Inland Waterways: Actions Needed to Increase Budget Transparency and Contracting Efficiency
Released: 2018-11-07T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: The Corps is primarily responsible for operating and maintaining the nation's inland waterways, including maintaining locks and dams as well as rehabilitating, modernizing, or constructing new infrastructure as needed. Persistent schedule delays and cost overruns for inland-waterways construction projects have prompted some in Congress to explore funding and management alternatives.

GAO was asked to review options to change the management of inland waterways. Among other things, this report assesses how the Corps allocates funds for operations and maintenance for the inland waterways, describes how the Corps funds construction projects, and assesses the effect of the current funding approach on projects' costs and schedules. GAO reviewed Corps documents and data; interviewed officials from Corps headquarters, six districts, and representatives of regional and national stakeholder groups—including commercial and recreational interests as well as contributors to relevant literature—selected to achieve a variety of viewpoints; and developed a simulation of the effect of various funding approaches on the total funding requirements and timelines for a set of hypothetical construction projects.

section_title: What GAO Found
paragraphs: The U.S. Army Corps of Engineers (Corps) allocates its appropriated funding for operations and maintenance projects for the inland waterways based on risk and economic benefits. However, the Corps does not know how much deferred maintenance exists for inland waterways because there is no agreed upon definition for deferred maintenance. Corps and ASA-CW officials identified several challenges related to developing a useful definition with which to measure deferred maintenance. For example, a single measure may not be useful to gauge the condition of the waterways because the effect of deferred maintenance projects on the reliability of the waterways will vary. However, without a measure or measures of deferred maintenance for inland waterways that (1) the Corps finds useful, (2) reflects its priorities, and (3) accurately conveys a consistent and well-defined measure of deferred maintenance, the Corps is limited in its ability to manage its maintenance efforts and accurately communicate its estimated maintenance costs to OMB and the Congress.

With regard to inland-waterways construction projects, the Corps prioritizes them based on expected costs and benefits. The Corps assesses the net economic benefits of inland-waterways construction projects' alternatives by comparing estimated direct costs (e.g., construction costs to build a new lock chamber) to estimated reductions in the waterway transportation costs (e.g., reduced travel costs related to a reduction in the time it might take for a barge to pass through a larger lock chamber). According to Corps officials and stakeholders, the current incremental-funding approach for prioritized projects, among other things, has resulted in schedule delays (as shown below) and cost increases. Although full upfront funding for capital projects is an important tool for effective management, inland-waterways construction projects have been funded incrementally, meaning the Corps requests—and Congress appropriates—annual funding that covers a portion of a project's estimated costs. Corps reports and academic studies have found that this approach results in increased project costs because the Corps must contract for construction in separable pieces. This approach is less efficient than contracting for the entire project at once. For example, Corps officials currently expect that the Kentucky Lock Addition project will cost at least $229 million more than the originally estimated cost as a direct result of this contracting approach. Without some change in the way inland-waterways construction projects are funded to either provide full funding or reduce the effects of incremental funding by concentrating funding on fewer projects at one time, current cost increases and schedule delays resulting from inefficient contracting are likely to continue.

section_title: What GAO Recommends
paragraphs: GAO is making two recommendations: that the Corps define and measure deferred maintenance for inland waterways and that it pursue changes to increase its ability to more efficiently use available funding for construction. The Department of Defense concurred with GAO's recommendations.

section_title: Letter
paragraphs: U.S. inland waterways are a critical component of the nation’s freight  transportation system, providing benefits related to the U.S. economy as  well as national defense. According to the U.S. Army Corps of Engineers  (the Corps), commercial operators transported approximately $194 billion  worth of cargo throughout the inland waterways system in 2016.  Additionally, the National Grain and Feed Association estimates that  nearly 60 percent of U.S. grain and soybean exports are transported via  waterways to ports in the Gulf of Mexico, with another 27 percent  transported via waterways to ports in the Pacific Northwest. Inland  waterways are especially important in transporting heavy, bulk  commodities including coal, petroleum, chemicals, and grain, as the  waterways provide cost-effective transportation while limiting the  congestion and safety risks posed by transporting these goods via rail  and truck. Navigation on the inland waterways for waterborne vessels,  such as towboats and barges, is made possible by locks and dams: dams  create pools for navigation and locks allow vessels to move from one river  or pool to another. In addition to commercial transportation, other  beneficiaries of the inland waterways system include recreational boaters,  companies that provide hydroelectric power generated by dams, and  municipal water supply and treatment facilities, among others. The Corps  is primarily responsible for managing the nation’s inland waterways,  including operating and maintaining the system of locks and dams as well  as constructing new infrastructure or rehabilitating existing infrastructure  when needed. Commercial vessel operators that travel on portions of the  inland waterways help pay the costs of constructing and rehabilitating  inland waterways infrastructure by paying a tax on diesel fuel, and this  revenue is deposited into the Inland Waterways Trust Fund (Trust Fund).

Persistent schedule delays and cost overruns for inland-waterways  construction projects have prompted some in Congress to explore  alternative approaches for managing and funding the Trust Fund. Among  other things, you asked us to review options to change the management  of inland waterways. In this report, we:  1.  assess how the Corps allocates funds for operations and  maintenance projects for the inland waterways system;  2.  describe how the Corps prioritizes and funds construction projects,  and assess the effect of the current funding approach on projects’  costs and schedules; and  3.  present stakeholders’ opinions on proposed options for increasing  available funding for inland-waterways construction projects and any  associated limitations or tradeoffs.

The scope of our review focuses on Corps activities related to commercial  navigation—including operations, maintenance, and construction—on the  27 inland waterways subject to the diesel fuel tax. These waterways  include the navigable waterways of the Mississippi River and its  tributaries, the Ohio River basin, the Gulf and Atlantic Intracoastal  Waterways, and the Columbia-Snake Rivers (see app. I for a complete  list of fuel-taxed inland waterways).

For all objectives, we interviewed a range of Corps officials at the  headquarters, division, and district levels, as well as national and regional  stakeholders. We interviewed district officials from a non-generalizable  sample of 6 of the 24 Corps districts that manage fuel-taxed waterways  within their district boundaries, which we selected to include a variety of  geographic regions, waterway characteristics, primary commodities  shipped, and history of construction projects funded through the Trust  Fund. Based on these criteria, we selected the Corps districts in Little  Rock, Arkansas; Mobile, Alabama; New Orleans, Louisiana; Pittsburgh,  Pennsylvania; Rock Island, Illinois; and Walla Walla, Washington. In  addition, we interviewed officials from the Corps’ Northwestern Division  office, which oversees the Walla Walla District, to understand the division- level role in coordinating districts’ inland-waterways infrastructure  projects. We also conducted semi-structured interviews with waterways  stakeholders representing 43 national and regional entities and 12  researchers (academics, economists, and engineers). National  stakeholders were identified by reviewing related literature and our prior  reports and recommendations from the Transportation Research Board  and the Waterways Council, Inc. Regional stakeholders in the six  selected districts were identified through recommendations from the  Corps and national waterways-stakeholder organizations to represent a  mix of commercial (such as barge companies and shippers with  commercial interests in the U.S. inland waterways system); recreational;  and industrial water users (such as municipal water authorities and  hydropower entities). From those stakeholders, we selected entities to  interview to achieve diversity of waterway user perspectives, and  conducted interviews with both individual entities as well as associations  representing a variety of users and companies. In addition to waterways  users, we interviewed stakeholders who have conducted research  regarding the management and funding of fuel-taxed waterways. See  appendix II for a list of entities represented among the stakeholders we  interviewed. We analyzed interviewee responses to identify common  themes and the range of opinions that arose. Because we selected a non- generalizable sample of stakeholders, their responses should not be used  to make inferences about a population. To characterize stakeholders’  views throughout this report, we defined modifiers (e.g., “some”) to  quantify stakeholders as follows:  “some” stakeholders represents stakeholders in 3 to 14 of the 42  interviews  “many” stakeholders represents stakeholders in 15 or more of the 42  interviews.

To examine how the Corps allocates funds for operations and  maintenance projects for the inland-waterways navigation system, we  examined amounts requested for civil works in the President’s budget  requests and appropriations for civil works for fiscal years 1997 through  2018 as well as the Corps’ budget-request development guidance to  understand how the Corps develops its budget request and prioritizes  operations and maintenance projects. We also interviewed officials from  the Office of the Assistant Secretary of the Army for Civil Works (ASA- CW); the Office of Management and Budget (OMB); the Department of  Transportation’s Maritime Administration; and the Department of  Homeland Security’s U.S. Coast Guard to understand how the Corps  coordinates with other agencies to fulfill its inland-waterways navigation  mission. To assess the Corps’ efforts related to deferred maintenance, we  interviewed Corps officials about how deferred maintenance is measured  and defined and compared these practices with pertinent federal internal- control standards.

To describe how the Corps prioritizes and funds inland-waterways  construction projects, we reviewed relevant statutes and agency policies  and guidance related to planning and budgeting for inland-waterways  construction projects. We compared the established method of funding  inland-waterways construction projects with federal internal-control  standards, OMB guidance, and prior GAO work related to funding capital  projects. To examine the effect of the current funding approach on  projects’ costs and schedules, we reviewed relevant Corps documents,  such as reports on ongoing construction projects and studies on  construction cost increases, prior GAO reports, OMB guidance, and other  academic studies. As part of our examination of the effect of the current  funding approach on costs and schedules for inland-waterways  construction projects, we developed a simulation of the effect of various  funding approaches on the total funding requirements for a set of  hypothetical construction projects. The simulation incorporates assumptions regarding the amount of total funding a project would require  (including any cost overruns) due to the pattern and timing of funding  made available. Additional information on our simulation methodology  and the full results are included in appendix III.

