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Will Change, and Implementing Best Practices May Improve the 
Estimates' Reliability' which was released on May 13, 2010. 

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GAO-10-541R: 

United States Government Accountability Office: 
Washington, DC 20548: 

May 13, 2010: 

The Honorable Patty Murray:
Chairman:
The Honorable Christopher Bond:
Ranking Member:
Subcommittee on Transportation, Housing and Urban Development, and 
Related Agencies: 
Committee on Appropriations:
United States Senate: 

The Honorable John W. Olver:
Chairman:
The Honorable Tom Latham:
Ranking Member:
Subcommittee on Transportation, Housing and Urban Development, and 
Related Agencies: 
Committee on Appropriations:
House of Representatives: 

Subject: St. Lawrence Seaway: Estimates for the Asset Renewal Program 
Will Change, and Implementing Best Practices May Improve the 
Estimates' Reliability: 

The St. Lawrence Seaway (the Seaway) is a 50-year-old binational 
transportation asset serving substantial manufacturing and service 
industries in both the United States and Canada. Jointly operated by 
the United States and Canada, the 15-lock Seaway has been used to move 
more than 2.5 billion metric tons of cargo, which includes iron ore, 
grain, and coal, valued at more than $375 billion, between the United 
States, Canada, and international markets since opening in 1959. A 
single ship on the Seaway can carry about 25,000 tons of cargo, which 
is the equivalent amount of cargo that 870 large trucks or 225 
railcars can carry. 

The Saint Lawrence Seaway Development Corporation (SLSDC), a wholly 
owned government corporation within the U.S. Department of 
Transportation (DOT), operates and maintains the two locks owned by 
the United States and the navigation channels in U.S. waters between 
Massena, New York, and Lake Ontario.[Footnote 1] In 2009, SLSDC 
initiated a 10-year U.S. Seaway Asset Renewal Program (ARP) for its 
navigation infrastructure and facilities. The ARP marks the first time 
in SLSDC's history that a dedicated effort to repair and modernize the 
U.S. Seaway infrastructure has taken place. The projects included in 
the ARP focus on improving aging Seaway infrastructure, conducting 
maintenance dredging, investing in new technologies, purchasing new 
equipment, and refurbishing old facilities. None of these investments 
will result in increases to the authorized depth or width of the 
navigation channel or to the size of the two existing U.S. locks. 

In 2009, Congress instructed us to examine the ARP.[Footnote 2] As 
discussed with the committees of jurisdiction, we examined (1) how the 
cost estimates in the ARP have changed from February 2009 to February 
2010, (2) the extent to which the ARP covers all asset renewal needs, 
and (3) the steps U.S. and Canadian authorities have taken to 
coordinate their asset renewal programs. 

Among other things, we found that SLSDC's estimating process for the 
projects we reviewed did not fully meet the four characteristics-- 
comprehensive, well documented, accurate, and credible--for producing 
a high-quality cost estimate. We are therefore making a recommendation 
to SLSDC to improve its cost-estimating process. The results of our 
work are contained in enclosure I. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to the U.S. Department of 
Transportation for its review and comment. SLSDC officials commented 
that they were pleased that the report's findings showed that the 
total estimated cost of the ARP had not changed significantly after 
the first year of the program. They also agreed to consider our 
recommendation by carefully reviewing the GAO Cost Estimating and 
Assessment Guide to identify those concepts and practices that offer 
potential utility to the development of future ARP project cost 
estimates. SLSDC officials noted that while they recognize the 
potential utility of the best practices identified in the GAO Cost 
Estimating and Assessment Guide for large multiyear projects, they 
believe the cost guide's applicability is less apparent with regard to 
a number of small-scale projects in SLSDC's ARP. We are encouraged 
that SLSDC is committed to considering our recommendation and, as 
stated in our report, agree that the extent to which each of the cost 
guide's best practices can be implemented by SLSDC may vary depending 
on each project's scope and complexity. 

SLSDC officials also provided technical comments to our report, which 
we incorporated as appropriate. 

Scope and Methodology: 

To perform our work, we interviewed SLSDC officials; reviewed agency 
documents related to the ARP, asset renewal needs, and its program to 
assess the condition of its assets; and analyzed agency data on the 
estimated costs of ARP projects and fiscal year 2009 contracts. We 
also assessed the extent to which 2 of the 52 ARP projects met the 
best practices guidelines for cost estimating contained in the GAO 
Cost Estimating and Assessment Guide. We selected these projects 
because they started in fiscal year 2009 or 2010, are expected to cost 
more than $1 million when completed, are complex, and are critical to 
the operation of the locks. We reviewed industry information and prior 
GAO reports to determine the expected variability between estimated 
and actual costs as well as the reasonableness of SLSDC's assessment 
program. We also interviewed U.S. and Canadian officials to understand 
the steps taken to coordinate their asset renewal programs and 
reviewed applicable laws and treaties. We conducted this performance 
audit from July 2009 to May 2010 in accordance with generally accepted 
government auditing standards. Those standards require that we plan 
and perform the audit to obtain sufficient, appropriate evidence to 
provide a reasonable basis for our findings and conclusions based on 
our audit objectives. We believe that the evidence obtained provides a 
reasonable basis for our findings and conclusions based on our audit 
objectives. Additional information about our scope and methodology is 
provided in enclosure II. 

We are sending copies of this report to interested congressional 
committees and the Secretary of Transportation. In addition, the 
report is available at no charge on the GAO Web site at [hyperlink, 
http://www.gao.gov]. If you or your staff have any questions about 
this report, please contact Terrell Dorn at (202) 512-6923 or 
dornt@gao.gov. Contact points for our Offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report. Key contributors are listed in enclosure II. 

Signed by: 

Terrell G. Dorn, P.E. 
Director, Physical Infrastructure Issues: 

Enclosures: 

[End of section] 

Enclosure I: 

St. Lawrence Seaway: Estimates for the Asset Renewal Program Will 
Change, and Implementing Best Practices May Improve the Estimates 
Reliability: 

Why GAO Did This Study: 

The St. Lawrence Seaway is a 50year-old binational transportation 
asset jointly operated by the United States and Canada that is used to 
move cargo between North America and international markets. In 2009, 
the U.S. Saint Lawrence Seaway Development Corporation (SLSDC), which 
is responsible for operating and maintaining the two locks and 
navigation channels in the U.S. portion of the Seaway, initiated a 10-
year Asset Renewal Program (ARP) to address long-term needs of the 
locks, navigation channels, and related facilities and equipment. 

In 2009, Congress instructed GAO to examine the ARP. Accordingly, GAO 
examined (1) how the cost estimates have changed from February 2009 to 
February 2010, (2) the extent to which the ARP covers all asset 
renewal needs, and (3) the steps U.S. and Canadian authorities have 
taken to coordinate their asset renewal programs. To conduct this 
work, GAO reviewed agency program documents, interviewed SLSDC 
officials, and analyzed ARP estimates and fiscal year 2009 contract 
data. 

What GAO Recommends
To improve estimates of the cost of the ARP projects, GAO recommends 
that SLSDC develop a cost-estimating process that follows best 
practices to better ensure that its estimates are comprehensive, well 
documented, accurate, and credible. 
SLSDC agreed to consider the report's recommendation. 

For more information, contact Terrell G. Dorn at (202) 512-6923 or 
dornt@gao.gov. 

Summary of Results: 

The total ARP estimate, which increased from $177 million to $186 
million from February 2009 to February 2010, will continue to change 
as its 52 component projects are developed. Generally, as projects 
mature and requirements are refined, the accuracy of estimates 
increases and the variability decreases. For the ARP contracts that 
SLSDC awarded in fiscal year 2009, GAO found significant variability 
between the estimated costs and the amounts of some awarded contracts. 
This variability is attributable to, among other things, general 
economic conditions, project-specific factors, and incomplete 
requirements definitions. Though some factors that affect the 
variability between estimated and actual costs may be out of the 
control of SLSDC, reliable estimates should consider potential 
uncertainties. GAO used the GAO Cost Estimating and Assessment Guide 
to evaluate SLSDC's cost-estimating process on two of the complex ARP 
projects that began in fiscal year 2009, are expected to cost more 
than $1 million when completed, and are critical to the operation of 
the locks. GAO found that SLSDC's estimating process for these two 
projects did not fully meet any of the four characteristics—
comprehensive, well documented, accurate, and credible—for producing a 
high-quality cost estimate, and partly as a result, the estimates were 
unreliable and underestimated the actual cost. Because of the 
variability between estimated costs and actual awards, SLSDC adjusted 
the ARP spending plan by reallocating project funding and deferring or 
accelerating projects to meet the targeted spending amount of 
approximately $17.6 million for fiscal year 2009. 

The ARP addresses most asset renewal needs identified through prior 
inspections of its assets. The remaining needs are generally addressed 
through routine maintenance. However, SLSDC could use its program 
flexibility to add or modify ARP projects if the needs cannot be 
adequately addressed through routine maintenance. For example, because 
routine maintenance funding is not adequate for the second phase of an 
emergency communications system in the underground areas of the locks, 
SLSDC plans to add a project to the ARP for this work. Furthermore, 
SLSDC's continual condition assessment of its assets may result in 
reprioritizing existing ARP projects or adding new projects if the 
cost to address newly identified needs exceed its routine maintenance 
budget. 

The steps the United States and Canada have taken to coordinate the 
ARP generally involve setting the annual opening and closing dates of 
the Seaway and exchanging technical project information. Coordination 
of the opening and closing dates, while routine, is important for the 
ARP because it determines the work schedule for a number of critical 
projects that can be completed only during the winter shutdown period. 
SLSDC and the Canadian Seaway share technical information about 
similarly scoped projects both countries are doing and on projects 
that would affect vessel-operating procedures at the locks. 

Great Lakes St. Lawrence Seaway Study: 

As joint custodians of the Great Lakes St. Lawrence Seaway System, the 
governments of the United States and Canada signed a memorandum of 
cooperation in 2003. It formed the framework for a binational study to 
assess the current condition of the waterway and determine how to best 
use and maintain it now and in the future. 

A final report resulting from the study was made public on November 
26, 2007. The report addresses future investments needed to keep the 
existing infrastructure reliable and ensure the system is a safe, 
efficient, and sustainable component of North America's transportation 
infrastructure for years to come. The report also addresses both the 
expected economic benefits arising from the continued operation of the 
system and the potential environmental impact associated with 
commercial navigation. 

The following seven U.S. and Canadian departments and agencies were 
involved in the multiyear study: 

* U.S. Department of Transportation; 
* Saint Lawrence Seaway Development Corporation; 
* U.S. Army Corps of Engineers; 
* U.S. Fish and Wildlife Service; 
* Transport Canada; 
* St. Lawrence Seaway Management Corporation (the Canadian Seaway); 
* Environment Canada. 

As part of the study, engineers from the United States and Canada 
performed inspections and developed recommendations for repairs and/or 
improvements to critical infrastructure in the Great Lakes St. 
Lawrence Seaway System. In describing the condition of the system, the 
study states that it has held up reasonably well; however, a number of 
components need repair, rehabilitation, or replacement. According to 
the study, Seaway infrastructure—which has worn as a result of 
operational and weather-related stress—has reached or exceeded its 
original design life. Because each year the likelihood increases that 
any one of the Seaway's hundreds of different components will fail, 
the study states that a considerable amount of effort is needed to 
maintain the system at its current operational level. 

Design life: When properly maintained, navigation projects, such as 
locks, traditionally have a 50-year design life, which is the minimal 
time the project is expected to provide reliable performance without 
major infrastructure investments to keep it safe and efficient. 

Operational stress: Day-to-day passage of vessels contributes to 
operational stress that is typically either a result of wear/damage 
from vessel movement or wear from the cyclical operation of the 
various mechanical components, such as gates and valves. 

Weather-related stress: The geographic location of the Seaway subjects 
it to severe weather conditions that cause wear as a result of freeze-
thaw cycles and ice buildup on components. 

Great Lakes St. Lawrence Seaway System: 

As shown below, the St. Lawrence Seaway, which extends from Montreal 
to Lake Erie, is part of the larger Great Lakes St. Lawrence Seaway 
System that moves cargo between North America and international 
markets. The Seaway is operated jointly by the U.S. Saint Lawrence 
Seaway Development Corporation—which operates 2 locks—and the Canadian 
Seaway—which operates 13 locks.[Footnote 3] The unique binational 
nature of the Seaway requires 24-hour, year-round coordination between 
SLSDC and the Canadian Seaway, particularly regarding rules and 
regulations, overall day-to-day operations, traffic management, 
navigation aids, safety, environmental programs, and operating dates. 
In addition, SLSDC and the Canadian Seaway work on trade development 
activities designed to increase use of the Great Lakes St. Lawrence 
Seaway System. 

Figure 1: Map of the Great Lakes St. Lawrence Seaway System, with the 
15 locks on the St. Lawrence Seaway portion identified: 

[Refer to PDF for image: illustrated map] 

The following are depicted on the map: 

Ports: 
Buffalo; 
Chicago; 
Cleveland; 
Detroit; 
Duluth; 
Massena; 
Milwaukee; 
Montreal; 
Quebec; 
Thunder Bay; 
Toronto. 

Canadian locks: 
Number 1-4, 7-15. 

United States locks: 
Snell (#5); 
Eisenhower (#6). 

Sources: Map Resources and GAO. 

[End of figure] 

The Seaway operates a little more than 9 months a year, closing for 
winter from late December through late March. While the Seaway is 
closed, U.S. and Canadian officials perform detailed inspections and 
routine maintenance of infrastructure. These efforts are key to the 
operational sustainability of the Seaway because they allow officials 
to identify and schedule repairs before conditions reach a critical 
stage. 

Unlike most other lock-based transportation systems that have twinned 
locks to ensure continued operation in the event of a lock failure, 
the Seaway is a single lock system. As a result, closures or delays at 
one of the locks would disrupt the entire Seaway's operation and could 
result in Seaway customers seeking alternative transportation modes in 
the future. For example, a number of customers stopped using the 
Seaway after a lock failure at one of the Canadian locks in 1985 
trapped 53 commercial vessels in the Seaway for 24 days and cost 
shippers more than $24 million. 

Saint Lawrence Seaway Development Corporation: 

SLSDC operates and maintains the U.S. portion of the St. Lawrence 
Seaway, to include portions of the navigation channels and the 
Bertrand Snell and Dwight D. Eisenhower Locks. Over its history, these 
locks and the U.S. portion of the Seaway have been available to 
vessels about 99 percent of the time during the 24-hours-a-day, 7-days-
a-week shipping season.[Footnote 4] However, as indicated by recent 
component failures at similarly-aged locks on the Ohio River, 
continued reliable operation of SLSDC's locks is uncertain considering 
that the infrastructure is approaching the end of its 50-year design 
life.[Footnote 5] As shown in figure 2, the locks have a number of 
mechanical components. SLSDC also owns and maintains other assets—such 
as roads, a bridge jointly owned with Canada, a highway tunnel, a 
Visitors' Center, various buildings, vessels, and vehicles—and ensures 
that its portion of the waterway is deep enough for vessels to transit. 

