GAO: MARAD Needs to Improve Financial Assistance Programs
Building commercial ships in U.S. shipyards supports the maritime industry, which plays a vital role in national security. However, U.S. commercial shipbuilding has been in decline for decades. The Maritime Administration (MARAD) has four financial assistance programs to help change that – U.S.-built vessels generally cost more than foreign-built ones.
It's not clear if these programs are meeting the needs of the industry or national security, says the Government Accountability Office (GAO).
MARAD hasn't established measurable goals, such as the number of ships built because of a program. It can't assess the programs' performance without them.
The Federal Ship Financing Program generally offers loan guarantees for vessel construction at U.S. shipyards. In the last five years, the program executed two loan guarantees for two vessel owners totaling nearly $400 million.
The two tax deferral programs, the Construction Reserve Fund Program and the Capital Construction Fund Program, allow vessel owners or operators to defer paying tax on certain eligible deposits that are placed into an account and can be used to fund projects at U.S. shipyards. In 2024, seven vessel owners or operators had a Construction Reserve Fund program account, and 137 vessel owners or operators had a Capital Construction Fund Program account.
The Small Shipyard Grant program provides grants to small shipyards for equipment or training. In fiscal year 2024, this program had $8.75 million in available funds and had 78 grant applications from shipbuilding or repair companies requesting just under $50 million.
These four financial assistance programs have provided some support for vessel owners or operators and shipyards, but the programs' administration does not follow leading practices for assessing program performance, says GAO.
GAO is making seven recommendations:
The Administrator of the Maritime Administration should develop measurable goals for the Capital Construction Fund Program to identify the results the program seeks to achieve and then develop a process to collect information to measure progress and use that information to assess progress on a regular basis.
The Administrator of the Maritime Administration should develop measurable goals for the Construction Reserve Fund Program to identify the results the program seeks to achieve and then develop a process to collect information to measure progress and use that information to assess progress on a regular basis.
The Administrator of the Maritime Administration should develop measurable goals for the Federal Ship Financing Program to identify the results the program seeks to achieve and then develop a process to collect information to measure progress and use that information to assess progress on a regular basis.
The Administrator of the Maritime Administration should assess the potential effects of either combining the Construction Reserve Fund Program and the Capital Construction Fund Program or eliminating the Construction Reserve Fund Program and, if warranted, develop a legislative proposal for congressional consideration.
The Administrator of the Maritime Administration should develop measurable goals for the Small Shipyard Grant program to identify the results the program seeks to achieve and then develop a process to collect information to measure progress and use that information to assess progress on a regular basis.
The Administrator of the Maritime Administration should document the agency's decision rationale for selecting or not selecting applications to receive Small Shipyard Grant program awards.
The Administrator of the Maritime Administration should notify all applicants to the Small Shipyard Grant program of their award status and how to request feedback on unsuccessful applications.
