Office of Inspector General

Audit Report

MARAD HAS TAKEN STEPS TO DEVELOP A 

PORT INFRASTRUCTURE DEVELOPMENT 

PROGRAM BUT IS CHALLENGED IN

MANAGING ITS CURRENT PORT PROJECTS

Maritime Administration

Report Number: CR-2013-117

Date Issued: August 2, 2013
U.S. Department of

Memorandum

Transportation

Office of the Secretary

of Transportation

Office of Inspector General

Subject: ACTION: MARAD Has Taken Steps To Develop 

a Port Infrastructure Development Program but Is

Challenged in Managing Its Current Port Projects

Report No. CR-2013-117

Date: August 2, 2013

From: Mitchell Behm

Assistant Inspector General for Rail, Maritime, 

 Hazmat Transport, and Economic Analysis

Mary Kay Langan-Feirson

Assistant Inspector General for Acquisition and 

 Procurement Audits

Reply to 

Attn. of: 

JA-50/JA-60

To: Maritime Administrator

In 2003, the Maritime Administration (MARAD) was authorized to administer 

funds for developing and modernizing the Port of Anchorage, the main seaport in 

Anchorage, AK.1 The Port of Anchorage Intermodal Expansion Project—a 

partnership with the Port and the Municipality of Anchorage—is ongoing, and 

there have been significant setbacks, including construction problems and 

schedule delays. 

MARAD has since been authorized to administer two other port projects: the 

multi-port Hawaii Harbors Infrastructure Expansion Program in 20052 and the 

Port of Guam Improvement Enterprise Program in 2008.3 The Port of Guam 

project, which is estimated to receive up to $117 million in Federal funding, is part 

of a critical construction program that will support the relocation of U.S. Marine 

Corps forces from Japan to Guam. In 2009, MARAD was mandated to establish a 

 1 Consolidated Appropriations Resolution 2003, Pub. L. No. 108-7 § 626 (Feb. 20, 2003). 2 Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users of “SAFETEA-LU,” Pub. L. 

109-59 § 9008 (Aug. 10, 2005). 3 Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub. L. No. 110-417 § 3512 (Oct. 14, 

2008).
2

Port Infrastructure Development Program (PIDP) for the improvement of port 

facilities.

4

The setbacks with the Port of Anchorage project have raised concerns about 

MARAD’s ability to manage its port projects. Given MARAD’s central role, we 

evaluated the Agency’s execution of its port infrastructure development 

responsibilities. Specifically, we evaluated MARAD’s (1) oversight and risk 

management of port infrastructure development projects, and (2) oversight of port 

infrastructure projects’ contract planning and administration. 

We conducted this audit in accordance with generally accepted Government 

auditing standards. To conduct our work, we evaluated MARAD’s project 

oversight, risk management, document management, and contract management 

practices for its Port of Anchorage, Hawaii Harbors, and Port of Guam projects. 

We used the Port of Anchorage project as a primary case study because it is 

MARAD’s first port project, which it started managing 10 years ago. In addition, 

we interviewed MARAD and port officials and reviewed contract files for all three 

ports. Exhibit A contains the full details of our scope and methodology. 

RESULTS IN BRIEF

MARAD did not establish effective oversight mechanisms when it initiated its 

port infrastructure development responsibilities. MARAD narrowly interpreted 

statutory requirements, which state that appropriated amounts for the Port of 

Anchorage and Hawaii Harbors projects shall be “transferred to and administered 

by” the Maritime Administrator. According to MARAD officials, in the absence 

of clear statutory guidance, MARAD delegated authority for project construction 

and management through Memorandums of Agreement (MOAs) with the local 

authorities in Anchorage, Hawaii, and Guam. In doing so, MARAD did not (1) 

adequately define its port project oversight responsibilities or provide guidance to 

contractors for developing Program Management Plans (PMPs); (2) establish a 

sound risk management process consistent with industry best practices; or (3) have 

a process to systematically store, maintain, and track project progress and funds. 

For example, MARAD did not develop a risk management process for the Port of 

Anchorage project until almost 7 years after the project began, and the Hawaii 

Harbors project still does not have one. MARAD has recently taken steps to more 

clearly define its role in developing and overseeing the Port of Guam project 

including establishing a risk management process that includes all elements 

recommended by industry standards. MARAD has also taken steps to develop a 

 4 National Defense Authorization Act for Fiscal Year 2010, Pub. L. No. 111-84 § 3512 (Oct. 28, 2009); 46 United 

States Code Annotated (U.S.C.A.) § 50302.
3

PIDP, which could provide a framework for ongoing and future port infrastructure 

projects, but has not yet completed it. 

MARAD did not effectively manage its port project contracts. Between 2003 and 

2011, the Port of Anchorage project’s cost estimate grew over four and a half 

times from $211 million to $1 billion, with scheduled completion slipping 8 years.

According to MARAD officials, prior to 2011 the Agency’s leadership made a 

policy decision that abdicated programmatic and technical control to local port 

officials which contributed to problems with the project.5 We found that the Port 

of Anchorage project also had significant contracting problems stemming from 

MARAD’s inadequate planning, lack of reliable cost estimates, and 

noncompliance with Federal contracting requirements when awarding and 

administering the port contracts. Notably, we found that MARAD acted contrary 

to the intent of the Small Business Administration’s (SBA) 8(a) program6 by 

steering the first Port of Anchorage contract to the Port’s preferred firm. We did 

not identify contract award issues at the Port of Guam and Hawaii Harbors 

projects, which were awarded several years after the first Port of Anchorage 

contract; however, we found weaknesses regarding MARAD’s contract 

management. For example, MARAD did not establish contract administration 

plans for any of its port projects to ensure proper monitoring of the contracts. 

We are making a series of recommendations to improve MARAD’s management 

of its port infrastructure development projects. 

BACKGROUND

Congress directed MARAD to administer funding for the Port of Anchorage, 

Hawaii Harbors, and Port of Guam projects. In 2009, Congress also directed 

MARAD to develop a PIDP. According to the legislation, the PIDP is to (1) 

receive funds provided for the project; (2) coordinate with other Federal agencies 

to expedite the improvement of port facilities, to increase port security, or to 

provide greater access to port facilities; (3) coordinate all reviews or requirements 

with appropriate local, State, and Federal agencies; and (4) provide technical 

assistance to port authorities as needed for project planning, design, and 

construction. The law also allows for the creation of a fund, which is to be used to 

carry out projects under the PIDP. 

 5 According to MARAD officials, the Agency took programmatic and technical control of the project in January 2011 

and implemented a series of oversight, management, planning, and risk mitigation measures. However, the MOA 

MARAD used to implement these measures expired May 2012. Currently, there is no MOA for the Port of Anchorage 

project.

6 The SBA 8(a) program was established to assist eligible small businesses that are owned and controlled by socially 

and economically disadvanged individuals to compete in the American economy through business development.
4

To date, MARAD has received over $263 million in Federal funding for port 

infrastructure development projects from Agencies such as the Department of 

Defense (DOD), the Federal Transit Administration (FTA), and the Federal 

Highway Administration (FHWA). The FTA funds and some FHWA funds 

required matching funds from the Port of Anchorage.

Key port project stakeholders include MARAD, State and local authorities, and 

contractors. For each port project, MARAD and port stakeholders developed 

Memorandums of Agreement (MOA), which are intended to outline stakeholders’ 

roles, detail management procedures, and help ensure accountability. MARAD 

also called for the development of PMPs, planning agreements that should capture 

project stakeholder responsibilities. Table 1 provides a summary of the port 

infrastructure development projects.

Table 1. Summary of Port Infrastructure Development Projects

Port project State or local stakeholders Federal funding

Port of Anchorage Municipality of Anchorage and Port of Anchorage $139 million

Hawaii Harbors State of Hawaii Department of Transportation $8 million

Port of Guam Government of Guam and Port Authority of Guam aup to $117 million

a The $117 million includes $64 million in requested U.S. Department of Agriculture loans.

Source: MARAD

Between May 2003 and April 2010, MARAD awarded four contracts for its three 

port projects—including two for the Port of Anchorage project (see exhibit B for a 

detailed summary of the port project contracts). Because MARAD awarded 

contracts for these projects, MARAD is responsible for contract oversight and 

compliance with relevant contracting laws and regulations, such as the 

Competition in Contracting Act of 1984 and the Federal Acquisition Regulation 

(FAR), as well as best practices for Government procurement.

MARAD LACKED EFFECTIVE OVERSIGHT MECHANISMS WHEN 

IT EXECUTED ITS PORT INFRASTRUCTURE DEVELOPMENT 

RESPONSIBILITIES

MARAD adopted a narrow interpretation of its statutory requirements for port 

infrastructure development, one of a number of initial missteps the Agency made 

when executing its responsibilities. In addition, MARAD did not until recently (1) 

adequately define its port project oversight responsibilities or provide guidance to 

contractors for developing PMPs; (2) establish a sound risk management process; 

or (3) have a process to systematically store, maintain, and track project progress 
5

and funds. Finally, MARAD has taken steps to develop a PIDP, which could 

provide a framework for ongoing and future port projects, but has not yet 

completed it.

MARAD Narrowly Interpreted Its Statutory Requirements for Port 

Infrastructure Development at the First Two Port Projects

MARAD narrowly interpreted its statutory responsibilities at the Port of 

Anchorage and Hawaii Harbors projects by limiting its role to obligating and 

distributing funds for project tasks. The statute required that appropriated funds for 

the Port of Anchorage project shall be “transferred to and administered by the 

Administrator of the Maritime Administration.” These provisions do not provide 

additional details on how MARAD should execute its responsibilities. In the 

absence of additional details, MARAD adopted a narrow interpretation of its 

responsibility to “administer the project.” Rather than take on a comprehensive 

role in developing and overseeing the port infrastructure projects, MARAD’s main 

role has, until recently, been limited to obligating and distributing funds to 

contractors for project tasks, such as project oversight, program management, 

engineering, design, and construction. In contrast, FTA, a major Department of 

Transportation (DOT) agency responsible for overseeing mass transportation 

funding, outlines a more defined Federal role in project development and 

management, specifically regarding oversight. According to FTA guidance, 

project management oversight is a continuous review and evaluation to ensure that 

a project complies with statutory, administrative, and regulatory requirements and 

is completed on time and within budget. MARAD’s flawed execution of its port 

infrastructure development responsibilities, due in part to its narrow interpretation 

of the law, has led to significant setbacks at the Port of Anchorage project and has 

contributed to construction problems and schedule delays.