In fiscal year 2009, SLSDC initiated a 10-year Asset Renewal Program, 
informed by the results of the Great Lakes St. Lawrence Seaway Study 
to address the long-term asset renewal needs of the U.S. lock 
infrastructure, navigation channels, and related facilities and 
equipment. The current 52 projects in the ARP cover a number of agency 
assets and focus on, among other things, improving lock structure and 
operating equipment, conducting maintenance dredging, investing in new 
technologies, purchasing new vehicles and equipment, and refurbishing 
old facilities. To ensure that the ARP is executed properly and to 
identify any concerns, SLSDC formed an internal working group, made up 
of senior managers in engineering, procurement, financial management, 
budget, legal affairs, and policy that meets every 2 weeks to review 
the status of ongoing projects and discuss ways to improve the overall 
management, execution, and reporting of the program. 

SLSDC receives funding for the ARP through the annual appropriations 
process.[Footnote 6] As part of this process, SLSDC submits an annual 
spending plan identifying estimated amounts for each project it 
expects to work on in that year. These project estimates are typically 
"project feasibility" estimates developed during the planning stage of 
project development. SLSDC has flexibility to adjust the annual 
spending plan and may reallocate funding among ARP projects based on 
bids received, updated estimates, and project reprioritization that 
occurs after the spending plan has been submitted. 

Figure 2: Illustration of a Lock and Its Various Components: 

[Refer to PDF for image: illustration] 

The following are depicted in the illustration: 

Lock directions: 
Up, toward Great Lakes; 
Down, toward Atlantic Ocean. 

Lock control building; 
Upper culvert valve; 
Lower miter gate (open); 
Upper miter gate (closed); 
Ship arrestor; 
Mooring buttons; 
Vertical lift gate; 
Stiffleg derrick; 
Guardwall with fendering. 

Cross-section view: 

Vertical lift gate; 
Upper culvert valve; 
Upper miter gate (closed); 
Lower miter gate (open). 

Source: GAO. 

[End of figure] 

ARP Cost Estimates Will Change over Time, but SLSDC Does Not Use Best 
Practices to Estimate Costs: 

Cost Estimating: 

According to the GAO Cost Estimating and Assessment Guide, cost 
estimating requires both science and judgment. Since, by definition, 
answers are seldom—if ever—precise, the goal is to find a reasonable 
"answer."[Footnote 7] Cost estimates are based on many assumptions and 
are expected to change as project requirements are clarified. Once a 
cost estimate has been accepted and approved, it should be updated 
periodically as the program matures and as schedules and requirements 
change. Updated estimates help give management control over a 
project's resources when new requirements are called for under tight 
budget conditions. 

ARP Cost Estimates Have Changed: 

From February 2009 to February 2010, the ARP program estimate, which 
is the sum of cost estimates of the individual projects, increased 
from $177 million to $186 million[Footnote 8] Over $3 million (39 
percent) of this increase is due to updates reflecting the continual 
refinement of project requirements, actual awards made in the first 
year of the program, and inflation adjustments. The remaining increase 
of over $5 million is due to the 2 ARP projects added as part of the 
agency's continual efforts to evaluate and reprioritize agency needs. 

Specifically, SLSDC revised its baseline estimate for 30 ARP projects—
increasing the estimate for 14 projects and decreasing the estimate 
for 16 projects.[Footnote 9] For example, SLSDC increased the project 
estimate for its miter gate rehabilitation project by 23 percent based 
on the results of the first phase of the project.[Footnote 10] In 
another case, on the basis of a consultant's evaluation of the current 
system, SLSDC decreased by 49 percent its estimate for upgrading the 
compressed air systems that are used to control the buildup of ice in 
and around the locks. Even though SLSDC has adjusted the estimated 
cost of some projects, officials stated that they expect to satisfy 
all requirements originally identified in the ARP. 

Project Development Stages: 

Planning stage: Planning activities generally occur 3 to 5 years prior 
to construction. During this stage, project officials set functional 
requirements. General design criteria, significant features and 
components, methods of accomplishment, and a proposed schedule are 
defined. Cost estimates at this stage may be based on past cost 
experience with similar projects or on an order-of-magnitude basis and 
may be expected to vary by plus or minus 40 percent from the actual 
cost. 

Design stage: Detailed criteria and parameters of a project are 
developed to define, as applicable, significant features and 
components. Design work generally begins 1 to 2 years prior to 
construction. Working drawings and specifications for construction 
activities are produced in this stage. The cost estimates are refined 
as the design matures and may be expected to vary by plus or minus 30 
percent from actual costs. 

Final design: Final plans and detailed specifications for the 
performance of construction work are developed. The cost estimates 
developed at this stage are the most accurate estimates possible prior 
to competitive bidding and construction and are expected to be plus or 
minus 10 percent of actual costs. 

Construction stage: Contractor services are procured through a 
solicitation process, and contracts are awarded in accordance with 
acquisition protocols. Work detailed in the design drawings and 
specifications is executed. Changes may occur after contract award, 
and because of any such changes, project costs may be expected to vary 
up to 10 percent. 

ARP Project Estimates Will Continue to Change: 

Because the majority of project estimates were developed in the 
planning stage, they will continue to change as part of the project 
development process. Generally, the more information that is known 
about a project and is used to develop the estimate, the more accurate 
and less variable the estimate is expected to be. While all estimates 
will have some degree of variability from actual costs, cost 
uncertainty is greatest in the initial project development stages. As 
shown in figure 3, as projects mature and requirements are refined, 
the accuracy of the estimate increases and the variability decreases 
to reflect these updates. 

Figure 3: Cone of Uncertainty in Cost Estimating: 

[Refer to PDF for image: illustration] 

The illustration is a line graph plotting the cost estimate in dollars 
against time. 

A cost estimate baseline is established. 

As the elements of time change from planning to design, to final 
design/construction, estimate becomes more certain as program 
progresses. 

The upper limit of cost estimate and the lower limit of cost estimate 
combine to produce uncertainty, which decreased until final 
design/construction. 

Source: GAO. 

[End of figure] 

Fiscal Year 2009 Projects: 

For the 19 projects funded in fiscal year 2009, SLSDC awarded 41 
contracts for a wide variety of equipment and services: 

* Commercial items, such as a crane and a snowplow; 

* Engineering consulting services for surveying and design work; and; 

* Construction services to repair/upgrade lock structures and 
operating components. 

The 19 projects were: 

1. Snell Lock Guidewall Fendering: Replace protective fendering on 
downstream guidewall. 

2. Guidewall Rehabilitation: Repair concrete and mooring buttons on 
approach walls at both locks. 

3. Paving and Drainage Infrastructure: Repair pavement and improve
drainage on roads, work areas, and parking lots. 

4. Valve Operating Equipment: Replace electric motors with hydraulic 
machinery at north side culvert valves at both locks. 

5. Lock Covers: Refurbish and insulate steel modules used to cover 
locks for winter maintenance. 

6. Seaway International Bridge: Repair, blast clean, and coat 
structural components on south span. 

7. Navigational Aids: Replace buoys, flashers, and markers. 

8. Vehicles and Equipment: Replace a crane and other mobile equipment. 

9. Electric Power Utility: Upgrade power supply infrastructure to 
locks and facilities. 

10. Floating Plant: Repair or replace vessels used to support 
operations. 

11. Roof Replacement: Replace roofs on SLSDC buildings. 

12. Eisenhower Lock Tunnel: Seal leaking joints in tunnel. 

13. Navigation Support Systems: Install systems to support automated 
traffic management and monitor weather conditions. 

14. Dredging: Conduct maintenance dredging. 

15. Miter Gates: Repair upstream gate at Eisenhower Lock. 

16. Lock Controls: Upgrade and expand computer system used to monitor 
and control lock functions. 

17. Compressed Air Systems: Replace air compressors and piping in 
systems used for maintenance and ice control in and around the locks. 

18. Lock Structural Repairs: Repair/grout cracks and joints in 
concrete at both locks. 

19. Fire Alarm Systems: Replace fire alarm systems at SLSDC facilities. 

Fiscal Year 2009 Contract Awards Varied Widely from Estimates: 

For the 41 ARP contracts awarded in fiscal year 2009, covering 19 ARP 
projects, we found significant variability between the estimated costs 
and the amounts of the initial awarded contracts. (See figure 4.) 
Industry definitions indicate that contract award amounts should 
generally be plus or minus 10 percent of the estimate used as part of 
the contract solicitation process. Of the 41 contracts awarded for ARP 
projects in fiscal year 2009, 22 contract awards were within 10 
percent of the estimate used as part of the contract solicitation 
process. These contract awards totaled more than $3 million of the 
approximately $17.6 million obligated for fiscal year 2009. The 
remaining 19 contract awards varied by more than 10 percent from 
estimates used as part of the contract solicitation process and 
totaled nearly $13.3 million.[Footnote 11] We found that the initial 
award amounts of these ARP contracts ranged from 74 percent less to 
171 percent greater than estimates. (See enclosure V for details). 

Figure 4: Differences between Fiscal Year 2009 ARP Estimate and 
Initial Contract Award Price: 

[Refer to PDF for image: graph] 

The graph lots points of percent difference in initial award (from 
estimate) against estimated contract cost (in millions of dollars). 

Source: GAO presentation of SLDSC data. 

For one particular point: For this contract the estimate included 
combined costs of dredging at two separate locations. Because there 
was a delay in obtaining required permits at one of the locations, 
SLSDC awarded the contract in two parts. Therefore, we used both 
awards in our analysis. 

[End of figure] 

Contract Awards Varied for a Number of Reasons: 

Several factors, including economic conditions, project-specific 
conditions, and requirements definition, contributed to the 
substantial differences between estimated costs and award amounts of 
some of the fiscal year 2009 contracts. In some cases, a combination 
of these factors may have contributed to these differences. 

* Economic conditions: As we reported in December 2009, weak economic 
conditions have contributed to many federally funded contracts being 
awarded for less than the estimated cost.[Footnote 12] Similarly, 
SLSDC officials indicated that these economic conditions likely 
increased competition for some of its contracts and created a bidding 
environment favorable to the agency. For example, four contractors bid 
on a contract to repair paving and drainage structures, and SLSDC 
awarded the contract at a cost 27 percent less than estimated. 
However, the level of competition was not consistently strong across 
all of SLSDC's contract solicitations. For example, SLSDC received 
only one bid on a contract to supply a container trailer and made an 
award at an amount 16 percent greater than the estimated cost. In 
another example, SLSDC canceled its procurement action to award a 
contract in fiscal year 2009 for replacement culvert valves when it 
received a single bid that was 52 percent higher than estimated. 
[Footnote 13] 

* Project-specific conditions: Some contract costs varied from 
estimates because of unique circumstances that could not have been 
anticipated. For example, SLSDC awarded a contract for replacement of 
rubber fenders at an amount 19 percent less than estimated because the 
winning contractor possessed a mold for fabricating the fenders that 
matched SLSDC's specifications. 

* Requirements definition: Incomplete definition of requirements 
resulted in some contract awards at higher-than-estimated amounts. For 
example, after developing the estimate for the purchase of a boat to 
use as a maintenance vessel, SLSDC modified its specification to add 
items to the boat without updating its estimate. As a result, SLSDC 
awarded the contract at an amount 11 percent higher than estimated.
SLSDC can correct incomplete project requirements definitions, but 
factors such as project-specific and general economic conditions and 
their effect on estimates are difficult to control. Though some 
factors may be out of SLSDC's control, we have found that reliable 
estimates should account for uncertainties. Because uncertainty cannot 
be avoided, it is preferable to identify the elements that represent 
the most uncertainty as part of the overall project development 
process. Incorporating uncertainties into a cost estimate, as part of 
the overall cost-estimating and project development process, allows 
decision makers to determine a range of potential costs and assess and 
communicate the variability in an estimate. For example, uncertainties 
such as undefined or unknown technical information, uncertain economic 
conditions, and requirements growth may negatively or positively 
affect a program's cost. 

Characteristics of High-Quality Cost Estimates[Footnote 14] 

Comprehensive: The cost estimates should include costs of the program 
over its full life cycle, provide a level of detail appropriate to 
ensure that cost elements are neither omitted nor double-counted, and 
document all cost-influencing ground rules and assumptions. 

Well documented: The cost estimates should be supported by detailed 
documentation that describes the purpose of the estimate, the program 
background and system description, the scope of the estimate, the 
ground rules and assumptions, all data sources, estimating methodology 
and rationale, and the results of the risk analysis. Moreover, this
information should be captured in such a way that the data used to 
derive the estimate can be traced back to, and verified against, their 
sources. 

Accurate: The cost estimates should be based on an assessment of most 
likely costs (adjusted for inflation), documented assumptions, and 
historical cost estimates and actual experiences on other comparable 
programs. Estimates should be cross-checked against an independent 
cost estimate for accuracy, double counting, and omissions. In 
addition, the estimates should be updated to reflect any changes. 

Credible: The cost estimates should discuss any limitations of the 
analysis because of uncertainty, or biases surrounding data or 
assumptions. Risk and uncertainty analysis should be performed to 
determine the level of risk associated with the estimate.
Further, the estimate's results should be cross-checked against an 
independent cost estimate.[Footnote 15] 

SLSDC Does Not Use Formal Cost-Estimating Guidance, Increasing the 
Risk of Unreliable Estimates: 

A senior SLSDC official stated that because of the small size of the 
engineering office and the staffs familiarity with lock 
infrastructure, the agency does not use formal estimating guidance; 
rather engineers and management communicate routinely about project 
requirements and cost estimates. SLSDC's engineering and maintenance 
staff, who are responsible for maintaining the lock infrastructure, 
generally develop the ARP project cost estimates. In estimating 
project costs, SLSDC staff obtain cost information from various 
sources, depending on the specifics of the project. The information 
sources are commercially available cost-estimating guides, such as 
RSMeans, and historical data from past SLSDC work and comparable 
Canadian or U.S. Army Corps of Engineers projects.[Footnote 16] In 
addition, SLSDC uses expert consultants when it determines that it 
cannot develop project requirements and cost estimates in-house. 

We have previously reported that the lack of cost-estimating guidance 
at other agencies has led to cost estimates of poor quality.[Footnote 
17] Such guidance serves as a mechanism for providing a standard cost-
estimating process to agency officials and contractors. Cost-
estimating guidance also establishes roles and responsibilities for 
those preparing, reviewing, and updating all types of cost estimates.
According to the GAO Cost Estimating and Assessment Guide, a reliable 
cost-estimating process is necessary to ensure that cost estimates—
particularly for large, complex projects—are comprehensive, well 
documented, accurate, and credible.[Footnote 18] The cost guide 
identifies best practices that, followed correctly, should result in 
reliable cost estimates that management can use for making informed 
decisions. (See enclosure VI for details). 