Finally, to identify proposed options to alter inland waterways funding and  management, we conducted a literature search to identify relevant studies  and proposals. We reviewed relevant literature to identify the options  most commonly proposed, reviewed proposals by recent administrations,  and interviewed Corps officials and seven other entities including the  Transportation Research Board and district and agency stakeholders to  verify that we identified commonly proposed options. We interviewed the  55 stakeholders noted above about their general views on the potential  benefits, limitations, and trade-offs of those options. We also reviewed  available literature—including our prior reports—to identify potential  benefits, limitations, and trade-offs of these options. Appendix IV provides  additional information about our objectives, scope, and methodology.

We conducted this performance audit from June 2017 through November  2018 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.
subsections: section_title: Background
paragraphs: Although less visible than other transportation modes and not as vast as  they are, inland waterways allow shippers to transport goods, particularly  bulk commodities, in a relatively cost-effective and environmentally  friendly method between ports all along the waterways, and to coastal  ports for transportation to international markets. For example, in a report  prepared for the National Waterways Foundation, the Texas A&M  Transportation Institute found that, for every gallon of fuel burned, 647  tons of cargo can be carried 1 mile by barge, but only 477 tons by train or  145 tons by truck. Additionally, if cargo transported on inland waterways  each year were to be moved by truck, it would take an additional tens of  millions of truck trips to carry that cargo—more than doubling the number  of trucks per day, per lane on a typical rural interstate. Most of the goods  moved on the inland and intracoastal waterways are bulk commodities,  including coal; petroleum products; chemicals; aggregate construction  materials such as sand, gravel and stone; as well as grain, soybeans, and  other agricultural products.

Approximately 12,000 miles of inland and intracoastal waterways and  channels in the United States are commercially navigable and  approximately 11,000 miles make up the fuel-taxed portion of the system,  shown in figure 1. The remaining approximately 1,000 miles of inland  and intracoastal waterways and channels are not part of the taxable  waterways and contain very few significant lock and dam structures.  Some commercial waterways users, especially those on the Upper  Mississippi and Ohio Rivers, may never leave the taxable portion of the  system, but other vessel operators may navigate through taxable and  non-taxable waterways, including connecting deep draft waterways.

Navigation on inland waterways is made possible by locks and dams,  navigation structures and aids (such as buoys), as well as channel  maintenance and dredging where necessary to maintain a minimum  channel depth of 9 feet to support commercial barge traffic. Dams form  the foundation of the inland waterways system and create “pools” for  navigation during periods of low and medium river flow. Locks at dam  sites allow river traffic to move up or down from one pool to another much  like a stairway of water. See figure 2 below.

As part of its Civil Works Program, the Corps operates and maintains the  fuel-taxed inland waterways for the purpose of facilitating navigation. The  Corps is responsible for balancing its navigation mission with other civil  works missions, including hydropower generation, flood risk  management, emergency response, environmental stewardship, and  recreation (see fig. 3). For example, the Corps may consider the  migration of fish when designing locks and dams that facilitate navigation.

Congress appropriates funding for the Corps’ Civil Works Program. For  inland waterways, the Corps uses funding for two main purposes: (1)  inland waterways operations and maintenance and (2) inland waterways  construction. From fiscal years 2006–2017 (the years for which data were  available), the Corps obligated an average of $690 million annually for  operations and maintenance of the fuel-taxed inland waterways.  Funding for operations and maintenance is appropriated entirely from  general revenues. Figure 4 shows annual obligations for inland  waterways operations and maintenance for fiscal years 2006 through  2017.

For construction projects, Congress appropriates funding from the Inland  Waterways Trust Fund (Trust Fund) in addition to funds from general  revenues. Since the Inland Waterways Revenue Act of 1978 (1978 Act),  commercial waterway users have paid taxes on fuel used by commercial  towboats and other vessels that typically move barges, revenues from  which are deposited in the Trust Fund. The Water Resources  Development Act of 1986 (1986 Act) increased the initial fuel-tax rate per  gallon and established a cost-sharing process for inland waterways  expenditures. Together, the 1978 Act and the 1986 Act established a  means for the inland waterways industry to provide economic support for infrastructure development. These users currently pay a $0.29 per gallon  tax on diesel fuel used on the fuel-taxed portion of the inland waterways,  revenue from which is then deposited into the Trust Fund. Traditionally,  50 percent of a project’s funding is appropriated from general revenues  and 50 percent is appropriated from the Trust Fund, though Congress  reduced the Trust Fund’s cost share for the ongoing new construction of  the Olmsted Locks and Dam project to 25 percent for fiscal year 2014 and  to 15 percent for subsequent fiscal years. In fiscal year 2018,  commercial waterway users contributed about 35 percent of the $399  million allocated to various construction projects (see fig. 5). On average,  from fiscal years 1997 through 2018, the Corps has allocated about $240  million annually for construction to repair or improve existing inland- waterways navigation infrastructure.

In its 2017 annual financial report, the Corps notes that the number of  instances of lock closures on inland waterways (including the fuel taxed  inland waterways) due to preventable mechanical breakdowns and  failures lasting longer than one day and lasting longer than one week  have decreased since fiscal year 2010, but that the lock closures that do  occur can result in substantial delays to shippers, carriers, and users, and  are a factor in the cost of shipping commodities on waterways.  According to the Inland Waterways Users Board (Board)—an advisory  committee made up of industry stakeholders—U.S. inland waterways  infrastructure is in need of modernization. The Corps currently manages  construction projects aimed at replacing, expanding, and modernizing  existing locks and dams. For fiscal year 2018, the Corps has allocated  about $399 million from money Congress appropriated for civil works  construction for a total of five inland waterways construction projects: four  ongoing projects and one new project (see fig. 6). According to the Board,  as of December 2017, 14 new lock and dam construction projects have  been authorized by Congress but have not yet received construction  funding.

In addition to the Corps and the Board, several entities have roles related  to the inland waterways:

The Assistant Secretary of the Army for Civil Works (ASA-CW): the  ASA-CW establishes policy direction and provides supervision of the  Department of the Army functions relating to all aspects of the Corps’  Civil Works program.

Maritime Administration: within the Department of Transportation, the  Maritime Administration promotes the use of waterborne  transportation and its integration with other segments of the  transportation system. It is also charged with maintaining the health of  the merchant marine, since commercial mariners, vessels, and  intermodal facilities are vital for supporting national security.

The U.S. Coast Guard (Coast Guard): within the Department of  Homeland Security, the Coast Guard is responsible for, among other  things, facilitating the safe and efficient flow of commerce on the  navigable waterways of the United States. For example, the Coast  Guard regulates and enforces safety standards for inland waterways  vessels and operator licensing, conducts icebreaking to facilitate the  flow of commerce and relieve flooding from ice dams, and installs and  monitors aids to navigation that mark the navigable channel (such as  buoys, beacons, and lights) to facilitate the safe movement of vessels.  The Coast Guard coordinates with the Corps to ensure aids-to- navigation are properly installed and makes adjustments as channel  conditions may dictate.

Office of Management and Budget (OMB): Within the Executive Office  of the President, OMB oversees the implementation of the President’s  policy, budget, management, and regulatory objectives. Related to  inland waterways, OMB works with the Corps and the ASA-CW to  formulate the annual President’s budget request and issues policies  related to the budget’s implementation, project study, and  prioritization.

section_title: The Corps Allocates Funds for Operations and Maintenance Based on Economic Benefits and Risk but Lacks a Method of Tracking Deferred Maintenance for Inland Waterways
subsections: section_title: The Corps Allocates Funds for Operations and Maintenance Projects Based on Economic Benefit and Risk
paragraphs: As part of its management of the inland waterways, the Corps budgets for  the costs of operations and maintenance (which are funded from one  appropriation account) and construction (funded from a separate  appropriation account) and develops an annual budget request to submit  to OMB. The Corps develops this budget request for all its civil works  activities, including locks and dams on the fuel-taxed inland waterways  system; this request is reviewed and finalized by the ASA-CW and OMB  before being submitted to Congress as part of the annual President’s  budget request.

To prepare its annual budget request, the Corps identifies potential  operations activities and maintenance projects and submits estimates of  the costs to complete those activities, but not all identified maintenance  projects are included in the budget request. According to Corps officials,  as part of the budget request development process, the Corps provides  OMB and the ASA-CW with a variety of funding proposals that would  enable different levels of service for all of its civil works assets, including  inland waterways. However, according to Corps officials, the President’s  budget request for civil works—including funding for inland-waterways  maintenance projects—is based on broader administration priorities and  does not request funding to complete all identified maintenance projects.  The Corps then receives annual appropriations for its Civil Works  Program, from which it allocates funding to each of its missions, including  inland waterways navigation. Figure 7 illustrates the Corps’ budget  formulation and execution process.

In 2008, the Corps began implementing an asset management process to  guide its management of the Civil Works Program, including inland  waterways. Under this process, the Corps determines the hours of  operation for each lock, which maintenance activities to perform, and  which construction projects to prioritize based on the economic value  these activities will provide. The Corps ranks maintenance projects  identified during the budget formulation process based on the value or  level of service the project is expected to provide as well as how critical  they are and funds as many of the priority projects as possible given  available funding and the rest are deferred. The Corps assesses the  value of inland waterways assets (such as waterways, locks, and dams)  based primarily on the economic benefits derived from improved  commercial navigation—that is, the benefits achieved by allowing  shippers to transport commodities to both domestic and foreign markets  more cost effectively than they would using other modes of transportation  (such as truck and rail). Economic benefits are generally determined  using measures of commercial use, and assets are categorized as high,  moderate, and low commercial use. The Corps’ approach to operations  and maintenance is as follows:

Operations: The Corps allocates funding for operations based on  service priorities. The Corps operates locks at varying levels of  service (i.e., hours of operation) based primarily on past commercial  traffic volume, but also considering the volume of recreational traffic  and available resources. The Corps operates high-use locks  continuously (24/7), while operating those with less commercial traffic  and fewer economic benefits less frequently, sometimes by  appointment only.

