Inland Waterways: Actions Needed to Increase Budget Transparency and Contracting Efficiency
Fast Facts
The U.S. Army Corps of Engineers maintains the nation's inland waterways, including locks and dams. Its inland waterways construction projects have often seen delays and cost overruns.
Corps reports and academic studies say the Corps faces higher costs and delays because it receives funding for only a part of a project each year, so it must contract for projects in pieces. Corps officials estimate that this inefficient approach will add $229 million to the cost of one project alone.
We recommended the Corps seek ways to use construction funds more efficiently.
A towboat brings two barges through a lock (left) and a new lock under construction (right) on the Monongahela River in Charleroi, Pennsylvania.
This is a photo showing a towboat bringing two barges through a lock and a new lock under construction.
Highlights
What GAO Found
The U.S. Army Corps of Engineers (Corps) allocates its appropriated funding for operations and maintenance projects for the inland waterways based on risk and economic benefits. However, the Corps does not know how much deferred maintenance exists for inland waterways because there is no agreed upon definition for deferred maintenance. Corps and ASA-CW officials identified several challenges related to developing a useful definition with which to measure deferred maintenance. For example, a single measure may not be useful to gauge the condition of the waterways because the effect of deferred maintenance projects on the reliability of the waterways will vary. However, without a measure or measures of deferred maintenance for inland waterways that (1) the Corps finds useful, (2) reflects its priorities, and (3) accurately conveys a consistent and well-defined measure of deferred maintenance, the Corps is limited in its ability to manage its maintenance efforts and accurately communicate its estimated maintenance costs to OMB and the Congress.
With regard to inland-waterways construction projects, the Corps prioritizes them based on expected costs and benefits. The Corps assesses the net economic benefits of inland-waterways construction projects' alternatives by comparing estimated direct costs (e.g., construction costs to build a new lock chamber) to estimated reductions in the waterway transportation costs (e.g., reduced travel costs related to a reduction in the time it might take for a barge to pass through a larger lock chamber). According to Corps officials and stakeholders, the current incremental-funding approach for prioritized projects, among other things, has resulted in schedule delays (as shown below) and cost increases. Although full upfront funding for capital projects is an important tool for effective management, inland-waterways construction projects have been funded incrementally, meaning the Corps requests—and Congress appropriates—annual funding that covers a portion of a project's estimated costs. Corps reports and academic studies have found that this approach results in increased project costs because the Corps must contract for construction in separable pieces. This approach is less efficient than contracting for the entire project at once. For example, Corps officials currently expect that the Kentucky Lock Addition project will cost at least $229 million more than the originally estimated cost as a direct result of this contracting approach. Without some change in the way inland-waterways construction projects are funded to either provide full funding or reduce the effects of incremental funding by concentrating funding on fewer projects at one time, current cost increases and schedule delays resulting from inefficient contracting are likely to continue.
Timelines for Ongoing New Construction Projects on Inland Waterways, Fiscal Year 2018
|
Project |
Construction start |
Estimated completion after authorization |
Estimated completiona |
|
Olmsted Locks and Dam: Ohio River |
1993 |
2005 |
2018 |
|
Lower Monongahela Locks and Dams: Monongahela River |
1994 |
2003 |
2023 |
|
Kentucky Lock Addition: Tennessee River |
1998 |
2007 |
2024 |
|
Chickamauga Lock: Tennessee River |
2007 |
2014 |
2023 |
Source: GAO presentation of U.S. Army Corps of Engineers information. | GAO-19-20
aEstimated completion refers to the date at which the facility is expected to be operational.
Why GAO Did This Study
The Corps is primarily responsible for operating and maintaining the nation's inland waterways, including maintaining locks and dams as well as rehabilitating, modernizing, or constructing new infrastructure as needed. Persistent schedule delays and cost overruns for inland-waterways construction projects have prompted some in Congress to explore funding and management alternatives.
GAO was asked to review options to change the management of inland waterways. Among other things, this report assesses how the Corps allocates funds for operations and maintenance for the inland waterways, describes how the Corps funds construction projects, and assesses the effect of the current funding approach on projects' costs and schedules. GAO reviewed Corps documents and data; interviewed officials from Corps headquarters, six districts, and representatives of regional and national stakeholder groups—including commercial and recreational interests as well as contributors to relevant literature—selected to achieve a variety of viewpoints; and developed a simulation of the effect of various funding approaches on the total funding requirements and timelines for a set of hypothetical construction projects.
