Coast Guard Cutter Procurement: Background and Issues for Congress

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Coast Guard Cutter Procurement:
Background and Issues for Congress
Ronald O'Rourke
Specialist in Naval Affairs
JulyOctober 31, 2012

Congressional Research Service
7-5700
www.crs.gov
R42567

CRS Report for Congress
Prepared for Members and Committees of Congress

 Coast Guard Cutter Procurement: Background and Issues for Congress

Summary
The Coast Guard’s program of record (POR) calls for procuring eight National Security Cutters
(NSCs), 25 Offshore Patrol Cutters (OPCs), and 58 Fast Response Cutters (FRCs) as
replacements for 90 aging Coast Guard cutters and patrol craft. The NSC, OPC, and FRC
programs have a combined estimated acquisition cost of about $16.821.1 billion, and the Coast
Guard’s proposed FY2013 budget requests a total of $852 million in acquisition funding for the
three programs.
NSCs are the Coast Guard’s largest and most capable general-purpose cutters. They have an
estimated average procurement cost of about $684 million per ship. The first three are now in
service, and the fourth and fifth are under construction. The Coast Guard’s proposed FY2013
budget requests $683 million for the NSC program, including $658 million to complete the
funding for the sixth NSC.
OPCs are to be smaller, less expensive, and in some respects less capable than NSCs. They have
an estimated average procurement cost of about $324484 million per ship. The first OPC is to be
procured in FY2017. The Coast Guard’s proposed FY2013 budget requests $30 million for the
OPC program.
FRCs are considerably smaller and less expensive than OPCs. They have an estimated average
procurement cost of about $6873 million per boat. A total of 18 have been funded through FY2012.
The first entered service on April 14, 2012; the second was delivered to the Coast Guard on May
26, 2012; and the third is scheduled to be delivered by the end of FY2012. The Coast Guard’s
proposed FY2013 budget requests $139 million for the FRC program.
Potential oversight issues for Congress regarding the NSC, OPC, and FRC programs include the
following:
•

the absence of funding in the Coast Guard’s FY2013 five-year (FY2013-FY2017)
capital investment plan for the seventh and eighth NSCs;

•

hull corrosion and leaks in the third NSC;

•

the Coast Guard’s proposal to restructure the use of FY2012 FRC acquisition
funding so as to procure four FRCs in FY2012 rather than six, and to defer the
procurement of the other two FY2012-funded FRCs to FY2013;

•

delays, cost growth, and testing issues in the FRC program;

•

the Coast Guard’s acquisition strategy for the OPC;

•

the potential for using multiyear procurement (MYP) in acquiring new cutters;

•

the adequacy of the Coast Guard’s planned NSC, OPC, and FRC procurement
quantities;

•

whether eight NSCs, 25 OPCs, and 58 FRCs is the best mix of cutters that could
be procured for roughly the same total amount of acquisition funding; and

•

the adequacy of information available to Congress to support review and
oversight of Coast Guard procurement programs, including cutter procurement
programs.

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Contents
Introduction...................................................................................................................................... 1
Background ...................................................................................................................................... 1
Older Ships to Be Replaced by NSCs, OPCs, and FRCs .......................................................... 1
Missions of NSCs, OPCs, and FRCs ......................................................................................... 2
NSC Program............................................................................................................................. 3
OPC Program............................................................................................................................. 5
FRC Program ............................................................................................................................. 7
NSC, OPC, and FRC Funding in Five-Year Capital Investment Plan ....................................... 9
Issues for Congress ........................................................................................................................ 10
NSC Program: No Funding in Five-Year Plan for 7th and 8th Ships ........................................ 10
NSC Program: Hull Corrosion and Leaks on Third Ship ........................................................ 14
FRC Program: Proposed Restructuring of FY2012 Funds ...................................................... 15
FRC Program: Delays, Cost Growth, and Testing ................................................................... 1718
OPC Program: Cost, Design, and Acquisition Strategy........................................................... 19
2012 Testimony ................................................................................................................. 20
September 2012 GAO Report ........................................................................................... 21
Multiyear Procurement (MYP)................................................................................................ 2125
Adequacy of Planned Procurement Quantities ........................................................................ 2125
Alternative Force Mixes Equal in Cost to Program of Record ................................................ 3034
Information for Supporting Congressional Oversight of Procurement Programs ................... 3237
Legislative Activity for FY2013 .................................................................................................... 3439
Summary of Appropriations Action on FY2013 Funding Request ......................................... 3439
FY2013 Department of Homeland Security Appropriations Act (H.R. 5855/S. 3216) ........... 3540
House................................................................................................................................. 3540
Senate ................................................................................................................................ 4044

Figures
Figure 1. National Security Cutter ................................................................................................... 3
Figure 2. Offshore Patrol Cutter (Generic Conceptual Rendering) ............................................................... 6
Figure 3. Fast Response Cutter ........................................................................................................ 78
Figure 4. Projected Mission Demands vs. Projected Capability/Performance .............................. 2528
Figure AB-1. Budget Item Justification Sheet (Exhibit P-40) .......................................................... 4451
Figure AB-2. Weapon System Cost Analysis Sheet (Exhibit P-5) ................................................... 4552
Figure AB-3. Ship Production Schedule (Exhibit P-27)................................................................... 4653

Tables
Table 1. NSC Acquisition Funding, by Hull .................................................................................... 4
Table 2. FRC Acquisition Funding, by Hull .................................................................................... 89
Table 3. NSC, OPC, and FRC Funding in Five-Year Capital Investment Plan ............................... 9
 10

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Table 4. Program of Record Compared to Objective Fleet Mix .................................................... 22

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26
Table 5. POR Compared to FMAs 1 Through 4 ............................................................................ 2327
Table 6. Force Mixes and Mission Performance Gaps .................................................................. 2427
Table 7. POR Compared to Objective Mixes in FMA Phases 1 and 2........................................... 2629
Table 8. Alternative Force Mixes Examined in DHS Cutter Study ............................................... 3135
Table 9. FY2013 Congressional Appropriations Action ................................................................ 3539
Table BC-1. Navy Ship Force Structure Goal .................................................................................. 4754
Table CD-1. Navy FY2013 Five-Year (FY2013-FY2017) Shipbuilding Plan ................................. 4855
Table DE-1. Navy FY2013 30-Year (FY2013-FY2042) Shipbuilding Plan ..................................... 4956
Table DE-2. Projected Force Levels Resulting from FY2013 30-Year (FY2013-FY2042)
Shipbuilding Plan ....................................................................................................................... 5057

Appendixes
Appendix A. Findings and Recommendations of DHS Cutter Study ............................................ 48
Appendix B. P-5, P-40, and P-27 Data Exhibits for Littoral Combat Ship (LCS) Program.......... 4350
Appendix BC. Navy Ship Force Structure Objective ....................................................................... 4754
Appendix CD. Navy FY2013 Five-Year Shipbuilding Plan............................................................. 4855
Appendix DE. Navy FY2013 30-Year Shipbuilding Plan ................................................................ 4956

Contacts
Author Contact Information........................................................................................................... 5158

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 Coast Guard Cutter Procurement: Background and Issues for Congress

Introduction
This report provides background information and potential oversight issues for Congress on the
Coast Guard’s programs for procuring eight National Security Cutters (NSCs), 25 Offshore Patrol
Cutters (OPCs), and 58 Fast Response Cutters (FRCs). These 91 planned cutters are intended as
replacements for 90 aging Coast Guard cutters and patrol craft. The Coast Guard began procuring
NSCs and FRCs a few years ago, and the first few NSCs and FRCs are now in service. The Coast
Guard plans to begin procuring OPCs within the next few years. The NSC, OPC, and FRC
programs have a combined estimated acquisition cost of about $16.821.1 billion, and the Coast
Guard’s proposed FY2013 budget requests a total of $852 million in acquisition funding for the
three programs.
The issue for Congress is whether to approve, reject, or modify the Coast Guard’s funding
requests and acquisition strategies for the NSC, OPC, and FRC programs. Congress’s decisions
on these three programs could substantially affect Coast Guard capabilities and funding
requirements, and the U.S. shipbuilding industrial base.
The NSC, OPC, and FRC programs have been subjects of congressional oversight for several
years, and were previously covered in an earlier CRS report that is now archived.1 The Coast
Guard’s plans for modernizing its fleet of polar icebreakers are covered in a separate CRS report.2

Background
Older Ships to Be Replaced by NSCs, OPCs, and FRCs
The 91 planned NSCs, OPCs, and FRCs are intended to replace 90 older Coast Guard ships—the
service’s 12 high-endurance cutters (WHECs), 29 medium-endurance cutters (WMECs), and 49
110-foot patrol craft (WPBs).3 The Coast Guard’s 12 Hamilton (WHEC-715) class highendurance cutters entered service between 1967 and 1972.4 The Coast Guard’s 29 mediumendurance cutters include 13 Famous (WMEC-901) class ships that entered service between 1983
1

The earlier report was CRS Report RL33753, Coast Guard Deepwater Acquisition Programs: Background, Oversight
Issues, and Options for Congress, by Ronald O'Rourke. From the late 1990s until 2007, the Coast Guard’s efforts to
acquire NSCs, OPCs, and FRCs were parts of a larger, integrated Coast Guard acquisition effort aimed at acquiring
several new types of cutters and aircraft that was called the Integrated Deepwater System (IDS) program, or Deepwater
for short. In 2007, the Coast Guard broke up the Deepwater effort into a series of individual cutter and aircraft
acquisition programs, but continued to use the term Deepwater as a shorthand way of referring collectively to these
now-separated programs. In its FY2012 budget submission, the Coast Guard stopped using the term Deepwater entirely
as a way of referring to these programs. Congress, in acting on the Coast Guard’s proposed FY2012 budget, did not
object to ending the use of the term Deepwater. Reflecting this development, CRS Report RL33753, Coast Guard
Deepwater Acquisition Programs: Background, Oversight Issues, and Options for Congress was archived in early
2012, following final congressional action on the FY2012 budget, and remains available to congressional readers as a
source of historical reference information on Deepwater acquisition efforts.
2
CRS Report RL34391, Coast Guard Polar Icebreaker Modernization: Background and Issues for Congress, by
Ronald O'Rourke.
3
In the designations WHEC, WMEC, and WPB, W means Coast Guard ship, HEC stands for high-endurance cutter,
MEC stands for medium-endurance cutter, and PB stands for patrol boat.
4
Hamilton-class cutters are 378 feet long and have a full load displacement of about 3,400 tons.

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and 1991,5 14 Reliance (WMEC-615) class ships that entered service between 1964 and 1969,6
and two one-of-a-kind cutters that originally entered service with the Navy in 1944 and 1971 and
were later transferred to the Coast Guard.7 The Coast Guard’s 49 110-foot Island (WPB-1301)
class patrol boats entered service between 1986 and 1992.8
Many of these 90 ships are manpower-intensive and increasingly expensive to maintain, and have
features that in some cases are not optimal for performing their assigned missions. Some of them
have already been removed from Coast Guard service: eight of the Island-class patrol boats were
removed from service in 2007 following an unsuccessful effort to modernize and lengthen them
to 123 feet; the one-of-a-kind cutter that originally entered service with the Navy in 1944 was
decommissioned in 2011; and three of the Hamilton-class cutters have been decommissioned as
of April 2012, having been replaced by the first three NSCs. A July 2012 Government
Accountability Office (GAO) report discusses the generally poor physical condition and declining
operational capacity of the Coast Guard’s older high-endurance cutters, medium-endurance
cutters, and 110-foot patrol craft .9

Missions of NSCs, OPCs, and FRCs
NSCs, OPCs, and FRCs, like the ships they are intended to replace, are to be multimission ships
for routinely performing 7 of the Coast Guard’s 11 statutory missions, including
•

search and rescue (SAR);

•

drug interdiction;

•

migrant interdiction;

•

ports, waterways, and coastal security (PWCS);

•

protection of living marine resources;

•

other/general law enforcement; and

•

defense readiness operations.10

5

Famous class cutters are 270 feet long and have a full load displacement of about 1,800 tons.
Reliance class cutters are 210 feet long and have a full load displacement of about 1,100 tons.
7
The two one-of-a-kind cutters are the Acushnet (WMEC-167), which originally entered service with the Navy in
1944, and the Alex Haley (WMEC-39), which originally entered service with the Navy in 1971. The Acushnet served in
the Navy from until 1946, when it was transferred to the Coast Guard. The ship was about 214 feet long and had a
displacement of about 1,700 tons. The Alex Haley served in the Navy until 1996. It was transferred to the Coast Guard
in 1997, converted into a cutter, and re-entered service with the Coast Guard in 1999. It is 282 feet long and has a full
load displacement of about 2,900 tons.
8
Island-class boats are 110 feet long and have a full load displacement of about 135 to 170 tons.
9
Government Accountability Office, Coast Guard[:]Legacy Vessels’ Declining Conditions Reinforce Need for More
Realistic Operational Targets, GAO-12-741, July 2012, 71 pp.
10
The four statutory Coast Guard missions that are not to be routinely performed by NSCs, OPCs, and FRCs are
marine safety, aids to navigation, marine environmental protection, and ice operations. These missions are performed
primarily by other Coast Guard ships. The Coast Guard states, however, that “while [NSCs, OPCs, and FRCs] will not
routinely conduct [the] Aids to Navigation, Marine Safety, or Marine Environmental Protection missions, they may
periodically be called upon to support these missions (i.e., validate the position of an Aid to Navigation, transport
personnel or serve as a Command and Control platform for a Marine Safety or Marine Environmental Response
mission, etc.).” (Source: Coast Guard information paper provided to CRS on June 1, 2012.)
6

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Smaller Coast Guard patrol craft and boats contribute to the performance of some of these seven
missions close to shore. NSCs, OPCs, and FRCs perform them both close to shore and in the
deepwater environment, which generally refers to waters more than 50 miles from shore.

NSC Program
National Security Cutters (Figure 1), also known as Legend (WMSL-750) class cutters,11 are the
Coast Guard’s largest and most capable general-purpose cutters.12 The Coast Guard’s program of
record (POR)—the service’s list, established in 2004, of planned procurement quantities for
various new types of ships and aircraft—calls for procuring eight NSCs as replacements for the
service’s 12 Hamilton class high-endurance cutters.
Figure 1. National Security Cutter

Source: U.S. Coast Guard photo accessed May 2, 2012, at http://www.flickr.com/photos/coast_guard/
5617034780/sizes/l/in/set-72157629650794895/.

Although the NSC program’s official total acquisition cost estimate is $4.749 billion, or an
average of about $594 million per ship,13 the Coast Guard more recently has estimated the
combined procurement cost of the eight ships at $5.474 billion, or an average of about $684
11

In the designation WMSL, W means Coast Guard ship and MSL stands for maritime security cutter, large. NSCs are
being named for legendary Coast Guard personnel.
12
The Coast Guard’s three polar icebreakers are much larger than NSCs, but are designed for a more specialized role of
operations in polar waters.
13
Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-12 (pdf page 166 of 400).

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million per ship, assuming the seventh and eighth ships were funded in FY2014 and FY2015,
respectively.14 The first three NSCs are now in service, and the fourth and fifth are under
construction.
NSCs are larger and technologically more advanced than Hamilton-class cutters.15 The Coast
Guard states that the NSC
is designed to be the flagship of the U.S. Coast Guard’s fleet, capable of executing the most
challenging maritime security missions including supporting the mission requirements of the
joint U.S. combatant commanders....
Compared to legacy cutters, the NSC’s design will provide better sea keeping and higher
sustained transit speeds, greater endurance and range, and the ability for launch and
recovery, in higher sea states of improved small boats, helicopters, and unmanned aerial
vehicles—all key attributes in enabling the Coast Guard to implement increased security
responsibilities. Such duties include exerting more effective jurisdiction over foreign-flagged
ships transiting U.S. waters. The National Security Cutter, for example, will enable the Coast
Guard to screen and target vessels faster, more safely and reliably before they arrive in U.S.
waters—to include conducting onboard verification through boardings and, if necessary,
taking enforcement-control actions. The NSC will serve as an integral part of the Coast
Guard’s collaborative inter-agency effort to achieve maritime domain awareness and ensure
the safety of the American public and sovereignty of U.S. maritime borders.16

NSCs are built by Ingalls Shipbuilding of Pascagoula, MS, a shipyard that forms part of
Huntington Ingalls Industries (HII).
Table 1 summarizes acquisition funding for the first six NSCs.
Table 1. NSC Acquisition Funding, by Hull
Millions of then-year dollars, rounded to nearest million
Hull

Fiscal years funded

Total acquisition
funding (millions)

Production contract
award date

Entered service

1

FY02-FY09 and FY15

$701

FY04

August 2008

2

FY04-FY09 and FY15

$528

FY05

May 2010

3

FY04-FY09

$551

FY07

March 2012

4

FY04-FY10, FY13, FY15-FY16

$690

FY11 (1st Quarter)

5

FY10-FY11

$697

FY11 (4th Quarter)

FY12 and FY13

$735a

6

Source: Coast Guard e-mail to CRS, December 9, 2011, and FY2013 Coast Guard budget submission.
a.

Includes $77 million in FY2012 and $658 million requested for FY2013. The FY2013 funding request for the
NSC program also includes $25 million for post-production activities for the fourth NSC to replace $25
million in funding for post-production activities provided in FY2010.

14

Source: Coast Guard information paper on NSC procurement costs provided to CRS on May 14, 2012.
The NSC design is 418 feet long and has a full load displacement of about 4,500 tons. The displacement of the NSC
design is about equal to that of Navy’s Oliver Hazard Perry (FFG-7) class frigates, which are 453 feet long and have a
full load displacement of about 4,200 tons.
16
U.S. Coast Guard description of the NSC, accessed May 2, 2012, at http://www.uscg.mil/hq/cg9/nsc/
projectdescription.asp.
15

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The Coast Guard’s proposed FY2013 budget requests $658 million in acquisition funding to
complete the funding for the sixth NSC. (The sixth NSC also received $77 million in FY2012 for
the procurement of long-lead time materials.) The FY2013 budget additionally requests $25
million for post-production activities for the fourth NSC, to replace $25 million in funds
appropriated for this purpose in FY2010, which the Coast Guard states are “likely to expire, are
cancelled and [are requested to be] re-appropriated in [FY]2013.”17
The Coast Guard’s FY2013 five-year (FY2013-FY2017) capital investment plan (see Table 3)
includes no funding for the seventh or eighth NSCs. The Coast Guard’s FY2012 five-year
(FY2012-FY2016) capital investment plan, in contrast, included funding for the seventh and
eighth NSCs in FY2014 and FY2015, respectively. Although there is no funding in the FY2013
five-year plan for the seventh and eighth NSCs, the Coast Guard’s POR continues to call for a
total force of eight NSCs. The Coast Guard estimates that the seventh and eighth NSCs would
cost $777 million and $795 million, respectively, if they were funded in FY2014 and FY2015,
respectively.18

OPC Program
Offshore Patrol Cutters (Figure 2) are to be smaller, less expensive, and in some respects less
capable than NSCs. The Coast Guard’s POR calls for procuring 25 OPCs as replacements for the
service’s 29 medium-endurance cutters. Under the Coast Guard’s FY2013 five-year (FY2013FY2017) capital investment plan, the first OPC is to be procured in FY2017.
The Coast Guard estimates the OPC program’s total
 acquisition cost at $8.09812.101 billion, or an 
average of about $324 million per ship.19 The Coast
Guard’s draft Request for Proposal (RFP) for the program, released on June 15, 2012, establishes
an affordability requirement for the program of an average construction price of not more than
$276 million per ship in constant FY2016 dollars for ships 4 through 9 in the program.20
Under the Coast Guard’s FY2013 five-year (FY2013-FY2017) capital investment plan, the first
OPC is to be procured in FY2017. The Coast Guard’s draft RFP for the program envisages
procuring the first 11 OPCs in FY2017-FY2023 in annual quantities of 1-1-1-2-2-2-2.21

17

Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-21 (pdf page 175 of 400).
18
Source: Coast Guard information paper on NSC procurement costs provided to CRS on May 14, 2012.
19
Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-12 (pdf page 166 of 400).
20
Section C.3 of the draft RFP states the following as the affordability requirement for the program: “The affordability
requirement for this procurement is as follows: the average unit price of Hulls #4 through #9 shall be $276,000,000.00,
or less, in Fiscal Year 16 dollars. This requirement is computed by the following formula: for hulls #4 through #9, the
target price for ship construction plus the corresponding long lead time material price, divided by six. (Source: Section
C of draft RFP, accessed June 29, 2012, at http://www.uscg.mil/ACQUISITION/opc/pdf/SectionC.pdf.)
21
Source: Section B of the draft RFP, accessed July 20, 2012, at http://www.uscg.mil/ACQUISITION/opc/pdf/
SectionB.pdf.