The statutory authority for the Hawaii Harbors project also does not specify how 

MARAD should execute its port infrastructure development responsibilities. It 

states that the appropriated amounts shall be transferred and administered by the 

Maritime Administrator and that appropriated funds for the project are “subject 

only to such conditions and requirements as may be required by the Maritime 

Administration.”7 As with the Port of Anchorage project, MARAD narrowly 

interpreted its responsibilities for the Hawaii Harbors project and has relied on the 

contractor to perform much of the project implementation, including oversight.

Compared to the statutory authorities for the Port of Anchorage and Hawaii 

Harbors projects, the authorizing legislation for the Port of Guam project provides 

more detail regarding MARAD’s responsibilities. Specifically, it authorizes the 

 7 SAFETEA-LU.
6

Secretary of Transportation, acting through the Maritime Administrator, to 

establish a Port of Guam Improvement Enterprise Program to provide for the 

planning, design, and construction of projects. It also grants the Maritime 

Administrator certain authorities in carrying out the program, such as the authority 

to provide for coordination among governmental agencies to expedite review 

processes and to provide technical assistance to the Port of Guam as needed.8 As 

discussed in this report, MARAD has taken a more proactive role in executing its 

responsibilities for the Port of Guam project. 

MARAD Has Recently Defined Port Project Oversight Responsibilities 

To Ensure Agency and Stakeholder Accountability

MARAD’s earlier port project MOAs did not include major oversight measures 

that clearly defined the Agency’s and other stakeholders’ project oversight 

responsibilities. However, port project responsibilities are better defined in 

MARAD’s most recent port project MOA, dated November 2011. According to 

FTA and FHWA—other DOT Operating Administrations that oversee large 

infrastructure projects—establishing well-defined project oversight responsibilities 

and documented procedures at the outset of a project is critical to ensuring 

accountability for monitoring scope changes and preventing cost overruns.9

MARAD also did not establish guidance on developing PMPs and does not have 

evidence that it approved them. As a result, the PMPs for the port projects did not,

until recently, include well-defined project roles and responsibilities.

Port Projects’ Memorandums of Agreement Did Not Initially Include Major 

Oversight Measures

The MOAs for the Hawaii Harbors and Port of Guam projects and the original 

MOA for the Port of Anchorage project did not include sufficient oversight 

measures that would determine how MARAD and other stakeholders would 

oversee the projects. Our review of the MOAs for the three port projects 

determined that, although all of the MOAs (1) required stakeholders to meet 

periodically, (2) gave MARAD the ability to execute documents to transfer 

funding to the projects, and (3) granted MARAD the authority to provide technical 

and subject matter expertise, they still lacked oversight measures that would 

clearly define how MARAD and other stakeholders would oversee the projects 

(see table 2). The 2011 MOA for the Port of Anchorage project includes more 

major oversight measures than the earlier MOAs. 

 8 Duncan Hunter National Defense Authorization Act for Fiscal Year 2009, Pub. L. No. 110-417 § 3512 (Oct. 14, 

2008).

9 FTA’s Project Management Oversight Mission Statement; and FHWA’s Stewardship/Oversight Task Force Report, 

Policy on Stewardship and Oversight, March 2001.
7

The original MOA for the Port of Anchorage project and the Hawaii Harbors 

project MOA lacked key oversight measures, such as providing an on-site 

representative or establishing project oversight teams. These oversight teams are 

decision-making bodies that include all major stakeholders and provide overall 

executive leadership, vision, policy, strategic objectives, and priorities for the 

project. The teams also have responsibility for such things as managing project 

scope, schedule, and budget.

MARAD revised its MOA for the Port of Anchorage project in November 2011

after major problems with the project were revealed to Agency officials and the 

public. The revised Port of Anchorage MOA clarified and increased MARAD’s 

oversight responsibilities and included additional measures essential to oversight. 

The revised MOA fully empowers MARAD to provide overall executive 

leadership, primarily by establishing a project oversight team called the Port 

Oversight and Management Organization in which MARAD plays an active 

decision-making role. These additional oversight mechanisms could have helped 

MARAD to improve its management of the Port of Anchorage project had they 

been implemented much earlier in the project. For example, MARAD and port 

officials told us that an on-site representative with the appropriate authority could 

have provided program direction and approved or disapproved of spending and 

construction decisions in a timely manner. 

Table 2. Summary of Major Oversight Measures Included in the 

Port Project MOAs

Major oversight measures included in 

the port project MOAs

Port of 

Anchorage 

MOA 

(2003)

Hawaii 

Harbors

MOA 

(2006)

Port of 

Guam 

MOA 

(2008)

Port of 

Anchorage 

MOA

(2011)

1 Port Authority provides overall program 

requirements and direction for the project

Yes Yes Yes No

2 The State/locality/port has the authority 

to designate points of contact for 

direction and management

Yes Yes Yes No 

3 State/locality/port is responsible for 

developing port master plan

No No No Yes

4 All stakeholders have the shared 

responsibility to meet periodically to 

discuss project progress and 

development

Yes Yes Yes Yes

5 MARAD has the responsibility to execute 

documents to transfer monies from other 

Federal sources to a project

Yes Yes Yes Yes 
8

Major oversight measures included in 

the port project MOAs

Port of 

Anchorage 

MOA 

(2003)

Hawaii 

Harbors

MOA 

(2006)

Port of 

Guam 

MOA 

(2008)

Port of 

Anchorage 

MOA

(2011)

6 MARAD is specified as the designated 

lead Federal Agency for the program to 

ensure adherence to applicable Federal 

and local laws and regulations on 

appropriations, acquisitions, and grants 

No No Yes No 

7 A project oversight team is established to 

provide vision, policy, and priorities and 

outline the various stakeholders’ 

responsibilities

No No No Yes 

8 MARAD has the authority to provide 

technical and/or subject matter expertise

Yes Yes Yes Yes

9 MARAD provides an on-site 

representative 

No No No Yes

10 MARAD provides project records to the 

State/locality/port

No No No Yes

11All stakeholders share the responsibility 

to meet and develop a project financial 

plan of costs to complete work in PMP

No No No Yes

Source: OIG analysis of port project MOAs

MARAD Did Not Establish Guidance on Developing Project Management 

Plans, Including How To Define Roles and Responsibilities

MARAD did not provide guidance to contractors on developing PMPs, project 

planning documents that, among other things, define project stakeholder roles and 

responsibilities. According to FHWA guidance—which MARAD officials stated 

they use as project management criteria—PMPs should define the overall roles, 

responsibilities, and relationships between public and private stakeholders and 

define the management procedures and processes that will result in the major 

project being completed on-time, within budget, and with the highest degree of 

quality. MARAD tasked contractors with developing PMPs for the port projects 

but did not provide them with guidance on this task. For example, MARAD did 

not provide guidance on how to develop the project organizational chart, including 

roles and responsibilities. Further, MARAD could not provide evidence that it 

reviewed and approved the PMPs for the Port of Anchorage and Hawaii Harbors 

projects. As of December 2012, MARAD has yet to establish guidance for 

contractors on developing PMPs.

As a result, the PMPs did not adequately define project roles and responsibilities. 

The PMP for the Port of Anchorage project only identified the contractor’s roles 

and responsibilities and not those of MARAD or other project stakeholders. The 
9

Hawaii Harbors project did not have a PMP at all. Although we found an 

organization chart for the Hawaii Harbors project, it did not detail Agency and 

stakeholder roles and responsibilities. 

The Port Authority of Guam prepared an Implementation Plan for the Port of 

Guam project, which stated that MARAD’s project role would be defined in a 

subsequent Program Management, Oversight, and Procedures Manual. However, 

when we reviewed the manual it was still in draft and did not document 

MARAD’s and project stakeholders’ roles. In June 2012, after we raised these 

issues, MARAD finalized a Program Management Manual for the Port of Guam 

project, which clearly outlines the roles and responsibilities of MARAD and key 

project stakeholders. The manual was reviewed and approved by all project 

stakeholders and includes organizational charts that show the Agency’s 

involvement at various project phases, which FHWA recommends to help ensure 

accountability. Additionally, the manual establishes the Project Management 

Oversight Organization, an oversight team that gives the Agency flexibility to 

oversee all work performed. 

MARAD Did Not Establish a Sound Risk Management Process Until 

Projects Were Well Under Way

The Port of Anchorage and Port of Guam projects currently have risk management 

processes that are consistent with industry best practices. However, MARAD did 

not implement a risk management process at the Port of Anchorage project until 

7 years after the project began, which was well after the start of construction. In 

addition, the Hawaii Harbors project still lacks a risk management process. 

Industry best practices call for establishing formal risk management policies and 

procedures to provide an organized, systematic risk management process that 

identifies, analyzes, and effectively mitigates risks to achieve program objectives. 

The Project Management Body of Knowledge (PMBOK), a recognized guide for 

the project management profession, outlines six elements of an effective risk 

management process. Table 3 shows that all of the risk elements are currently in 

place at the Port of Anchorage and Port of Guam projects, but none are in place at 

the Hawaii Harbors project. 
10

Table 3. Risk Management Elements Currently Incorporated Into 

Port Projects’ Risk Management Processes

Risk management elementsa

Port of 

Anchorage 

Port of 

Guam

Hawaii 

Harbors 

1 Risk Management Plan. Defines how to 

conduct risk management activities 

Yes Yes No

2 Risk Identification. Determines which risks 

may affect the project, and documents their 

characteristics

Yes Yes No

3 Qualitative Risk Analysis. Prioritizes risks 

by assessing their probability of occurrence 

and impact

Yes Yes No

4 Quantitative Risk Analysis. Numerically 

analyzes the effect of risks on project 

objectives

Yes Yes No

5 Risk Response Planning. Develops 

actions to enhance opportunities and to 

reduce threats to project objectives

Yes Yes No

6 Risk Monitoring & Control.

Implements risk response plans, tracks 

identified risks, monitors residual risks, 

identifies new risks, and evaluates risk 

process effectiveness 

Yes Yes No

a Risk management processes recommended in PMBOK.