Maintenance: The Corps allocates funding for maintenance projects  based on the risk of not performing maintenance; this risk is  determined by considering both the condition of an asset as well as  the economic impact of a reduction in service should the asset fail  (that is, the traffic that would be affected if a lock or dam were to  become unusable).

section_title: Lack of a Deferred Maintenance Measure for Inland Waterways Limits the Corps’ Ability to Identify and Communicate Estimated Maintenance Costs
paragraphs: According to Corps and ASA-CW officials, the Corps does not know how  much deferred maintenance exists for inland waterways, because there is  no agreed upon definition for deferred maintenance. Corps and ASA- CW officials identified several challenges related to developing a useful  definition with which to measure deferred maintenance:

Using the total cost to conduct all maintenance identified during the  budget formulation process may not be useful as a budget tool  because the Corps would not have the capacity to conduct all  identified maintenance in one fiscal year.

A single measure may not be useful to gauge the condition of the  system, because not all deferred maintenance projects have the same  effect on system reliability, for example:

Some identified maintenance, such as preventive maintenance  conducted less frequently than preferred (like painting lock  components to prevent future corrosion), may not affect reliability  or function in the short term.

Deferring the replacement or rehabilitation of broken or  malfunctioning components—such as a lock gate arm—on low  use waterways may result in closures on those waterways or  delays related to the condition of the lock, but would affect a  relatively small amount of cargo and vessels and have a smaller  economic impact than closures on high-use waterways.

Deferring the replacement or rehabilitation of broken or  malfunctioning components on high-use waterways may result in  closures that prevent traffic to large sections of the inland  waterways system and affect a large portion of cargo transported  via waterways.

Some deferred maintenance projects may never be undertaken, while  others are planned for the near future. Corps officials told us that,  depending on the risk associated with not completing a particular  maintenance project, the Corps may choose to never complete the  project, such as mowing the grass at a low-use lock and dam facility.  Conversely, some incomplete projects represent later phases of  projects that are already under way and are planned for completion in  the near term.

The lack of a definition and measure of deferred maintenance for inland  waterways projects is inconsistent with federal internal-control standards,  which call for agencies to identify information requirements needed to  achieve objectives and address identified risks (such as reliability of the  waterways) and to process relevant data to develop that information.  Further, internal control standards call for agencies to communicate  information externally—such as to Congress and OMB—to achieve  agencies’ objectives. Corps and ASA-CW officials acknowledged that  there is a lack of information on deferred maintenance provided to  Congress. One Corps official suggested that the Corps may need more  than one measure of deferred maintenance to capture differences in the  type and consequences of various projects. Additionally, ASA-CW  officials noted that once a meaningful definition or metric for deferred  maintenance is identified, the Corps lacks a way to track this information.  Without a measure—or measures—of deferred maintenance for inland  waterways (1) that the Corps can use to budget for and manage the  inland waterways, (2) that reflects its priorities, and (3) that accurately  conveys a consistent and well-defined measure of deferred maintenance  that can be communicated to outside stakeholders, the Corps is limited in  its ability to identify preventive maintenance that could forestall more  costly maintenance or rehabilitation in the future and communicate its  estimated maintenance costs to OMB and the Congress. In turn, the lack  of a measure could limit the ability of Congress to make informed funding  decisions pertaining to the Corps.

Both the stakeholders we interviewed and the Corps have identified  effects on the reliability of the inland waterways related to current funding  levels for operations and maintenance. For instance, many stakeholders  we spoke to said the funding the Corps receives for operations and  maintenance on inland waterways has not been sufficient to maintain the  stakeholders’ desired level of reliability. Some stated that the Corps is  currently operating using a “fix as fails” approach: that is, requesting  enough funding to be able to respond to crises but not to conduct  preventive maintenance. Further, many stakeholders said there is  potential for some waterway users to switch to other modes of  transportation based on unreliability. For instance, two stakeholders  stated that businesses may be “chased away” because the inland  waterways system continues to be unreliable due to unscheduled  closures for maintenance. For example, during the course of our review,  one lock on the Ohio River experienced repeated unscheduled closures.  One such closure lasted from September 6, 2017, through September 14,  2017, during which time no vessels were able to travel through the lock.  According to a June 2017 Corps report on the causes of mechanical  breakdowns leading to unscheduled lock closures, routine maintenance  occurs less frequently than in the past due to a lack of funding, and that  delayed maintenance increases the risk of operational or catastrophic  failure that results in lock closures. Figure 8 illustrates the condition of  both deteriorating and recently rehabilitated inland waterways’ navigation  facilities. Identifying and communicating about deferred maintenance  could help Congress and OMB understand the extent of any problems  with reliability that could affect the inland waterways system.

section_title: Incremental-Funding Approach for Inland- Waterway Construction Projects Contributes to Cost Overruns and Schedule Delays
subsections: section_title: Inland-Waterways Construction Projects Are Individually Funded according to Various Priorities
paragraphs: The Corps manages inland-waterways construction projects—the  modernization and rehabilitation of existing locks and dams (called major  rehabilitation), or the construction of new structures—to ensure the  facilities continue to function and meet future requirements, and prioritizes  these projects based on expected costs and benefits. As shown in figure  9, construction projects are developed in response to an identified  problem. Congress then authorizes inland-waterways construction  projects for study and construction and provides funding through the  annual appropriations process, although some authorized projects may  not receive funding. Since 1996, Congress has appropriated  construction funding that the Corps has allocated toward 20 projects, of  which 15 have been completed.

The Corps assesses the net economic benefits of inland-waterways  construction-project alternatives by comparing estimated direct costs  (e.g., construction costs to build a new lock chamber) to estimated  reductions in the waterway transportation costs (e.g., reduced travel costs  related to a reduction in the time it might take for a barge to pass through  a larger lock chamber). For the Corps to recommend construction, the  project must have a benefit-cost ratio—that is, the ratio of estimated  benefits to estimated costs—greater than 1 to 1 using a statutorily defined  discount rate that varies from year to year. The project must then be  authorized for construction by Congress through legislation to be eligible  for funding, which typically occurs in a Water Resources Development  Act.

The Corps—with advice from the Inland Waterways Users Board  (Board)—prioritizes authorized inland-waterways construction projects  according to estimated net economic benefits and an assessment of the  economic and safety consequences of not doing the project. In  collaboration with Corps headquarters, division, and district offices, the  ASA-CW determines which civil works construction projects will be  prioritized to include in the budget request to OMB. OMB considers the  recommendations of the ASA-CW and the Corps in deciding which  projects to include in the President’s budget request. While Corps  projects with a benefit-cost ratio of at least 1 to 1 at the statutorily defined  discount rate are eligible to seek funding, OMB assesses projects against  a different threshold in determining which projects are included in the  President’s budget request. In line with OMB practice since the mid- 2000s (and, according to OMB officials, consistent with their evaluation of  most federal programs per their guidance set in 1992), generally only  inland-waterways construction projects with a benefit-cost ratio of at least  2.5 to 1 using a 7 percent discount rate are included in the annual  President’s budget request. In recent years, only one of the Corps’  ongoing construction projects—the Olmsted Locks and Dam project—has  met this threshold.

Congress appropriates funds to the Corps’ Civil Works construction  account, and the Corps allocates some of that funding to inland- waterways construction projects. In recent years, Congress has appropriated funds for projects included in the President’s budget request  and has directed the Corps to allocate appropriated amounts that exceed  the amount requested in the President’s budget request to other projects  as depicted in step 8 in figure 9. For example, in fiscal year 2018, the  Administration requested $175 million for the Olmsted Locks and Dam  project, but five projects were funded that year. In the Joint Explanatory  Statement accompanying the appropriations, Congress directed the  Corps to allocate funds to inland-waterways construction projects  prioritized by economic effect in such a way that the Corps uses all  estimated Trust Fund revenues. In accordance with this direction, the  Corps allocated $399 million to inland-waterways construction projects,  with more than half—$224 million— going toward the other three ongoing  inland-waterways projects and a new major rehabilitation project (see fig.  10).

Stakeholders we spoke to stated that the process for determining which  construction projects receive funding can be challenging. Some stated  that the use of different discount rates and benefit-cost ratio thresholds for  authorization and budgeting purposes can create confusion as to whether  projects will be funded. Also, some stakeholders stated that because the  7 percent discount rate used by OMB to calculate the benefit-cost ratio is  higher than the statutory rate used in recent years, use of the OMB  discount rate can result in projects being excluded from the President’s  budget request, an exclusion that can reduce the likelihood of the project  receiving funding. According to the Board, as of December 2017, 14  construction projects have been authorized for construction but have not  been allocated construction funding, and an additional 7 major  rehabilitation projects are also candidates for construction over the next  20 years. However, Corps officials stated that, once the Olmsted Locks  and Dam project is completed, none of the currently authorized projects  will meet OMB’s threshold for inclusion in the President’s budget request.  Further, some stakeholders told us that the Corps’ policy—developed to  provide additional information to OMB during budget development—to  recalculate a project’s benefit-cost ratio every few years, including while  the project is under construction, can create challenges. For one, ongoing  projects included in the President’s budget request have subsequently  been excluded in later years due to a lower updated benefit-cost ratio,  which might reduce the likelihood of the project’s being allocated  funding. For example, the Lower Monongahela Locks and Dams project  had a benefit-cost ratio of 6.7 to 1 at a 7.75 percent discount rate when  construction funds were first expended in fiscal year 1995 (based on  benefits and costs as estimated when the project was authorized in fiscal  year 1992) and has been allocated funding every year since. However,  this project was not included in either the fiscal year 2017 or 2018  President’s budget requests due in part to its updated benefit-cost ratio  having fallen below the 2.5 to 1 threshold because of increased costs and  changes to the expected benefits. Although it was not included in the  President’s budget request, the Corps ultimately allocated funding for the  project in fiscal years 2017 and 2018 based on congressional direction.

section_title: Incremental Funding of Inland-Waterways Construction Projects Contributes to Cost Overruns and Schedule Delays
paragraphs: Since at least 1995, all inland-waterways construction projects have been  funded incrementally, meaning that annual appropriations have covered a  portion of the project’s estimated costs. There are several reasons that  the Administration may request and Congress may appropriate funding  for inland-waterways construction projects incrementally—as they both  have done in recent years—in lieu of full upfront funding.