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Figure 2. Offshore Patrol Cutter (Conceptual Rendering)

Source: U.S. Coast Guard conceptual rendering accessed May 3, 2012, at http://www.uscg.mil/hq/cg9/opc/
484 million per ship. These figures reflect a revised OPC program baseline that
was approved in April 2012; they represent a 49% increase over the previous figures of $8.098
billion and $324 million, respectively.19 A September 2012 GAO report states that
The initial Deepwater baseline included an $8 billion estimate for the Offshore Patrol Cutter
program. However, program officials stated they did not have good data for how the lead
systems integrator for the Deepwater program generated the original estimate, and that the
current estimate approved by DHS in April 2012—with a threshold of approximately $12
billion—is higher likely because the original estimate was developed before the program
requirements were established. Program officials also cited delays in the program, and the
corresponding inflation associated with those delays, as additional reasons for the cost
increase. Even though the Coast Guard used the original 2007 Deepwater Baseline estimate
of $8 billion to characterize the expected cost of the program multiple times to Congress, it
now characterizes the revised acquisition program baseline as the initial cost estimate for the
program.20

The Coast Guard’s Request for Proposal (RFP) for the program, released on September 25, 2012,
establishes an affordability requirement for the program of an average unit price of $310 million
17

Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-21 (pdf page 175 of 400).
18
Source: Coast Guard information paper on NSC procurement costs provided to CRS on May 14, 2012.
19
Government Accountability Office, Coast Guard[:] Portfolio Management Approach Needed to Improve Major
Acquisition Outcomes, GAO-12-918, September 2012, p. 13 (Figure 13).
20
Government Accountability Office, Coast Guard[:] Portfolio Management Approach Needed to Improve Major
Acquisition Outcomes, GAO-12-918, September 2012, p. 15.

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per ship, or less, in then-year dollars (i.e., dollars that are not adjusted for inflation) for ships 4
through 9 in the program.21
Figure 2. Offshore Patrol Cutter (Generic Conceptual Rendering)

Source: U.S. Coast Guard generic conceptual rendering accessed May 3, 2012, at http://www.uscg.mil/hq/cg9/
opc/default.asp.

The service states that OPCs
will complement the Coast Guard’s legacy fleet and next-generation cutters to extend
operational capabilities across the mission spectrum. The OPC will recapitalize the service’s
Medium Endurance Cutters and will feature increased range and endurance; more powerful
weapons; larger flight decks; improved command, control, communications, computers,
intelligence, surveillance and reconnaissance (C4ISR) equipment; and will accommodate
aircraft and small boat operations in higher sea states.22

The Coast Guard has defined operational requirements for OPC, released a technical data package
on the OPC to industry on March 14, 2012, and released the draft RFP for the OPC to industry on
June 15, 2012, with responses due by July 16, 2012.23 The Coast Guard plans to award
preliminary and contract design (P&CD) contracts to as many as three competitors in FY2013.
The Coast Guard plans to evaluate the P&CD efforts and then award one of the competitors a
contract for detailed design development and ship construction.24
The Coast Guard’s proposed FY2013 budget requests $30 million in acquisition funding for the
OPC program, including $15.2 million for preliminary and contract design work on the ship and
$14.8 million for technical and project management work for the program.
22

Coast Guard fact sheet on the OPC accessed May 3, 2012, at http://www.uscg.mil/hq/cg9/programs/pdf/opc.pdf.
The draft FRP documents were posted at http://www.uscg.mil/ACQUISITION/opc/draftrfp.asp.
24
Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-25 (pdf page 179 of 400).
23

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FRC Program
Fast Response Cutters (Figure 3), also called Sentinel (WPC-1101) class patrol boats, are
considerably smaller and less expensive than OPCs, but are larger than the Coast Guard’s older
patrol boats.25 The Coast Guard’s POR calls for procuring 58 FRCs as replacements for the
service’s 49 Island-class patrol boats.
The Coast Guard estimates the FRC program’s total acquisition cost at $3.928 billion, or an
average of about $68 million per boat.26 A total of 18 FRCs have been funded through FY2012.
The first entered service on April 14, 2012; the second was delivered to the Coast Guard on May
26, 2012; and the third is scheduled to be delivered by the end of FY2012.
Figure 3. Fast Response Cutter
(With an older Island-class patrol boat behind)

Source: U.S. Coast Guard photo accessed May 4, 2012, at http://www.flickr.com/photos/coast_guard/
6871815460/sizes/l/in/set-72157629286167596/.

The Coast Guard states that
The planned fleet of FRCs will conduct primarily the same missions as the 110’ patrol boats
being replaced. In addition, the FRC will have several increased capabilities enhancing
overall mission execution. The FRC is designed for rapid response, with approximately a 28
25

FRCs are 154 feet long and have a full load displacement of 353 tons.
Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-12 (pdf page 166 of 400).
26

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knot speed capability, and will typically operate in the coastal zones. Examples of missions
that FRCs will complete include SAR, Migrant Interdiction, Drug Interdiction and Ports
Waterways and Coastal Security.
FRCs will provide enhanced capabilities over the 110’s including improved C4ISR
capability and interoperability; stern launch and recovery (up through sea state 4) of a 40
knot, Over-the-Horizon, 7m cutter boat; a remote operated, gyro stabilized MK38 Mod 2,
25mm main gun; improved sea keeping; and enhanced crew habitability.27At least eight shipyards have expressed interest in the program.23 The Coast Guard’s acquisition
strategy for the first 9 to 11 ships in the program is as follows:

21
Source: Section C.5 of the RFP, accessed October 31, 2012, at http://www.uscg.mil/ACQUISITION/newsroom/
updates/opc092512.asp.
22
Coast Guard fact sheet on the OPC accessed May 3, 2012, at http://www.uscg.mil/hq/cg9/programs/pdf/opc.pdf.
23
The firms are General Dynamics Bath Iron Works (GD/BIW), Bollinger, Eastern Shipbuilding, Huntington Ingalls
Industries (HII), Marinette Marine, General Dynamics National Steel and Shipbuilding Company (GD/NASSCO),
Vigor Shipyards, and VT Halter Marine. Source: U. S. Coast Guard Offshore Patrol Cutter (OPC) List of Interested
Contractors Updated July 2012, accessed online October 23, 2012, at http://www.uscg.mil/ACQUISITION/opc/pdf/
companiesinterested.pdf. The document states that these firms “expressed interest in the Offshore Patrol Cutter
acquisition and have agreed to their names provided on the Coast Guard website.”

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The OPC procurement shall implement a two-phase down select strategy. Phase I entails a
full and open competition for Preliminary and Contract Design (P&CD) awarded to a
maximum of three offerors. The Coast Guard intends to competitively award the Phase I
contract in Fiscal Year (FY) 2013. P&CD will culminate in a Contract Design Review
(KDR). After KDR, the three contractors will submit proposals which will result in a down
selection to one contractor to continue with Phase II....
Phase II award is planned for FY 2016..... Phase II’s down selection will be accomplished by
exercising one option with a single contractor for Detail Design (DD) with additional options
for Long Lead Time Materials, lead ship and eight to ten follow ships. DD will start after
option exercise and be complete upon delivery of the first ship. The contractor will present
the OPC design at the Initial Critical Design Reviews (ICDR) and Final Critical Design
Review (FCDR) followed by a Production Readiness Review (PRR). During Phase II
contract performance, the contractor will be encouraged to submit a fixed price proposal
(before construction begins on the Hull #6) for option Hulls #6 through #11 (LRIP 2). If the
priced effort is deemed fair and reasonable the contractor shall be eligible for Hulls #10 and
#11. If not, the contract will continue with the FPI [fixed price incentive] structure and the
contract will end with Hull #9.24

The Coast Guard’s proposed FY2013 budget requests $30 million in acquisition funding for the
OPC program, including $15.2 million for preliminary and contract design work on the ship and
$14.8 million for technical and project management work for the program.

FRC Program
Fast Response Cutters (Figure 3), also called Sentinel (WPC-1101) class patrol boats, are
considerably smaller and less expensive than OPCs, but are larger than the Coast Guard’s older
patrol boats.25 The Coast Guard’s POR calls for procuring 58 FRCs as replacements for the
service’s 49 Island-class patrol boats.
The Coast Guard states that
The planned fleet of FRCs will conduct primarily the same missions as the 110’ patrol boats
being replaced. In addition, the FRC will have several increased capabilities enhancing
overall mission execution. The FRC is designed for rapid response, with approximately a 28
knot speed capability, and will typically operate in the coastal zones. Examples of missions
that FRCs will complete include SAR, Migrant Interdiction, Drug Interdiction and Ports
Waterways and Coastal Security.
FRCs will provide enhanced capabilities over the 110’s including improved C4ISR
capability and interoperability; stern launch and recovery (up through sea state 4) of a 40
knot, Over-the-Horizon, 7m cutter boat; a remote operated, gyro stabilized MK38 Mod 2,
25mm main gun; improved sea keeping; and enhanced crew habitability.26

24

Source: Section C.1 of the RFP, accessed October 31, 2012, at http://www.uscg.mil/ACQUISITION/newsroom/
updates/opc092512.asp.
25
FRCs are 154 feet long and have a full load displacement of 353 tons.
26
Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-28 (pdf page 182 of 400).

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The Coast Guard estimates the FRC program’s total acquisition cost at $4.243 billion, or an
average of about $73 million per boat.27 A total of 18 FRCs have been funded through FY2012.
The first entered service on April 14, 2012; the second was delivered to the Coast Guard on May
26, 2012, and commissioned into service on August 3, 2012; and the third was delivered to the
Coast Guard on August 15, 2012.
Figure 3. Fast Response Cutter
(With an older Island-class patrol boat behind)

Source: U.S. Coast Guard photo accessed May 4, 2012, at http://www.flickr.com/photos/coast_guard/
6871815460/sizes/l/in/set-72157629286167596/.

FRCs are currently built by Bollinger Shipyards of Lockport, LA. Bollinger’s contract with the
Coast Guard originally included options to build up to 34 FRCs, but some of the options were not
fully exercised by the Coast Guard, so Bollinger’s contract can now cover up to 30 FRCs. The
builder of the remaining 28 planned FRCs has not yet been determined. The Coast Guard holds
the data rights for the Sentinel-class design and plans to hold a competition in 2015 for the
contract to build the remaining boats in the class.28
Table 2 summarizes acquisition funding for the first 18 FRCs.


27

Government Accountability Office, Coast Guard[:] Portfolio Management Approach Needed to Improve Major
Acquisition Outcomes, GAO-12-918, September 2012, p. 13 (Figure 13).
28
Mike McCarthy, “House Markup Would Avoid Slipping USCG’s New Cutters,” Defense Daily, May 15, 2012: 3.

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Table 2. FRC Acquisition Funding, by Hull
Millions of then-year dollars, rounded to nearest million
Quantity

Hulls

Fiscal years funded

Total acquisition
funding (millions)

Average unit
cost (millions)

0

n/a

FY07 and prior years

$2

n/a

4

1 to 4

FY05, FY07, FY09

$267

$66.75

4

5 to 8

FY2010

$243

$60.75

4

9 to 12

FY2011

$240

$60.00

4a

13 to 16a

FY2012

$358b

$59.00b

Source: Coast Guard e-mail to CRS, December 9, 2011, and FY2013 Coast Guard budget submission.
a.

The FY2012 budget funded the procurement of six boats (numbers 13 through 18). The Coast Guard’s
FY2013 budget proposes deferring the procurement of boats 17 and 18 to FY2013, which would reduce the
FY2012 figure to 4 boats (hulls 13 to 16). Under this proposal, of the $358 million provided for the program
in FY2012, $95 million provided for boats 17 and 18 would be, in effect, transferred to FY2013.

b.

Includes $27 million for FRC reprocurement data and licensing package (RDLP) and $95 million to be used
for procuring two additional FRCs (numbers 17 and 18) in FY2013. These two sums are excluded from the
unit cost calculation.

The Coast Guard’s proposed FY2013 budget requests $139 million in acquisition funding for the
FRC program, including $78.5 million for 19th and 20th FRCs, and $60.5 million for other
program costs. The Coast Guard’s FY2013 budget also proposes to restructure the use of the
funding that was provided in FY2012 for the procurement of six FRCs. Under the Coast Guard’s
proposal, four (rather than six) FRCs would be procured in FY2012, and the remaining two FRCs
that were funded in FY2012 (numbers 17 and 18) would instead be procured in FY2013, along

27

Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-28 (pdf page 182 of 400).
28
Mike McCarthy, “House Markup Would Avoid Slipping USCG’s New Cutters,” Defense Daily, May 15, 2012: 3.

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with two more FRCs (numbers 19 and 20). Of the $358 million in funds provided in FY2012, $95
million would be transferred to FY2013 to fund the procurement FRCs 17 and 18.
This proposal would result in the procurement of four FRCs (numbers 13 through 16) in FY2012,
and another four (numbers 17 through 20) in FY2013.29 The Coast Guard states that “this plan
will allow the Coast Guard to procure FRCs under the current contract terms and conditions,
maintaining the same steady production rate as the previous year.”30

NSC, OPC, and FRC Funding in Five-Year Capital Investment Plan
Table 3 shows annual acquisition funding for the NSC, OPC, and FRC programs in the Coast
Guard’s FY2013 five-year (FY2013-FY2017) capital investment plan.
29

The Coast Guard states that the FY2013 request
funds production of FRC hulls #19 – 20, associated contract line items, and project management
costs. Hulls #17 - 20 will be procured in FY 2013 using FY 2012 and FY 2013 funds. Specifically,
the Coast Guard will procure four FRCs in FY 2012 (two less than funded in the FY 2012 enacted
[budget]) and carry forward $95 million from FY 2012, combining these funds with the FY 2013
request to procure a total of four FRCs in FY 2013.
(Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional
Justification, p. CG-AC&I-28 (pdf page 182 of 400).
30
Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-28 (pdf page 182 of 400).

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Table 3. NSC, OPC, and FRC Funding in Five-Year Capital Investment Plan
(millions of then-year dollars)

NSC


FY2013

FY2014

FY2015

FY2016

FY2017

NSC

683a

0

0

0

0
530c

OPC

30

50

40

200b

530c

FRC

139d

360

360

360

360

Total

852

410

400

560

890

Source: Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p.
CG-AC&I-12 (pdf page 166 of 400).
a.

Includes $658 million to complete acquisition funding for the sixth NSC, and $25 million in post-production
activities for the fourth NSC.

b.

Includes funding for detailed design and long-lead time materials for the first OPC.

c.

Includes funding to complete the acquisition cost of the first OPC.

d.

The Coast Guard’s FY2013 budget proposes to shift an additional $95 million in FY2012 funding to FY2013,
resulting in a total of $234 million available to the FRC program in FY2013.

29

The Coast Guard states that the FY2013 request
funds production of FRC hulls #19 – 20, associated contract line items, and project management
costs. Hulls #17 - 20 will be procured in FY 2013 using FY 2012 and FY 2013 funds. Specifically,
the Coast Guard will procure four FRCs in FY 2012 (two less than funded in the FY 2012 enacted
[budget]) and carry forward $95 million from FY 2012, combining these funds with the FY 2013
request to procure a total of four FRCs in FY 2013.
(Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional
Justification, p. CG-AC&I-28 (pdf page 182 of 400).
30
Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-28 (pdf page 182 of 400).

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Issues for Congress
NSC Program: No Funding in Five-Year Plan for 7th and 8th Ships
One potential oversight issue for Congress for FY2013 concerns the absence of funding in the
Coast Guard’s FY2013 five-year (FY2013-FY2017) capital investment plan for the seventh and
eighth National Security Cutters. As mentioned earlier, in contrast to the Coast Guard’s FY2013
five-year capital investment plan, the Coast Guard’s FY2012 five-year (FY2012-FY2016) capital
investment plan included funding for the seventh and eighth NSCs in FY2014 and FY2015,
respectively. Since the Coast Guard’s POR continues to call for a total of eight NSCs, the
suggestion from the FY2013 five-year plan is that the Coast Guard now anticipates funding (or
hopes to be able to fund) the seventh and eighth NSCs some time after FY2017. Potential
oversight  oversight
questions for Congress include the following:
•

The Coast Guard’s FY2013 five-year capital investment plan includes a total of
$860 million in acquisition funding through FY2017 for the design and
procurement of a new polar icebreaker. This funding was not included in the
FY2012 five-year capital investment plan—the project to design and build a
polar icebreaker is a new acquisition project initiated in the FY2013 budget.31 In
preparing the FY2013 five-year capital investment plan, was a budgetary tradeoff
made between the new polar icebreaker and the seventh and eighth NSCs? Was
the new polar icebreaker, in other words, funded in the FY2013 five-year capital
investment plan at the expense of the seventh and eighth NSCs?

•

In what fiscal years does the Coast Guard now anticipate funding (or hope to be
able to fund) the procurement of the seventh and eighth NSCs? If the Coast


31

For more information on the proposed new polar icebreaker, see CRS Report RL34391, Coast Guard Polar
Icebreaker Modernization: Background and Issues for Congress, by Ronald O'Rourke.

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Guard’s time frame for procuring the seventh and eighth ships is currently
unclear, when does the Coast Guard anticipate having a better understanding of
when those ships might be procured?


•

How efficient would it be to have a multiyear break in the procurement sequence
between the sixth NSC and the seventh and eighth NSCs? For each year that
procurement of the seventh and eighth NSCs is deferred beyond FY2014 and
FY2015, respectively, how much would the procurement cost of the seventh and
eighth NSCs increase in real (i.e., inflation-adjusted) terms due to loss of learning
and program shutdown and restart costs at the shipyard and component makers?

•

What would be the operational implications of limiting NSC procurement to six
ships rather than the planned total of eight? How, in other words, would having
six NSCs rather than eight affect the Coast Guard’s ability to perform its missions
in coming years?

•

To what degree could the operational impact of having six NSCs rather than eight
in coming years be mitigated by extending the service lives of older high- or
medium-endurance cutters? Would such service life extensions be feasible and
cost effective?

31

For more information on the proposed new polar icebreaker, see CRS Report RL34391, Coast Guard Polar
Icebreaker Modernization: Background and Issues for Congress, by Ronald O'Rourke.

