Detailed Information on the
Maritime Security Program Assessment

Monitoring MSP agreements and, when appropriate, modifying those agreements, including substitution of vessels with DOD approval, to ensure that the MSP is meeting DOD's needs.

Measure: Percentage of sealift (shipping) capacity required by the Department of Defense (DOD), including both government and commercially-owned ships, complete with crews, that are available for deployment within mobilization timelines.

Explanation:This purpose of this overall program measure, a combination of three separate sealift readiness measures, is to assess the abiltiy to respond to DOD needs for sustainment seaflift capacity within mobilization timelines. Assets in three programs are incorporated into an aggregate readiness percentage, including: government-owned Ready Reserve Force ships (RRF), commercial ships enrolled in the Maritime Administration's Maritime Security Program (MSP), and commercial ships enrolled in Maritime Administration Voluntary Intermodal Sealift Agreements (VISAs). Each of the commercial vessels enrolled in the MSP and/or VISA programs are registered under the U.S. flag and are crewed with U.S.-citizen merchant marines. Both annual and long-term targets are ambitious and are based on historic performance levels while also recognizing that 100% availability of U.S.-flag sealift assets is typically not possible for a given mobility timeline due to both scheduled and unscheduled drydockinng or downtime for repairs and maintenance. Annual perfomance outcomes are impacted by substantial increases in activations and deployments due to in part logistical challenges in meeting crew requirements and in part to increased downtime for vessel maintenance requirements. DOD sealift requirements are contually assessed and compared to RRF, MSP and VISA assets. Changes to these requirements and to the composition of the RRF and to the U.S.-flag commercial fleet may result in future adustments to current long-term performance targets.

Measure: Ship capacity for container ships [in thousands of twenty-foot container equivalent units (TEUs)] enrolled in the Maritime Security Program and available to meet requirements for intermodal, commercial sealift capacity as determined by the U.S. Department of Defense.

Explanation:This measure tracks the program's contribution to the total commercial sealift capacity requirement. In FY 2008, the Maritime Administration revised this measure to better reflect the change in MSP fleet compostion following reauthorization of the program subsequent to the initial PART evaluation. Reauthorization legislation increased the MSP fleet from 47 ships through FY 2005 to 60 ships beginning in FY 2006. The additional ships under the most recent authorization also initiated a change in the compostion of vessel type within the MSP fleet. Beginning in FY 2006, the MSP fleet transitioned from a fleet predominantly composed of containerships to a fleet that included more roll-on/roll-off (RO/RO) vessels. This transition in fleet composition has necessitated a change in capacity measurement to conform the Department of Defense practice of measuring RO/RO capacity in square footage rather than in TEUs. The revision to this measure includes a change, beginning in FY 2006 to both targets and actual performance, to reflect only that portion of the MSP fleet capacity still measured in TEUs. The remainder of the MSP fleet capacity will be reflected in a separate new measure with separate performance targets for RO/RO capacity in square footage. The new annual target is set with the expectation by program management that replacement of TEU capacity with RO/RO capacity in the MSP fleet composition will continue at a gradual pace for the foreseeable future.

Measure: Ship capacity for roll-on/roll-off (RO/RO) ships (in millions of square feet) enrolled in the Maritime Security Program and available to meet requirements for intermodal, commercial sealift capacity as determined by the U.S. Department of Defense.

Explanation:This measure tracks the program's contribution to the total commercial sealift capacity requirement. In FY 2008, the Maritime Administration added this measure to better reflect the change in MSP fleet compostion following reauthorization of the program subsequent to the initial PART evaluation. Reauthorization legislation increased the MSP fleet from 47 ships through FY 2005 to 60 ships beginning in FY 2006. The additional ships under the most recent authorization also initiated a change in the compostion of vessel type within the MSP fleet. Beginning in FY 2006, the MSP fleet transitioned from a fleet predominantly composed of containerships to a fleet that included more roll-on/roll-off (RO/RO) vessels. This transition in fleet composition has necessitated a an additional capacity measurement to conform the Department of Defense practice of measuring RO/RO capacity in square footage rather than in TEUs. Additional RO/RO capacity is expected in the composition of the MSP fleet and the targets have been adjusted in accordance with this expectation beginning with the 2010 fiscal year.

Is the program purpose clear?

Explanation: Authorizing legislation dated October 1996 states: The Secretary of Transportation shall establish a fleet of active, militarily useful, privately-owned vessels to meet national defense and other security requirements and maintain a United States presence in international commercial shipping. Subtitle C of the Maritime Security Act of 2003 (the 2003 Act) reaffirmed the program purpose and added the phrase 'commercially viable'.

Evidence: 1. Maritime Security Act , P.L. 104-239 2. Maritime Security Act of 2003 (Subtitle C reauthorized the Maritime Security Program), P.L. 108-136

Does the program address a specific and existing problem, interest or need?

Explanation: The MSP maintains a commercially viable and militarily useful U.S.-flag international commercial fleet which gives the United States access to important ports, the ability to negotiate bilateral maritime trading agreements, and standing to participate in international organizations such as the United Nations' International Maritime Organization, the United Nations' World Trade Organization, and the Organization for Economic Cooperation and Development. The presence of a U.S.-flag fleet in major markets (1) aids the U.S. economy, (2) creates jobs for trained seamen, (3) ensures that an open market for shipping goods will exist, and (4) guarantees the United States a seat in international maritime negotiations. Between 1993 and 1997, the U.S.-flag international fleet declined 34% and the previous Government aid program, operating-differential subsidy (ODS) was expiring. MSP has maintained a fleet of 47 vessels in the international trade of the United States. Without the MSP most of this fleet would likely have been reflagged foreign. Each billet on a U.S.-flag vessel supports approximately 2.3 seamen. The current 47-ship MSP fleet supports about 950 billets (2,200 jobs). If the MSP vessels were flagged foreign, these jobs would be lost to the U.S. economy. Lack of standing would make it more difficult for the United States to oppose unilateral shipping arrangements imposed by trading partners, thus affecting open markets. The MSP reauthorization legislation will increase the size of the MSP fleet to 60 vessels.

