Naval Ship Donation: Existing Procedures Inadequate for the Use of Additional Evaluation Criteria

Published by the Government Accountability Office on 1997-08-15.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                   United States General Accounting Office

GAO                Report to the Secretary of the Navy

August 1997
                   NAVAL SHIP
                   Existing Procedures
                   Inadequate for the Use
                   of Additional
                   Evaluation Criteria

                   United States
GAO                General Accounting Office
                   Washington, D.C. 20548

                   National Security and
                   International Affairs Division


                   August 15, 1997

                   The Honorable John F. Dalton
                   The Secretary of the Navy

                   Dear Mr. Secretary:

                   On August 21, 1996, you announced your decision to donate the USS
                   Missouri, a ship of historical significance, to the USS Missouri Memorial
                   Association in Hawaii. At the request of Congressman Norman Dicks, we
                   reviewed the facts surrounding the donation process. Specifically, we
                   obtained information on the (1) process of applying for the ship,
                   (2) evaluation criteria and weighting used to evaluate the applications, and
                   (3) use of the criteria and weighting in the selection process. On June 3,
                   1997, we reported our results to Congressman Dicks.1 The purpose of this
                   letter is to quickly summarize our findings and to recommend ways to
                   improve the process for any future ship donation.

                   The Secretary of the Navy has legal authority (10 U.S.C. 7306) to transfer
Background         title of ships no longer needed for the Navy’s purposes to not-for-profit
                   entities and others. However, the law requires that (1) such a donation be
                   made at no cost to the government, (2) the recipient maintain the ship, and
                   (3) Congress be allowed 60 days to review the Secretary’s decision.

                   The Navy’s ship donation evaluation process is designed to help the
                   Secretary of the Navy determine whether those seeking a donation of a
                   ship meet the Navy’s requirements for financial and technical capabilities.
                   The overall purpose of the ship donation program is to promote the public
                   interest in the defense of the nation and to commemorate historic deeds
                   performed by naval ships. In the past, with one exception, only 1
                   application was received for each of 43 donations and the qualified
                   applicant received the donation. However, for the USS Missouri, the Navy
                   received five applications.

                   The Navy began the donation process for the USS Missouri in the same
Results in Brief   manner as prior donations, by requesting financial and technical
                   information from the applicants and working with applicants to help
                   ensure that their applications would satisfy the Navy’s financial and
                   technical requirements. Subsequently, the Navy decided that, with respect

                    USS Missouri: Navy’s Evaluation Process in Ship Donation (GAO/NSIAD-97-171R, June 3, 1997).

                   Page 1                                                        GAO/NSIAD-97-180 Ship Donation

to the USS Missouri, additional evaluation criteria, “historical significance”
and “public affairs benefits to the Navy,” were needed to assist the
Secretary of the Navy in making the donation decision among four of five
applicants that met the Navy’s financial and technical requirements. This
was the first time such additional criteria were used in any donation
selection process.

While the donation process appears to have been impartially applied, and
all applicants were provided the same information on the additional
criteria at the same time, the Navy did not do a good job in communicating
its additional requirements to the applicants. Specifically, applicants were
not told (1) what the relative importance of the evaluation criteria was in
the process (the added criteria actually represented 75 percent of the
donation award weight), (2) what the added evaluation criteria meant, or
(3) how well already submitted applications met the added criteria
(a procedure routinely used in the financial and technical evaluation
process). These factors were particularly important because the Navy’s
evaluation teams were told to base their scoring only on the information
contained in the applications. As a result, Navy evaluation teams found
that the applications had limited information that could be applied against
the added criteria. According to some applicants, had they known that the
additional criteria carried so much weight, they would have revised their
applications. What appears to have been an otherwise open process with
clear communications and frequent interaction between the Navy and the
applicants for the USS Missouri was not with respect to the additional two
criteria .

The Secretary of Navy, by statute, has broad discretion in making ship
donation decisions. The Navy’s existing donation application procedures
are designed for assessing applicants in terms of their financial and
technical capabilities to move and sustain a vessel. When additional
criteria beyond financial and technical requirements are used and
applicants are asked to submit information to address them, as was the
case with the USS Missouri, existing application procedures do not
provide guidance on how the Navy should proceed. We believe that, had
there been written procedures that required the Navy to communicate to
the applicants the meaning and relative importance of the additional
criteria and to work with applicants to address the additional criteria, the
problems encountered in the USS Missouri case could have been avoided.