Available annual funding is generally less than the amount required to  cover the full cost of one new construction project. In addition, the  Corps (like other federal agencies) cannot enter a contract that  exceeds available funding unless authorized by law. For example,  based on average annual Trust Fund revenues since 2015 of about  $107 million, a 50-50 cost share would provide about $214 million in  construction funding annually, whereas the four ongoing construction  projects were each originally estimated to cost more than that amount.  Further, of the 10 new construction projects prioritized to be  completed next in the Corps’ capital investment strategy, as of 2016,  7 of them are estimated to cost at least $350 million.

Additionally, these projects—even once begun—must compete  annually with other funding priorities across the federal government.  We have previously reported that full upfront funding of capital assets  can be challenging to obtain in an era of resource constraints;  incremental funding can make it easier for agencies to meet mission  capital demands within the constraints of their appropriation.

Further, while the Corps could carry over appropriations until they  accrue sufficient funds to fully fund a project upfront (because their  construction appropriations historically have not expired), Corps  officials we spoke to had concerns about this practice. They stated  that carryover funds may be seen as available and reprogrammed to  other civil works efforts (such as rebuilding infrastructure in the wake  of a natural disaster) and that Congress and the Board both expect  the Corps to obligate appropriated funds. In addition, some  stakeholders had concerns that delaying the start of construction until  full upfront funding was appropriated could result in further  deterioration or increased maintenance costs for those facilities.

Finally, according to some stakeholders we spoke to, the current  incremental funding approach has allowed construction projects on  multiple waterways to occur at once—a way of spreading benefits  across the system and providing some indication to local users and  beneficiaries that their local facility will be repaired or replaced.

Nonetheless, incremental funding for inland waterways projects—among  other factors such as engineering design changes—has contributed to  increased costs and schedule delays because it results in inefficient  contracting practices. Corps reports and academic studies have found  that incremental funding has resulted in inefficient contracting for  construction projects, in part because funding is not guaranteed beyond  the current year and contractors must stop working once funds are  exhausted. Because the Corps receives annual appropriations for a  portion of the total estimated cost of a project, the Corps awards contracts  for separable elements that can be constructed and left for a period of  time with minimal damage and safety risks if further funding is unavailable  (such as a contract to build part of a lock wall). According to Corps district  officials, this practice has resulted in the Corps entering into many more  contracts for each project than they would if they had full upfront funding.  For example, Corps officials told us that due to incremental funding, the  Lower Monongahela Locks and Dams project is currently on its 14th  construction contract even though it was originally planned to be  completed using only two contracts. Corps officials told us that this  contracting practice is inefficient and can lead to cost overruns due to, for  example:  contractor mobilization and demobilization, such as moving heavy  equipment on and off the construction site, at the beginning and end  of each contract; prolonged construction due to multiple contractors unable to work at  the same worksite during the same time; extra administrative expenses associated with letting multiple  increased cost of fuel and construction materials (e.g., steel and  cement) from year to year; higher costs of buying construction materials in smaller quantities;  inflation due to prolonged construction.

Further, according to Corps officials and stakeholders, additional  challenges related to the timing and amount of funding allocated in a  given fiscal year can exacerbate inefficiency related to incremental  funding. For example, while under a continuing resolution, the Corps does  not allocate funding to projects that were not included in the President’s  budget, per OMB policy, which can delay funding for projects until  Congress provides appropriations for the remainder of the fiscal year.  Thus, in fiscal year 2018, funding was delayed for the three ongoing  projects that were not included in the President’s budget request.  Although project work can continue if the Corps has some carryover  funds, Corps officials told us that, if they exhaust their funds, a continuing  resolution could mean they won’t be able to exercise the next option on a  construction contract. As a result, the contractor would have to stop  work and shut down the construction site, and the Corps would need to  close the existing contract, repackage the remaining work, and re- advertise the contract—all tasks that can increase the full cost of a  project. Additionally, according to Corps officials, when projects receive  smaller portions of funding than estimated for the upcoming fiscal year,  the amount may not be enough to allow a contractor to continue on the  most efficient construction schedule for that contract or contract option  which can have the effect of increasing costs. Moreover, according to  Corps district officials, the benefit-cost ratios for some ongoing projects  have decreased in recent years in part because the projects have  experienced increased costs (relative to expected benefits) due to a  number of factors, including inefficient contracting stemming from  incremental funding, which may affect the project’s priority status and  inclusion in the President’s budget request.

All four of the Corps’ ongoing construction projects have experienced cost  overruns and, as shown in figure 11, schedule delays. According to Corps  officials, some of these cost increases and delays were due to inefficient  contracting stemming from incremental funding. For example, Corps  officials currently expect that the Kentucky Lock Addition project will  require at least $229 million more (about 19 percent above the original  estimated cost) as a direct result of inefficient contracting and be  completed 17 years later than planned. Similarly, the Corps estimates  that the Chickamauga Lock project will need at least $170 million more  (about 24 percent above the original estimated cost) due to inefficient  contracting and be completed at least 13 years later than planned. The  amount of estimated cost overruns for just these two projects could  potentially fund an entire additional project.

section_title: Timing and Distribution of Funding Could Reduce Cost Increases and Schedule Delays for Inland-Waterways Construction Projects
paragraphs: In the absence of full funding, our funding simulation demonstrates that  contracting efficiency for inland-waterways construction projects could be  increased by funding fewer projects at a time. We developed a simulation  for a set of four hypothetical new construction projects under different  funding approaches to explore the effects of different funding patterns  and timing on total project costs and timeframes. We assumed that all  four hypothetical projects could be completed for $2 billion ($500 million  each, with expected funding of $100 million per year) within 5 years of  construction. For our simulation, we assumed that $200 million would be  available to allocate each year across the four projects—an amount  roughly similar to recent funding levels for actual inland waterways  projects. We developed five funding approaches that varied in the pattern  and timing of funding allocated toward each project. Given these patterns  of funding, we also incorporated cost effects that we hypothesized would  occur. For example, for each year that a project did not receive full  funding—that is, the entire remaining costs of the project were not  provided—we assumed the remaining funding required to complete the  project would increase to account for contracting inefficiencies that were  likely to occur due to incremental funding, such as increased contractor  mobilization and demobilization. Also, for any year that a project received  funding in smaller amounts than expected, we assumed that funding  required to complete the project would rise due to exacerbated contract  inefficiencies due to such factors as having to buy materials in smaller  quantities or break work into smaller separable elements. In addition, we  incorporated inflation into projects’ remaining costs when funding for  those projects was delayed. See appendix III for more detailed  information regarding our methodology for this simulation.

While fully funding projects up front would help to avoid cost increases or  delays due to inefficient contracting, we found that, even with incremental  funding, varying the timing and amount of funding can reduce inefficiency  (see fig. 12). For example, we found that compared to other approaches,  an incremental funding approach that concentrates all available funding to  one of the four projects at a time—as in Approach A, shown in figure 12— results in lower cost overruns and faster construction than an approach  that funds more projects simultaneously with smaller amounts of funding,  as in Approach B (see app. III for results for all five approaches). In  addition, concentrating funding toward one project could lead to greater  years of benefits—as measured by the Corps as the number of years a  facility has been constructed and available for use by vessels. However,  according to Corps officials and stakeholders we spoke to, there may be  risks associated with concentrating funding on one project at a time due  to concerns with delaying the start of other high priority projects. For  example, during the time in which a project is waiting for funding, the  infrastructure may experience further deterioration, and vessels using the  facility may experience increased delays. Corps officials we spoke to  about this simulation generally agreed that the Corps’ current funding  approach most closely resembles Approach B, with most funding going to  the Olmsted Locks and Dam project while the remaining three ongoing  projects receive smaller amounts (see also fig. 6).

OMB and GAO have advocated for full upfront funding of capital projects  as a way to recognize full budgetary commitments, but, as discussed,  fiscal pressures on both the Corps and Congress may make it difficult to  request and appropriate full funding. OMB’s Capital Programming Guide  states that full funding can help ensure that all costs and benefits are taken into account at the  time decisions are made to provide resources,  increase the opportunity to use more competitive contracts, and allow for more efficient work planning.

Further, we have previously reported that full funding is an important tool  for maintaining government-wide fiscal control, because failure to  recognize the full costs of proposed commitments during budget  decisions could lead to distortions in the allocation of resources. We  have also reported that incremental funding of capital projects can reduce  available funding for future projects and erodes future program flexibility  because funding is dedicated to projects begun in previous years.  Though providing full upfront funding would likely reduce the overall costs  of inland waterways construction over the long term, it may require a  significant increase in annual appropriations in the short term, which  Corps officials consider to be highly unlikely.

