Research Fleet Modernization: NOAA Needs to Consider Alternatives to the
Acquisition of New Vessels (Letter Report, 08/03/94, GAO/RCED-94-170).

The National Oceanic and Atmospheric Administration (NOAA) in the
Commerce Department operates a fleet of 18 ships that supports its
programs in fisheries and oceanographic research, and hydrographic
charting and mapping.  Because the fleet is old and technologically
obsolete, NOAA has concluded that fleet replacement and modernization
are critical to supporting its mission requirements.  In this report on
the cost-efficiency, accounting, and operating practices of NOAA vessels
compared with other federal and private research vessels, GAO found that
NOAA has generally agreed with previous studies that it experiment with
contracting and chartering the services of private vessels as an
alternative to acquiring new ships.  NOAA's current fleet modernization
plan, however, focuses on the acquisition of new vessels and does not
fully consider the role that contracted and chartered vessels could
play.  Because NOAA does not have the data it needs to adequately assess
whether use of private ships could meet its needs, the agency has no
assurance that its fleet modernization plans are the most cost-effective
means of meeting future program requirements.

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

 REPORTNUM:  RCED-94-170
     TITLE:  Research Fleet Modernization: NOAA Needs to Consider 
             Alternatives to the Acquisition of New Vessels
      DATE:  08/03/94
   SUBJECT:  Ships
             Oceanographic research
             Cost control
             Cost effectiveness analysis
             Future budget projections
             Comparative analysis
             Evaluation methods
             Agency missions
             Federal procurement
             Data collection operations
IDENTIFIER:  NOAA Fleet Modernization Plan
             National Performance Review
             NOAA National Undersea Research Program
             
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Cover
================================================================ COVER


Report to Congressional Committees

August 1994

RESEARCH FLEET MODERNIZATION -
NOAA NEEDS TO CONSIDER
ALTERNATIVES TO THE ACQUISITION OF
NEW VESSELS

GAO/RCED-94-170

NOAA's Fleet Modernization


Abbreviations
=============================================================== ABBREV

  GAO - General Accounting Office
  NMFS - National Marine Fisheries Service
  NOAA - National Oceanic and Atmospheric Administration
  NOS - National Ocean Service
  NURP - National Undersea Research Program
  OAR - Office of Oceanic and Atmospheric Research
  OGP - Office of Global Programs
  UNOLS - University-National Oceanographic Laboratory System

Letter
=============================================================== LETTER


B-256820

August 3, 1994

The Honorable Gerry E.  Studds
Chairman, Committee on Merchant Marine
 and Fisheries
House of Representatives

The Honorable Ernest F.  Hollings
Chairman, Committee on Commerce, Science
 and Transportation
United States Senate

The Department of Commerce's National Oceanic and Atmospheric
Administration (NOAA) operates a fleet of 18 ships that support
NOAA's programs in fisheries research, oceanographic research, and
hydrographic charting and mapping.  However, because the fleet is old
and technologically obsolete, NOAA has concluded that fleet
replacement and modernization are critical to supporting its mission
requirements.  To this end, NOAA has developed a fleet modernization
plan that calls for acquiring 24 new or refurbished vessels over a
15-year period at an estimated cost of $1.9 billion (in fiscal year
1995 dollars). 

Section 608 of the National Oceanic and Atmospheric Administration
Authorization Act of 1992 (P.L.  102-567) required the General
Accounting Office to report on the cost-efficiency, accounting, and
operating practices of NOAA's vessels compared with other federal and
private research vessels.  Pursuant to subsequent discussions with
the House Committee on Merchant Marine and Fisheries, which was
responsible for the language in the act requiring our report, we
agreed to review the extent to which NOAA has considered alternatives
to the acquisition of vessels in developing its fleet modernization
plan.  Specifically, we (1) examined past reports and studies that
addressed NOAA's fleet operations and modernization needs, (2)
determined the extent to which NOAA's current fleet modernization
plan had evaluated alternatives to acquiring new vessels, and (3)
considered what additional actions, if any, NOAA needed to take to
ensure that all viable and cost-effective options for meeting future
mission requirements were fully considered.  In October 1993, we
testified before the Subcommittee on Oceanography, Gulf of Mexico and
the Outer Continental Shelf, House Committee on Merchant Marine and
Fisheries, on the preliminary results of our review.\1 This report
presents the final results of our work. 