Evidence: 1. U.S.- flag Ships Engaged In Commercial Foreign Commerce of the United States or in Foreign to Foreign Commerce for the Years 1993 to 2002 shows decline in # of ships from 1993 through 1997 from 116 to 76 and increasing from 1997 as MSP was implemented - from 76 to 85 in 2002. -1993 - 116 ships; 1994 - 109 ships; 1995 - 88 ships; 1996 - 85 ships; 1997 - 76 ships; 1998 - 78 ships; 1999 - 86 ships; 2000 - 87 ships; 2001 - 92 ships; 2002 - 85 ships Liner operators in MSP often run a service of all U.S.-flag vessels. Quite often this requires more vessels than are enrolled in MSP. The desirability of an all-U.S.-flag service stems from the U.S. flag requirement for carriage of preference cargo, particularly military. 2. Maritime Security Program and Voluntary Intermodal Sealift Agreement Program Evaluation U.S. Department of Transportation Maritime Administration March 2002 (Program Evaluation) pp. 3-4; 8-9; 12-13 3. MTMC Liner Vessels supporting OIF January 1 ' June 1, 2003 shows list of 33 MSP ships supporting Operation Iraqi Freedom (OIF) for Military Traffic Management Command (MTMC) liner service 4. Ships used in Operation Iraqi Freedom January 1, 2003 ' May 1, 2003 shows two MSP ships chartered to the Military Sealift Command (MSC) in OIF 5. Letter dated May 12, 2003 from General John W. Handy, Commander, USTRANSCOM to the Honorable Duncan Hunter, Chairman House Armed Service Committee re: importance of MSP 6. Letter dated May 12, 2003 from General John W. Handy, Commander, USTRANSCOM to the Honorable Edward C. Aldridge, Jr. Under Secretary of Defense re: importance of MSP

Is the program designed so that it is not redundant or duplicative of any other Federal, state, local or private effort?

Explanation: MSP fills a unique role because there is no other program that addresses the need of maintaining a U.S.-flag commercial fleet of active, commercially viable, militarily useful, privately-owned vessels that serves the dual purposes of meeting national defense and other security requirements and maintaining a United States presence in international commercial shipping.

Evidence: 1. Maritime Security Act , P.L. 104-239 2. Maritime Security Act of 2003 (Subtitle C reauthorized the Maritime Security Program), P.L. 108-136

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: MSP was designed to ensure a U.S. presence in foreign commerce in a less expensive manner and to avoid the major flaws of the preceding Government support program, Operating-Differential Subsidy (ODS). MSP is much less expensive, because MSP payments are capped by legislation, while ODS payments increased annually based on a complex daily rate calculation of the foreign competition. MSP operators have fewer operating restrictions and are paid a set amount per month as long as the vessel is operated in foreign commerce. Because it is so streamlined, a small staff administers MSP (3.5 FTE's) while, at the height of the ODS program, the staff to administer ODS was approximately 30 FTE's.

Evidence: 1. The Maritime Security Act, P.L. 104-239 authorizes 47 vessels at $2.1 M per vessel per year. Under the ODS program, shipping operators could be paid for the following items of subsidy: (1) wages (including benefits), (2) maintenance and repairs not compensated by insurance, (3) protection and indemnity insurance, (4) protection and indemnity deductibles, (5) hull and machinery insurance, and (6) other items. ODS liner participants were required to trade in specific areas and make a minimum number of voyages. A U.S.-flag fleet in foreign commerce provides the United States with access to important ports, standing to participate in international organizations such as the United Nation's International Maritime Organization, the United Nation's World Trade Organization, and the Organization for Economic Cooperation and Development, and the ability to negotiate bilateral maritime trading agreements. The National Defense Transportation Association (NDTA), citing estimates prepared by the U.S. Transportation Command (USTRANSCOM), concluded that the cost to the U.S. Government to replicate the sealift capability in MSP would be approximately $6.3 billion. 2. Comparison of Outlay for ODS and MSP 3. 46 CFR 252 - Operating-Differential Subsidy for Bulk Cargo Vessels Engaged in Worldwide Services; 46 CFR 281 - Informational Procedure Required Under Liner ODS Agreements; 46 CFR 282 - Operating-Differential Subsidy for Liner Vessels Engaged in Essential Services in the Foreign Commerce of the United States 4. 46 CFR 295 Maritime Security Program (MSP) 5. Memorandum dated December 23, 1997, from Director, Office of Financial and Rate Approvals to Associate Administrator for Financial Approvals and Cargo Preference re: American President Lines, Ltd. (APL) Final 1997 Daily ODS Wage Rates and supporting rate calculation data ' shows complexity of process to determine ODS payments 6. Letter dated January 8, 2001 from Deputy Director, Plans and Policy, USTRANSCOM, to Associate Administrator for National Security, Maritime Administration (MARAD) re: USTRANSCOM responses to questions for MARAD Program Evaluation pp. 4-5 question 13 7. Maritime Security Program and Commercial Shipping are Critical to Military Transport A Report By The National Defense Transportation Association's Military Sealift Committee February 2003 (NDTA study) pp.24-25

Is the program effectively targeted, so that resources will reach intended beneficiaries and/or otherwise address the program's purpose directly?