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Some of the above questions have been discussed at hearings on the Coast Guard’s proposed
FY2013 budget. For example, at a March 6, 2012, hearing on the Coast Guard’s proposed
FY2013 budget before the Homeland Security Committee of the House Appropriations
Committee, the following exchange occurred:
REPRESENTATIVE ADERHOLT:
The president’s budget includes funding for the six NSC, which has been referred to earlier,
but that does not provide any funding in the out-years for the NSC number 7 and number 8,
but not—but nor does the funding profile show the shutdown of cost associated within the
program. Is the program of record for 8 NSC still a relative requirement?
ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, U.S. COAST GUARD:
Yes, sir. And I have confirmed that with our secretary [Secretary of Homeland Security Janet
Napolitano]. She has stated that it’s still the program of record.
This year, our acquisition budget—our acquisition portion of the budget, although our
overall budget is reduced by about four percent. The [FY]‘13 budget represents a 20 percent
reduction in our acquisition monies. That’s caused us to work across our entire portfolio.
And quite frankly, we’re ordering the minimum production level in almost every project that
we have, including the National Security Cutter.
I acknowledge right up front that in the five-year plan, there are zeros next to 7 and 8, but the
secretary remains committed that is the program of record. And I think given the constraints
of the Budget Control Act, we’re going to have to look at each and every asset in every
portfolio in each and every year as we go forward and work doubly hard to justify whatever
we can get to spend on those projects.
ADERHOLT:
In order to maintain the core production rate, when does the Coast Guard need funding to
begin construction of the NSC 7?


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PAPP:
NSC 7 would be within the [FY]‘14 budget is what we had programmed in order to keep the
flow at the shipyard in proper sequence, and to get the—under the original construct, if you
are back to the [FY]‘12 budget submission, we were looking at Year [FY]‘14 and [FY]‘15
for 7 and 8 in order to keep the flow going, and also make room in the budget for starting the
offshore patrol cutter.32

Later in the hearing, the following exchange occurred:
ADERHOLT:
If you don't get the funds for the NSC 7 and 8, what will that mean for your legacy fleet?
PAPP:

32

Source: Transcript of hearing.

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Well, we would have to look at all the options that are available. One option might be
keeping the 300—some of the 378-foot [Hamilton-class] High Endurance Cutters on active
duty. That presents a challenge.
Just two years ago—I’m sorry, three—four years ago now when I was the Atlantic Area
commander, I had to shut down both Dallas and Gallatin—the two [Hamilton-class] ships
that are home-ported in Charleston. We found major structural problems in those ships that
made them unsafe to go to sea.
The commandant, at the time, again under my recommendation, we decided to reactivate
those ships. It took us $20 million and two years to get Gallatin back in the sea. So I was
confronted with that decision today as commandant. We wouldn’t spend the money, we’ll
just decommission the ship or lay it up because it’s just unsafe to send people to sea in.
The remainder of the ships that we have in service right now are rapidly approaching that as
well. We only get about a million dollars a year in sustainment funds for each one of those
ships. If you spend $20 million on one ship or you spend $2 million on one ship, it comes at
the expense of other ships and other programs, which worsens their condition as well. So
that’s a risky proposition going forward, trying to keep the Hamilton class, 378-foot High
Endurance Cutters in service because they’re just increasingly expensive each year.
But if the NSC program is curtailed, I need to look at what the options are to keep some of
those ships in the budget, which would push them up into the 50-year range by the time.
We'll probably look at decommissioning them.33

Later in the hearing, Papp stated: “We need the National Security Cutter as well, and if we push
that off, one estimate we did last year is we pushed it off as much as the [sic: a] year. You increase
that [cost] by about $50 million on that ship if you push it off.”34
At a March 7, 2012, hearing before the Oceans, Atmosphere, Fisheries, and Coast Guard
subcommittees of the Senate Commerce, Science, and Transportation Committee, the following
exchange occurred:
32

Source: Transcript of hearing.
Source: Transcript of hearing.
34
Source: Transcript of hearing.
33

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SENTOR LAUTENBERG:
One of the things I wanna ask Admiral Papp that is the delay in fully complimenting the
fleet, [NSC] ships seven and eight. What missions will be impacted? I mean if you said that
you might not be able to carry out the same level of mission involvement as you’ve had,
what—what kind of missions might be affected by the inability that order up and get the
eight ships going?
PAPP:
Well, senator, first of all, if there’s a delay in building the ships, one of the options that we’ll
look at is the extending the life of the 378-foot high endurance cutters that are out there right
now. I don’t want to do that, because they are very expensive [to operate and maintain].
They’re obsolete. The habitability conditions for the crews are not good. And they’re quite
clearly not as effective as the new ships we’re building.

33
34

Source: Transcript of hearing.
Source: Transcript of hearing.

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But they are ships and they’re out there and filling the hole and they’re doing the missions.
It’s just very expensive (inaudible). So I have to look at some option or keeping the three
378s going for a number of years longer rather than to take cut back the missions. If we
didn’t have the budget room to be able to do that then we would have to look at the potential
for cutting back their missions. And as I said earlier, it varies. We have to set priorities.
Clearly, we’ve got a lot of ships to voted [sic: devoted] to the traffic zones in the eastern
pacific and Caribbean where the—where the cocaine is flowing. We could perhaps put fewer
ships down there. Right now, we’re down to almost the bare minimum in terms of our
presence in the bearing sea and the Gulf of Alaska to protect the fisheries and to rescue
fisherman. We’re involved in the western pacific doing high seas driftnet. Its potential for
cutting back there. And those are the types of things that we would have to look at. My job is
come up with the plan and keeping enough ships out there running within the budget so that
we don't have to cut back on those missions.35

At a May 9, 2012, hearing on the Coast Guard’s proposed FY2013 budget before the Homeland
Security subcommittee of the Senate Appropriations Committee, the following exchange
occurred:
SENATOR LANDRIEU:
The budget request includes funding for the six[th NSC], but no funding is projected for [the]
out years for the final two. I know in the past that you’ve testified that the seventh and eighth
are necessary to meet your requirements[.] [W]hen Secretary Napolitano testified before the
subcommittee in March, she said quote, “Before moving ahead on number seven and eight,
we wanna make sure we’re coordinated with the Navy.” Her point, was to make sure the
Coast Guard and the Navy fleets are not duplicative and complement each other. Have you
talked with Chief of Naval Operations about your respective fleet plan? Did your
conversation provide more clarity on the need for seven and eight? And what are the impacts
to our nation that seven and eight are not built?
PAPP:
The answer to your immediate question, chairman [is:] Yes, I have spoken with Admiral
[Jonathan] Greenert [the Chief of Naval Operations]. We meet regularly. We see each other,
35

Source: Transcript of hearing.

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usually, about twice a week. But we held a specific meeting—[to] discuss ship building in
particular and make sure that both of our services are giving the American citizens the best
return on their investment.
And last week, even though I was still recovering, our staffs got together, and they compared
our ship building programs as well. And what we’ve determined is that the Navy is building
ships that the Navy needs. The Coast Guard is building ships that the Coast Guard needs.
And while these fleets are complementary for best services to the American people, we need
to be able to be interoperable, share some systems so that if the worst case happens, Coast
Guard Cutters can be used to support the United States Navy, and likewise, under domestic
or security situations, Navy assets can help supplement the Coast Guard. So, what we do is
we build complementary vessels that I can assure you, they’re non-redundant. You ask the
CNO, I’m sure he’ll tell you, he doesn’t have enough ships to do all the things he needs to
do. And I’ll tell you that I don't have enough ships to do all the things I need to do.

35

Source: Transcript of hearing.

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As regards to number seven and eight. I actually see a ray of optimism there. The fact of the
matter is, it remains the program of record, eight National Security Cutters, and Secretary
Napolitano, has confirmed that. And in fact, seven and eight are listed in the five-year plan.
And it’s regrettable that there are zeroes on there, I would like that to be different. But,
having said that, when I look at the cumulative figures that have been projected by the
administration in our five-year plan, it really brings us closer to the level of funding that I
think is adequate to recapitalize the Coast Guard.
In Fiscal Year ‘14, it calls for almost $1.5 billion. I’ve gone on record saying that I think the
Coast Guard needs closer to $2 billion dollars a year to recapitalize—[to] do proper
recapitalization. And over that five-year period, we build up to $1.7 billion. So, that is a ray
of hope for me that we’re getting closer to what we need to recapitalize the service.
As regards the figures beneath the columns for each one of those years, I think, we all know
that year-to-year, that’s a negotiation process. It’s a projection, but every year, it seems to
change. So, what the secretary has done is she said, “We need to compare with the Navy. We
need to make sure that we’re not building something that’s redundant. That is a[n] unfair
burden on the taxpayers because the Navy can do it or vise versa.” And I think that we have
determined in my discussion with the CNO that we are not.36

Later in this hearing, when asked about the potential cost of a production break between the sixth
NSC and the seventh and eight NSCs, Papp stated that “if there’s any break in subsequent funding
for follow (ph) [sic: follow-on] National Security Cutters, you can expect probably a cost increase
at every year [of] delay. It’s probably about 10 percent [per year] as what we estimate.”37

NSC Program: Hull Corrosion and Leaks on Third Ship
Another potential oversight issue for Congress concerns hull corrosion and leaks in the third
National Security Cutter. A May 17, 2012, press report states:
The Coast Guard will send its third National Security Cutter, the Stratton, in for an
emergency dry docking shortly after the service found premature corrosion in a portion of
the aft hull last month, congressional and Coast Guard officials said yesterday.


36
37

Source: Transcript of hearing.
Source: Transcript of hearing.

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The unexpected dry docking will keep the Stratton out of service until around mid-July and
the repairs of the hull plating will cost more than $600,000, according to briefing material
prepared by the House Transportation and Infrastructure Coast Guard Subcommittee, which
held a hearing yesterday on the service’s recapitalization program....
The Stratton was commissioned on March 31 and in April its crew found seawater in the
ship. A subsequent inspection of the hull found small cracks and pitting, which is unusual for
a new ship, Vice Adm. John Currier, deputy commandant for Mission Support in the Coast
Guard, testified at the hearing. The dry docking is slated to begin later this month or early in
June and last between 30 and 45 days, he said.
Hull inspections of the first two NSCs, the Bertholf and Waesche, uncovered no problems so
the hull corrosion is not a class-wide issue, Currier said.

36
37

Source: Transcript of hearing.
Source: Transcript of hearing.

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As for what caused the premature hull corrosion, Currier said that will have to wait until
inspections are completed during the upcoming dry docking and said a permanent fix will be
done in “short order.” Currier says trying to explain the cause now would be speculation but
said that from his experience the problem could range anywhere between a quality of steel
issue to the impact of a recent localized repair where some welding had to be done where the
Stratton bumped into the pier. He noted that the issue with the Stratton is consistent with
improper welding but refrained from suggesting this is the cause of the problem.
Currier also said that it’s premature to discuss whether the hull leaks are covered by
warranty. Huntington Ingalls Industries [HII] is the prime contractor for the 418-foot NSCs.
That said, he doesn’t believe there were problems with either the Coast Guard’s acquisition
process or HII’s shipyard.38

Potential oversight questions for Congress include the following:
•

What caused the corrosion and leaks—a design problem, a manufacturing
problem, or something else?

•

Who is paying the cost of repairing the leaks—the Coast Guard or the
shipbuilder? What is the shipbuilder’s contractual obligation regarding repairs for
problems of this kind?

•

What is the likelihood that similar problems will be found on other NSCs?

FRC Program: Proposed Restructuring of FY2012 Funds
Another potential oversight question for Congress concerns the Coast Guard’s proposal to
restructure the use of FY2012 FRC acquisition funding so as to procure four Fast Response
Cutters in FY2012 rather than six, and to defer the procurement of the other two FY2012-funded
FRCs to FY2013. Potential oversight questions for Congress include the following:
•

The Coast Guard states that “this plan will allow the Coast Guard to procure
FRCs under the current contract terms and conditions, maintaining the same


38

Calvin Biesecker, “Leaky Hull Sending Newest National Security Cutter To Emergency Dry Dock,” Defense Daily,
May 17, 2012: 4-5. Material in brackets as in original. See also Associated Press, “Crew of New Coast Guard Cutter
Making Emergency Repairs After Rust, Holes Found in Hull,” Washington Post (www.washingtonpost.com), May 8,
2012.

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steady production rate as the previous year.”39 Would procuring six FRCs in
FY2012 prevent the Coast Guard from procuring FRCs under the current contract
terms and conditions, and if so, why? Why would it be important to maintain in
FY2012 the same production rate (four boats per year) as the previous year?


•

In requesting funding in its FY2012 budget for procurement of six FRCs, the
Coast Guard last year stated that “procuring six FRCs maximizes the production
line and generates a cost savings of nearly $5 million per hull.”40 Why is that
logic no longer compelling to the Coast Guard?

38

Calvin Biesecker, “Leaky Hull Sending Newest National Security Cutter To Emergency Dry Dock,” Defense Daily,
May 17, 2012: 4-5. Material in brackets as in original. See also Associated Press, “Crew of New Coast Guard Cutter
Making Emergency Repairs After Rust, Holes Found in Hull,” Washington Post (www.washingtonpost.com), May 8,
2012.
39
Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-28 (pdf page 182 of 400).
40
Department of Homeland Security, United States Coast Guard, Fiscal Year 2012 Congressional Justification, p. CGAC&I-41 (pdf page 209 of 421).

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•

What impact, if any, does this proposal to restructure the use of these FY2012
funds have on the credibility of Coast Guard funding requests for the FRC
program or other programs for FY2013 and beyond?

Some of the above questions have been discussed at hearings on the Coast Guard’s proposed
FY2013 budget. For example, at a March 7, 2012, hearing on the proposed FY2013 budgets for
the Coast Guard and maritime transportation programs before the Coast Guard and Maritime
Transportation subcommittee of the House Transportation and Infrastructure Committee, the
following exchange occurred:
REPRESENATIVE LOBIONDO:
Admiral Papp, on the fast response cutter, the Coast Guard proposes to withhold up to $135
million provided by Congress in the F.Y. ‘12 budget to construct six new fast response
cutters, and instead construct four fast response cutters in F.Y. ‘12. The service proposes to
combine the withheld $139 million from [FY]‘12 funding with an additional $130 million
from F.Y. ‘13 to construct four FRCs in 2013.
Can you talk to us a little bit about why the Coast Guard has apparently decided to disregard
the intent of Congress and abandon plans to build the six FRCs in [FY]2012?
ADMIRAL ROBERT J. PAPP, JR., COMMANDANT, U.S. COAST GUARD:
Well, sir, I—I think almost every question that you asked today I could probably start off by
saying that I have a budget. At the end of the day, I’ve been given a budget. I have to live
within that budget. I have to make decisions on priorities and what we’re going to maintain.
You noted that there’s a four percent reduction in the overall budget, but when you look at
our acquisition funds, it’s a 20 percent reduction this year. So all of our acquisition portfolio,
every project that we have an approved baseline on, what we’re forced to do is go to the
minimum ordering quantity for each and every product including the national security cutter
and other projects.
So for the fast response cutter, our contract requires us to build a minimum of four each year
or maximum of six. We haven’t ramped up to six yet. Right now, with the shipyard, we’ve
been ordering four a year. We’re grateful that we got the money in the [FY]‘12 budget to
build out six.


39

Department of Homeland Security, United States Coast Guard, Fiscal Year 2013 Congressional Justification, p. CGAC&I-28 (pdf page 182 of 400).
40
Department of Homeland Security, United States Coast Guard, Fiscal Year 2012 Congressional Justification, p. CGAC&I-41 (pdf page 209 of 421).

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We don’t want to do anything contrary to the—what the Congress—congressional intent is,
but what we would to do is work with the Congress to get permission to withhold that money
so that we can spread out four each year to keep the minimum level order going for the fast
response cutter.
I could only find enough money within our [FY]‘13 appropriation and acquisitions to pay for
two fast response cutters. So in order to live up to the contract and build a minimum of four a
year, we looked at that option of moving the money from [FY]‘12 into [FY]‘13 to bounce it
out at four a year. Hopefully, in future years, we'll be able to go back up to six [a year].41

At a May 9, 2012, hearing on the Coast Guard’s proposed FY2013 budget before the Homeland
Security subcommittee of the Senate Appropriations Committee, the following exchange
occurred:
41

Source: Transcript of hearing.

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SENATOR LANDRIEU:
In 2012, we fully funded the department’s request for six fast response cutters the
department sold this committee on the fact that building six maximizes the production line,
and actually save taxpayers $30 million when you get the efficiency of building a line and
keeping the production going. It also obviously, accelerates the delivery of these ships that
are important in your priority.
Last year’s budget request indicated that another six were necessary, but the budget before us
includes funding for only two. Yesterday, the House of Appropriations Committee released
their draft [of the FY2013 Department of Homeland Security budget], and it includes funds
for four. If our senate bill would include funds for four or more, will you be in a position to
award a contract for six that continuing the savings in the efficiencies that we tried to create
last year, Admiral.
PAPP:
Yes, chairman. Absolutely. You know, it’s regrettable and I understand that the confidence
and the support that you gave to Coast Guard by putting six patrol boats in last year’s budget.
Unfortunately, in trying to fit within the top line this year of my acquisition funding,
acquisition funding was reduced by 20 percent. I was forced into a position to having to
maintain the minimum production level in all our acquisition projects just to keep the lines
going, so we don’t have to restart lines later on at great cost.
So, I admit there’s a little bit of a shell game. What I did was I fit in as many things as I
could, and then ended up with two FRC’s in the [FY]‘13 budget, and I was hopeful that we
would get permission to be able to use the [FY]‘12 money to keep the production in line
going at a least four per year. But given the scenario that—that you’ve suggested here from
the House mark, absolutely, if there are four FRC’s in the [FY]‘13 budget, that will allow me
to execute this year, six. And that’s absolutely the way ships should be produced.
You give the ship builder a constant stream of funding or a predictable stream of funding,
they can keep their employees on, they can buy a long lead time parts, it’s the most efficient
way around the shipyard, much the same way as we need to run the National Security Cutter
program as well at Huntington Ingalls. They need to have predictability, steady funding


41

Source: Transcript of hearing.

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stream so that we can get the best efficiencies, and get the best price from the taxpayer as we
build these ships.42

FRC Program: Delays, Cost Growth, and Testing
Another potential oversight issue for Congress concerns delays, cost growth, and testing issues in
the FRC program. A March 2012 report on the FRC program by Office of the Inspector General
(OIG) of the Department of Homeland Security (DHS—the parent department of the Coast
Guard) stated:
The Coast Guard’s oversight of the Fast Response Cutter acquisition has helped ensure that
the provisions of the contract reflect the Coast Guard’s operational requirements and that the
contractor is meeting the contract’s provisions. However, the Coast Guard has executed an
aggressive, schedule-driven strategy that allowed construction of the Fast Response Cutters
to start before operational, design, and technical risks were resolved. Consequently, six
42

Source: Transcript of hearing.

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cutters under construction required rework that resulted in at least 270 days of schedule
delays for each cutter and a total cost increase of $6.9 million for the acquisition. This
aggressive acquisition strategy also allowed the Coast Guard to procure 12 Fast Response
Cutters before testing the lead cutter in actual operations. It is uncertain whether the Fast
Response Cutter will perform as intended until it completes operational test and evaluation in
actual maritime environments.
If operational test and evaluation on the lead Fast Response Cutter reveals deficiencies, the
Fast Response Cutters may incur additional costly rework and delays, or the Coast Guard
may have to accept Fast Response Cutters that do not fully meet its mission requirements.
This may hinder the Coast Guard’s ability to fill the critical shortages in its patrol boat
fleet.43

The report also stated:
Recommendations
We recommend that the Assistant Commandant for Acquisitions, U.S. Coast Guard:
Recommendation #1: Ensure that future acquisitions employ a knowledge-based acquisition
strategy to the maximum extent practicable by revising the U.S. Coast Guard’s Major
Systems Acquisition Manual to allow for a schedule-driven acquisition strategy to be
employed only when it is properly authorized and supported by the results of a risk
assessment and cost-benefit analysis.
Recommendation #2: Improve low-rate initial production decisions for the U.S. Coast
Guard Surface Acquisition programs by issuing a policy memorandum that requires that it
achieve a specific level of design maturity at Critical Design Review.