--------------------
\1 Ocean Research Vessels:  NOAA Fleet Modernization Plan
(GAO/T-RCED-94-52, Oct.  21, 1993). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

A number of past studies that examined NOAA's fleet operations and
fleet modernization needs have suggested that NOAA experiment with
contracting and chartering the services of private sector vessels as
potentially cost-effective alternatives to acquiring new vessels for
meeting its future program missions. 

NOAA has generally agreed with these previous studies, and an earlier
effort to plan for modernizing its fleet recognized the potential of
contracting for vessel charters.  NOAA's current fleet modernization
plan, however, focuses on the acquisition of new vessels and does not
fully consider the role that contracted and chartered services could
play as alternatives to acquiring new vessels. 

Because NOAA does not have the financial and operational data it
needs to adequately assess whether chartered and contracted vessel
services can cost-effectively meet the needs of NOAA's programs, NOAA
has no assurance that its fleet modernization plan represents the
most cost-effective means of meeting future program requirements. 
One way for NOAA to obtain the data it needs is to experiment with
contracting for the products and services required by NOAA's
programs.  To this end, NOAA is working to award a contract for
hydrographic charting and mapping services.  Ultimately, the results
of such vessel contracting and chartering options, if integrated into
NOAA's efforts to plan for fleet modernization, would provide NOAA
with a basis for identifying the most cost-effective options for
meeting its future program needs. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Office of NOAA Corps Operations funds, operates, and maintains
NOAA's fleet.  Operating at an annual cost of around $60 million, the
fleet of 18 vessels currently provides about 3,400 days at sea
annually of vessel support to NOAA's program offices.  NOAA's fleet
capability, however, has been deteriorating for a number of years. 
In comparison, in 1980 NOAA had 25 active vessels providing about
5,000 days at sea of vessel support.  Most of NOAA's ships are
approaching or have exceeded 30 years of service, and NOAA projects
that, without modernization, its fleet will no longer be able to
operate by the turn of the century. 

In October 1992, the Congress enacted the National Oceanic and
Atmospheric Administration Authorization Act of 1992, which
authorized NOAA to implement a 15-year fleet replacement and
modernization program.  NOAA currently estimates the cost of its
fleet modernization plan at $1.9 billion, in addition to the cost of
current fleet operations.  Table 1 shows that $163.3 million has been
appropriated (or requested) for the fleet modernization program over
its first 4 fiscal years. 



                           Table 1
           
                 Funds Appropriated for Fleet
                        Modernization

                    (Dollars in Millions)

                                                       Funds
Fiscal year                                     appropriated
---------------------------------------------  -------------
1992                                                  $ 33.2
1993                                                    30.0
1994                                                    77.1
1995 (requested)                                        23.0
============================================================
Total                                                 $163.3
------------------------------------------------------------
Source:  NOAA. 


   PREVIOUS STUDIES RECOMMEND
   EXPERIMENTING WITH VESSEL
   CONTRACTING AND CHARTERING
------------------------------------------------------------ Letter :3

Over the past several years, several studies have examined NOAA's
fleet operations and fleet modernization needs and have suggested
that NOAA experiment with greater use of contracts with private
sector vessels for charter services as potentially cost-effective
alternatives to continued reliance on NOAA's vessels.  For example,
in 1986 we reported to the House Committee on Merchant Marine and
Fisheries\2 that NOAA needed to develop more definitive information
on private vessels' availability, capability, and cost before taking
any action to deactivate NOAA's vessels.  In a 1988 report, the
Marine Board of the National Research Council found that other
governmental and private sector organizations have used chartering
successfully and recommended that NOAA, in order to gain chartering
experience, prepare a Request for Proposal for chartering ships to
service one or more mission areas. 

In 1991, NOAA completed its fleet replacement and modernization plan,
and Commerce's Oceanic and Atmospheric Management Advisory
Committee\3 subsequently evaluated NOAA's plan in 1992.  The
Committee concluded that many of NOAA's mission requirements could be
accomplished cost-effectively without requiring that NOAA build its
own special-purpose ships and that contracting options offered the
flexibility to respond to future changes in either program funding or
technical mission requirements.  In May 1992 testimony before the
Subcommittee on Oceanography, Gulf of Mexico and the Outer
Continental Shelf, House Committee on Merchant Marine and Fisheries,
the Advisory Committee's vice chairman stated that NOAA should make
greater use of commonly available contracting options to augment its
core fleet's capability and that it needed to determine the best mix
of NOAA-owned vessels and contracted vessels to meet its mission
requirements. 

