Vol. 114 - No. 92 - May 14, 2010
GAO Says St. Lawrence Seaway Estimates for the Asset Renewal Program Will Change, and Implementing Best Practices May Improve the Estimates' Reliability
The General Accountability Office released a 40-age report yesterday, noting among other things, that the St. Lawrence Seaway estimates for the asset renewal program will change, and implementing best practices may improve the estimates’s reliability.
Why GAO Did This Study
The St. Lawrence Seaway is a 50-year-old binational transportation asset jointly operated by the United States and Canada that is used to move cargo between North America and international markets. In 2009, the U.S. Saint Lawrence Seaway Development Corporation (SLSDC), which is responsible for operating and maintaining the two locks and navigation channels in the U.S. portion of the Seaway, initiated a 10-year Asset Renewal Program (ARP) to address long-term needs of the locks, navigation channels, and related facilities and equipment.
In 2009, Congress instructed GAO to examine the ARP. Accordingly, GAO examined (1) how the cost estimates have changed from February 2009 to February 2010, (2) the extent to which the ARP covers all asset renewal needs, and (3) the steps U.S. and Canadian authorities have taken to coordinate their asset renewal programs. To conduct this work, GAO reviewed agency program documents, interviewed SLSDC officials, and analyzed ARP estimates and fiscal year 2009 contract data.
What GAO Recommends
To improve estimates of the cost of the ARP projects, GAO recommends that SLSDC develop a cost-estimating process that follows best practices to better ensure that its estimates are comprehensive, well documented, accurate, and credible. SLSDC agreed to consider the report’s recommendation.
For more information, contact Terrell G. Dorn at (202) 512-6923 or dornt@gao.gov.
Summary of Results
The total ARP estimate, which increased from $177 million to $186 million from February 2009 to February 2010, will continue to change as its 52 component projects are developed. Generally, as projects mature and requirements are refined, the accuracy of estimates increases and the variability decreases. For the ARP contracts that SLSDC awarded in fiscal year 2009, GAO found significant variability between the estimated costs and the amounts of some awarded contracts. This variability is attributable to, among other things, general economic conditions, project-specific factors, and incomplete requirements definitions.
Though some factors that affect the variability between estimated and actual costs may be out of the control of SLSDC, reliable estimates should consider potential uncertainties.
GAO used the GAO Cost Estimating and Assessment Guide to evaluate SLSDC’s cost-estimating process on two of the complex ARP projects that began in fiscal year 2009, are expected to cost more than $1 million when completed, and are critical to the operation of the locks. GAO found that SLSDC’s estimating process for these two projects did not fully meet any of the four characteristics—comprehensive, well documented, accurate, and credible—for producing a high-quality cost estimate, and partly as a result, the estimates were unreliable and underestimated the actual cost. Because of the variability between estimated costs and actual awards, SLSDC adjusted the ARP spending plan by reallocating project funding and deferring or accelerating projects to meet the targeted spending amount of approximately $17.6 million for fiscal year 2009.
The ARP addresses most asset renewal needs identified through prior inspections of its assets. The remaining needs are generally addressed through routine maintenance. However, SLSDC could use its program flexibility to add or modify ARP projects if the needs cannot be adequately addressed through routine maintenance. For example, because routine maintenance funding is not adequate for the second phase of an emergency communications system in the underground areas of the locks, SLSDC plans to add a project to the ARP for this work. Furthermore, SLSDC’s continual condition assessment of its assets may result in reprioritizing existing ARP projects or adding new projects if the cost to address newly identified needs exceed its routine maintenance budget.
The steps the United States and Canada have taken to coordinate the ARP generally involve setting the annual opening and closing dates of the Seaway and exchanging technical project information. Coordination of the opening and closing dates, while routine, is important for the ARP because it determines the work schedule for a number of critical projects that can be completed only during the winter shutdown period. SLSDC and the Canadian Seaway share technical information about similarly scoped projects both countries are doing and on projects that would affect vessel-operating procedures at the locks.
The 40-page report is available at: http://www.gao.gov/new.items/d10541r.pdf