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OIG Finds Contract Management Weaknesses at MARAD

An audit by the Office of Inspector General (OIG) at the Department of Transportation has found the that Maritime Administration’s (MARAD) ability to achieve cost-effective contracts is compromised by several management control weaknesses

The audit examined contract policies, procedures and practices within the United States Merchant Marine Academy (USMMA). USMMA is a Federal service academy operated by 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 have found weaknesses in MARAD’s acquisition controls and processes, such as noncompliance with Federal and departmental procurement requirements. 

The Government Accountability Office developed a framework after it identified systemic weaknesses in key areas of acquisition reported by various Federal Government accountability organizations. This framework, which enables a high-level, qualitative assessment of a Federal agency’s acquisition function guided OIG’s review.

OIG has found MARAD’s ability to achieve cost-effective USMMA contracts is compromised by weaknesses in management controls. Specifically, the watchdog found USMMA contract documentation to be incomplete, which could hinder 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. 

Furthermore, OIG found that 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 a contracting officer’s representative assigned to USMMA contracts totaling $18.2 million lacked proper certifications. In other examples, contracts had been cancelled late due to staff turnover and lack of continuity in the transition.

Finally, OIG found that 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, OIG determined that USMMA’s CIP project contracts have experienced inefficiencies, including increased costs and schedule delays. OIG estimates that MARAD’s lack of adequate controls to verify compliance with requirements has put $57.5 million in Federal funds at risk.

USMMA acquisition and program officials told OIG that frequent changes to the scope and priority of CIP projects places Academy staff in an always-changing environment where new and/or urgent requirements have to be met and resources for previously planned projects must be diverted to new ones. USMMA officials added that due in part to the changes in direction and planning for the execution of CIP project contracts, the Academy had an unobligated balance of $73.4 million in appropriations for CIP purposes as of June 2021.

OIG has made a raft of recommendations to MARAD, including that it establishes and implements a control process to verify compliance with Federal and Departmental requirements; requires training and refresher training for all MARAD acquisition staff; and develops and implements standardized contract forms and templates to document completion of procurement requirements. MARAD has agreed with OIG’s recommendations and expects to complete all work to meet these by June 30, 2022.

Read the full report at OIG

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Kylie Bielby
Kylie Bielby has more than 20 years' experience in reporting and editing a wide range of security topics, covering geopolitical and policy analysis to international and country-specific trends and events. Before joining GTSC's Homeland Security Today staff, she was an editor and contributor for Jane's, and a columnist and managing editor for security and counter-terror publications.

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