Reports last year from Vice President Gore's National Performance
Review\4 and the Department of Commerce's Office of Inspector
General\5 have also echoed the need for NOAA to consider contracting
as a viable option to purchasing new ships.  In September 1993, the
National Performance Review recommended that NOAA experiment with
public and private sector competition to help fulfill its
vessel-days-at-sea requirements.  Also last September, the Inspector
General recommended that alternative methods of meeting mission
requirements, such as contracting, chartering, and leasing ships or
services, be aggressively pursued. 

Most recently, the Marine Board again evaluated NOAA's fleet
modernization plan and, in an April 1994 advance copy of its final
report, concluded that the plan does not adequately consider
alternatives to a large in-house fleet and that NOAA would reduce
ship costs and have more operational flexibility if it chartered
vessels as a regular part of its marine operations. 


--------------------
\2 Deactivating Research Vessels:  National Oceanic and Atmospheric
Administration's Use of Private Ships (GAO/RCED-86-133, June 11,
1986). 

\3 The Committee was established in 1990 by the Secretary of Commerce
and serves as the Secretary's principal outside advisory council on
NOAA matters. 

\4 Creating a Government That Works Better & Costs Less, Report of
the National Performance Review (Sept.  1993). 

\5 Semiannual Review of Fleet Replacement and Modernization Program,
National Oceanic and Atmospheric Administration (EAD-5656-3-0001,
Sept.  1993). 


   NOAA'S FLEET MODERNIZATION PLAN
   DOES NOT FULLY CONSIDER VESSEL
   CHARTERING ALTERNATIVES
------------------------------------------------------------ Letter :4

NOAA has generally agreed with previous studies and reports
recommending that it experiment with greater use of contracting for
charter services to perform its missions.  Furthermore, some of
NOAA's earlier fleet modernization plans and studies discussed the
potential cost-effectiveness of chartering vessels to meet some
mission requirements and included specific estimates of the extent to
which chartering might be used.  NOAA's current fleet modernization
plan, however, focuses primarily on acquiring new vessels, through
purchase or lease, while recognizing that some limited chartering
will occur to provide services when NOAA's vessels are out of
service. 

NOAA has developed an economic model as part of its current
modernization plan to compare the cost-effectiveness of purchasing
versus leasing vessels.  With its focus on vessel acquisition and
operational costs, however, the model does not consider the option of
NOAA's relying on contractor-or charter-provided oceanographic
services as an alternative to acquiring a vessel. 


      PREVIOUS MODERNIZATION
      PLANNING EFFORTS RECOGNIZED
      POTENTIAL OF CONTRACTING FOR
      CHARTERS
---------------------------------------------------------- Letter :4.1

In January 1990, NOAA began to assess its ocean mission requirements
and the fleet needed to support its current and projected programs. 
NOAA organized working groups of scientists, engineers, and program
managers from within and outside of NOAA to identify mission and ship
requirements, develop vessel hull and instrumentation characteristics
to meet these requirements, and ultimately develop a long-term
strategy for implementing fleet modernization.  NOAA's resulting
October 1990 fleet modernization study presented three planning
levels for meeting NOAA's current, near-term, and longer-term program
needs, ranging from 6,100 to 10,215 days at sea of vessel support and
requiring from 22 to 43 vessels.  The study, in considering new ways
of increasing the fleet's flexibility and efficiency, found vessel
chartering to be a potentially attractive alternative in certain
circumstances; it estimated that overall fleet costs would be lower
if 10 percent to 20 percent of mission days at sea were met through
vessel charters. 

After conducting the fleet modernization study, NOAA further refined
the minimum level of vessel support necessary to support its
currently funded programs and arrived at 6,686 days at sea per year,
provided by a fleet of 28 vessels.  At this level of vessel support,
NOAA continued to see the need for chartering, envisioning that 4 of
the 28 vessels--14 percent--would be chartered. 


