MARAD’s Ability To Achieve Cost-Effective USMMA Contracts Is Compromised by Several Management Control Weaknesses

What We Looked AtThe United States Merchant Marine Academy (USMMA) is a Federal service academy operated by the Maritime Administration (MARAD). Its mission is to graduate exemplary leaders committed to serve the Nation’s security, marine transportation, and economic needs. In support of its mission, USMMA procures contracts for operational products and services that, for fiscal years 2015 through 2019, totaled an estimated $99.2 million. Prior reviews found weaknesses in MARAD’s acquisition controls and processes, such as noncompliance with Federal and departmental procurement requirements. Accordingly, we initiated this audit with the following objective: to assess contract award and administration policies, procedures, and practices for MARAD’s USMMA acquisitions. What We FoundMARAD’s ability to achieve cost-effective USMMA contracts is compromised by several management control weaknesses. Specifically, its USMMA contract documentation is incomplete, which hinders the Agency’s decision making for new investments to support Academy missions. MARAD also could not demonstrate compliance with key procurement requirements, including those to help ensure fair and reasonable pricing, for 19 sample USMMA contracts totaling $45 million. Additionally, MARAD has gaps in its management of contracting officers and contracting officer representatives assigned to USMMA contracts, increasing the risk that unauthorized or improperly qualified individuals may execute, award, or manage these contracts. For example, a contracting officer without the appropriate warrant authority awarded a $1.9 million USMMA contract, and contracting officer’s representative assigned to USMMA contracts totaling $18.2 million lacked proper certifications. Finally, frequent changes to Academy plans have impeded efficient execution of Capital Improvement Program (CIP) contracts—USMMA’s highest dollar contracts—as MARAD does not have a process to adequately assess how such changes impact the overall CIP portfolio. As a result, USMMA’s CIP project contracts have experienced inefficiencies, including increased costs and schedule delays. We estimate that MARAD’s lack of adequate controls to verify compliance with requirements has put $57.5 million in Federal funds at risk. Our RecommendationsMARAD concurred with all 10 of our recommendations. We consider all recommendations resolved but open pending completion of planned actions.