We used the GAO Cost Estimating and Assessment Guide to provide 
criteria for evaluating SLSDC's cost-estimating process on two of the 
complex ARP projects that began in fiscal year 2009, are expected to 
cost more than $1 million when completed, and are critical to the 
operation of the locks, and, as shown in tables 1 and 2, found that 
its estimating process for both projects was lacking. In particular, 
we found that SLSDC's process did not fully meet any of the four 
characteristics for producing a high-quality cost estimate, and partly 
as a result, the estimates produced by this process were unreliable 
and underestimated the actual cost of each project by more than 45 
percent. See enclosure VII for our more detailed assessments. 

Table 1: Assessment of ARP Project # 4: Culvert Valve Operating 
Equipment, Phase I: 

Project description: This is a two-phase project to replace the 
operating machinery for the Eisenhower and Snell Lock culvert valves, 
which are used for filling and emptying the locks. The upgrade will 
replace motors and gears—which have been maintained but not replaced 
or upgraded since their installation in the 1950s—with new hydraulic 
operating machinery to match the upgrades made at the Canadian Seaway 
locks and other similar locks in the United States. The first phase of 
this project began in fiscal year 2009 when SLSDC awarded a contract 
to upgrade the operating machinery on the north sides of both locks. 
Because of the long lead time needed to acquire the equipment, the 
actual work will be performed over the 3-month period of January to 
March 2011. 

Final estimate (phase I): $2.8 million: 
Actual award (phase I): $4.1 million: 

Characteristic: Comprehensive; 
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Partially met; 
Reason for assessment: The cost estimate defined the work in detail 
and, for each cost category, clearly described how most of the various 
cost elements are summed. The cost estimate also included basic 
assumptions, such as inflation. However, because the cost estimate 
does not specifically break out common costs, such as training and 
testing, we were unable to determine whether the estimate included all 
of the relevant costs of the project. In addition, key assumptions on 
time frame and risk, including their effect on costs, were not 
accounted for in the estimate. 

Characteristic: Well documented; 
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Substantially met; 
Reason for assessment: The documentation of the cost estimate included 
the purpose and basic cost-influencing ground rules and assumptions. 
In addition, the cost estimate incorporated local labor rates and 
vendor quotes, and was based on a technical baseline that included 
final drawings and specifications. However, while the documentation 
for the most part provided details on the cost of the estimate, the 
estimate provided to management did not clearly convey whether all 
costs were properly captured, all risks were properly considered, and 
underlying assumptions were valid. For example, key assumptions on 
time frame and risk were not reflected in the estimate. 

Characteristic: Accurate; 
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Substantially met; 
Reason for assessment: The cost estimate is based on a detailed 
buildup of estimated labor and material prices, and SLSDC updated both 
the current and future phases of the project cost estimate with fiscal 
year 2009 award data. However, the estimate for this project was not 
cross-checked against an independent cost estimate to ensure accuracy 
and minimize the risk of omissions and double counting in the 
estimate.[B] 

Characteristic: Credible; 
Overall assessment (fully met/substantially met/partially
met/minimally met/not met)[A]: Minimally met; 
Reason for assessment: The cost estimate is based on a detailed 
buildup of estimated labor and material prices. However, the estimate 
was not cross-checked against an independent cost estimate to ensure 
that different estimating approaches would produce similar results. In 
addition, SLSDC did not conduct sensitivity and risk analyses; 
therefore, the estimate did not reflect the degree of uncertainty, and 
decision makers had no insight into the level of confidence associated 
with it. 

Source: GAO analysis of SLSDC data. 

Notes: 

[A] The ratings we used in this analysis are as follows: "Fully met" 
means that the agency provided complete evidence that satisfies the 
entire criterion; "Substantially met" means that the agency provided 
evidence that satisfies a large portion of the criterion; "Partially 
met" means that the agency provided evidence that satisfies about half 
of the criterion; "Minimally met" means that the agency provided 
evidence that satisfies a small portion of the criterion; and "Not 
met" means that the agency provided no evidence that satisfies any 
part of the criterion. 

[B] An independent cost estimate is another estimate based on the same 
technical information that is used to validate and cross-check the 
baseline estimate but is prepared by a person or organization that has 
no stake in the approval of the project. 

[End of table] 

Table 2: Assessment of ARP Project #31: Rehabilitate Upstream Miter 
Gates, Phase I: 

Project description: This is a two-phase project to rehabilitate the 
miter gates at the upstream end of both Eisenhower and Snell Locks. 
The project will replace worn and/or damaged components to ensure 
proper functioning of the miter gates. 

The first phase of this project began in fiscal year 2009 when SLSDC 
awarded a contract to rehabilitate the upstream gate at Eisenhower 
Lock. Because of the long lead time needed to acquire gate components, 
the actual work will be performed over the 3-month period of January 
to March 2011. 

Final estimate (phase 1): $1.3 million: 
Award amount (phase 1): $2.2 million: 

Characteristic: Comprehensive; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met)[A]: Minimally met; 
Reason for assessment: The estimate included basic cost-influencing 
ground rules and assumptions, such as labor and inflation rates. 
However, key assumptions on time frame and risk, including their 
effect on costs, were not accounted for in the estimate. In addition, 
the cost estimate does not define the work in detail nor does it 
provide a framework for planning and assigning the work down to an 
appropriate level of detail. 

Characteristic: Well documented; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met)[A]: Partially met; 
Reason for assessment: The documentation of the cost estimate included 
the purpose and basic cost-influencing ground rules and assumptions. 
However, the estimate did not provide enough detail to easily defend 
the estimate. For example, a technical baseline description with all 
of the project requirements was only 35 percent complete, and key 
assumptions on time frame and risk were not included in the 
documentation. In addition, the cost estimation documentation did not 
provide detailed material and labor cost information that would allow 
someone unfamiliar with the project to re-create them. 

Characteristic: Accurate; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met)[A]: Partially met; 
Reason for assessment: SLSDC updated both the current and future 
phases of the project cost estimate with fiscal year 2009 award data. 
While the cost estimate for this project is based on a similar 
project, adjusted with a rule-of-thumb factor, the cost estimate was 
not based on a detailed buildup of individual cost elements. In 
addition, the estimate for this project was not cross-checked against 
an independent cost estimate to ensure accuracy and minimize the risk 
of omissions and double counting in the estimate.[B] 

Characteristic: Credible; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met)[A]: Minimally met; 
Reason for assessment: The cost estimate is based on a similar project 
as well as the knowledge of SLSDC engineers. However, the estimate was 
not cross-checked against an independent cost estimate to ensure that 
different estimating approaches would produce similar results. In 
addition, SLSDC did not conduct sensitivity and risk analyses; 
therefore, the estimate did not reflect the degree of uncertainty, and 
decision makers had no insight into the level of confidence associated 
with it. 

Source: GAO analysis of SLSDC data. 

[A] The ratings we used in this analysis are as follows: "Fully met" 
means that the agency provided complete evidence that satisfies the 
entire criterion; "Substantially met" means that the agency provided 
evidence that satisfies a large portion of the criterion; "Partially 
met" means that the agency provided evidence that satisfies about half 
of the criterion; "Minimally met" means that the agency provided 
evidence that satisfies a small portion of the criterion; and "Not 
met" means that the agency provided no evidence that satisfies any 
part of the criterion. 

[B] An independent cost estimate is another estimate based on the same 
technical information that is used to validate and cross-check the 
baseline estimate but is prepared by a person or organization that has 
no stake in the approval of the project. 

[End of table] 

SLSDC Adjusted the Fiscal Year 2009 Spending Plan: 

Because of the variability in cost estimates and reprioritization of 
ARP projects, SLSDC adjusted its fiscal year 2009 spending plan by 
reallocating funding, and deferring and accelerating projects to meet 
the targeted spending amount of approximately $17.6 million. 

* Reallocating project funding: SLSDC reallocated funding gained from 
contracts with lower-than-expected costs to pay for contracts with 
higher-than-expected costs. For example, the cost of the contract to 
dredge the navigation channel was significantly lower than estimated 
because the estimate included an allowance for hauling and disposing 
of hazardous sediments. Because no hazardous material was found, SLSDC 
was able to complete the work for 42 percent less than expected. 
Unused funds were then applied to other projects, such as the miter 
gate rehabilitation, in which actual awards were greater than 
estimates. 

* Deferring projects: As a result of the increased costs of higher-
priority projects, such as the miter gate rehabilitation and 
replacement of the culvert valve operating equipment, SLSDC deferred 
plans to purchase a new emergency response boat and a barge. 
Similarly, SLSDC deferred the purchase of materials to refurbish the 
lock covers used during the winter maintenance season because of the 
increased costs of the higher-priority projects. 

* Accelerating projects: SLSDC accelerated projects that increased in 
priority as a result of its continual monitoring of lock conditions. 
For example, SLSDC accelerated repair work in one of the lock 
machinery recesses to reduce leaking, which had increased 
significantly in 2009. 

While SLSDC has flexibility to adjust its annual spending plans, such 
flexibility does not eliminate the need to produce reliable and valid 
cost estimates. Office of Management and Budget guidance points out 
that estimating inaccuracy—both overestimating and underestimating—can 
adversely affect other projects. With overestimating, an agency may 
request and be provided with more resources than it will actually need 
for the project, thereby resulting in fewer resources available for 
other projects or programs. Underestimating projects can lead an 
agency to request fewer resources than it will actually need to 
complete the project, potentially leading to a reduction in the 
project scope, termination of the project, or the shifting of funds 
from other projects. Furthermore, inaccurate estimates may also reduce 
confidence in the accuracy of future estimates provided by an agency. 

Great Lakes St. Lawrence Seaway Study Inspections: 

As part of the Great Lakes St. Lawrence Seaway Study, engineers from 
the United States and Canada, including engineers from SLSDC and the 
Canadian Seaway, conducted on-site assessments of the current 
condition of all locks in the Great Lakes St. Lawrence Seaway System 
to obtain a general picture of issues such as wear, material fatigue, 
redundancy, and problems with concrete, as well as to categorize 
outstanding maintenance issues. Individual lock components were 
evaluated in terms of importance to operation, likelihood of failure, 
consequences of failure, and costs of keeping them operational. At the 
two U.S. locks, the engineers determined that the most critical areas 
are associated with concrete quality at the Eisenhower Lock, the 
condition of the lower miter gates at both locks, the south span of 
the Seaway International Bridge, and the Eisenhower Lock highway 
tunnel. 

SLSDC Capital Plans: 

Each year, SLSDC engineering and maintenance teams update plans for 
capital projects and equipment based on lock inspections and 
anticipated life cycles of parts and machinery. Projects deemed 
necessary to ensure reliability and availability of the existing lock 
structures are included in the agency's annual budget request. Project 
work may span a number of years because of the need to maintain the 
agency's capital budget at consistent levels and because of the 
limited 3-month winter shutdown period to complete the work. 

ARP Addresses Most Previously Identified Asset Renewal Needs, and 
SLSDC Will Continue to Assess Condition of Assets: 

ARP Addresses Most Asset Renewal Needs, and Remaining Needs Are 
Generally Addressed through Routine Maintenance: 

The ARP addresses the vast majority of the asset renewal needs 
identified through inspections performed as part of the Great Lakes 
St. Lawrence Seaway study and the development of agency capital plans 
submitted with annual budget requests for fiscal years 2003-2008. The 
remaining needs are generally addressed through routine maintenance, 
but SLSDC could use its flexibility to add new or modify existing ARP 
projects if maintenance funding cannot adequately address the needs. 
For example, SLSDC plans to add a project to the ARP to install the 
second phase of an emergency communications system in the underground 
areas of the locks and modify or add a project to construct a washing 
facility to help reduce corrosion on and extend the service life of 
agency vehicles, because routine maintenance funding is not adequate 
to address these needs. 

SLSDC's Ongoing Assessment Program Could Affect the ARP: 

While the ARP addresses most known asset renewal needs, SLSDC's 
ongoing asset condition assessment program may identify new 
requirements and cause the agency to add new or reprioritize current 
ARP projects. Periodic condition assessment-—in which assets are 
inspected to determine if they are sound and functional and to 
identify maintenance and repair needs—-is an essential step in 
effective facilities management. SLSDC has followed a reasonable 
approach for condition assessment. SLSDC's operating, maintenance, and 
engineering staff who are involved with the assets on a daily basis 
perform the assessments. As shown in table 3, assets are assessed at 
varying frequencies and levels of detail, depending on their 
significance to sustaining operations. For example, SLSDC staff 
inspect critical lock-operating equipment and systems three times a 
week during the shipping season and perform a more detailed inspection 
during the winter shutdown period. In contrast, equipment and vehicles 
that are less critical to operations are inspected less frequently. 
This approach is consistent with National Research Council guidance 
that states the importance of prioritizing assets so that assessments 
concentrate on the critical elements that affect the ability of the 
agency to operate effectively.[Footnote 19] SLSDC uses a preventive 
maintenance database to record inspection results, create repair work 
orders, and schedule maintenance activities. 

To address new requirements that may be identified through its 
condition assessment program, SLSDC officials stated that the agency 
will first attempt to use routine maintenance funding. If these 
requirements cannot be met using this funding, SLSDC officials said 
that they would then revise the ARP to account for the work. In 
addition, SLSDC's assessment program may cause it to modify the 
scheduling of ARP projects if assets currently slotted to have work 
performed in future years begin to experience problems that require 
more immediate attention. 

Condition Assessments: 

Condition assessments are conducted to understand an asset's overall 
state and to identify renewal or replacement needs that will preserve 
its ability to support the mission or activities it was designed to 
serve. During a condition assessment, trained personnel inspect the 
physical condition and functional performance of facilities, systems, 
and materials for signs of deterioration, failure, or more subtle 
symptoms that conditions are not normal. Condition assessments can 
range from staff walking through a facility and visually inspecting 
conditions to more comprehensive studies, using a variety of technical 
diagnostic techniques. 

Table 3: SLSDC's Condition Assessment Program for Infrastructure 
Assets: 

Asset: Electrical equipment; 
Description of assessment: 
* Lock-operating machinery is inspected three times per week during 
the navigation season; 
* Emergency generators are inspected and tested biweekly; 
* Transformers, automatic transfer switches, switchgear, and limit 
switches are inspected and preventive maintenance is performed 
annually. 

Asset: Concrete structures; 
Description of assessment: 
* Approach walls and lock walls are inspected for damage on all shifts 
each day during the navigation season; 
* All concrete is inspected annually when the locks are dewatered. 
Damaged or deteriorated concrete is further assessed by taking core 
samples to determine extent of damage/deterioration. 

Asset: Vertical lift gate; 
Description of assessment: 
* Vertical lift gate is tested monthly to ensure it would operate in 
an emergency. 

Asset: Lock-operating equipment and systems (including gates, valves, 
ship arrestors, walls, compressors, and pumps); 
Description of assessment: 
* Lock-operating equipment and systems are inspected three times a 
week during the navigation season. Checklists are used for these 
inspections; 
* Lock-operating equipment and systems, and all underwater structures, 
are inspected in greater detail during the winter shutdown period. As 
part of this inspection, equipment is operated and/or disassembled. 