Explanation: MSP contracts are entered into directly with each ship operator and provide a set payment for services provided. The authorizing legislation in October 1996 established a priority system to fill the slots available for the program. First priority consideration was given to: (1) U.S. citizens as who owned and operated U.S.-flag vessels that were (a) less than 15 years of age, or Lighter Aboard Ships (LASH) up to 25 years of age, or (2) foreign controlled corporations who (a) owned vessels less than 10 years of age that were eligible for U.S. registry and (b) were operating, managing, or chartering vessels for the Secretary of Defense. Fifty-nine vessels qualified under the first priority, but only 47 were selected because of the $100 million annual funding limitation and the $2.1 million annual payment per vessel. Vessels that did not meet the first priority were not selected for the program. The November 2003 reauthorization legislation established a priority system for the selection of 60 vessels within several categories of military capability. The thirteen additional slots are designed to address military requirements, as targeted by General John W. Handy, Commander, USTRANSCOM, in a May 12, 2003 letter to the Honorable Duncan Hunter, Chairman of the House Armed Services Committee.

Evidence: 1. Maritime Security Act, P.L. 104-239 pp. 4-5 Sec. 652(i) 2. Maritime Security Act of 2003 (Subtitle C reauthorized the Maritime Security Program), P.L. 108-136 pp. 34-35 Sec. 53103(c) 3. 46 CFR 295 Maritime Security Program (MSP) 4. Maritime Security Program Operating Agreement with American President Lines, Inc. (and successor American Ship Management, LLC) Contract No. MA/MSP-1 Vessel: APL KOREA including Amendments 1 & 2 5. Memorandum, dated December 12, 1996, from Director, Office of Sealift Support to Maritime Administrator re: Approval of Operating Agreements under the Maritime Security Program 6. Memorandum dated January 22, 1997, from Director, Office of Sealift Support to Maritime Administrator re: Denial of Applications for Operating Agreements under the Maritime Security Program 7. Letter dated May 12, 2003 from General John W. Handy, Commander, USTRANSCOM to the Honorable Duncan Hunter, Chairman House Armed Service Committee re: importance of MSP

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: MSP's long-term performance measure is to contribute, along with non-MSP participants in the Voluntary Intermodal Sealift Agreement program (VISA) and the Ready Reserve Force (RRF), to DOT's Strategic Mobility Goal to maintain availability of DOD required shipping capacity at 94 percent of that required through FY 2008. In order for MSP to contribute to reaching this target, it must maintain a fleet of 47 militarily useful vessels in MSP - the maximum that can be contracted within the parameters of the $100 million annual funding and the $2.1 million annual payment per vessel. MSP program managers' internal goal is to contract 100% of the 47 vessels it is authorized to contract. This target also contributes to MARAD's Security Strategic Outcome, which is to ensure: 'Sufficient . . . sustainment . . . capacity is available to support DOD deployment requirements'. MSP contributes approximately 70% of the capacity toward meeting MARAD's annual performance goal of 165,000 available TEUs in VISA to meet DOD's requirements for intermodal commercial sealift capacity. In FY 2006, MARAD's internal long-term measure of 47 vessels will be increased to 60 vessels to coincide with the reauthorizing legislation.

Evidence: 1. Maritime Administration Strategic Plan for Fiscal Years 2003-2008 pp. 12; 21 2. U.S. Department Of Transportation Strategic Plan 2003-2008 p. 66 3. Maritime Security Program (MSP) Participants ' Operating-Differential Subsidy (ODS) and MSP Contract Information 4. Maritime Security Program Number of Participants End of Fiscal Year 5. The long-term measures of the MSP are heavily influenced by two factors ' program legislation and DOD's requirements. The current number of vessels in MSP is limited to 47 by a combination of the annual funding ($100 million) and the payment per vessel ($2.1 million per year) in the authorizing legislation. The reauthorizing legislation raises that total to 60 vessels in FY 2006. DOD vessel requirements include not only modern containerships, which have large TEU capacity, but RO/RO's and geared containerships, which do not. The additional 13 vessels in MSP will be selected to meet specific DOD needs. Quality of the vessels as they pertain to DOD needs, not quantity of TEU's will be the guiding factor.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: Maintaining 94% availability of the vessels in MSP, VISA and RRF is an ambitious target; it is not possible to have 100% of ship assets available at any given time. Ships require scheduled drydockings and periodic repairs and suffer downtime due to unexpected mechanical difficulties. For MSP keeping the program fully subscribed despite turnover in the vessels under contract in the program and mergers and acquisitions among several companies has been a challenge. MARAD, however, has done this in three of the last four years and used the replacement vessels as opportunities to improve the quality of the fleet mix through either age decreases, TEU increases, and/or better military capabilities.

Evidence: 1. Maritime Administration Strategic Plan for Fiscal Years 2003-2008 pp. 12; 21 2. U.S. Department of Transportation Strategic Plan 2003-2008 p. 66 3. 2005 Budget Security Performance Goal Strategic Mobility p. 39 4. Maritime Security Program (MSP) Participants ' Operating-Differential Subsidy (ODS) and MSP Contract Information 5. Maritime Security Program Number of Participants End of Fiscal Year

Does the program have a limited number of specific annual performance measures that can demonstrate progress toward achieving the program's long-term goals?

