St. Lawrence Seaway
Estimates for the Asset Renewal Program Will Change, and Implementing Best Practices May Improve the Estimates' Reliability Gao ID: GAO-10-541R May 13, 2010The St. Lawrence Seaway is a 50-year-old binational transportation asset jointly operated by the United States and Canada that is used to move cargo between North America and international markets. In 2009, the U.S. Saint Lawrence Seaway Development Corporation (SLSDC), which is responsible for operating and maintaining the two locks and navigation channels in the U.S. portion of the Seaway, initiated a 10-year Asset Renewal Program (ARP) to address long-term needs of the locks, navigation channels, and related facilities and equipment. In 2009, Congress instructed GAO to examine the ARP. Accordingly, GAO examined (1) how the cost estimates have changed from February 2009 to February 2010, (2) the extent to which the ARP covers all asset renewal needs, and (3) the steps U.S. and Canadian authorities have taken to coordinate their asset renewal programs. To conduct this work, GAO reviewed agency program documents, interviewed SLSDC officials, and analyzed ARP estimates and fiscal year 2009 contract data.
The total ARP estimate, which increased from $177 million to $186 million from February 2009 to February 2010, will continue to change as its 52 component projects are developed. Generally, as projects mature and requirements are refined, the accuracy of estimates increases and the variability decreases. For the ARP contracts that SLSDC awarded in fiscal year 2009, GAO found significant variability between the estimated costs and the amounts of some awarded contracts. This variability is attributable to, among other things, general economic conditions, project-specific factors, and incomplete requirements definitions. Though some factors that affect the variability between estimated and actual costs may be out of the control of SLSDC, reliable estimates should consider potential uncertainties. GAO used the GAO Cost Estimating and Assessment Guide to evaluate SLSDC's cost-estimating process on two of the complex ARP projects that began in fiscal year 2009, are expected to cost more than $1 million when completed, and are critical to the operation of the locks. GAO found that SLSDC's estimating process for these two projects did not fully meet any of the four characteristics--comprehensive, well documented, accurate, and credible--for producing a high-quality cost estimate, and partly as a result, the estimates were unreliable and underestimated the actual cost. Because of the variability between estimated costs and actual awards, SLSDC adjusted the ARP spending plan by reallocating project funding and deferring or accelerating projects to meet the targeted spending amount of approximately $17.6 million for fiscal year 2009. The ARP addresses most asset renewal needs identified through prior inspections of its assets. The remaining needs are generally addressed through routine maintenance. However, SLSDC could use its program flexibility to add or modify ARP projects if the needs cannot be adequately addressed through routine maintenance. For example, because routine maintenance funding is not adequate for the second phase of an emergency communications system in the underground areas of the locks, SLSDC plans to add a project to the ARP for this work. Furthermore, SLSDC's continual condition assessment of its assets may result in reprioritizing existing ARP projects or adding new projects if the cost to address newly identified needs exceed its routine maintenance budget. The steps the United States and Canada have taken to coordinate the ARP generally involve setting the annual opening and closing dates of the Seaway and exchanging technical project information. Coordination of the opening and closing dates, while routine, is important for the ARP because it determines the work schedule for a number of critical projects that can be completed only during the winter shutdown period. SLSDC and the Canadian Seaway share technical information about similarly scoped projects both countries are doing and on projects that would affect vessel-operating procedures at the locks.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Terrell G. Dorn Team: Government Accountability Office: Physical Infrastructure Phone: No phone on recordGAO-10-541R, St. Lawrence Seaway: Estimates for the Asset Renewal Program Will Change, and Implementing Best Practices May Improve the Estimates' Reliability
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GAO-10-541R:
United States Government Accountability Office:
Washington, DC 20548:
May 13, 2010:
The Honorable Patty Murray:
Chairman:
The Honorable Christopher Bond:
Ranking Member:
Subcommittee on Transportation, Housing and Urban Development, and
Related Agencies:
Committee on Appropriations:
United States Senate:
The Honorable John W. Olver:
Chairman:
The Honorable Tom Latham:
Ranking Member:
Subcommittee on Transportation, Housing and Urban Development, and
Related Agencies:
Committee on Appropriations:
House of Representatives:
Subject: St. Lawrence Seaway: Estimates for the Asset Renewal Program
Will Change, and Implementing Best Practices May Improve the
Estimates' Reliability:
The St. Lawrence Seaway (the Seaway) is a 50-year-old binational
transportation asset serving substantial manufacturing and service
industries in both the United States and Canada. Jointly operated by
the United States and Canada, the 15-lock Seaway has been used to move
more than 2.5 billion metric tons of cargo, which includes iron ore,
grain, and coal, valued at more than $375 billion, between the United
States, Canada, and international markets since opening in 1959. A
single ship on the Seaway can carry about 25,000 tons of cargo, which
is the equivalent amount of cargo that 870 large trucks or 225
railcars can carry.
The Saint Lawrence Seaway Development Corporation (SLSDC), a wholly
owned government corporation within the U.S. Department of
Transportation (DOT), operates and maintains the two locks owned by
the United States and the navigation channels in U.S. waters between
Massena, New York, and Lake Ontario.[Footnote 1] In 2009, SLSDC
initiated a 10-year U.S. Seaway Asset Renewal Program (ARP) for its
navigation infrastructure and facilities. The ARP marks the first time
in SLSDC's history that a dedicated effort to repair and modernize the
U.S. Seaway infrastructure has taken place. The projects included in
the ARP focus on improving aging Seaway infrastructure, conducting
maintenance dredging, investing in new technologies, purchasing new
equipment, and refurbishing old facilities. None of these investments
will result in increases to the authorized depth or width of the
navigation channel or to the size of the two existing U.S. locks.
In 2009, Congress instructed us to examine the ARP.[Footnote 2] As
discussed with the committees of jurisdiction, we examined (1) how the
cost estimates in the ARP have changed from February 2009 to February
2010, (2) the extent to which the ARP covers all asset renewal needs,
and (3) the steps U.S. and Canadian authorities have taken to
coordinate their asset renewal programs.
Among other things, we found that SLSDC's estimating process for the
projects we reviewed did not fully meet the four characteristics--
comprehensive, well documented, accurate, and credible--for producing
a high-quality cost estimate. We are therefore making a recommendation
to SLSDC to improve its cost-estimating process. The results of our
work are contained in enclosure I.
Agency Comments and Our Evaluation:
We provided a draft of this report to the U.S. Department of
Transportation for its review and comment. SLSDC officials commented
that they were pleased that the report's findings showed that the
total estimated cost of the ARP had not changed significantly after
the first year of the program. They also agreed to consider our
recommendation by carefully reviewing the GAO Cost Estimating and
Assessment Guide to identify those concepts and practices that offer
potential utility to the development of future ARP project cost
estimates. SLSDC officials noted that while they recognize the
potential utility of the best practices identified in the GAO Cost
Estimating and Assessment Guide for large multiyear projects, they
believe the cost guide's applicability is less apparent with regard to
a number of small-scale projects in SLSDC's ARP. We are encouraged
that SLSDC is committed to considering our recommendation and, as
stated in our report, agree that the extent to which each of the cost
guide's best practices can be implemented by SLSDC may vary depending
on each project's scope and complexity.
SLSDC officials also provided technical comments to our report, which
we incorporated as appropriate.
Scope and Methodology:
To perform our work, we interviewed SLSDC officials; reviewed agency
documents related to the ARP, asset renewal needs, and its program to
assess the condition of its assets; and analyzed agency data on the
estimated costs of ARP projects and fiscal year 2009 contracts. We
also assessed the extent to which 2 of the 52 ARP projects met the
best practices guidelines for cost estimating contained in the GAO
Cost Estimating and Assessment Guide. We selected these projects
because they started in fiscal year 2009 or 2010, are expected to cost
more than $1 million when completed, are complex, and are critical to
the operation of the locks. We reviewed industry information and prior
GAO reports to determine the expected variability between estimated
and actual costs as well as the reasonableness of SLSDC's assessment
program. We also interviewed U.S. and Canadian officials to understand
the steps taken to coordinate their asset renewal programs and
reviewed applicable laws and treaties. We conducted this performance
audit from July 2009 to May 2010 in accordance with generally accepted
government auditing standards. Those standards require that we plan
and perform the audit to obtain sufficient, appropriate evidence to
provide a reasonable basis for our findings and conclusions based on
our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit
objectives. Additional information about our scope and methodology is
provided in enclosure II.
We are sending copies of this report to interested congressional
committees and the Secretary of Transportation. In addition, the
report is available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov]. If you or your staff have any questions about
this report, please contact Terrell Dorn at (202) 512-6923 or
dornt@gao.gov. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this
report. Key contributors are listed in enclosure II.
Signed by:
Terrell G. Dorn, P.E.
Director, Physical Infrastructure Issues:
Enclosures:
[End of section]
Enclosure I:
St. Lawrence Seaway: Estimates for the Asset Renewal Program Will
Change, and Implementing Best Practices May Improve the Estimates
Reliability:
Why GAO Did This Study:
The St. Lawrence Seaway is a 50year-old binational transportation
asset jointly operated by the United States and Canada that is used to
move cargo between North America and international markets. In 2009,
the U.S. Saint Lawrence Seaway Development Corporation (SLSDC), which
is responsible for operating and maintaining the two locks and
navigation channels in the U.S. portion of the Seaway, initiated a 10-
year Asset Renewal Program (ARP) to address long-term needs of the
locks, navigation channels, and related facilities and equipment.
In 2009, Congress instructed GAO to examine the ARP. Accordingly, GAO
examined (1) how the cost estimates have changed from February 2009 to
February 2010, (2) the extent to which the ARP covers all asset
renewal needs, and (3) the steps U.S. and Canadian authorities have
taken to coordinate their asset renewal programs. To conduct this
work, GAO reviewed agency program documents, interviewed SLSDC
officials, and analyzed ARP estimates and fiscal year 2009 contract
data.
What GAO Recommends
To improve estimates of the cost of the ARP projects, GAO recommends
that SLSDC develop a cost-estimating process that follows best
practices to better ensure that its estimates are comprehensive, well
documented, accurate, and credible.
SLSDC agreed to consider the report's recommendation.
For more information, contact Terrell G. Dorn at (202) 512-6923 or
dornt@gao.gov.
Summary of Results:
The total ARP estimate, which increased from $177 million to $186
million from February 2009 to February 2010, will continue to change
as its 52 component projects are developed. Generally, as projects
mature and requirements are refined, the accuracy of estimates
increases and the variability decreases. For the ARP contracts that
SLSDC awarded in fiscal year 2009, GAO found significant variability
between the estimated costs and the amounts of some awarded contracts.
This variability is attributable to, among other things, general
economic conditions, project-specific factors, and incomplete
requirements definitions. Though some factors that affect the
variability between estimated and actual costs may be out of the
control of SLSDC, reliable estimates should consider potential
uncertainties. GAO used the GAO Cost Estimating and Assessment Guide
to evaluate SLSDC's cost-estimating process on two of the complex ARP
projects that began in fiscal year 2009, are expected to cost more
than $1 million when completed, and are critical to the operation of
the locks. GAO found that SLSDC's estimating process for these two
projects did not fully meet any of the four characteristics”
comprehensive, well documented, accurate, and credible”for producing a
high-quality cost estimate, and partly as a result, the estimates were
unreliable and underestimated the actual cost. Because of the
variability between estimated costs and actual awards, SLSDC adjusted
the ARP spending plan by reallocating project funding and deferring or
accelerating projects to meet the targeted spending amount of
approximately $17.6 million for fiscal year 2009.
The ARP addresses most asset renewal needs identified through prior
inspections of its assets. The remaining needs are generally addressed
through routine maintenance. However, SLSDC could use its program
flexibility to add or modify ARP projects if the needs cannot be
adequately addressed through routine maintenance. For example, because
routine maintenance funding is not adequate for the second phase of an
emergency communications system in the underground areas of the locks,
SLSDC plans to add a project to the ARP for this work. Furthermore,
SLSDC's continual condition assessment of its assets may result in
reprioritizing existing ARP projects or adding new projects if the
cost to address newly identified needs exceed its routine maintenance
budget.
The steps the United States and Canada have taken to coordinate the
ARP generally involve setting the annual opening and closing dates of
the Seaway and exchanging technical project information. Coordination
of the opening and closing dates, while routine, is important for the
ARP because it determines the work schedule for a number of critical
projects that can be completed only during the winter shutdown period.
SLSDC and the Canadian Seaway share technical information about
similarly scoped projects both countries are doing and on projects
that would affect vessel-operating procedures at the locks.
Great Lakes St. Lawrence Seaway Study:
As joint custodians of the Great Lakes St. Lawrence Seaway System, the
governments of the United States and Canada signed a memorandum of
cooperation in 2003. It formed the framework for a binational study to
assess the current condition of the waterway and determine how to best
use and maintain it now and in the future.
A final report resulting from the study was made public on November
26, 2007. The report addresses future investments needed to keep the
existing infrastructure reliable and ensure the system is a safe,
efficient, and sustainable component of North America's transportation
infrastructure for years to come. The report also addresses both the
expected economic benefits arising from the continued operation of the
system and the potential environmental impact associated with
commercial navigation.
The following seven U.S. and Canadian departments and agencies were
involved in the multiyear study:
* U.S. Department of Transportation;
* Saint Lawrence Seaway Development Corporation;
* U.S. Army Corps of Engineers;
* U.S. Fish and Wildlife Service;
* Transport Canada;
* St. Lawrence Seaway Management Corporation (the Canadian Seaway);
* Environment Canada.
As part of the study, engineers from the United States and Canada
performed inspections and developed recommendations for repairs and/or
improvements to critical infrastructure in the Great Lakes St.
Lawrence Seaway System. In describing the condition of the system, the
study states that it has held up reasonably well; however, a number of
components need repair, rehabilitation, or replacement. According to
the study, Seaway infrastructure”which has worn as a result of
operational and weather-related stress”has reached or exceeded its
original design life. Because each year the likelihood increases that
any one of the Seaway's hundreds of different components will fail,
the study states that a considerable amount of effort is needed to
maintain the system at its current operational level.
Design life: When properly maintained, navigation projects, such as
locks, traditionally have a 50-year design life, which is the minimal
time the project is expected to provide reliable performance without
major infrastructure investments to keep it safe and efficient.
Operational stress: Day-to-day passage of vessels contributes to
operational stress that is typically either a result of wear/damage
from vessel movement or wear from the cyclical operation of the
various mechanical components, such as gates and valves.
Weather-related stress: The geographic location of the Seaway subjects
it to severe weather conditions that cause wear as a result of freeze-
thaw cycles and ice buildup on components.