      CURRENT FLEET MODERNIZATION
      PLAN SIGNIFICANTLY LIMITS
      VESSEL CHARTERING
---------------------------------------------------------- Letter :4.2

In its subsequent 1991 fleet replacement and modernization plan, NOAA
reduced its fleet modernization goal to 5,000 days at sea of vessel
support after taking into account overall departmental budgetary
constraints.  In the process of revising its fleet modernization
goals downward, however, NOAA also largely eliminated the
consideration of chartered vessels as a means to accomplish its 5,000
days at sea.  In its plan, NOAA set out a strategy and chronology for
constructing a fleet of 20 new vessels over a 15-year period, but it
envisioned chartering vessels for only 200 (4 percent) of the 5,000
planned days at sea.\6 In explaining the rationale for largely
excluding charters from the plan, the director of the fleet
modernization office said that Commerce had decided that NOAA's
limited resources should be spent to the greatest extent possible on
modernizing and upgrading NOAA's fleet. 

Last summer, NOAA further modified its fleet modernization goals when
it released an agencywide strategic plan, which discussed the need
for additional days at sea to support NOAA's programs.  To this end,
NOAA's latest fleet modernization plan, released in November 1993,
provides for 5,760 days at sea of vessel support; however, no days
are specifically set aside for charters.  NOAA received approval for
this plan from the Office of Management and Budget and formally
transmitted the plan to the Congress in December 1993.  To meet this
level of vessel support, the plan envisions the need for 24 vessels,
including the acquisition and conversion of 6 surplus U.S.  Navy
vessels to supplement the acquisition of 18 new vessels through
construction, lease, or charter.  NOAA estimates that the program
will cost $1.9 billion.  NOAA plans to update the plan annually. 

While NOAA's plan does not contain any specific estimates for
contracting for chartered vessels, it does state that some chartering
will occur using vessels from the commercial sector to provide
services when NOAA's vessels are out of service.  NOAA will also use
cooperative arrangements with vessels from the University-National
Oceanographic Laboratory System (UNOLS).\7 NOAA has occasionally used
UNOLS' vessels in the past for some of its oceanographic research
work, and concerns have been raised about how efficiently NOAA's
vessels operate when compared with UNOLS' vessels.  As a result, NOAA
analyzed the operating costs of its vessels in comparison with one
new UNOLS vessel.  The analysis found that operating costs for NOAA's
vessels are higher, primarily because of greater crew requirements
and maintenance costs brought about by the age and design of NOAA's
older ships.  The analysis concluded that the modernization of NOAA's
fleet should provide more efficient vessels requiring smaller crews
and make NOAA's and UNOLS' future vessel costs per day at sea nearly
equal.  (See app.  I for a discussion of NOAA's analysis.)


--------------------
\6 For fleet planning purposes, NOAA calculates that one ship will
normally operate at sea for 240 days during 1 year. 

\7 UNOLS, an association of universities and ocean science research
institutions, has a fleet of 26 oceanographic research vessels. 
These ships, some of which are federally owned, perform research
funded mainly by federal agencies, including the National Science
Foundation, the U.S.  Navy, and NOAA. 


      NOAA DEVELOPED AN ECONOMIC
      MODEL TO COMPARE THE
      PURCHASE/LEASE OF VESSELS
---------------------------------------------------------- Letter :4.3

In response to recommendations contained in the 1992 evaluation of
NOAA's fleet modernization plan by Commerce's Oceanic and Atmospheric
Management Advisory Committee, NOAA developed for the plan an
economic model to assess the cost-effectiveness of acquiring vessels
through either purchase or lease.  Before NOAA acquires a new vessel
as part of its modernization plan, it plans to first develop
specifications for the type of vessel needed to perform the desired
program mission and then apply its economic model to evaluate whether
it is more cost-effective for NOAA to own and operate or to lease the
vessel.  The model will be used to estimate the cost of the vessel
under four scenarios comparing government ownership and operation
with contracting. 

To date, NOAA has applied its model in one instance--evaluating a
replacement vessel for its 44-year-old wooden fishing trawler, John
N.  Cobb, which has been used for fisheries research.  The results
showed that a NOAA-owned and -operated vessel would be more
cost-effective than a contractor-owned or -operated vessel.  However,
this type of evaluation is limited in that NOAA is specifying the
type of ship needed to perform the mission--in this instance a new,
154-foot fisheries research vessel costing an estimated $33.2
million.\8 By specifying the type of vessel, NOAA is limiting its
options and failing to consider the possibility that contractors may
be able to successfully provide the needed fisheries research
services to NOAA more cost-effectively on a chartered vessel of their
own choosing. 