Both OMB and GAO have acknowledged the challenges associated with  “spikes” in appropriations that would be required for full funding and have  suggested that innovative funding mechanisms could be used to mitigate  this challenge. In 2010, we recommended that the Corps work with  Congress to develop a more stable project-funding approach for Civil  Works projects that provides more efficient use of funds, but the  Department of Defense only partially concurred with the recommendation,  stating that it will support budget decisions made by the administration.  However, without some change in the way inland-waterways construction  projects are funded to either provide full funding or reduce the effects of  incremental funding by concentrating on fewer projects at one time,  current cost increases and schedule delays resulting from inefficient  contracting are likely to continue. For example, according to the Corps’  2016 capital investment strategy, under a scenario in which construction  funding is limited only by available Trust Fund revenues, in the next 20  years the Corps could complete 16 of the 22 major rehabilitation and new  construction projects identified as priority projects for approximately $7  billion; however, because these estimates do not account for cost  overruns due to the current incremental funding approach, the Corps is  unlikely to meet this goal.

section_title: Stakeholders Identified Limitations and Trade-offs Associated with Proposed Options for Increasing Available Funding for Inland- Waterways Construction
paragraphs: In addition to adjusting the timing and distribution of funding, according to  some of the stakeholders we interviewed, increasing available funding for  construction would provide more upfront funding to enable more efficient  contracting. Stakeholders said that with additional funding, the Corps may  be able to complete ongoing inland waterways projects more quickly and  begin other construction projects. We asked stakeholders representing 55  national and regional entities and researchers about options to increase  available funding for inland waterways construction that have been  proposed by policymakers and in relevant literature including: altering the cost share between the Trust Fund and federal  requiring other users and beneficiaries of the waterways to contribute  to the Trust Fund,  increasing or adding fees for commercial users, expanding opportunities for local sponsors to contribute to funding pursuing alternative financing arrangements.

While each option has potential benefits, stakeholders we interviewed  identified limitations or trade-offs that could affect the feasibility of each  option.

Altering the Trust Fund cost share. Altering the percentage of the Trust  Fund cost share for construction projects could increase available funding  to complete construction projects. For example, in 2014 the Trust Fund’s  cost share for the Olmsted Locks and Dam project was reduced by  statute from 50 to 25 percent for fiscal year 2014, and to 15 percent for  subsequent fiscal years—thereby increasing the federal share to 85  percent—to speed the pace of other inland-waterways construction  projects (by increasing the overall funding available for those projects)  and to reduce the costs to commercial users. The Inland Waterways  Users Board (Board), in its April 2018 annual letter to Congress,  proposed making such a change for all future projects. Specifically, the  Board proposed increasing the federal government’s share of  construction costs from 50 percent to 75 percent. According to the  Board and some stakeholders, this could increase the available funding  for Corps construction projects on the inland waterways system. Because  each Trust Fund dollar would be matched by three dollars from general  revenues as opposed to one dollar under a 50/50 split, overall funding  may be increased. The Board stated that this approach may also enable  the Corps to start and complete projects more quickly. For example, as  shown in figure 12, with more upfront funding available for each project,  the Corps may be able to contract for projects more efficiently than if it  received smaller amounts of funding each year. However, some  stakeholders said additional appropriations for inland waterways  construction from general revenues would be required to achieve the  benefits of this option, an approach that could, in turn, reduce funding  available for other congressional priorities or increase the federal deficit.  Absent additional appropriations, however, the amount of funding for  construction could be reduced. For example, if appropriations from  general revenues were $100 million per year under both scenarios, total  funding for inland waterways under a 75/25 split would be only about  $133 million, instead of $200 million under the traditional 50/50 split. To  provide the same $200 million for construction, but reduce the costs to  commercial users under a 75/25 split, appropriations from general  revenues would need to increase to $150 million.

Require other users and beneficiaries of the waterways to contribute  to the Trust Fund. Some stakeholders we spoke to proposed requiring  that other users of the waterways contribute to the Trust Fund.  Recreational boaters, municipal water utilities, and hydropower utilities  already pay fees associated with their use of inland waterways, but this  revenue is not directed toward the Trust Fund, for example:  recreational users, such as recreational boaters and fishermen, on all  waterways pay fees of about $628 million annually on fishing  equipment and taxes on fuel used in motorboats that are currently  deposited into the U.S. Fish and Wildlife Sport Fish Restoration and  Boating Trust Fund, which is used to sustain sport-fishing  populations; municipal water utilities that have Corps’ water storage contracts on  the inland waterways pay fees that are currently deposited into the  general fund of the Treasury; and power generated by federally owned hydroelectric dams (including  those owned by the Corps on the inland waterways) is sold at rates  intended to cover the government’s costs of operating and  maintaining the dams, among other things.

Other infrastructure trust funds are supported in part through user fees  paid by both commercial and non-commercial users. For example, excise  taxes, primarily on motor fuels and commercial trucks and tires, are  deposited into the Highway Trust Fund, which is used to provide grants to  state highway or transportation agencies. Some stakeholders said that all  users who benefit from the pools created by navigation dams should bear  some portion of the costs of the infrastructure, and revenue collected from  these users could potentially be redirected to the Trust Fund. However,  some other stakeholders said that these users as well as U.S. taxpayers  that do not use the waterways already contribute to inland waterways  construction, operations, and maintenance costs through their federal tax  contributions to general revenues. We have previously found that in  theory, the extent to which a program is funded by user fees should  generally be guided by who primarily benefits from the program; however,  the extent to which a program benefits users or the general public is not  usually clear cut. In addition, redirecting revenue from fees currently  paid by other users of the waterways to inland waterways would reduce  funding available for other congressional priorities, as these funds are  currently being directed towards other uses.

Increasing or adding fees for commercial users. Past administrations  as well as entities such as the Congressional Budget Office have  proposed increasing revenue for inland waterways construction by  increasing existing fees or imposing additional fees, such as lockage  fees, for commercial users of the inland waterways—the only group that  is currently paying the fuel tax—as they are the primary beneficiaries.  For instance, in a legislative proposal accompanying the fiscal year 2019  President’s budget request, the current administration proposed  increasing the number of waterways subject to the fuel tax, which could  have the effect of increasing the amount some users pay or increasing  the number of commercial users subject to the tax. However, some  stakeholders pointed out that increasing or adding fees for these users  would raise the costs of transportation on the waterways, which could  lead shippers to switch to other modes of transportation (such as trucks  and rail, which are less efficient) and ultimately reduce both waterways  traffic and Trust Fund revenue. Specific proposals for increasing or  adding to existing fees are described in more detail below.

Index fuel tax to inflation: Two stakeholders said that indexing the fuel  tax to inflation could help the Trust Fund retain its purchasing  capability over time. In fiscal year 1994, the fuel tax was set at $0.20  per gallon, and it was not raised again until 2015, when Congress  increased the tax to $0.29 per gallon with the support of commercial  users–close to the inflation adjusted-level of the 1994 rate.  However, the rate was not set to automatically rise with future  inflation, which reduces the purchasing power of the fuel tax over  time. For example, according to our analysis of fuel tax revenue for  1994–2014, if the fuel tax had been indexed to inflation as of 1994,  about $400 million in additional revenues would have been raised  over the 20-year period between 1994 and 2014. If the additional  $400 million were matched by general revenues dollar for dollar, a  total of $800 million more would have been available to the Corps for  construction projects.

Annual vessel fee: Citing the insufficiency of existing revenue to pay  the users’ share of capital investment costs, the current administration  has proposed a new annual per vessel fee for commercial users to  help finance future construction projects and cover a portion of the  cost of operating and maintaining them (operations and maintenance  has historically been a federal responsibility). The current  administration expects this fee would raise approximately $1.78 billion  in new revenue from fiscal years 2019–2028 ($178 million annually) to  supplement revenue from the existing fuel tax. In its annual letter to  Congress, the Board said this proposal is similar to what the prior  administration proposed and that Congress has repeatedly rejected  because it would more than double the amount collected from  commercial users of the inland waterways system each year, with  associated consequences for shipping costs and traffic diverted to  other modes.

Lockage fees: Various groups have proposed collecting lockage fees  from commercial users to tie fees more closely to use of the  infrastructure and increase available funding. For example, prior  administrations’ budget proposals have recommended replacing or  supplementing the fuel tax with lockage fees. According to the  Transportation Research Board, lockage fees could increase available  funding for construction, are moderately easy to administer, and could  be implemented on a system-wide basis, with lock operators keeping  track of lock use. However, some stakeholders stated that the relative  unknowns of how a lockage fee would be implemented make it less  appealing than the current, familiar fuel tax, which they are able to  incorporate into their operating budgets. Additionally, some  stakeholders told us adding lockage fees—just like increasing the fuel  tax or adding other fees—would increase shipping costs, and could  reduce traffic on the inland waterways. Further, some stakeholders  raised concerns about the equity of lockage fees, as all users benefit  from the system as a whole, but not all users frequently pass through  locks. For example, as one stakeholder pointed out: the Mississippi  River has zero locks and dams from St. Louis to New Orleans, so  users that operate chiefly on that part of the system may not need to  pay lockage fees. As such, lockage fees would affect some  commercial users more than others: if the fuel tax were replaced with  lockage fees, some users (those that do not routinely pass through  locks, but benefit from the pools created) may ultimately pay much  less than they currently do, while others (those operating on areas of  the system with a high number of locks) would pay much more.

Expanding the use of contributed funds. Expanding the Corps’  authority to allow local sponsors—generally state and local governments  or interstate agencies—to contribute to the costs of project construction,  as is the case for other types of water resource projects, could increase  available funding. The Water Resources Reform and Development Act  of 2014 established a pilot project that enabled the Corps to accept  contributed funds from nonfederal interests to pay for the costs of  operating inland waterways facilities but does not allow such contributions  for maintenance or construction.

Some stakeholders said expanding the current use of contributed funds  for operations expenses by enabling local sponsors to contribute funds for  construction could potentially benefit some communities and increase  available funding. However, the costs for construction and maintenance  of facilities on high-use waterways would likely be too high for local  sponsors to offset. Moreover, we have reported that state and local  governments face long-term fiscal pressures, which may limit their ability  to contribute to costs for navigation locks in their jurisdictions.

Pursuing alternative-financing arrangements. The current  administration and others have proposed alternative-financing options  that could enable the Corps to leverage either private capital or other  available funds in order to provide full upfront funding for inland  waterways construction projects. Numerous proposals call for the Corps  to leverage private capital, such as public-private partnerships or debt  financing, to access full funding at the beginning of inland-waterways  construction projects. The Water Resources Redevelopment Act of 2014  authorized the Corps to implement pilot programs to explore the use of  debt financing, such as low interest loans provided under the Water  Infrastructure Finance and Innovation Act of 2014, and public-private  partnerships for civil works water resources projects. Similarly, the current  administration’s 2018 Legislative Outline for Rebuilding Infrastructure in  America proposes authorizing the Secretary of the Army to execute  agreements with non-federal public or private entities for civil works water  resources construction projects.