42

Source: Transcript of hearing.
Department of Homeland Security, Office of Inspector General, U.S. Coast Guard’s Acquisition of the Sentinel Class
– Fast Response Cutter, OIG-12-68, March 2012, p. 1. Accessed June 29, 2012 at http://www.oig.dhs.gov/assets/
Mgmt/2012/OIG_12-68_Mar12.pdf. See also Calvin Biesecker, “Coast Guard’s Aggressive Schedule On FRC Carries
Technical Risks, IG Cautions,” Defense Daily, April 13, 2012: 3-4.
43

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Recommendation #3: Issue a policy memorandum that requires authorization to proceed
with low-rate initial production be supported by the reported results of operational
assessments.
Recommendation #4: Revise the Coast Guard’s acquisition policy to require a documented
risk assessment when low-rate initial production quantity exceeds 10%, or other Coast Guard
established minimum, of the total quantity approved for the acquisition.
Recommendation #5: Mitigate risk by executing plans for an operational assessment prior
to delivery of the lead FRC and take immediate action to implement recommendations from
the operational assessment. Any recommendations not implemented should be supported by
the results of a risk assessment and cost-benefit analysis.44

The Coast Guard partially concurred with the first three recommendations and concurred with the
final two.45
43

Department of Homeland Security, Office of Inspector General, U.S. Coast Guard’s Acquisition of the Sentinel Class
– Fast Response Cutter, OIG-12-68, March 2012, p. 1. Accessed June 29, 2012 at http://www.oig.dhs.gov/assets/
Mgmt/2012/OIG_12-68_Mar12.pdf. See also Calvin Biesecker, “Coast Guard’s Aggressive Schedule On FRC Carries
Technical Risks, IG Cautions,” Defense Daily, April 13, 2012: 3-4.
44
Department of Homeland Security, Office of Inspector General, U.S. Coast Guard’s Acquisition of the Sentinel Class
– Fast Response Cutter, OIG-12-68, March 2012, p. 13.
45
Department of Homeland Security, Office of Inspector General, U.S. Coast Guard’s Acquisition of the Sentinel Class
– Fast Response Cutter, OIG-12-68, March 2012, pp. 14-17.

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OPC Program: Cost, Design, and Acquisition Strategy
Another potential oversight issue for Congress concerns the Coast Guard’s acquisition strategy
for the Offshore Patrol Cutter. Potential oversight questions for Congress include the following:
•

Has the Coast Guard fully incorporated into the OPC acquisition strategy lessons
learned from the NSC and FRC programs? What, in the Coast Guard’s view, are
those lessons?

•

As mentioned earlier, the Coast Guard’s draft RFP for the OPC program
 establishes an 
affordability requirement of an average construction price of not
more than $276 million per ship in constant FY2016unit price of $310 million per ship, or
less, in then-year dollars for ships 4 through 9
 in the program. How was the $276 310
million figure determined?

•

What process is the Coast Guard using to evaluate tradeoffs in OPC performance
features against this target construction price? What performance features have
been reduced or eliminated to meet the target construction price?

•

How much confidence does the Coast Guard have that the OPC that emerges
from the tradeoff process could be built within the Coast Guard’s target
construction price?

•

As mentioned earlier, the Coast Guard plans to award preliminary and contract
design (P&CD) contracts as many as three competitors in FY2013. Is the number
of potential P&CD contracts too high, too low, or about right? How did the Coast
Guard arrive at this number?

•

As also mentioned earlier, the Coast Guard plans to evaluate the P&CD efforts
and then award one of the competitors a contract for detailed design development
and ship construction. What process does the Coast Guard plan to use in


44

Department of Homeland Security, Office of Inspector General, U.S. Coast Guard’s Acquisition of the Sentinel Class
– Fast Response Cutter, OIG-12-68, March 2012, p. 13.
45
Department of Homeland Security, Office of Inspector General, U.S. Coast Guard’s Acquisition of the Sentinel Class
– Fast Response Cutter, OIG-12-68, March 2012, pp. 14-17.

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evaluating the P&CD efforts? What evaluation factors does the Coast Guard plan
to use, and how much weight will be assigned to each?

2012 Testimony
Some of the above questions have been discussed at hearings on the Coast Guard’s proposed
FY2013 budget. For example, at a March 6, 2012, hearing on the Coast Guard’s proposed
FY2013 budget before the Homeland Security Committee of the House Appropriations
Committee, Admiral Robert J. Papp, Jr., the Commandant of the Coast Guard, stated:
When I came in as commandant, I realized that this [the OPC program] was the most
expensive project that the Coast Guard has ever taken on, honestly, as each [of the] 25 ships
are a significant investment. And I also understood looking out at the horizon and seeing the
storm clouds that restrict the budgets coming up there we needed to build a ship that was
affordable.
We rescrubbed the requirements. We have battled ourselves within the Coast Guard to make
sure we're asking for just exactly what we need, nothing more nothing less. And I have said
three things to my staff as we go on forward—affordable, affordable, affordable.
And now I'm very pleased to say that just last week that the department [DHS] has
reviewed—we passed a major milestone with acquisition decision event number two which

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validated our requirements for the type of cutter that we’re looking for and we are ready to
go towards the preliminary and contract design work this next year.46

Later in the hearing, the following exchange occurred:
ADERHOLT:
And there has been a discussion as to the capability of the OPC with objective design being
more capable than the—than the threshold capability.47 What is the current plan and
capability of the OPC and what capability thresholds are you considering?
PAPP:
We—the driving one as I said is affordability, but having said that—and I’m not—I’m not
trying to be funny here, but the—the sea-keeping capability being, you know, to operate in
Sea State 5 is probably the most important to us right now because with fewer national
security cutters, at least fewer than the hindrance posed that we have right now.
None of our medium endurance cutters—the 210 foot and 270 foot [medium-endurance]
cutters that we have—can operate in the Gulf of Alaska and the Bering Sea and they do not
have the long legs to be able to send them out in the—on some of the longer deployments
that we do in the Pacific.
So it has to be able to launch the aircraft and boats in Sea State 5, you know, which is
standard offset in the Bering Sea and also have endurance that we’ll be able to keep it out
there on station. And I believe it was 45 days [of operation at sea] we’re looking for without
refueling.48

46

Source: Transcript of hearing.
In the design of many U.S. weapon systems, threshold refers to a minimally acceptable level of capability, and
objective refers to a higher (but also more expensive or technically challenging) level of capability.
47

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there on station. And I believe it was 45 days [of operation at sea] we’re looking for without
refueling.48

September 2012 GAO Report
Regarding the Coast Guard’s requirements development process for the OPC, a September 2012
GAO report states:
Coast Guard Took Positive Steps to Improve Requirements Development and Consider
Affordability for the Offshore Patrol Cutter
The Coast Guard took some steps to improve the requirements development process for the
Offshore Patrol Cutter—the largest acquisition in DHS’s acquisitions portfolio and,
according to officials, the first acquisition in the Deepwater surface fleet in which the Coast
Guard had complete control over the requirements development process. The Coast Guard
undertook studies and analysis that, in part, considered the measurability and testability as
required by guidance of the following four key performance parameters: operating range,
operational sustainment and crew, speed, and patrol endurance. For example, the range
requirement, which is the distance the cutter can travel between refueling, is clearly stated as
a minimum acceptable requirement of 8,500 nautical miles at a constant speed of 14 knots to
48
Source: Transcript of hearing. At a March 7, 2012, hearing on the proposed FY2013 budgets for the Coast Guard and
maritime transportation programs before the Coast Guard and Maritime Transportation subcommittee of the House
Transportation and Infrastructure Committee, the following similar exchange occurred:
REPRESENATIVE LARSEN:
Admiral Papp, some questions about the offshore patrol cutter. Obviously, we’re—we’re a little bit
(inaudible) before that’s operational. And I have a question about whether or not the requirements
for the OPC will prioritize one set of factors over a different set of factors. (inaudible) and
Endurance, that might be more helpful in the Pacific versus speed, armament, and other
requirements. How are you approaching the requirement—setting requirements to the OPC?
PAPP:
Sir, realizing that this is going to be the largest acquisition project that the Coast Guard has ever
done and recognizing that these ships are going to last us 40 years, we’re taking the law beyond this
[sic: a long look at this?]. And I realize there are some people that feel like we have dragged our
feet a little bit or pushed this to the right a little bit, and I would say that’s just not the case. It is a
little delayed from where we started out.
But when I came in as commandant, I realized that we were going to be facing constrained budgets.
So I had the staff take a look at the OPC once again, scrub the requirements with a direction that
the primary requirement is affordability. We just could not afford everything that was in the
requirements before, so we set new thresholds for it.
But the most important is the sea-keeping capability because with a reduced number of national
security cutters, if we only have eight national security cutters replacing the 12 Hamilton class
cutters, we have to have a ship that’s capable of going up into the Gulf of Alaska, the Bering Sea,
(continued...)
47

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the Western Pacific.
Our medium endurance cutters right now, and speaking as a captain of a 270-foot cutter, we
cannot—those ships cannot perform in the extreme weather conditions that you find sometimes in
the North Atlantic much less the Arctic, and the—the Bering Sea.
So keeping the requirements for sea state five for helicopter launching and boat launching, and the
Endurance were most important. And I'm really pleased to say that we have finally passed that
hurdle. We went through acquisition decision event number two with the Department of Homeland
Security last week, and they approved our requirements so we’re—we’re stepping out smartly now,
moving ahead.
(Transcript of hearing)

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a maximum level of 9,500 nautical miles. Although cutters typically transit at various speeds
over the course of a patrol, the Coast Guard conducted analysis to determine that the 14
knots speed at the minimum and maximum ranges would provide enough days between
refueling given the percentage of time that the Coast Guard normally operates at certain
speeds. By developing a measurable range requirement, the Coast Guard helped to promote a
clear understanding of Offshore Patrol Cutter performance by potential shipbuilders and
sought to balance the cost of additional range with the value that it provides. Furthermore,
officials at the independent test authority—the Navy’s Commander Operational Test and
Evaluation Force—told us that they have been actively involved through the requirements
development process and many of their questions regarding testability have been resolved.
Two other key performance parameters—seakeeping and interoperability—are not as
consistent with the Coast Guard’s guidelines of measurability and testability as identified in
the Major Systems Acquisition Manual. For example the seakeeping key performance
parameter described in the requirements document states that the Offshore Patrol Cutter shall
be able to launch small boats and helicopters in 8.2- to 13.1-foot waves. However, in the
specifications document, which is used to translate the requirements document into a level of
detail from which contractors can develop a reasonably priced proposal, the Coast Guard
states that the Offshore Patrol Cutter shall be able to launch small boats and helicopters in no
more than 10.7 foot waves while transiting in a direction that minimizes the pitch and roll of
the vessel—an important detail not specified in the requirements document. Further, the
interoperability key performance parameter states that the Coast Guard must be able to
exchange voice, video, and data with the Department of Defense and Homeland Security
agencies. However, it does not list specific external partners or substantial details regarding
the systems required to exchange data and the types and size of these data that could be
examples of measurability and testability. This key performance parameter does not make
this distinction between parts of the military that the Coast Guard operates with most often,
such as the U.S. Navy and the intelligence community, and simply requires interoperability
with all of DOD. Similarly, the interoperability key performance parameter does not specify
the DHS agencies for which the Coast Guard must exchange data with, which makes this
parameter difficult to test. Coast Guard’s independent testing officials agreed that this key
performance parameter, as currently written, is not testable in a meaningful way and stated
that there are ongoing efforts to improve the clarity of this requirement.
During the requirements development process for the Offshore Patrol Cutter, the Coast
Guard also made some decisions with respect to affordability. The following are examples
where the Coast Guard made capability trades that are expected to help lower the program’s
acquisition cost:
•

Speed—after a series of analyses, the Coast Guard decided to reduce the minimum
acceptable speed from 25 to 22 knots thereby, according to officials, potentially
eliminating the need for two diesel engines. According to a study completed by the
Coast Guard, this trade could reduce the acquisition cost of each cutter by $10 million.

•

Stern Launch—the Coast Guard removed the stern launch ramp capability from the
Offshore Patrol Cutter design. While this trade-off may inhibit the launch and recovery
of small boats in certain conditions, such as substantial roll or side-to-side movement of
the vessel, Coast Guard officials stated that it will reduce the cost of the cutter because a
stern launch ramp requires the cutter to be heavier, thus adding cost.

•

C4ISR—the Coast Guard eliminated a minimum requirement for an integrated C4ISR
system and instead is requiring a system built with interfaces to communicate between
different software programs. According to Coast Guard officials, the Coast Guard now
plans to use a Coast Guard-developed software system—Seawatch—rather than the
more costly lead systems integrator-developed software system currently installed on

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the National Security Cutter, even though this system does not provide the Coast Guard
with the capability to exchange near real-time battle data with DOD assets.
The improvements and affordability decisions that the Coast Guard has made in its
requirements development process for the Offshore Patrol Cutter are even more evident
when compared with the process for generating requirements for its other major cutter—the
National Security Cutter. Due to the nature of the lead systems integrator strategy that the
Coast Guard initially used to buy the National Security Cutter, Integrated Coast Guard
Systems developed the requirements, designed, and began producing the National Security
Cutter before the requirements document was completed. The Coast Guard did not have an
operational requirements document at the time the Coast Guard awarded the construction
contract for the first cutter in 2004, but the Coast Guard documented the requirements in
2006. Further, even as the third National Security Cutter was in production, Coast Guard was
refining the requirements and, in January 2010, made the decision to clarify some key
performance parameters such as anti-terrorism/force protection and underwater mine
detection because the existing requirements were not testable. To further remedy the lack of
clear requirements, Coast Guard officials stated that they are currently developing a second
version of the requirements document that improves the specificity and definition of many of
the National Security Cutter’s requirements and will be used as criteria during operational
testing. To date, the Coast Guard has not reduced the National Security Cutter’s capability
for the purpose of affordability as it has done for the Offshore Patrol Cutter. However,
according to Coast Guard officials, there is a revised acquisition program baseline under
review which will reflect an ongoing effort to lower the acquisition cost of the vessel.49

Regarding the potential accuracy of the Coast Guard’s estimated procurement cost for the OPC,
given the known procurement cost of the NSC, the September 2012 GAO report states:
Major Cutter Requirements and Missions Have Similarities, but Costs Vary Greatly
and Concerns Remain about Affordability
The requirements and missions for the National Security Cutter and the Offshore Patrol
Cutter programs have similarities, but the actual cost for one National Security Cutter
compared to the estimated cost of one Offshore Patrol Cutter varies greatly. Even though the
Coast Guard took steps to consider affordability while developing the requirements for the
Offshore Patrol Cutter, those affordability decisions do not explain the magnitude in the
difference between these two costs....
This comparison raises questions whether the Offshore Patrol Cutter could be a less
expensive, viable substitute for the National Security Cutter or whether there are
assumptions built into the Offshore Patrol Cutter cost estimate, not related to requirements,
which are driving the estimated costs down. With respect to the first, DHS, motivated by
concerns about the affordability of the National Security Cutter program, completed a Cutter
Study in August 2011 which included an analysis to examine the feasibility of varying the
combination of objective—or optimal performing—Offshore Patrol Cutters and National
Security Cutters in the program of record. Through this analysis, DHS found that defense
operations is a key factor in determining the quantity of National Security Cutters needed
and that the Coast Guard only needs 3.5 National Security Cutters per year to fully satisfy
the planned requirement for defense-related missions. DHS concluded that with six National
Security Cutters the Coast Guard can meet its goals for defense operations and mitigate some
of the near-term capacity loss of the five National Security Cutter fleet modeled in the Cutter
49

Government Accountability Office, Coast Guard[:] Portfolio Management Approach Needed to Improve Major
Acquisition Outcomes, GAO-12-918, September 2012, pp. 28-31.

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Study. DHS Program Analysis and Evaluation officials stated that this, in conjunction with
other information, helped to inform the decision to not include the last two National Security
Cutter hulls—hulls 7 and 8—in the fiscal years 2013-2017 capital investment plan. However,
the DHS Cutter Study also notes that the time line for the two acquisitions makes a trade-off
between the National Security Cutter and the Offshore Patrol Cutter difficult since the
National Security Cutter program is in production whereas the Offshore Patrol Cutter
program is only in the design phase. Similarly, we have reported that the Coast Guard may
face an operational gap in its ability to perform missions using major cutters due to the
condition of the legacy fleet.
With respect to the second possibility that there are assumptions built into the Offshore
Patrol Cutter cost estimate that are driving the estimated costs down, the Coast Guard
included three key assumptions in the Offshore Patrol Cutter’s life cycle cost estimate,
generally not related to the cutter’s key requirements, which lower the estimated cost in
comparison to the actual cost of the National Security Cutter. These three assumptions are:
•

Learning Curve. The Coast Guard assumes that the shipyard(s) will generally continue
to reduce the labor hours required to build the Offshore Patrol Cutter through the
production of all 25 vessels. This may prove optimistic, particularly for later ships in the
class, because the amount of additional learning per vessel–or efficiencies gained during
production due to improving the manufacturing process to build the ship in a way that
requires fewer labor hours–typically decreases over time in a shipbuilding program.

•

Military versus Commercial Standards. The life cycle cost estimate assumes that
certain areas of the Offshore Patrol Cutter’s construction and material would reflect an
average of 55 percent commercial standards—or construction standards that are
typically used for military sealift ships that provide ocean transportation—and 45
percent military standards—or construction standards typically used for Navy combat
vessels. Any changes in this assumption could have a significant effect on the cost
estimate because military standards require more sophisticated construction
applications, particularly in the areas of shock hardening and signature reduction, to
prepare a ship to survive battle. Such sensitivity could help to explain the difference in
costs between the Offshore Patrol Cutter program and the National Security Cutter
program and officials stated that the latter program is being built to about 90 percent
military standards.

•

Production Schedule. The cost estimate reflects the Coast Guard’s plan to switch from
building one Offshore Patrol Cutter per year to building two Offshore Patrol Cutters per
year beginning with the fourth and fifth vessel in the class. If the Coast Guard cannot
achieve or maintain this build rate due to budget constraints, it may choose to stretch the
schedule for the program which in turn could increase costs.

Coast Guard program officials generally agreed that these three variables are important to the
cost of the Offshore Patrol Cutter and are key reasons why the Coast Guard expects one
Offshore Patrol Cutter to cost less than half of one National Security Cutter. However, these
officials recognized that the cost estimate for the Offshore Patrol Cutter is still uncertain
since the cutter has yet to be designed—thus, the National Security Cutter’s actual costs are
more reliable. Coast Guard program officials also added that the cost estimate for the
Offshore Patrol Cutter is optimistic in that it assumes that the cutter will be built in
accordance with the current acquisition strategy and planned schedule. They noted that any
delays, design issues, or contract oversight problems—all of which were experienced during

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the purchase of the National Security Cutter—could increase the eventual price of the
Offshore Patrol Cutter.50

Multiyear Procurement (MYP)
Another potential oversight issue for Congress concerns the potential for using multiyear
procurement (MYP), also known as multiyear contracting, in acquiring new cutters. With
congressional approval, certain Department of Defense (DOD) programs for procuring ships,
aircraft, and other items employ MYP as a way of reducing procurement costs. As part of its
FY2013 budget submission, for example, the Navy is requesting congressional approval for using
MYP arrangements for DDG-51 destroyers to be procured in FY2013-FY2017, for Virginia-class
submarines to be procured in FY2014-FY2018, and for V-22 Osprey tilt-rotor aircraft to be
procured in FY2013-FY2017. Compared to the standard or default approach of annual
contracting, MYP has the potential for reducing procurement costs by several percent.4951
The statute that governs the use of MYP—10 U.S.C. 2306b—makes MYP available with
congressional approval not only to DOD, but to other government departments, including DHS,
the parent department of the Coast Guard.5052 Unlike the Navy and other DOD services, however,
the Coast Guard is not using MYP for any of its ship or aircraft procurement programs. Potential
oversight questions for Congress include the following:
•

Has the Coast Guard considered using MYP for procuring NSCs, OPCs, or
FRCs? If not, why not?