Explanation: MARAD has two annual performance measures (116,000 TEUs and 47 ships) and, beginning in the FY 2006 budget, an efficiency goal of 0.4 % administrative salary dollars to total MSP payments. MSP contributes approximately 70% of the capacity toward meeting MARAD's current annual performance goal of 165,000 available TEUs in VISA to meet DOD's requirements for intermodal commercial sealift capacity. Beginning with the 2006 budget, MARAD will be splitting that performance goal to reflect the individual contributions of the MSP vessels and the non-MSP VISA vessels. MARAD's annual performance goal for MSP alone will be to contribute a minimum of 116,000 available TEUs. MARAD has an internal annual program measure of maintaining the maximum number of MSP vessels that may be under contract, currently 47, rising to 60 in FY 2006.

Evidence: 1. 2005 Budget Security Performance Goal Strategic Mobility MARAD Supplementary Performance Measure for Commercial Sealift ' VISA TEUs (current) p. 40 2. Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for Commercial Sealift ' MSP TEUs (proposed) 3. .Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for MSP Program Efficiency (proposed)

Does the program have baselines and ambitious targets for its annual measures?

Explanation: The performance measures of providing 116,000 TEUs and maintaining 47 vessels in MSP have been met most but not all years since 2000. The fluctuation in the number of TEUs from year-to-year results from turnover of vessels within MSP. Since the MSP was initially fully subscribed in 2000, there have been changes in the industry. Despite these changes, MARAD has kept the program fully subscribed in three of the last four years and improved the quality of the fleet mix through the addition of newer ships, ships with greater capacity, and/or vessels with better military capability.

Evidence: 1. 2005 Budget Security Performance Goal Strategic Mobility MARAD Supplementary Performance Measure for Commercial Sealift ' VISA TEU's (current) 2. Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for Commercial Sealift ' MSP TEUs (proposed) 3. Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for MSP Program Efficiency (proposed)

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) commit to and work toward the annual and/or long-term goals of the program?

Explanation: MARAD, DOD and MSP operators are committed to and work toward the annual and long-term goals of maintaining 47 vessels and a total capacity of 116,000 TEUs in MSP. MARAD monitors MSP contracts to determine the number of days vessels operate in foreign commerce, the number of days the vessels spend in repair status, whether preference bulk cargo was carried, and whether a vessel was under MSC charter. Each of these conditions could affect payments. Joint Planning Advisory Group (JPAG) and Executive Working Group (EWG) sessions, with participants from DOD, MARAD, and industry, are held, as needed, to test the ability and review the performance of the maritime industry to provide commercial sealift capability to meet DOD's peacetime and wartime requirements. MSP fosters a unique relationship between MARAD and DOD in that DOD is committed to goals it sets and MARAD is committed to part of the DOD goals relating to commercial vessel capacity available.

Evidence: 1. List of JPAG Meetings (to demonstrate frequency of meetings used for coordination of partners in meetings program's goals) 2. Synopsis & Timeline Joint Planning Advisory Group Meeting 19 April 2001 3. Joint Planning Advisory Group (JPAG) Meeting After-Action Report 03 April 2003 4. VISA Executive Working Group (EWG) Meeting Minutes, 20 November 2003 5. Maritime Security Program Operating Agreement with American President Lines, Inc. (and successor American Ship Management, LLC) Contract No. MA/MSP-1 Vessel: APL KOREA including Amendments 1 & 2

Are independent evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: Several reviews of MSP have been conducted, both internally and externally. These reports include a FY 2002 Program Evaluation by MARAD's Office of Policy and Plans, a National Defense Transportation Association (NDTA), a non-Governmental organization, report on Maritime Policy that specifically addresses MSP, and an AT&T Government Solutions, Inc. study on the optimum size of MSP. General Handy's May 12, 2003 letter to Armed Forces Committee Chairman Duncan Hunter (Chairman Hunter), stated his support for MSP, highlighted the benefits of MSP during Operation Iraqi Freedom, and noted that fleet composition needed to be examined. JPAG and EWG meetings also provide frequent feedback from DOD. There are no plans to hire a contractor to produce a report on MSP.

Evidence: 1. Program Evaluation 2. NDTA study 3. Report To The Chairman, Senate Committee On Commerce, Science And Transportation On The Issue Of Introducing Competitive Bidding To The Maritime Security Program (MSP) P.L. 104-239, DOT/MARAD, (June 1997) 4. Sizing The Maritime Security Fleet In Support A Renewed Maritime Security Program (MSP) William A. Macht AT&T Government Solutions, Inc.

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: MARAD's performance with regard to its sealift capacity performance goal is a part of the justification for MSP in each year's budget. MSP is a separately identified account and program activity in MARAD's budget. Due to the wording of the MSP legislation, administrative costs are not included in the MSP account. In some years, MSP had instances where a small amount of carryover funding existed due to an MSP ship operator temporarily not qualifying for a monthly payment. On occasion when these circumstances occurred, MARAD requested and Congress reduced the MSP appropriation for the following year by the amount of the carryover.

Evidence: 1. 2005 Budget Security Performance Goal Strategic Mobility MARAD Supplementary Performance Measure for Commercial Sealift ' VISA TEU's (current) 2. Department of Transportation Maritime Administration Recent Appropriations History, 2004 Request

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: MARAD took care to address ODS deficiencies by making strategic planning an integral part of the program design as well as providing the opportunity for systematic feedback from DOD. ODS was strictly a differential cost program. There was no incentive for companies to reduce their costs under ODS. MSP has a fixed maximum dollar payout and operators can not pass along any costs to the Government. That provides a basic incentive for an operator to reduce costs. Planned meetings among the three partners (MARAD, DOD, and industry), JPAG meetings as necessary, and monthly EWG meetings, were an essential element of developing the MSP concept.