Source: OIG analysis of port project risk management plans

Although the risk management process for the Port of Anchorage project now 

includes all risk elements, MARAD did not implement the process until January 

2010. In addition, until February 2011, the initial process lacked a risk 

management plan, which defines how risk management activities would be 

conducted and includes elements such as defined project team roles and 

responsibilities, project milestones, budget information, and timing. MARAD’s 

risk management process for the Port of Guam project also includes all six risk 

elements, but the Agency and all stakeholders did not formally approve the 

process until June 2012—4 years after the MOA was signed. MARAD did not 

develop a risk management process for the Hawaii Harbors project. According to 

the PMBOK, risk exists the moment a project is conceived; therefore, moving 

forward on a project without a proactive focus on risk management increases the 

impact that risks can have on the project—and can potentially lead to project 

failure.
11

MARAD Did Not Have a Process To Systematically Store, Maintain, 

and Track Project Progress and Funds at its First Two Port Projects

The Port of Anchorage and Hawaii Harbors projects did not have effective 

systems or processes in place for documenting and reporting significant 

transactions, events, and decisions. A document management system is a method 

used to capture and organize these important project data. In addition, project 

management best practices recommend implementing report performance 

processes, which collect and distribute performance information, status reports, 

progress measurements, and forecasts.10 MARAD has implemented a system at 

the Port of Guam project that is consistent with industry standards.

Although MARAD intended for the contractor to implement a comprehensive 

management information system at the Port of Anchorage project, the effort was 

never completed. According to the original statement of work for the project, the 

contractor was tasked with developing and maintaining a secure web-based 

management information system that would be accessible by MARAD, the Port, 

and other agreed-to parties. The system would collect, manage, analyze, and 

distribute key performance information, allowing management and technical staff 

to plan and monitor work progress, identify issues early, and implement solutions 

quickly. For example, the system was to provide schedules of meetings, project 

status reports, information on needed recommendations, technical documents for 

review, and budget information. However, this task only received partial funding 

and was never completed. 

In lieu of a comprehensive management information system, MARAD funded a 

less robust system for the Port of Anchorage and Hawaii Harbors projects: a 

contract management system to be used by all project stakeholders to document 

and view contract task orders. However, MARAD deactivated the system 

mid‐contract due to security concerns and did not replace it. According to 

MARAD, the contract and project documentation for these projects is currently 

archived because MARAD’s role in the design and construction for the projects 

has ended.

Without a comprehensive management information system, MARAD had 

difficulty providing some basic project management reports. For example, when 

we asked for data on appropriated funds disbursed for the Port of Anchorage 

project, the reports that MARAD supplied contained data discrepancies that we 

were not able to reconcile. Given that the Port of Anchorage project had not been 

appropriated funds since fiscal year 2010, we expected the reports to contain 

consistent information. When we brought these discrepancies to the attention of 

MARAD officials, they were also unable to reconcile the inconsistencies with any 

 10 PMBOK.
12

reliable, system-generated reports. In addition, we requested project status reports 

for the Port of Anchorage and Hawaii Harbors projects, but MARAD was only 

able to provide a report for the Port of Anchorage project. Because MARAD 

lacked an automated system with which to generate project status reports, 

MARAD had to manually create the report, which took the Agency over 6 months 

to complete. 

In September 2012, MARAD and its port project contractors completed the 

development of a comprehensive management information system for the Port of 

Guam project. The tool, referred to as the Primavera Construction Management 

System (PCMS), serves as MARAD’s document management and reporting 

system. PCMS, a web-based system, will track project information by each job 

task and will capture information such as communications (i.e. correspondence 

and telephone records between project stakeholders); contract information (i.e. 

cost worksheets and purchase orders); cost, budget, and schedule data; and quality 

control information. It will also allow MARAD and port officials to produce daily, 

weekly, and monthly reports based on the data entered into the system. Based on 

MARAD’s demonstration of the system and our review of the procedure manual

and system description, the PCMS is consistent with industry standards. MARAD 

officials told us that future port projects will also use PCMS for project document 

management and reporting needs.

MARAD Has Taken Steps To Develop a Congressionally Mandated 

Port Infrastructure Development Program But Has Not Completed It

According to MARAD officials, the Agency has begun to develop a PIDP; 

however, they have not provided a date by which it would be completed. MARAD 

officials provided us with the Agency’s proposed framework for the PIDP, which 

was presented at a port association conference in January 2012. The framework, 

which is outlined in table 4, includes three categories of MARAD’s involvement 

in port infrastructure projects. However, as of December 2012, MARAD officials 

have not provided us with any additional documentation indicating the status of 

the proposed framework nor any policies or procedures for implementation.
13

Table 4. MARAD’s Proposed Port Infrastructure Development 

Program Framework

Role Applicable to Level of MARAD involvement

ENGAGEMENT All ports Low Federal oversight. MARAD would serve as an advocate 

by providing guidelines and data and would provide direct 

support to individual ports upon request.

FINANCING Limited number 

of ports

Moderate Federal oversight. MARAD would provide direct 

funding support via existing and future programs.

PROJECT 

MANAGEMENT

Very few ports High Federal oversight and project assistance where unique 

Federal interest exists. MARAD would co-manage the 

project with the port. 

Source: MARAD

MARAD officials told us that the authorizing legislation did not require the 

Agency to have a program in place for the Port of Anchorage, Hawaii Harbors, or 

Port of Guam projects, so they are being used as pilot projects to determine 

MARAD’s future role in port infrastructure development. MARAD officials stated 

that, because Congress has not yet appropriated funding for the PIDP, it is difficult 

to predict a date by which the Agency would be able to complete the structure for 

a program mandated 4 years ago.

11

In addition, we reviewed MARAD’s PIDP funding requests, and it appears to us

that the requests were inconsistent, unclear, and insufficient to determine the 

PIDP’s needs. The PIDP funding requests were minor components of larger 

funding requests for “Intermodal System Development” or “Headquarters 

Operations,” and most did not include language related to port expansion or 

development. In addition, between 2009 and 2013 the Agency’s funding requests

for the PIDP ranged widely from approximately $3.7 million to $63 million. It is 

unclear how the Agency arrived at these figures, as the requests did not specify 

how MARAD would use the funding to develop a PIDP. For example, MARAD 

did not detail its staffing or resource needs or describe the PIDP’s intended goals. 

Without a PIDP, MARAD lacks institutionalized policies and procedures to 

effectively oversee ongoing and future port infrastructure projects. While the 

legislation does not specifically require MARAD to have a program in place for 

the Port of Anchorage, Port of Guam, or Hawaii Harbors projects, lessons learned 

from these projects could provide the framework for putting in place key program 

elements for MARAD’s PIDP—and mitigate cost, schedule, and performance 

problems similar to the ones MARAD has faced on the Port of Anchorage project.

 11 MARAD did receive some funding related to the port projects in the form of administrative fees. These 

administrative fees are not to exceed 3 percent of the amounts appropriated to the fund for a fiscal year and may be 

used for the Maritime Administrator’s administrative expenses.
14

MARAD DID NOT EFFECTIVELY MANAGE ITS PORT PROJECT 

CONTRACTS

Effective acquisition management helps ensure that the Government gets what it 

pays for. However, our review determined that MARAD did not effectively 

manage its port project contracts. MARAD did not conduct adequate planning and 

entered into port project contracts without reliable cost estimates. In addition, 

MARAD did not comply with Federal contract requirements when awarding and 

administering the Port of Anchorage contracts. At all three port projects, MARAD

did not provide effective contract administration.

MARAD Did Not Conduct Adequate Planning for Its Port Projects

Sound planning is important to establish a strong foundation for successful 

acquisition outcomes. However, MARAD’s planning efforts for its port project 

contracts were inadequate. MARAD used contracts instead of grants or 

cooperative agreements (known collectively as assistance agreements) to 

administer the port projects—without documenting its rationale. MARAD also did 

not require written agreements from port project stakeholders regarding matching 

funds. Finally, MARAD did not prepare required acquisition plans for the Port of 

Anchorage contracts, and the acquisition plans for the Hawaii Harbors and Port of 

Guam projects were missing critical documentation and contained errors that call 

into question the accuracy of the plans. 

MARAD Used Contracts Instead of Assistance Agreements To Administer 

the Port Projects Without Documenting Rationale

MARAD chose to use contracts to administer Federal funds for all three port 

projects rather than assistance agreements. According to MARAD and the 

documentation it provided, the Agency did not consider using assistance 

agreements when planning the Port of Anchorage project. In addition, MARAD 

did not provide us with any contemporaneous explanation as to its reasons for 

awarding contracts for the Hawaii Harbors and Port of Guam projects.

The Federal Grant and Cooperative Agreement Act12

provides criteria for agencies 

in selecting the most appropriate legal instruments but also allows an agency to 

decide when the use of a contract is appropriate. The Act specifies that contracts 

should be reserved for acquiring goods or services that directly benefit the 

Government, while assistance agreements should be used to accomplish public 

 12 The Federal Grant and Cooperative Agreement Act provides criteria for choosing an appropriate legal instrument 

(contract, grant, or cooperative agreement). Pub. L. No. 95–224 (Feb. 3, 1978) [codified at 31 U.S.C.A § 6301–6308].
15

objectives.

13 Even though the Port of Anchorage project primarily benefits the 

public, MARAD opted to award contracts for the project. 

An agency’s choice of legal instrument is significant because contracts can expose 

the Government to certain risks—such as contractor claims. For example, 

MARAD recently settled two claims with the contractor for the Port of Anchorage 

project for $11.3 million. These claims cited problems such as changing contract 

requirements, delayed work, and an alleged defective design.14 In contrast, under a 

Federal assistance agreement, an agency is not subject to these risks for contractor 

claims because there is no privity—or direct contractual relationship—between the 

Government and the recipient’s contractor.

15 If MARAD had awarded an 

assistance agreement for the Port of Anchorage project, it would not be subject to 

contractor claims. 

In addition, contracts require direct Federal oversight, as well as compliance with 

Federal contracting laws, regulations, and best practices.