Great Lakes St. Lawrence Seaway System:
As shown below, the St. Lawrence Seaway, which extends from Montreal
to Lake Erie, is part of the larger Great Lakes St. Lawrence Seaway
System that moves cargo between North America and international
markets. The Seaway is operated jointly by the U.S. Saint Lawrence
Seaway Development Corporation”which operates 2 locks”and the Canadian
Seaway”which operates 13 locks.[Footnote 3] The unique binational
nature of the Seaway requires 24-hour, year-round coordination between
SLSDC and the Canadian Seaway, particularly regarding rules and
regulations, overall day-to-day operations, traffic management,
navigation aids, safety, environmental programs, and operating dates.
In addition, SLSDC and the Canadian Seaway work on trade development
activities designed to increase use of the Great Lakes St. Lawrence
Seaway System.
Figure 1: Map of the Great Lakes St. Lawrence Seaway System, with the
15 locks on the St. Lawrence Seaway portion identified:
[Refer to PDF for image: illustrated map]
The following are depicted on the map:
Ports:
Buffalo;
Chicago;
Cleveland;
Detroit;
Duluth;
Massena;
Milwaukee;
Montreal;
Quebec;
Thunder Bay;
Toronto.
Canadian locks:
Number 1-4, 7-15.
United States locks:
Snell (#5);
Eisenhower (#6).
Sources: Map Resources and GAO.
[End of figure]
The Seaway operates a little more than 9 months a year, closing for
winter from late December through late March. While the Seaway is
closed, U.S. and Canadian officials perform detailed inspections and
routine maintenance of infrastructure. These efforts are key to the
operational sustainability of the Seaway because they allow officials
to identify and schedule repairs before conditions reach a critical
stage.
Unlike most other lock-based transportation systems that have twinned
locks to ensure continued operation in the event of a lock failure,
the Seaway is a single lock system. As a result, closures or delays at
one of the locks would disrupt the entire Seaway's operation and could
result in Seaway customers seeking alternative transportation modes in
the future. For example, a number of customers stopped using the
Seaway after a lock failure at one of the Canadian locks in 1985
trapped 53 commercial vessels in the Seaway for 24 days and cost
shippers more than $24 million.
Saint Lawrence Seaway Development Corporation:
SLSDC operates and maintains the U.S. portion of the St. Lawrence
Seaway, to include portions of the navigation channels and the
Bertrand Snell and Dwight D. Eisenhower Locks. Over its history, these
locks and the U.S. portion of the Seaway have been available to
vessels about 99 percent of the time during the 24-hours-a-day, 7-days-
a-week shipping season.[Footnote 4] However, as indicated by recent
component failures at similarly-aged locks on the Ohio River,
continued reliable operation of SLSDC's locks is uncertain considering
that the infrastructure is approaching the end of its 50-year design
life.[Footnote 5] As shown in figure 2, the locks have a number of
mechanical components. SLSDC also owns and maintains other assets”such
as roads, a bridge jointly owned with Canada, a highway tunnel, a
Visitors' Center, various buildings, vessels, and vehicles”and ensures
that its portion of the waterway is deep enough for vessels to transit.
In fiscal year 2009, SLSDC initiated a 10-year Asset Renewal Program,
informed by the results of the Great Lakes St. Lawrence Seaway Study
to address the long-term asset renewal needs of the U.S. lock
infrastructure, navigation channels, and related facilities and
equipment. The current 52 projects in the ARP cover a number of agency
assets and focus on, among other things, improving lock structure and
operating equipment, conducting maintenance dredging, investing in new
technologies, purchasing new vehicles and equipment, and refurbishing
old facilities. To ensure that the ARP is executed properly and to
identify any concerns, SLSDC formed an internal working group, made up
of senior managers in engineering, procurement, financial management,
budget, legal affairs, and policy that meets every 2 weeks to review
the status of ongoing projects and discuss ways to improve the overall
management, execution, and reporting of the program.
SLSDC receives funding for the ARP through the annual appropriations
process.[Footnote 6] As part of this process, SLSDC submits an annual
spending plan identifying estimated amounts for each project it
expects to work on in that year. These project estimates are typically
"project feasibility" estimates developed during the planning stage of
project development. SLSDC has flexibility to adjust the annual
spending plan and may reallocate funding among ARP projects based on
bids received, updated estimates, and project reprioritization that
occurs after the spending plan has been submitted.
Figure 2: Illustration of a Lock and Its Various Components:
[Refer to PDF for image: illustration]
The following are depicted in the illustration:
Lock directions:
Up, toward Great Lakes;
Down, toward Atlantic Ocean.
Lock control building;
Upper culvert valve;
Lower miter gate (open);
Upper miter gate (closed);
Ship arrestor;
Mooring buttons;
Vertical lift gate;
Stiffleg derrick;
Guardwall with fendering.
Cross-section view:
Vertical lift gate;
Upper culvert valve;
Upper miter gate (closed);
Lower miter gate (open).
Source: GAO.
[End of figure]
ARP Cost Estimates Will Change over Time, but SLSDC Does Not Use Best
Practices to Estimate Costs:
Cost Estimating:
According to the GAO Cost Estimating and Assessment Guide, cost
estimating requires both science and judgment. Since, by definition,
answers are seldom”if ever”precise, the goal is to find a reasonable
"answer."[Footnote 7] Cost estimates are based on many assumptions and
are expected to change as project requirements are clarified. Once a
cost estimate has been accepted and approved, it should be updated
periodically as the program matures and as schedules and requirements
change. Updated estimates help give management control over a
project's resources when new requirements are called for under tight
budget conditions.
ARP Cost Estimates Have Changed:
From February 2009 to February 2010, the ARP program estimate, which
is the sum of cost estimates of the individual projects, increased
from $177 million to $186 million[Footnote 8] Over $3 million (39
percent) of this increase is due to updates reflecting the continual
refinement of project requirements, actual awards made in the first
year of the program, and inflation adjustments. The remaining increase
of over $5 million is due to the 2 ARP projects added as part of the
agency's continual efforts to evaluate and reprioritize agency needs.
Specifically, SLSDC revised its baseline estimate for 30 ARP projects”
increasing the estimate for 14 projects and decreasing the estimate
for 16 projects.[Footnote 9] For example, SLSDC increased the project
estimate for its miter gate rehabilitation project by 23 percent based
on the results of the first phase of the project.[Footnote 10] In
another case, on the basis of a consultant's evaluation of the current
system, SLSDC decreased by 49 percent its estimate for upgrading the
compressed air systems that are used to control the buildup of ice in
and around the locks. Even though SLSDC has adjusted the estimated
cost of some projects, officials stated that they expect to satisfy
all requirements originally identified in the ARP.
Project Development Stages:
Planning stage: Planning activities generally occur 3 to 5 years prior
to construction. During this stage, project officials set functional
requirements. General design criteria, significant features and
components, methods of accomplishment, and a proposed schedule are
defined. Cost estimates at this stage may be based on past cost
experience with similar projects or on an order-of-magnitude basis and
may be expected to vary by plus or minus 40 percent from the actual
cost.
Design stage: Detailed criteria and parameters of a project are
developed to define, as applicable, significant features and
components. Design work generally begins 1 to 2 years prior to
construction. Working drawings and specifications for construction
activities are produced in this stage. The cost estimates are refined
as the design matures and may be expected to vary by plus or minus 30
percent from actual costs.
Final design: Final plans and detailed specifications for the
performance of construction work are developed. The cost estimates
developed at this stage are the most accurate estimates possible prior
to competitive bidding and construction and are expected to be plus or
minus 10 percent of actual costs.
Construction stage: Contractor services are procured through a
solicitation process, and contracts are awarded in accordance with
acquisition protocols. Work detailed in the design drawings and
specifications is executed. Changes may occur after contract award,
and because of any such changes, project costs may be expected to vary
up to 10 percent.
ARP Project Estimates Will Continue to Change:
Because the majority of project estimates were developed in the
planning stage, they will continue to change as part of the project
development process. Generally, the more information that is known
about a project and is used to develop the estimate, the more accurate
and less variable the estimate is expected to be. While all estimates
will have some degree of variability from actual costs, cost
uncertainty is greatest in the initial project development stages. As
shown in figure 3, as projects mature and requirements are refined,
the accuracy of the estimate increases and the variability decreases
to reflect these updates.
Figure 3: Cone of Uncertainty in Cost Estimating:
[Refer to PDF for image: illustration]
The illustration is a line graph plotting the cost estimate in dollars
against time.
A cost estimate baseline is established.
As the elements of time change from planning to design, to final
design/construction, estimate becomes more certain as program
progresses.
The upper limit of cost estimate and the lower limit of cost estimate
combine to produce uncertainty, which decreased until final
design/construction.
Source: GAO.
[End of figure]
Fiscal Year 2009 Projects:
For the 19 projects funded in fiscal year 2009, SLSDC awarded 41
contracts for a wide variety of equipment and services:
* Commercial items, such as a crane and a snowplow;
* Engineering consulting services for surveying and design work; and;
* Construction services to repair/upgrade lock structures and
operating components.
The 19 projects were:
1. Snell Lock Guidewall Fendering: Replace protective fendering on
downstream guidewall.
2. Guidewall Rehabilitation: Repair concrete and mooring buttons on
approach walls at both locks.
3. Paving and Drainage Infrastructure: Repair pavement and improve
drainage on roads, work areas, and parking lots.
4. Valve Operating Equipment: Replace electric motors with hydraulic
machinery at north side culvert valves at both locks.
5. Lock Covers: Refurbish and insulate steel modules used to cover
locks for winter maintenance.
6. Seaway International Bridge: Repair, blast clean, and coat
structural components on south span.
7. Navigational Aids: Replace buoys, flashers, and markers.
8. Vehicles and Equipment: Replace a crane and other mobile equipment.
9. Electric Power Utility: Upgrade power supply infrastructure to
locks and facilities.
10. Floating Plant: Repair or replace vessels used to support
operations.
11. Roof Replacement: Replace roofs on SLSDC buildings.
12. Eisenhower Lock Tunnel: Seal leaking joints in tunnel.
13. Navigation Support Systems: Install systems to support automated
traffic management and monitor weather conditions.
14. Dredging: Conduct maintenance dredging.
15. Miter Gates: Repair upstream gate at Eisenhower Lock.
16. Lock Controls: Upgrade and expand computer system used to monitor
and control lock functions.
17. Compressed Air Systems: Replace air compressors and piping in
systems used for maintenance and ice control in and around the locks.
18. Lock Structural Repairs: Repair/grout cracks and joints in
concrete at both locks.
19. Fire Alarm Systems: Replace fire alarm systems at SLSDC facilities.
Fiscal Year 2009 Contract Awards Varied Widely from Estimates:
For the 41 ARP contracts awarded in fiscal year 2009, covering 19 ARP
projects, we found significant variability between the estimated costs
and the amounts of the initial awarded contracts. (See figure 4.)
Industry definitions indicate that contract award amounts should
generally be plus or minus 10 percent of the estimate used as part of
the contract solicitation process. Of the 41 contracts awarded for ARP
projects in fiscal year 2009, 22 contract awards were within 10
percent of the estimate used as part of the contract solicitation
process. These contract awards totaled more than $3 million of the
approximately $17.6 million obligated for fiscal year 2009. The
remaining 19 contract awards varied by more than 10 percent from
estimates used as part of the contract solicitation process and
totaled nearly $13.3 million.[Footnote 11] We found that the initial
award amounts of these ARP contracts ranged from 74 percent less to
171 percent greater than estimates. (See enclosure V for details).
Figure 4: Differences between Fiscal Year 2009 ARP Estimate and
Initial Contract Award Price:
[Refer to PDF for image: graph]
The graph lots points of percent difference in initial award (from
estimate) against estimated contract cost (in millions of dollars).
Source: GAO presentation of SLDSC data.
For one particular point: For this contract the estimate included
combined costs of dredging at two separate locations. Because there
was a delay in obtaining required permits at one of the locations,
SLSDC awarded the contract in two parts. Therefore, we used both
awards in our analysis.
[End of figure]
Contract Awards Varied for a Number of Reasons:
Several factors, including economic conditions, project-specific
conditions, and requirements definition, contributed to the
substantial differences between estimated costs and award amounts of
some of the fiscal year 2009 contracts. In some cases, a combination
of these factors may have contributed to these differences.
* Economic conditions: As we reported in December 2009, weak economic
conditions have contributed to many federally funded contracts being
awarded for less than the estimated cost.[Footnote 12] Similarly,
SLSDC officials indicated that these economic conditions likely
increased competition for some of its contracts and created a bidding
environment favorable to the agency. For example, four contractors bid
on a contract to repair paving and drainage structures, and SLSDC
awarded the contract at a cost 27 percent less than estimated.
However, the level of competition was not consistently strong across
all of SLSDC's contract solicitations. For example, SLSDC received
only one bid on a contract to supply a container trailer and made an
award at an amount 16 percent greater than the estimated cost. In
another example, SLSDC canceled its procurement action to award a
contract in fiscal year 2009 for replacement culvert valves when it
received a single bid that was 52 percent higher than estimated.
[Footnote 13]
* Project-specific conditions: Some contract costs varied from
estimates because of unique circumstances that could not have been
anticipated. For example, SLSDC awarded a contract for replacement of
rubber fenders at an amount 19 percent less than estimated because the
winning contractor possessed a mold for fabricating the fenders that
matched SLSDC's specifications.
* Requirements definition: Incomplete definition of requirements
resulted in some contract awards at higher-than-estimated amounts. For
example, after developing the estimate for the purchase of a boat to
use as a maintenance vessel, SLSDC modified its specification to add
items to the boat without updating its estimate. As a result, SLSDC
awarded the contract at an amount 11 percent higher than estimated.
SLSDC can correct incomplete project requirements definitions, but
factors such as project-specific and general economic conditions and
their effect on estimates are difficult to control. Though some
factors may be out of SLSDC's control, we have found that reliable
estimates should account for uncertainties. Because uncertainty cannot
be avoided, it is preferable to identify the elements that represent
the most uncertainty as part of the overall project development
process. Incorporating uncertainties into a cost estimate, as part of
the overall cost-estimating and project development process, allows
decision makers to determine a range of potential costs and assess and
communicate the variability in an estimate. For example, uncertainties
such as undefined or unknown technical information, uncertain economic
conditions, and requirements growth may negatively or positively
affect a program's cost.
Characteristics of High-Quality Cost Estimates[Footnote 14]
Comprehensive: The cost estimates should include costs of the program
over its full life cycle, provide a level of detail appropriate to
ensure that cost elements are neither omitted nor double-counted, and
document all cost-influencing ground rules and assumptions.