--------------------
\8 In fiscal year 1993 dollars. 


   NOAA HAS YET TO OBTAIN NEEDED
   FINANCIAL AND OPERATIONAL DATA
   TO ADEQUATELY ASSESS CHARTERING
   ALTERNATIVES
------------------------------------------------------------ Letter :5

NOAA has taken limited action to date to experiment with contracting
for charter services.  Furthermore, most of the charter activity that
NOAA has conducted is not the type that could potentially replace the
use of NOAA's own vessels.  As we testified in October 1993, if NOAA
experiments with contracting options as part of its modernization
planning effort, it could use the experience to better assess the
role that charters can play in NOAA's fleet modernization effort. 
NOAA is beginning to take some additional actions to experiment with
chartering alternatives, in particular for hydrographic charting and
mapping services--one NOAA program mission for which chartering shows
promise as an alternative to purchasing or leasing new vessels. 


      NOAA'S PAST VESSEL
      CHARTERING
---------------------------------------------------------- Letter :5.1

Table 2, which shows NOAA's overall vessel days at sea for fiscal
years 1992 and 1993, indicates that 2,581 days at sea--27 percent of
NOAA's 9,434 total vessel days at sea during that period--were
provided by chartered vessels. 



                                     Table 2
                     
                     NOAA's Total Vessel Days at Sea, Fiscal
                                  Years 1992-93


Type of vessel               NMFS\a    OAR/OGP\b  NURP\c   NOS\d   Other   Total
---------------------------  ------  -----------  ------  ------  ------  ------
NOAA vessel                   3,570          945       0   2,105     233   6,853
Chartered vessel              1,215          326     960      58      22   2,581
================================================================================
Total days at sea             4,785        1,271     960   2,163     255   9,434
--------------------------------------------------------------------------------
\a National Marine Fisheries Service. 

\b Office of Oceanic and Atmospheric Research/Office of Global
Programs. 

\c National Undersea Research Program. 

\d National Ocean Service. 

Source:  NOAA. 

Most of NOAA's charters have been associated with activities for
which, or were conducted in locations where, NOAA either lacked the
necessary vessel capability or had traditionally used chartered
vessels.  For example, 960 days at sea of vessel time, 37 percent of
NOAA's total chartered days at sea, were for vessels associated with
NOAA's National Undersea Research Program (NURP).  NURP sponsors
oceanographic research using submersible research vessels, and NOAA
must charter these vessels because it does not operate any
submersibles or submersible support vessels.  Furthermore, 925 of the
1,215 days at sea shown in the table that were chartered by the
National Marine Fisheries Service (NMFS) represented chartering
activity by the NMFS Alaska Region, which has historically chartered
local fishing vessels for assistance in its fisheries research work
rather than relying on NOAA's fleet vessels.  Overall, NURP's vessel
charters and NMFS' Alaska charters accounted for 73 percent of NOAA's
total chartered vessel activity during fiscal years 1992 and 1993. 
The remaining charter activity was accounted for by NOAA's Office of
Oceanic and Atmospheric Research (OAR), Office of Global Programs
(OGP), and National Ocean Service (NOS). 


      SOME LIMITED CHARTERING
      PLANNED FOR FISCAL YEARS
      1994 AND 1995--ADDITIONAL
      EXPERIMENTS UNCERTAIN
---------------------------------------------------------- Letter :5.2

In our October 1993 testimony, we discussed NOAA's need to (1)
experiment with contracting for desired end products and mission
outputs and (2) give contractors flexibility in how they perform the
work.  Also testifying at the same hearing, NOAA's Deputy Under
Secretary for Oceans and Atmosphere stated that NOAA would conduct
experiments in competition between the public and private sectors for
ship services.  The Deputy Under Secretary stated that "actual
performance experience and data from this competition will help NOAA
in its decisions on how best to meet its missions and what the proper
mix of government and private sector ships should be."