Asset: Fleet of vessels (tugs, buoy barge, and gatelifter vessel); 
Description of assessment: 
* Major pieces of the fleet are taken out of the water for assessment, 
and underwater components are repaired on a 5- to 10-year cycle; 
* The 300-ton gatelifter vessel is assessed through a training 
exercise annually or biannually; 
* All vessels are inspected before each use; 
* The large tug has oil samples taken from multiple systems twice a 
year, and the oil is changed based on the results of the samples; 
* For all other vessels, the oil is changed after operating for a 
predetermined number of hours. 

Asset: Fixed and floating aids to navigation; 
Description of assessment: 
* Fixed and floating aids are inspected annually, more frequently if 
maintenance is required; 
* All floating aids are repaired, cleaned, and painted on a 5-year 
cycle. 

Asset: Vehicles; 
Description of assessment: 
* Vehicles are checked and serviced every 3,000 miles, at a minimum. 

Asset: Mobile equipment (cranes, grader, backhoe, loader, forklifts, 
snowplows, mowing equipment, generators, air compressors, and so 
forth); 
Description of assessment: 
* Cranes are inspected monthly; 
* Equipment utilized during winter maintenance periods (e.g., 
snowplow) is inspected and serviced before and after each winter 
season; 
* All other equipment is inspected and serviced annually, at a minimum. 

Asset: Buildings; 
Description of assessment: 
* Buildings are continuously assessed as part of routine use. 

Source: SLSDC data. 

[End of table] 

The Canadian Seaway's ARP: 

The Canadian Seaway began an asset renewal program for its 13 locks in 
1997, and because it considers asset renewal work an ongoing effort, 
there is no targeted end date. The Canadian ARP is funded in 5-year 
increments from the Canadian government, and the Canadian Seaway 
currently expects to spend about C$570 million through 2013. 

ARP Projects Affecting Vessel Operating Procedures: 

Vessel self-spotting system: This technology uses laser scanning and 
image recognition techniques to detect and track the position of a 
vessel as it enters the lock. The system will provide vessel captains 
with visual and audio indication of their vessel's position relative 
to its mooring position. According to the Canadian Seaway, the 
technology will reduce the time vessels are in the lock. All Canadian 
locks are expected to be equipped with this technology by 2010. 
SLSDC's project to install this system is currently expected to begin 
in 2014. 

Vessel vacuum mooring system: This technology uses vacuum pads to 
secure vessels while they are in the lock. The system has been 
proposed as an alternative to manually securing vessels using casting 
lines from the ship to the lock wall. Use of this system could allow 
ships to transit the system without Seaway-specific equipment they 
currently carry. According to the Canadian Seaway, testing of this 
technology is under way. SLSDC's project to install this system is 
currently expected to begin in 2016. 

U.S. and Canadian Officials Coordinate as Needed on ARP Issues: 

While the two Seaway entities collaborated on the binational study and 
coordinate on day-to-day operations, U.S. and Canadian officials 
stated that coordination specific to the ARP generally involves 
opening and closing of the Seaway and the exchange of technical 
project information. Although both countries currently have programs 
to renew assets, officials stated that more detailed coordination of 
their programs is not warranted because of differences in the programs. 

Coordination of the opening and closing dates, while routine, is 
important for the ARP because it determines the work schedule for a 
number of critical projects that can be completed only during the 
winter shutdown period. Because of this limited winter maintenance 
time frame, SLSDC's ARP contracts contain penalty clauses to ensure 
that contractors complete work in time to allow the two U.S. locks to 
open on the agreed-upon date. 

SLSDC and the Canadian Seaway share technical information about 
projects both countries are doing. For example, the Canadian Seaway 
shared with SLSDC specifications and drawings from its miter gate 
project, which were used to assist SLSDC in designing its miter gate 
rehabilitation project. In addition, as part of the common goal to 
ensure that vessel operators transiting the Seaway have the same 
experience at each of the 15 locks, the two entities are coordinating 
on projects that would affect vessel operating procedures at the 
locks. For example, the Canadian Seaway is researching, testing, and 
implementing technologies to track and secure vessels as they enter 
the locks, and is sharing the results with the United States. SLSDC 
officials told us that work on two ARP projects to incorporate this 
technology will begin after they are successfully implemented at the 
Canadian locks. In the meantime, SLSDC uses updates from Canada's 
testing and implementing efforts to refine the scope and estimates of 
its projects. For example, SLSDC updated the scope and estimate of its 
vacuum mooring system project after Canadian testing of the system 
indicated that four vacuum units per lock may be required as opposed 
to the original plan of two per lock. 

Conclusions and Recommendation for Executive Action: 

Conclusions: 

The Asset Renewal Program represents a significant investment in 
SLSDC's infrastructure as part of the agency's effort to maintain the 
functionality of the St. Lawrence Seaway. Because many of the 
individual ARP projects are still in the early stages of project 
definition, it is reasonable to expect that cost estimates will 
continue to change. Estimates for asset renewal projects, like any 
estimate of a future activity, can never be exact. On the basis of the 
variability between estimated and actual costs experienced during the 
first year of the ARP, SLSDC was able to adjust its spending plans by 
reallocating funding and reprioritizing projects. Nevertheless, there 
is no guarantee that such favorable adjustments can be repeated in 
future years. As the ARP nears completion, SLSDC may have limited 
opportunities to reallocate funding and reprioritize projects. As a 
result, SLSDC may need to reduce the scope of work in the ARP or 
extend the length of the program beyond the current 10-year plan in 
order to complete all planned projects. 

SLSDC's need to adjust its annual spending plans could be reduced 
through increasing the reliability of project cost estimates. While we 
acknowledge that the considerable knowledge and experience of SLSDC's 
personnel is a valuable input to the cost-estimating process, it is 
only one part of a reliable cost-estimating process. We have 
identified a number of cost-estimating best practices in our cost 
assessment guide that, when applied, should result in reliable and 
valid cost estimates. We recognize that application of all of these 
best practices takes both time and financial resources. Therefore, 
SLSDC may choose to apply each best practice to varying degrees, 
depending on the scope and complexity of the individual projects. 
However, the overall effect of applying these best practices is to 
enable SLSDC to better identify and address issues contributing to 
cost variability and allow the agency to provide congressional 
decision makers, and other stakeholders, with more precise information 
about the ARP's estimated cost and increased confidence in SLSDC's 
annual spending plans. 

Recommendation for Executive Action: 

To improve the reliability of cost estimates of the ARP projects, we 
recommend that the Secretary of Transportation direct the SLSDC 
Administrator to develop a cost-estimating process that follows best 
practices to better ensure that its estimates are comprehensive, well 
documented, accurate, and credible. 

[End of Enclosure I] 

Enclosure II: Scope and Methodology: 

GAO Contact: 

Terrell G. Dorn, (202) 512-6923, or dornt@gao.gov. 

Staff Acknowledgments: 

In addition to the contact named above, individuals making key 
contributions to this report include Michael Armes, Assistant 
Director; Tisha Derricotte; Heather Frevert; Jason Lee; Susan Michal-
Smith; Josh Ormond; and Matt Voit. 

The objectives of this study were to determine (1) how the cost 
estimates in the Asset Renewal Program (ARP) have changed from 
February 2009 to February 2010, (2) the extent to which the ARP covers 
all asset renewal needs, and (3) the steps the U.S. and Canadian 
authorities have taken to coordinate their asset renewal programs. 

We employed several methods to determine how the cost estimate for the 
ARP has changed from February 2009 to February 2010. For example, we 
interviewed Saint Lawrence Seaway Development Corporation (SLSDC) 
officials and compared the February 2009 project feasibility estimates 
of the original 50 projects with the February 2010 estimates updated 
after the end of the first year of the 10-year program to quantify 
differences and determine the reasons for changes in the estimates. 
[Footnote 20] We obtained information from SLSDC on the project 
development stage at which each of the February 2010 project estimates 
was developed and used industry information and prior GAO reports to 
determine the expected variability between estimated and actual costs, 
and how this variability may change as the projects, and their 
corresponding estimates, mature through the project development 
process. We then compared the estimates used as part of the contract 
solicitation process with the initial award amount for 40 of the 41 
ARP contracts awarded in fiscal year 2009 to determine the extent of 
variability between estimates and initial awards. For the remaining 
fiscal year 2009 contract, the estimate included combined costs of 
dredging at two separate locations. Because there was a delay in 
obtaining all required permits, SLSDC awarded the contract in two 
parts; therefore, we compared the total of the two award amounts to 
the estimate used as part of the contract solicitation process. We 
interviewed SLSDC officials and analyzed data to determine the reasons 
for the variability between estimates and awards, and how the agency's 
fiscal year 2009 spending plan was modified in response to this 
variability as well as changes in project priorities, including the 
addition of two ARP projects. Our analysis of fiscal year 2009 
contract data cannot be generalized to ARP contracts awarded after 
fiscal year 2009. We interviewed an SLSDC official and reviewed 
audited financial statements to ensure the reliability of the contract 
data and determined that the data were sufficiently reliable for the 
purposes of this report. 

To evaluate the process SLSDC used to estimate the costs of projects 
in the ARP, we interviewed SLSDC officials and reviewed documents 
related to the agency's estimating process. We used the GAO Cost 
Estimating and Assessment Guide to evaluate the extent to which the 
estimates SLSDC prepared for two projects reflected the four key 
characteristics of high-quality estimates-—credible, well documented, 
accurate, and comprehensive. We selected projects to review in detail 
based on the following criteria: (1) projects starting in fiscal year 
2009 or 2010, (2) projects expected to cost more than $1 million when 
completed, (3) projects that were complex, and (4) projects that were 
critical to the operation of the locks. While 5 of the 52 projects met 
all of the criteria, we selected 3 projects because of the time and 
level of effort required to evaluate the estimating process for these 
projects. The 3 projects we initially selected were Project 4: Both 
Locks: Culvert Valve Machinery-Upgrade to Hydraulic Operations; 
Project 12: Corporation Equipment: Upgrade/Replace Floating Plant; and 
Project 31: Both Locks: Rehabilitate Upstream Miter Gates. However, 
Project 12 was dropped from our analysis after additional information 
obtained from officials and project documents revealed that the 
project did not fully meet our selection criteria.[Footnote 21] For 
Projects 4 and 31, we analyzed supporting technical and design 
documents related to the estimates, and interviewed SLSDC officials 
and the contractor involved in Project 4 about the processes used to 
prepare the estimates. GAO cost-estimating experts then compared the 
approaches for preparing the estimates for these two projects with the 
best practices contained in our guide and determined the extent to 
which the process complied with our cost guide. The information 
obtained from our review of SLSDC's estimating process for these two 
projects cannot be generalized to all ARP estimates. 

To determine the extent to which the ARP covers asset renewal needs, 
we interviewed SLSDC officials, and reviewed (1) ARP documents that 
described the projects, (2) agency capital plans and annual reports 
from 2003-2008, and (3) the Great Lakes St. Lawrence Seaway Study to 
identify SLSDC asset renewal needs. We compared the needs identified 
in the agency capital plans and the Great Lakes St. Lawrence Seaway 
Study with the current 52 ARP projects to determine the extent to 
which the ARP addressed all asset renewal needs. For any asset renewal 
need not identified in the ARP, we obtained additional information and 
interviewed SLSDC officials to determine why these needs were not 
included in the ARP, the extent to which these needs were addressed 
prior to implementing the ARP, and how SLSDC plans to address any 
needs in the future. We also reviewed documents and interviewed SLSDC 
officials to understand SLSDC's program to assess the condition of its 
infrastructure, facilities, and equipment, and how SLSDC anticipates 
addressing any future needs identified as a result of its assessment 
program, including how the results of the program could affect the 
ARP. We used industry information on condition assessment for 
facilities to determine the reasonableness of SLSDC's condition 
assessment program. 

To determine the steps taken by SLSDC and Canadian authorities to 
coordinate their asset renewal programs, we interviewed officials from 
SLSDC and their counterparts at the Canadian St. Lawrence Seaway 
Management Corporation and reviewed relevant laws and treaties and 
agreements between the United States and Canada. In addition, we 
reviewed annual reports from SLSDC and the Canadian Seaway describing 
asset renewal efforts. 

We conducted this performance audit from July 2009 to May 2010 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of Enclosure II] 

Enclosure III: How a Lock Works: 

The primary purpose of a lock is to raise and lower ships to bypass 
rapids in a river and/or overcome changes in water surface levels. 
Generally, a lock does not require pumps to operate, as water is moved 
by gravity from the high water side to the lower water side. The basic 
feature of a lock structure is an enclosed area called the chamber. 
The chamber of concrete walls has watertight gates at each end (called 
miter gates) and valves to fill and empty water from the chamber. The 
process of raising or lowering a ship in the chamber is called a 
lockage and is shown below in figure 5. 

Figure 5: Operation of a lock: 

[Refer to PDF for image: illustration] 

Lock Operation: 

(1) In this example, a ship approaches the lock chamber from the west, 
or upstream, end. The lock gates are closed, and the water level in 
the lock chamber is the same as the water level downstream of the lock 
chamber. 

(2) With both the lower and upper gates closed and the emptying 
culvert valves closed, the chamber is brought to the upper level by 
opening the filling culvert valves. This allows the water to flow from 
the intakes into the chamber. Once the chamber is filled, the upper 
gates are opened and the ship enters. 

(3) After the ship is in the chamber, the upper gates and the filling 
culvert valves are closed. The emptying culvert valves are then opened 
to allow water to flow out of the lock chamber to the lower level. As 
the water leaves the chamber, the ship is lowered. 

(4) When the water in the chamber reaches the lower level, the ship is 
fully lowered. The lower gates are opened, and the ship leaves. 
		
Source: GAO. 

[End of figure] 

End of Enclosure III] 

Enclosure IV: 52 ARP Projects: 

Table 4: Projects in the ARP: 

Project: 1. Snell Lock: Replace Fendering Downstream Guidewall 
Extension; 
Description: This project is to replace the 20-year-old composite 
fendering on the downstream guidewall at Snell Lock; 
Total project estimate (as of February 2010): $251,600. 

Project: 2. Eisenhower and Snell Locks: Rehabilitate Downstream Miter 
Gates; 
Description: This project is to completely rehabilitate the miter 
gates at the downstream ends of both locks. It includes replacing worn 
and/or damaged components to ensure proper functioning of the miter 
gates; 
Total project estimate (as of February 2010): $8,630,000. 

Project: 3. Eisenhower and Snell Locks: Rehabilitate Mooring Buttons 
and Pin and Rehabilitate Concrete along Guidewalls and Guardwalls; 
Description: This project is to rehabilitate the upstream and 
downstream concrete approach walls at both locks and the mooring 
buttons located behind these walls for transiting vessels to tie to. 
The rehabilitation work will include pinning dislodged lifts, 
repairing damaged concrete, and raising mooring buttons that have 
settled; 
Total project estimate (as of February 2010): $251,000. 
	