•

What would be the potential savings of using MYP for procuring the final two or
three NSCs, for procuring OPCs, or for procuring FRCs?

•

What are the potential risks or downsides of using MYP for procuring NSCs,
OPCs, or FRCs?

Adequacy of Planned Procurement Quantities
Another oversight issue for Congress concerns the adequacy of the Coast Guard’s planned NSC,
OPC, and FRC procurement quantities. The POR’s planned force of 91 NSCs, OPCs, and FRCs is
about equal in number to the Coast Guard’s legacy force of 90 high-endurance cutters, mediumendurance cutters, and 110-foot patrol craft. NSCs, OPCs, and FRCs, moreover, are to be
individually more capable than the older ships they are to replace. Even so, Coast Guard studies
have concluded that the planned total of 91 NSCs, OPCs, and FRCs would be considerably fewer
(...continued)
the Western Pacific.
Our medium endurance cutters right now, and speaking as a captain of a 270-foot cutter, we
cannot—those ships cannot perform in the extreme weather conditions that you find sometimes in
the North Atlantic much less the Arctic, and the—the Bering Sea.
So keeping the requirements for sea state five for helicopter launching and boat launching, and the
Endurance were most important. And I'm really pleased to say that we have finally passed that
hurdle. We went through acquisition decision event number two with the Department of Homeland
Security last week, and they approved our requirements so we’re—we’re stepping out smartly now,
moving ahead.
(Transcript of hearing)
49ships than the number that would be needed to fully perform the service’s statutory missions in
coming years, in part because Coast Guard mission demands are expected to be greater in coming
years than they were in the past. CRS first testified about this issue in 2005.53
50

Government Accountability Office, Coast Guard[:] Portfolio Management Approach Needed to Improve Major
Acquisition Outcomes, GAO-12-918, September 2012, pp. 31, 33-35.
51
For more on MYP, see CRS Report R41909, Multiyear Procurement (MYP) and Block Buy Contracting in Defense
Acquisition: Background and Issues for Congress, by Ronald O'Rourke and Moshe Schwartz.
50
10 U.S.C. 2306b(b)(2)(B).

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ships than the number that would be needed to fully perform the service’s statutory missions in
coming years, in part because Coast Guard mission demands are expected to be greater in coming
years than they were in the past. CRS first testified about this issue in 2005.51
52
10 U.S.C. 2306b(b)(2)(B).
53
See Statement of Ronald O’Rourke, Specialist in National Defense, Congressional Research Service, Before the
Senate Commerce, Science, and Transportation Committee, Subcommittee on Fisheries and the Coast Guard, Hearing
on The Coast Guard’s Revised Deepwater Implementation Plan, June 21, 2005, pp. 1-5.

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The Coast Guard estimates that with the POR’s planned force of 91 NSCs, OPCs, and FRCs, the
service would have capability or capacity gaps52gaps54 in 6 of its 11 statutory missions—search and
rescue (SAR); defense readiness; counter-drug operations; ports, waterways, and coastal security
(PWCS); protection of living marine resources (LMR); and alien migrant interdiction operations
(AMIO). The Coast Guard judges that some of these gaps would be “high risk” or “very high
risk.”
Public discussions of the POR frequently mention the substantial improvement that the POR
force would represent over the legacy force. Only rarely, however, have these discussions
explicitly acknowledged the extent to which the POR force would be smaller in number than the
force that would be required, by Coast Guard estimate, to fully perform the Coast Guard’s
statutory missions in coming years. Discussions that focus on the POR’s improvement over the
legacy force while omitting mention of the considerably larger number of cutters that would be
required, by Coast Guard estimate, to fully perform the Coast Guard’s statutory missions in
coming years could encourage audiences to conclude, contrary to Coast Guard estimates, that the
POR’s planned force of 91 cutters would be capable of fully performing the Coast Guard’s
statutory missions in coming years.
In a study completed in December 2009 called the Fleet Mix Analysis (FMA) Phase 1, the Coast
Guard calculated the size of the force that in its view would be needed to fully perform the
service’s statutory missions in coming years. The study refers to this larger force as the objective
fleet mix. Table 4 compares planned numbers of NSCs, OPCs, and FRCs in the POR to those in
the objective fleet mix.
Table 4. Program of Record Compared to Objective Fleet Mix
From Fleet Mix Analysis Phase 1 (2009)

Ship type

Program of
Record (POR)

Objective Fleet Mix
compared to POR

Objective
Fleet Mix
From FMA
Phase 1

Number

%

NSC

8

9

+1

+13%

OPC

25

57

+32

+128%

FRC

58

91

+33

+57%

Total

91

157

+66

+73%

Source: Fleet Mix Analysis Phase 1, Executive Summary, Table ES-8 on page ES-13.

51
See Statement of Ronald O’Rourke, Specialist in National Defense, Congressional Research Service, Before the
Senate Commerce, Science, and Transportation Committee, Subcommittee on Fisheries and the Coast Guard, Hearing
on The Coast Guard’s Revised Deepwater Implementation Plan, June 21, 2005, pp. 1-5.
52
The Coast Guard uses capability as a qualitative term, to refer to the kinds of missions that can be performed, and
capacity as a quantitative term, to refer to how much (i.e., to what scale or volume) a mission can be performed.

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As can be seen in Table 4, the objective fleet mix includes 66 additional cutters, or about 73%
more cutters than in the POR. Stated the other way around, the POR includes about 58% as many
cutters as the objective fleet mix.
As intermediate steps between the POR force and the objective fleet mix, FMA Phase 1
calculated three additional forces, called FMA-1, FMA-2, and FMA-3. (The objective fleet mix
was then relabeled FMA-4.) Table 5 compares the POR to FMAs 1 through 4.


54

The Coast Guard uses capability as a qualitative term, to refer to the kinds of missions that can be performed, and
capacity as a quantitative term, to refer to how much (i.e., to what scale or volume) a mission can be performed.

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Table 5. POR Compared to FMAs 1 Through 4
From Fleet Mix Analysis Phase 1 (2009)

Ship type

Program of
Record
(POR)

FMA-1

FMA-2

FMA-3

FMA-4
(Objective
Fleet Mix)

NSC

8

9

9

9

9

OPC

25

32

43

50

57

FRC

58

63

75

80

91

Total

91

104

127

139

157

Source: Fleet Mix Analysis Phase 1, Executive Summary, Table ES-8 on page ES-13.

FMA-1 was calculated to address the mission gaps that the Coast Guard judged to be “very high
risk.” FMA-2 was calculated to address both those gaps and additional gaps that the Coast Guard
judged to be “high risk.” FMA-3 was calculated to address all those gaps, plus gaps that the Coast
Guard judged to be “medium risk.” FMA-4—the objective fleet mix—was calculated to address
all the foregoing gaps, plus the remaining gaps, which the Coast Guard judge to be “low risk” or
“very low risk.” Table 6 shows the POR and FMAs 1 through 4 in terms of their mission
performance gaps.

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Table 6. Force Mixes and Mission Performance Gaps
From Fleet Mix Analysis Phase 1 (2009)—an X mark indicates a mission performance gap
Risk levels of
these
performance
gaps

Program
of
Record
(POR)

Search and Rescue (SAR)
capability

Very high

X

Defense Readiness capacity

Very high

X

Counter Drug capacity

Very high

X

Ports, Waterways, and Coastal
Security (PWCS) capacitya

High

X

X

Living Marine Resources (LMR)
capability and capacitya

High

X

X

PWCS capacityb

Medium

X

X

X

LMR capacityc

Medium

X

X

X

Alien Migrant Interdiction
Operations (AMIO) capacityd

Low/very low

X

X

X

X

PWCS capacitye

Low/very low

X

X

X

X

Missions with performance
gaps

FMA-1

FMA-2

FMA-3

FMA-4
(Objective
Fleet Mix)

[all gaps
addressed]

Source: Fleet Mix Analysis Phase 1, Executive Summary, page ES-11 through ES-13.
Notes: In the first column, The Coast Guard uses capability as a qualitative term, to refer to the kinds of
missions that can be performed, and capacity as a quantitative term, to refer to how much (i.e., to what scale or
volume) a mission can be performed.
a.

This gap occurs in the Southeast operating area (Coast Guard Districts 7 and 8) and the Western operating
area (Districts 11, 13, and 14).

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b.

This gap occurs in Alaska.

c.

This gap occurs in Alaska and in the Northeast operating area (Districts 1 and 5).

d.

This gap occurs in the Southeast and Western operating areas.

e.

This gap occurs in the Northeast operating area.

Figure 4, taken from FMA Phase 1, depicts the overall mission capability/performance gap
situation in graphic form. It appears to be conceptual rather than drawn to precise scale. The black
line descending toward 0 by the year 2027 shows the declining capability and performance of the
Coast Guard’s legacy assets as they gradually age out of the force. The purple line branching up
from the black line shows the added capability from ships and aircraft to be procured under the
POR, including the 91 planned NSCs, OPCs, and FRCs. The level of capability to be provided
when the POR force is fully in place is the green line, labeled “2005 Mission Needs Statement.”
As can be seen in the graph, this level of capability is substantially below a projection of Coast
Guard mission demands made after the terrorist attacks of September 11, 2001 (the red line,
labeled “Post-9/11 CG Mission Demands”), and even further below a Coast Guard projection of
future mission demands (the top dashed line, labeled “Future Mission Demands”). The dashed
blue lines show future capability levels that would result from reducing planned procurement
quantities in the POR or executing the POR over a longer time period than originally planned.

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Figure 4. Projected Mission Demands vs. Projected Capability/Performance
From Fleet Mix Analysis Phase 1, Executive Summary

Source: Fleet Mix Analysis Phase 1, Executive Summary, Figure ES-1 on p. ES-2.

FMA Phase 1 was a fiscally unconstrained study, meaning that the larger force mixes shown in
Table 5 were calculated primarily on the basis of their capability for performing missions, rather
than their potential acquisition or life-cycle operation and support (O&S) costs.
Although the FMA Phase 1 was completed in December 2009, the figures shown in Table 5 were
generally not included in public discussions of the Coast Guard’s future force structure needs


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until April 2011, when GAO presented them in testimony.5355 GAO again presented them in a July
2011 report.5456
The Coast Guard completed a follow-on study, called Fleet Mix Analysis (FMA) Phase 2, in May
2011. Among other things, FMA Phase 2 includes a revised and updated objective fleet mix called
the refined objective mix. Table 7 compares the POR to the objective fleet mix from FMA Phase
1 and the refined objective mix from FMA Phase 2.

53

Government Accountability Office, Coast Guard[:]Observations on Acquisition Management and Efforts to
Reassess the Deepwater Program, Testimony Before the Subcommittee on Coast Guard and Maritime Transportation,
Committee on Transportation and Infrastructure, House of Representatives, Statement of John P. Hutton, Director
Acquisition and Sourcing Management, GAO-11-535T, April 13, 2011, p. 10.
54
Government Accountability Office, Coast Guard[:]Action Needed As Approved Deepwater Program Remains
Unachievable, GAO-11-743, July 2011, p. 46.

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Table 7. POR Compared to Objective Mixes in FMA Phases 1 and 2
From Fleet Mix Analysis Phase 1 (2009) and Phase 2 (2011)

Ship type

Program of
Record
(POR)

Objective
Fleet Mix
from FMA
Phase 1

Refined
Objective
Mix from
FMA Phase 2

NSC

8

9

9

OPC

25

57

49

FRC

58

91

91

Total

91

157

149

Source: Fleet Mix Analysis Phase 1, Executive Summary, Table ES-8 on page ES-13, and Fleet Mix Analysis Phase
2, Table ES-2 on p. iv.

As can be seen in Table 7, compared to the objective fleet mix from FMA Phase 1, the refined
objective mix from FMA Phase 2 includes 49 OPCs rather than 57. The refined objective mix
includes 58 additional cutters, or about 64% more cutters than in the POR. Stated the other way
around, the POR includes about 61% as many cutters as the refined objective mix.
Compared to the POR, the larger force mixes shown in Table 5 and Table 7 would be more
expensive to procure, operate, and support than the POR force. Using the average NSC, OPC, and
FRC procurement cost figures presented earlier (see “Background”), procuring the 58 additional
cutters in the Refined Objective Mix from FMA Phase 2 might cost an additional $10.7 billion, of
which most (about $7.8 billion) would be for the 24 additional FRCs. (The actual cost would
depend on numerous factors, such as annual procurement rates.) O&S costs for these 58
additional cutters over their life cycles (including crew costs and periodic ship maintenance costs)
would require billions of additional dollars.5557
The larger force mixes in the FMA Phase 1 and 2 studies, moreover, include not only increased
numbers of cutters, but also increased numbers of Coast Guard aircraft. In the FMA Phase 1
study, for example, the objective fleet mix included 479 aircraft—93% more than the 248 aircraft
55
Government Accountability Office, Coast Guard[:]Observations on Acquisition Management and Efforts to
Reassess the Deepwater Program, Testimony Before the Subcommittee on Coast Guard and Maritime Transportation,
Committee on Transportation and Infrastructure, House of Representatives, Statement of John P. Hutton, Director
Acquisition and Sourcing Management, GAO-11-535T, April 13, 2011, p. 10.
56
Government Accountability Office, Coast Guard[:]Action Needed As Approved Deepwater Program Remains
Unachievable, GAO-11-743, July 2011, p. 46.
57
The FMA Phase 1 and Phase 2 studies present acquisition and life-cycle ownership cost calculations for force mixes
that include not only larger numbers of NSC, OPCs, and FRCs, but corresponding larger numbers of Coast Guard
aircraft.

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in the POR mix. A decision to procure larger numbers of cutters like those shown in Table 5 and
Table 7 might thus also imply a decision to procure, operate, and support larger numbers of Coast
Guard aircraft, which would require billions of additional dollars. The FMA Phase 1 study
estimated the procurement cost of the objective fleet mix of 157 cutters and 479 aircraft at $61
billion to $67 billion in constant FY2009 dollars, or about 66% more than the procurement cost of
$37 billion to $40 billion in constant FY2009 dollars estimated for the POR mix of 91 cutters and
248 aircraft. The study estimated the total ownership cost (i.e., procurement plus life-cycle O&S
cost) of the objective fleet mix of cutters and aircraft at $201 billion to $208 billion in constant
FY2009 dollars, or about 53% more than the total ownership cost of $132 billion to $136 billion
in constant FY2009 dollars estimated for POR mix of cutters and aircraft.56

55
The FMA Phase 1 and Phase 2 studies present acquisition and life-cycle ownership cost calculations for force mixes
that include not only larger numbers of NSC, OPCs, and FRCs, but corresponding larger numbers of Coast Guard
aircraft.
56
Fleet Mix Analysis Phase 1, Executive Summary, Table ES-11 on page ES-19, and Table ES-10 on page ES-18. The
life-cycle O&S cost was calculated through 2050.

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58
The POR was originally defined in 2004 as the optimal mix of assets that could be acquired for a
total estimated acquisition cost of about $24 billion, and the $24 billion figure is often referenced
as a baseline in discussing Coast Guard plans for acquiring new deepwater-capable ships and
aircraft. GAO’s July 2011 report, for example, notes that the total estimated acquisition cost of
the POR has grown to as much as $29.3 billion, or about $5 billion more than the original
estimate of $24.2 billion, and that there could be additional cost growth beyond that figure.5759
GAO has expressed strong doubts, given growth in the estimated acquisition cost of the POR and
the amounts of acquisition funding that the Coast Guard has received in recent years, about the
Coast Guard’s ability to afford the POR, let alone any larger force mix, and has recommended in
its July 2011 report and subsequent work that the Coast Guard instead examine force mixes that
are smaller than the POR.5860 Force mixes that are smaller than the POR might lead to overall
capability levels similar to those shown by the dashed blue lines in Figure 4, and mission
performance gaps that are greater in magnitude than those indicated for the POR force in Table 6.
At a March 7, 2012, hearing before the Oceans, Atmosphere, Fisheries, and Coast Guard
subcommittees of the Senate Commerce, Science, and Transportation Committee, Admiral Robert
J. Papp, the Commandant of the Coast Guard, in commenting on GAO’s July 2011 report, stated
in part:
And I think part of the GAO report as I read it was also saying maybe we need to recalculate
getting fewer ships or whatever else. But what I don’t have is people taking—giving us
fewer missions. Our missions continue to increase so I remain committed to the original
baseline of the eight national security cutters, the 25 OPCs and others [other systems] as they
are in the projects [sic: POR?].59

Although the annual amounts of acquisition funding that the Coast Guard has received in recent
years are one potential guide to what Coast Guard acquisition funding levels might or should be
in coming years, there may be other potential guides. For example, one could envision potential
guides that focus on whether Coast Guard funding for ship acquisition and sustainment is
commensurate with Coast Guard funding for the personnel that in many cases will operate the
ships. Observations that might be made in connection with this example include the following:
•

The Coast Guard has about 12.5% as many active-duty personnel as the Navy.6061

Similarly, in commenting on a draft version of a September 2012 GAO report, the Coast Guard
stated in part:

58
Fleet Mix Analysis Phase 1, Executive Summary, Table ES-11 on page ES-19, and Table ES-10 on page ES-18. The
life-cycle O&S cost was calculated through 2050.
59
Government Accountability Office, Coast Guard[:]Action Needed As Approved Deepwater Program Remains
Unachievable, GAO-11-743, July 2011, summary page.
60
See, for example, Government Accountability Office, Coast Guard[:]Action Needed As Approved Deepwater
Program Remains Unachievable, GAO-11-743, July 2011, p. 46; and Government Accountability Office, Observations
on the Coast Guard’s and the Department of Homeland Security’s Fleet Studies, GAO-12-751R, May 31, 2012.
61
Source: Transcript of hearing.

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The assets required to meet Coast Guard statutorily required missions do not change on the
basis of budgetary constraints. While changes in the fiscal environment may impact the rate
and efficiency at which the Coast Guard can acquire new cutters, aircraft, boats and C4ISR
systems to replace aging and failing equipment, it does not reduce or otherwise change the
needs of the Service.62

The September 2012 GAO report refers multiple times to a need for the Coast Guard, in
managing its acquisition programs, to work within “realistic fiscal constraints” and “expected
funding levels,” which the report appears to define as an amount of acquisition funding level
similar to the Coast Guard’s FY2013 request and to the amounts that the Coast Guard received in
the five years prior to FY2013.63 Although the annual amounts of acquisition funding that the
Coast Guard has received in recent years are one potential guide to what Coast Guard acquisition
funding levels might or should be in coming years, there may be other potential guides. For
example, one could envision potential guides that focus on whether Coast Guard funding for ship
acquisition and sustainment is commensurate with Coast Guard funding for the personnel that in
many cases will operate the ships. Observations that might be made in connection with this
example include the following:
•

The Coast Guard has about 12.5% as many active-duty personnel as the Navy.64
If the amount of funding for surface ship acquisition and sustainment in the Coast
Guard’s budget were equivalent to 12.5% of the amount of funding in the Navy’s
shipbuilding account, it would be about $1.7 billion per year, or about 93% more
than the $879.5 million that the Coast Guard has requested for FY2013 for
surface ship acquisition and sustainment programs.61

57
Government Accountability Office, Coast Guard[:]Action Needed As Approved Deepwater Program Remains
Unachievable, GAO-11-743, July 2011, summary page.
58
See, for example, Government Accountability Office, Coast Guard[:]Action Needed As Approved Deepwater
Program Remains Unachievable, GAO-11-743, July 2011, p. 46; and Government Accountability Office, Observations
on the Coast Guard’s and the Department of Homeland Security’s Fleet Studies, GAO-12-751R, May 31, 2012.
59
Source: Transcript of hearing.
6065

•

Funding in the Navy’s shipbuilding account is equivalent to about 50% of the
Navy’s funding for active-duty personnel.66 If Coast Guard funding for surface
ship acquisition and sustainment were equivalent to 50% of Coast Guard funding
for military pay and allowances, it would again be about $1.7 billion per year.67

It is not clear whether either of the two above observations would be appropriate as guides for
determining appropriate levels of funding for Coast Guard surface ship acquisition and
sustainment in coming years, or more appropriate than other guides. But it might also be argued
that is not clear that recent Coast Guard acquisition funding levels are the sole or most
appropriate guide for determining appropriate levels of such funding in coming years, particularly
since the Coast Guard has entered a period where it is seeking to replace multiple classes of
assets. Although prior-year funding levels are often used in federal budgeting to determine what
62

Letter dated September 13, 2012, from Jim H. Crumpacker, Director, [DHS] Departmental GAO-OIG Liaison
Office, to John P. Hutton, Director, Acquisition Sourcing Management, U.S. Government Accountability Office, as
reprinted in Government Accountability Office, Coast Guard[:] Portfolio Management Approach Needed to Improve
Major Acquisition Outcomes, GAO-12-918, September 2012, p. 53.
63
Government Accountability Office, Coast Guard[:] Portfolio Management Approach Needed to Improve Major
Acquisition Outcomes, GAO-12-918, September 2012, p. 22-23, including Figure 7 on p. 23.
64
The Coast Guard for FY2013 is requesting an active-duty end strength (i.e., number of permanent positions) of
40,444; the Navy for FY2013 is requesting an active-duty end strength of 322,700.
6165
The Navy’s proposed FY2013 budget requests $13,580 million for the Shipbuilding and Conversion, Navy (SCN)
appropriation account.
66
The Navy’s proposed FY2013 budget requests $27,091 million for the Military Personnel, Navy (MPN)
appropriation account.
67
The Coast Guard’s proposed FY2013 budget requests $3,415.6 million for military pay and allowances.