Evidence: 1. Program Evaluation pp. 2; 6 2. List of JPAG Meetings 3. Synopsis & Timeline Joint Planning Advisory Group Meeting 19 April 2001 4. Joint Planning Advisory Group (JPAG) Meeting After-Action Report 03 April 2003 5. VISA Executive Working Group (EWG) Meeting Minutes, 20 November 2003

Has the agency/program conducted a recent, meaningful, credible analysis of alternatives that includes trade-offs between cost, schedule, risk, and performance goals and used the results to guide the resulting activity?

Explanation: Reviews have been made by USTRANSCOM, in response a request by MARAD, stating that without MSP or VISA, that agency would either have to engage foreign flag carriers to provide sealift or it would have to build its own fleet. The NDTA, citing estimates prepared by USTRANSCOM in 2001, concluded that the cost to the U.S. Government to replicate the sealift capability in MSP would be approximately $6.3 billion. USTRANSCOM also stated that DOD had comfort knowing it had assured access to the U.S.-flag commercial sealift, but the expanded use of foreign-flag carriers as an alternative would cause grave concerns about "assured access to their capacity and about security".

Evidence: 1. Letter dated January 8, 2001 from Deputy Director, Plans and Policy, USTRANSCOM, to Associate Administrator for National Security, Maritime Administration (MARAD) re: USTRANSCOM responses to questions for MARAD Program Evaluation pp. 4-5 question 13 2. NDTA study pp. 24- 25 paragraph 4.1 3. Program Evaluation pp. 66-67 4. Maritime Security Fleet: Factors To Consider Before Deciding To Select Participants Competitively. U.S. General Accounting Office (September 1997 GAO-NSIAD-97-246)

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: MARAD collects, on a monthly basis, vouchers from its program partners (MSP operators) that address the major requirements of MSP contracts ' operation of vessels in the foreign commerce of the U.S., limitation of time that vessels are in drydock or repair status, restriction against carriage of bulk preference cargo, and restriction of operation under MSC charter. The data is then corroborated against industry sources. If contract requirements are not met, MARAD may adjust payment to the MSP operators. As an example, in 1999, Waterman Steamship Corporation conducted extensive repairs after an accident to its vessel, the GREEN ISLAND. MARAD withheld payments to Waterman until the operator supplied the agency with a satisfactory explanation regarding the length of the repairs. Then MARAD made a determination as to how much of the withheld money Waterman was entitled to under the MSP regulations.

Evidence: 1. Maritime Security Program (MSP) Payment Process 2. Public Voucher For Purchases and Services Other Than Personal First Ocean Bulk Carrier, II, LLC Voucher No. 9-22-02 - example of a voucher with no problems 3. Public Voucher For Purchases and Services Other Than Personal American International Car Carriers, Inc. Voucher No. 7-14-15-03 ' example of a voucher where payment was withheld 4. Memoranda dated June 29,1999, July 9, 1999, August 12, 1999, September 17, 1999, and October 18, 1999 from Director, Office of Sealift Support to File re: Withholding of MSP payments from Contract No. MA/MSP-44 VESSEL: GREEN ISLAND 5. Memorandum dated December 22, 1999 from Director, Office of Sealift Support to Associate Administrator for National Security re: Approval of MSP Payments for Waterman Steamship Corporation's vessel GREEN ISLAND 6. Memoranda dated December 9, 1999 and December 22, 1999 from Director, Office of Sealift Support to Associate Administrator for National Security re: FABC Contract No. 17 MSP Payments ' discussion of why MSP payments were withheld from FABC and resolution of matter, including repayment of some of funds withheld.

Are Federal managers and program partners (including grantees, sub-grantees, contractors, cost-sharing partners, and other government partners) held accountable for cost, schedule and performance results?

Explanation: Federal managers and program partners are held accountable, both internally and externally, by their customers. MARAD MSP managers have MSP targets as critical elements in their performance plans. JPAG and EWG meetings provide forums in which representatives of MARAD, DOD, and industry are able to assess industry capabilities against DOD requirements. Wide ranging discussions among the partners allow MARAD managers, DOD representatives, and industry to identify problems, seek solutions, and improve the overall system. MARAD monitors MSP carriers' operations to determine the level of payment each carrier should receive. To receive the current maximum retainer of $2.1 million, an MSP carrier must operate at least 320 days each year in the U.S. foreign trade. The voyages are the means by which MSP ship operators are held accountable under DOD contracts ' were vessels available when needed, was cargo delivered in a timely fashion to the correct place.

Evidence: 1. Joint Planning Advisory Group (JPAG) Meeting Minutes 14 May 2003 pp. 1-2 2. Maritime Security Program Operating Agreement with American President Lines, Inc. (and successor American Ship Management, LLC) Contract No. MA/MSP-1 Vessel: APL KOREA including Amendments 1 & 2 3. Public Voucher For Purchases and Services Other Than Personal First Ocean Bulk Carrier, II, LLC Voucher No. 9-22-02 - example of a voucher with no problems 4. Public Voucher For Purchases and Services Other Than Personal American International Car Carriers, Inc. Voucher No. 7-14-15-03 ' example of a voucher where payment was withheld 5. 46 CFR 295 Maritime Security Program (MSP) 6. Memoranda dated December 9, 1999 and December 22, 1999 from Director, Office of Sealift Support to Associate Administrator for National Security re: FABC Contract No. 17 MSP Payments ' discussion of why MSP payments were withheld from FABC and resolution of matter, including repayment of some of funds withheld 7. Letter dated October 9, 1998 from Director, Office of Sealift Support to Director, Operations Accounting, Sea-Land Service, Inc. re: clarification of port call days 8. Letter dated July 31, 2002 from Associate Administrator for National Security to Counsel, U.S. Ship Management, Inc. re: extension of drydock and repair time

Are funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: In accordance with prompt payment procedures, MARAD has a payment process to ensure timely payment of obligations. MSP operators usually submit their vouchers within the first week after the end of the month. Payments are based upon the number of days that vessels operate in the foreign commerce of the United States.

