The probe by the GAO, the investigative arm of Congress, comes in response to a controversial contract that calls for selling two uncompleted oil tankers and towing 13 ships to England for scrapping. Domestic scrappers, mostly from Texas, were angered to learn the work would be sent overseas and many questioned the fairness of the bidding process.

The Maritime Administration, or MARAD, has defended the contract, saying it provided the "best value" to taxpayers - even if the British bid was not necessarily the lowest price.

Rep. Solomon P. Ortiz, D-Texas, who requested the GAO review, said the British deal deserves thorough scrutiny.

"Recent events indicate MARAD's program is not being implemented in a method to gain the best value for the U.S. taxpayer or reduce the environmental threat," Ortiz wrote in a letter to Comptroller General David M. Walker. "Neither is it fair to industry, especially the domestic ship- breaking industry."

Ortiz, whose district includes several scrapping companies, urged the GAO to review the process MARAD uses to determine "best value" and how the process could be modified to speed up ship disposal work, among other things.

Instead of using more domestic scrappers, Ortiz wrote, "MARAD has chosen to spend an inordinate amount of time and resources in exporting ships to England for dismantling."

Four of the 13 ships slated for the Able UK shipyard in England have left the James River, but a lawsuit filed by environmental groups is blocking the departure of the rest until at least next spring.

Environmentalists have questioned whether MARAD complied with federal law by exporting ships laden with toxic PCBs. Federal law generally prohibits the export of PCBs, although exemptions can be granted by the Environmental Protection Agency.

Beyond the environmental concerns, the ship-scrapping industry has questioned how a foreign company, with higher towing costs, could have produced the most cost-effective bid that meets environmental standards.

A Texas company, International Shipbreaking Limited, submitted a proposal to scrap 13 ships for $12.8 million - or about $2 million less than the Able UK proposal, according to information obtained by Basel Action Network. The network is an international coalition of environmental groups that monitors the transport of hazardous waste.

MARAD and International Shipbreaking declined to confirm that price, saying the bid remains confidential. But Robert Berry, the co-chief operating officer for International Shipbreaking, said, "It's probably not far off."

An official from MARAD, who requested anonymity, cautioned that price is not the only criterion used to evaluate scrapping proposals. Among other considerations, the official said, the agency considers whether a company can handle large volumes of work safely and whether the work could be completed relatively quickly.

"It's not lowest cost," the official said. "It's best value to the government."

MARAD officials have questioned whether domestic scrappers have facilities large enough to safely dispose of as many as 13 ships at one time. They said Able UK has a 24-acre yard that can safely store and dismantle many ships at once. Berry, the Texas scrapper, said his facility could probably handle seven ships at one time, but could easily do 13 within a year.

Critics of MARAD, including two congressmen, also have questioned why a ship disposal plan includes the sale of oil tankers, and how the agency determined the value of those ships. The contract with Able UK - through its New York- based company Post-Service Remediation Partners - is valued at $17.8 million. But the government would receive a $3 million credit for selling the two tankers - resulting in a net cost of $14.8 million.

The GAO agreed to conduct the probe in a letter to Ortiz dated Oct. 7. The agency made no comment on the merits of the complaint.