To this end, NOAA has planned charters for this fiscal year and next
year.  NOAA plans to make $2 million available during fiscal year
1994 to contract for the acquisition, processing, and delivery of
nautical charting and mapping data involving an area off the
northeast coast of the United States.  (NOAA had planned to do this
during fiscal year 1993 but canceled its plans because of funding
limitations.) For fiscal year 1995, a NOAA fleet modernization
official stated that NOAA's budget request includes $1.6 million for
a chartered replacement vessel to conduct fisheries research while
the NOAA vessel Delaware II is undergoing a major overhaul and $2
million to conduct additional nautical charting and mapping work. 

NOAA expects that these charters will be responsive to our suggestion
and to the recommendation of the National Performance Review on
experimenting with competition between the public and private
sectors.  NOAA believes that the contracts will help provide needed
operational and financial data with which to better evaluate the
capabilities of private sector vessels.  The director of the fleet
modernization office also informed us that his office is starting to
develop an evaluation methodology for use in assessing the results of
the planned chartering efforts.  He explained that the evaluation's
objective is to ensure that future fleet modernization decisions are
made after having systematically considered both vessel acquisition
and chartering options.  In commenting on a draft of this report, the
Commerce's Assistant Secretary for Administration stated that the
evaluation methodology for NOAA's charting and mapping contract will
be completed by December 1994. 

Some uncertainty exists, however, about the extent to which funds
will be made available for future chartering experiments.  While
NOAA's fleet modernization program is funding the $5.6 million to
experiment with charters for fiscal years 1994 and 1995,\9 NOAA has
stated that it is curtailing fleet modernization-funded chartering
activity.  NOAA's 1993 strategic plan states that additional charter
time to meet short-term needs will have to be funded through the
individual NOAA program offices in fiscal year 1995 and beyond. 
(Fleet modernization funds may still be used to charter vessels when
NOAA's vessels are out of service while being modernized.) However, a
NOAA fleet modernization official informed us that the NOAA program
office's requests for additional charter funds did not survive review
at the departmental and Office of Management and Budget level and
consequently were not included in NOAA's fiscal year 1995 budget
request to the Congress. 


--------------------
\9 During fiscal years 1992 and 1993, 252 days at sea of NOAA's total
vessel charter activity were funded through NOAA's fleet
modernization budget, at a total cost of $2.7 million. 


      OPPORTUNITIES EXIST TO
      PERFORM ADDITIONAL
      CHARTERING FOR CHARTING AND
      MAPPING
---------------------------------------------------------- Letter :5.3

Hydrographic charting and mapping is a specific program that merits
further assessment as to whether the private sector can
cost-effectively contribute to meeting NOAA's mission requirements. 
The National Performance Review highlighted NOAA's charting and
mapping mission as one in which NOAA should experiment with
public/private competition, and NOAA currently is working to contract
out some of its charting and mapping work.  In November 1993, NOAA
published a notice in the Commerce Business Daily announcing its
intent to solicit industry proposals for the acquisition of nautical
sounding data covering Western Long Island Sound, Vineyard Sound, and
Nantucket Sound.  In February 1994, NOAA issued its formal
solicitation, and an agency official stated that NOAA hopes to award
the contract this summer. 

The results of the planned contracting activity could have
substantial ramifications for NOAA's future vessel needs. 
Specifically, NOAA's modernization plan currently envisions continued
use of NOAA's vessels for charting and mapping work at a cost of $335
million for overhauling two ships, converting four surplus Navy
ships, and purchasing three new ships.  The current plan calls for
these vessels ultimately to operate for about 1,700 days at sea
annually.  In comparison, during fiscal year 1993 NOAA's existing
five charting and mapping vessels provided about 900 days at sea of
mapping and charting effort. 

NOAA has made little use of contractors for charting and mapping
because of concerns about the quality of their work.  NOAA is liable
for the accuracy of the nautical charts that are produced.  When NOAA
contracted for some hydrographic survey work in 1984 in Lake
Superior, it experienced problems with the survey data provided by
the contractor. 

Currently, however, representatives of several private sector
charting and mapping interests have said that they have the
capability to perform some of NOAA's charting and mapping missions. 
As evidence, the contractors have cited similar charting and mapping
work performed for the U.S.  Army Corps of Engineers in rivers and
harbors.  A Corps official said that the Corps has been successfully
contracting for charting and mapping work for a number of years, and
he estimated that about 35 percent of the Corps' work is performed
under contract.  The National Performance Review pointed to potential
savings that may result from contracting, and to this end, private
sector interests stated that their charting and mapping work could be
performed using smaller or less expensive vessels than NOAA uses. 

