Industry Concerns Regarding the Policies and Procedures of the Military Sealift Command

GAO discussed the positions of the Military Sealift Command (MSC) and maritime industry representatives regarding MSC policies and procedures and their impact on the U.S. Merchant Marine, focusing on the: (1) use of cost comparisons in determining who operated and maintained MSC ships; (2) current system of setting cargo rates for MSC cargo; and (3) use of Ready Reserve Force (RRF) ships. GAO found that: (1) some commercial firms believed that MSC cost-estimating procedures favored MSC, but MSC believed that comparisons offered commercial firms new contracting opportunities; (2) since 1982, four cost comparisons favored MSC and showed a total difference of about $65.2 million for 15 ships, and one comparison favored a commercial firm and showed a difference of about $24.8 million for 12 ships; (3) increasing the number of government-owned, commercially operated vessels would likely result in additional costs to the government; (4) some industry members believed that MSC should modify its rate-setting process, since the rates were too low, and carriers were not recovering their costs, but MSC believed that the existing system worked well; (5) ocean carriers believed that they were losing opportunities to carry cargo, due to MSC use of RRF ships for extended periods of time; and (6) in the fall of 1987, MSC began concerted efforts to carry cargo for military exercises in commercial ships. GAO believes that MSC should identify and fully disclose additional costs which may result from its efforts to support the maritime industry.