MARAD’s Office of Ship Operations maintains the NDRF as a reserve of ships for defense and national emergencies. When ships are no longer considered useful for defense or aid missions, the Office of Ship Disposal, which reports to the Associate Administrator for National Security, arranges for their responsible disposal. NDRF ships are located at three sites: the James River Reserve Fleet at Fort Eustis, Virginia; the Beaumont Reserve Fleet in Beaumont, Texas; and the Suisun Bay Reserve Fleet at Benicia, California. In addition, as established in a Memorandum of Agreement with the Navy in 2011, MARAD disposes of certain non-combatant ships from the Naval Inactive Ship Maintenance Facilities in Pearl Harbor, Hawaii and in Philadelphia, Pennsylvania. Naval Inactive Ship Maintenance Facilities are used to hold decommissioned U.S. Navy and auxiliary ships pending determination of their disposal. MARAD’s Ship Disposal Program’s mission is to dispose of obsolete NDRF ships through the most expedient, best value, and environmentally safe disposal methods. The program’s approach is to remove all ships that present the highest risk to the environment as soon as possible, and to have disposal alternatives and the necessary funding in place to ensure that obsolete ships can be disposed of at a faster rate than ships in the NDRF are designated as obsolete. MARAD’s Ship Disposal Program is authorized to consider alternative ship disposal methods in addition to recycling obsolete NDRF ships, including, for example, artificial reefing and donation. MARAD has made limited use of these methods because of a number of environmental, financial, and legal barriers. According to MARAD, recycling is the most expedient, environmentally sound, and cost-effective method of disposal available. After MARAD determines that a ship is ready for recycling, it first offers the ship for sale to qualified contractors through sales contracts. If it receives no offers to purchase the ship, MARAD will then procure services to dispose of the ship through a contract for services—in which the government pays the contractor to recycle the ship’s material. When acquiring services through a contract, MARAD uses simplified acquisition procedures, as defined in the FAR, which allow for simplified processes to MARAD is generally not award contracts under a certain dollar threshold.required to follow the procedures delineated in the FAR when awarding sales contracts because the government is not acquiring supplies or services with appropriated funds. However, MARAD officials explained that because they are required to adhere to the FAR when awarding contracts for services, to be consistent, they adopted similar procedures for sales contracts. In the past two years, MARAD has disposed of the ships exclusively through domestic recycling using sales contracts. See appendix II for more information on the ship disposal options used since 2001. In its most recent announcement in November 2013, however, three ships were announced as ready for recycling and MARAD received no sales offers. As a result, MARAD plans to procure the services to recycle the ships through contracts for services. MARAD officials explained that, while they cannot know all the factors the contractors considered when deciding whether or not to submit a sales offer on a ship, the specific ships in this announcement may not have looked profitable to the contractors for a variety of reasons. One ship was tested and proven to have polychlorinated biphenyls, which must be removed through a very costly process before the steel can be sold to recyclers. The other two ships were small, and MARAD officials noted that contractors may have estimated that the costs of towing the ship to the facility plus the labor were not likely to be recovered in the sale of the steel. Since 2005, MARAD has been using a two-step source selection process for ship recycling. The first step is to qualify the facilities of ship recycling contractors that respond to MARAD’s solicitation for ship disposal, thereby creating a pool of qualified facilities for contracts for either sales or services. In this step, MARAD determines if a ship recycling facility is qualified by evaluating the facility against multiple criteria as outlined in the solicitation. The second step is to award ship recycling contracts for specific ships to qualified contractors. Qualified contractors submit offers in response to MARAD’s announcements—which inform the contractors about the location, names, and work to be completed on multiple ships available for recycling. MARAD then evaluates the offers and determines which offer is the best value for the government, consistent with the FAR, using price and non-price factors such as schedule, capacity, and past performance. The first step for a contractor interested in having their facility qualified is to submit a proposal in response to MARAD’s solicitation. MARAD’s process for determining if a ship recycling facility is qualified consists of evaluating the facility’s proposal against multiple criteria as outlined in MARAD’s solicitation for ship disposal. These criteria include considering how a contractor plans to dismantle ships and the extent that the site is capable to support that effort. Beginning in 2005, MARAD began using an open solicitation process—in which interested vendors can respond at any time as opposed to by a specific date. Periodically, MARAD