Well documented: The cost estimates should be supported by detailed
documentation that describes the purpose of the estimate, the program
background and system description, the scope of the estimate, the
ground rules and assumptions, all data sources, estimating methodology
and rationale, and the results of the risk analysis. Moreover, this
information should be captured in such a way that the data used to
derive the estimate can be traced back to, and verified against, their
sources.
Accurate: The cost estimates should be based on an assessment of most
likely costs (adjusted for inflation), documented assumptions, and
historical cost estimates and actual experiences on other comparable
programs. Estimates should be cross-checked against an independent
cost estimate for accuracy, double counting, and omissions. In
addition, the estimates should be updated to reflect any changes.
Credible: The cost estimates should discuss any limitations of the
analysis because of uncertainty, or biases surrounding data or
assumptions. Risk and uncertainty analysis should be performed to
determine the level of risk associated with the estimate.
Further, the estimate's results should be cross-checked against an
independent cost estimate.[Footnote 15]
SLSDC Does Not Use Formal Cost-Estimating Guidance, Increasing the
Risk of Unreliable Estimates:
A senior SLSDC official stated that because of the small size of the
engineering office and the staffs familiarity with lock
infrastructure, the agency does not use formal estimating guidance;
rather engineers and management communicate routinely about project
requirements and cost estimates. SLSDC's engineering and maintenance
staff, who are responsible for maintaining the lock infrastructure,
generally develop the ARP project cost estimates. In estimating
project costs, SLSDC staff obtain cost information from various
sources, depending on the specifics of the project. The information
sources are commercially available cost-estimating guides, such as
RSMeans, and historical data from past SLSDC work and comparable
Canadian or U.S. Army Corps of Engineers projects.[Footnote 16] In
addition, SLSDC uses expert consultants when it determines that it
cannot develop project requirements and cost estimates in-house.
We have previously reported that the lack of cost-estimating guidance
at other agencies has led to cost estimates of poor quality.[Footnote
17] Such guidance serves as a mechanism for providing a standard cost-
estimating process to agency officials and contractors. Cost-
estimating guidance also establishes roles and responsibilities for
those preparing, reviewing, and updating all types of cost estimates.
According to the GAO Cost Estimating and Assessment Guide, a reliable
cost-estimating process is necessary to ensure that cost estimates”
particularly for large, complex projects”are comprehensive, well
documented, accurate, and credible.[Footnote 18] The cost guide
identifies best practices that, followed correctly, should result in
reliable cost estimates that management can use for making informed
decisions. (See enclosure VI for details).
We used the GAO Cost Estimating and Assessment Guide to provide
criteria for evaluating SLSDC's cost-estimating process on two of the
complex ARP projects that began in fiscal year 2009, are expected to
cost more than $1 million when completed, and are critical to the
operation of the locks, and, as shown in tables 1 and 2, found that
its estimating process for both projects was lacking. In particular,
we found that SLSDC's process did not fully meet any of the four
characteristics for producing a high-quality cost estimate, and partly
as a result, the estimates produced by this process were unreliable
and underestimated the actual cost of each project by more than 45
percent. See enclosure VII for our more detailed assessments.
Table 1: Assessment of ARP Project # 4: Culvert Valve Operating
Equipment, Phase I:
Project description: This is a two-phase project to replace the
operating machinery for the Eisenhower and Snell Lock culvert valves,
which are used for filling and emptying the locks. The upgrade will
replace motors and gears”which have been maintained but not replaced
or upgraded since their installation in the 1950s”with new hydraulic
operating machinery to match the upgrades made at the Canadian Seaway
locks and other similar locks in the United States. The first phase of
this project began in fiscal year 2009 when SLSDC awarded a contract
to upgrade the operating machinery on the north sides of both locks.
Because of the long lead time needed to acquire the equipment, the
actual work will be performed over the 3-month period of January to
March 2011.
Final estimate (phase I): $2.8 million:
Actual award (phase I): $4.1 million:
Characteristic: Comprehensive;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Partially met;
Reason for assessment: The cost estimate defined the work in detail
and, for each cost category, clearly described how most of the various
cost elements are summed. The cost estimate also included basic
assumptions, such as inflation. However, because the cost estimate
does not specifically break out common costs, such as training and
testing, we were unable to determine whether the estimate included all
of the relevant costs of the project. In addition, key assumptions on
time frame and risk, including their effect on costs, were not
accounted for in the estimate.
Characteristic: Well documented;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Substantially met;
Reason for assessment: The documentation of the cost estimate included
the purpose and basic cost-influencing ground rules and assumptions.
In addition, the cost estimate incorporated local labor rates and
vendor quotes, and was based on a technical baseline that included
final drawings and specifications. However, while the documentation
for the most part provided details on the cost of the estimate, the
estimate provided to management did not clearly convey whether all
costs were properly captured, all risks were properly considered, and
underlying assumptions were valid. For example, key assumptions on
time frame and risk were not reflected in the estimate.
Characteristic: Accurate;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Substantially met;
Reason for assessment: The cost estimate is based on a detailed
buildup of estimated labor and material prices, and SLSDC updated both
the current and future phases of the project cost estimate with fiscal
year 2009 award data. However, the estimate for this project was not
cross-checked against an independent cost estimate to ensure accuracy
and minimize the risk of omissions and double counting in the
estimate.[B]
Characteristic: Credible;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Minimally met;
Reason for assessment: The cost estimate is based on a detailed
buildup of estimated labor and material prices. However, the estimate
was not cross-checked against an independent cost estimate to ensure
that different estimating approaches would produce similar results. In
addition, SLSDC did not conduct sensitivity and risk analyses;
therefore, the estimate did not reflect the degree of uncertainty, and
decision makers had no insight into the level of confidence associated
with it.
Source: GAO analysis of SLSDC data.
Notes:
[A] The ratings we used in this analysis are as follows: "Fully met"
means that the agency provided complete evidence that satisfies the
entire criterion; "Substantially met" means that the agency provided
evidence that satisfies a large portion of the criterion; "Partially
met" means that the agency provided evidence that satisfies about half
of the criterion; "Minimally met" means that the agency provided
evidence that satisfies a small portion of the criterion; and "Not
met" means that the agency provided no evidence that satisfies any
part of the criterion.
[B] An independent cost estimate is another estimate based on the same
technical information that is used to validate and cross-check the
baseline estimate but is prepared by a person or organization that has
no stake in the approval of the project.
[End of table]
Table 2: Assessment of ARP Project #31: Rehabilitate Upstream Miter
Gates, Phase I:
Project description: This is a two-phase project to rehabilitate the
miter gates at the upstream end of both Eisenhower and Snell Locks.
The project will replace worn and/or damaged components to ensure
proper functioning of the miter gates.
The first phase of this project began in fiscal year 2009 when SLSDC
awarded a contract to rehabilitate the upstream gate at Eisenhower
Lock. Because of the long lead time needed to acquire gate components,
the actual work will be performed over the 3-month period of January
to March 2011.
Final estimate (phase 1): $1.3 million:
Award amount (phase 1): $2.2 million:
Characteristic: Comprehensive;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Minimally met;
Reason for assessment: The estimate included basic cost-influencing
ground rules and assumptions, such as labor and inflation rates.
However, key assumptions on time frame and risk, including their
effect on costs, were not accounted for in the estimate. In addition,
the cost estimate does not define the work in detail nor does it
provide a framework for planning and assigning the work down to an
appropriate level of detail.
Characteristic: Well documented;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Partially met;
Reason for assessment: The documentation of the cost estimate included
the purpose and basic cost-influencing ground rules and assumptions.
However, the estimate did not provide enough detail to easily defend
the estimate. For example, a technical baseline description with all
of the project requirements was only 35 percent complete, and key
assumptions on time frame and risk were not included in the
documentation. In addition, the cost estimation documentation did not
provide detailed material and labor cost information that would allow
someone unfamiliar with the project to re-create them.
Characteristic: Accurate;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Partially met;
Reason for assessment: SLSDC updated both the current and future
phases of the project cost estimate with fiscal year 2009 award data.
While the cost estimate for this project is based on a similar
project, adjusted with a rule-of-thumb factor, the cost estimate was
not based on a detailed buildup of individual cost elements. In
addition, the estimate for this project was not cross-checked against
an independent cost estimate to ensure accuracy and minimize the risk
of omissions and double counting in the estimate.[B]
Characteristic: Credible;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Minimally met;
Reason for assessment: The cost estimate is based on a similar project
as well as the knowledge of SLSDC engineers. However, the estimate was
not cross-checked against an independent cost estimate to ensure that
different estimating approaches would produce similar results. In
addition, SLSDC did not conduct sensitivity and risk analyses;
therefore, the estimate did not reflect the degree of uncertainty, and
decision makers had no insight into the level of confidence associated
with it.
Source: GAO analysis of SLSDC data.
[A] The ratings we used in this analysis are as follows: "Fully met"
means that the agency provided complete evidence that satisfies the
entire criterion; "Substantially met" means that the agency provided
evidence that satisfies a large portion of the criterion; "Partially
met" means that the agency provided evidence that satisfies about half
of the criterion; "Minimally met" means that the agency provided
evidence that satisfies a small portion of the criterion; and "Not
met" means that the agency provided no evidence that satisfies any
part of the criterion.
[B] An independent cost estimate is another estimate based on the same
technical information that is used to validate and cross-check the
baseline estimate but is prepared by a person or organization that has
no stake in the approval of the project.
[End of table]
SLSDC Adjusted the Fiscal Year 2009 Spending Plan:
Because of the variability in cost estimates and reprioritization of
ARP projects, SLSDC adjusted its fiscal year 2009 spending plan by
reallocating funding, and deferring and accelerating projects to meet
the targeted spending amount of approximately $17.6 million.
* Reallocating project funding: SLSDC reallocated funding gained from
contracts with lower-than-expected costs to pay for contracts with
higher-than-expected costs. For example, the cost of the contract to
dredge the navigation channel was significantly lower than estimated
because the estimate included an allowance for hauling and disposing
of hazardous sediments. Because no hazardous material was found, SLSDC
was able to complete the work for 42 percent less than expected.
Unused funds were then applied to other projects, such as the miter
gate rehabilitation, in which actual awards were greater than
estimates.
* Deferring projects: As a result of the increased costs of higher-
priority projects, such as the miter gate rehabilitation and
replacement of the culvert valve operating equipment, SLSDC deferred
plans to purchase a new emergency response boat and a barge.
Similarly, SLSDC deferred the purchase of materials to refurbish the
lock covers used during the winter maintenance season because of the
increased costs of the higher-priority projects.
* Accelerating projects: SLSDC accelerated projects that increased in
priority as a result of its continual monitoring of lock conditions.
For example, SLSDC accelerated repair work in one of the lock
machinery recesses to reduce leaking, which had increased
significantly in 2009.
While SLSDC has flexibility to adjust its annual spending plans, such
flexibility does not eliminate the need to produce reliable and valid
cost estimates. Office of Management and Budget guidance points out
that estimating inaccuracy”both overestimating and underestimating”can
adversely affect other projects. With overestimating, an agency may
request and be provided with more resources than it will actually need
for the project, thereby resulting in fewer resources available for
other projects or programs. Underestimating projects can lead an
agency to request fewer resources than it will actually need to
complete the project, potentially leading to a reduction in the
project scope, termination of the project, or the shifting of funds
from other projects. Furthermore, inaccurate estimates may also reduce
confidence in the accuracy of future estimates provided by an agency.
Great Lakes St. Lawrence Seaway Study Inspections:
As part of the Great Lakes St. Lawrence Seaway Study, engineers from
the United States and Canada, including engineers from SLSDC and the
Canadian Seaway, conducted on-site assessments of the current
condition of all locks in the Great Lakes St. Lawrence Seaway System
to obtain a general picture of issues such as wear, material fatigue,
redundancy, and problems with concrete, as well as to categorize
outstanding maintenance issues. Individual lock components were
evaluated in terms of importance to operation, likelihood of failure,
consequences of failure, and costs of keeping them operational. At the
two U.S. locks, the engineers determined that the most critical areas
are associated with concrete quality at the Eisenhower Lock, the
condition of the lower miter gates at both locks, the south span of
the Seaway International Bridge, and the Eisenhower Lock highway
tunnel.
SLSDC Capital Plans:
Each year, SLSDC engineering and maintenance teams update plans for
capital projects and equipment based on lock inspections and
anticipated life cycles of parts and machinery. Projects deemed
necessary to ensure reliability and availability of the existing lock
structures are included in the agency's annual budget request. Project
work may span a number of years because of the need to maintain the
agency's capital budget at consistent levels and because of the
limited 3-month winter shutdown period to complete the work.
ARP Addresses Most Previously Identified Asset Renewal Needs, and
SLSDC Will Continue to Assess Condition of Assets:
ARP Addresses Most Asset Renewal Needs, and Remaining Needs Are
Generally Addressed through Routine Maintenance:
The ARP addresses the vast majority of the asset renewal needs
identified through inspections performed as part of the Great Lakes
St. Lawrence Seaway study and the development of agency capital plans
submitted with annual budget requests for fiscal years 2003-2008. The
remaining needs are generally addressed through routine maintenance,
but SLSDC could use its flexibility to add new or modify existing ARP
projects if maintenance funding cannot adequately address the needs.
For example, SLSDC plans to add a project to the ARP to install the
second phase of an emergency communications system in the underground
areas of the locks and modify or add a project to construct a washing
facility to help reduce corrosion on and extend the service life of
agency vehicles, because routine maintenance funding is not adequate
to address these needs.
SLSDC's Ongoing Assessment Program Could Affect the ARP:
While the ARP addresses most known asset renewal needs, SLSDC's
ongoing asset condition assessment program may identify new
requirements and cause the agency to add new or reprioritize current
ARP projects. Periodic condition assessment-”in which assets are
inspected to determine if they are sound and functional and to
identify maintenance and repair needs”-is an essential step in
effective facilities management. SLSDC has followed a reasonable
approach for condition assessment. SLSDC's operating, maintenance, and
engineering staff who are involved with the assets on a daily basis
perform the assessments. As shown in table 3, assets are assessed at
varying frequencies and levels of detail, depending on their
significance to sustaining operations. For example, SLSDC staff
inspect critical lock-operating equipment and systems three times a
week during the shipping season and perform a more detailed inspection
during the winter shutdown period. In contrast, equipment and vehicles
that are less critical to operations are inspected less frequently.
This approach is consistent with National Research Council guidance
that states the importance of prioritizing assets so that assessments
concentrate on the critical elements that affect the ability of the
agency to operate effectively.[Footnote 19] SLSDC uses a preventive
maintenance database to record inspection results, create repair work
orders, and schedule maintenance activities.