Project: 4. Eisenhower and Snell Locks: Culvert Valve Machinery-—
Upgrade to Hydraulic Operation; 
Description: This project is for replacing the 50-year-old operating 
machinery for culvert valves at both locks with new hydraulic 
operating machinery to match the upgrades made at the Canadian Seaway 
locks and other similar locks in the United States; 
Total project estimate (as of February 2010): $8,617,050. 

Project: 5. Eisenhower and Snell Locks: Rehabilitate and Insulate Winter
Maintenance Lock Covers; 
Description: This project is for rehabilitating and insulating the 40-
year-old steel modules utilized to cover both locks when major winter 
maintenance projects are planned; 
Total project estimate (as of February 2010): $304,698. 

Project: 6. Seaway International Bridge: Perform Structural 
Rehabilitation and Corrosion Prevention; 
Description: This project is for rehabilitation of the structural 
components of the south span of the Seaway International Bridge, which 
crosses the Seaway navigation channel and is jointly owned with 
Canada. SLSDC owns 68 percent of the south span of the bridge, and the 
budget request reflects the U.S. prorated amount for the project. 
Canada owns the remaining 32 percent of the south span;	
Total project estimate (as of February 2010): $12,341,878. 

Project: 7. Eisenhower and Snell Locks: Culvert Valves—-Replace with 
Single Skin Valves; 
This project is for replacing the 50-year-old double skin culvert 
valves utilized for filling and emptying both locks with single skin 
valves, which will provide better access to the structural members for 
inspection and maintenance; 
Total project estimate (as of February 2010): $1,514,000. 

Project: 8. Floating Navigational Aids: Replace; 
Description: This is an ongoing program to replace approximately 100 
buoys and 50 winter markers on an as-required basis; 
Total project estimate (as of February 2010): $615,254. 

Project: 9. SLSDC Equipment: Replace Heavy and Light Equipment, 
Maintenance Vehicles, and Shop Equipment; 
Description: This is an ongoing program to replace heavy and light 
equipment, vehicles, and shop equipment as they become worn out and 
unserviceable. Heavy and light equipment includes such items as a 
crane, dump truck, snowplow, backhoe, grader, and front end loader, 
and shop equipment includes such items as a lathe, a milling machine, 
and a drill press; 
Total project estimate (as of February 2010): $3,728,504. 

Project: 10. Eisenhower and Snell Locks: Upgrade Power Supply 
Infrastructure from Moses-Saunders Dam to Both Locks and Adjacent 
Facilities; 
Description: This project is for upgrading the 50-year-old 
infrastructure that supplies power to both locks and to SLSDC's 
maintenance facility; 
Total project estimate (as of February 2010): $289,594. 

Project: 11. Fixed Navigational Aids: Rehabilitate; 
Description: This project is for rehabilitating 50-year-old fixed 
navigational aids in the Seaway, including the concrete bases of some 
of these structures, which are eroding and cracking; 
Total project estimate (as of February 2010): $1,743,000. 

Project: 12. SLSDC Equipment: Upgrade/Replace Floating Plant; 
Description: This is an ongoing program to rehabilitate and/or replace 
SLSDC's floating plant,	which is utilized for maintaining the locks 
and navigation channels. This multiyear project also includes 
replacing the tug; upgrading the buoy tender barge; purchasing a 
smaller tug and a small barge and scow for maintaining fixed 
navigation aids and for emergency/spot dredging; and for 
rehabilitating the crane barge/gate-lifter, which would have to be 
utilized if a miter gate was damaged and had to be replaced; 
Total project estimate (as of February 2010): $32,020,745. 

Project: 13. SLSDC Facilities: Replace Roofs; 
Description: This project is for replacing the roofs on SLSDC's 
various buildings and facilities in Massena, New York, as required; 
Total project estimate (as of February 2010): $1,887,949. 

Project: 14. SLSDC Facilities: Replace Paving and Drainage 
Infrastructure; 
Description: This project is for improving the pavement and drainage 
along lock approach walls, agency roadways, and parking and work areas 
at all SLSDC facilities; 
Total project estimate (as of February 2010): $6,255,837. 

Project: 15. Eisenhower Lock: Highway Tunnel-—Rehabilitate; 
Description: This is an ongoing project to maintain the highway tunnel 
that goes under the Eisenhower Lock, including grouting to limit the 
water leaking into the tunnel, replacing damaged or missing tiles from 
the walls and ceiling, replacing deteriorated/damaged gratings and 
railings, stabilizing or repairing wingwalls at the tunnel approaches, 
clearing tunnel drains that are becoming plugged with concrete leachate 
products, and upgrading the lighting to meet current standards; 
Total project estimate (as of February 2010): $1,449,636. 

Project: 16. Seaway System: Upgrade GPS/AIS/TMS Technologies; 
Description: This project is to expand the use of the Seaway's Global 
Positioning System (GPS)/Automatic Identification System (AIS) 
navigation technologies, which are incorporated into the Seaway's 
binational Traffic Management System (TMS). Future upgrades will 
further improve the safety for vessels transiting the Seaway. Plans 
are to use these technologies to enable vessels to better identify 
hazards at times of limited visibility; 
Total project estimate (as of February 2010): $459,997. 
		
Project: 17. Navigation Channels: Dredge U.S. Sectors to Maintain 
Design Grade and Dispose of Sediments; 
Description: This project is for dredging of the navigation channel to 
remove sediments to maintain the channel at its authorized depth; 
Total project estimate (as of February 2010): $14,636,556. 

Project: 18. Eisenhower Lock: Vertical Lift Gate-—Replace Wire Ropes; 
Description: This project is for replacing the 30-year-old wire rope 
cables that serve to raise and lower the vertical lift gate at 
Eisenhower Lock. The vertical lift gate is an emergency closure 
designed to hold back water if a miter gate is compromised; 
Total project estimate (as of February 2010): $503,000. 

Project: 19. SLSDC Facilities: Upgrade Electrical Distribution 
Equipment; 
Description: This project is for upgrading 50-year-old electrical 
distribution equipment at both locks and at the Maintenance Facility; 
Total project estimate (as of February 2010): $801,000. 

Project: 20. Eisenhower and Snell Locks: Upgrade Lock Status/Controls; 
Description: This project is for upgrading the lock/equipment status 
systems and the lock operating controls at both locks; 
Total project estimate (as of February 2010): $234,558. 

Project: 21. Eisenhower and Snell Locks: Compressed Air Systems--
Upgrade/Replace; 
Description: This project is for replacing the compressors and 
corroded piping that provide compressed air for various systems at 
both locks for maintenance work and for ice control in and around the 
locks during the opening and closing of the Seaway; 
Total project estimate (as of February 2010): $1,527,878. 

Project: 22. Eisenhower and Snell Locks: Install Vessel Self Spotting 
Equipment; 
Description: This project is for installing technology at both locks 
so that vessel captains transiting the locks can more easily locate 
their vessel's position in the lock. The Canadian Seaway agency has 
been testing this new technology at its locks and will have it 
installed at all of its locks during the 2010 shipping season; 
Total project estimate (as of February 2010): $579,000. 

Project: 23. Eisenhower and Snell Locks: Install Vessel Vacuum Mooring 
Systems; 
Description: This project is for installing vessel vacuum mooring 
equipment at both locks to hold vessels in place while they are in the 
lock. The Canadian Seaway agency commenced testing this new technology 
at the beginning of the 2007 navigation season and continues to refine 
equipment specifications; 
Total project estimate (as of February 2010): $9,971,000. 

Project: 24. Eisenhower and Snell Locks: Structural Repair—-Grout 
Leaks in Galleries and Recesses; 
Description: This project is for grouting cracks/joints in the 
concrete in the galleries and recesses at both locks to reduce the 
infiltration of water into these areas; 
Total project estimate (as of February 2010): $441,561. 

Project: 25. SLSDC Facilities: Upgrade/Replace Fire Alarm/Protection 
Systems; 
Description: This project is for replacing antiquated fire alarm and 
fire protection systems at SLSDC facilities. Prior to the start of the 
ARP, SLSDC began work on this project because problems with the 
current system required more immediate attention. Therefore, the scope 
of the project under the ARP has been reduced; 
Total project estimate (as of February 2010): $105,148. 

Project: 26. SLSDC Facilities: Upgrade Storage for Lock Spare Parts; 
Description: This project is for constructing buildings for storage of 
lock spare parts to prevent them from corroding prior to their use; 
Total project estimate (as of February 2010): $609,000. 

Project: 27. SLSDC Facilities: Replace Windows and Doors and Repair 
Building Facades; 
Description: This project is for replacing corroded/worn windows and 
doors and for repairing the brick and stone facades; 
Total project estimate (as of February 2010): $1,025,000. 

Project: 28. Snell Lock: Walls, Sills and Culverts: Rehabilitate 
Concrete; 
Description: This project is to replace deteriorated/damaged concrete 
at Snell Lock along the lock walls, filling and emptying culverts, and 
the gate sills; 
Total project estimate (as of February 2010): $6,207,000. 

Project: 29. Eisenhower Lock: Walls, Sills and Culverts—-Rehabilitate 
Concrete; 
Description: This project is to replace deteriorated/damaged concrete 
at Eisenhower Lock along the lock walls, filling and emptying 
culverts, and the gate sills; 
Total project estimate (as of February 2010): $8,182,000. 

Project: 30. Eisenhower Lock: Ice Flushing System—-Upgrade; 	
Description: This project was for making improvements to the 
Eisenhower Lock ice flushing system used to remove ice from the lock 
chamber. However, SLSDC addressed this need through improved 
preventive maintenance procedures and minor improvements to the 
current system, which eliminated the need for major upgrades. 
Therefore, the scope of the project under the ARP has been reduced; 
Total project estimate (as of February 2010): $0. 

Project: 31. Eisenhower and Snell Locks: Rehabilitate Upstream Miter 
Gates; 
Description: This project is to completely rehabilitate the miter 
gates at the upstream ends of both locks. It includes replacing worn 
and/or damaged components to ensure proper functioning of the miter 
gates; 
Total project estimate (as of February 2010): $3,709,585. 

Project: 32. SLSDC Facilities: Rehabilitate Spare Gate Storage and 
Assembly Area; 
Description: This project is for rehabilitating the spare miter gate 
storage and assembly area. The work will include repair of the spare 
gate assembly pads and their supporting piles and blast cleaning and 
painting of the spare miter gates and gate assembly towers; 
Total project estimate (as of February 2010): $762,000. 

Project: 33. Eisenhower and Snell Locks: Upgrade Drainage 
Infrastructure in Galleries and Recesses; 
Description: This project is to open existing drains or to drill new 
ones in the galleries and machinery recesses at both locks; 
Total project estimate (as of February 2010): $614,000. 

Project: 34. Eisenhower and Snell Locks: Improve Ice Control; 
Description: This project is to improve the methods and equipment used 
to control ice in and around both locks during the opening and closing 
of each shipping season; 
Total project estimate (as of February 2010): $1,021,000. 

Project: 35. Vessel Mooring Cells: Rehabilitate and Extend; 
Description: This project is for rehabilitating and extending the 
vessel mooring cells upstream of Eisenhower Lock and in the 
Intermediate Pool between the locks. These mooring cells are used by 
vessels to tie the ship to a fixed point while awaiting repairs or 
inspections; 
Total project estimate (as of February 2010): $3,186,000. 

Project: 36. Eisenhower Lock: Diffusers—-Replace; 
Description: This project is to replace deteriorated and damaged 
concrete in the diffusers at Eisenhower Lock. The diffusers are the 
outlet structures used to slow the flow of water when the lock is 
emptied; 
Total project estimate (as of February 2010): $3,045,000. 

Project: 37. Eisenhower Lock: Construct Drydock for Vessel Maintenance; 
Description: This project is for constructing a drydock in Eisenhower 
Lock so that repairs to SLSDC's floating plant can be made on-site; 
Total project estimate (as of February 2010): $800,000. 

Project: 38. Eisenhower and Snell Locks: Upgrade/Replace Emergency 
Generators; 
Description: This project is for replacing the 20-year-old emergency 
generators at both locks. The project will also transfer and install 
one of the generators removed from the locks at the Maintenance 
Facility; 
Total project estimate (as of February 2010): $1,018,000. 

Project: 39. Eisenhower and Snell Locks: Dewatering Pumps-—Upgrade 
Outdated Equipment; 
Description: This project is for replacing the 50-year-old pumps used 
for dewatering both locks; 
Total project estimate (as of February 2010): $407,000. 

Project: 40. Eisenhower and Snell Locks: Extend Guidewalls in Pool; 
Description: This project is for extending the downstream guidewall at 
Eisenhower Lock and the upstream guidewall at Snell Lock; 
Total project estimate (as of February 2010): $3,076,000. 

Project: 41. Snell Lock: Install Ice Flushing System Technologies; 
This project is for installation of an ice flushing system at Snell 
Lock similar to the one at Eisenhower; 
Total project estimate (as of February 2010): $10,178,000. 

Project: 42. Eisenhower and Snell Locks: Miter Gates—-Structural 
Rehabilitation; 
Description: This project is to blast-clean and coat the upstream and 
downstream miter gates at both locks; 
Total project estimate (as of February 2010): $2,554,000. 

Project: 43. Eisenhower and Snell Locks: Miter Gate Machinery--
Upgrade/Replace; 
Description: This project is for replacing the 50-year-old operating 
machinery for the miter gates at both locks. The upgrade will include 
new hydraulic operating equipment to match the upgrades made at the 
Canadian Seaway locks and the other locks in the United States; 
Total project estimate (as of February 2010): $3,281,000. 

Project: 44. Eisenhower and Snell Locks: Ship Arrestor Machinery--
Upgrade/Replace; 
Description: This project is for replacing the 50-year-old operating 
machinery for the ship arrestors at both locks. The ship arrestors 
protect the miter gates from damage that would be caused by a vessel 
that was unable to stop; 
Total project estimate (as of February 2010): $825,000. 

Project: 45. Flow Control Dikes—-Rehabilitate; 
Description: This project is for placing additional stone on the dikes 
downstream of Snell Lock to return them to their original design; 
Total project estimate (as of February 2010): $515,000. 

Project: 46. Eisenhower and Snell Locks: Guidewall Extensions-—
Rehabilitate; 
Description: This project is to repair damage to the guidewall 
extensions located at the upstream end of Eisenhower Lock and at the 
downstream end of Snell Lock; 
Total project estimate (as of February 2010): $1,033,000. 

Project: 47. Eisenhower Lock: Vertical Lift Gate-—Structural 
Rehabilitation; 
Description: This project is for blast-cleaning and treating the 
vertical lift gate at Eisenhower Lock to prevent corrosion. The 
vertical lift gate is an emergency closure designed to be raised in 
the event a miter gate is compromised; 
Total project estimate (as of February 2010): $725,000. 

