Recommendations on Containerized Shipping Service to Puerto Rico, Hawaii, and Guam

The Department of Defense (DOD) did not concur with the following two GAO recommendations concerning containerized shipping service to Puerto Rico, Hawaii; and Guam: (1) the Military Sealift Command (MSC) should be directed to develop a staff knowledgeable in commercial ocean tariffs; and (2) MSC should review its negotiation efforts to date in the Puerto Rico trade. DOD replied to GAO that they disagreed that MSC has a void in the ability to use commercial ocean tariffs, and that the problem was not one of a lack of staff competence but a lack of basic commodity information necessary to properly rate the shipments.

GAO requested that DOD reconsider GAO's recommendations in these two areas. GAO's conclusion that MSC needed to develop a staff knowledgeable in this area was based primarily on statements MSC made in its cases before the Federal Maritime Commission. The record shows that neither MSC, nor anyone in DOD, possessed the tariff expertise to use commodity information prudently. The study DOD cited as showing a 6% cost advantage in favor of the Government negotiated rates over the commercial tariffs lacked the basic foundation for a comparative cost study. Also, there is a continuing need to obtain better commodity description information to enable MSC to evaluate the reasonableness of its negotiated rates. The original recommendations are still appropriate.