While some stakeholders stated that alternative-financing arrangements  could increase available funding for inland-waterways construction  projects, they were unsure of whether these agreements would work in  practice. According to some stakeholders, public-private partnerships and  debt-financing would provide upfront funding with an expectation of either  a profitable return to a private equity partner or repayment of debt;  however, according to some stakeholders, there is limited interest in  entering into these financing arrangements among private sector  investors because there is no clear and viable revenue stream to provide  such returns. For instance, some stakeholders told us that increasing  fees for commercial users to provide a revenue stream could have the  effect of reducing traffic on waterways, which would reduce the revenue  potential of fees.

Alternative-financing arrangements would also require congressional  action to implement. Specifically, depending on the structure of these  financing agreements, alternative financing would require legislative  changes, which could include granting the Corps authority to: (1) enter  into public-private partnerships, (2) use debt financing, (3) use contract  authority to obligate funding beyond what is appropriated in a given  year, or (4) collect and retain revenue such as lockage fees. While the  Water Resources Reform and Development Act of 2014 authorized the  pilot programs to explore the use of public private partnerships and debt  financing, Corps officials told us that they cannot enter into agreements of  this type without specific appropriations, which they have not yet  received. Corps officials stated that they are currently developing a high  level policy to provide general direction about the use of alternative  financing but according to them, the lack of a clear revenue source may  make it more difficult to execute alternative-financing strategies that  include private partners for inland waterways infrastructure.

In contrast, the President recently proposed establishment of a Federal  Capital Revolving Fund, which could enable federal agencies to access  full upfront funding for certain construction projects without leveraging  private capital. According to the proposal, the revolving fund would  transfer funding to agencies to finance large-dollar real-property capital  projects designated in appropriations acts if the project receives an  appropriation for the first of a maximum of 15 required annual  repayments. If those conditions are met, the revolving fund would transfer  funds to agencies to cover the full cost to acquire the capital asset—in the  case of inland waterways, the full cost to construct the project.  Purchasing agencies would repay the fund using annual appropriations— for inland waterways, this approach likely would mean that repayments  could be made using appropriations from either the Trust Fund or general  revenues. While Corps inland-waterways construction projects would not  be eligible for funding under this proposal, this type of approach to  alternative financing could potentially be used to enable the Corps to  contract for inland waterways construction more efficiently. However, only  projects included in the President’s budget request would be eligible to  receive this funding. At present, only one inland waterway project— Olmsted Locks and Dam—meets that requirement, and the Corps does  not anticipate other authorized projects meeting the current benefit-cost  ratio threshold for inclusion. Congressional action would be required to  implement the proposed Federal Capital Revolving Fund, as well as  authorize eligibility of inland-waterways construction projects, or a  separate fund that would include Corps infrastructure projects.

section_title: Conclusions
paragraphs: The inland waterways are a critical component of the nation’s freight  transportation system, and the Corps must manage the system within the  context of competing priorities and limited resources. To effectively  manage those resources, the Corps must accurately identify, assess, and  communicate its priorities for operations, maintenance, and construction  funding. The Corps cannot quantify deferred maintenance for inland  waterways because it lacks a definition and measure (or measures) of  deferred maintenance that reflects priorities and how deferral will affect  system reliability. As such, the Corps is unable to clearly communicate its  funding needs related to operating and maintaining the inland waterways.

As with many federal programs, the Corps manages inland-waterways- construction and major-rehabilitation projects within some fundamental  constraints, including available Trust Fund revenue, which is less than the  amount that would be needed to fully fund the estimated costs of any of  the four ongoing new construction projects. Accordingly, Congress and  the President have instead incrementally funded multiple construction  projects at a time. However, this incremental-funding approach can lead  to construction delays and increasing costs. As a result, other priority  projects cannot be started, construction backlogs grow, and delays and  closures continue to affect vessels at locks and dams that continue to  deteriorate while waiting for replacement or rehabilitation. The Corps’  capital investment strategy identifies an approach to funding priority  projects given estimated Trust Fund revenue, but given the constrained  fiscal environment and the unpredictable nature of the annual  appropriations process, cost increases and schedule delays are likely to  continue. Should Congress decide that additional funding is warranted to  reduce this inefficiency, our report includes several options stakeholders  have identified for doing so, such as increasing the federal share of  construction costs for these projects. In the absence of increased funding,  however, stakeholders we spoke to identified actions the Corps could  take in coordination with Congress to increase the efficiency of  contracting for inland waterways projects. The Corps could explore  changes—such as sequencing project construction or legislative changes  to enable more upfront funding prior to starting construction, among other  options discussed in this report—that would enable the Corps to contract  for inland waterways construction in a more efficient way. However, all of  the options we discuss have important policy trade-offs and other  challenges that the Corps and Congress would need to carefully consider.

section_title: Recommendations for Executive Action
paragraphs: We are making the following two recommendations to the Corps:  The Chief of Engineers and Commanding General of the U.S. Army  Corps of Engineers should define and measure deferred maintenance for  inland waterways in a way that enables the Corps to clearly communicate  estimated costs for maintenance needs. (Recommendation 1)

The Chief of Engineers and Commanding General of the U.S. Army  Corps of Engineers should pursue ways to increase the Corps’ ability to  use available funding for inland waterways construction more efficiently  and, should changes to the Corps’ authority be necessary, develop a  legislative proposal to request such authority. (Recommendation 2)

section_title: Agency Comments
paragraphs: We provided a draft of this report to the Secretaries of Defense,  Transportation, and Homeland Security and the Director of the Office of  Management and Budget for review and comment. The Department of  Defense provided written comments that are reprinted in appendix V; the  department concurred with our recommendations. The Department of  Homeland Security and Office of Management and Budget provided  technical comments, which we incorporated as appropriate. The  Department of Transportation had no comments on the draft report.

We are sending copies of this report to appropriate congressional  committees; the Secretaries of Defense, Transportation, and Homeland  Security; and the Director of the Office of Management and Budget. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-2834 or VonAhA@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. GAO staff who made key contributions to  this report are listed in appendix VI.

section_title: Appendix I: Inland and Intracoastal Fuel- Taxed Waterways of the United States
paragraphs: 1.  Alabama-Coosa Rivers: From junction with the Tombigbee River at  river mile (hereinafter referred to as RM) 0 to junction with Coosa  River at RM 314.  2.  Allegheny River: From confluence with the Monongahela River to form  the Ohio River at RM 0 to the head of the existing project at East  Brady, Pennsylvania, RM 72.  3.  Apalachicola-Chattahoochee and Flint Rivers (ACF): Apalachicola  River from mouth at Apalachicola Bay (intersection with the Gulf  Intracoastal Waterway) RM 0 to junction with Chattahoochee and Flint  Rivers at RM 107.8. Chattahoochee River from junction with  Apalachicola and Flint Rivers at RM 0 to Columbus, Georgia at  RM155 and Flint River, from junction with Apalachicola and  Chattahoochee Rivers at RM 0 to Bainbridge, Georgia, at RM 28.  4.  Arkansas River (McClellan-Kerr Arkansas River Navigation System):  From junction with Mississippi River at RM 0 to Port of Catoosa,  Oklahoma, at RM 448.2.  5.  Atchafalaya River: From RM 0 at its intersection with the Gulf  Intracoastal Waterway at Morgan City, Louisiana, upstream to junction  with Red River at RM 116.8.  6.  Atlantic Intracoastal Waterway: Two inland waterway routes  approximately paralleling the Atlantic coast between Norfolk, Virginia,  and Miami, Florida, for 1,192 miles via both the Albermarle and  Chesapeake Canal and Great Dismal Swamp Canal routes.  7.  Black Warrior-Tombigbee-Mobile Rivers: Black Warrior River System  from RM 2.9, Mobile River (at Chickasaw Creek) to confluence with  Tombigbee River at RM 45. Tombigbee River (to Demopolis at RM  215.4) to port of Birmingham, RM’s 374-411 and upstream to head of  navigation on Mulberry Fork (RM 429.6), Locust Fork (RM 407.8), and  Sipsey Fork (RM 430.4).  8.  Columbia River (Columbia-Snake Rivers Inland Waterways): From the  Dalles at RM 191.5 to Pasco, Washington (McNary Pool), at RM 330,  Snake River from RM 0 at the mouth to RM 231.5 at Johnson Bar  Landing, Idaho.  9.  Cumberland River: Junction with Ohio River at RM 0 to head of  navigation, upstream to Carthage, Tennessee, at RM 313.5.  10. Green and Barren Rivers: Green River from junction with the Ohio  River at RM 0 to head of navigation at RM 149.1.  11. Gulf Intracoastal Waterway: From St. Mark’s River, Florida, to  Brownsville, Texas, 1,134.5 miles.  12. Illinois Waterway (Calumet-Sag Channel): From the junction of the  Illinois River with the Mississippi River RM 0 to Chicago Harbor at  Lake Michigan, approximately RM 350.  13. Kanawha River: From junction with Ohio River at RM 0 to RM 90.6 at  Deepwater, West Virginia.  14. Kaskaskia River: From junction with Mississippi River at RM 0 to RM  36.2 at Fayetteville, Illinois.  15. Kentucky River: From junction with Ohio River at RM 0 to confluence  of Middle and North Forks at RM 258.6.  16. Lower Mississippi River: From Baton Rouge, Louisiana, RM 233.9 to  Cairo, Illinois, RM 953.8.  17. Upper Mississippi River: From Cairo, Illinois, RM 953.8 to  Minneapolis, Minnesota, RM 1,811.4  18. Missouri River: From junction with Mississippi River at RM 0 to Sioux  City, Iowa, at RM 734.8.  19. Monongahela River: From junction with Allegheny River to form the  Ohio River at RM 0 to junction of the Tygart and West Fork Rivers,  Fairmont, West Virginia, at RM 128.7.  20. Ohio River: From junction with the Mississippi River at RM 0 to  junction of the Allegheny and Monongahela Rivers at Pittsburgh,  Pennsylvania, at RM 981.  21. Ouachita-Black Rivers: From the mouth of the Black River at its  junction with the Red River at RM 0 to RM 351 at Camden, Arkansas.  22. Pearl River: From junction of West Pearl River with the Rigolets at RM  0 to Bogalusa, Louisiana, RM 58.  23. Red River: From RM 0 to the mouth of Cypress Bayou at RM 236.  24. Tennessee River: From junction with Ohio River at RM 0 to  confluence with Holstein and French Rivers at RM 652.  25. White River: From RM 9.8 to RM 255 at Newport, Arkansas.  26. Willamette River: From RM 21 upstream of Portland, Oregon, to  Harrisburg, Oregon, at RM 194.  27. Tennessee-Tombigbee Waterway: From its confluence with the  Tennessee River to the Warrior River at Demopolis, Alabama.

