GAO Finds Opportunities for Improvement in MARAD's Shipyard Programs
The Government Accountability Office has completed a review of MARAD's promotional programs for shipbuilding, and has found room for improvement - primarily in goal-setting and tracking. Ever under-resourced, MARAD carries out its statutorily-mandated programs but does not always have internal goals for what these programs should accomplish - nor has it likely been asked by anyone before GAO arrived. GAO also found that there may be room for improvement in the Small Shipyard Grant program, with potential to enlarge it and to increase its transparency.
The Small Shipyard Grant program awards minor federal support funding to yards, typically totaling about $10-20 million per year. The number of applications outstrips the supply of funding, and so MARAD staff use a scoring system to weigh the merits of each application. After rating about 100 factors per project, they pick the best candidates and present them to the Maritime Administrator (or acting administrator) for final approval.
The administrator decides which applicants get grants, which are typically small sums in the range of $300,000-$1 million - not enough for a full modernization, but enough to buy a crane or train a new cohort of apprentices. But the reasons for picking projects are not written down or presented to the successful shipyards, GAO said, nor do unsuccessful applicants find out why their project was turned down (at least not in a formal, documented way).
"While grantees have benefitted . . . the Maritime Administration cannot determine to what extent the Small Shipyard Grant program is achieving its intended outcomes because it does not have measurable goals and does not assess the performance of the program," GAO found. "A better understanding of the impact of the Small Shipyard Grant program could help inform the Maritime Administration’s broader efforts to support the U.S. maritime industry."
GAO also recommended writing down the reasons why each grant is approved or disapproved in order to make the process more transparent and consistent. It has previously made the same recommendation for all of the Department of Transportation, MARAD's parent agency.
A bigger Small Shipyard Grant program could help struggling yards to modernize, GAO found. In a survey of shipbuilders conducted for the study, 92 out of 105 reported that their outdated infrastructure impeded efficiency, and 89 out of 105 said that it was hard to finance infrastructure improvements with private capital. "Expanding the Small Shipyard Grant program could allow shipyards to invest more in new equipment, according to nine out of 10 industry groups and shipbuilding or repair companies that discussed the program with us," GAO reported.
In its review of MARAD's twin newbuild financing programs, the Capital Construction Fund Program and the Construction Reserve Fund Program, GAO found that recent statutory changes have made them both about the same. They are both run by the same staffers at MARAD, a total of two people, and at least one owner uses the programs interchangeably. GAO recommended merging the programs to reduce duplication.
Workforce woes
Beyond MARAD, GAO also took input from shipbuilders in a general survey about market conditions, and relayed familiar news about the availability of willing and capable workers. "Boom-and-bust" shipbuilding has made it difficult to retain good welders and shipfitters, and now the industry is competing with service-sector employers too. "One shipyard representative said that at one point, the shipyard had 1,000 employees, but now that number is down to 200, in part because younger generations are not getting into the shipbuilding and repair industry," GAO reported.
The agency also took the time to talk to foreign officials in the UK, Singapore and South Korea, and all reported a hard time recruiting young people. Unlike the United States, Singapore and South Korea use foreign guest workers to round out their payrolls, subject to percentage limits.
A consistent government procurement program would help smooth out the boom-and-bust cycles for American shipbuilders, participants told GAO. These could include American-made newbuilds for the aging Ready Reserve Fleet, as proposed and funded in the FY2024 budget for MARAD. To further stimulate fleet growth, GAO held up the example of the multi-billion-dollar procurement programs in South Korea and Canada, and called for setting specific goals for vessel construction numbers and types.