Project: 48. Eisenhower and Snell Locks: Stiffleg Derricks—-Replace; 
Description: This project is for replacing the structural components 
of the stiffleg derricks at both locks. The stiffleg derricks, located 
at each end of each lock, are hoisting devices used to place the 
temporary closure structures required for dewatering a lock for
inspection and/or repair of the underwater components; 
Total project estimate (as of February 2010): $834,000. 

Project: 49. Seaway International Bridge—-Replace Deck; 
Description: This project is for rehabilitation of the deck of the 
south span of the Seaway International Bridge, which crosses the 
Seaway navigation channel and is jointly owned with Canada. SLSDC owns 
68 percent of the south span of the bridge, and the budget request 
reflects the U.S. prorated amount for the project. Canada owns the 
remaining 32 percent of the south span; 
Total project estimate (as of February 2010): $14,225,000. 

Project: 50. Snell Lock: Diffusers-—Replace; 
Description: This project is to replace the deteriorated and damaged 
concrete in the diffusers at Snell Lock. The diffusers are the outlet 
structures used to slow the flow of water when the lock is emptied; 
Total project estimate (as of February 2010): $3,140,000. 

Project: 51. SLSDC Facilities: Upgrade Physical Security to Meet 
Description: Homeland Security Presidential Directive 12 (HSPD-12) 
Requirements; 
This project is for procuring the Personal Identity Verification cards 
issued by the Department of Transportation and for acquiring and 
installing the required infrastructure to meet HSPD-12, which 
establishes a federal standard for secure and reliable forms of 
identification for access to federal facilities; 
Total project estimate (as of February 2010): $200,000. 

Project: 52. Eisenhower Lock: Visitors' Center-—Replace; 
Description: This project will replace the existing 50-year-old 
Visitors' Center at Eisenhower Lock with a new facility that will meet 
federal physical security and accessibility standards; 
Total project estimate (as of February 2010): $5,000,000. 

Project: Engineering Design, Construction Inspection, Contracting 
Support, and Project Management; 
Description: To accomplish all of the ARP projects, SLSDC will require 
additional engineering design support, construction inspectors to 
monitor and insure the quality of the work, and contracting 
specialists to handle the increase in contract work. This estimate is 
for fiscal year 2010 only. Similar costs for fiscal year 2009 (actual) 
and fiscal year 2011 and beyond (estimates) are included directly in 
the individual project estimates; 
Total project estimate (as of February 2010): $306,000. 

Project: Total: $185,638,028. 

Source: GAO analysis of SLSDC data. 

[End of table] 

[End of Enclosure IV] 

Enclosure V: ARP Fiscal Year 2009 Contract Estimates and Awards: 

Table 5: ARP Fiscal Year 2009 Contracts Estimates Compared with Awards: 

Fiscal year 2009 awarded contracts: 1. Power supply infrastructure 
upgrade; 
Estimate used during contract solicitation: $75,000; 
Initial contract award: $19,594; 
Percent difference between estimate and award: -74%; 
ARP project number: 10. 

Fiscal year 2009 awarded contracts: 2. Software for viewing and 
plotting hydrographic survey results; 
Estimate used during contract solicitation: $19,123; 
Initial contract award: $6,750; 
Percent difference between estimate and award: -65%; 
ARP project number: 12. 

Fiscal year 2009 awarded contracts: 3. Paving and drainage repairs at 
both locks--design; 
Estimate used during contract solicitation: $50,000; 
Initial contract award: $20,600; 
Percent difference between estimate and award: -59%; 
ARP project number: 3 & 14. 

Fiscal year 2009 awarded contracts: 4. Navigation channel dredging; 
Estimate used during contract solicitation: $6,400,000; 
Initial contract award: $3,690,700; 
Percent difference between estimate and award: -42%; 
ARP project number: 17. 

Fiscal year 2009 awarded contracts: 5. River bottom sediment sampling; 
Estimate used during contract solicitation: $80,000; 
Initial contract award: $46,918; 
Percent difference between estimate and award: -41%; 
ARP project number: 17. 

Fiscal year 2009 awarded contracts: 6. Paving at Visitors' Center 
parking lot; 
Estimate used during contract solicitation: $24,000; 
Initial contract award: $14,873; 
Percent difference between estimate and award: -38%; 
ARP project number: 3 & 14. 

Fiscal year 2009 awarded contracts: 7. Hydrographic survey equipment; 
Estimate used during contract solicitation: $16,421; 
Initial contract award: $10,890; 
Percent difference between estimate and award: -34%; 
ARP project number: 12. 

Fiscal year 2009 awarded contracts: 8. Pavement, mooring buttons, and 
drainage repairs and improvement at both locks; 
Estimate used during contract solicitation: $1,200,000; 
Initial contract award: $877,350; 
Percent difference between estimate and award: -27%; 
ARP project number: 3 & 14. 

Fiscal year 2009 awarded contracts: 9. Mower; 
Estimate used during contract solicitation: $16,000; 
Initial contract award: $12,216; 
Percent difference between estimate and award: -24%; 
ARP project number: 9. 

Fiscal year 2009 awarded contracts: 10. All-terrain crane; 
Estimate used during contract solicitation: $1,750,000; 
Initial contract award: $1,358,888; 
Percent difference between estimate and award: -22%; 
ARP project number: 9. 

Fiscal year 2009 awarded contracts: 11. Rubber fenders; 
Estimate used during contract solicitation: $300,000; 
Initial contract award: $241,600; 
Percent difference between estimate and award: -19%; 
ARP project number: 1. 

Fiscal year 2009 awarded contracts: 12. Rotary cutter; 
Estimate used during contract solicitation: $13,000; 
Initial contract award: $11,096; 
Percent difference between estimate and award: -15%; 
ARP project number: 9. 

Fiscal year 2009 awarded contracts: 13. Hydrographic survey equipment; 
Estimate used during contract solicitation: $42,550; 
Initial contract award: $38,396; 
Percent difference between estimate and award: -10%; 
ARP project number: 12. 

Fiscal year 2009 awarded contracts: 14. Hydrographic survey software; 
Estimate used during contract solicitation: $11,775; 
Initial contract award: $11,030; 
Percent difference between estimate and award: -6%; 
ARP project number: 12. 

Fiscal year 2009 awarded contracts: 15. Weather and visibility 
monitoring equipment; 
Estimate used during contract solicitation: $19,000; 
Initial contract award: $18,499; 
Percent difference between estimate and award: -3%; 
ARP project number: 16. 

Fiscal year 2009 awarded contracts: 16. Snowplow; 
Estimate used during contract solicitation: $90,869; 
Initial contract award: $89,162; 
Percent difference between estimate and award: -2%; 
ARP project number: 9. 

Fiscal year 2009 awarded contracts: 17. Dry dock buoy barge; 
Estimate used during contract solicitation: $225,000; 
Initial contract award: $221,182; 
Percent difference between estimate and award: -2%; 
ARP project number: 12. 

Fiscal year 2009 awarded contracts: 18. Beacon marking a known 
critical point to be picked up by a ship's radar for use during 
periods of limited visibility; 
Estimate used during contract solicitation: $33,050; 
Initial contract award: $32,389; 
Percent difference between estimate and award: -2%; 
ARP project number: 16. 

Fiscal year 2009 awarded contracts: 19. Weather and visibility 
monitoring equipment; 
Estimate used during contract solicitation: $19,000; 
Initial contract award: $18,531; 
Percent difference between estimate and award: -2%; 
ARP project number: 16. 

Fiscal year 2009 awarded contracts: 20. 27-foot hydrographic survey 
vessel (boat); 
Estimate used during contract solicitation: $265,000; 
Initial contract award: $262,355; 
Percent difference between estimate and award: -1%; 
ARP project number: 12. 

Fiscal year 2009 awarded contracts: 21. Grouting and lighting of 
highway tunnel-study; 
Estimate used during contract solicitation: $27,000; 
Initial contract award: $26,636; 
Percent difference between estimate and award: -1%; 
ARP project number: 15. 

Fiscal year 2009 awarded contracts: 22. Compressed air systems-study; 
Estimate used during contract solicitation: $20,000; 
Initial contract award: $19,704; 
Percent difference between estimate and award: -1%; 
ARP project number: 21. 

Fiscal year 2009 awarded contracts: 23. Culvert valve machinery--
design; 
Estimate used during contract solicitation: $30,000; 
Initial contract award: $30,000; 
Percent difference between estimate and award: 0; 
ARP project number: 4. 

Fiscal year 2009 awarded contracts: 24. Culvert valve machinery--
design; 
Estimate used during contract solicitation: $10,000; 
Initial contract award: $10,000; 
Percent difference between estimate and award: 0; 
ARP project number: 4. 

Fiscal year 2009 awarded contracts: 25. Lock roof cover 
upgrade/rehabilitation; 
Estimate used during contract solicitation: $29,400; 
Initial contract award: $29,400; 
Percent difference between estimate and award: 0; 
ARP project number: 5. 

Fiscal year 2009 awarded contracts: 26. Rehabilitation work on U.S. 
portion of the bridge; 
Estimate used during contract solicitation: $2,000,000; 
Initial contract award: $2,000,000; 
Percent difference between estimate and award: 0; 
ARP project number: 6. 

Fiscal year 2009 awarded contracts: 27. Snowplow; 
Estimate used during contract solicitation: $51,069; 
Initial contract award: $51,250; 
Percent difference between estimate and award: 0; 
ARP project number: 9. 

Fiscal year 2009 awarded contracts: 28. Weather- and visibility-
monitoring equipment; 
Estimate used during contract solicitation: $14,190; 
Initial contract award: $14,190; 
Percent difference between estimate and award: 0; 
ARP project number: 16. 

Fiscal year 2009 awarded contracts: 29. Weatherproof enclosure for 
wind-monitoring equipment; 
Estimate used during contract solicitation: $5,460; 
Initial contract award: $5,460; 
Percent difference between estimate and award: 0; 
ARP project number: 16. 

Fiscal year 2009 awarded contracts: 30. Differential gauges; 
Estimate used during contract solicitation: $6,196; 
Initial contract award: $6,198; 
Percent difference between estimate and award: 0; 
ARP project number: 20. 

Fiscal year 2009 awarded contracts: 31. Marine lanterns for 
navigational aids; 
Estimate used during contract solicitation: $60,815; 
Initial contract award: $61,254; 
Percent difference between estimate and award: 1%; 
ARP project number: 8. 

Fiscal year 2009 awarded contracts: 32. Steel and materials for lock 
roof cover upgrade/rehabilitation; 
Estimate used during contract solicitation: $12,900; 
Initial contract award: $13,467; 
Percent difference between estimate and award: 4%; 
ARP project number: 5. 

Fiscal year 2009 awarded contracts: 33. Hydrographic survey equipment; 
Estimate used during contract solicitation: $7,120; 
Initial contract award: $7,700; 
Percent difference between estimate and award: 8%; 
ARP project number: 12. 

Fiscal year 2009 awarded contracts: 34. Roofs on control houses at 
Snell Lock; 
Estimate used during contract solicitation: $85,000; 
Initial contract award: $91,419; 
Percent difference between estimate and award: 8%; 
ARP project number: 13. 

Fiscal year 2009 awarded contracts: 35. Boston whaler (boat); 
Estimate used during contract solicitation: $27,838; 
Initial contract award: $30,766; 
Percent difference between estimate and award: 11%; 
ARP project number: 12. 

Fiscal year 2009 awarded contracts: 36. Container trailer; 
Estimate used during contract solicitation: $10,000; 
Initial contract award: $11,550; 
Percent difference between estimate and award: 16%; 
ARP project number: 9. 

Fiscal year 2009 awarded contracts: 37. Tractor; 
Estimate used during contract solicitation: $24,000; 
Initial contract award: $30,808; 
Percent difference between estimate and award: 28%; 
ARP project number: 9. 

Fiscal year 2009 awarded contracts: 38. Grouting at Snell Lock; 
Estimate used during contract solicitation: $40,000; 
Initial contract award: $53,215; 
Percent difference between estimate and award: 33%; 
ARP project number: 24. 

Fiscal year 2009 awarded contracts: 39. Upgrade culvert valve 
operating machinery control for the north side valves at both locks; 
Estimate used during contract solicitation: $2,750,000; 
Initial contract award: $4,077,050; 
Percent difference between estimate and award: 48%; 
ARP project number: 4. 

Fiscal year 2009 awarded contracts: 40. Rehabilitation of upstream 
miter gate at Eisenhower Lock; 
Estimate used during contract solicitation: $1,250,000; 
Initial contract award: $2,201,585; 
Percent difference between estimate and award: 76%; 
ARP project number: 31. 

Fiscal year 2009 awarded contracts: 41. Inspection and pre- and 
postdredge surveys; 
Estimate used during contract solicitation: $200,000; 
Initial contract award: $541,829; 
Percent difference between estimate and award: 171%; 
ARP project number: 17. 

Fiscal year 2009 awarded contracts: Total; 
Estimate used during contract solicitation: $17,310,776; 
Initial contract award: $16,316,500. 

Small purchase orders and modifications to contracts after initial 
award; 
Initial contract award: $1,270,528. 

Final total fiscal year 2009 obligations; 
Initial contract award: $17,587,028. 

Source: GAO analysis of SLSDC data. 

[End of table] 

[End of Enclosure V] 

Enclosure VI: Cost-Estimating Best Practices: 

Figure 6: 12 Key Cost-Estimating Steps: 

[Refer to PDF for image: illustration] 

Initiation and research: Your audience, what you are estimating, and 
why you are estimating it are of the utmost importance: 
* Define the estimate's purpose; 
* Develop the estimating plan. 

Assessment: Cost assessment steps are iterative and can be 
accomplished in varying order or concurrently: 
* Define the program; 
* Obtain the data; 
* Determine the estimating structure; 
* Identify ground rules and assumptions; 
* Develop the point estimate and compare it to an independent
cost estimate. 

Analysis, presentation, and updating the estimate steps can lead to 
repeating previous assessment steps. 

Analysis: The confidence in the point or range of the estimate is 
crucial to the decision maker: 
* Conduct sensitivity analysis; 
* Conduct a risk and uncertainty analysis; 
* Document the estimate; 

Presentation: Documentation and presentation make or break a cost 
estimating decision outcome: 
* Present estimate to management for approval; 
* Update the estimate to reflect actual 
costs/changes. 			 

Source: GAO. 

[End of figure] 

Table 6: Four Characteristics of a High-Quality Cost Estimate with 
Their Corresponding 12 Key Cost-Estimating Steps: 

Characteristic: Comprehensive; 
Step: 
* Develop the estimating plan; 
* Identify ground rules and assumptions[A]; 
* Determine the estimating structure. 

Characteristic: Well-documented; 
Step: 
* Define the estimate's purpose, scope, and schedule; 
* Define the program; 
* Identify ground rules and assumptions[A]; 
* Obtain the data; 
* Document the estimate; 
* Present the estimate to management. 