section_title: Appendix II: Inland Waterways Stakeholders GAO Interviewed
paragraphs: Appendix II: Inland Waterways Stakeholders  GAO Interviewed Entity  American Association of State Highway and Transportation Officials  American Society of Civil Engineers  Big River Coalition (New Orleans)

Gulf Intracoastal Canal Association (New Orleans)

Illinois Corn Growers Association (Rock Island)

National Grain and Feed Association  Pacific Northwest Waterways Association (Walla Walla)

River Industry Action Committee (Rock Island)

Warrior-Tombigbee Waterway Association (Mobile)

Waterways Association of Pittsburgh (Pittsburgh)

Waterways Council, Inc.

Archer Daniels Midland Company (Rock Island)

Campbell Transportation Company, Inc. (Pittsburgh)

Canal Barge Company, Inc. (New Orleans)

Channel Shipyard Companies (New Orleans)

Cooper Marine & Timberlands Corp (Mobile)

J. Craig Stepan, formerly of U.S. Steel (Mobile)

Parker Towing Company (Mobile)

Shaver Transportation (Walla Walla)

Tidewater Barge Lines (Walla Walla)

Turn Services (New Orleans)

Arkansas Waterways Commission (Little Rock)

Little Rock Port Authority (Little Rock)

The Port of New Orleans (New Orleans)

The Port of Pittsburgh Commission (Pittsburgh)

Washington Grain Commission (Walla Walla)

Alabama Scenic River Trail (Mobile)

Allegheny River Development Corporation (Pittsburgh)
subsections: section_title: Stakeholder Type
paragraphs: Entity  Boat Owners Association of the United States (BoatUS)

Little Rock Yacht Club (Little Rock)

Upper Monongahela River Association (Pittsburgh)

Allegheny County Sanitary Authority (Pittsburgh)

Clarksville Light & Water Company (Little Rock)

Southwestern Power Resources Association (Little Rock)

C. James Kruse, Texas A&M University  Chris Hendrickson, Ph.D., Carnegie Mellon University   Craig Philip, Ph.D., Vanderbilt University  Dennis Lambert, COWI Marine North America  Edward Dickey, Ph.D., Dawson & Associates  Gary Loew, Dawson & Associates  Jill Jamieson, Jones Lang LaSalle  Leonard Shabman, Ph.D., Resources for the Future   Paul Bingham, Economic Development Research Group, Inc.

B. Starr McMullen, Ph.D., Oregon State University  Stephen Fitzroy, Ph.D., Economic Development Research Group, Inc.

section_title: Appendix III: Technical Appendix for GAO’s Funding Simulation for Inland-Waterways Construction Projects
paragraphs: To illustrate the effects associated with the current-funding approach,  which was consistently discussed as a challenge in interviews with  agency officials and stakeholders, we developed a funding simulation for  hypothetical projects using assumptions that were anchored in findings  from a 2008 Corps study on factors contributing to cost increases for  inland-waterways construction projects. This funding simulation was  intended to demonstrate the effects of the pattern and timing of funding  on total project costs and construction schedules. To inform our  assumptions, we analyzed the results of the Corps study, which  examined three inland-waterways construction projects and identified the  many factors that contributed to cost increases and schedule delays for  each project. One of the factors the report identified that led to higher  funding requirements (that is, cost overruns) was inefficient contracting  driven by the amount and timing of funding provided to each project.

We developed five hypothetical scenarios that represent different funding  approaches of a set of four identical construction projects (including a  control scenario in which full upfront funding for all projects is available)  based on the following information: each project requires $500 million in funding; each project takes 5 years to construct if it is fully funded with $500 absent full upfront funding, projects were structured to expect funding  of $100 million per year for the project; once started, funding is not interrupted over the period of our  total amount of available funding to fund these projects is $200 million  per year; and;  the number of years the projects provide benefits—that is, the number  of years a facility has been constructed and is available for use by  vessels—varies within the period of time selected for the simulation  (2020 through 2034).

To illustrate the effects of the different funding approaches on total project  costs and time frames, we made assumptions about the effect of various  funding structures on total funding requirements. These assumptions  were informed by our review of the findings of the Corps’ study related to  the effects of incremental funding and discussions of these issues with  Corps officials. These assumptions include:

Remaining required project funding was assumed to increase by 2  percent each year due to inefficient contracting that results from less  than full upfront funding—that is, if the full $500 million of estimated  project funding is not provided in year 1.

Remaining required project funding was also assumed to increase by  0.5 percent each year if projects received less funding than is  expected in a given year (less than $100 million) due to exacerbated  project-contracting inefficiencies.

An increase of 2 percent per year of remaining required project  funding was applied if the project’s start was delayed beyond its  intended starting year due to inflation.

We applied increases to funding requirements where appropriate under  the five different funding approaches:

Approach A: Fund One Project at a Time—Funding only one project  at a time with all available funding ($200 million). Once the first project  has been fully funded, all available funding is provided to the second  project, and so on.

Approach B: Fund Multiple Projects at Different Amounts—Funding  one project at a time at the expected level—that is, at $100 million  each year until it is finished—then dividing remaining available funding  equally to the remaining three projects. After the first project is  complete, the second project receives $100 million each year until  completion and the remaining funding is divided evenly, and so on.

Approach C: Fund Two Projects at a Time—Available funding is  divided among two projects; two projects receive funding at the  expected level ($100 million) and the start of funding for the remaining  projects is delayed until the first 2 are completed.

Approach D: Delay Construction to Fully Fund One Project at a  Time—Full upfront funding for one project at a time: allocation of  funds is delayed until the entire remaining funding required ($500  million plus increases due to inflation) is available.

Approach E: Fund Multiple Projects Equally—Equally funding all four  projects at once: since the overall budget is $200 million, each project  is funded at $50 million per year.

We found that the timing and amount of incremental funding resulted in  varying degrees of cost overruns (see fig. 13). In addition, the different  funding approaches led to varying years of benefits—as measured by the  Corps as the number of years a facility has been constructed and  available for use by vessels—counted over a 15-year span of our  simulation. This variation is shown in figure 13, but these projects would  provide many years of benefits beyond this timeframe. For example, we  found that—compared to other approaches—an incremental funding  approach that concentrates all available funding to one of the four  projects at a time, as in Approach A, below, can reduce inefficiency.

To validate our findings, we solicited feedback from Corps officials from  the Pittsburgh District, Pennsylvania and Rock Island District, Illinois— based on their past and current experience with inland-waterways  construction projects—from the Corps’ Cost Estimating Center of  Expertise in Walla Walla, Washington; and representatives from the  Waterways Council, Inc. to understand the perspectives of industry  stakeholders. They all generally agreed that our assumptions,  approaches, and results were reasonable.

section_title: Appendix IV: Objectives, Scope, and Methodology
paragraphs: In this report, we (1) assess how the Corps allocates funds for operations  and maintenance projects for the inland waterways system; (2) describe  how the Corps prioritizes and funds construction projects, and assess the  effect of the current-funding approach on projects’ costs and schedules;  and (3) present stakeholder opinions on proposed options to alter the  funding and management of inland waterways and any associated  limitations or trade-offs. The scope of our review includes Corps activities  related to managing commercial navigation—including operations,  maintenance, and construction—on the 27 inland waterways subject to  the inland waterways diesel fuel tax. The fuel-taxed inland waterways  system is made up of the navigable waterways of the Mississippi River  and its tributaries, the Ohio River basin, the Gulf and Atlantic Intracoastal  Waterways, and the Columbia-Snake Rivers, among others (see app. I  for a list of fuel-taxed inland waterways). Commercial navigation activities  are those that facilitate the movement of traffic along the waterways for  commercial purposes, such as the transportation of goods for sale. For  contextual information on operations, maintenance, and construction  spending, we analyzed Corps financial data on obligations for operations  and maintenance for inland-waterways navigation projects for fiscal years  2006 through 2017 (the only years for which data were available) and  allocations for construction and major rehabilitation of locks and dams for  fiscal years 1997 through 2018 from the Corps of Engineers Financial  Management System. To determine the reliability of this data for the  purposes of this report, we reviewed the data to identify obvious errors  and missing data and interviewed appropriate Corps officials about  related internal controls and procedures and the limitations of the data.  We found these data to be sufficiently reliable for the purpose of providing  contextual information about funding for inland waterways operations and  maintenance and construction over time.