Evidence: 1. Maritime Security Program (MSP) Payment Process 2. Public Voucher For Purchases and Services Other Than Personal First Ocean Bulk Carrier, II, LLC Voucher No. 9-22-02 - example of a voucher with no problems 3. Public Voucher For Purchases and Services Other Than Personal American International Car Carriers, Inc. Voucher No. 7-14-15-03 ' example of a voucher where payment was withheld 4. FY 2003 Payment schedule for American Ship Management ' APL SINGAPORE ' MA/MSP-3 5. Annual MARAD Statement of MSP Funds Expended by Contract ' FY 1998-FY 2003 6. Memoranda dated December 9, 1999 and December 22, 1999 from Director, Office of Sealift Support to Associate Administrator for National Security re: FABC Contract No. 17 MSP Payments ' discussion of why MSP payments were withheld from FABC and resolution of matter, including repayment of some of funds withheld 7. Memoranda dated June 29,1999, July 9, 1999, August 12, 1999, September 17, 1999, and October 18, 1999 from Director, Office of Sealift Support to File re: Withholding of MSP payments from Contract No. MA/MSP-44 VESSEL: GREEN ISLAND

Does the program have procedures (e.g. competitive sourcing/cost comparisons, IT improvements, appropriate incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: MSP addressed ODS inefficiencies in budget projection, rate calculations, and fund disbursements by greatly streamlining the process to make it more efficient. A budget projection for MSP is essentially $2.1 million times 47 ships or $98.7 million. MSP operators are paid a set amount per month for vessels operating in foreign commerce, but adjustments are made for vessels not operating in foreign commerce. Payments are made a month in arrears. The ODS budget process was complicated and required time consuming reconciliation between actual and projected foreign-flag competition on each trade route for each operator. It was not unusual for payments to take years to complete. A small staff is required to administer MSP (3.5 FTE's) while the staff to administer ODS reached 30 FTE's at its peak. MARAD's efficiency goal, beginning in the FY 2006 budget, is to maintain a ratio of 0.4 percent administrative salary dollars to total MSP payments.

Evidence: 1. Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for MSP Program Efficiency (proposed) 2. Maritime Security Act , P.L. 104-239 3. Memoranda dated June 29,1999, July 9, 1999, August 12, 1999, September 17, 1999, and October 18, 1999 from Director, Office of Sealift Support to File re: Withholding of MSP payments from Contract No. MA/MSP-44 VESSEL: GREEN ISLAND 4. Memorandum dated December 23, 1997, from Director, Office of Financial and Rate Approvals to Associate Administrator for Financial Approvals and Cargo Preference re: American President Lines, Ltd. (APL) Final 1997 Daily ODS Wage Rates and supporting rate calculation data ' shows complexity of process to determine ODS payments

Does the program collaborate and coordinate effectively with related programs?

Explanation: To meet DOD sealift capacity needs, MSP collaborates and coordinates effectively with related programs such as RRF. The DOD organic fleet, including the RRF, is designed to meet DOD's surge needs in a national emergency. The MSP fleet's principal purpose is to provide sustainment capability after surge needs have been met. Both MSP and RRF are MARAD programs located organizationally under the Associate Administrator for National Security. Based on experience gained during Operation Iraqi Freedom, General Handy wrote to Chairman Hunter that fleet composition within MSP needed to be addressed. The 2003 Act created five slots in MSP specifically for tankers and eight more slots for vessels that best meet DOD's requirements. The MRS-05, a classified DOD document, estimates DOD's military useful capacity requirements and includes MSP among the programs necessary for DOD to meet its needs. JPAG and EWG meetings, co-chaired by MARAD and USTRANSCOM, show coordination and collaboration.

Evidence: 1. Letter dated May 12, 2003 from General John W. Handy, Commander, USTRANSCOM to the Honorable Duncan Hunter, Chairman House Armed Service Committee re: importance of MSP 2. MTMC Liner Vessels supporting OIF January 1 ' June 1, 2003 shows list of 33 MSP ships supporting Operation Iraqi Freedom (OIF) for Military Traffic Management Command (MTMC) liner service 3. Ships used in Operation Iraqi Freedom January 1, 2003 ' May 1, 2003 shows two MSP ships chartered to the Military Sealift Command (MSC) in OIF 4. United States Transportation Command the National Defense Reserve Fleet and the Ready Reserve A Chronology James K. Matthews United States Transportation Command Research Center December 1999 5. MRS-05 is classified secret. You may come to our office to view it.

Does the program use strong financial management practices?