Echoing the statements made by private sector charting and mapping
interests, NOAA's Deputy Director of the Coast and Geodetic Survey
stated that contractors currently are capable of performing the type
of charting and mapping work that NOAA performs.  Furthermore, the
Deputy Assistant Administrator of the National Ocean Service (NOS)
believes that the private sector can be used to augment the charting
and mapping activity conducted by NOAA's vessels and that he hopes
that the current contracting initiative can lead to more private
sector efforts.  He pointed out that NOS has identified a backlog of
46,000 square miles of critical survey areas needing to be charted
and mapped and that, given the condition of NOAA's fleet and the time
needed to build new ships, a cost-effective and timely way to start
reducing the backlog is to rely on the private sector. 


   CONCLUSION
------------------------------------------------------------ Letter :6

NOAA has stated that it intends to consider vessel chartering
alternatives as part of its fleet modernization plan.  In particular,
NOAA has planned three charters to test their cost-effectiveness and
operational feasibility and is developing an evaluation methodology
to assess the results of these charters in the context of fleet
modernization needs. 

Nonetheless, NOAA's fleet modernization plan, as written, continues
to focus primarily on vessel acquisition for meeting NOAA's future
mission needs and does not adequately address the role that chartered
and contracted vessel services can play as alternatives to acquiring
vessels.  Until NOAA has taken advantage of opportunities to evaluate
the feasibility of charters and has developed a means to measure
their results, NOAA will not have assurance that its $1.9 billion
modernization plan represents the most cost-effective means to meet
future program needs. 


   RECOMMENDATIONS TO THE
   ADMINISTRATOR, NOAA
------------------------------------------------------------ Letter :7

In order to ensure that all viable and cost-effective options for
accomplishing NOAA's program missions are considered in making
decisions on future fleet modernization, we recommend that the
Administrator, NOAA,

  ensure that sufficient funding is made available to carry out
     needed efforts to assess the operational feasibility and
     cost-effectiveness of using private sector contracting and
     charter services for vessels to support such mission
     requirements as hydrographic charting and mapping,

  continue to develop a methodology to assess the results of these
     efforts, and

  reevaluate the level of vessel chartering in the fleet
     modernization plan in light of the results of these assessments. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :8

In written comments on a draft of this report, the Secretary of
Commerce concurred with the report's recommendations and indicated
the steps the Department plans to take to implement them (see app. 
II).  In addition, Office of NOAA Corps Operations officials provided
comments clarifying some technical points, which we incorporated in
the report where appropriate. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :9

We conducted our review between January 1993 and June 1994, in
accordance with generally accepted government auditing standards.  In
conducting our work, we reviewed NOAA's fleet modernization study as
well as previous studies on NOAA's fleet needs, interviewed program
and fleet officials, and obtained information from other sources on
both private and public sector oceanographic research activities. 


---------------------------------------------------------- Letter :9.1

Unless you publicly announce its contents earlier, we plan no further
distribution of this report until 7 days from the date of this
letter.  At that time, we will make copies available to the Secretary
of Commerce and other interested parties.  We will also make copies
available to others on request. 

This work was performed under the direction of James Duffus III,
Director, Natural Resources Management Issues, who can be reached at
(202) 512-7756.  Other major contributors to this report are listed
in appendix II. 

Keith O.  Fultz
Assistant Comptroller General


OPERATING COSTS OF NOAA'S VERSUS
UNOLS' VESSELS
=========================================================== Appendix I

In 1991, at the direction of the Administrator, National Oceanic and
Atmospheric Administration (NOAA), a committee was formed to compare
NOAA's vessel operating costs with the University-National
Oceanographic Laboratory System's (UNOLS) vessel costs.  This effort
was undertaken to address perceptions that NOAA's vessels were much
more costly to operate than UNOLS' vessels.  Overall, the committee
found that operating costs for NOAA's vessels were about 25 percent
higher per day at sea than UNOLS' vessels.  However, after making
adjustments for equivalent days at sea of vessel operation between
NOAA and UNOLS, the cost differential was reduced to about 10 to 15
percent.  The committee concluded that most of the cost differences
were due to the greater crew requirements necessitated by the age and
design of the older NOAA ships.  NOAA also concluded that the future
modernization of its fleet should lead to more efficient vessel
operations, thus reducing crew requirements and making NOAA's and
UNOLS' vessel costs per day at sea nearly equal. 