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might be a realistic funding level for a program area for coming years, it might also be argued
that a sole reliance on such a standard could short-circuit the policymaking process and limit
options available to congressional (and executive branch) policymakers by in effect ruling out the
option of deciding, as a matter of policy, that a program area is a high-enough priority that
funding for it should be increased above prior-year levels, even while overall federal funding
remains constrained. Supporters of this perspective might argue that what constitutes a realistic
level of funding in coming years for a given program area is a policy question for congressional
(and executive branch) policymakers to decide, and that an unvarying approach of basing futureyear funding for various program areas on their prior-year funding levels would hamper the
ability of the congressional (and executive branch) policymakers to alter the composition of the
federal budget over time to meet changing federal needs

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•

Funding in the Navy’s shipbuilding account is equivalent to about 50% of the
Navy’s funding for active-duty personnel.62 If Coast Guard funding for surface
ship acquisition and sustainment were equivalent to 50% of Coast Guard funding
for military pay and allowances, it would again be about $1.7 billion per year.63

It is not clear whether either of the two above observations would be appropriate as guides for
determining appropriate levels of funding for Coast Guard surface ship acquisition and
sustainment in coming years, or more appropriate than other guides. But it might also be argued
that is not clear that recent Coast Guard acquisition funding levels are the sole or most
appropriate guide for determining appropriate levels of such funding in coming years, particularly
since the Coast Guard has entered a period where it is seeking to replace multiple classes of
assets.
At an October 4, 2011, hearing on the Coast Guard’s major acquisition programs before the Coast
Guard and Maritime Transportation subcommittee of the House Transportation and Infrastructure
Committee, the following exchange occurred:
REPRESENATIVE FRANK LOBIONDO:
Can you give us your take on what percentage of value must be invested each year to
maintain current levels of effort and to allow the Coast Guard to fully carry out its missions?
ADMIRAL ROBERT J. PAPP, COMMANDANT OF THE COAST GUARD:
I think I can, Mr. Chairman. Actually, in discussions and looking at our budget—and I’ll
give you rough numbers here, what we do now is we have to live within the constraints that
we’ve been averaging about $1.4 billion in acquisition money each year.
If you look at our complete portfolio, the things that we’d like to do, when you look at the
shore infrastructure that needs to be taken care of, when you look at renovating our smaller
icebreakers and other ships and aircraft that we have, we’ve done some rough estimates that
it would really take close to about $2.5 billion a year, if we were to do all the things that we
would like to do to sustain our capital plant.
So I’m just like any other head of any other agency here, as that the end of the day, we’re
given a top line and we have to make choices and tradeoffs and basically, my tradeoffs boil
down to sustaining frontline operations balancing that, we’re trying to recapitalize the Coast
Guard and there’s where the break is and where we have to define our spending.6468

An April 18, 2012, blog entry stated:
If the Coast Guard capital expenditure budget remains unchanged at less than $1.5 billion
annually in the coming years, it will result in a service in possession of only 70 percent of the
assets it possesses today, said Coast Guard Rear Adm. Mark Butt.

62
The Navy’s proposed FY2013 budget requests $27,091 million for the Military Personnel, Navy (MPN)
appropriation account.
63
The Coast Guard’s proposed FY2013 budget requests $3,415.6 million for military pay and allowances.
64
Source: Transcript of heraring.

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Butt, who spoke April 17 [2012] at [a] panel [discussion] during the Navy League Sea Air
Space conference in National Harbor, Md., echoed Coast Guard Commandant Robert Papp
in stating that the service really needs around $2.5 billion annually for procurement.65
Butt, who spoke April 17 [2012] at [a] panel [discussion] during the Navy League Sea Air
Space conference in National Harbor, Md., echoed Coast Guard Commandant Robert Papp
in stating that the service really needs around $2.5 billion annually for procurement.69

68

Source: Transcript of heraring.
David Perera, “The Coast Guard Is Shrinking,” FierceHomelandSecurity.com, April 18, 2012, accessed July 20,
2012 at http://www.fiercehomelandsecurity.com/story/coast-guard-shrinking/2012-04-18.
69

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At a May 9, 2012, hearing on the Coast Guard’s proposed FY2013 budget before the Homeland
Security subcommittee of the Senate Appropriations Committee, Admiral Papp testified, “I’ve
gone on record saying that I think the Coast Guard needs closer to $2 billion dollars a year [in
acquisition funding] to recapitalize—[to] do proper recapitalization.”6670 The Coast Guard received
$1.464 billion in acquisition funding in FY2012, and the Coast Guard’s proposed FY2013 budget
requests $1.192 billion in acquisition funding.
Potential oversight questions for Congress include the following:
•

Under the POR force mix, how large a performance gap, precisely, would there
be in each of the missions shown in Table 6? What impact would these
performance gaps have on public safety, national security, and protection of
living marine resources?

•

How sensitive are these performance gaps to the way in which the Coast Guard
translates its statutory missions into more precise statements of required mission
performance?

•

Given the performance gaps shown in Table 6, should planned numbers of Coast
Guard cutters and aircraft be increased, or the Coast Guard’s statutory missions
reduced, or both?

•

How much larger would the performance gaps in Table 6 be if planned numbers
of Coast Guard cutters and aircraft are reduced below the POR figures?

•

Has the executive branch made sufficiently clear to Congress the difference
between the number of ships and aircraft in the POR force and the number that
would be needed to fully perform the Coast Guard’s statutory missions in coming
years? Why has public discussion of the POR focused mostly on the capability
improvement it would produce over the legacy force, and rarely on the
performance gaps it would have in the missions shown in Table 6?

•

Why was the POR designed to fit within an originally estimated acquisition cost
of about $24 billion? What analysis led to the selection of $24 billion as the
appropriate total acquisition cost target for the POR?

65

David Perera, “The Coast Guard Is Shrinking,” FierceHomelandSecurity.com, April 18, 2012, accessed July 20,
2012 at http://www.fiercehomelandsecurity.com/story/coast-guard-shrinking/2012-04-18.
66
•

Are recent Coast Guard acquisition funding levels the sole or most appropriate
guide in determining future Coast Guard acquisition funding levels? If recent
Coast Guard acquisition funding levels are used as a guide in setting future Coast
Guard acquisition funding levels, how would that affect Coast Guard ship and

70

Source: transcript of hearing. Papp may have been referring to remarks he made to the press before giving his annual
state of the Coast Guard speech on February 23, 2012, in which reportedly stated that the Coast Guard would require
about $2 billion per year in acquisition funding to fully replace its current assets. (See Adam Benson, “Coast Guard
Cutbacks Will Cost 1,000 Jobs,” Norwich Bulletin, February 23, 2012, accessed May 31, 2012, at
http://www.norwichbulletin.com/news/x1138492141/Coast-Guard-cutbacks-will-cost-1-000-jobs#axzz1wSDAFCzX.
See also “Coast Guard Leader Calls For More Ships,” MilitaryFeed.com, February 24, 2012, accessed May 31, 2012, at
http://militaryfeed.com/coast-guard-leader-calls-for-more-ships-5/; Associated Press, “Coast Guard Commandant Calls
for New Ships,” TheLog.com, March 10, 2012, accessed May 31, 2012, at http://www.thelog.com/SNW/Article/CoastGuard-Commandant-Calls-for-New-Ships-to-Replace-Aging-Fleet; Mickey McCarter, “Congress Poised to Give Coast
Guard More Money Than Requested for FY 2013,” HSToday.us, May 10, 2012, accessed May 31, 2012, at
http://www.hstoday.us/focused-topics/customs-immigration/single-article-page/congress-poised-to-give-coast-guardmore-money-than-requested-for-fy-2013.html.)

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•

Are recent Coast Guard acquisition funding levels the sole or most appropriate
guide in determining future Coast Guard acquisition funding levels? If recent
Coast Guard acquisition funding levels are used as a guide in setting future Coast
Guard acquisition funding levels, how would that affect Coast Guard ship and
aircraft force levels, and consequently Coast Guard mission capability and
capacity, over the long run?

Alternative Force Mixes Equal in Cost to Program of Record
Another potential oversight issue for Congress is whether eight NSCs, 25 OPCs, and 58 FRCs is
the best mix of cutters that could be procured for the roughly the same total amount of acquisition
funding. This issue was explored in a DHS Cutter Study that was completed in August 2011.
GAO reviewed this study, as well as the Coast Guard’s FMA Phase 1 and Phase 2 studies, and
provided some observations on the three studies in a May 2012 report.67
GAO states in the May 2012 report that “seeking information to aid in making trade-offs, DHS, at
the suggestion of OMB, commissioned a Cutter Study looking at potential trade-offs within the
Coast Guard’s major cutter fleet, comprised of National Security Cutters (NSCs) and Offshore
Patrol Cutters (OPCs).”68 The Cutter Study, GAO states, was “conducted to evaluate whether an
alternative cutter fleet mix could improve the Coast Guard’s performance while maintaining
acquisition costs of the program of record at the time of the study. DHS Program Analysis and
Evaluation (PA&E) led the analysis with contractor support including the Center for Naval
Analysis (CNA).”69
71
The study’s synopsis states that
In 2010, DHS was directed to conduct a study of USCG’s major cutter recapitalization plan.
The goal of this study was to evaluate whether an alternative cutter fleet mix could improve
USCG’s performance while maintaining current acquisition costs of the recapitalization
program of record (POR). This question was motivated by the current fiscal environment and
the increasing cost of the National Security Cutter (NSC), which in turn generated questions
about its affordability and cost-effectiveness. However, the desired outcome was to provide
insight into determining the most cost-effective fleet to execute USCG missions both near
term and well into the future....
The study was led by DHS Program Analysis and Evaluation (PA&E) with contract support
from Center for Naval Analysis (CNA) and MicroSystems Integration (MSI)....
The starting assumption for this study was that available USCG recapitalization funding is
fixed at the cost of the POR. The study then identified and assessed the performance of
alternative cutter fleets of equal acquisition cost, and compared the performance of these
alternatives to the POR.72

The DHS Cutter Study examined force mixes that included not only NSCs, OPCs, and FRCs, but
also two other ship-acquisition options—a modernized version of the Coast Guard’s 270-foot
Famous (WMEC-901) class medium-endurance cutter (“Mod-270” for short), and the Navy’s
Littoral Combat Ship (LCS).7073 (In recent years, some observers have suggested that the Coast
Guard should procure the LCS in lieu of planned cutters, while other observers have suggested
that the Navy should procure a modified version of the NSC in lieu of the LCS.) Table 8 shows
the nine alternative force mixes examined by the DHS Cutter Study—called Fleets 1 through 9—
along with the POR mix.

67
Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland Security’s
Fleet Studies, GAO-12-751R, May 31, 2012.
68
Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland Security’s
Fleet Studies, GAO-12-751R, May 31, 2012, p. 2.
69
Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland Security’s
Fleet Studies, GAO-12-751R, May 31, 2012, briefing slide 3.
70, along with the POR mix.

71
Alarik Fritz, Raymond Gelhaus, and Kent Nordstrom, Options for the Future USCG Cutter Fleet, Performance
Trade-Offs with Fixed Acquisition Cost, IPR 14297, August 2011, 392 pp., accessed online October 23, 2012 at
http://assets.fiercemarkets.net/public/sites/govit/dhscoastguardcutterstudy.pdf.
72
Alarik Fritz, Raymond Gelhaus, and Kent Nordstrom, Options for the Future USCG Cutter Fleet, Performance
Trade-Offs with Fixed Acquisition Cost, IPR 14297, August 2011, Synopsis of Results, p. 1.
73
For more on the LCS program, see CRS Report RL33741, Navy Littoral Combat Ship (LCS) Program: Background,
Issues, and Options
and Issues for Congress, by Ronald O'Rourke.

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Table 8. Alternative Force Mixes Examined in DHS Cutter Study
Group A

Group B

Group C

Ship
type

POR

Fleet 1

Fleet 2

Fleet 3

Fleet 4

Fleet 5

Fleet 6

Fleet 7

Fleet 8

Fleet 9

NSC

8

5

7

9

5

7

8

8

8

8

OPC

25

30

26

23

0

0

0

22

19

16

Mod270

0

0

0

0

41

37

34

0

0

0

LCS

0

0

0

0

0

0

0

3

6

9

FRC

58

58

62

59

60

58

58

58

58

58

Source: Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland
Security’s Fleet Studies, GAO-12-751R, May 31, 2012, briefing slide 15.

GAO states that “DHS PA&E and OMB [Office of Management and Budget] have so far used the
Cutter Study to inform the fiscal year 2013 budget. For example, DHS PA&E officials stated that
the Cutter Study provided information that DHS and OMB used, in conjunction with other
information sources, to inform the decision to not include the last two NSC hulls—hulls 7 and
8—in the FY2013-2017 capital investment plan.”71 It can be noted that none of the force mixes
shown in Table 8 includes six NSCs, which is the number that would result from approving the
Coast Guard’s FY2013 five-year capital investment plan, and not funding any NSCs in years
beyond the five-year plan.
GAO states that the Cutter Study
determined that the LCS is not well-suited for Coast Guard missions. For example, while the
planned LCS has a higher speed than the planned OPC, its limitations include
•

Limited range—[the LCS] requires more frequent refueling than the planned OPC
(reducing its available mission time) [and]

•

[An] Inability to maintain effective presence—[the LCS] cannot operate boats or aircraft
in as high a sea state.72

This conclusion appears consistent with Coast Guard views regarding the suitability of the LCS
for performing Coast Guard missions.
GAO further states that
In the Cutter Study, the Center for Naval Analysis (CNA) recommends that DHS explore
additional fleet mix options, including looking at a mid-capability OPC.
The mid-capability OPC would reduce the speed and range of the objective OPC but
otherwise maintain its presence capabilities including an ability to operate in sea state 5.

71

Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland Security’s
Fleet Studies, GAO-12-751R, May 31, 2012, p. 3.
72
Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland Security’s
Fleet Studies, GAO-12-751R, May 31, 2012, briefing slide 17.

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A CNA official responsible for the analysis stated that other characteristics of this
midcapability OPC could include removing or reducing the following from the objective
OPC Alarik Fritz, Raymond Gelhaus, and Kent Nordstrom, Options for the Future USCG Cutter Fleet,
Performance Trade-Offs with Fixed Acquisition Cost, IPR 14297, August 2011, p. 2

Regarding these alternative force mixes, the synopsis stated:
Several alternative fleets were found to improve performance in certain missions and regions
when compared to the POR. However, any improvements in mission performance over the
POR came at a cost to mission performance in other areas. Thus, the study found that if DHS
is willing to accept lower performance than the POR in selected missions and regions, it has
two alternatives to the major cutter recapitalization POR:
[Fleet 1]: Increase Offshore Patrol Cutter (OPC) fleet size in lieu of acquiring NSCs 6-8.
[Fleet 6]: Increase OPC fleet size while selectively reducing OPC capability.74

The synopsis stated that exercising both of the above alternatives in tandem would lead to Fleet
4.75 The synopsis stated that
Both alternatives [Fleets 1 and 6] improve several end-state Coast Guard-wide measures of
performance... without increasing USCG’s major cutter acquisition costs. Moreover, these
options are not mutually exclusive, and can be implemented in tandem. However, both
alternatives require tradeoffs, and before selecting an alternative fleet recapitalization plan,
DHS must determine whether the general performance benefits... are sufficient to offset these
particular tradeoffs....
Compared to the POR, the increased performance for these alternatives would likely not be
seen, until the early 2030s, whereas some of the decreases in capability for [Fleet 1] would
begin in 2018 and for [Fleet 6] by 2020. Also, [Fleet 1’s] cumulative performance
improvement will not meet and exceed the POR’s until 2055....
While the study did not model the performance of a six-NSC fleet, the near-term impacts
were analyzed. Adding a sixth NSC to [Fleet 1] mitigates some of the near-term capacity loss
when compared to the Program of Record, and mitigates some risk to performance of
Defense Operations and Homeland Security Contingency response.
74

Alarik Fritz, Raymond Gelhaus, and Kent Nordstrom, Options for the Future USCG Cutter Fleet, Performance
Trade-Offs with Fixed Acquisition Cost, IPR 14297, August 2011, Synopsis of Results, pp. 1-2.
75
Alarik Fritz, Raymond Gelhaus, and Kent Nordstrom, Options for the Future USCG Cutter Fleet, Performance
Trade-Offs with Fixed Acquisition Cost, IPR 14297, August 2011, Synopsis of Results, p. 2.

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This study also evaluated the potential for Navy’s Littoral Combat Ship (LCS) to costeffectively replace or augment the OPC fleet. An analysis of alternative cutter fleets that
incorporated small numbers of LCS in the most favorable operating conditions showed that
the LCS is not well-suited to USCG operations due to its limited range and ensuing inability
to maintain effective presence. While the LCS has advanced capabilities, most notably its
top-end speed, this does not offset its reduced presence. Therefore, based on acquisition costs
used in this study, the OPC is clearly more cost-effective at executing USCG’s major cutter
mission set.76

GAO reviewed the DHS Cutter Study, as well as the Coast Guard’s FMA Phase 1 and Phase 2
studies, and provided some observations on the three studies in a May 2012 report.77 GAO states
that “DHS PA&E and OMB [Office of Management and Budget] have so far used the Cutter
Study to inform the fiscal year 2013 budget. For example, DHS PA&E officials stated that the
Cutter Study provided information that DHS and OMB used, in conjunction with other
information sources, to inform the decision to not include the last two NSC hulls—hulls 7 and
8—in the FY2013-2017 capital investment plan.”78 GAO further states that
In the Cutter Study, the Center for Naval Analysis (CNA) recommends that DHS explore
additional fleet mix options, including looking at a mid-capability OPC.
The mid-capability OPC would reduce the speed and range of the objective OPC but
otherwise maintain its presence capabilities including an ability to operate in sea state 5.
A CNA official responsible for the analysis stated that other characteristics of this midcapability OPC could include removing or reducing the following from the objective OPC
without affecting presence:
•

Sensitive Compartmentalized Information Facility

•

Air Search and Fire Control Radars (acquire the positions of targets and provide these
data to a ship’s command and control and weapon systems)

•

Electronic Warfare Support Measures

•

Berthing space (114 instead of 122)

•

Weapons suite (e.g., 25mm gun instead of 57mm)

The CNA official also stated that CNA has not studied whether these changes to the
objective OPC would otherwise affect mission performance.7379

Potential oversight questions for Congress include the following:


76
Alarik Fritz, Raymond Gelhaus, and Kent Nordstrom, Options for the Future USCG Cutter Fleet, Performance
Trade-Offs with Fixed Acquisition Cost, IPR 14297, August 2011, Synopsis of Results, pp. 2-3.
77
Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland Security’s
Fleet Studies, GAO-12-751R, May 31, 2012.
78
Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland Security’s
Fleet Studies, GAO-12-751R, May 31, 2012, p. 3.
79
Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland Security’s
Fleet Studies, GAO-12-751R, May 31, 2012, briefing slide 18.