Explanation: MSP uses internal control procedures and regular data collection from program partners (MSP operators) to insure that funds are being used appropriately. MARAD also complies with prompt payment procedures to ensure that program partners receive timely payments. A Department of Transportation Inspector General (IG) report on MSP issued September 26, 2000 found that MARAD had not finalized sufficient internal control procedures for the review of MSP vouchers and associated payments. MARAD concurred with the findings and, within ten days, instituted controls exceeding the recommendations. An IG report of June 12, 1998 found that MARAD had complied with the statutory requirements of the Maritime Security Act. MSP payments are made monthly in arrears. Each contract holder submits a monthly voucher detailing and certifying the parameters of their service in the foreign commerce. This information is corroborated by MARAD's Office of Sealift Support.

Evidence: 1. Maritime Security Program (MSP) Payment Process 2. FY 2003 Payment schedule for American Ship Management ' APL SINGAPORE ' MA/MSP-3 3. Annual MARAD Statement of MSP Funds Expended by Contract ' FY 1998-FY 2003 4. Office of Inspector General - Department of Transportation Inspector General ' Audit Report On The Maritime Security Program, MARAD Report No. MA-1998-156 5. Office of the Inspector General - Department of Transportation Inspector General - Follow-Up Audit Of Payments Under The Maritime Security Program Report No. MH-2000-123 Outline of the process Each contract holder submits a voucher for its vessel(s) on a monthly basis, usually within the first week of the month. The contract holder certifies that the vessel(s) under contract were in authorized U.S. foreign trade service for a specific number of days. MARAD's Office of Sealift Support corroborates that data against industry sources. The contract holder also certifies whether the vessel(s) were undergoing drydocking, survey, inspection or repair work and, if so, for how many days. That information is also independently confirmed. After verification by MARAD of the eligible number of days operated, payments are made in accordance with prompt payment procedures, usually on or about the first day of the next month. Further, the contract holder certifies whether any of its vessel(s) were engaged in transporting more than 7,500 tons of civilian bulk preference cargo on any day during the month. The Office of Sealift Support verifies that certification by comparing the MSP contract holders against a list that MARAD's Office of Cargo Preference prepares monthly of MSP vessels, if any, that transported more than 7,500 tons of civilian bulk preference cargo. MSC prepares a monthly list of its chartered vessels that the Office of Sealift Support checks for MSP contract vessels.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: MSP was designed to address ODS deficiencies including cumbersome rules and regulations and overly complicated rate calculations, and has responded quickly to IG findings. Rules and regulations concerning ship operations have been streamlined and rate calculations have been greatly simplified. An IG report on MSP issued on September 26, 2000 found that MARAD had not finalized sufficient internal control procedures for the review of MSP vouchers and associated payments. MARAD concurred with the findings and, within ten days, instituted controls exceeding the recommendations. An IG report of June 12, 1998 found that MARAD had complied with the statutory requirements of the Maritime Security Act.

Evidence: 1. Program Evaluation 2. ODS Accruals and Outlays ' January 1, 1937, to September 30, 2001 3. Comparison of Outlay for ODS and MSP 4. 46 CFR 252 - Operating-Differential Subsidy for Bulk Cargo Vessels Engaged in Worldwide Services 5. 46 CFR 282 - Operating-Differential Subsidy for Liner Vessels Engaged in Essential Services in the Foreign Commerce of the United States 6. Memorandum dated December 23, 1997, from Director, Office of Financial and Rate Approvals to Associate Administrator for Financial Approvals and Cargo Preference re: American President Lines, Ltd. (APL) Final 1997 Daily ODS Wage Rates and supporting rate calculation data 7. Office of Inspector General - Department of Transportation Inspector General ' Audit Report On The Maritime Security Program, MARAD Report No. MA-1998-156 8. Office of the Inspector General - Department of Transportation Inspector General - Follow-Up Audit Of Payments Under The Maritime Security Program Report No. MH-2000-123

Is the program managed by maintaining clearly defined deliverables, capability/performance characteristics, and appropriate, credible cost and schedule goals?

Explanation: Congress has clearly defined deliverables for MSP and MARAD has translated those requirements into operating agreements with ship operators. Individual contracts are signed for each vessel in the program and the MSP pays a set amount each month ($175,000) for each contracted vessel that is engaged in the U.S. foreign trade. Each company is required to submit a voucher that certifies its service in U.S. foreign commerce. Congress established a priority system for the selection of the original 47 vessels in MSP. All 47 vessels qualified under the first priority. Replacement vessels have been selected to meet DOD tonnage and ship type requirements such as carriage of sustained cargo like ammunition and meals.

Evidence: 1. Maritime Security Act, P.L. 104-239 pp. 4-5 Sec. 652(i) 2. Maritime Security Act of 2003 (Subtitle C reauthorized the Maritime Security Program) p.l. 108-136 pp. 34-35 Sec. 53103(c) 3. Public Voucher For Purchases and Services Other Than Personal First Ocean Bulk Carrier, II, LLC Voucher No. 9-22-02 - example of a voucher with no problems

Has the program demonstrated adequate progress in achieving its long-term performance goals?

Explanation: In the past two fiscal years, MARAD has met its performance measure of maintaining the availability of DOD required shipping capacity at 94 percent of that required through the contributions of MSP, VISA, and the RRF. In addition in three of the last four years, MARAD has met its internal annual program goal of maintaining 100% of the number of militarily useful, modern, efficient vessels that could legislatively be included in MSP.

Evidence: 1. 2005 Budget Security Performance Goal Strategic Mobility p. 39 2. 2005 Budget Security Performance Goal Strategic Mobility MARAD Supplementary Performance Measure for Commercial Sealift ' VISA TEUs (current) P. 40 3. Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for Commercial Sealift ' MSP TEUs (proposed) 4. Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for MSP Program Efficiency (proposed)

Does the program (including program partners) achieve its annual performance goals?