Characteristic: Accurate; 
Step: 
* Develop the point estimate and compare it with an independent cost 
estimate[B]; 
* Update the estimate to reflect actual costs and changes. 

Characteristic: Credible; 
Step: 
* Develop the point estimate and compare it with an independent cost 
estimate[B]; 
* Conduct a sensitivity analysis; 
* Conduct risk and uncertainty analysis. 

Source: GAO 

[A] This step applies to two of the characteristics—-comprehensive and 
well documented. 

[B] This step applies to two of the characteristics—-accuracy and 
credibility. 

[End of table] 

[End of Enclosure VI] 

Enclosure VII: Assessment of Two Project Cost Estimates Reviewed: 

This enclosure provides the assessments of two SLSDC project cost 
estimates we reviewed in detail. Each assessment provides our analysis 
of the extent to which the project's cost-estimating processes and 
methodologies included the 12 key steps necessary for preparing high-
quality estimates (see figure 6), and some key examples of the 
rationale behind our analysis. 

Assessment of ARP Project #4: Culvert Valve Operating Equipment, Phase 
1: 

Project description: This is a two-phase project to replace the 
operating machinery for the Eisenhower and Snell Lock culvert valves, 
which are used for filling and emptying the locks. The upgrade will 
replace motors and gears—which have been maintained but not replaced 
or upgraded since their installation in the 1950s—with new hydraulic 
operating machinery to match the upgrades made at the Canadian Seaway 
locks and other similar locks in the United States. SLSDC contracted 
with the U.S. Army Corps of Engineers to develop the project's design 
and cost estimate. 

The first phase of this project began in fiscal year 2009 when SLSDC 
awarded a contract to upgrade the operating machinery on the north 
side of both locks. Because of the long lead time needed to acquire 
the equipment, the actual work will be performed over the 3-month 
period of January to March 2011. 

Final estimate (phase 1): $2.8 million. 
Actual award (phase 1): $4.1 million. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Comprehensive; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Partially met. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Comprehensive; Develop the estimating plan;	
Explanation: The cost-estimating team should develop a written study 
plan that (1) determines the estimating team's composition and whether 
the team is from a centralized office, (2) identifies which subject 
matter experts the team will rely on for information, (3) outlines the 
estimating approach, and (4) identifies a master schedule for 
completing the estimate that provides adequate time to do the work. 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Minimally met; 
Key examples of rationale for assessment: The contractor responsible 
for creating the estimate has a centralized cost-estimating department 
that specializes in marine equipment. However, SLSDC did not specify 
details or requirements for the cost estimate or identify any 
necessary guidance or policy to be followed. In addition, a written 
study plan and schedule of specific tasks were not developed, and 
therefore, responsibilities were not clearly defined and due dates 
were not established. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Comprehensive; Determine the estimating structure; 
Explanation: There should be a defined work breakdown structure (WBS) 
and/or a cost element structure. The WBS should be product-oriented, 
traceable to the statement of work, and at an appropriate level of 
detail to ensure that cost elements are neither omitted nor double-
counted. A WBS dictionary should be developed that defines what is 
included in each element and how it relates to other elements in the 
hierarchy; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Partially met; 
Key examples of rationale for assessment: The cost estimate defined 
the work in detail and for each cost category, the estimate clearly 
describes how most of the various cost elements are summed, thereby 
ensuring that no costs are double-counted. However, because the 
estimate does not specifically break out costs common for most 
projects, such as testing, training, or government equipment costs, we 
cannot verify that the estimate includes all relevant costs of the 
project. In addition, the estimate was task-oriented, rather than 
product-oriented. A product-oriented work breakdown structure allows a 
program manager to more precisely identify which components are 
causing cost or schedule overruns and to more effectively mitigate the 
root causes of overruns.
			
Four characteristics of high-quality cost estimates and 12 key steps: 
Comprehensive; Identify ground rules and assumptions; 
Explanation: Ground rules and assumptions should document the 
rationale and any historical data to back up any claims. Risks that 
are associated with any assumptions should be identified and traced to 
specific WBS elements. Budget constraints, as well as the effect of 
delaying program content, should be defined. Inflation indexes and 
their source should be identified, and if items are excluded from the 
estimate, they should be documented and explained; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Partially met; 
Key examples of rationale for assessment: The cost estimate 
documentation provides for basic assumptions underlying the estimate; 
however, some assumptions are not fully documented. Key global 
assumptions about the project were not taken into account because they 
were not discussed between SLSDC and its contractor. For example, 
several risks, including confined working spaces, ice, and freezing 
conditions, which could cause a delay in the schedule, were not 
accounted for in the cost estimate. 
			
Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Substantially met 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Define the estimate's purpose	
Explanation: The purpose and scope of the cost estimate should be 
defined and documented. The level of detail in the cost estimate 
should be consistent with the level of detail available for the 
program, and all applicable costs should be estimated, including life 
cycle costs; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Fully met; 
Key examples of rationale for assessment: The purpose and scope of the 
cost estimate is documented and clearly defined in the statement of 
work at a level that would enable SLSDC to submit a quality cost 
estimate.
		
Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Define the program characteristics 
Explanation: There should be a documented technical baseline 
description that is contained in a single document. The technical 
baseline description should include requirements, purpose, technical 
characteristics, development plan, acquisition strategy, operational 
plan, and risk; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Fully met; 
Key examples of rationale for assessment: A technical baseline has 
been documented that includes, among other things, requirements, 
purpose, and design features. The cost estimate is based upon the 
final drawings and specifications. 
		
Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Identify ground rules and assumptions; 
Explanation: Ground rules and assumptions should document the 
rationale and any historical data to back up any claims. Risks that 
are associated with any assumptions should be identified and traced to 
specific WBS elements. Budget constraints, as well as the effect of 
delaying program content, should be defined. Inflation indexes and 
their source should be identified, and if items are excluded from the 
estimate, they should be documented and explained; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Partially met; 
Key examples of rationale for assessment: The cost estimate 
documentation provides for basic assumptions underlying the estimate, 
such as inflation; however, some assumptions are not fully documented. 
Key global assumptions about the project were not taken into account 
because they were not discussed between SLSDC and its contractor. For 
example, several risks, including confined working spaces, ice, and 
freezing conditions, which could cause a delay in the schedule, were 
not accounted for in the cost estimate.
			
Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Obtain the data	
Explanation: The data should be gathered from valid historical actual 
cost, schedule, and program and technical sources. The data should 
apply to the program being estimated and should be analyzed for cost 
drivers. Data should be collected from primary sources and adequately 
documented. Analysts should meet with the data sources to better 
understand the program, and data should be reviewed and benchmarked 
against historical data for reasonableness; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Substantially met; 
Key examples of rationale for assessment: The final cost estimate is 
based partially on the preliminary cost estimate from 2002, adjusted 
to current year dollars. The 2002 estimate incorporated data on 
similar historical projects, local labor rates, vendor quotes, and 
estimator experience to develop the estimate. However, estimators did 
not adjust the historical data to reflect the increased labor costs 
required to complete the project during the compressed timeline of the 
winter shutdown period, which limited the usefulness of these data. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Document the estimate; 
Explanation: Documentation should describe the cost-estimating 
process, data sources, and methods step by step so that a cost analyst 
unfamiliar with the program can understand what was done and replicate 
it. The documentation should include ground rules and assumptions, 
descriptions of methodologies, and sensitivity and risk and 
uncertainty analysis results broken out by cost element. Management 
approval and updates that reflect actual costs or changes should be 
included; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Substantially met; 
Key examples of rationale for assessment: The documentation of the 
final cost estimate includes detailed materials for estimated labor, 
equipment, contingency, and bond requirements, which allows management 
to clearly see how the total cost of the project is calculated. 
However, the cost estimate documentation does not trace all estimates 
to raw or normalized data. For example, the documentation does not 
provide a basis or supporting data for included quantities, equipment, 
or contingency that would allow an analyst unfamiliar with the project 
to recreate them. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Present the estimate to management; 
Explanation: Management should be presented with a clear explanation 
of the cost estimate so as to convey its level of competence. The 
presentation should illustrate the largest cost drivers, an overview 
of the program's technical foundation and objectives, a discussion of 
ground rules and assumptions, cost-estimating methodologies for each 
cost element, and the results from the sensitivity and risk and 
uncertainty analyses. Feedback from the briefing, including 
management's acceptance of the estimate, should be acted upon and 
recorded in the cost estimate documentation; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Minimally met; 
Key examples of rationale for assessment: While the estimate was 
approved by SLSDC management, it was not presented to SLSDC management 
in a clear and concise way. For example, while SLSDC officials stated 
that the estimate was reviewed for completeness and reasonableness of 
assumptions, the estimate provided did not clearly convey whether or 
not all costs were properly captured, all risks were properly 
considered, and underlying assumptions were valid. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Accurate; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Substantially met. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Accurate; Develop the point estimate and compare with an independent 
cost estimate; 
Explanation: The cost estimator should consider various cost-
estimating methods, like analogy, engineering buildup, parametric, and 
extrapolating from actual costs. The point estimate should be 
developed by aggregating the WBS cost estimates, and results should be 
checked for accuracy, double counting, and omissions. The point 
estimate results should be validated with cross-checks and an 
independent cost estimate; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Substantially met; 
Key examples of rationale for assessment: The cost estimate is based 
on a detailed buildup of estimated labor and material prices, but was 
not cross-checked against an independent cost estimate to ensure 
accuracy and minimize double counting and omissions. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Accurate; Update the estimate to reflect actual costs and changes; 
Explanation: There should be a process for the estimating team to 
update the estimate with actual costs as they become available. The 
estimate should reflect changes in technical or program assumptions. 
Finally, the estimate should discuss lessons learned for elements 
whose actual costs or schedules differed from those of the estimate; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Substantially met; 
Key examples of rationale for assessment: SLSDC updated both the 
current and future phases of the project cost estimate with fiscal 
year 2009 award data; however, because the project is not yet 
complete, SLSDC cannot update the estimate with actual incurred costs 
or lessons learned. 
		
Four characteristics of high-quality cost estimates and 12 key steps: 
Credible; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Minimally met; 

Four characteristics of high-quality cost estimates and 12 key steps: 
Credible; Develop the point estimate and compare to an independent 
cost estimate; 
Explanation: The cost estimator should consider various cost-
estimating methods like analogy, engineering buildup, parametric, and 
extrapolating from actual costs. The point estimate should be 
developed by aggregating the WBS cost estimates. The point estimate 
results should be crosschecked against an independent cost estimate to 
ensure that different estimating approaches would produce similar 
results; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Substantially met; 
Key examples of rationale for assessment: The cost estimate is based 
on a detailed buildup of estimated labor and material prices, but was 
not cross-checked against an independent cost estimate to ensure that 
different estimating approaches would produce similar results. 
Comparing the cost estimate against an independent cost estimate would 
allow SLSDC to examine where and why there are differences in key cost 
drivers. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Credible; Conduct a sensitivity analysis; 
Explanation: The cost estimate should include a sensitivity analysis 
that identifies a range of possible costs from changing key cost 
driver assumptions or factors; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Not met; 
Key examples of rationale for assessment: A sensitivity analysis was 
not performed on the estimate, and therefore, decision makers were not 
fully aware of how changes to assumptions or key cost drivers (such as 
labor or equipment) could affect the estimate. For example, a 
sensitivity analysis could have provided decision makers with 
information on how premium pay rates would affect the estimate.
	
Four characteristics of high-quality cost estimates and 12 key steps: 
Explanation: Credible; Conduct risk and uncertainty analysis; 
A risk and uncertainty analysis should be conducted that quantifies 
the risks and identifies the effects of changing key cost driver 
assumptions and factors. The probability associated with the point 
estimate should be identified, and contingency reserves should be 
recommended for achieving the desired confidence level. Finally, a 
risk management plan should be implemented jointly with the contractor 
to identify and analyze risk, plan for risk mitigation, and 
continually track risk; 
Overall assessment (fully met/substantially met/partially 
met/minimally met/not met): Not met; 
Key examples of rationale for assessment: A risk and uncertainty 
analysis was not performed on the estimate and therefore the estimate 
did not reflect the degree of uncertainty, and decision makers had no 
insight into the level of confidence associated with it. SLSDC 
officials stated that they did not request that their contractor 
perform an uncertainty analysis, despite the project risk involved in 
completing the project under a compressed schedule. 

Source: GAO analysis of SLSDC data. 

[A]The ratings we used in this analysis are as follows: "Fully met" 
means that the agency provided complete evidence that satisfies the 
entire criterion; "Substantially met" means that the agency provided 
evidence that satisfies a large portion of the criterion; "Partially 
met" means that the agency provided evidence that satisfies about half 
of the criterion; "Minimally met" means that the agency provided 
evidence that satisfies a small portion of the criterion; and "Not 
met" means that the agency provided no evidence that satisfies any 
part of the criterion. 

[End of table] 

Assessment of ARP Project #31: Rehabilitate Upstream Miter Gates, 
Phase 1: 

Project description: This is a two-phase project to rehabilitate the 
miter gates at the upstream ends of both Eisenhower and Snell Locks. 
The project will replace worn and/or damaged components to ensure 
proper functioning of the miter gates. 

The first phase of this project began in fiscal year 2009 when SLSDC 
awarded a contract to rehabilitate the upstream gate at Eisenhower 
Lock. Because of the long lead time needed to acquire gate components, 
the actual work will be performed over the 3-month period of January 
to March 2011. 

Final estimate (phase 1): $1.3 million. 
Award amount (phase 1): $2.2 million. 
		