To address new requirements that may be identified through its
condition assessment program, SLSDC officials stated that the agency
will first attempt to use routine maintenance funding. If these
requirements cannot be met using this funding, SLSDC officials said
that they would then revise the ARP to account for the work. In
addition, SLSDC's assessment program may cause it to modify the
scheduling of ARP projects if assets currently slotted to have work
performed in future years begin to experience problems that require
more immediate attention.
Condition Assessments:
Condition assessments are conducted to understand an asset's overall
state and to identify renewal or replacement needs that will preserve
its ability to support the mission or activities it was designed to
serve. During a condition assessment, trained personnel inspect the
physical condition and functional performance of facilities, systems,
and materials for signs of deterioration, failure, or more subtle
symptoms that conditions are not normal. Condition assessments can
range from staff walking through a facility and visually inspecting
conditions to more comprehensive studies, using a variety of technical
diagnostic techniques.
Table 3: SLSDC's Condition Assessment Program for Infrastructure
Assets:
Asset: Electrical equipment;
Description of assessment:
* Lock-operating machinery is inspected three times per week during
the navigation season;
* Emergency generators are inspected and tested biweekly;
* Transformers, automatic transfer switches, switchgear, and limit
switches are inspected and preventive maintenance is performed
annually.
Asset: Concrete structures;
Description of assessment:
* Approach walls and lock walls are inspected for damage on all shifts
each day during the navigation season;
* All concrete is inspected annually when the locks are dewatered.
Damaged or deteriorated concrete is further assessed by taking core
samples to determine extent of damage/deterioration.
Asset: Vertical lift gate;
Description of assessment:
* Vertical lift gate is tested monthly to ensure it would operate in
an emergency.
Asset: Lock-operating equipment and systems (including gates, valves,
ship arrestors, walls, compressors, and pumps);
Description of assessment:
* Lock-operating equipment and systems are inspected three times a
week during the navigation season. Checklists are used for these
inspections;
* Lock-operating equipment and systems, and all underwater structures,
are inspected in greater detail during the winter shutdown period. As
part of this inspection, equipment is operated and/or disassembled.
Asset: Fleet of vessels (tugs, buoy barge, and gatelifter vessel);
Description of assessment:
* Major pieces of the fleet are taken out of the water for assessment,
and underwater components are repaired on a 5- to 10-year cycle;
* The 300-ton gatelifter vessel is assessed through a training
exercise annually or biannually;
* All vessels are inspected before each use;
* The large tug has oil samples taken from multiple systems twice a
year, and the oil is changed based on the results of the samples;
* For all other vessels, the oil is changed after operating for a
predetermined number of hours.
Asset: Fixed and floating aids to navigation;
Description of assessment:
* Fixed and floating aids are inspected annually, more frequently if
maintenance is required;
* All floating aids are repaired, cleaned, and painted on a 5-year
cycle.
Asset: Vehicles;
Description of assessment:
* Vehicles are checked and serviced every 3,000 miles, at a minimum.
Asset: Mobile equipment (cranes, grader, backhoe, loader, forklifts,
snowplows, mowing equipment, generators, air compressors, and so
forth);
Description of assessment:
* Cranes are inspected monthly;
* Equipment utilized during winter maintenance periods (e.g.,
snowplow) is inspected and serviced before and after each winter
season;
* All other equipment is inspected and serviced annually, at a minimum.
Asset: Buildings;
Description of assessment:
* Buildings are continuously assessed as part of routine use.
Source: SLSDC data.
[End of table]
The Canadian Seaway's ARP:
The Canadian Seaway began an asset renewal program for its 13 locks in
1997, and because it considers asset renewal work an ongoing effort,
there is no targeted end date. The Canadian ARP is funded in 5-year
increments from the Canadian government, and the Canadian Seaway
currently expects to spend about C$570 million through 2013.
ARP Projects Affecting Vessel Operating Procedures:
Vessel self-spotting system: This technology uses laser scanning and
image recognition techniques to detect and track the position of a
vessel as it enters the lock. The system will provide vessel captains
with visual and audio indication of their vessel's position relative
to its mooring position. According to the Canadian Seaway, the
technology will reduce the time vessels are in the lock. All Canadian
locks are expected to be equipped with this technology by 2010.
SLSDC's project to install this system is currently expected to begin
in 2014.
Vessel vacuum mooring system: This technology uses vacuum pads to
secure vessels while they are in the lock. The system has been
proposed as an alternative to manually securing vessels using casting
lines from the ship to the lock wall. Use of this system could allow
ships to transit the system without Seaway-specific equipment they
currently carry. According to the Canadian Seaway, testing of this
technology is under way. SLSDC's project to install this system is
currently expected to begin in 2016.
U.S. and Canadian Officials Coordinate as Needed on ARP Issues:
While the two Seaway entities collaborated on the binational study and
coordinate on day-to-day operations, U.S. and Canadian officials
stated that coordination specific to the ARP generally involves
opening and closing of the Seaway and the exchange of technical
project information. Although both countries currently have programs
to renew assets, officials stated that more detailed coordination of
their programs is not warranted because of differences in the programs.
Coordination of the opening and closing dates, while routine, is
important for the ARP because it determines the work schedule for a
number of critical projects that can be completed only during the
winter shutdown period. Because of this limited winter maintenance
time frame, SLSDC's ARP contracts contain penalty clauses to ensure
that contractors complete work in time to allow the two U.S. locks to
open on the agreed-upon date.
SLSDC and the Canadian Seaway share technical information about
projects both countries are doing. For example, the Canadian Seaway
shared with SLSDC specifications and drawings from its miter gate
project, which were used to assist SLSDC in designing its miter gate
rehabilitation project. In addition, as part of the common goal to
ensure that vessel operators transiting the Seaway have the same
experience at each of the 15 locks, the two entities are coordinating
on projects that would affect vessel operating procedures at the
locks. For example, the Canadian Seaway is researching, testing, and
implementing technologies to track and secure vessels as they enter
the locks, and is sharing the results with the United States. SLSDC
officials told us that work on two ARP projects to incorporate this
technology will begin after they are successfully implemented at the
Canadian locks. In the meantime, SLSDC uses updates from Canada's
testing and implementing efforts to refine the scope and estimates of
its projects. For example, SLSDC updated the scope and estimate of its
vacuum mooring system project after Canadian testing of the system
indicated that four vacuum units per lock may be required as opposed
to the original plan of two per lock.
Conclusions and Recommendation for Executive Action:
Conclusions:
The Asset Renewal Program represents a significant investment in
SLSDC's infrastructure as part of the agency's effort to maintain the
functionality of the St. Lawrence Seaway. Because many of the
individual ARP projects are still in the early stages of project
definition, it is reasonable to expect that cost estimates will
continue to change. Estimates for asset renewal projects, like any
estimate of a future activity, can never be exact. On the basis of the
variability between estimated and actual costs experienced during the
first year of the ARP, SLSDC was able to adjust its spending plans by
reallocating funding and reprioritizing projects. Nevertheless, there
is no guarantee that such favorable adjustments can be repeated in
future years. As the ARP nears completion, SLSDC may have limited
opportunities to reallocate funding and reprioritize projects. As a
result, SLSDC may need to reduce the scope of work in the ARP or
extend the length of the program beyond the current 10-year plan in
order to complete all planned projects.
SLSDC's need to adjust its annual spending plans could be reduced
through increasing the reliability of project cost estimates. While we
acknowledge that the considerable knowledge and experience of SLSDC's
personnel is a valuable input to the cost-estimating process, it is
only one part of a reliable cost-estimating process. We have
identified a number of cost-estimating best practices in our cost
assessment guide that, when applied, should result in reliable and
valid cost estimates. We recognize that application of all of these
best practices takes both time and financial resources. Therefore,
SLSDC may choose to apply each best practice to varying degrees,
depending on the scope and complexity of the individual projects.
However, the overall effect of applying these best practices is to
enable SLSDC to better identify and address issues contributing to
cost variability and allow the agency to provide congressional
decision makers, and other stakeholders, with more precise information
about the ARP's estimated cost and increased confidence in SLSDC's
annual spending plans.
Recommendation for Executive Action:
To improve the reliability of cost estimates of the ARP projects, we
recommend that the Secretary of Transportation direct the SLSDC
Administrator to develop a cost-estimating process that follows best
practices to better ensure that its estimates are comprehensive, well
documented, accurate, and credible.
[End of Enclosure I]
Enclosure II: Scope and Methodology:
GAO Contact:
Terrell G. Dorn, (202) 512-6923, or dornt@gao.gov.
Staff Acknowledgments:
In addition to the contact named above, individuals making key
contributions to this report include Michael Armes, Assistant
Director; Tisha Derricotte; Heather Frevert; Jason Lee; Susan Michal-
Smith; Josh Ormond; and Matt Voit.
The objectives of this study were to determine (1) how the cost
estimates in the Asset Renewal Program (ARP) have changed from
February 2009 to February 2010, (2) the extent to which the ARP covers
all asset renewal needs, and (3) the steps the U.S. and Canadian
authorities have taken to coordinate their asset renewal programs.
We employed several methods to determine how the cost estimate for the
ARP has changed from February 2009 to February 2010. For example, we
interviewed Saint Lawrence Seaway Development Corporation (SLSDC)
officials and compared the February 2009 project feasibility estimates
of the original 50 projects with the February 2010 estimates updated
after the end of the first year of the 10-year program to quantify
differences and determine the reasons for changes in the estimates.
[Footnote 20] We obtained information from SLSDC on the project
development stage at which each of the February 2010 project estimates
was developed and used industry information and prior GAO reports to
determine the expected variability between estimated and actual costs,
and how this variability may change as the projects, and their
corresponding estimates, mature through the project development
process. We then compared the estimates used as part of the contract
solicitation process with the initial award amount for 40 of the 41
ARP contracts awarded in fiscal year 2009 to determine the extent of
variability between estimates and initial awards. For the remaining
fiscal year 2009 contract, the estimate included combined costs of
dredging at two separate locations. Because there was a delay in
obtaining all required permits, SLSDC awarded the contract in two
parts; therefore, we compared the total of the two award amounts to
the estimate used as part of the contract solicitation process. We
interviewed SLSDC officials and analyzed data to determine the reasons
for the variability between estimates and awards, and how the agency's
fiscal year 2009 spending plan was modified in response to this
variability as well as changes in project priorities, including the
addition of two ARP projects. Our analysis of fiscal year 2009
contract data cannot be generalized to ARP contracts awarded after
fiscal year 2009. We interviewed an SLSDC official and reviewed
audited financial statements to ensure the reliability of the contract
data and determined that the data were sufficiently reliable for the
purposes of this report.
To evaluate the process SLSDC used to estimate the costs of projects
in the ARP, we interviewed SLSDC officials and reviewed documents
related to the agency's estimating process. We used the GAO Cost
Estimating and Assessment Guide to evaluate the extent to which the
estimates SLSDC prepared for two projects reflected the four key
characteristics of high-quality estimates-”credible, well documented,
accurate, and comprehensive. We selected projects to review in detail
based on the following criteria: (1) projects starting in fiscal year
2009 or 2010, (2) projects expected to cost more than $1 million when
completed, (3) projects that were complex, and (4) projects that were
critical to the operation of the locks. While 5 of the 52 projects met
all of the criteria, we selected 3 projects because of the time and
level of effort required to evaluate the estimating process for these
projects. The 3 projects we initially selected were Project 4: Both
Locks: Culvert Valve Machinery-Upgrade to Hydraulic Operations;
Project 12: Corporation Equipment: Upgrade/Replace Floating Plant; and
Project 31: Both Locks: Rehabilitate Upstream Miter Gates. However,
Project 12 was dropped from our analysis after additional information
obtained from officials and project documents revealed that the
project did not fully meet our selection criteria.[Footnote 21] For
Projects 4 and 31, we analyzed supporting technical and design
documents related to the estimates, and interviewed SLSDC officials
and the contractor involved in Project 4 about the processes used to
prepare the estimates. GAO cost-estimating experts then compared the
approaches for preparing the estimates for these two projects with the
best practices contained in our guide and determined the extent to
which the process complied with our cost guide. The information
obtained from our review of SLSDC's estimating process for these two
projects cannot be generalized to all ARP estimates.
To determine the extent to which the ARP covers asset renewal needs,
we interviewed SLSDC officials, and reviewed (1) ARP documents that
described the projects, (2) agency capital plans and annual reports
from 2003-2008, and (3) the Great Lakes St. Lawrence Seaway Study to
identify SLSDC asset renewal needs. We compared the needs identified
in the agency capital plans and the Great Lakes St. Lawrence Seaway
Study with the current 52 ARP projects to determine the extent to
which the ARP addressed all asset renewal needs. For any asset renewal
need not identified in the ARP, we obtained additional information and
interviewed SLSDC officials to determine why these needs were not
included in the ARP, the extent to which these needs were addressed
prior to implementing the ARP, and how SLSDC plans to address any
needs in the future. We also reviewed documents and interviewed SLSDC
officials to understand SLSDC's program to assess the condition of its
infrastructure, facilities, and equipment, and how SLSDC anticipates
addressing any future needs identified as a result of its assessment
program, including how the results of the program could affect the
ARP. We used industry information on condition assessment for
facilities to determine the reasonableness of SLSDC's condition
assessment program.
To determine the steps taken by SLSDC and Canadian authorities to
coordinate their asset renewal programs, we interviewed officials from
SLSDC and their counterparts at the Canadian St. Lawrence Seaway
Management Corporation and reviewed relevant laws and treaties and
agreements between the United States and Canada. In addition, we
reviewed annual reports from SLSDC and the Canadian Seaway describing
asset renewal efforts.
We conducted this performance audit from July 2009 to May 2010 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
[End of Enclosure II]
Enclosure III: How a Lock Works:
The primary purpose of a lock is to raise and lower ships to bypass
rapids in a river and/or overcome changes in water surface levels.
Generally, a lock does not require pumps to operate, as water is moved
by gravity from the high water side to the lower water side. The basic
feature of a lock structure is an enclosed area called the chamber.
The chamber of concrete walls has watertight gates at each end (called
miter gates) and valves to fill and empty water from the chamber. The
process of raising or lowering a ship in the chamber is called a
lockage and is shown below in figure 5.
Figure 5: Operation of a lock:
[Refer to PDF for image: illustration]
Lock Operation:
(1) In this example, a ship approaches the lock chamber from the west,
or upstream, end. The lock gates are closed, and the water level in
the lock chamber is the same as the water level downstream of the lock
chamber.
(2) With both the lower and upper gates closed and the emptying
culvert valves closed, the chamber is brought to the upper level by
opening the filling culvert valves. This allows the water to flow from
the intakes into the chamber. Once the chamber is filled, the upper
gates are opened and the ship enters.
