Where Did the Maritime Heritage Grant Money Go? - Part 1

James River Fleet

Published Jul 7, 2015 4:36 PM by Denise Krepp

In 1998, Congress held a hearing to examine the Maritime Administration's ship recycling program. Witnesses testified about irregularities and the lack of compliance with the National Maritime Heritage Act. Fast forward seventeen years and the problems continue to exist. Maritime heritage and preservation organizations, specified as recipients of one-quarter of MARAD obsolete ship sales in the 1994 Act, have still not received their full funding  and are wondering where the money has gone. So are domestic metal recycling companies that have paid, since 2005, in excess of $75 million for the ship steel commodity.

The National Maritime Heritage Act specifically mandates that MARAD annually transfer one-quarter of its ship sales to the Interior Department for a competitive maritime heritage grant program. Congress also directed that the grant funding be used to "foster in the American public a greater awareness and appreciation of the role of the maritime endeavors in our Nation's history and culture."

Funding for the maritime heritage grants comes from MARAD’s sale of excess government vessels. Twenty-five percent of sale proceeds is used to fund the grants. In the 1998 hearing, one of the witnesses referenced then Senator Cohen's 1996 letter to MARAD concerning the program. Senator Cohen was concerned about the lack of funding and how this shortfall could impact the grant program. His concerns remain valid today.

The 1998 Congressional hearing triggered an initial dispersal of funds - 39 grants totaling $652,616 was awarded in the "inaugural" round. Then nothing. The U.S. has collected over $75 million from the sale of excess government vessels since 2005, but the next round of grants wasn't awarded until April 2015.  The second round was larger than the first one - $2.6 million but it still didn't cover the twenty-five percent allocated by Congress. So again, where did the money go?

The answer to that question resides with the STORIS Act introduced by Senator Vitter and Representative Graves earlier this year. The legislation requires a Government Accountability Office (GAO) audit of how MARAD used the funding. Two disbursements in twenty-one years does not meet the definition of "annual grant" and that is what GAO is tasked with examining.

GAO is also tasked with reviewing how MARAD awards excess government vessel sales contracts to bidders that are not the highest bidder. Surprisingly, the agency does not award vessels based on price.  Price is only a significant factor when this determination is made and twenty percent of the excess government vessel sales contracts since 2008 were awarded to lower bidders.  

MARAD claims that awarding contracts to lower bidders is in the best interest of the federal government, but what about the maritime heritage organizations and the other recipients of the sales money – the U.S. Merchant Marine Academy and six state maritime schools. Who is looking out for their interests? Not MARAD. If MARAD was looking out for their interests, they would be awarding contacts based on price - the more money the government receives from excess vessel sales contracts amongst a pool of pre-qualified companies, the more money is available for maritime heritage grants.

Congress recognized in 1994 that historic resources significant to the Nation's maritime heritage are being lost with increasing frequency. Unfortunately, MARAD's refusal to disburse the maritime heritage grant funding on a yearly basis increased these losses exponentially. The STORIS Act and accompanying GAO audit can reverse this trend. The faster the legislation become law, the sooner funds will become available to protect our nation's maritime heritage.

The second part of this story will cover how U.S. government vessels ended up in Mexico and China.

K. Denise Rucker Krepp, U.S. ship recycling advocate and former Maritime Administration Chief Counsel 

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.