were no NOAA fleet, there would be no justification for
the NOAA Corps as a separate service. In 1995, NPR, noting that
the NOAA Corps was the smallest uniformed service and that the
fleet it commanded was obsolete, recommended that the NOAA Corps
be gradually reduced in number and eventually eliminated.

Enclosure Subcommittee Questions and Our Responses

Page 6 GAO/GGD-99-60R Responses to NOAA Fleet Questions 6. NOAA
says that it has downsized the NOAA Corps from over 400 officers
in 1994

to about 240 officers at the beginning of Fiscal Year 1999 and
achieved annual cost savings of at least $6 million. Has GAO
reviewed NOAA's reported downsizing of the NOAA Corps, and if so,
what have you found?

Answer: We have not reviewed NOAA's reported downsizing of its
NOAA Corps. However, in 1996 we (1) reported on the anomaly of
NOAA (and the Public Health Service) being paid military benefits
and allowances while not meeting the Department of Defense's
criteria and principles for a military compensation system and (2)
compared the costs of the NOAA billets that existed at that time
with civilian pay and benefits for the same positions. In October
1997, we testified before a Senate Subcommittee on issues relating
to the civilianization of the NOAA Corps. In December 1997, we
responded to several post- hearing questions on NOAA's plan and
proposed legislation to downsize and civilianize the NOAA Corps.
These GAO products are footnoted in our prepared statement for the
Subcommittee's February 24, 1999, hearing.

While we have not reviewed NOAA's downsizing of the NOAA Corps and
claimed cost savings, the Commerce IG did review NOAA's 1997 plan
and legislative proposal to downsize and civilianize the NOAA
Corps. In this regard, the IG recommended downsizing the NOAA
Corps to achieve significant cost savings and management
efficiencies and expressed serious concerns about NOAA's plan and
legislative proposal. Congress had its own ideas and, in Public
Law 105- 384, authorized a NOAA Corps slightly larger than
today's.

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