(3) After the ship is in the chamber, the upper gates and the filling
culvert valves are closed. The emptying culvert valves are then opened
to allow water to flow out of the lock chamber to the lower level. As
the water leaves the chamber, the ship is lowered.
(4) When the water in the chamber reaches the lower level, the ship is
fully lowered. The lower gates are opened, and the ship leaves.
Source: GAO.
[End of figure]
End of Enclosure III]
Enclosure IV: 52 ARP Projects:
Table 4: Projects in the ARP:
Project: 1. Snell Lock: Replace Fendering Downstream Guidewall
Extension;
Description: This project is to replace the 20-year-old composite
fendering on the downstream guidewall at Snell Lock;
Total project estimate (as of February 2010): $251,600.
Project: 2. Eisenhower and Snell Locks: Rehabilitate Downstream Miter
Gates;
Description: This project is to completely rehabilitate the miter
gates at the downstream ends of both locks. It includes replacing worn
and/or damaged components to ensure proper functioning of the miter
gates;
Total project estimate (as of February 2010): $8,630,000.
Project: 3. Eisenhower and Snell Locks: Rehabilitate Mooring Buttons
and Pin and Rehabilitate Concrete along Guidewalls and Guardwalls;
Description: This project is to rehabilitate the upstream and
downstream concrete approach walls at both locks and the mooring
buttons located behind these walls for transiting vessels to tie to.
The rehabilitation work will include pinning dislodged lifts,
repairing damaged concrete, and raising mooring buttons that have
settled;
Total project estimate (as of February 2010): $251,000.
Project: 4. Eisenhower and Snell Locks: Culvert Valve Machinery-”
Upgrade to Hydraulic Operation;
Description: This project is for replacing the 50-year-old operating
machinery for culvert valves at both locks with new hydraulic
operating machinery to match the upgrades made at the Canadian Seaway
locks and other similar locks in the United States;
Total project estimate (as of February 2010): $8,617,050.
Project: 5. Eisenhower and Snell Locks: Rehabilitate and Insulate Winter
Maintenance Lock Covers;
Description: This project is for rehabilitating and insulating the 40-
year-old steel modules utilized to cover both locks when major winter
maintenance projects are planned;
Total project estimate (as of February 2010): $304,698.
Project: 6. Seaway International Bridge: Perform Structural
Rehabilitation and Corrosion Prevention;
Description: This project is for rehabilitation of the structural
components of the south span of the Seaway International Bridge, which
crosses the Seaway navigation channel and is jointly owned with
Canada. SLSDC owns 68 percent of the south span of the bridge, and the
budget request reflects the U.S. prorated amount for the project.
Canada owns the remaining 32 percent of the south span;
Total project estimate (as of February 2010): $12,341,878.
Project: 7. Eisenhower and Snell Locks: Culvert Valves”-Replace with
Single Skin Valves;
This project is for replacing the 50-year-old double skin culvert
valves utilized for filling and emptying both locks with single skin
valves, which will provide better access to the structural members for
inspection and maintenance;
Total project estimate (as of February 2010): $1,514,000.
Project: 8. Floating Navigational Aids: Replace;
Description: This is an ongoing program to replace approximately 100
buoys and 50 winter markers on an as-required basis;
Total project estimate (as of February 2010): $615,254.
Project: 9. SLSDC Equipment: Replace Heavy and Light Equipment,
Maintenance Vehicles, and Shop Equipment;
Description: This is an ongoing program to replace heavy and light
equipment, vehicles, and shop equipment as they become worn out and
unserviceable. Heavy and light equipment includes such items as a
crane, dump truck, snowplow, backhoe, grader, and front end loader,
and shop equipment includes such items as a lathe, a milling machine,
and a drill press;
Total project estimate (as of February 2010): $3,728,504.
Project: 10. Eisenhower and Snell Locks: Upgrade Power Supply
Infrastructure from Moses-Saunders Dam to Both Locks and Adjacent
Facilities;
Description: This project is for upgrading the 50-year-old
infrastructure that supplies power to both locks and to SLSDC's
maintenance facility;
Total project estimate (as of February 2010): $289,594.
Project: 11. Fixed Navigational Aids: Rehabilitate;
Description: This project is for rehabilitating 50-year-old fixed
navigational aids in the Seaway, including the concrete bases of some
of these structures, which are eroding and cracking;
Total project estimate (as of February 2010): $1,743,000.
Project: 12. SLSDC Equipment: Upgrade/Replace Floating Plant;
Description: This is an ongoing program to rehabilitate and/or replace
SLSDC's floating plant, which is utilized for maintaining the locks
and navigation channels. This multiyear project also includes
replacing the tug; upgrading the buoy tender barge; purchasing a
smaller tug and a small barge and scow for maintaining fixed
navigation aids and for emergency/spot dredging; and for
rehabilitating the crane barge/gate-lifter, which would have to be
utilized if a miter gate was damaged and had to be replaced;
Total project estimate (as of February 2010): $32,020,745.
Project: 13. SLSDC Facilities: Replace Roofs;
Description: This project is for replacing the roofs on SLSDC's
various buildings and facilities in Massena, New York, as required;
Total project estimate (as of February 2010): $1,887,949.
Project: 14. SLSDC Facilities: Replace Paving and Drainage
Infrastructure;
Description: This project is for improving the pavement and drainage
along lock approach walls, agency roadways, and parking and work areas
at all SLSDC facilities;
Total project estimate (as of February 2010): $6,255,837.
Project: 15. Eisenhower Lock: Highway Tunnel-”Rehabilitate;
Description: This is an ongoing project to maintain the highway tunnel
that goes under the Eisenhower Lock, including grouting to limit the
water leaking into the tunnel, replacing damaged or missing tiles from
the walls and ceiling, replacing deteriorated/damaged gratings and
railings, stabilizing or repairing wingwalls at the tunnel approaches,
clearing tunnel drains that are becoming plugged with concrete leachate
products, and upgrading the lighting to meet current standards;
Total project estimate (as of February 2010): $1,449,636.
Project: 16. Seaway System: Upgrade GPS/AIS/TMS Technologies;
Description: This project is to expand the use of the Seaway's Global
Positioning System (GPS)/Automatic Identification System (AIS)
navigation technologies, which are incorporated into the Seaway's
binational Traffic Management System (TMS). Future upgrades will
further improve the safety for vessels transiting the Seaway. Plans
are to use these technologies to enable vessels to better identify
hazards at times of limited visibility;
Total project estimate (as of February 2010): $459,997.
Project: 17. Navigation Channels: Dredge U.S. Sectors to Maintain
Design Grade and Dispose of Sediments;
Description: This project is for dredging of the navigation channel to
remove sediments to maintain the channel at its authorized depth;
Total project estimate (as of February 2010): $14,636,556.
Project: 18. Eisenhower Lock: Vertical Lift Gate-”Replace Wire Ropes;
Description: This project is for replacing the 30-year-old wire rope
cables that serve to raise and lower the vertical lift gate at
Eisenhower Lock. The vertical lift gate is an emergency closure
designed to hold back water if a miter gate is compromised;
Total project estimate (as of February 2010): $503,000.
Project: 19. SLSDC Facilities: Upgrade Electrical Distribution
Equipment;
Description: This project is for upgrading 50-year-old electrical
distribution equipment at both locks and at the Maintenance Facility;
Total project estimate (as of February 2010): $801,000.
Project: 20. Eisenhower and Snell Locks: Upgrade Lock Status/Controls;
Description: This project is for upgrading the lock/equipment status
systems and the lock operating controls at both locks;
Total project estimate (as of February 2010): $234,558.
Project: 21. Eisenhower and Snell Locks: Compressed Air Systems--
Upgrade/Replace;
Description: This project is for replacing the compressors and
corroded piping that provide compressed air for various systems at
both locks for maintenance work and for ice control in and around the
locks during the opening and closing of the Seaway;
Total project estimate (as of February 2010): $1,527,878.
Project: 22. Eisenhower and Snell Locks: Install Vessel Self Spotting
Equipment;
Description: This project is for installing technology at both locks
so that vessel captains transiting the locks can more easily locate
their vessel's position in the lock. The Canadian Seaway agency has
been testing this new technology at its locks and will have it
installed at all of its locks during the 2010 shipping season;
Total project estimate (as of February 2010): $579,000.
Project: 23. Eisenhower and Snell Locks: Install Vessel Vacuum Mooring
Systems;
Description: This project is for installing vessel vacuum mooring
equipment at both locks to hold vessels in place while they are in the
lock. The Canadian Seaway agency commenced testing this new technology
at the beginning of the 2007 navigation season and continues to refine
equipment specifications;
Total project estimate (as of February 2010): $9,971,000.
Project: 24. Eisenhower and Snell Locks: Structural Repair”-Grout
Leaks in Galleries and Recesses;
Description: This project is for grouting cracks/joints in the
concrete in the galleries and recesses at both locks to reduce the
infiltration of water into these areas;
Total project estimate (as of February 2010): $441,561.
Project: 25. SLSDC Facilities: Upgrade/Replace Fire Alarm/Protection
Systems;
Description: This project is for replacing antiquated fire alarm and
fire protection systems at SLSDC facilities. Prior to the start of the
ARP, SLSDC began work on this project because problems with the
current system required more immediate attention. Therefore, the scope
of the project under the ARP has been reduced;
Total project estimate (as of February 2010): $105,148.
Project: 26. SLSDC Facilities: Upgrade Storage for Lock Spare Parts;
Description: This project is for constructing buildings for storage of
lock spare parts to prevent them from corroding prior to their use;
Total project estimate (as of February 2010): $609,000.
Project: 27. SLSDC Facilities: Replace Windows and Doors and Repair
Building Facades;
Description: This project is for replacing corroded/worn windows and
doors and for repairing the brick and stone facades;
Total project estimate (as of February 2010): $1,025,000.
Project: 28. Snell Lock: Walls, Sills and Culverts: Rehabilitate
Concrete;
Description: This project is to replace deteriorated/damaged concrete
at Snell Lock along the lock walls, filling and emptying culverts, and
the gate sills;
Total project estimate (as of February 2010): $6,207,000.
Project: 29. Eisenhower Lock: Walls, Sills and Culverts”-Rehabilitate
Concrete;
Description: This project is to replace deteriorated/damaged concrete
at Eisenhower Lock along the lock walls, filling and emptying
culverts, and the gate sills;
Total project estimate (as of February 2010): $8,182,000.
Project: 30. Eisenhower Lock: Ice Flushing System”-Upgrade;
Description: This project was for making improvements to the
Eisenhower Lock ice flushing system used to remove ice from the lock
chamber. However, SLSDC addressed this need through improved
preventive maintenance procedures and minor improvements to the
current system, which eliminated the need for major upgrades.
Therefore, the scope of the project under the ARP has been reduced;
Total project estimate (as of February 2010): $0.
Project: 31. Eisenhower and Snell Locks: Rehabilitate Upstream Miter
Gates;
Description: This project is to completely rehabilitate the miter
gates at the upstream ends of both locks. It includes replacing worn
and/or damaged components to ensure proper functioning of the miter
gates;
Total project estimate (as of February 2010): $3,709,585.
Project: 32. SLSDC Facilities: Rehabilitate Spare Gate Storage and
Assembly Area;
Description: This project is for rehabilitating the spare miter gate
storage and assembly area. The work will include repair of the spare
gate assembly pads and their supporting piles and blast cleaning and
painting of the spare miter gates and gate assembly towers;
Total project estimate (as of February 2010): $762,000.
Project: 33. Eisenhower and Snell Locks: Upgrade Drainage
Infrastructure in Galleries and Recesses;
Description: This project is to open existing drains or to drill new
ones in the galleries and machinery recesses at both locks;
Total project estimate (as of February 2010): $614,000.
Project: 34. Eisenhower and Snell Locks: Improve Ice Control;
Description: This project is to improve the methods and equipment used
to control ice in and around both locks during the opening and closing
of each shipping season;
Total project estimate (as of February 2010): $1,021,000.
Project: 35. Vessel Mooring Cells: Rehabilitate and Extend;
Description: This project is for rehabilitating and extending the
vessel mooring cells upstream of Eisenhower Lock and in the
Intermediate Pool between the locks. These mooring cells are used by
vessels to tie the ship to a fixed point while awaiting repairs or
inspections;
Total project estimate (as of February 2010): $3,186,000.
Project: 36. Eisenhower Lock: Diffusers”-Replace;
Description: This project is to replace deteriorated and damaged
concrete in the diffusers at Eisenhower Lock. The diffusers are the
outlet structures used to slow the flow of water when the lock is
emptied;
Total project estimate (as of February 2010): $3,045,000.
Project: 37. Eisenhower Lock: Construct Drydock for Vessel Maintenance;
Description: This project is for constructing a drydock in Eisenhower
Lock so that repairs to SLSDC's floating plant can be made on-site;
Total project estimate (as of February 2010): $800,000.
Project: 38. Eisenhower and Snell Locks: Upgrade/Replace Emergency
Generators;
Description: This project is for replacing the 20-year-old emergency
generators at both locks. The project will also transfer and install
one of the generators removed from the locks at the Maintenance
Facility;
Total project estimate (as of February 2010): $1,018,000.
Project: 39. Eisenhower and Snell Locks: Dewatering Pumps-”Upgrade
Outdated Equipment;
Description: This project is for replacing the 50-year-old pumps used
for dewatering both locks;
Total project estimate (as of February 2010): $407,000.
Project: 40. Eisenhower and Snell Locks: Extend Guidewalls in Pool;
Description: This project is for extending the downstream guidewall at
Eisenhower Lock and the upstream guidewall at Snell Lock;
Total project estimate (as of February 2010): $3,076,000.
Project: 41. Snell Lock: Install Ice Flushing System Technologies;
This project is for installation of an ice flushing system at Snell
Lock similar to the one at Eisenhower;
Total project estimate (as of February 2010): $10,178,000.
Project: 42. Eisenhower and Snell Locks: Miter Gates”-Structural
Rehabilitation;
Description: This project is to blast-clean and coat the upstream and
downstream miter gates at both locks;
Total project estimate (as of February 2010): $2,554,000.
Project: 43. Eisenhower and Snell Locks: Miter Gate Machinery--
Upgrade/Replace;
Description: This project is for replacing the 50-year-old operating
machinery for the miter gates at both locks. The upgrade will include
new hydraulic operating equipment to match the upgrades made at the
Canadian Seaway locks and the other locks in the United States;
Total project estimate (as of February 2010): $3,281,000.
Project: 44. Eisenhower and Snell Locks: Ship Arrestor Machinery--
Upgrade/Replace;
Description: This project is for replacing the 50-year-old operating
machinery for the ship arrestors at both locks. The ship arrestors
protect the miter gates from damage that would be caused by a vessel
that was unable to stop;
Total project estimate (as of February 2010): $825,000.