Page 2                                           GAO/NSIAD-97-180 Ship Donation

                     In the future, the Navy may again face situations where there are multiple
Recommendation       applicants for a ship donation and may decide that additional criteria
                     beyond the traditional financial and technical evaluation are necessary.
                     Therefore, we recommend that the Secretary of the Navy establish written
                     procedures to require that, whenever the Navy decides to ask applicants to
                     submit information to address additional criteria, the Navy
                     (1) communicate to applicants, at the earliest possible date, necessary
                     information that, at a minimum, includes the criteria that will be used to
                     evaluate the applications, the relative importance of the criteria in the final
                     selection, and clear definitions of what the criteria mean and (2) work
                     with applicants to increase the likelihood that applications will adequately
                     address the additional criteria, as has been the Navy’s practice in the
                     financial and technical areas.

                     In commenting on a draft of this report, the Navy took the position that
Agency Comments      there was already in place a process that maximizes both communication
and Our Evaluation   and flexibility. The Navy also stated that (1) it was important that the Navy
                     have the flexibility to select the best approach for each donation and
                     (2) whenever more than one application is received for the same ship, the
                     Navy makes every effort to conduct an impartial and fair analysis of each
                     application. The Navy also commented that a ship donation decision is not
                     a procurement competition but felt that we were recommending
                     procedures similar to those used for competitive procurements.

                     Our review of the process used for the USS Missouri indicated that the
                     Navy (1) did not explain the meaning of the added criteria and their
                     relative importance and (2) used two different approaches—the Navy
                     appeared to have used an open approach with clear communications and
                     frequent interactions with the applicants for the traditional financial and
                     technical capability criteria, but did not use a similar approach for the two
                     added criteria.

                     We are not recommending that ship donations be treated like competitive
                     procurements. The intent of our recommendation is that the Navy commit
                     itself, in its written procedures, to (1) explaining the meaning and relative
                     importance of any added criteria for which it is requesting information
                     from the applicants and (2) following the same approach for any added
                     criteria that it uses for the traditional financial and technical capability
                     criteria by working with the applicants to help ensure that their
                     applications provide the level of details and specificity the Navy feels it
                     needs. In an effort to ensure that readers of our final report will not

                     Page 3                                            GAO/NSIAD-97-180 Ship Donation

              misconstrue our intent, we have modified the language but not the thrust
              of our recommendation.

              The Navy’s comments are reprinted in appendix I. The Navy also provided
              a technical suggestion which we have incorporated in the background
              section of this report.

              This report is based on information gathered for our June 3, 1997, report
Scope and     on the USS Missouri. To obtain information for that report, we interviewed
Methodology   officials and reviewed files at the Naval Sea Systems Command, the Naval
              Historical Center, the Office of Chief of Naval Information, and the Office
              of the Deputy Assistant Secretary of the Navy for Ship Programs. We also
              interviewed representatives of four of the top five applicants; the fifth
              applicant has disbanded.

              We conducted our review during April and May 1997 in accordance with
              generally accepted government auditing standards.

              This report contains recommendations to you. The head of a federal
              agency is required under 31 U.S.C. 720 to submit a written statement on
              actions taken on our recommendations to the Senate Committee on
              Governmental Affairs and the House Committee on Government Reform
              and Oversight no later than 60 days after the date of the report. A written
              statement must also be submitted to the Senate and House Committees on
              Appropriations with an agency’s first request for appropriations made
              more than 60 days after the date of this report.

              We are sending copies of this report to appropriate congressional
              committees; the Secretary of Defense; and the Director, Office of
              Management and Budget. We will also make copies available to others
              upon request.

              Page 4                                         GAO/NSIAD-97-180 Ship Donation

Please contact me at (202) 512-4587 if you or your staff have any questions
concerning this report. Major contributors to this report were Charles W.
Thompson and John P. Ting.

Sincerely yours,

David E. Cooper
Associate Director, Defense Acquisitions Issues

Page 5                                         GAO/NSIAD-97-180 Ship Donation
Appendix I

Comments From the Department of the

             Page 6            GAO/NSIAD-97-180 Ship Donation
Appendix I
Comments From the Department of the

Page 7                                GAO/NSIAD-97-180 Ship Donation
           Appendix I
           Comments From the Department of the

(707267)   Page 8                                GAO/NSIAD-97-180 Ship Donation
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