16 However, MARAD has 

not provided the level of oversight required to administer its Federal port project 

contracts—most notably for the Port of Anchorage project. MARAD believed that 

the Port of Anchorage17 had full programmatic and technical control of the project 

and stated that it made decisions based on Port officials’ requests regarding project 

design, scope, and contractor selection. MARAD also pointed to the 2003 MOA, 

which states that the Municipality was responsible for providing overall program 

requirements and direction to MARAD. Nevertheless, once the Agency decided to 

award a Federal contract for the Port of Anchorage project, it became responsible 

for ensuring that Federal acquisition rules were followed and for providing 

adequate planning, estimating, and oversight of the contract.

MARAD Did Not Require Written Agreements for Matching Funds

For the Port of Anchorage project, MARAD used funds from FTA and FHWA 

grant programs with matching fund requirements but did not require local funders,

such as the Port of Anchorage and the State of Alaska, to agree in writing to 

provide the required matching funds. MARAD stated that funders have since far 

exceeded the matching fund requirements. However, without a written agreement

upfront, MARAD risked not receiving adequate matching funds. While MARAD 

 13 31 U.S.C.A. § 6305. 14 On March 8, 2013, the Municipality filed a separate suit against Integrated Concepts and Research Corporation 

(ICRC), PND Engineers, and CH2M Hill Alaska (formerly known as VECO), alleging breach of contract (by ICRC), 

professional negligence (by ICRC, PND and VECO), and negligence (by ICRC and PND). 15“Privity of contract” is the relationship between parties to a contract allowing them to sue each other but preventing a 

third party from doing so. Black’s Law Dictionary. 16 Several Federal contracting regulations, including the FAR, set forth criteria for planning, awarding, and 

administering Government contracts.

17 The Port of Anchorage is an enterprise department of the Municipality of Anchorage. As an enterprise department, 

the Port creates enough revenue to support its operations and pay fees to the Municipality annually.
16

has already spent all Federal funding for the Port of Anchorage project, 

weaknesses in the Agency’s practices for matching fund requirements could 

impair receipt of matching funds on future port projects.

Weaknesses Exist in MARAD’s Acquisition Planning 

Acquisition plans are important to help ensure the Government meets its need in 

the most effective, economical, and timely manner. Accordingly, the FAR and the 

Transportation Acquisition Manual (TAM) require agencies to prepare acquisition 

plans and document the basis for how the plans were developed. However, 

MARAD did not prepare acquisition plans for the Port of Anchorage contracts,

even though the TAM requires written acquisition plans consistent with the FAR

for acquisitions greater than $20 million.

18 MARAD stated that it conducted 

acquisition planning on a task order basis and provided a task order approval 

request prepared by its contractor as an example. However, the document does 

not address FAR-required elements for acquisition plans.

The acquisition plans for the Hawaii Harbors and Port of Guam contracts met 

some FAR requirements, such as documenting security concerns and acquisition 

cycle milestones (e.g., issuing the solicitation, negotiation, and approving the 

contract). However, the plans contained identical statements regarding the 

projects’ budget and market research without adequate supporting documentation.

We question these identical statements because the projects are unique—having 

different sizes, locations, and requirements. For example, the Port of Guam project 

involves 1 port, while the Hawaii Harbors project, located 3,800 miles away, may 

include work at up to 10 ports. In addition, the Hawaii Harbors project includes 

added work requirements, such as new geographic information systems and an 

expansion of terminal yard space. Yet the acquisition plans for these two projects 

contained the following:

• Both plans contain the identical budgeting statement: “it is anticipated that the 

annual costs for environmental, design/engineering, and construction efforts 

will vary between $10M and $30M.” MARAD did not provide FAR-required

support for how it derived these estimates, so it was unclear why the estimates 

would be the same for both ports.

• Identical market research statements in the plans indicate that MARAD 

performed the same market research for both port projects. Both plans state 

that “at least six firms” were identified as potential bidders and stated that 

“each has provided evidence of prior experience with management of major 

infrastructure development projects at marine facilities.” However, the plans 

contained no other identifying information, such as names or evidence of 

 18 With certain exceptions. See TAM 1207.103, “Agency Head Responsibilities”. 
17

experience. Although MARAD provided documentation intended to support 

these statements when we requested them for our review, the documents were

dated 2 months after the acquisition plans were approved, suggesting that they 

were not used during the planning process.19 According to the FAR, 

acquisition plans must document market research results in a manner 

appropriate to the size and complexity of the acquisition.

Moreover, we found errors in the projects’ acquisition plans that suggest MARAD 

prepared the plans in a haphazard manner and raise questions about the accuracy

of the plans. For example, the acquisition plan for the Hawaii Harbors project 

mistakenly references the Port of Guam. In addition, MARAD approved the 

acquisition plans for both projects on the same day, but some additional 

supporting documents for both projects are dated 2 months later—indicating that 

MARAD approved the plans before the supporting documents were finalized.

MARAD Entered Into Contracts Without IGCEs or Reliable Cost 

Estimates 

MARAD did not develop Independent Government Cost Estimates (IGCEs) for

the port contracts or ensure that all three port projects’ cost estimates were 

reliable. IGCEs, which are required by both Federal and DOT acquisition 

regulations,20 are detailed estimates of what a reasonable person should pay to 

obtain the best value for a product or service. A well-supported IGCE is a valuable 

tool for price negotiations and can lead to more accurate projections of budget 

requirements. In the absence of reliable cost estimates for the port projects, 

MARAD could have used IGCEs to establish dependable estimates.

MARAD awarded both Port of Anchorage contracts without IGCEs. MARAD

officials acknowledged that an IGCE was not prepared for the first Port of 

Anchorage contract. For the second contract, MARAD provided a document that it 

described as an IGCE, but the document did not meet TAM IGCE requirements 

because it did not include the specific cost elements or methodology used. In 

addition, MARAD initially told us that its staff prepared this document but later 

said that the contractor ICRC prepared it. Moreover, MARAD did not provide

evidence that the Agency validated ICRC’s document.

MARAD stated that it also relied on Defense Contract Audit Agency (DCAA) 

audits and the contractor’s task order determinations to determine price 

reasonableness for the second Port of Anchorage contract. However, MARAD was 

unable to demonstrate how it used these alternative means to establish a fair and 

reasonable price for the contract. Further, the DCAA audits MARAD provided 

 19 The documentation named 8 firms for the Hawaii Harbors project and 13 firms for the Port of Guam project. 20 FAR 36.203 and TAM 1215.404-70.
18

$0

$200

$400

$600

$800

$1,000

$1,200

2003 2004 2008 2011

Cost estimate (in millions)

either predated the second Port of Anchorage contract by 3 to 4 years or were 

limited in scope. For example, for one audit, MARAD requested that DCAA 

review only certain elements of ICRC’s proposal, which represent just 6 percent of 

the contract’s $704-million maximum award value. In addition, ICRC submitted 

direct labor and indirect rate data that covered just 7 months of the proposed 

7-year contract period and omitted all subcontractor costs, which further limited 

DCAA’s review. According to DCAA’s report, data for the entire performance 

period is required to establish reliable cost estimates.

For the Port of Guam and Hawaii Harbors contracts, MARAD officials initially 

said that IGCEs were prepared for both contracts but later said that IGCEs were 

not prepared. 

In addition, the port projects’ cost estimates are unreliable. For the Port of 

Anchorage project, MARAD’s records show that the cost estimates for the project 

grew significantly between 2003 and 2011 (see figure 1). 

Figure 1. The Port of Anchorage Project’s Cost Estimates 

Increased Significantly Between 2003 and 2011

Source: 2003 Port of Anchorage contract, 2005 Port of Anchorage contract modification, 2008 

Port of Anchorage contract, and MARAD document (“Explanation of PIEP Project Cost 

Increases”)

We could not determine how these estimates for the Port of Anchorage contracts

were derived because MARAD could not provide documentation showing who 

developed the estimates or what factors were considered. MARAD contends that it 

was the Port’s responsibility to plan and estimate the funding necessary to conduct 

the project and that it relied on information from the Municipality to award the

contracts. According to MARAD officials, the Port estimated the project costs and 

deliberately underreported them to ensure that funding for the project would be 

approved. MARAD awarded the contracts without validating the Port’s estimates.

According to MARAD 

documentation from January 26, 

2011, the Port of Anchorage 

project was estimated to cost at 

least $1 billion—over four and a 

half times the original $211 

million cost estimate.
19

Further, a new cost estimate must be developed for the Port of Anchorage project. 

MARAD officials stated that alternatives need to be developed to replace the 

current design based on a recent study conducted by the United States Army Corps 

of Engineers in partnership with MARAD, the Port, and the Municipality. In 

addition, MARAD representatives recently informed us that the Municipality is 

considering scaling down the project to just over a third of the 2011 cost estimate.

MARAD also lacks adequate documentation to support the cost estimates for the 

Hawaii Harbors and Port of Guam projects. With the exception of the port 

estimate for the Port of Guam project,21 MARAD could not provide 

documentation showing who developed the various port project estimates or 

explain why they doubled over time, as shown in table 5. 

Table 5. Varying Cost Estimates for the Port of Guam and Hawaii 

Harbors Projects

Port of Guam Hawaii Harbors

Source Cost Estimate Year Cost Estimate Year

Porta $195 million 2007 $200 million unknown

Acquisition Plan $400 million 2008 $200 million 2008

Maximum Contract 

Award Value $400 million 2010 $400 million 2009

a According to MARAD, the Ports of Guam and Hawaii provided these figures. 

Source: MARAD file documentation

Without supporting documentation, it is unclear why the cost estimates in the 

acquisition plans and the maximum contract award values varied from the Port 

estimates. Further, MARAD officials acknowledged that they did not 

independently validate the cost estimates provided by the port stakeholders, as 

they believed “there was no need to second-guess the estimates.”

MARAD Did Not Adhere to Federal Contracting Requirements When 

Awarding and Administering the Port of Anchorage Contracts

MARAD acted contrary to the intent of SBA’s 8(a) Business Development 

Program when it awarded the first contract for the Port of Anchorage project. 

MARAD also did not comply with Federal regulations to terminate the first Port 

of Anchorage contract when the contractor no longer met eligibility requirements.

In addition, under the project’s second contract, MARAD did not implement the 

award fee plan or conduct award fee evaluations in accordance with Federal 

 21 For the Port of Guam project, MARAD provided documentation showing that a contractor developed the 

$195-million port estimate as part of the 2007 update to the Master Plan.
20

regulations and contract terms. Further, MARAD limited competition on a design 

subcontract by allowing the use of brand name technology without required 

justification.