Project: 45. Flow Control Dikes”-Rehabilitate;
Description: This project is for placing additional stone on the dikes
downstream of Snell Lock to return them to their original design;
Total project estimate (as of February 2010): $515,000.
Project: 46. Eisenhower and Snell Locks: Guidewall Extensions-”
Rehabilitate;
Description: This project is to repair damage to the guidewall
extensions located at the upstream end of Eisenhower Lock and at the
downstream end of Snell Lock;
Total project estimate (as of February 2010): $1,033,000.
Project: 47. Eisenhower Lock: Vertical Lift Gate-”Structural
Rehabilitation;
Description: This project is for blast-cleaning and treating the
vertical lift gate at Eisenhower Lock to prevent corrosion. The
vertical lift gate is an emergency closure designed to be raised in
the event a miter gate is compromised;
Total project estimate (as of February 2010): $725,000.
Project: 48. Eisenhower and Snell Locks: Stiffleg Derricks”-Replace;
Description: This project is for replacing the structural components
of the stiffleg derricks at both locks. The stiffleg derricks, located
at each end of each lock, are hoisting devices used to place the
temporary closure structures required for dewatering a lock for
inspection and/or repair of the underwater components;
Total project estimate (as of February 2010): $834,000.
Project: 49. Seaway International Bridge”-Replace Deck;
Description: This project is for rehabilitation of the deck of the
south span of the Seaway International Bridge, which crosses the
Seaway navigation channel and is jointly owned with Canada. SLSDC owns
68 percent of the south span of the bridge, and the budget request
reflects the U.S. prorated amount for the project. Canada owns the
remaining 32 percent of the south span;
Total project estimate (as of February 2010): $14,225,000.
Project: 50. Snell Lock: Diffusers-”Replace;
Description: This project is to replace the deteriorated and damaged
concrete in the diffusers at Snell Lock. The diffusers are the outlet
structures used to slow the flow of water when the lock is emptied;
Total project estimate (as of February 2010): $3,140,000.
Project: 51. SLSDC Facilities: Upgrade Physical Security to Meet
Description: Homeland Security Presidential Directive 12 (HSPD-12)
Requirements;
This project is for procuring the Personal Identity Verification cards
issued by the Department of Transportation and for acquiring and
installing the required infrastructure to meet HSPD-12, which
establishes a federal standard for secure and reliable forms of
identification for access to federal facilities;
Total project estimate (as of February 2010): $200,000.
Project: 52. Eisenhower Lock: Visitors' Center-”Replace;
Description: This project will replace the existing 50-year-old
Visitors' Center at Eisenhower Lock with a new facility that will meet
federal physical security and accessibility standards;
Total project estimate (as of February 2010): $5,000,000.
Project: Engineering Design, Construction Inspection, Contracting
Support, and Project Management;
Description: To accomplish all of the ARP projects, SLSDC will require
additional engineering design support, construction inspectors to
monitor and insure the quality of the work, and contracting
specialists to handle the increase in contract work. This estimate is
for fiscal year 2010 only. Similar costs for fiscal year 2009 (actual)
and fiscal year 2011 and beyond (estimates) are included directly in
the individual project estimates;
Total project estimate (as of February 2010): $306,000.
Project: Total: $185,638,028.
Source: GAO analysis of SLSDC data.
[End of table]
[End of Enclosure IV]
Enclosure V: ARP Fiscal Year 2009 Contract Estimates and Awards:
Table 5: ARP Fiscal Year 2009 Contracts Estimates Compared with Awards:
Fiscal year 2009 awarded contracts: 1. Power supply infrastructure
upgrade;
Estimate used during contract solicitation: $75,000;
Initial contract award: $19,594;
Percent difference between estimate and award: -74%;
ARP project number: 10.
Fiscal year 2009 awarded contracts: 2. Software for viewing and
plotting hydrographic survey results;
Estimate used during contract solicitation: $19,123;
Initial contract award: $6,750;
Percent difference between estimate and award: -65%;
ARP project number: 12.
Fiscal year 2009 awarded contracts: 3. Paving and drainage repairs at
both locks--design;
Estimate used during contract solicitation: $50,000;
Initial contract award: $20,600;
Percent difference between estimate and award: -59%;
ARP project number: 3 & 14.
Fiscal year 2009 awarded contracts: 4. Navigation channel dredging;
Estimate used during contract solicitation: $6,400,000;
Initial contract award: $3,690,700;
Percent difference between estimate and award: -42%;
ARP project number: 17.
Fiscal year 2009 awarded contracts: 5. River bottom sediment sampling;
Estimate used during contract solicitation: $80,000;
Initial contract award: $46,918;
Percent difference between estimate and award: -41%;
ARP project number: 17.
Fiscal year 2009 awarded contracts: 6. Paving at Visitors' Center
parking lot;
Estimate used during contract solicitation: $24,000;
Initial contract award: $14,873;
Percent difference between estimate and award: -38%;
ARP project number: 3 & 14.
Fiscal year 2009 awarded contracts: 7. Hydrographic survey equipment;
Estimate used during contract solicitation: $16,421;
Initial contract award: $10,890;
Percent difference between estimate and award: -34%;
ARP project number: 12.
Fiscal year 2009 awarded contracts: 8. Pavement, mooring buttons, and
drainage repairs and improvement at both locks;
Estimate used during contract solicitation: $1,200,000;
Initial contract award: $877,350;
Percent difference between estimate and award: -27%;
ARP project number: 3 & 14.
Fiscal year 2009 awarded contracts: 9. Mower;
Estimate used during contract solicitation: $16,000;
Initial contract award: $12,216;
Percent difference between estimate and award: -24%;
ARP project number: 9.
Fiscal year 2009 awarded contracts: 10. All-terrain crane;
Estimate used during contract solicitation: $1,750,000;
Initial contract award: $1,358,888;
Percent difference between estimate and award: -22%;
ARP project number: 9.
Fiscal year 2009 awarded contracts: 11. Rubber fenders;
Estimate used during contract solicitation: $300,000;
Initial contract award: $241,600;
Percent difference between estimate and award: -19%;
ARP project number: 1.
Fiscal year 2009 awarded contracts: 12. Rotary cutter;
Estimate used during contract solicitation: $13,000;
Initial contract award: $11,096;
Percent difference between estimate and award: -15%;
ARP project number: 9.
Fiscal year 2009 awarded contracts: 13. Hydrographic survey equipment;
Estimate used during contract solicitation: $42,550;
Initial contract award: $38,396;
Percent difference between estimate and award: -10%;
ARP project number: 12.
Fiscal year 2009 awarded contracts: 14. Hydrographic survey software;
Estimate used during contract solicitation: $11,775;
Initial contract award: $11,030;
Percent difference between estimate and award: -6%;
ARP project number: 12.
Fiscal year 2009 awarded contracts: 15. Weather and visibility
monitoring equipment;
Estimate used during contract solicitation: $19,000;
Initial contract award: $18,499;
Percent difference between estimate and award: -3%;
ARP project number: 16.
Fiscal year 2009 awarded contracts: 16. Snowplow;
Estimate used during contract solicitation: $90,869;
Initial contract award: $89,162;
Percent difference between estimate and award: -2%;
ARP project number: 9.
Fiscal year 2009 awarded contracts: 17. Dry dock buoy barge;
Estimate used during contract solicitation: $225,000;
Initial contract award: $221,182;
Percent difference between estimate and award: -2%;
ARP project number: 12.
Fiscal year 2009 awarded contracts: 18. Beacon marking a known
critical point to be picked up by a ship's radar for use during
periods of limited visibility;
Estimate used during contract solicitation: $33,050;
Initial contract award: $32,389;
Percent difference between estimate and award: -2%;
ARP project number: 16.
Fiscal year 2009 awarded contracts: 19. Weather and visibility
monitoring equipment;
Estimate used during contract solicitation: $19,000;
Initial contract award: $18,531;
Percent difference between estimate and award: -2%;
ARP project number: 16.
Fiscal year 2009 awarded contracts: 20. 27-foot hydrographic survey
vessel (boat);
Estimate used during contract solicitation: $265,000;
Initial contract award: $262,355;
Percent difference between estimate and award: -1%;
ARP project number: 12.
Fiscal year 2009 awarded contracts: 21. Grouting and lighting of
highway tunnel-study;
Estimate used during contract solicitation: $27,000;
Initial contract award: $26,636;
Percent difference between estimate and award: -1%;
ARP project number: 15.
Fiscal year 2009 awarded contracts: 22. Compressed air systems-study;
Estimate used during contract solicitation: $20,000;
Initial contract award: $19,704;
Percent difference between estimate and award: -1%;
ARP project number: 21.
Fiscal year 2009 awarded contracts: 23. Culvert valve machinery--
design;
Estimate used during contract solicitation: $30,000;
Initial contract award: $30,000;
Percent difference between estimate and award: 0;
ARP project number: 4.
Fiscal year 2009 awarded contracts: 24. Culvert valve machinery--
design;
Estimate used during contract solicitation: $10,000;
Initial contract award: $10,000;
Percent difference between estimate and award: 0;
ARP project number: 4.
Fiscal year 2009 awarded contracts: 25. Lock roof cover
upgrade/rehabilitation;
Estimate used during contract solicitation: $29,400;
Initial contract award: $29,400;
Percent difference between estimate and award: 0;
ARP project number: 5.
Fiscal year 2009 awarded contracts: 26. Rehabilitation work on U.S.
portion of the bridge;
Estimate used during contract solicitation: $2,000,000;
Initial contract award: $2,000,000;
Percent difference between estimate and award: 0;
ARP project number: 6.
Fiscal year 2009 awarded contracts: 27. Snowplow;
Estimate used during contract solicitation: $51,069;
Initial contract award: $51,250;
Percent difference between estimate and award: 0;
ARP project number: 9.
Fiscal year 2009 awarded contracts: 28. Weather- and visibility-
monitoring equipment;
Estimate used during contract solicitation: $14,190;
Initial contract award: $14,190;
Percent difference between estimate and award: 0;
ARP project number: 16.
Fiscal year 2009 awarded contracts: 29. Weatherproof enclosure for
wind-monitoring equipment;
Estimate used during contract solicitation: $5,460;
Initial contract award: $5,460;
Percent difference between estimate and award: 0;
ARP project number: 16.
Fiscal year 2009 awarded contracts: 30. Differential gauges;
Estimate used during contract solicitation: $6,196;
Initial contract award: $6,198;
Percent difference between estimate and award: 0;
ARP project number: 20.
Fiscal year 2009 awarded contracts: 31. Marine lanterns for
navigational aids;
Estimate used during contract solicitation: $60,815;
Initial contract award: $61,254;
Percent difference between estimate and award: 1%;
ARP project number: 8.
Fiscal year 2009 awarded contracts: 32. Steel and materials for lock
roof cover upgrade/rehabilitation;
Estimate used during contract solicitation: $12,900;
Initial contract award: $13,467;
Percent difference between estimate and award: 4%;
ARP project number: 5.
Fiscal year 2009 awarded contracts: 33. Hydrographic survey equipment;
Estimate used during contract solicitation: $7,120;
Initial contract award: $7,700;
Percent difference between estimate and award: 8%;
ARP project number: 12.
Fiscal year 2009 awarded contracts: 34. Roofs on control houses at
Snell Lock;
Estimate used during contract solicitation: $85,000;
Initial contract award: $91,419;
Percent difference between estimate and award: 8%;
ARP project number: 13.
Fiscal year 2009 awarded contracts: 35. Boston whaler (boat);
Estimate used during contract solicitation: $27,838;
Initial contract award: $30,766;
Percent difference between estimate and award: 11%;
ARP project number: 12.
Fiscal year 2009 awarded contracts: 36. Container trailer;
Estimate used during contract solicitation: $10,000;
Initial contract award: $11,550;
Percent difference between estimate and award: 16%;
ARP project number: 9.
Fiscal year 2009 awarded contracts: 37. Tractor;
Estimate used during contract solicitation: $24,000;
Initial contract award: $30,808;
Percent difference between estimate and award: 28%;
ARP project number: 9.
Fiscal year 2009 awarded contracts: 38. Grouting at Snell Lock;
Estimate used during contract solicitation: $40,000;
Initial contract award: $53,215;
Percent difference between estimate and award: 33%;
ARP project number: 24.
Fiscal year 2009 awarded contracts: 39. Upgrade culvert valve
operating machinery control for the north side valves at both locks;
Estimate used during contract solicitation: $2,750,000;
Initial contract award: $4,077,050;
Percent difference between estimate and award: 48%;
ARP project number: 4.
Fiscal year 2009 awarded contracts: 40. Rehabilitation of upstream
miter gate at Eisenhower Lock;
Estimate used during contract solicitation: $1,250,000;
Initial contract award: $2,201,585;
Percent difference between estimate and award: 76%;
ARP project number: 31.
Fiscal year 2009 awarded contracts: 41. Inspection and pre- and
postdredge surveys;
Estimate used during contract solicitation: $200,000;
Initial contract award: $541,829;
Percent difference between estimate and award: 171%;
ARP project number: 17.
Fiscal year 2009 awarded contracts: Total;
Estimate used during contract solicitation: $17,310,776;
Initial contract award: $16,316,500.
Small purchase orders and modifications to contracts after initial
award;
Initial contract award: $1,270,528.
Final total fiscal year 2009 obligations;
Initial contract award: $17,587,028.
Source: GAO analysis of SLSDC data.
[End of table]
[End of Enclosure V]
Enclosure VI: Cost-Estimating Best Practices:
Figure 6: 12 Key Cost-Estimating Steps:
[Refer to PDF for image: illustration]
Initiation and research: Your audience, what you are estimating, and
why you are estimating it are of the utmost importance:
* Define the estimate's purpose;
* Develop the estimating plan.
Assessment: Cost assessment steps are iterative and can be
accomplished in varying order or concurrently:
* Define the program;
* Obtain the data;
* Determine the estimating structure;
* Identify ground rules and assumptions;
* Develop the point estimate and compare it to an independent
cost estimate.
Analysis, presentation, and updating the estimate steps can lead to
repeating previous assessment steps.
Analysis: The confidence in the point or range of the estimate is
crucial to the decision maker:
* Conduct sensitivity analysis;
* Conduct a risk and uncertainty analysis;
* Document the estimate;
Presentation: Documentation and presentation make or break a cost
estimating decision outcome:
* Present estimate to management for approval;
* Update the estimate to reflect actual
costs/changes.
Source: GAO.
[End of figure]
Table 6: Four Characteristics of a High-Quality Cost Estimate with
Their Corresponding 12 Key Cost-Estimating Steps:
Characteristic: Comprehensive;
Step:
* Develop the estimating plan;
* Identify ground rules and assumptions[A];
* Determine the estimating structure.