Recommendations
GAO is making two recommendations: that the Corps define and measure deferred maintenance for inland waterways and that it pursue changes to increase its ability to more efficiently use available funding for construction. The Department of Defense concurred with GAO's recommendations.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Corps of Engineers | The Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers should define and measure deferred maintenance for inland waterways in a way that enables the Corps to clearly communicate estimated costs for maintenance needs. (Recommendation 1) |
The U.S. Army Corps of Engineers (Corps) has primary responsibility for operating and maintaining the nation's inland waterways, including maintaining locks and dams. Maintenance projects for locks and dams are funded from the Corps' Operations and Maintenance appropriation. However, we found in 2018 that the Corps did not know how much deferred maintenance exists for inland waterways because there is no agreed upon definition for deferred maintenance. Corps and ASA-CW officials identified several challenges related to developing a useful definition with which to measure deferred maintenance. For example, a single measure may not be useful to gauge the condition of the waterways because the effect of deferred maintenance projects on the reliability of the waterways will vary. However, the lack of a definition and measure of deferred maintenance for inland waterways projects is inconsistent with federal internal-control standards, which call for agencies to identify information requirements needed to achieve objectives and address identified risks (such as reliability of the waterways) and to process relevant data to develop that information. Further, internal control standards call for agencies to communicate information externally-such as to Congress and OMB-to achieve agencies' objectives. Without a measure or measures of deferred maintenance for inland waterways that (1) the Corps finds useful, (2) reflects its priorities, and (3) accurately conveys a consistent and well-defined measure of deferred maintenance, the Corps was limited in its ability to manage its maintenance efforts and accurately communicate its estimated maintenance costs to OMB and the Congress. As such, we recommended that the Corps define and measure deferred maintenance for inland waterways in a way that enables the Corps to clearly communicate estimated costs for maintenance needs. In 2022, we confirmed that the Corps had issued guidance defining and establishing reporting requirements for deferred maintenance needs. The guidance defines major operation and maintenance needs as critical activities that either prevent liability or damage or protect property and infrastructure. The guidance also defines deferred operation and maintenance needs as those that were identified but not performed when they should have been or were scheduled then delayed. Further, the guidance states that a complete list of major operation and maintenance needs of all Corps projects and properties-including those related to inland waterways locks and dams, among other types of infrastructure-should be developed and provided to Congress every two years in conjunction with the President's annual budget submission to Congress, beginning in fiscal year 2020. The guidance states that this list should include an estimate of the costs of those needs along with an estimate of the unmet or deferred needs. The Corps also provided a list of the unfunded or deferred maintenance as of March 2021, which amounted to over $1.8 billion in unfunded major operations and maintenance needs. By clearly defining and collecting information on the unfunded operations and maintenance projects that the Corps has identified as high priority, the Corps is better positioned to manage its operations and maintenance funding as well as communicating resource needs to OMB and the Congress.
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| Corps of Engineers | The Chief of Engineers and Commanding General of the U.S. Army Corps of Engineers should pursue ways to increase the Corps' ability to use available funding for inland waterways construction more efficiently and, should changes to the Corps' authority be necessary, develop a legislative proposal to request such authority. (Recommendation 2) |
The U.S. Army Corps of Engineers (Corps) has primary responsibility for rehabilitating, modernizing, or constructing new locks and dams on the nation's inland waterways. In 2018, we reported that the Corps prioritizes construction projects based on expected costs and benefits. However, as we found in 2018, Corps reports and academic studies found that the approach for funding these projects results in increased project costs because the Corps contracts for construction in separable pieces. As Corps officials and stakeholders stated, the incremental-funding approach for prioritized projects, among other factors, resulted in schedule delays and cost increases. Although full upfront funding for capital projects is an important tool for effective management, the inland-waterways construction projects we reviewed were funded incrementally, meaning the Corps requests-and Congress appropriates-annual funding that covers a portion of a project's estimated costs. In the years preceding our report, the Corps had requested funding for only one project, but Congress had directed the Corps to allocate funding to additional projects as well. This approach is less efficient than contracting for the entire project at once. For example, at the time of our report, Corps officials expected that one project would cost at least $229 million more than the originally estimated cost as a direct result of this contracting approach. As such, we recommended that the Corps pursue ways to increase the Corps' ability to use available funding for inland waterways construction more efficiently and, should changes to the Corps' authority be necessary, develop a legislative proposal to request such authority. In 2022, GAO reviewed information on the steps the Corps has taken to pursue opportunities to increase the efficiency of funding for inland waterways construction projects. While the Corps stated that it does not plan to pursue additional authorities to increase funding efficiency, the Corps and Congress have implemented some efforts to increase funding efficiency and transparency. First, for fiscal years 2021 through 2031, the Water Resources Development Act of 2020 changed the cost sharing ratio for inland waterways construction projects that results in additional funding for construction being available from the Inland Waterways Trust Fund (funded via a fuel tax paid by users of the inland waterways). Under statute, 50 percent of inland waterway construction funding is to be paid from amounts appropriated from the Inland Waterways Trust Fund and 50 percent was to be paid from amounts appropriated from the general fund of the U.S. Treasury. However, pursuant to the Water Resources Development Act of 2020, notwithstanding this statutory 50/50 cost share formula, inland waterways construction projects receiving a construction appropriation during any of the fiscal years 2021 through 2031, 35 percent of the cost of construction are to be paid from amounts appropriated form the Trust Fund, resulting in a larger share of costs being paid from amounts appropriated from the general fund of the U.S. Treasury. Depending on the total appropriations for inland waterways construction projects in any given year, the reduction in the share of costs paid from amounts appropriated from the Trust Fund may result in more funding available in the Trust Fund to fund construction projects. In turn, this change could enable the Corps to fund projects more efficiently. Second, in its 2020 update to the Inland Waterways Capital Investment Strategy, the Corps clearly identified the lower overall costs associated with fully funding construction projects to enable construction to be completed sooner, and the cost implications of the current incremental funding process. By clearly communicating this information, the Corps provides decision-makers-including the administration and Congress-with the context needed to weigh competing priorities and allocate limited resources.
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