25-30055-10

Purpose of the Report

In accordance with Title 24 of the Alaska Statutes and a special request by the Legislative Budget and Audit Committee, we have conducted a performance audit of DOTPF’s AMHS procurement practices for state ferry overhaul and refurbishment. Our objectives were:

• To evaluate AMHS’ compliance with the applicable state and federal procurement statutes and regulations, which includes, when appropriate, the application of the interport differential.
• To evaluate the current state statutes and regulations to assess whether their application results in fair and unbiased contract awards.
• To evaluate the process of developing ferry maintenance schedules and assess the reasonableness of the process.

Report Conclusions

AMHS is adhering to state and federal procurement laws and regulations when contracting for vessel overhauls and refurbishments. Contracts for annual overhauls and refurbishments between July 2004 and March 2010 were issued in accordance with both state and federal procurement laws and regulations.

The interport differential is applied following regulations. However, the regulations are not current. Alaska regulation 17 AAC 70.430 defines the base port for each AMHS vessel; however, this regulation has not been updated to include the last three vessels added to the system. Where applicable, interport differential costs were applied correctly, and bid specifications were developed without creating bias between competing bidders, however some of the interport differential components have not been updated since 1996.

Current statutes and regulations governing state funded overhauls create a public-policy based bias by mandating the use of in-state shipyards whenever possible.

AMHS has developed a reasonable process of overhaul and refurbishment scheduling which prioritizes the travel demand of their customers while meeting the regulatory requirement of the vessels. This process is complex and includes multiple factors, including a seven month window in which to schedule refurbishments and overhauls.

Findings and Recommendations

Recommendation No. 1

DOTPF’s AMHS division director should update the components of the interport differential calculation and assign the responsibility of regularly updating the components to an AMHS staff member.

The interport differential components have not been consistently updated since the inception of the interport differential calculation in 1996. The responsibility for updating the interport differential components has not been assigned to a specific AMHS position.

We recommend that all of the components of the interport differential be updated to ensure that they accurately reflect the costs for work at an out-of-state shipyard. We also recommend that the responsibility of regularly updating the components be assigned to an AMHS position.

Recommendation No. 2

DOTPF’s commissioner should update 17 AAC 70.430 to reflect the current fleet.

AMHS regulations are out of date and, therefore, not in compliance with statute. The base port for each AMHS vessel is designated in 17 AAC 70.430. However, 17 AAC 70.430 currently includes a base port designation for the M/V Bartlett which was decommissioned in late 2003. Furthermore, 17 AAC 70.430 does not include a base port designation for M/V Fairweather, M/V Lituya, or M/V Chenega, which were all added to the fleet in 2004 and 2005.

By not designating a base port for these three vessels, DOTPF is not adhering to AS 39.90.049. We recommend that the regulations be updated to reflect the current fleet.