Characteristic: Well-documented;
Step:
* Define the estimate's purpose, scope, and schedule;
* Define the program;
* Identify ground rules and assumptions[A];
* Obtain the data;
* Document the estimate;
* Present the estimate to management.
Characteristic: Accurate;
Step:
* Develop the point estimate and compare it with an independent cost
estimate[B];
* Update the estimate to reflect actual costs and changes.
Characteristic: Credible;
Step:
* Develop the point estimate and compare it with an independent cost
estimate[B];
* Conduct a sensitivity analysis;
* Conduct risk and uncertainty analysis.
Source: GAO
[A] This step applies to two of the characteristics”-comprehensive and
well documented.
[B] This step applies to two of the characteristics”-accuracy and
credibility.
[End of table]
[End of Enclosure VI]
Enclosure VII: Assessment of Two Project Cost Estimates Reviewed:
This enclosure provides the assessments of two SLSDC project cost
estimates we reviewed in detail. Each assessment provides our analysis
of the extent to which the project's cost-estimating processes and
methodologies included the 12 key steps necessary for preparing high-
quality estimates (see figure 6), and some key examples of the
rationale behind our analysis.
Assessment of ARP Project #4: Culvert Valve Operating Equipment, Phase
1:
Project description: This is a two-phase project to replace the
operating machinery for the Eisenhower and Snell Lock culvert valves,
which are used for filling and emptying the locks. The upgrade will
replace motors and gears”which have been maintained but not replaced
or upgraded since their installation in the 1950s”with new hydraulic
operating machinery to match the upgrades made at the Canadian Seaway
locks and other similar locks in the United States. SLSDC contracted
with the U.S. Army Corps of Engineers to develop the project's design
and cost estimate.
The first phase of this project began in fiscal year 2009 when SLSDC
awarded a contract to upgrade the operating machinery on the north
side of both locks. Because of the long lead time needed to acquire
the equipment, the actual work will be performed over the 3-month
period of January to March 2011.
Final estimate (phase 1): $2.8 million.
Actual award (phase 1): $4.1 million.
Four characteristics of high-quality cost estimates and 12 key steps:
Comprehensive;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Partially met.
Four characteristics of high-quality cost estimates and 12 key steps:
Comprehensive; Develop the estimating plan;
Explanation: The cost-estimating team should develop a written study
plan that (1) determines the estimating team's composition and whether
the team is from a centralized office, (2) identifies which subject
matter experts the team will rely on for information, (3) outlines the
estimating approach, and (4) identifies a master schedule for
completing the estimate that provides adequate time to do the work.
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Minimally met;
Key examples of rationale for assessment: The contractor responsible
for creating the estimate has a centralized cost-estimating department
that specializes in marine equipment. However, SLSDC did not specify
details or requirements for the cost estimate or identify any
necessary guidance or policy to be followed. In addition, a written
study plan and schedule of specific tasks were not developed, and
therefore, responsibilities were not clearly defined and due dates
were not established.
Four characteristics of high-quality cost estimates and 12 key steps:
Comprehensive; Determine the estimating structure;
Explanation: There should be a defined work breakdown structure (WBS)
and/or a cost element structure. The WBS should be product-oriented,
traceable to the statement of work, and at an appropriate level of
detail to ensure that cost elements are neither omitted nor double-
counted. A WBS dictionary should be developed that defines what is
included in each element and how it relates to other elements in the
hierarchy;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Partially met;
Key examples of rationale for assessment: The cost estimate defined
the work in detail and for each cost category, the estimate clearly
describes how most of the various cost elements are summed, thereby
ensuring that no costs are double-counted. However, because the
estimate does not specifically break out costs common for most
projects, such as testing, training, or government equipment costs, we
cannot verify that the estimate includes all relevant costs of the
project. In addition, the estimate was task-oriented, rather than
product-oriented. A product-oriented work breakdown structure allows a
program manager to more precisely identify which components are
causing cost or schedule overruns and to more effectively mitigate the
root causes of overruns.
Four characteristics of high-quality cost estimates and 12 key steps:
Comprehensive; Identify ground rules and assumptions;
Explanation: Ground rules and assumptions should document the
rationale and any historical data to back up any claims. Risks that
are associated with any assumptions should be identified and traced to
specific WBS elements. Budget constraints, as well as the effect of
delaying program content, should be defined. Inflation indexes and
their source should be identified, and if items are excluded from the
estimate, they should be documented and explained;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Partially met;
Key examples of rationale for assessment: The cost estimate
documentation provides for basic assumptions underlying the estimate;
however, some assumptions are not fully documented. Key global
assumptions about the project were not taken into account because they
were not discussed between SLSDC and its contractor. For example,
several risks, including confined working spaces, ice, and freezing
conditions, which could cause a delay in the schedule, were not
accounted for in the cost estimate.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Substantially met
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Define the estimate's purpose
Explanation: The purpose and scope of the cost estimate should be
defined and documented. The level of detail in the cost estimate
should be consistent with the level of detail available for the
program, and all applicable costs should be estimated, including life
cycle costs;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Fully met;
Key examples of rationale for assessment: The purpose and scope of the
cost estimate is documented and clearly defined in the statement of
work at a level that would enable SLSDC to submit a quality cost
estimate.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Define the program characteristics
Explanation: There should be a documented technical baseline
description that is contained in a single document. The technical
baseline description should include requirements, purpose, technical
characteristics, development plan, acquisition strategy, operational
plan, and risk;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Fully met;
Key examples of rationale for assessment: A technical baseline has
been documented that includes, among other things, requirements,
purpose, and design features. The cost estimate is based upon the
final drawings and specifications.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Identify ground rules and assumptions;
Explanation: Ground rules and assumptions should document the
rationale and any historical data to back up any claims. Risks that
are associated with any assumptions should be identified and traced to
specific WBS elements. Budget constraints, as well as the effect of
delaying program content, should be defined. Inflation indexes and
their source should be identified, and if items are excluded from the
estimate, they should be documented and explained;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Partially met;
Key examples of rationale for assessment: The cost estimate
documentation provides for basic assumptions underlying the estimate,
such as inflation; however, some assumptions are not fully documented.
Key global assumptions about the project were not taken into account
because they were not discussed between SLSDC and its contractor. For
example, several risks, including confined working spaces, ice, and
freezing conditions, which could cause a delay in the schedule, were
not accounted for in the cost estimate.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Obtain the data
Explanation: The data should be gathered from valid historical actual
cost, schedule, and program and technical sources. The data should
apply to the program being estimated and should be analyzed for cost
drivers. Data should be collected from primary sources and adequately
documented. Analysts should meet with the data sources to better
understand the program, and data should be reviewed and benchmarked
against historical data for reasonableness;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Substantially met;
Key examples of rationale for assessment: The final cost estimate is
based partially on the preliminary cost estimate from 2002, adjusted
to current year dollars. The 2002 estimate incorporated data on
similar historical projects, local labor rates, vendor quotes, and
estimator experience to develop the estimate. However, estimators did
not adjust the historical data to reflect the increased labor costs
required to complete the project during the compressed timeline of the
winter shutdown period, which limited the usefulness of these data.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Document the estimate;
Explanation: Documentation should describe the cost-estimating
process, data sources, and methods step by step so that a cost analyst
unfamiliar with the program can understand what was done and replicate
it. The documentation should include ground rules and assumptions,
descriptions of methodologies, and sensitivity and risk and
uncertainty analysis results broken out by cost element. Management
approval and updates that reflect actual costs or changes should be
included;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Substantially met;
Key examples of rationale for assessment: The documentation of the
final cost estimate includes detailed materials for estimated labor,
equipment, contingency, and bond requirements, which allows management
to clearly see how the total cost of the project is calculated.
However, the cost estimate documentation does not trace all estimates
to raw or normalized data. For example, the documentation does not
provide a basis or supporting data for included quantities, equipment,
or contingency that would allow an analyst unfamiliar with the project
to recreate them.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Present the estimate to management;
Explanation: Management should be presented with a clear explanation
of the cost estimate so as to convey its level of competence. The
presentation should illustrate the largest cost drivers, an overview
of the program's technical foundation and objectives, a discussion of
ground rules and assumptions, cost-estimating methodologies for each
cost element, and the results from the sensitivity and risk and
uncertainty analyses. Feedback from the briefing, including
management's acceptance of the estimate, should be acted upon and
recorded in the cost estimate documentation;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Minimally met;
Key examples of rationale for assessment: While the estimate was
approved by SLSDC management, it was not presented to SLSDC management
in a clear and concise way. For example, while SLSDC officials stated
that the estimate was reviewed for completeness and reasonableness of
assumptions, the estimate provided did not clearly convey whether or
not all costs were properly captured, all risks were properly
considered, and underlying assumptions were valid.
Four characteristics of high-quality cost estimates and 12 key steps:
Accurate;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Substantially met.
Four characteristics of high-quality cost estimates and 12 key steps:
Accurate; Develop the point estimate and compare with an independent
cost estimate;
Explanation: The cost estimator should consider various cost-
estimating methods, like analogy, engineering buildup, parametric, and
extrapolating from actual costs. The point estimate should be
developed by aggregating the WBS cost estimates, and results should be
checked for accuracy, double counting, and omissions. The point
estimate results should be validated with cross-checks and an
independent cost estimate;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Substantially met;
Key examples of rationale for assessment: The cost estimate is based
on a detailed buildup of estimated labor and material prices, but was
not cross-checked against an independent cost estimate to ensure
accuracy and minimize double counting and omissions.
Four characteristics of high-quality cost estimates and 12 key steps:
Accurate; Update the estimate to reflect actual costs and changes;
Explanation: There should be a process for the estimating team to
update the estimate with actual costs as they become available. The
estimate should reflect changes in technical or program assumptions.
Finally, the estimate should discuss lessons learned for elements
whose actual costs or schedules differed from those of the estimate;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Substantially met;
Key examples of rationale for assessment: SLSDC updated both the
current and future phases of the project cost estimate with fiscal
year 2009 award data; however, because the project is not yet
complete, SLSDC cannot update the estimate with actual incurred costs
or lessons learned.
Four characteristics of high-quality cost estimates and 12 key steps:
Credible;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Minimally met;
Four characteristics of high-quality cost estimates and 12 key steps:
Credible; Develop the point estimate and compare to an independent
cost estimate;
Explanation: The cost estimator should consider various cost-
estimating methods like analogy, engineering buildup, parametric, and
extrapolating from actual costs. The point estimate should be
developed by aggregating the WBS cost estimates. The point estimate
results should be crosschecked against an independent cost estimate to
ensure that different estimating approaches would produce similar
results;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Substantially met;
Key examples of rationale for assessment: The cost estimate is based
on a detailed buildup of estimated labor and material prices, but was
not cross-checked against an independent cost estimate to ensure that
different estimating approaches would produce similar results.
Comparing the cost estimate against an independent cost estimate would
allow SLSDC to examine where and why there are differences in key cost
drivers.
Four characteristics of high-quality cost estimates and 12 key steps:
Credible; Conduct a sensitivity analysis;
Explanation: The cost estimate should include a sensitivity analysis
that identifies a range of possible costs from changing key cost
driver assumptions or factors;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Not met;
Key examples of rationale for assessment: A sensitivity analysis was
not performed on the estimate, and therefore, decision makers were not
fully aware of how changes to assumptions or key cost drivers (such as
labor or equipment) could affect the estimate. For example, a
sensitivity analysis could have provided decision makers with
information on how premium pay rates would affect the estimate.
Four characteristics of high-quality cost estimates and 12 key steps:
Explanation: Credible; Conduct risk and uncertainty analysis;
A risk and uncertainty analysis should be conducted that quantifies
the risks and identifies the effects of changing key cost driver
assumptions and factors. The probability associated with the point
estimate should be identified, and contingency reserves should be
recommended for achieving the desired confidence level. Finally, a
risk management plan should be implemented jointly with the contractor
to identify and analyze risk, plan for risk mitigation, and
continually track risk;
Overall assessment (fully met/substantially met/partially
met/minimally met/not met): Not met;
Key examples of rationale for assessment: A risk and uncertainty
analysis was not performed on the estimate and therefore the estimate
did not reflect the degree of uncertainty, and decision makers had no
insight into the level of confidence associated with it. SLSDC
officials stated that they did not request that their contractor
perform an uncertainty analysis, despite the project risk involved in
completing the project under a compressed schedule.
Source: GAO analysis of SLSDC data.
[A]The ratings we used in this analysis are as follows: "Fully met"
means that the agency provided complete evidence that satisfies the
entire criterion; "Substantially met" means that the agency provided
evidence that satisfies a large portion of the criterion; "Partially
met" means that the agency provided evidence that satisfies about half
of the criterion; "Minimally met" means that the agency provided
evidence that satisfies a small portion of the criterion; and "Not
met" means that the agency provided no evidence that satisfies any
part of the criterion.
[End of table]
Assessment of ARP Project #31: Rehabilitate Upstream Miter Gates,
Phase 1:
Project description: This is a two-phase project to rehabilitate the
miter gates at the upstream ends of both Eisenhower and Snell Locks.
The project will replace worn and/or damaged components to ensure
proper functioning of the miter gates.
The first phase of this project began in fiscal year 2009 when SLSDC
awarded a contract to rehabilitate the upstream gate at Eisenhower
Lock. Because of the long lead time needed to acquire gate components,
the actual work will be performed over the 3-month period of January
to March 2011.
Final estimate (phase 1): $1.3 million.
Award amount (phase 1): $2.2 million.
Four characteristics of high-quality cost estimates and 12 key steps:
Comprehensive;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Minimally met
Four characteristics of high-quality cost estimates and 12 key steps:
Comprehensive; Develop the estimating plan;
Explanation: The cost-estimating team should develop a written study
plan that (1) determines the estimating team's composition and whether
the team is from a centralized office, (2) identifies which subject
matter experts the team will rely on for information, (3) outlines the
estimating approach, and (4) identifies a master schedule for
completing the estimate that provides adequate time to do the work;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Minimally met;
Key examples of rationale for assessment: While the cost estimators
were from a centralized team that specializes in marine equipment,
SLSDC did not develop a written study plan or a schedule of specific
tasks, clearly define responsibilities, or identify due dates for key
tasks.