will update and reissue the solicitation, as it did in fiscal year 2009 and again in fiscal year 2014. When the solicitation was updated in fiscal year 2014, previously-qualified facilities needed to re-qualify based on any new criteria incorporated into the updated solicitation. Once the interested recycling contractor submits a proposal, MARAD follows the steps indicated in figure 1 to determine if the ship recycling facility is qualified. MARAD reviews the proposal—including a technical compliance plan that addresses performance capability and ability to comply with all applicable local, state, and federal environmental, safety, and health laws and regulations—for completeness in its initial evaluation. Once MARAD determines that the proposal is complete, it begins evaluating the proposal against multiple criteria including: feasibility and likelihood of success of the engineering, technical, and management approach for disposal of obsolete ships and associated risks; productivity of the proposed approach including schedule and cost assessments; type and sufficiency of proposed methods, processes, and procedures; and depth, relevance, and currency of requisite experience of the facility. The length of the qualification process—which has been as short as a few months or as long as five years—varies for several reasons. One reason for the variation, according to MARAD officials, is that the initial proposals are rarely complete. This part of the process is iterative and MARAD officials stated that they work closely with individual contractors to obtain the necessary information to enable the completion of the evaluation process. In its fiscal year 2014 solicitation, MARAD’s stated goal is to complete the initial evaluation of proposals within eight weeks from the date the proposals are submitted. This timeline, according to officials, is based on the availability of MARAD’s resources. However, MARAD officials noted that the contractor’s responsiveness to requests for additional explanation or information is out of their control and can impact their ability to move forward with the qualification process. In some cases, a contractor may opt to not continue with the qualification process. Another reason for the different timetables for qualification, according to MARAD officials, is that each facility is unique and faces individual challenges. MARAD officials explained that it is incumbent upon the contractor to identify all of the local, state, and federal laws and regulations that apply to ship recycling for the location where the facility is located, and to comply with those laws. For example, a facility in California took over five years to qualify because, according to MARAD officials, it had to address strict state and local environmental laws and regulations and experienced significant delays in obtaining necessary permits from state environmental regulators. Further, the proposed location had not been used for many years, and MARAD needed additional assurances to ensure qualification criteria were met. When a new process is introduced by a ship recycling facility, qualification may take more time. For instance, a contractor recently proposed a new method for ship recycling that involves dismantling the ship while afloat. MARAD considers the procedures for maintaining the stability of the ship; environmental abatement of hazardous materials, such as asbestos and paint disposal; worker safety; and health considerations under this new approach before making a qualification decision. As shown in figure 2, MARAD currently has six qualified recycling facilities, represented by four contractors, in two states: Louisiana and Texas. As of October 2013, there were 27 MARAD and two Navy-owned ships awaiting disposal. After a facility is deemed qualified, MARAD conducts regular oversight, to include bi-weekly teleconferences and quarterly visits to the facilities. During its visits, MARAD checks the facility’s compliance processes and issues deficiency notices if corrective action is needed. In addition, MARAD conducts oversight of the environmental protection and worker safety procedures for the facility. If there is a deficiency found, MARAD refers the issue to the appropriate federal agency, such as the Environmental Protection Agency or Occupational Safety and Health Administration. Further, through its announcement process, MARAD requires existing qualified contractors to report changes made to their ship recycling facilities. These changes could range from a minor change to one part of its recycling process, such as a change in paint removal process, or a significant change such as when a facility is changing ownership. After becoming qualified, a contractor’s facility is eligible to compete for ship recycling contracts, and does so by providing offers in response to MARAD’s announcements on specific ships. Approximately three to four announcements are issued per year, with three to six ships offered per announcement. MARAD’s announcement includes the location and names of the ships that MARAD would like recycled, and the work to be accomplished for each ship. According to MARAD officials, including multiple ships in each announcement optimizes competition and minimizes costs. To decide which facility should receive contracts for the ships in the announcement, MARAD uses a source selection process to determine which offer provides the best value to the government.