MARAD Acted Contrary to the Intent of SBA’s 8(a) Program When It 

Awarded the First Port of Anchorage Contract

MARAD acted contrary to the intent of SBA’s 8(a) Business Development 

Program by steering the first Port of Anchorage contract to the Port’s preferred 

firm Integrated Concepts and Research Corporation (ICRC). ICRC, who did not 

meet certain 8(a) eligibility requirements for sole source awards, wrote to 

MARAD and port officials to suggest awarding the sole source contract to Koniag 

Services, Inc. (KSI), a newly formed Alaska Native Corporation (ANC) with few 

restrictions on the contracts it was able to receive.22 In May 2003, MARAD 

awarded the first $211 million Port of Anchorage contract to KSI—a firm that the 

Port of Anchorage referred to as a “shell corporation.” Less than 9 months later, 

MARAD transferred the contract to ICRC. Table 6 shows the sequence of events 

surrounding MARAD’s award of the first Port of Anchorage contract.

Table 6. Events Surrounding the Award of the First Port of 

Anchorage Contract

Date Action

Sept. 2002 The Port of Anchorage indicated its preference for contractor ICRC as far back 

as September 2002—8 months before the Port of Anchorage contract was 

awarded. 

Feb. 2003 The Port and ICRC met with MARAD to discuss awarding the contract to ICRC. 

In addition, ICRC’s vice president wrote a letter to MARAD and port officials,

suggesting that MARAD could expedite the SBA approval process by awarding 

a sole source contract to its sister company KSI and then transfer the contract 

to a joint venture between KSI and ICRC. ICRC’s vice president wrote another 

letter to MARAD’s director of acquisitions that provided step-by-step instructions 

on obtaining SBA approval for the KSI contract, which according to ICRC would 

allow MARAD to bypass a 2-3 month SBA review process for the proposed joint 

venture.

a

 22 While procurements expected to exceed $3 million must normally be competed among eligible 8(a) firms, an ANC 

was eligible to receive a sole source 8(a) contract award regardless of amount. As of 2011, the FAR requires 

contracting officers to prepare a justification for each 8(a) ANC sole source contract over $20 million. 
21

Date Action

May 2003 To begin work on the Port of Anchorage project while the contract was still under 

negotiations, MARAD issued a letter contract for geotechnical sampling and 

testing. MARAD accidentally awarded the letter contract to ICRC instead of KSI. 

The next day, MARAD issued a modification to change the name to KSI. On May 

30, 2003, MARAD officially awarded an 8(a) sole source contract to KSI. 

Although ICRC was not a party to the sole source contract, ICRC’s chief 

executive officer represented KSI during contract negotiations, and ICRC’s vice 

president was listed as the principal-in-charge for the contract.

Aug. 2003 The Port of Anchorage wrote MARAD to express its dissatisfaction with KSI and

question KSI’s leadership. The Port of Anchorage described KSI as a “shell 

corporation” and urged MARAD to novate (or transfer) the contract to ICRC.

Oct. 2003 MARAD notified KSI that it must produce invoices from an established 

accounting system within 10 days or MARAD would terminate the contract for 

default. KSI initially objected, stating that it used a reputable accounting software 

package—in fact, the same package used by ICRC. The next day, KSI informed 

MARAD that it would request permission to novate the contract to ICRC. 

Feb. 2004 MARAD agreed to the transfer of the first Port of Anchorage contract to ICRC—

less than 9 months after awarding the contract to KSI. 

a According to an October 2003 MARAD memorandum, SBA notified KSI that it would not approve a joint venture 

agreement between KSI and ICRC because the contract had already been awarded to KSI.

Source: Contract files from the first Port of Anchorage contract

MARAD officials stated that they do not have enough information to comment on

the decisions surrounding the first Port of Anchorage contract because the event 

occurred nearly a decade ago.

MARAD Did Not Comply With Federal Regulations To Terminate the First 

Port of Anchorage Contract When ICRC Was Bought by a Large Business

MARAD did not comply with Federal regulations to terminate the first Port of 

Anchorage contract when ICRC was acquired by a large company in June 2007. 

Federal regulations require an agency to terminate an 8(a) contract if the small 

business contractor is no longer owned or controlled by disadvantaged individuals. 

The FAR also permits SBA to waive the termination requirement if the head of the 

agency certifies that contract termination would severely impair the agency’s 

program objectives. On September 4, 2007, MARAD asked for a waiver, but SBA 

denied the request on September 19, 2007. SBA stated that allowing the 8(a) 

contract to be transferred to a large business could jeopardize the integrity of the 

8(a) program and establish a precedent. 

According to MARAD officials, the contract was not terminated based on an

undocumented agreement with SBA to allow the contract to run its course. As 

evidence of this agreement, MARAD officials cited a January 22, 2008, order in 

which SBA dismissed ICRC’s appeal of its denial of a termination waiver. 

However, the order did not expressly waive MARAD’s requirement to terminate 
22

or allow MARAD to continue the contract. Moreover, MARAD’s contract 

documentation clearly shows that SBA had rejected MARAD’s request for a 

termination waiver. Specifically, in the sole source justification for the second Port 

of Anchorage contract, which was initiated the same day as SBA’s dismissal 

order, MARAD stated that “in January 2008, the SBA declined to issue such a 

waiver.” The justification also said that the purpose of the sole source contract was

“to take over the terminated previous contract.” MARAD’s own sole source

documentation for the second Port of Anchorage contract shows that the MARAD 

officials executing the justification believed that the agency was in fact required to 

terminate the first Port of Anchorage contract. 

However, MARAD did not terminate the first Port of Anchorage contract and 

allowed it to continue for more than 2 years after the award of the second Port of 

Anchorage contract. MARAD also ordered additional work under the first 

contract, despite Agency officials’ statements that no new work was ordered under 

it. Specifically, MARAD issued two task orders under the first contract, with a 

total initial value of almost $28 million.23 Simultaneously managing two ICRC 

contracts with similar statements of work could have led to problems with 

oversight and management of the work.

MARAD Did Not Effectively Administer the Award Fee Provision for the 

Second Port of Anchorage Contract

Award fees are financial incentives intended to motivate the contractor to achieve 

the Government’s desired goals for a project. However, MARAD mismanaged its 

administration of the contract’s award fee provision for the second Port of 

Anchorage contract by not complying with contract terms and Federal award fee 

regulations.24

Award fee plans are important to establish the procedures for evaluating the 

contractor’s performance for an award fee, including the award fee evaluation 

periods and performance measures. However, MARAD did not complete an award 

fee plan until nearly 2 years after the contract began. Because it took so long for 

MARAD to implement an award fee plan, nearly half of the award fee evaluation 

periods had ended without having in place any evaluation procedures or criteria to 

assess the contractor’s performance. In addition, MARAD did not conduct its 

award fee evaluations according to the award fee plan that it ultimately adopted. 

MARAD also approved a $345,000 award fee payment to the contractor 372 days 

late and without conducting a required evaluation to determine whether the 

contractor’s performance warranted the fee (see table 7).

 23 MARAD added funding to those task orders 2 months after the second contract was awarded to increase the 

maximum value to $105 million. 24 FAR 16.404, FAR 16.405, and FAR 16.401; TAR 1252.216-72; TAR 1252.216-71.
23

During the first 

period, MARAD 

awarded a 

$345,000 fee 

without 

evaluating the 

contractor’s 

performance.

Table 7. Award Fee Evaluations Conducted Under the Second 

Port of Anchorage Contract

a The award fee plan requires an award fee evaluation to be completed within 15 business days after 

the end of the evaluation period.

Source: OIG analysis 

According to MARAD’s award fee decision document for the first evaluation 

period, evaluating the contractor’s performance so late after the fact would have 

been difficult and time consuming, so the contracting officer and the Contracting 

Officer’s Technical Representative (COTR) approved the award fee “in an effort 

to get current in the process.” However, paying the contractor an award fee 

without a required evaluation goes against FAR regulations governing award fees. 

MARAD was also aware of serious performance problems during the first 

evaluation period that should have been considered when determining the award 

fee. For example, ICRC informed MARAD of construction problems encountered 

by one of its subcontractors regarding significant setbacks related to damage to the

project’s open cell sheet piling and a related subcontractor claim. Nevertheless, 

MARAD approved full payment of the award fee to the contractor, effectively 

negating the purpose of an award fee to incentivize good performance. 

While MARAD did conduct evaluations for evaluation periods 2 and 3, it did not 

fully complete them in accordance with the award fee plan or with Federal 

requirements. For example, MARAD’s award fee determination letters—which 

are used to convey evaluation results—included only brief descriptions of the 

contractor’s strengths and weaknesses and did not provide details on how the 

contractor’s performance warranted the overall scores shown for each of the three 

performance areas (program management, cost control, and technical schedule). 

Evaluation Periods

Evaluations 

Completed

Award Fee 

Approved

No. of Days 

Fee Decisions 

Were Latea

1 7/16/2008 - 6/30/2009 No Yes ($345,000) 372

2 7/1/2009 - 12/31/2009 Yes No 191

3 1/1/2010 - 6/30/2010 Yes No 368

4 7/1/2010 - 12/31/2010 No N/A N/A

5 1/1/2011 - 6/30/2011 No N/A N/A

6 7/1/2011 - 12/31/2011 No N/A N/A
24

MARAD Allowed the Use of a Proprietary Technology Without Justification 

or Independent Review of the Design

According to Federal law, a government agency generally may not award a 

contract using other than full and open competition unless a written justification is 

provided.

25 The FAR recognizes that specifying a supply or service available from 

only one source, such as patented supplies and services, limits competition and 

requires proper justification in advance. However, MARAD—without 

justification— approved a $6.1-million task order for a subcontract that called for

open cell sheet pile design,

26 a proprietary technology. As such, MARAD 

effectively limited competition for the task order. Although proposals were 

solicited from at least six contractors, only the contractor that owned the 

technology submitted a bid and was subsequently awarded the work in June 2006. 

One contractor who declined to bid specifically cited concerns about patent 

infringement and the uncertain reliability of the open cell sheet pile technology. 