Four characteristics of high-quality cost estimates and 12 key steps:
Comprehensive; Determine the estimating structure;
Explanation: There should be a defined work breakdown structure (WBS)
and/or a cost element structure. The WBS should be product-oriented,
traceable to the statement of work, and at an appropriate level of
detail to ensure
that cost elements are neither omitted nor double-counted. A WBS
dictionary should be developed that defines what is included in each
element and how it relates to other elements in the hierarchy;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Not met;
Key examples of rationale for assessment: The cost estimate does not
define the work in detail nor does it provide a framework for planning
and assigning the work down to an appropriate level of detail. A
product-oriented structure allows a program manager to more precisely
identify which components are causing cost or schedule overruns and to
more effectively mitigate the root cause of overruns.
Four characteristics of high-quality cost estimates and 12 key steps:
Comprehensive; Identify ground rules and assumptions;
Explanation: Ground rules and assumptions should document the
rationale and any historical data to back up any claims. Risks that
are associated with any assumptions should be identified and traced to
specific WBS elements. Budget constraints, as well as the effect of
delaying program content, should be defined. Inflation indexes and
their source should be identified, and if items are excluded from the
estimate, they should be documented and explained;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Partially met;
Key examples of rationale for assessment: Basic cost-influencing
ground rules and assumptions, such as labor rates, and inflation
rates, were documented. However, the cost estimate did not reflect (1)
the compressed time frame required to complete the work during the
winter shutdown and penalties for not completing the work on time and
(2) the risks associated with performing the effort in the winter (ice
and freezing conditions).
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Partially met;
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Define the estimate's purpose;
Explanation: The purpose and scope of the cost estimate should be
defined and documented. The level of detail in the cost estimate
should be consistent with the level of detail available for the
program, and all applicable costs should be estimated, including life
cycle costs;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Fully met;
Key examples of rationale for assessment: The purpose of the cost
estimate is documented at a level that would enable SLSDC to submit a
high-quality cost estimate.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Define the program characteristics;
Explanation: There should be a documented technical baseline
description that is contained in a single document. The technical
baseline description should include requirements, purpose, technical
characteristics, development plan, acquisition strategy, operational
plan, and risk;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Partially met;
Key examples of rationale for assessment: The cost estimate and the
technical design are based on a similar Canadian project, and adjusted
based on SLSDC's requirements. However, when the cost estimate was
prepared, the technical baseline description was only 35 percent
complete. The accuracy of a cost estimate depends on a well-defined
program. In the absence of fully defined requirements, more
assumptions must be made, increasing the risk associated with the
estimate.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Identify ground rules and assumptions;
Explanation: Ground rules and assumptions should document the
rationale and any historical data to back up any claims. Risks that
are associated with any assumptions should be identified and traced to
specific WBS elements. Budget constraints, as well as the effect of
delaying program content, should be defined. Inflation indexes and
their source should be identified, and if items are excluded from the
estimate, they should be documented and explained;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Partially met;
Key examples of rationale for assessment: Basic cost-influencing
ground rules and assumptions, such as labor rates, and inflation
rates, were documented. However, the cost estimate did not reflect (1)
the compressed time frame required to complete the work during the
winter shutdown and penalties for not completing the work on time and
(2) the risks associated with performing the effort in the winter (ice
and freezing conditions).
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Obtain the data;
Explanation: The data should be gathered from valid historical actual
cost, schedule, and program and technical sources. The data should
apply to the program being estimated and should be analyzed for cost
drivers. Data should be collected from primary sources and adequately
documented. Analysts should meet with the data sources to better
understand the program, and data should be reviewed and benchmarked
against historical data for reasonableness;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Partially met;
Key examples of rationale for assessment: The cost estimate was based
on a 2005 Canadian project, as well as expert knowledge from SLSDC in-
house engineers. However, the Canadian project information was from a
contractor's bid and not from actual costs of the completed project.
In addition, SLSDC had equipment requirements that differed from those
of the Canadian project and that SLSDC did not account for in its
estimate.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Document the estimate;
Explanation: Documentation should describe the cost-estimating
process, data sources, and methods step by step so that a cost analyst
unfamiliar with the program can understand what was done and replicate
it. The documentation should include ground rules and assumptions,
descriptions of methodologies, and sensitivity and risk and
uncertainty analysis results broken out by WBS cost element.
Management approval and updates that reflect actual costs or changes
should be included;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Minimally met;
Key examples of rationale for assessment: The cost estimate
documentation did not provide detailed material and labor cost
information that would allow someone unfamiliar with the project to
recreate it. Without thorough documentation, a cost estimate cannot be
properly validated or defended. Well-documented estimates may also
contribute to the collection of cost and technical data that could be
used to support the cost estimates of future Seaway projects.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Present the estimate to management;
Explanation: Management should be presented with a clear explanation
of the cost estimate so as to convey its level of competence. The
presentation should illustrate the largest cost drivers, an overview
of the program's technical foundation and objectives, a discussion of
ground rules and assumptions, cost-estimating methodologies for each
WBS, and the results from the sensitivity and risk and uncertainty
analyses. Feedback from the briefing, including management's
acceptance of the estimate, should be acted upon and recorded in the
cost estimate documentation;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Minimally met;
Key examples of rationale for assessment: While the estimate was
approved by SLSDC management, the estimate did not provide enough
detail to easily defend the estimate by showing how it is accurate,
complete, and high in quality. SLSDC officials stated that the
estimate was not reviewed in detail because the majority of the effort
was used to review technical specifications for the miter gates.
Without a thorough management review, SLSDC cannot ensure that the
cost estimate properly captures all of the costs and risks associated
with the project.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Develop the point estimate and compare with an
independent cost estimate;
Explanation: The cost estimator should consider various cost-
estimating methods like analogy, engineering buildup, parametric, and
extrapolating from actual costs. The point estimate should be
developed by aggregating the WBS cost estimates and results should be
cross-checked for accuracy, double counting, and omissions. The point
estimate results should be validated with cross-checks and an
independent cost estimate;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Partially met;
Key examples of rationale for assessment: The cost estimate is based
on a similar Canadian project, and SLSDC engineers applied
professional judgment and experience to adjust the estimate to reflect
the requirements of the project. However, the estimate was based on a
project bid, adjusted with a rule-of-thumb factor, rather than actual
costs, and the estimate was not based on a detailed buildup of
individual cost elements. In addition, the estimate was not cross-
checked against an independent cost estimate to ensure accuracy and
minimize double counting and omissions.
Four characteristics of high-quality cost estimates and 12 key steps:
Well documented; Update the estimate to reflect actual costs and
changes;
Explanation: There should be a process for the estimating team to
update the estimate with actual costs as they become available. The
estimate should reflect changes in technical or program assumptions.
Finally, the estimate should discuss lessons learned for elements
whose actual costs or schedules differed from those of the estimate;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Substantially met;
Key examples of rationale for assessment: SLSDC updated both the
current and future phases of the project cost estimate with 2009 award
data. However, because the project is not yet complete, SLSDC cannot
update the estimate with actual incurred costs or lessons learned.
Four characteristics of high-quality cost estimates and 12 key steps:
Credible;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Minimally met.
Four characteristics of high-quality cost estimates and 12 key steps:
Credible; Develop the point estimate and compare to an independent
cost estimate;
Explanation: The cost estimator should consider various cost-
estimating methods like analogy, engineering buildup, parametric, and
extrapolating from actual costs. The point estimate should be
developed by aggregating the WBS cost estimates. The point estimate
results should be crosschecked against an independent cost estimate to
ensure that different estimating approaches would produce similar
results;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Partially met;
Key examples of rationale for assessment: The cost estimate is based
on a similar Canadian project, and SLSDC engineers applied
professional judgment and experience to adjust the estimate to reflect
the requirements of the project. However, the estimate was based on a
project bid, adjusted with a rule-of-thumb factor, rather than actual
costs, and the estimate was not based on a detailed buildup of
individual cost elements. In addition, the project estimate was not
cross-checked against an independent cost estimate to ensure that
different estimating approaches would produce similar results.
Comparing the cost estimate against an independent cost estimate would
allow SLSDC to examine where and why there are differences in key cost
drivers.
Four characteristics of high-quality cost estimates and 12 key steps:
Credible; Conduct a sensitivity analysis;
Explanation: The cost estimate should include a sensitivity analysis
that identifies a range of possible costs from changing key cost
driver assumptions or factors;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Not met;
Key examples of rationale for assessment: A sensitivity analysis was
not performed on the estimate, and therefore, decision makers were not
fully aware of how changes to assumptions or key cost drivers (such as
labor or equipment) could affect the estimate. For example, a
sensitivity analysis could have provided decision makers with
information on how premium pay rates would affect the estimate.
Four characteristics of high-quality cost estimates and 12 key steps:
Credible; Conduct risk and uncertainty analysis;
Explanation: A risk and uncertainty analysis should be conducted that
quantifies the risks and identifies the effects of changing key cost
driver assumptions and factors. The probability associated with the
point estimate should be identified, and contingency reserves should
be recommended for achieving the desired confidence level. Finally, a
risk management plan should be implemented jointly with the contractor
to identify and analyze risk, plan for risk mitigation, and
continually track risk;
Overall assessment (Fully met/Substantially met/Partially
met/Minimally met/Not met): Not met;
Key examples of rationale for assessment: A risk and uncertainty
analysis was not performed on the estimate, and therefore the estimate
did not reflect the degree of uncertainty and decision makers had no
insight into the level of confidence associated with it. SLSDC
officials stated that despite the project risk involved in completing
the project under a compressed schedule, they did not conduct a risk
and uncertainty analysis because such an analysis is not a part of
their estimating process.
Source: GAO analysis of SLSDC data.
[A] The ratings we used in this analysis are as follows: "Fully met"
means that the agency provided complete evidence that satisfies the
entire criterion; "Substantially met" means that the agency provided
evidence that satisfies a large portion of the criterion; "Partially
met" means that the agency provided evidence that satisfies about half
of the criterion; "Minimally met" means that the agency provided
evidence that satisfies a small portion of the criterion; and "Not
met" means that the agency provided no evidence that satisfies any
part of the criterion.
[End of table]
[End of Enclosure VII]
Footnotes:
[1] A government corporation is an entity for a public purpose
established by the U.S. government in a corporate form by a federal
charter, and subject to chapter 91 of Title 31 of the U.S. Code,
commonly referred to as the Government Corporation Control Act.
However, for the purposes of this report, we sometimes refer to SLSDC
as an agency.
[2] Explanatory Statement in the 2009 Committee Print of the House
Committee on Appropriations on H.R. 1105, at 2109, accompanying the
Omnibus Appropriations Act for FY 2009, Pub. L. No. 111-8, Div. I,
Title I, 123 Stat. 524, 943 (2009). In addition, S. Rep. No. 111-69,
at 94 (2009), which accompanied the Transportation, and Housing and
Urban Development, and Related Agencies Appropriations Bill for FY
2010 stated that the GAO report should be submitted to the House and
Senate Committees on Appropriations no later than May 31, 2010. The
Conference Report, H.R. Rep. No. 111-366, at 379 (2009), accompanying
the Consolidated Appropriations Act for FY 2010, Pub. No. 111-117, 123
Stat. 3034 (2009), stated the language in Senate Report No. 111-69
should be complied with unless specifically addressed to the contrary
in the conference report and the statement of the managers. There was
no statement to the contrary relating to the date for the submission
of this report.
[3] See enclosure III for a visual presentation of how locks operate.
[4] The Seaway's shipping season is typically from late March through
late December. hi measuring time when the locks are not available to
vessels, SLSDC considers, among other things, delays caused by
weather, vessel incidents, insufficient water levels, and lock
equipment malfunction.
[5] See Tom Sawyer, "Metal Fatigue Suspected in Second Lock-Gate
Failure," Engineering News-Record (Feb. 15, 2010), 15.
[6] Fiscal year 2009 was the first year SLSDC was appropriated funds
for the ARP. See Pub. No. 111-8, Div. I, Title I, 123 Stat 524, 943
(2009).
[7] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for
Developing and Managing Capital Program Costs, [hyperlink,
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009).
[8] The February 2009 ARP estimate of $177 million was based on 50
projects. SLSDC added 2 projects to the ARP, and therefore the
February 2010 program estimate of $186 million was based on 52
projects. The 2 projects added will replace the Visitors' Center and
upgrade physical security. For more information on all 52 projects,
see enclosure IV.
[9] Of the 30 projects where the estimate was revised, 8 estimates
changed by less than 5 percent, 4 changed from 5 to 10 percent, and
the remaining 18 changed by more than 10 percent.
[10] Many of the ARP projects have multiple phases that may span a
number of years, and SLSDC may award multiple contracts to complete
each project or project phase. In addition, each phase may go through
the project development process, and therefore a project with multiple
phases may have phases in different stages of project development.
[11] SLSDC also obligated approximately $85,000 for small purchase
orders and $1.2 million for modifications to existing contracts,
primarily for additional work on the Seaway International Bridge.
[12] GAO, Recovery Act: Status of States' and Localities' Use of Funds
and Efforts to Ensure Accountability, [hyperlink,
http://www.gao.gov/products/GAO-10-231], (Washington, D.C.: Dec. 10,
2009).
[13] SLSDC resolicited for contract bids in fiscal year 2010 and
awarded a contract for culvert valve replacement at an amount 51
percent less than estimated.
[14] [hyperlink, http://www.gao.gov/products/GA0-09-3SP].
[15] An independent cost estimate is another estimate based on the
same technical information that is used to validate and cross-check
the baseline estimate but is prepared by a person or organization that
has no stake in the approval of the project.
[16] The U.S. Army Corps of Engineers operates over 200 locks
throughout the United States.
[17] GA0, Department of Energy: Actions Needed to Develop High-Quality
Cost Estimates for Construction and Environmental Cleanup Projects,
[hyperlink, http://www.gao.gov/products/GAO-10-199] (Washington, D.C.:
Jan. 14, 2010); Telecommunications: GSA Has Accumulated Adequate
Funding for Transition to New Contracts but Needs Cost Estimation
Policy, GAO-07-268 (Washington, D.C.: Feb. 23, 2007).
[18] The definition of a "large, complex project" varies by agency
depending on the size and value of the assets it manages.
[19] National Research Council, Stewardship of Federal Facilities: A
Proactive Strategy for Managing the Nation's Public Assets
(Washington, D.C.: 1998).
[20] The estimates for six of the projects changed by $3,000 or less
because of minor rounding of future SLSDC budget estimates. Because
these changes were small, due only to rounding, and not a result of a
material change in the project, we did not consider the adjustments in
these projects to reflect a change in the total project estimate.
[21] In fiscal year 2009, SLSDC awarded a number of small contracts
(each less than $1 million) for commercial-off-the-shelf items with
fairly well-established market prices, and as such, these contracts
were not for complex projects critical to the operation of the locks.
Future work planned as part of this project is expected to be more
complex and cost more than $1 million, but this work is still in the
planning stage and lacked enough information to evaluate using our
cost-estimating criteria.
[End of section]
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