Four characteristics of high-quality cost estimates and 12 key steps: 
Comprehensive; 	
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Minimally met 

Four characteristics of high-quality cost estimates and 12 key steps: 
Comprehensive; Develop the estimating plan; 
Explanation: The cost-estimating team should develop a written study 
plan that (1) determines the estimating team's composition and whether 
the team is from a centralized office, (2) identifies which subject 
matter experts the team will rely on for information, (3) outlines the 
estimating approach, and (4) identifies a master schedule for 
completing the estimate that provides adequate time to do the work; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Minimally met; 
Key examples of rationale for assessment: While the cost estimators 
were from a centralized team that specializes in marine equipment, 
SLSDC did not develop a written study plan or a schedule of specific 
tasks, clearly define responsibilities, or identify due dates for key 
tasks. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Comprehensive; Determine the estimating structure; 
Explanation: There should be a defined work breakdown structure (WBS) 
and/or a cost element structure. The WBS should be product-oriented, 
traceable to the statement of work, and at an appropriate level of 
detail to ensure 
that cost elements are neither omitted nor double-counted. A WBS 
dictionary should be developed that defines what is included in each 
element and how it relates to other elements in the hierarchy; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Not met; 
Key examples of rationale for assessment: The cost estimate does not 
define the work in detail nor does it provide a framework for planning 
and assigning the work down to an appropriate level of detail. A 
product-oriented structure allows a program manager to more precisely 
identify which components are causing cost or schedule overruns and to 
more effectively mitigate the root cause of overruns. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Comprehensive; Identify ground	rules and assumptions; 
Explanation: Ground rules and assumptions should document the 
rationale and any historical data to back up any claims. Risks that 
are associated with any assumptions should be identified and traced to 
specific WBS elements. Budget constraints, as well as the effect of 
delaying program content, should be defined. Inflation indexes and 
their source should be identified, and if items are excluded from the 
estimate, they should be documented and explained; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Partially met; 
Key examples of rationale for assessment: Basic cost-influencing 
ground rules and assumptions, such as labor rates, and inflation 
rates, were documented. However, the cost estimate did not reflect (1) 
the compressed time frame required to complete the work during the 
winter shutdown and penalties for not completing the work on time and 
(2) the risks associated with performing the effort in the winter (ice 
and freezing conditions). 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; 	
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Partially met; 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Define the estimate's purpose; 
Explanation: The purpose and scope of the cost estimate should be 
defined and documented. The level of detail in the cost estimate 
should be consistent with the level of detail available for the 
program, and all applicable costs should be estimated, including life 
cycle costs; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Fully met; 
Key examples of rationale for assessment: The purpose of the cost 
estimate is documented at a level that would enable SLSDC to submit a 
high-quality cost estimate. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Define the program characteristics; 
Explanation: There should be a documented technical baseline 
description that is contained in a single document. The technical 
baseline description should include requirements, purpose, technical 
characteristics, development plan, acquisition strategy, operational 
plan, and risk; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Partially met; 
Key examples of rationale for assessment: The cost estimate and the 
technical design are based on a similar Canadian project, and adjusted 
based on SLSDC's requirements. However, when the cost estimate was 
prepared, the technical baseline description was only 35 percent 
complete. The accuracy of a cost estimate depends on a well-defined 
program. In the absence of fully defined requirements, more 
assumptions must be made, increasing the risk associated with the 
estimate. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Identify ground rules and assumptions; 
Explanation: Ground rules and assumptions should document the 
rationale and any historical data to back up any claims. Risks that 
are associated with any assumptions should be identified and traced to 
specific WBS elements. Budget constraints, as well as the effect of 
delaying program content, should be defined. Inflation indexes and 
their source should be identified, and if items are excluded from the 
estimate, they should be documented and explained; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Partially met; 
Key examples of rationale for assessment: Basic cost-influencing 
ground rules and assumptions, such as labor rates, and inflation 
rates, were documented. However, the cost estimate did not reflect (1) 
the compressed time frame required to complete the work during the 
winter shutdown and penalties for not completing the work on time and 
(2) the risks associated with performing the effort in the winter (ice 
and freezing conditions). 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Obtain the data; 
Explanation: The data should be gathered from valid historical actual 
cost, schedule, and program and technical sources. The data should 
apply to the program being estimated and should be analyzed for cost 
drivers. Data should be collected from primary sources and adequately 
documented. Analysts should meet with the data sources to better 
understand the program, and data should be reviewed and benchmarked 
against historical data for reasonableness; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Partially met; 
Key examples of rationale for assessment: The cost estimate was based 
on a 2005 Canadian project, as well as expert knowledge from SLSDC in-
house engineers. However, the Canadian project information was from a 
contractor's bid and not from actual costs of the completed project. 
In addition, SLSDC had equipment requirements that differed from those 
of the Canadian project and that SLSDC did not account for in its 
estimate. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Document the estimate; 
Explanation: Documentation should describe the cost-estimating 
process, data sources, and methods step by step so that a cost analyst 
unfamiliar with the program can understand what was done and replicate 
it. The documentation should include ground rules and assumptions, 
descriptions of methodologies, and sensitivity and risk and 
uncertainty analysis results broken out by WBS cost element. 
Management approval and updates that reflect actual costs or changes 
should be included; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Minimally met; 
Key examples of rationale for assessment: The cost estimate 
documentation did not provide detailed material and labor cost 
information that would allow someone unfamiliar with the project to 
recreate it. Without thorough documentation, a cost estimate cannot be 
properly validated or defended. Well-documented estimates may also 
contribute to the collection of cost and technical data that could be 
used to support the cost estimates of future Seaway projects.
			
Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Present the estimate to management; 
Explanation: Management should be presented with a clear explanation 
of the cost estimate so as to convey its level of competence. The 
presentation should illustrate the largest cost drivers, an overview 
of the program's technical foundation and objectives, a discussion of 
ground rules and assumptions, cost-estimating methodologies for each 
WBS, and the results from the sensitivity and risk and uncertainty 
analyses. Feedback from the briefing, including management's 
acceptance of the estimate, should be acted upon and recorded in the 
cost estimate documentation; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Minimally met; 
Key examples of rationale for assessment: While the estimate was 
approved by SLSDC management, the estimate did not provide enough 
detail to easily defend the estimate by showing how it is accurate, 
complete, and high in quality. SLSDC officials stated that the 
estimate was not reviewed in detail because the majority of the effort 
was used to review technical specifications for the miter gates. 
Without a thorough management review, SLSDC cannot ensure that the 
cost estimate properly captures all of the costs and risks associated 
with the project. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Develop the point estimate and compare with an 
independent cost estimate; 
Explanation: The cost estimator should consider various cost-
estimating methods like analogy, engineering buildup, parametric, and 
extrapolating from actual costs. The point estimate should be 
developed by aggregating the WBS cost estimates and results should be 
cross-checked for accuracy, double counting, and omissions. The point 
estimate results should be validated with cross-checks and an 
independent cost estimate; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Partially met; 
Key examples of rationale for assessment: The cost estimate is based 
on a similar Canadian project, and SLSDC engineers applied 
professional judgment and experience to adjust the estimate to reflect 
the requirements of the project. However, the estimate was based on a 
project bid, adjusted with a rule-of-thumb factor, rather than actual 
costs, and the estimate was not based on a detailed buildup of 
individual cost elements. In addition, the estimate was not cross-
checked against an independent cost estimate to ensure accuracy and 
minimize double counting and omissions. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Well documented; Update the estimate to reflect actual costs and 
changes; 
Explanation: There should be a process for the estimating team to 
update the estimate with actual costs as they become available. The 
estimate should reflect changes in technical or program assumptions. 
Finally, the estimate should discuss lessons learned for elements 
whose actual costs or schedules differed from those of the estimate; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Substantially met; 
Key examples of rationale for assessment: SLSDC updated both the 
current and future phases of the project cost estimate with 2009 award 
data. However, because the project is not yet complete, SLSDC cannot 
update the estimate with actual incurred costs or lessons learned. 
		
Four characteristics of high-quality cost estimates and 12 key steps: 
Credible; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Minimally met. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Credible; Develop the point estimate and compare to an independent 
cost estimate; 
Explanation: The cost estimator should consider various cost-
estimating methods like analogy, engineering buildup, parametric, and 
extrapolating from actual costs. The point estimate should be 
developed by aggregating the WBS cost estimates. The point estimate 
results should be crosschecked against an independent cost estimate to 
ensure that different estimating approaches would produce similar 
results; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Partially met; 
Key examples of rationale for assessment: The cost estimate is based 
on a similar Canadian project, and SLSDC engineers applied 
professional judgment and experience to adjust the estimate to reflect 
the requirements of the project. However, the estimate was based on a 
project bid, adjusted with a rule-of-thumb factor, rather than actual 
costs, and the estimate was not based on a detailed buildup of 
individual cost elements. In addition, the project estimate was not 
cross-checked against an independent cost estimate to ensure that 
different estimating approaches would produce similar results. 
Comparing the cost estimate against an independent cost estimate would 
allow SLSDC to examine where and why there are differences in key cost 
drivers. 

Four characteristics of high-quality cost estimates and 12 key steps: 
Credible; Conduct a sensitivity analysis; 
Explanation: The cost estimate should include a sensitivity analysis 
that identifies a range of possible costs from changing key cost 
driver assumptions or factors; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Not met; 
Key examples of rationale for assessment: A sensitivity analysis was 
not performed on the estimate, and therefore, decision makers were not 
fully aware of how changes to assumptions or key cost drivers (such as 
labor or equipment) could affect the estimate. For example, a 
sensitivity analysis could have provided decision makers with 
information on how premium pay rates would affect the estimate. 
	
Four characteristics of high-quality cost estimates and 12 key steps: 
Credible; Conduct risk and uncertainty analysis; 
Explanation: A risk and uncertainty analysis should be conducted that 
quantifies the risks and identifies the effects of changing key cost 
driver assumptions and factors. The probability associated with the 
point estimate should be identified, and contingency reserves should 
be recommended for achieving the desired confidence level. Finally, a 
risk management plan should be implemented jointly with the contractor 
to identify and analyze risk, plan for risk mitigation, and 
continually track risk; 
Overall assessment (Fully met/Substantially met/Partially 
met/Minimally met/Not met): Not met; 
Key examples of rationale for assessment: A risk and uncertainty 
analysis was not performed on the estimate, and therefore the estimate 
did not reflect the degree of uncertainty and decision makers had no 
insight into the level of confidence associated with it. SLSDC 
officials stated that despite the project risk involved in completing 
the project under a compressed schedule, they did not conduct a risk 
and uncertainty analysis because such an analysis is not a part of 
their estimating process. 

Source: GAO analysis of SLSDC data. 

[A] The ratings we used in this analysis are as follows: "Fully met" 
means that the agency provided complete evidence that satisfies the 
entire criterion; "Substantially met" means that the agency provided 
evidence that satisfies a large portion of the criterion; "Partially 
met" means that the agency provided evidence that satisfies about half 
of the criterion; "Minimally met" means that the agency provided 
evidence that satisfies a small portion of the criterion; and "Not 
met" means that the agency provided no evidence that satisfies any 
part of the criterion. 

[End of table] 

[End of Enclosure VII] 

Footnotes: 

[1] A government corporation is an entity for a public purpose 
established by the U.S. government in a corporate form by a federal 
charter, and subject to chapter 91 of Title 31 of the U.S. Code, 
commonly referred to as the Government Corporation Control Act. 
However, for the purposes of this report, we sometimes refer to SLSDC 
as an agency. 

[2] Explanatory Statement in the 2009 Committee Print of the House 
Committee on Appropriations on H.R. 1105, at 2109, accompanying the 
Omnibus Appropriations Act for FY 2009, Pub. L. No. 111-8, Div. I, 
Title I, 123 Stat. 524, 943 (2009). In addition, S. Rep. No. 111-69, 
at 94 (2009), which accompanied the Transportation, and Housing and 
Urban Development, and Related Agencies Appropriations Bill for FY 
2010 stated that the GAO report should be submitted to the House and 
Senate Committees on Appropriations no later than May 31, 2010. The 
Conference Report, H.R. Rep. No. 111-366, at 379 (2009), accompanying 
the Consolidated Appropriations Act for FY 2010, Pub. No. 111-117, 123 
Stat. 3034 (2009), stated the language in Senate Report No. 111-69 
should be complied with unless specifically addressed to the contrary 
in the conference report and the statement of the managers. There was 
no statement to the contrary relating to the date for the submission 
of this report. 

[3] See enclosure III for a visual presentation of how locks operate. 

[4] The Seaway's shipping season is typically from late March through 
late December. hi measuring time when the locks are not available to 
vessels, SLSDC considers, among other things, delays caused by 
weather, vessel incidents, insufficient water levels, and lock 
equipment malfunction. 

[5] See Tom Sawyer, "Metal Fatigue Suspected in Second Lock-Gate 
Failure," Engineering News-Record (Feb. 15, 2010), 15. 

[6] Fiscal year 2009 was the first year SLSDC was appropriated funds 
for the ARP. See Pub. No. 111-8, Div. I, Title I, 123 Stat 524, 943 
(2009). 

[7] GAO, GAO Cost Estimating and Assessment Guide: Best Practices for 
Developing and Managing Capital Program Costs, [hyperlink, 
http://www.gao.gov/products/GAO-09-3SP] (Washington, D.C.: March 2009). 

[8] The February 2009 ARP estimate of $177 million was based on 50 
projects. SLSDC added 2 projects to the ARP, and therefore the 
February 2010 program estimate of $186 million was based on 52 
projects. The 2 projects added will replace the Visitors' Center and 
upgrade physical security. For more information on all 52 projects, 
see enclosure IV. 

[9] Of the 30 projects where the estimate was revised, 8 estimates 
changed by less than 5 percent, 4 changed from 5 to 10 percent, and 
the remaining 18 changed by more than 10 percent. 

[10] Many of the ARP projects have multiple phases that may span a 
number of years, and SLSDC may award multiple contracts to complete 
each project or project phase. In addition, each phase may go through 
the project development process, and therefore a project with multiple 
phases may have phases in different stages of project development. 

[11] SLSDC also obligated approximately $85,000 for small purchase 
orders and $1.2 million for modifications to existing contracts, 
primarily for additional work on the Seaway International Bridge. 

[12] GAO, Recovery Act: Status of States' and Localities' Use of Funds 
and Efforts to Ensure Accountability, [hyperlink, 
http://www.gao.gov/products/GAO-10-231], (Washington, D.C.: Dec. 10, 
2009). 

[13] SLSDC resolicited for contract bids in fiscal year 2010 and 
awarded a contract for culvert valve replacement at an amount 51 
percent less than estimated. 

[14] [hyperlink, http://www.gao.gov/products/GA0-09-3SP]. 

[15] An independent cost estimate is another estimate based on the 
same technical information that is used to validate and cross-check 
the baseline estimate but is prepared by a person or organization that 
has no stake in the approval of the project. 

[16] The U.S. Army Corps of Engineers operates over 200 locks 
throughout the United States. 

[17] GA0, Department of Energy: Actions Needed to Develop High-Quality 
Cost Estimates for Construction and Environmental Cleanup Projects, 
[hyperlink, http://www.gao.gov/products/GAO-10-199] (Washington, D.C.: 
Jan. 14, 2010); Telecommunications: GSA Has Accumulated Adequate 
Funding for Transition to New Contracts but Needs Cost Estimation 
Policy, GAO-07-268 (Washington, D.C.: Feb. 23, 2007). 

[18] The definition of a "large, complex project" varies by agency 
depending on the size and value of the assets it manages. 

[19] National Research Council, Stewardship of Federal Facilities: A 
Proactive Strategy for Managing the Nation's Public Assets 
(Washington, D.C.: 1998). 

[20] The estimates for six of the projects changed by $3,000 or less 
because of minor rounding of future SLSDC budget estimates. Because 
these changes were small, due only to rounding, and not a result of a 
material change in the project, we did not consider the adjustments in 
these projects to reflect a change in the total project estimate. 

[21] In fiscal year 2009, SLSDC awarded a number of small contracts 
(each less than $1 million) for commercial-off-the-shelf items with 
fairly well-established market prices, and as such, these contracts 
were not for complex projects critical to the operation of the locks. 
Future work planned as part of this project is expected to be more 
complex and cost more than $1 million, but this work is still in the 
planning stage and lacked enough information to evaluate using our 
cost-estimating criteria. 

[End of section] 

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