In addition, the Municipality of Anchorage’s Geotechnical Advisory Commission 

(GAC) voiced objections to the design in September 2006. The GAC pointed out 

that an earlier study of the design was not independent because it had been 

conducted by parties directly involved in the project. However, MARAD did not 

request an independent review until 2011—3 years after critical problems with the 

design were discovered in 2008. According to the study released in February 2013, 

three of the Port of Anchorage project’s four constructed facilities do not meet 

project design requirements for normal working conditions or seismic activity

from earthquakes. The study also states that these three facilities will need to be 

replaced using a suitable method. MARAD has recently indicated that alternatives 

will need to be developed to replace the project’s open cell sheet pile-based

design. 

MARAD Has Not Provided Effective Contract Administration for Its 

Port Projects

Effective contract administration is important to protect the Government’s 

interests. However, MARAD has not provided effective contract administration of 

the port infrastructure projects. Specifically, MARAD did not (1) develop written 

contract administration plans; (2) follow procedures to designate COTRs; 

(3) properly maintain contract file documentation, including required COTR files;

or (4) conduct required evaluations of contractor performance.

 25 41 U.S.C. 3304 (formerly 41 U.S.C. 253). 26 Open cell sheet pile is a system with flat steel sheet piles driven side by side on a curve to form the face of a wharf.

They are supported by sheet pile walls extending perpendicularly behind the face of the wharf, which is backfilled with 

granular soil.
25

MARAD Did Not Develop Written Contract Administration Plans

MARAD did not develop written contract administration plans for any of the port 

project contracts. The FAR requires an agency to develop a written plan of action—

prior to contract award—that describes how the contract will be administered and 

monitored. For example, an agency must describe how it will inspect and accept 

work corresponding to the work statement’s performance criteria. According to 

Federal regulations and the Office of Federal Procurement Policy (OFPP), a 

contract administration plan is essential for good contract administration, as it 

provides a systematic method for COTRs or other monitoring staff to evaluate the 

contractor’s performance and deliverables.27 In addition, the 2008 DOT COTR 

Handbook calls for COTRs to maintain surveillance plans, contractor performance 

reports, and documentation for actions taken to correct contractor performance

deficiencies. 

MARAD stated that, instead of developing contract administration plans for the 

port projects, it followed established oversight processes and distinct quality 

assurance plans. However, MARAD did not provide documentation to support its 

statements. MARAD stated that it also monitored contractor performance at the 

Port of Anchorage project through weekly technical, administrative, and oversight 

meetings. However, the lack of contract administration plans at the outset of the 

Port of Anchorage project limited MARAD’s ability to effectively administer the 

contracts. For example, MARAD contracting staff stated that some task orders

lacked clear scope and milestones, which made it impossible to monitor ongoing 

activities. 

MARAD Did Not Follow Procedures To Establish COTR Oversight Roles

MARAD did not follow procedures to officially designate COTRs28 or designate 

them in a timely manner. According to OFPP, the COTR plays a critical role in the 

contract administration process, functioning as the “eyes and ears” of the 

contracting officer. For the Port of Anchorage project, MARAD did not issue 

letters for three of the four COTRs and was 5 months late in issuing a letter to the 

fourth COTR. For the Port of Guam and Hawaii Harbors projects, MARAD issued 

COTR designation letters late by 2 months and 11 months, respectively. Timely 

designation of COTRs is important because it ensures that COTRs are aware they 

have been assigned to oversee a contract and understand their oversight roles. As 

of 2011, the FAR requires COTR designation prior to award.29

 27 FAR 7.103, FAR 7.105, FAR 42.1101, and FAR 46.104—all effective at the time of award; OFPP, “A Guide to Best 

Practices for Contract Administration,” 1994.

28 TAM 1242.7104 requires DOT Operating Administrations to designate COTRs by issuing COTR designation letters, 

which explain the COTRs’ specific duties and tasks. 

29 FAR 16.301.
26

MARAD Does Not Maintain Adequate Contract File Documentation for Key 

Decisions or Required COTR Files

MARAD did not follow FAR and DOT requirements to properly maintain contract 

files for the port projects.

30 Complete contract file documentation is important 

because it allows new staff to readily access and understand the contract’s 

complete history and preserves prior work as a basis for future actions and 

oversight. In addition to missing acquisition plans and IGCEs, MARAD’s files did 

not include documentation that the FAR requires for some significant contractrelated decisions and activities. For example, while the first Port of Anchorage 

contract’s statement of work called for bus terminal development, bus facilities 

were not ordered. However, MARAD’s Port of Anchorage contract file lacks 

documentation to justify why it spent over $35 million from FTA’s transit bus and 

bus facilities appropriations for a variety of unrelated purposes, including a dock 

for Coast Guard boats and project management. MARAD stated that congressional 

earmark language allowed the Agency to use the FTA funds in any manner 

deemed necessary for an intermodal port project. Nonetheless, MARAD’s 

decision to use the FTA funding for other purposes is an important one that 

warrants documentation in the contract file.

Further, MARAD did not properly maintain required COTR files for any of its 

port projects.

31 The TAM requires the COTR files to be organized and provides a 

framework for organizing them. However, MARAD stored contract administration 

information on a common shared drive rather than a designated COTR file, and 

the drive was disorganized and missing required documentation.

MARAD Did Not Conduct Contractor Performance Evaluations

Each of MARAD’s port project contracts require MARAD to prepare semiannual 

contractor performance evaluations in accordance with the FAR; yet MARAD did 

not comply with this requirement for any of the port projects.

32 MARAD officials 

stated that the Agency did not have to conduct semiannual evaluations because the 

FAR allows award fee evaluations to be used instead. The FAR does allow award 

fee evaluations to be used to meet these evaluation requirements; however, the 

second Port of Anchorage contract was the only MARAD port project contract

that included an award fee provision (see exhibit B for each project’s contract 

 30 FAR 4.8, “Government Contract Files”; DOT COTR Program, September 2008; DOT Acquisition Policy Letter2008-02. 31 TAM 1242.7104(11)(c)—Letter of Appointment states that COTRs are required to establish and maintain an 

organized contract administration file to record all contractor and Government actions pertaining to the contract. 32 The contracts contain a clause that call for semiannual evaluations to be prepared in accordance with FAR 

42.1502(a)—which requires agencies to prepare interim evaluations to provide current information for contracts or 

orders with a period of performance longer than one year. According to the FAR, these interim evaluations are to be 

used for source selection purposes.
27

type). Per MARAD’s reasoning, MARAD’s contract files should have contained 

evidence of award fee evaluations for all of the port contracts. However, the 

Agency only performed two out of six required award fee evaluations for the 

second Port of Anchorage contract. MARAD did not complete any other 

evaluations—semiannual or award fee—for MARAD’s other port project

contracts.

CONCLUSION

Port infrastructure development is a relatively new responsibility for MARAD and 

also an opportunity for it to be a major stakeholder in rebuilding the Nation’s 

maritime infrastructure. Effective program management, oversight, and 

contracting are critical to the success of this endeavor. However, challenges in 

these areas contributed to significant setbacks at the Port of Anchorage project—

including construction problems, schedule delays, and cost growth. While 

MARAD has begun implementing changes to improve its management of the Port 

of Guam project—including better defined project responsibilities and a new 

management information system—it is still in the process of developing the 

congressionally mandated port program. Until MARAD strengthens its planning,

oversight, and contracting processes, ongoing and future port projects will 

continue to be at risk of cost overruns and schedule delays.

RECOMMENDATIONS

We recommend that the Maritime Administrator take the following actions:

1. Develop guidance for port project management plans and organizational charts 

that outline the roles, responsibilities, and relationships of public and private 

stakeholders.

2. Consistently define and document MARAD’s oversight responsibilities for 

port infrastructure development.

3. Develop formal risk management policies and procedures consistent with 

industry best practices.

4. Implement policies and procedures for (a) analyzing and documenting 

decisions related to selecting the appropriate legal arrangement (e.g., contracts 

or assistance agreements) before obligating funds, and (b) requiring written 

agreements for payment of matching funds.
28

5. Implement procedures to help ensure that MARAD’s contract planning efforts 

comply with Federal acquisition regulations and requirements. These 

procedures should include: 

a) establishing acquisition plans and contract administration plans in a timely 

manner, and maintaining supporting documentation for their rationale; and

b) developing independent Government cost estimates, and validating cost 

estimates provided by entities other than MARAD.

6. Implement procedures to help ensure that MARAD’s contract award and 

execution efforts comply with Federal acquisition regulations and 

requirements. These procedures should include: 

a) awarding and terminating contracts, especially those awarded through the 

8(a) Business Development Program; 

b) reviewing and providing written justifications for the use of proprietary 

technology or other factors that may limit competition on port contracts.

7. Implement procedures to help ensure that MARAD’s management of costplus-award-fee contracts complies with Federal acquisition regulations and 

requirements. These procedures should include establishing timely award fee 

plans and properly executing those plans—including conducting award fee 

evaluations, documenting the results, and approving award fee payments.

8. Implement procedures to help ensure that MARAD’s contract administration 

and oversight efforts comply with Federal acquisition regulations and 

requirements. These procedures should include:

a) issuing timely contracting officer’s technical representative (COTR)

designation letters with appropriate descriptions of their roles and 

responsibilities;

b) maintaining complete contract files, including COTR files; and

c) conducting semiannual or interim contractor performance evaluations.

9. Provide a comprehensive action plan for developing a congressionally 

mandated Port Infrastructure Development Program (PIDP), including 

milestones for incorporating each of the preceding recommendations into the 

program. The plan should also require MARAD to prepare clear and specific 

budget requests that specify how the Agency would use all Federal funding

received for PIDP purposes.
29

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL 

RESPONSE

We provided a draft of this report to MARAD on April 22, 2013, and received its 

response on July 10, 2013, which is included as an appendix to this report. 

MARAD concurred with all nine of our recommendations. 

For recommendations 1, 2, 3, 7, 8, and 9, MARAD concurred and provided 

planned actions and time frames that meet the intent of our recommendations. We 

consider these recommendations resolved but open pending completion of the 

planned actions. 