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•

What role, exactly, did the DHS Cutter Study play in the executive branch
decision to not include funding for the seventh and eighth NSC in the Coast
Guard’s FY2013 five-year capital investment plan? Does the DHS Cutter Study
provide a sufficient analytical basis for such a decision?

•

Is the Coast Guard’s currently planned mix of eight NSCs, 25 OPCs, and 58
FRCs the best mix of cutters that could be procured for the roughly the same
amount of acquisition funding? What were the conclusions of the DHS Cutter
Study regarding the levels of overall mission effectiveness of the nine alternative
forces mixes relative to one another, and to the POR mix?

•

What is the Coast Guard’s assessment of the option of developing and procuring
a modified version of the 270-foot Famous-class medium-endurance cutter?

•

What is the Coast Guard’s assessment of the option suggested by the CNA
official for acquiring a “mid-capability OPC” as described in the GAO report?

Information for Supporting Congressional Oversight of
Procurement Programs
Another oversight issue for Congress concerns the adequacy of information available to Congress
to support review and oversight of Coast Guard procurement programs, including cutter
procurement programs. The Coast Guard has entered a period where, like the Navy, it is
requesting significant funding each year from Congress to execute multiple ship procurement and
modernization programs. Congress, however, lacks ready access to basic information exhibits on
Coast Guard shipbuilding programs that are equivalent to those that support congressional review
and oversight of Navy ship procurement programs.

73

Government Accountability Office, Observations on the Coast Guard’s and the Department of Homeland Security’s
Fleet Studies, GAO-12-751R, May 31, 2012, briefing slide 18.

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Basic information exhibits readily available to Congress that support congressional review and
oversight of Navy ship procurement programs include but are not limited to the following:
•

annual Budget Item Justification Sheets (P-40 Exhibits), Weapon System
Cost Analysis sheets (P-5 Exhibits), and Ship Production Schedules (P-27
Exhibits) for each Navy shipbuilding program—exhibits that present detailed
information on year-to-year program funding, unit procurement costs, and
production schedules (see Appendix AB for examples);

•

annual Selected Acquisition Reports (SARs) that DOD prepares for major DOD
acquisition programs, which present supplementary data on program cost
estimates, annual funding, and contract;

•

a concise statement of the Navy’s ship force structure goal—the Navy’s current
force structure goal is to achieve and maintain a fleet of about 310-316 battle
force ships, consisting of certain types and numbers of ships (see Appendix BC);

•

an annual five-year Navy shipbuilding plan that shows planned annual
procurement quantities for each type of ship being procured (see Appendix CD);
and

•

an annual 30-year Navy shipbuilding plan that shows annual procurement
quantities and projected Navy ship force levels over the next 30 years (see
Appendix D).

E).

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These information exhibits assist Congress in doing the following, among other things, in
reviewing and conducting oversight on Navy shipbuilding programs:
•

identifying and evaluating cost growth and schedule delays in the execution of
shipbuilding programs;

•

understanding the relationship between annual procurement rates and unit
procurement cost;

•

evaluating whether programs are achieving satisfactory production learning
curves over time;

•

evaluating whether proposed sequences of annual procurement quantities for
programs would be efficient to execute from an industrial standpoint;

•

evaluating stability in Navy shipbuilding planning by tracking year-to-year
changes in the five-year shipbuilding plan;

•

identifying potential financial and industrial-base linkages between shipbuilding
programs that are being funded in overlapping years;

•

identifying and evaluating Navy assumptions concerning service lives and
retirement dates for existing ships;

•

evaluating whether ship procurement needs are being pushed into the future,
potentially creating an expensive ship procurement “bow wave” in coming years;
and

•

understanding when the Navy will achieve its ship force level goals, and whether
the Navy will experience ship inventory shortfalls relative to those goals that
could affect the Navy’s ability to perform its missions in coming years.

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Although the Coast Guard and the Department of Homeland Security submit substantial budgetrelated information to Congress each year, Congress lacks ready access to the five sources of
detailed program information listed above:
•

Although the Coast Guard’s annual budget submission includes a budgetjustification book,7480 the entries in that book for the Coast Guard’s ship
procurement programs do not present information as detailed and structured as
that presented in the P-40, P-5, and P-27 exhibits.

•

Reports on Coast Guard programs equivalent to DOD’s SAR reports are not
readily available to Congress.

•

The Coast Guard’s POR is a statement of desired procurement quantities for
certain procurement programs, but not a concise statement of the Coast Guard’s
overall ship force structure objective, which would take into account continued
service of existing ships that are not in need of immediate replacement.

•

The Coast Guard’s five-year capital investment plan shows annual funding
amounts for individual programs, but not annual procurement quantities, and


80

For the FY2013 budget, this is Department of Homeland Security, United States Coast Guard, Fiscal Year 2012
Congressional Justification, 400 pp.

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annual procurement quantities are not always easy to discern from annual
funding amounts.


•

The Coast Guard’s budget submission does not include an equivalent of the
Navy’s 30-year shipbuilding plan.

A lack of ready access to these five sources of detailed program information can make it more
difficult for Congress to conduct similar evaluations of Coast Guard programs. As a consequence,
programs might, for example, be more likely to be reviewed over shorter time horizons, or in
isolation from one another.
A potential issue for Congress is whether to require the Coast Guard and the Department of
Homeland Security to provide equivalents to some or all of the five information sources listed
above. Opponents of this option might argue that the Coast Guard and DHS already provide
substantial budget-justification information to Congress, and that preparing Coast Guard
equivalents to some or all of these five information sources would be an expensive and timeconsuming proposition. Supporters of this option might argue that the cost of preparing and
submitting this information would be small relative to the combined total acquisition cost the
NSC, OPC, and FRC programs, and that information of this kind has proven to be of value in
supporting congressional review and oversight of Navy shipbuilding programs.

Legislative Activity for FY2013
Summary of Appropriations Action on FY2013 Funding Request
Table 9 summarizes congressional appropriations action on the Coast Guard’s FY2013 requests
for acquisition funding for the NSC, OPC, and FRC programs.
74

For the FY2013 budget, this is Department of Homeland Security, United States Coast Guard, Fiscal Year 2012
Congressional Justification, 400 pp.

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Table 9. FY2013 Congressional Appropriations Action
Figure in millions of dollars, rounded to nearest tenth
Request

House

Senate

NSC

683.0a

656.5

722.3

OPC

30.0

25.0

30.0

FRC

139.0b

224.0

335.0

Conference

Sources: FY2013 Coast Guard budget submission; H.Rept. 112-492 of May 23, 2012; S.Rept. 112-169 of May 22,
2012.
a.

Includes $658 million to complete acquisition funding for the sixth NSC, and $25 million in post-production
activities for the fourth NSC.

b.

The Coast Guard’s FY2013 budget proposes to shift an additional $95 million in FY2012 funding to FY2013,
resulting in a total of $234 million available to the FRC program in FY2013.

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FY2013 Department of Homeland Security Appropriations Act
(H.R. 5855/S. 3216)
House
H.R. 5855 as reported by the House Appropriations Committee (H.Rept. 112-492 of May 23,
2012) states that $66.0 million of the funding provided for the Coast Guard’s Acquisition,
Construction, and Improvements (AC&I) account “shall be immediately apportioned for contract
for long lead-time materials, components, and designs for the seventh National Security Cutter
notwithstanding the availability of funds for production costs or post-production costs.... ”
Section 516 of the bill as reported states:
Sec. 516. Any funds appropriated to Coast Guard `Acquisition, Construction, and
Improvements’ for fiscal years 2002, 2003, 2004, 2005, and 2006 for the 110-123 foot patrol
boat conversion that are recovered, collected, or otherwise received as the result of
negotiation, mediation, or litigation, shall be available until expended for the Fast Response
Cutter program.

Section 550 states:
Sec. 550. Notwithstanding Office of Management and Budget Circular A-11, in a budget
submission of the Coast Guard for Department of Homeland Security, Coast Guard,
`Acquisition, Construction, and Improvements’ for fiscal year 2014 or any fiscal year
thereafter, costs related to the construction or conversion of a cutter shall be requested in
accordance with the following guidelines:
(1) Costs of outfitting and post-delivery activities and spare or repair parts shall be requested
not earlier than for the first fiscal year in which it is necessary to incur such costs to maintain
a planned production schedule, which may be subsequent to the fiscal year for which cutter
end costs are requested.
(2) Costs of long lead time items shall be requested for the fiscal year in which it is necessary
to incur such costs to maintain a planned production schedule, which may be in advance of
the fiscal year for which cutter end costs are requested.

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(3) Costs of program management shall be requested for each fiscal year, for the portion of
program management costs attributable to such fiscal year.
(4) For purposes of the preceding paragraphs—
(A) the term `long lead time items’ means components, parts, material, or effort with
significantly longer lead times than other elements of an end item;
(B) the term `outfitting’ means procurement or installation of on board repair parts, other
secondary items, equipage, and recreation items; precommissioning crew support; general
use consumables furnished to the shipbuilder; the fitting out activity to fill a vessel’s initial
allowances; and contractor-furnished spares;
(C) the term `post delivery activities’ includes design, planning, Government furnished
material, and related labor for Government-responsible defects and deficiencies identified
during builders trials, acceptance trials, and testing during the post-delivery period; costs of


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all work required to correct defects or deficiencies identified during the post-delivery period;
and costs of all work required to correct trial card deficiencies on a vessel of a particular
class, as well as on subsequent vessels of that class (whether or not delivered) until the
corrective action for that cutter class is completed; and
(D) the term `cutter end costs’ includes the cost of construction or conversion of a vessel,
deferred work identified prior to vessel delivery, and, when unrelated to a specific fix,
normal changes authorized prior to completion of fitting out, advanced planning, and travel.

Regarding Section 550, H.Rept. 112-492 states:
FULL FUNDING
The Committee includes a new general provision [Section 550] to address the lack of clarity
in certain programs with respect to budgeting for long lead-time materials, end items,
outfitting, post-delivery activities, spares, program management, and contract closeout.
Acquisition programs within the AC&I appropriation have previously been required to
comply with an interpretation of OMB Circular A-11 that forces the Coast Guard to request
funding for activities that will not occur until years in the future. A current example of this
issue is the Coast Guard’s request for fiscal year 2013 that includes funding for post-delivery
activities of the sixth National Security Cutter that will not occur until fiscal year 2019. This
creates significant backlog, prevents acquisition of other capabilities, and is an ineffective
use of taxpayer funds.
While the Committee agrees that items should be fully funded, the requirement to fully fund
an end item to include outfitting, post-delivery activities, spares, and program management
in the same fiscal year as the initial procurement creates a carry-over of funds from one fiscal
year to another for items that are actually severable from the initial end item. Further, the
denial of the ability to budget for long lead-time material for large, complex end items such
as the National Security Cutter (NSC) creates further budget pressures in a significantly
constrained fiscal environment. The requirement to “fully fund” the sixth NSC consumes
over fifty percent of the Coast Guards fiscal year 2013 AC&I request.
It is disconcerting that DHS follows this overly conservative and costly requirement, unlike
other Federal Departments. For example, the Department of Defense is allowed to budget for
advance procurement of items prior to procurement, and then budgets for outfitting, postdelivery activities, and spares at the time of need or a lead-time away from need (i.e., the
appropriate fiscal year) as stipulated in the DoD Financial Management Regulation (Volume
2A, Chapter 1). Further evidence of this disparity is how the Department of the Navy

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requests funds for the CVN 79 within the Carrier Replacement Program. The program
initiated advance procurement for CVN 79 in fiscal year 2008 and continued advance
procurement funding through fiscal year 2012. The Navy’s request for fiscal year 2013
initiates the actual procurement with plans to spread the procurement over six years. Only
after delivery will the Navy request funds for post-delivery activities and initial spares.
However, the Coast Guard is not permitted to budget in this manner.
The Committee includes a general provision that specifically addresses these issues by
defining long lead-time material, outfitting, post-delivery activities, spares, and program
management. Further, the provision explicitly states that these activities shall be funded in
the fiscal year that corresponds to the time of need or a leadtime away from need.
Future budget submissions for the AC&I appropriations shall include funding for end items
that correspond to the need to contract for the item, to include the budgeting for long leadtime materials, as required. Further, the Committee directs that the Coast Guard comply with


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this new general provision of this Act with respect to budgeting for post-delivery, outfitting,
spares, and program management. (Pages 86-87)

The report also states:
NATIONAL SECURITY CUTTER
The Committee recommends $656,500,000 for the National Security Cutter program, a
decrease of $26,500,000 from the request and $579,500,000 above the amount provided in
fiscal year 2012. The recommendation includes a decrease of $17,000,000 for contract
savings associated with the long lead-time material contract for sixth NSC. The
recommendation complies with the new general provision in title V of this bill with respect
to full funding and, accordingly, reduces funding for post-delivery activities and program
management that are requested ahead of need. The recommendation also rescinds funds in
title V of this bill for post-delivery activities for the fourth and fifth NSC for the same
reasons.
The Committee recommends $66,000,000 for long lead-time material for the seventh NSC.
Initiating procurement of the seventh NSC is a low-risk option with known, fixed costs that
provides a greater capability today instead of waiting years for a future program to evolve.
The arguments proffered by the Administration to explain their failure to request this needed
funding are without merit. This cavalier approach will result in higher costs and an undue
delay of critical operational capabilities.
FAST RESPONSE CUTTER
The Committee recommends $224,000,000 for the acquisition of four Fast Response Cutters
(FRCs), $85,000,000 above the amount requested and $134,000,000 below the amount
provided in fiscal year 2012.
The fiscal year 2013 budget request included only two FRCs and proposed a restructure of
the funds provided in fiscal year 2012. In the P.L. 112-74, Congress provided funding for six
FRCs, the contract’s maximum sustaining rate, in order to accrue $30,000,000 in savings due
to economy of scale. The Coast Guard has now proposed in its fiscal year 2013 request to
only contract for four cutters in fiscal year 2012 and then place the remaining two fiscal year
2012 cutters on contract in fiscal year 2013 to have a combined buy of four FRCs in fiscal
year 2013, as four cutters is the minimum contract.

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This proposal by the Coast Guard not only squanders the savings from fiscal year 2012 but
also fiscal year 2013. This represents almost $60,000,000 in savings that will not be realized
while delaying the delivery of much needed capability.
The recommendation addresses these concerns by providing $95,000,000 above the budget
proposal for two additional FRCs. The recommendation also includes a reduction of
$10,000,000 for carry over. The Committee will continue to work with the Coast Guard to
ensure that the FRC program is properly funded in order to place all six FRC’s funded by
Congress in fiscal year 2012 on contract in that fiscal year.
OFFSHORE PATROL CUTTER
The Committee recommends $25,000,000 for the Offshore Patrol Cutter (OPC), $5,000,000
below the request and the same as the amount provided in fiscal year 2012. The
recommendation also includes a rescission of $50,000,000 from funds previously provided in
fiscal years 2011 and 2012.


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In fiscal year 2011, the Coast Guard requested and was appropriated $45,000,000 to support
the award and evaluation of a Preliminary and Contract Design (P&CD) contract. Again, in
fiscal year 2012, the Coast Guard requested and was appropriated an additional $25,000,000
to support the award and evaluation of a P&CD contact. In the fiscal year 2013, the Coast
Guard has again requested funding to support the award and evaluation of a P&CD contract.
To date, none of the funds appropriated for a P&CD contract have been obligated, creating
carry over in excess of $60,000,000.
The Coast Guard has stated that its plans to obligate significant funds on up to three P&CD
contracts to include the contract design option in fiscal year 2013. However, the Committee
is concerned that these actions are contrary to the Project Life Cycle Cost Estimate (PLCCE)
that was signed on March 1, 2012 and the draft Phase I Statement of Work (SOW) released
on March 14, 2012 and may result in a rush to judgment. The PLCCE explicitly states that
the acquisition strategy for OPC includes awarding multiple P&CD contracts, with
preliminary design efforts awarded in fiscal year 2013 and an option for contract design
efforts in fiscal year 2014. The draft Phase I SOW notes that Preliminary Design and
Contract Design are distinct efforts with Preliminary Design culminating with a Preliminary
Design Review (PDR). The Committee concurs with this strategy to obligate funds only for
the Preliminary Design option and only after review of the work that is required under that
portion of the contract and PDR is completed, to execute an option for the Contract Design.
This provides the Coast Guard the opportunity to down select after completion of
Preliminary Design, if needed. This type of strategy is similar to the competitive prototyping
that is statutorily required for all Department of Defense acquisitions as a part of the Weapon
Systems Acquisition Reform Act of 2009 (P.L. 111-23).
Accordingly, the Committee denies part of the request in fiscal year 2013 and rescinds
$50,000,000 from prior years based on significant carry over and the inability of the Coast
Guard to fully articulate an acquisition strategy that aligns with the PLCCE. The critical need
for a replacement of the legacy Medium Endurance Cutters cannot be denied and that need
grows more each year. However, a cautious acquisition strategy is also needed so that the
acquisition failures, as seen in other programs, do not delay even further a new and much
needed capability. (Pages 88-89)

The report also states:

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REVISED BUDGET JUSTIFICATION
The Coast Guard shall include a detailed budget justification for each PPA [program, project,
and activity] in [the] AC&I [account] for which funding is requested, or funding available
from prior years. In the fiscal year 2013 budget request, the Coast Guard failed to provide
program justification for numerous programs that have outstanding balances of funds
previously appropriated but unobligated. This practice of not including sufficiently detailed
justification needlessly hinders oversight by this Committee into how taxpayer funds are
being executed.
Further, the budget justification aircraft and vessels for fiscal year 2014 shall include detailed
cost information consistent with the appropriate work breakdown structure elements for the
program and standardized for similar type systems such as aircraft and vessels. The
breakdown shall include the following: per unit cost and associated quantity; antecedent
liability; long lead-time material; warranty; supply support; training; economic price
adjustment; survey, design and engineering; project management; post-delivery activities,
spares and other categories, as needed. The information shall include all fiscal years from
prior years through to complete years for relevant categories.