With regard to all of our reporting objectives, we interviewed a range of  Corps officials at the headquarters, division, and district levels, as well as  national and regional stakeholders. We interviewed district officials from  a non-generalizable sample of 6 of the 24 Corps districts that manage  fuel-taxed waterways within their district boundaries; we selected the districts to include a variety of geographic regions, waterway  characteristics, primary commodities shipped, and history of construction  projects funded through the Trust Fund. Based on these criteria, we  selected the Corps districts in Little Rock, Arkansas; Mobile, Alabama;  New Orleans, Louisiana; Pittsburgh, Pennsylvania; Rock Island, Illinois;  and Walla Walla, Washington. In addition, we interviewed officials from  the Corps’ Northwestern Division office, which oversees the Walla Walla  District, to understand the division-level role in coordinating districts’  inland-waterways infrastructure projects. We also conducted a total of 42  semi-structured interviews with waterways stakeholders representing 43  different regional and national entities including commercial, recreational,  and other waterway users and 12 researchers (academics, economists,  and engineers) for a total of 55 stakeholders. National stakeholders were  identified by reviewing related literature and our prior reports and  recommendations from the Transportation Research Board and the  Waterways Council, Inc. (an industry organization representing a range of  waterway users including shippers, ports, energy providers, waterways  operators, and other advocacy groups). Regional stakeholders in the six  selected districts were identified through recommendations from agencies  and national waterways stakeholder organizations to represent a mix of  commercial users (such as barge companies and shippers with  commercial interests in the U.S. inland waterways system); recreational  users; and industrial water users (such as municipal water authorities and  hydropower entities). From those stakeholders identified, we selected  entities to interview to achieve diversity of waterway users’ perspectives  and conducted interviews with both individual entities as well as  associations representing a variety of users and companies. In addition  to waterways’ users, we also interviewed stakeholders who have  conducted research regarding the management of and allocation of  funding for fuel-taxed waterways, selected based on their contributions to  the relevant literature on options for funding and managing inland  waterways, including academics, economists, and engineers who were  knowledgeable about a range of topics including commodities  transportation (agricultural, energy products, and other materials),  engineering, and water resources. See appendix II for a list of entities  represented among the stakeholders we interviewed.

We asked agency officials and stakeholders open-ended questions and  did not conduct a survey in which a response was provided irrespective of  whether a certain issue was relevant to the interviewee, so not every topic  was brought up or discussed by every interviewee. We analyzed the  responses to identify common themes and the range of opinions that  arose in interviews, which we have reported on. To identify these themes  and summarize the opinions of agency officials and stakeholders,  potential themes were identified via review of a sample of interviews. Two  analysts then conducted a content analysis to identify the themes  discussed in each interview and categorize the opinions of the  interviewees. For each interview, one analyst independently reviewed the  record of interview, and the other analyst later verified that coding. If there  was disagreement, the analysis discussed their assessment and came to  a final determination on the categorization. Because we selected a non- generalizable sample of stakeholders, their responses should not be used  to make inferences about a population. To characterize stakeholders’  views throughout this report, we defined modifiers (e.g., “some”) to  quantify stakeholders as follows:  “some” stakeholders represents stakeholders in 3 to 14 of the 42  interviews  “many” stakeholders represents stakeholders in 15 or more of the 42  interviews.

To examine how the Corps allocates funds for operations and  maintenance projects for the inland waterways system, we examined the  President’s budget request for civil works and appropriations for fiscal  years 1997 through 2018 as well as the Corps’ budget request  development guidance to understand how the Corps develops its budget  request and prioritizes operations and maintenance projects. We  conducted site visits to Mobile, Alabama; New Orleans, Louisiana; and  Pittsburgh, Pennsylvania, to interview Corps officials and various regional  stakeholder groups in person, and to observe the condition of waterway  infrastructure. We also interviewed officials from the Office of the  Assistant Secretary of the Army for Civil Works (ASA-CW), the Office of  Management and Budget (OMB), the Department of Transportation’s  Maritime Administration, and the Department of Homeland Security’s U.S.  Coast Guard to understand how the Corps coordinates with other  agencies to fulfill its inland-waterways navigation mission. To assess the  Corps’ efforts related to deferred maintenance we interviewed Corps  officials about how the Corps measures and defines deferred  maintenance and compared these practices with federal internal-control  standards related to control activities and quality information.

To describe how the Corps prioritizes and funds inland-waterways  construction projects and to examine the effect of the current funding  approach on projects’ costs and schedules, we reviewed relevant  statutes, agency policies and guidance, the Corps’ capital-investment  strategy documents prepared in conjunction with the Inland Waterways  Users Board, as well as the Corps’ Civil Works budget justification  documents in support of President’s budget requests, congressional  appropriations, and accompanying conference reports. We also reviewed  relevant Corps documents, such as reports on ongoing construction  projects and studies on construction cost increases; prior GAO reports;  OMB capital funding guidance; and other academic studies to gather  information on capital project funding approaches, including for inland  waterways projects. We analyzed data from the Corps of Engineers  Financial Management System to identify sources of funding for inland- waterways construction projects from fiscal years 1996 through 2018. As  discussed above, we found these data sufficiently reliable for the  purposes of providing contextual information about the Corps’ funding  sources. In addition to interviewing Corps officials and stakeholders, as  described above, we also interviewed officials from the office of the ASA- CW and OMB for their views regarding the prioritization and funding  processes for inland waterways-infrastructure projects, and the roles their  organizations play in those processes. We compared the established  method of funding inland-waterways construction projects with federal  internal-control standards, OMB guidance, and prior GAO work related to  funding capital projects.

To illustrate the effects of the current funding approach on costs and  schedules for inland-waterways construction projects, we developed a  simulation of the effects of various funding approaches on the total  funding requirements for a set of hypothetical construction projects. The  simulation incorporates assumptions regarding the amount of total  funding a project would require (including any cost overruns) due to the  pattern and timing of funding made available. Our assumptions were  anchored in findings from a 2008 Corps study on factors contributing to  cost increases for three inland-waterways construction projects, and  Corps officials and other industry stakeholders generally agreed that our  assumptions and results were reasonable. Additional information on our  methodology for developing this simulation and the full results are  included in appendix III.

Finally, to identify proposed options to alter the funding and management  of inland waterways, we conducted a literature search—including  scholarly/peer-reviewed journals, government reports, congressional  hearings’ transcripts, and associations’ and think tanks’ publications—to  identify relevant studies and proposals about inland waterways’ financing  in the United States, published between 2007 and 2017. Through our  literature search, we reviewed the abstracts for 103 potentially relevant  studies and identified 24 for further review. For each of these 24 studies,  we reviewed the entire study and determined 13 studies were relevant.  We then reviewed these 13 studies to identify the options most commonly  discussed or proposed. For the purposes of this report, we have divided  those options into broad categories: altering the cost sharing between the Trust Fund and federal  requiring other users and beneficiaries of the waterways to contribute  to the Trust Fund,  increasing or adding fees for commercial users, expanding opportunities for local sponsors to contribute to funding pursuing alternative-financing arrangements.

In addition, we reviewed proposals by recent administrations, including  the fiscal year 2018 President’s budget request, and interviewed Corps  officials and other entities including the Transportation Research Board  and district and agency stakeholders selected as described above to  ensure we had identified the most relevant options. During interviews with  stakeholders (as discussed above) we asked about their general views on  the potential benefits limitations, and trade-offs of those options. See  appendix II for a list of the stakeholders we interviewed.

We conducted this performance audit from June 2017 through November  2018 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.

section_title: Appendix V: Comments from the Department of Defense

section_title: Appendix VI: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: Andrew Von Ah, (202) 512-2834 or Vonaha@gao.gov.

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, the following individuals made  important contributions to this report: Susan Zimmerman, Assistant  Director; Katie Hamer, Analyst-In-Charge; Amy Abramowitz; Faisal Amin;  Krister Friday; Carol Henn; Hannah Laufe; Sara Ann Moessbauer; Josh  Ormond; Cheryl Peterson; Amy Rosewarne; Alexandra Rouse; Lisa  Shibata; and Pamela Snedden.

Fast facts: The U.S. Army Corps of Engineers maintains the nation's inland waterways, including locks and dams. Its inland waterways construction projects have often seen delays and cost overruns.

Corps reports and academic studies say the Corps faces higher costs and delays because it receives funding for only a part of a project each year, so it must contract for projects in pieces. Corps officials estimate that this inefficient approach will add $229 million to the cost of one project alone.

We recommended the Corps seek ways to use construction funds more efficiently.

Question-summary annotations: questions: question: How does the Corps allocate its appropriated funding?
answer: The U.S. Army Corps of Engineers (Corps) allocates its appropriated funding for operations and maintenance projects for the inland waterways based on risk and economic benefits.
child_questions: question: What information does the Corps lack for this method?
answer: However, the Corps does not know how much deferred maintenance exists for inland waterways because there is no agreed upon definition for deferred maintenance.

question: What challenges did the Corps and ASA-CW officials identify?
answer: Corps and ASA-CW officials identified several challenges related to developing a useful definition with which to measure deferred maintenance. For example, a single measure may not be useful to gauge the condition of the waterways because the effect of deferred maintenance projects on the reliability of the waterways will vary.
child_questions: question: How does a lack of an accurate measure of deferred maintenance hinder the Corps?
answer: However, without a measure or measures of deferred maintenance for inland waterways that (1) the Corps finds useful, (2) reflects its priorities, and (3) accurately conveys a consistent and well-defined measure of deferred maintenance, the Corps is limited in its ability to manage its maintenance efforts and accurately communicate its estimated maintenance costs to OMB and the Congress.

questions: question: What was GAO asked to review?
answer: GAO was asked to review options to change the management of inland waterways.

question: What does this report assess?
answer: Among other things, this report assesses how the Corps allocates funds for operations and maintenance for the inland waterways, describes how the Corps funds construction projects, and assesses the effect of the current funding approach on projects' costs and schedules.
child_questions: question: What data did GAO collect for this report?
answer: GAO reviewed Corps documents and data; interviewed officials from Corps headquarters, six districts, and representatives of regional and national stakeholder groups—including commercial and recreational interests as well as contributors to relevant literature—selected to achieve a variety of viewpoints; and developed a simulation of the effect of various funding approaches on the total funding requirements and timelines for a set of hypothetical construction projects.