For recommendations 4, 5, and 6, MARAD concurred and provided planned 

actions that partially meet the intent of our recommendations. We are requesting 

additional information before we can determine if the planned actions address the 

intent of these recommendations. Specifically: 

For recommendation 4, MARAD committed to completing a Port Infrastructure 

Program Manual by September 30, 2014, that will detail its documentation 

expectations regarding matching funds agreements. However, we are concerned 

with MARAD’s planned completion date for the manual because the 

Administration is currently negotiating a new assistance agreement for future work 

in Hawaii. We request that MARAD clarify how it will ensure appropriate 

analysis and documentation for its selection of new assistance agreements until the 

manual is completed. Until we receive this information, we consider 

recommendation 4 open and unresolved.

For recommendation 5, MARAD committed to having an independent 

procurement compliance review by August 30, 2014, after which it plans to 

complete an action plan to address the issues identified. However, MARAD did 

not specify whether the action plan will include implementation of procedures to 

ensure compliance with the FAR in the areas of acquisition planning, contract 

administration, and IGCEs, as we recommend. In addition, MARAD did not 

specify a time frame by which it would complete its action plan. Accordingly, we 

request that MARAD clarify whether it plans to implement procedures as part of 

its action plan and provide time frames by which it will complete the action plan 

and implement the procedures. MARAD, in its introductory remarks, indicated 

that the contract for the Port of Guam project would remain in place; however, we 

reported that MARAD has not implemented a required contract administration 

plan for the project. As such, we request that MARAD clarify whether its 

extensive implementation plan for the Port of Guam project will include a contract 

administration plan. Until we receive this information, we consider 

recommendation 5 open and unresolved.
30

For recommendation 6, MARAD stated that it has issued guidance on SBA’s 8(a) 

awards and will continue to host training sessions on SBA programs. This action 

appears to address the first part of our recommendation. However, we request that 

MARAD provide us a copy of the guidance, so that we can verify whether it meets 

the intent of our recommendation. In addition, MARAD did not provide planned 

actions to address the second part of our recommendation that MARAD 

implement procedures for reviewing and providing written justification for the use 

of proprietary technology and other factors that may limit competition on port 

contracts. Therefore, we request that MARAD clarify whether it will implement 

such procedures. Until we receive this information, we consider recommendation 

6 open and unresolved.

ACTIONS REQUIRED

MARAD’s planned actions and time frames for recommendations 1, 2, 3, 7, 8, and 

9 are responsive, and we consider them resolved but open pending completion of 

the planned actions. We consider recommendations 4, 5, and 6 open and 

unresolved. In accordance with Department of Transportation Order 8000.1C, we 

request that MARAD provide additional information on recommendations 4, 5, 

and 6, as described above, within 30 days of this report. 

If you have any questions concerning this report, please contact Mitchell Behm, 

Assistant Inspector General for Rail, Maritime, Hazmat Transport, and Economic 

Analysis, at (202) 366-9970 or Mary Kay Langan-Feirson, Assistant Inspector 

General for Acquisition and Procurement Audits, at (202) 366-5225. If you have 

specific questions about program management, please contact Toayoa Aldridge, 

Program Director, at (202) 366-2081. If you have specific questions about 

contracts, please contact Ken Prather, Program Director, at (202) 366-1820.

#

cc: DOT Audit Liaison (M-1)

MARAD Audit Liaison (MAR-392)
31

Exhibit A. Scope and Methodology

EXHIBIT A. SCOPE AND METHODOLOGY

We conducted our work from May 2011 through April 2013 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.

Our audit objectives were to evaluate MARAD’s execution of its port 

infrastructure development responsibilities. Specifically, we evaluated MARAD’s 

(1) oversight and risk management of port infrastructure development projects, 

and (2) oversight of port infrastructure projects’ contract planning and 

administration.

To evaluate MARAD’s oversight and risk management of port infrastructure 

development projects, we interviewed MARAD officials, contractor 

representatives at the Port of Anchorage, the Municipality of Anchorage Mayor’s 

Office, Municipal Assembly members, Port of Anchorage staff, and Alaska State 

officials. We also reviewed and analyzed documentation such as MOA 

agreements; statements of work; and documents pertaining to risk management, 

roles, and stakeholder responsibilities. Additionally, we assessed the interagency 

roles and responsibilities for port development projects and evaluated the 

Agency’s efforts to identify and mitigate project risks.

To evaluate MARAD’s oversight of port infrastructure projects’ contract planning 

and administration, we reviewed the Port of Anchorage project’s contract history 

as a case study. We also assessed MARAD’s contracting efforts at the Hawaii 

Harbors and Port of Guam projects. We reviewed the three port projects’ contract 

files and subcontract files for the Port of Anchorage project. We interviewed 

MARAD officials and contractor representatives at the Port of Anchorage. We 

identified and reviewed relevant acquisition criteria, including the United States 

Code, FAR, Transportation Acquisition Regulation (TAR), TAM, and Office of 

Management and Budget (OMB) guidance, as well as MARAD’s acquisition 

policies and procedures. We assessed MARAD’s acquisition planning and award 

processes, including competition methods and contract type. Finally, we evaluated 

MARAD’s contract administration, including mechanisms for monitoring and 

quality assurance, contract actions, and oversight resources. 
 32

Exhibit B. Summary of Port Project Contracts

EXHIBIT B. SUMMARY OF PORT PROJECT CONTRACTS

Port project Port of Anchorage Port of Anchorage Hawaii Harbors Port of Guam

Contract number DTMA1D03009 DTMA1D08012 DTMA1D09006 DTMA1D10002

Contract award date 05/30/2003 07/15/2008 07/31/2009 04/23/2010

Competition Used None—8(a) sole source None—sole source Full and opena Full and open

Period of performance 5/30/2003 - 5/31/2004 

plus 9 option years

7/16/2008 - 5/31/2011 

plus 4 option years

7/31/2009 - 7/31/2012 

plus 4 option years

5/1/2010 - 4/4/2013 

plus 4 option years

Maximum award value $427 millionb $704 million $400 million $400 million

Contractor Koniag Services, 

Inc. (KSI)

Integrated Concepts and 

Research Corporation 

(ICRC)

TEC, Inc. EA Engineering, Science, 

and Technology, Inc.

Contract type Firm-fixed-price and 

indefinite delivery/

indefinite quantity

Cost-plus-award-fee and

indefinite delivery/

indefinite quantity

Cost-plus-fixed-fee and

indefinite delivery/

indefinite quantity

Cost-plus-fixed-fee and

indefinite delivery/

indefinite quantity

Services provided Technical management, 

and staff support services, 

including but not limited to: 

program , design, and 

construction management; 

and contractor oversight

Technical management, 

and staff support services, 

including but not limited to: 

program , design, and 

construction management; 

and contractor oversight

Improvement activities to 

enhance the transportation 

of goods and people. 

Services include, but are 

not limited to: program, 

construction, and design 

management; port planning 

and preliminary design; 

technical management and 

staff augmentation; and 

contractor oversight

Improvement activities to 

enhance the transportation 

of goods and people. 

Services include, but are 

not limited to: program, 

construction, and design 

management; port planning 

and preliminary design; 

technical management and 

staff augmentation; and 

contractor oversight

a A best value process was used for the Hawaii Harbors and Port of Guam projects.

b The initial contract award value was $211 million; a December 2005 contract modification increased the maximum potential value to $427 million.

Source: Port of Anchorage, Hawaii Harbors, and Port of Guam project contract files
 33

Exhibit C. Major Contributors to This Report

EXHIBIT C. MAJOR CONTRIBUTORS TO THIS REPORT

Name Title

Toayoa Aldridge Program Director

Ken Prather Program Director

Aisha Evans Project Manager

Leslie Mitchell Senior Auditor

Paul Stark Senior Analyst

Meghann Noon Auditor

Meredith Howell Analyst

Michael Broadus Analyst

Tashaun Ross Analyst

Deanne Titus Analyst

Christina Lee Writer-Editor
 34

Appendix. Agency Response

APPENDIX. AGENCY RESPONSE

Memorandum

U.S. Department

of Transportation

 

Maritime

Administration

To: Calvin Scovel III Date: July 9, 2013

Inspector General

 

From: Paul N. Jaenichen, 

Acting Maritime Administrator

Re: Management Response to the Office of Inspector General (OIG) Draft Report on 

Port Development Projects and Program

______________________________________________________________________________________

The Maritime Administration (MARAD) is finalizing the development of a Congressionallyauthorized Port Infrastructure Development Program (PIDP) using contemporary best practices. 

In doing so, we recognize that the approaches taken with Anchorage, Hawaii and Guam, the 

three port development projects that predate the PIDP, were not consistent with current 

programmatic, technical and procurement policies or practice. This is especially true as a result 

of a key decision in 2003 to defer to local authorities for project management in Anchorage. 

MARAD no longer operates in this manner. As problems became apparent during construction 

at the Port of Anchorage Intermodal Expansion Project, MARAD reevaluated earlier policy 

decisions and instituted new project oversight and management for all three projects. This 

Administration has taken action to increase oversight, assign dedicated project and program 

staff, and increase its level of engagement with local partners. These actions led to a revised 

Memorandum of Agreement (MOA) in 2011 that required a project master plan, formalized the 

project management organization, and required a MARAD presence on site. MARAD is now in 

the process of terminating its involvement with the Port of Anchorage project.

Much of the OIG report focuses on the issues surrounding the Port of Anchorage project that led 

up to these changes. The two other projects reviewed by the report, one in Hawaii and the other 

in Guam, have been successful to-date, benefitting from the experience with Anchorage. 

MARAD’s future involvement in port development will be conducted in accordance with the 

parameters and procedures of the new PIDP, incorporating lessons learned from all three 

projects and the comments contained in the OIG report.

MARAD Heightened Oversight on Preexisting Port Projects

MARAD no longer conducts port development projects using the practices described in the OIG 

draft report relating to Anchorage, Hawaii and Guam. In each of these projects, MARAD is 

successfully addressing the issues identified in the OIG report. In Hawaii, MARAD is wrapping 

up its Federal contract and is negotiating an assistance agreement to administer any future 
 35

Appendix. Agency Response

Federal funding. The Federal contract in Guam will stay in place for the foreseeable future with 

increased levels of risk management protections, including requirements for an extensive 

implementation plan prior to construction and the use of dual-obligation performance bonds for 

subcontractors to protect the Federal interest in the project. For the Port of Anchorage 

Intermodal Expansion Project, procurements have been the responsibility of local authorities 

since June 1, 2012, because there is no Federal funding remaining.