Explanation: MARAD's annual performance goal is to have 165,000 available TEUs in VISA to meet DOD's requirements for intermodal commercial sealift capacity. The agency has met that goal three of the past four years, including this year. In three of the last four years, MARAD has met its internal annual program goal of maintaining 100% of the number of militarily useful, modern, efficient vessels that could legislatively be included in MSP. Beginning with the 2006 budget, we are splitting the annual TEU performance goal to reflect the individual contributions of the MSP vessels and the non-MSP VISA vessels. Currently, MSP contributes approximately 70% of the capacity toward meeting the capacity goal of 165,000 TEUs. Therefore, beginning in FY 2006, MARAD's annual performance goal for MSP alone will be to contribute a minimum of 116,000 available TEUs, approximately 70% of the combined goal. MSP has been over the 116,000 TEU threshold since 1999.

Evidence: 1. 2005 Budget Security Performance Goal Strategic Mobility MARAD Supplementary Performance Measure for Commercial Sealift ' VISA TEU's (current) p. 40 2. Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for Commercial Sealift ' MSP TEUs (proposed)

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program goals each year?

Explanation: MSP has answered a national security need for commercial vessels in a more efficient way than ODS. With considerably less personnel and funds expended, MSP accomplishes more than ODS did, at a far smaller cost. A small staff is required to administer MSP (3.5 FTE's) while the staff to administer ODS was much larger. During its peak years, ODS staffing was approximately 30 FTE's. Since its inception in 1996, MSP has not developed an efficiency measure. However, beginning in the FY 2006 Budget MARAD's efficiency goal, will be to maintain a ratio of 0.4 percent administrative salary dollars to total MSP payments.

Evidence: 1. Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for MSP Program Efficiency (proposed)

Does the performance of this program compare favorably to other programs, including government, private, etc., with similar purpose and goals?

Explanation: For $661.8 million that MARAD has spent on MSP payments from its inception through March 2004, MSP has provided capacity that would have cost DOD $6.3 billion to acquire. Although MSP is a unique program, it does compare favorably with other programs whose purpose and goals are similar or related. DOD relies on its organic fleet for surge, particularly 19 Large Medium Speed Roll-On/Roll-Off (LMSR) vessels. The cost to the U.S. Government to build these vessels was in excess of $4.5 billion, and contracts for operation and maintenance of the vessels are about $1 million per vessel per year. In contrast, the U.S. Government bore none of the ship-building costs for vessels in MSP. In general, the cost of delivering military cargoes by sea is approximately 1/10th the cost of delivering them by air. The cost of flying 2.4 million MRE's to Afghanistan was $7.34 per meal. Had these MRE's been delivered by sea and land, the cost would have been 15 cents per meal.

Evidence: 1. GlobalSecurity.org T-AKR USNS Bob Hope Large, Medium-speed, roll-on/roll-off ships [LMSR] 2. NDTA study pp. 28-29

Do independent evaluations of sufficient scope and quality indicate that the program is effective and achieving results?

Explanation: General Handy testified before the House Armed Forces Committee, Merchant Marine Panel on October 8, 2002, 'MSP is a cost effective program that assures guaranteed access to required commercial U.S. Flag shipping and U.S. Merchant Mariners, when needed. . . . While MSP offers guaranteed capability, it also provides the security we, as a nation, must have to 'go it alone.' MSP was designed to ensure a U.S. presence in foreign commerce in a less expensive manner and to avoid the major flaws of the preceding Government support program, ODS. MSP is much less expensive, because MSP payments are capped by legislation, while ODS payments were increased annually. The MSP has few operating restrictions and therefore requires a small staff to administer (3.5 FTE's). JPAG and EWG meetings provide immediate feedback on the effectiveness of MSP in meeting DOD needs. During Operation Iraqi Freedom, 33 MSP vessels carried cargo for MTMC and two MSP vessels were chartered to MSC.

Evidence: 1. MTMC Liner Vessels supporting OIF January 1 ' June 1, 2003 shows list of 33 MSP ships supporting Operation Iraqi Freedom (OIF) for Military Traffic Management Command (MTMC) liner service 2. Ships used in Operation Iraqi Freedom January 1, 2003 ' May 1, 2003 shows two MSP ships chartered to the Military Sealift Command (MSC) in OIF 3. Program Evaluation pp.2-4; 17 4. Statement of General John W. Handy, USAF Commander In Chief, U.S. Transportation Command, Before The House Armed Services Committee Marine Panel On The Maritime Security Program (MSP) October 8, 2002 5. Letter dated May 12, 2003 from General John W. Handy, Commander, USTRANSCOM to the Honorable Duncan Hunter, Chairman House Armed Service Committee re: importance of MSP

Were program goals achieved within budgeted costs and established schedules?

Explanation: MARAD has always kept obligations within the appropriations available and the current performance measure has been met three of the past four years. The proposed annual performance measure of 116,000 TEUs in MSP has been met since 1999. In three of the last four years, MARAD has met its internal program goal of maintaining 47 vessels in MSP.

Evidence: 1. Annual MARAD Statement of MSP Funds Expended by Contract ' FY 1998-FY 2003 2. Maritime Security Program Number of Participants And TEU Commitments End of Fiscal Year 3. Security Strategic Objective (DOT) National Security Strategic Objective (MARAD) MARAD Supplementary Performance Measure for Commercial Sealift ' MSP TEUs (proposed) 4. 2005 Budget Security Performance Goal Strategic Mobility MARAD Supplementary Performance Measure for Commercial Sealift ' VISA TEUs (current) p. 40