In initiating its review, the committee had to deal with some
fundamental differences between NOAA and UNOLS in (1) their methods
for tracking vessel operating costs, (2) the types of missions each
organization's vessels support, and (3) their approach to determining
the crew size for operating their vessels.  Because of such
differences, vessel operating costs as calculated separately by NOAA
and UNOLS are not directly comparable.  For example, NOAA's vessel
operating costs include some or all of the mission personnel as part
of the ship's crew, while the institutions that make up UNOLS
maintain pools of technician separate from the ship's crew. 
Conversely, UNOLS' vessel operating costs include a proportionate
share of shore support facilities and staff, while NOAA does not
include the cost of its marine centers in calculating the operating
costs of its vessels. 

In performing this study, the committee decided to adopt UNOLS'
vessel cost categories and then adjust NOAA's vessel costs
accordingly to put them on a comparable footing.  For its analysis,
the committee selected three NOAA vessels of comparable size and
function--the Malcolm Baldrige, the Discoverer, and the Surveyor--and
compared the operating costs of these vessels with those of the new
UNOLS vessel Thomas G.  Thompson. 

Major vessel cost elements considered by the committee included
vessel personnel costs and benefits as well as other operating
expenses, such as fuel and supplies; annual vessel maintenance; and
shoreside support, such as NOAA's marine centers and UNOLS' marine
operations staff.  Excluded from the committee's analysis were major
ship conversion or rehabilitation costs, scientific and electronic
equipment and support, and mission support personnel mentioned
previously.  Also excluded from the committee's calculations was
vessel depreciation, since neither NOAA nor UNOLS includes
depreciation in its calculations of vessel operating costs. 

As shown in figure 1, average operating costs per day at sea for the
three NOAA vessels examined were $20,800, compared with $16,500 for
the UNOLS vessel. 

   Figure I.1:  Comparison of
   NOAA's and UNOLS' Vessel
   Operating Costs, Fiscal Year
   1992

   (See figure in printed
   edition.)

Source:  NOAA. 

Most of the $4,300 per day difference was the result of NOAA's higher
expenses for crew salary, benefits, and overtime, as well as higher
vessel maintenance costs.  In this connection, the committee noted
that NOAA's ships carry additional maintenance personnel in deck and
engine departments and carry additional personnel in the steward's
department and that the average age of the three NOAA ships--26
years--necessitates greater maintenance.  Looking to the future, the
committee envisioned reductions in these expenses as the NOAA fleet
is modernized.  Specifically, the committee stated that future NOAA
vessels would need fewer engine department personnel because of
automated engine rooms, fewer maintenance personnel because of new
equipment, and fewer steward's department personnel because of modern
galley and mess areas.  New NOAA vessels should also be able to spend
more days at sea.  When combined, all of these factors should result
in lower operating costs per day at sea. 

In discussing NOAA's analysis, the Executive Secretary of UNOLS
expressed concern about the UNOLS vessels that were selected for
comparison.  Initially, the NOAA committee had selected two UNOLS
vessels, the Knorr and Thomas G.  Thompson.  The Executive Secretary
stated that the Knorr was not a good example to use since it was
undergoing a major conversion--30 feet were being added to its
length.  The NOAA committee deleted the Knorr from its final
analysis.  The Executive Secretary also expressed concern about using
the Thomas G.  Thompson, since it was a brand new vessel.  The NOAA
committee dealt with this problem by estimating operating costs for
the Thomas G.  Thompson for the year 1992 and comparing them with
actual operating costs of the NOAA vessels for 1990, inflated to
estimated 1992 levels. 

The NOAA committee also reviewed the operating costs for three U.S. 
Navy oceanographic research ships.  While not examining the costs in
depth, the committee concluded that operating costs for comparable
items for these three vessels were between $20,000 and $30,000 per
day at sea. 




(See figure in printed edition.)Appendix II
COMMENTS FROM THE DEPARTMENT OF
COMMERCE
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
========================================================= Appendix III

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C. 

Paul Grace, Assistant Director
Thomas Heck, Evaluator-in-Charge