Each of these three port projects has produced significant benefits. In Hawaii, the Pier 2 

Passenger Terminal Enhancement Project was completed and dedicated on June 20, 2012. Of 

note, the Historic Hawaii Foundation awarded the project a Preservation Media Honor on 

May 30, 2013. Hawaii also completed improvements to Hilo Harbors and the project has been 

recognized as one of the largest job creators in the state. In Guam, construction has just begun, 

with new administration offices and a lighting improvement project already completed. In May 

2013, Congresswoman Madeleine Bordallo of Guam sent a letter of appreciation to the 

Secretary of Transportation for the work completed on the project to date. In Alaska, 57 acres of 

new land were created and a barge berth was successfully constructed. This new land area has 

been used as a laydown area for a major energy project. Additionally, a two-mile haul road was 

completed for Joint Base Elmendorf-Richardson as well as a floating pier facility for the U.S. 

Coast Guard. 

Port Infrastructure Development Program Employs Best Practices

In the Fiscal Year (FY) 2010 National Defense Authorization Act (NDAA), Congress directed 

MARAD to implement a nationwide program for the improvement of port infrastructure. To 

date, no funding has been appropriated for this new program, although $2 million has been 

requested in the President’s 2014 budget. Further, the authorizing language is clear that the

projects in Anchorage, Hawaii and Guam are to be kept separate and distinct from this program. 

MARAD developed a conceptual framework for the new program, based on lessons learned 

from previous experience and best practices, which will be implemented subject to the 

availability of funding. In contrast to the three projects previously mentioned in which MARAD 

focused on administering funds or the construction phase of projects, the new program places 

the greatest emphasis on: a) stakeholder engagement, b) planning and c) financial strategies. In 

the new program, project or construction management will be a tool used only rarely in cases 

where the Federal government has both a large stake in a project and when there are welldocumented compelling reasons for that level of involvement and risk. The new program will 

assist ports in planning infrastructure improvements, engaging public and private stakeholders 

and leveraging the existing financial mechanisms (both public and private) to fund the 

modernization of our Nation’s ports. 

Procurement Review to Assess Compliance with Federal Acquisition Regulations

Due to the nature and extent of procurement related concerns identified in the OIG report 

associated with the three port projects, MARAD will complete a comprehensive review of 

compliance with Federal Acquisitions Regulations (FAR) for the procurement office. While a 

number of the issues relate to decisions that occurred a decade ago under a previous statutory 

and regulatory regime, the review is intended to confirm that deficiencies have been corrected, 
 36

Appendix. Agency Response

any remaining issues will be addressed and lessons learned will be captured. MARAD is 

working with the Department of Transportation’s Senior Procurement Executive to oversee an 

independent compliance review to identify any persisting compliance issues, evaluate their 

extent and identify a plan of action and milestones to rectify them. Separately, MARAD has 

begun reviewing its acquisition guidance and processes and will update its guidance and 

processes as necessary to ensure compliance with the FAR. This will include a review and 

updates to the MARAD Acquisition Guidance (MAG) notes and other internal processes with an 

expected completion by December 2013.

OIG RECOMMENDATIONS AND MARAD RESPONSES:

Recommendation 1: Develop guidance for port project management plans and organizational 

charts that outline the roles, responsibilities and relationships of public and private stakeholders.

Response: Concur. As indicated above, MARAD is establishing, through its Port 

Development Program, a fundamentally new approach to the agency’s involvement in Port 

projects. In developing this program, which has been authorized, but not yet funded, MARAD 

will issue a Port Infrastructure Program Manual that will provide agency-specific guidance for 

project management plans. It will also identify specific roles, responsibilities and relationships 

of public and private stakeholders. This guidance will specify features unique to port 

development projects while implementing industry standards with a distinct emphasis on scope, 

schedule and budget for the projects. To meet this goal, MARAD will utilize best practices 

learned from previous experience, other Federal agencies and the construction and project 

management industry. MARAD intends to complete this manual by September 30, 2014.

Recommendation 2: Consistently define and document MARAD’s oversight responsibilities 

for port infrastructure development.

Response: Concur. As indicated above, a Port Infrastructure Program Manual is being 

developed for the Port Development Program. The program manual will include a set of clearly 

delineated responsibilities for each participant in a given project, and will include specific 

expectations for the level of Federal involvement and MARAD’s oversight responsibilities. 

MARAD intends to complete this manual by September 30, 2014.

Recommendation 3: Develop formal risk management policies and procedures consistent with 

industry best practices.

Response: Concur. As indicated in response to Recommendation 1, a Port Infrastructure 

Program Manual is being developed for the Port Development Program. The program manual 

will include a set of risk management policies consistent with previous lessons learned, along 

with Federal and commercial best practices. MARAD intends to complete this manual by 

September 30, 2014.
 37

Appendix. Agency Response

Recommendation 4: Implement policies and procedures for (a) analyzing and documenting 

decisions related to selecting the appropriate legal arrangement (e.g., contracts or assistance 

agreements) before obligating funds, and (b) requiring written agreements for payment of 

matching funds.

Response: Concur. From the project management perspective, documentation expectations 

will be included as part of the Port Infrastructure Program Manual, expected to be completed by 

September 30, 2014. The manual will also detail expectations with regard to planning and 

executing agreements with regard to matching funds.

Recommendation 5: Implement procedures to help ensure that MARAD’s contract planning 

efforts comply with Federal acquisition regulations and requirements. These procedures should 

include:

a. Establishing acquisition plans and contract administration plans in a timely manner, 

and maintaining supporting documentation for their rationale; and

b. Developing independent Government cost estimates, and validating cost estimates 

provided by entities other than MARAD.

Response: Concur. MARAD recognizes there were issues with execution of procurement 

processes particularly with regard to the Port of Anchorage Intermodal Expansion Project. 

MARAD will not handle future projects in the same or a similar manner. Rather, MARAD will 

conduct its procurement activities in full compliance with the FARs. MARAD is working with 

the Department’s Office of the Senior Procurement Executive to arrange for an independent 

procurement compliance review. The specific procurement issues of planning cost estimations, 

administration and documentation will be included as focus areas in the review. Subsequent to 

the review, an action plan will be completed to address any procurement management issues 

identified. This review will be completed by August 30, 2014.

Recommendation 6: Implement procedures to help ensure that MARAD’s contract award and 

execution efforts comply with Federal acquisition regulations and requirements. These 

procedures should include:

a. Awarding and terminating contracts, especially those awarded through the 8(a) 

Business Development Program;

b. Reviewing and providing written justifications for the use of proprietary technology 

or other factors that may limit competition on port contracts.

Response: Concur. As part of the reform of acquisitions procedures and guidance, MARAD 

will focus on the award and termination of contracts through the 8(a) Business Development 

Program as well as written justifications for other than full-and-open competition. Earlier this 

year, the MARAD Small Business Specialist issued guidance to all contract specialists on the 

Department’s partnership agreement with the Small Business Administration (SBA) on 8(a) 

awards, and MARAD hosted a training session for the mode’s acquisition staff on SBA 

programs. MARAD will schedule a follow up training session with S-40 on the 8(a) program to 

be completed by November 2013. In addition, MARAD will hold formal training sessions on 

FAR requirements on other than full and open competition requirements by December 31, 2013.
 38

Appendix. Agency Response

Recommendation 7: Implement procedures to help ensure that MARAD’s management of 

cost-plus-award-fee contracts complies with Federal acquisition regulations and requirements. 

These procedures should include establishing timely award fee plans and properly executing 

those plans—including conducting award fee evaluations, documenting the results, and 

approving award fee payments.

Response: Concur. OST recently issued guidance for award fee contracts. MARAD will 

complete formal training on this guidance by November 2013. In addition, MARAD will 

increase the level and extent of oversight by defining specific procedures for informing senior 

management, including the Chief Counsel and the Executive Director, of any award fee 

payments. These procedures will be included in a MAG note expected to be issued by February 

28, 2014.

Recommendation 8: Implement procedures to help ensure that MARAD’s contract 

administration and oversight efforts comply with Federal acquisition regulations and 

requirements. These procedures should include:

a. Issuing timely contracting officer’s representative (COR) designation letters with

appropriate descriptions of their roles and responsibilities;

b. Maintaining complete contract files, including COR files; and

c. Conducting semiannual or interim contractor performance evaluations.

Response: Concur. (A) All individuals appointed by the Contracting Officer to support 

contract administration will be issued designation letters providing appropriate descriptions of 

their roles and responsibilities as CORs. The process is in place to ensure timely designation 

and detailed guidance will be implemented in the forthcoming updated MARAD Acquisition 

Guidance (MAG) note, which will be issued by November 30, 2013. (B) The contracts in 

Hawaii, Guam and Anchorage underscore the importance of proper documentation and record 

keeping on these complex acquisitions. MARAD has adopted the Department’s standard COR 

appointment letter which sets forth the required documents in a COR file and will issue updated 

guidance on the maintenance of complete contract and COR files in the November 30, 2013 

MAG note. The guidance will update and refine previous guidance and reinforce the lessons 

learned. (C) As required by contract and consistent with the FAR, MARAD will conduct 

semiannual or interim contractor performance evaluations. Interim evaluations of Hawaii and 

Guam contracts will be completed by October 31, 2013. Guidance regarding the evaluations as 

well as when they are required will be issued in an August 30, 2013 MAG note. 

Recommendation 9: Provide a comprehensive action plan for developing a congressionally 

mandated Port Infrastructure Development Program (PIDP), including milestones for 

incorporating each of the preceding recommendations into the program. The plan should also 

require MARAD to prepare clear and specific budget requests that specify how the Agency 

would use all Federal funding received for PIDP purposes.

Response: Concur. MARAD has been working on establishing a PIDP since 2010 and will 

incorporate OIG recommendations into the program based on appropriate milestones. MARAD 

will provide the action plan before February 28, 2014. 
 39

Appendix. Agency Response

_____________________________________________________________________________

I appreciate the opportunity to offer additional perspective on the OIG draft report and would 

like to thank you for the professionalism of the OIG Staff and the detailed recommendations 

developed in conducting this review. Please contact Joel Szabat, MARAD Executive Director, 

at (202) 366-5823 with any questions or requests for additional assistance.