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The budget justification for programs that are conversions or sustainment shall provide
similar data. Additionally, the justification shall include types of modifications, quantity of
kits and planned installation schedule of modification kits.
The budget justification for Program Oversight and Management, System Engineering and
Integration and C4ISR shall provide a breakout of funding by asset.
Additionally, the budget justification shall provide procurement history and planning for the
prior year, current year and budget year to include quantity and unit cost, contracting office
location, contractor, contract method/type, award date, date of first delivery, and the
availability of technical date package.
The Coast Guard is strongly encouraged to work with the Committee prior to the submission
of the fiscal year 2014 budget request to clarify the types of information required in
Congressional budget justification materials. (Pages 85-86)

The report also states:
CARRY OVER
The Coast Guard has numerous examples within the history of the AC&I appropriation of
requests for funding for assets or programs that will not obligate until future fiscal years.
While there are some cases where such forward funding may be required to meet antecedent
liabilities or other contractual requirements that mandate funding be available even though it
will not immediately obligate, in many cases, it is the result of insufficient planning resulting
in poor budgeting.
As budgets continue to tighten, the Committee cannot allow funds to sit idly for multiple
fiscal years. To address this issue, the recommendation includes reductions due to carry over
from the National Security Cutter program, the Fast Response Cutter program, Program
Management, and Systems Engineering and Integration. Further, the recommendation
includes rescissions to prior year appropriations of languishing carry-over.
In future budgets, the Coast Guard shall request funding programs, assets, modifications, and
installs that it will execute in the budget request year. Specifically, the budgeting of

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acquisition items shall be on a time-phased “lead-time away” or “need to commit” basis in
order to avoid accumulation of excessive carry-over. This includes the purchase of
modification kits prior to the input of aircraft into a depot or the funding of an installation
prior to the fiscal year of such install. (Page 87)

Senate
S. 3216 as reported by the Senate Appropriations Committee (S.Rept. 112-492 of May 23, 2012)
provides funding for the Coast Guard’s Acquisition, Construction, and Improvements (AC&I)
account, “Provided, That the funds provided by this Act shall be immediately available and
allotted to contract for the production of the sixth National Security Cutter notwithstanding the
availability of funds for post-production costs: Provided further, That the funds provided by this
Act shall be immediately available and allotted to contract for long lead time materials,
components, and designs for the seventh National Security Cutter notwithstanding the availability
of funds for production costs or post-production costs:.... ”
Section 516 of the bill as reported states:


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Sec. 516. Any funds appropriated to Coast Guard `Acquisition, Construction, and
Improvements’ for fiscal years 2002, 2003, 2004, 2005, and 2006 for the 110-123 foot patrol
boat conversion that are recovered, collected, or otherwise received as the result of
negotiation, mediation, or litigation, shall be available until expended for the Fast Response
Cutter program.

S.Rept. 112-169 states:
NATIONAL SECURITY CUTTER
The Coast Guard operates a fleet of 378-foot High Endurance Cutters [HECs] that are over
43 years old on average, and are increasingly unreliable and expensive to maintain. By
comparison, the average Navy ship is 20 years old. The Coast Guard’s program of record is
to acquire 8 National Security Cutters [NSCs] to replace 12 HECs (of which 3 have been
decommissioned with the arrival of the first 3 NSCs). To date, approximately
$3,199,000,000 has been appropriated for five NSCs and long lead time materials [LLTM]
for NSC–6. Three NSCs have been delivered to the Coast Guard, the fourth is expected to be
delivered in fiscal year 2014, and the fifth in fiscal year 2016.
NSC–1 [USCGC Bertholf] has already achieved several operational successes, including the
seizure of 1,300 kilograms of contraband with an estimated street value of $61,000,000
during its October-December 2011 patrol. During its first patrol in 2011, NSC–2 [USCGC
Waesche] seized 938 kilograms of contraband with an estimated street value of $24,800,000.
As noted in prior years, the Committee strongly supports the procurement of one National
Security Cutter per year until all eight planned ships are procured. The continuation of
production without a break will ensure that these ships, which are vital to the Coast Guard’s
mission, are procured at the lowest cost, and that they enter the Coast Guard fleet as soon as
possible. The Committee is concerned that the administration’s current acquisition policy
requires the Coast Guard to attain total acquisition cost for a vessel, including long lead time
materials, production costs, and post-production costs, before a production contract can be
awarded. This has the potential to create shipbuilding inefficiencies, force delayed obligation
of production funds, and require postproduction funds far in advance of when they will be
used. The budget request to rescind and reappropriate $25,000,000 previously appropriated
for NSC–4 post-production costs is evidence that this policy is misguided. The Department

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should be in a position to acquire NSCs in the most efficient manner within the guidelines of
strict governance measures. Therefore, the Committee includes language in the bill
specifying that funds made available by this act shall be available to contract for long lead
time materials for Coast Guard vessels, notwithstanding the availability of funds for
production costs or post-production costs.
For NSC–6, the Committee includes $13,300,000 for Segment 2 of LLTM, $15,700,000
below the request due to savings realized in the contract after the budget request was
formulated. The Committee recommendation also includes $557,000,000, as requested, for
production and $50,000,000 for post-production costs, $22,000,000 below the request due to
the fact that these funds are not necessary until fiscal years 2018 and 2019 and would expire
prior to obligation.
The request includes no funding in its outyear Capital Investment Plan for NSC–7 or NSC–8
despite the fact that the requirement for NSCs continues to be eight cutters. The
Administration’s request to zero out funding for the NSC is contrary to previous testimony
by the Secretary of Homeland Security and is inconsistent with testimony from the
Commandant before the Committee.


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Therefore, the recommendation includes $77,000,000 to acquire LLTM necessary for the
production of NSC–7. Finally, the recommendation includes $25,000,000 for postproduction costs for NSC–4 with a corresponding rescission of funds that are expected to
expire prior to obligation. This rescission is included in a general provision.
According to the Department, this will accelerate the production schedule for the cutter and
result in direct savings of approximately $40,000,000 compared to delaying long lead
acquisition to fiscal year 2014.
FAST RESPONSE CUTTER
The Committee recommends $335,000,000 for the Coast Guard’s Fast Response Cutter
[FRC], $196,000,000 above the request for a total of six cutters instead of two cutters. This
funding will allow the Coast Guard to acquire FRC hulls (19–24). Procuring six Fast
Response Cutters in fiscal year 2013 will maximize the production line and generate cost
savings of $5,000,000 per hull for a total savings to the taxpayers of $30,000,000. Funding
six boats instead of four will also allow the Coast Guard to advance the replacement of aging
110-foot Island Class Patrol Boats already beyond the end of their projected service life and
expensive to maintain.
The Coast Guard is currently operating with a shortfall of 25,075 hours (25 percent) below
its 1998 baseline of required patrol hours. Each FRC will provide 2,500 annual operating
hours and an improved sea keeping ability, resulting in better habitability and full-mission
capability in higher sea states....
OFFSHORE PATROL CUTTER
The recommendation includes $30,000,000 for the Offshore Patrol Cutter [OPC], as
requested. Funding is provided for pre-acquisition activities. The Coast Guard expects to
release a preliminary contract design “request for proposal” by the end of fiscal year 2012
with a contract award expected in fiscal year 2013. A final detailed design and construction
award is expected in fiscal year 2016.
The OPC’s initial capabilities to control and direct aircraft as well as execute interdiction
missions should, to the greatest extent feasible, be equivalent to that of the NSC to facilitate
maximum savings to the Federal Government, rather than being deferred to future upgrades

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that add to total cost of ownership. The Committee urges the Coast Guard to maximize, to
the greatest extent practicable, such systems commonality between the OPC and the NSC to
reduce total acquisition cost and life-cycle costs facilitated by savings in life-cycle logistics
management, integration costs, and personnel training efficiencies. (Pages 85-87; material in
brackets as in original)

The report also states:
PROGRAM OF RECORD
The Coast Guard’s Program of Record [POR] was developed based on mission requirements
established in its 2004 Deepwater Mission Need Statement [MNS]. The 2004 MNS
examined the Coast Guard’s maritime role post-September 11, 2001, gaps in requirements,
and capabilities necessary to carry out its responsibilities. The POR includes the assets and
acquisitions necessary to meet the requirements of the 2004 MNS and has guided the Coast
Guard as it recapitalizes its fleet of aging ships and aircraft. For instance, the POR includes a
requirement of eight National Security Cutters, 25 Offshore Patrol Cutters, 58 Fast Response
Cutters, 36 Maritime Patrol Aircraft, new communications systems across the fleet, and
upgrades to several legacy cutters and aircraft. In recent years, questions have been raised


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about the ability to achieve this mix of assets in terms of cost and schedule within budget
constraints, including those in the Budget Control Act of 2011. Most recent estimates
indicate the POR could cost as much as $29,300,000,000 to complete by 2031. While the
Committee does not believe that Coast Guard requirements should be modified to meet an
arbitrary spending topline, the Committee expects the Coast Guard to be considering various
options within the POR if budget toplines make it unrealistic to achieve. Therefore, the
Secretary and the Commandant shall develop a working group of experts to examine
available studies on Coast Guard fleet requirements to identify various options that fit in
expected and realistic budget parameters. For the options identified, the analysis should
include cost, capability, quantity tradeoffs, and the overall impact to the Coast Guard’s
ability to carry out its many statutory mission requirements. The Department shall provide
the results of this analysis to the Committee no later than 180 days after the date of
enactment of this act. (Pages 84-85; material in brackets as in original)

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Appendix A. 47

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Appendix A. Findings and Recommendations of
DHS Cutter Study
This appendix reprints the findings and recommendations of the August 2011 DHS Cutter study.
They are as follows:
Findings
These are our major findings:
•

Replacing some NSCs with OPCs has a small, positive impact on OpEff
[operational effectiveness]. Differences are on the order of 5 percent from POR [the
program of record] and scale with the difference in cutter availability.

•

Replacing all OPCs with mod-270 has a significant positive impact on OpEff. It
increases drug interdiction by roughly 20 percent over POR. The increase in
performance is much less than the increase in cutters. Performance in missions other
than counter-drug and in regions outside the southeast is comparable to or slightly below
POR.

•

Replacing OPCs with LCSs reduces OpEff significantly. Given that LCS acquisition
cost will be at least as much as OPC, we cannot construct a cost-effective way to use
LCS to increase UCSG mission performance.

•

Moving away from POR adds uncertainty. Reducing the number of NSCs may limit
USCG ability to support defense operations (DEFOPS), and switching to a mod-270
[cutter design] creates a fleet that has trouble operating in poor weather.

•

Long-term total ownership cost is similar for all excursions. Group B [alternative
fleets 4, 5, and 6] is most expensive, due to higher personnel costs.

•

Updated or changed assumptions could change OpEff significantly. More efficient
patrol patterns could increase POR OpEff by 5 percentage points at no cost, while a
potential “mid-capability” OPC could narrow the OpEff gap between group B and POR
by another 5 percentage points. With both changes, group A [alternative fleets 1, 2, and
3] and group B should have about equal OpEff.

Recommendations
Based on our findings, we make the following recommendations.
•

USCG should quantify the DEFOPS requirement to assess the impact of reducing
NSC numbers. A 2.0 NSC presence will be difficult to support with only 5 NSC if they
are also supporting other missions.

•

DHS PA&E should work with USCG to quantify distant, poor-weather operating
areas to inform or mitigate the limitations of the mod-270. Additional NSCs could
offset some of the range and seakeeping deficiencies of the mod-270. Further study is
necessary to see if it would be cost-effective.

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•

DHS PA&E should explore additional fleet mix options. Cost data should be updated
as new information becomes available to confirm that the modeled excursions are still
feasible. New options, such as a “mid-capability” OPC could improve fleet OpEff or
decrease cost.

•

USCG should optimize its cutter basing and CONOPS. Choosing cutter homeports
and operating patterns to maximize on-station patrol time will get the most out of a costlimited fleet.

•

DHS PA&E should commission a similar study for aircraft. This study did not
consider changes in aviation, which could have significant impact on performance.
There may be opportunities to trade off air and surface assets to maximize total OpEff.

•

DHS PA&E should track long-term acquisition profiles and recapitalization
priorities. The multi-year spending profile for cutter acquisition has periods of
significantly higher- and lower-than-average expenditure, which could have significant
interplay with other DHS acquisition priorities.81

81

Alarik Fritz, Raymond Gelhaus, and Kent Nordstrom, Options for the Future USCG Cutter Fleet, Performance
Trade-Offs with Fixed Acquisition Cost, IPR 14297, August 2011, pp. 2-3.

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Appendix B. P-5, P-40, and P-27 Data Exhibits for
Littoral Combat Ship (LCS) Program
This appendix presents the Budget Item Justification Sheet (Exhibit P-40), Weapon System Cost
Analysis sheet (Exhibit P-5), and Ship Production Schedule (Exhibit P-27) for the Navy’s Littoral
Combat Ship (LCS) program, as examples of the kind of information that is available each year to
support congressional review and oversight of Navy shipbuilding programs.

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Figure AB-1. Budget Item Justification Sheet (Exhibit P-40)
For Navy Littoral Combat Ship (LCS) Program

Source: Department of the Navy Fiscal Year (FY) 2013 Justification of Estimates, Shipbuilding and Conversion, Navy, February 2012, p. 11-1 (pdf page 156 of 246).

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Figure AB-2. Weapon System Cost Analysis Sheet (Exhibit P-5)
For Navy Littoral Combat Ship (LCS) Program

Source: Department of the Navy Fiscal Year (FY) 2013 Justification of Estimates, Shipbuilding and Conversion, Navy, February 2012, p. 11-2 (pdf page 157 of 246).

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Figure AB-3. Ship Production Schedule (Exhibit P-27)
For Navy Littoral Combat Ship (LCS) Program

Source: Department of the Navy Fiscal Year (FY) 2013 Justification of Estimates, Shipbuilding and Conversion, Navy, February 2012, p. 11-2 (pdf page 159 of 246).

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Appendix BC. Navy Ship Force Structure Objective
Table BC-1 presents the Navy’s current ship force structure objective.
Table BC-1. Navy Ship Force Structure Goal
Ship type

Force Structure
Objective

Ballistic missile submarines (SSBNs)

12-14

Cruise missile submarines (SSGNs)

0-4

Attack submarines (SSNs)

~48

Aircraft carriers

11

Cruisers and destroyers

~90

Littoral Combat Ships (LCSs)

~55

Amphibious ships

~32

Combat logistics (resupply) ships

~29

Joint High Speed Vessels (JHSVs)

10

Other (includes support ships)
Total battle force ships

~23
~310-316

Sources: FY2013 Navy 30-year (FY2013-FY2042) shipbuilding plan.
Note: The “~” symbol means approximately and signals that the number in question may be refined as a result
of a Naval Force Structure Assessment currently in progress.

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Appendix CD. Navy FY2013 Five-Year
Shipbuilding Plan
Table CD-1 presents the Navy’s FY2013 five-year (FY2013-FY2017) shipbuilding plan.
Table CD-1. Navy FY2013 Five-Year (FY2013-FY2017) Shipbuilding Plan
(Battle force ships—i.e., ships that count against 310-316 ship goal)
Ship type

FY13

FY14

FY15

FY16

FY17

Total

Ford (CVN-78) class aircraft carrier

1

1

Virginia (SSN-774) class attack submarine

2

1

2

2

2

9

Arleigh Burke (DDG-51) class destroyer

2

1

2

2

2

9

Littoral Combat Ship (LCS)

4

4

4

2

2

16

1

1

LHA(R) amphibious assault ship
Fleet tug (TATF)

2

Mobile Landing Platform (MLP)/Afloat Forward
Staging Base (AFSB)
Joint High Speed Vessel (JHSV)

1

1

1

1

TAO(X) oiler
TOTAL

2

1
10

7

8

9

1
7

41

Source: FY2013 Navy budget submission.
Notes: The MLP/AFSB is a variant of the MLP with additional features permitting it to serve in the role of an
AFSB.

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Appendix DE. Navy FY2013 30-Year
Shipbuilding Plan
Table DE-1 shows the Navy’s proposed FY2013 30-year (FY2013-FY2042) shipbuilding plan.
Table DE-1. Navy FY2013 30-Year (FY2013-FY2042) Shipbuilding Plan
FY
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42

CVN
1

1

1

1

1

1

LSC
2
1
2
2
2
2
2
2
2
2
3
2
3
2
3
2
3
2
2
2
2
2
2
3
3
3
3
3
3
3

SSC
4
4
4
2
2
3
3
3
3
3
3
3
3
3

1
1
1
1
2
3
4
4
4
4
2

SSN
2
1
2
2
2
2
2
3
2
3
2
1
2
1
1
1
1
1
1
1
1
1
1
1
1
2
1
2
1
2

SSBN

AWS

1
1
1
1
1
1

2

1
1
1
1
1
1
1
1
1
1

1
2
1
1
1
2

1

2
1

CLF

Supt
1
1

1

2

1

1
1
2

1
1
1
1
1
1
1
1
1
1
1
1
1
1
1

2
3
2
1

1
1
2
2
3
2
2

Total
10
7
8
9
7
11
8
12
9
12
13
12
10
9
6
9
8
9
8
11
8
8
5
7
7
10
8
11
8
8

Source: FY2013 30-year (FY2013-FY2042) shipbuilding plan.
Key: FY = Fiscal Year; CVN = aircraft carriers; LSC = surface combatants (i.e., cruisers and destroyers); SSC
= small surface combatants (i.e., Littoral Combat Ships [LCSs]); SSN = attack submarines; SSGN = cruise
missile submarines; SSBN = ballistic missile submarines; AWS = amphibious warfare ships; CLF = combat
logistics force (i.e., resupply) ships; Supt = support ships.

Table DE-2 shows the Navy’s projection of force levels for FY2013-FY2042 that would result
from implementing the FY2013 30-year (FY2013-FY2042) shipbuilding plan shown in Table
DE-1.

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Table DE-2. Projected Force Levels Resulting from FY2013 30-Year (FY2013-FY2042)
Shipbuilding Plan
CVN

LSC

SSC

SSN

SSGN

SSBN

AWS

CLF

Supt

Total

310-316 ship plan

11

~90

~55

~48

0-4

12-14

~32

~29

~33

~310-316

FY13

10

80

35

55

4

14

31

32

24

285

FY14

10

78

30

55

4

14

29

32

27

279

FY15

11

78

26

54

4

14

28

31

30

276

FY16

11

80

30

53

4

14

29

31

32

284

FY17

11

82

32

50

4

14

30

29

33

285

FY18

11

84

35

51

4

14

31

29

33

292

FY19

11

86

39

51

4

14

31

29

35

300

FY20

11

87

37

48

4

14

31

29

34

295

FY21

11

88

38

48

4

14

31

29

33

296

FY22

12

87

40

47

4

14

32

29

33

298

FY23

11

89

39

47

4

14

32

29

35

300

FY24

11

89

41

46

4

14

34

29

35

303

FY25

11

88

43

45

4

14

34

29

33

301

FY26

11

89

46

45

2

14

34

29

32

302

FY27

12

90

49

44

1

13

33

29

33

304

FY28

11

89

52

43

0

12

34

29

33

303

FY29

11

87

55

43

0

11

33

29

33

302

FY30

11

85

55

43

0

11

33

29

33

300

FY31

11

81

55

45

0

11

32

29

33

297

FY32

11

80

55

45

0

10

32

29

33

295

FY33

11

79

55

46

0

10

33

29

33

296

FY34

11

78

55

47

0

10

34

29

33

297

FY35

11

80

55

48

0

10

33

29

33

299

FY36

11

82

55

49

0

10

33

29

33

302

FY37

11

84

55

50

0

10

33

29

33

305

FY38

11

86

55

48

0

10

32

29

34

305

FY39

11

88

55

49

0

10

32

29

33

307

FY40

10

88

55

49

0

10

31

29

33

305

FY41

10

89

55

48

0

11

32

29

33

307

FY42

10

88

55

49

0

12

31

29

33

307

Source: FY2013 30-year (FY2013-FY2042) shipbuilding plan.
Note: Figures for support ships include five JHSVs transferred from the Army to the Navy and operated by the
Navy primarily for the performance of Army missions.
Key: FY = Fiscal Year; CVN = aircraft carriers; LSC = surface combatants (i.e., cruisers and destroyers); SSC
= small surface combatants (i.e., frigates, Littoral Combat Ships [LCSs], and mine warfare ships); SSN = attack
submarines; SSGN = cruise missile submarines; SSBN = ballistic missile submarines; AWS = amphibious
warfare ships; CLF = combat logistics force (i.e., resupply) ships; Supt = support ships.

Congressional Research Service

5057

 Coast Guard Cutter Procurement: Background and Issues for Congress

Author Contact Information
Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610

Congressional Research Service

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