Order Code RS21019
Updated April 1, 2005
CRS Report for Congress
Received through the CRS Web
Coast Guard Deepwater Program:
Background and Issues for Congress
Ronald O’Rourke
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division
Summary
The Deepwater program is a 20- to 25-year acquisition effort to replace or
modernize 93 aging Coast Guard ships and 207 aging Coast Guard aircraft. The
program’s estimated total acquisition cost is $19 billion to $24 billion. On March 25,
2005 the Coast Guard submitted to Congress a revised implementation plan for the
program that alters the planned capabilities and numbers of Deepwater assets and the
schedule for acquiring or modernizing them. Some Members of Congress have
criticized the revised implementation plan. The Coast Guard’s proposed FY2006 budget
requests $966 million for the program. This report will be updated as events warrant.
Background1
Introduction. The Coast Guard Deepwater program, known formally as the
Integrated Deepwater Systems (IDS) program, is a project to replace and modernize the
Coast Guard’s aging fleet of deepwater-capable cutters, patrol boats and aircraft. It is the
largest and most complex acquisition program in Coast Guard history. The issue for
Congress is whether to approve, reject, or modify the Administration’s funding requests
and overall approach for the program. Congress’ decisions on this issue could affect
Coast Guard capabilities, Coast Guard funding requirements, and the U.S. shipbuilding
and aircraft industry.
Deepwater Missions. The Coast Guard performs a variety of missions in the
deepwater environment (which generally means waters more than 50 miles from shore),
including the following: drug interdiction, alien migrant interdiction, fisheries
enforcement, search and rescue, the International Ice Patrol in northern waters; overseas
maritime intercept (sanctions-enforcement) operations, overseas port security and defense,
overseas peacetime military engagement; general defense operations in conjunction with
the Navy; marine pollution law enforcement, enforcement of lightering (i.e., at-sea cargo-
transfer) zones, and overseas inspection of foreign vessels entering U.S. ports.
1 For additional background information on the Deepwater program, see the program’s Internet
page at [http://www.uscg.mil/deepwater/].
Congressional Research Service ˜ The Library of Congress

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Legacy Deepwater-Capable Assets. The Coast Guard’s “legacy” assets for
performing deepwater missions include 93 aging cutters and patrol boats and 207 aging
aircraft. Many of these ships and aircraft are expensive to operate (in part because the
cutters require large crews), increasingly expensive to maintain, technologically obsolete,
and in some cases poorly suited for performing today’s deepwater missions.
Deepwater Program Competition and Contract Award. On June 25, 2002,
the Coast Guard announced that an industry team led by Lockheed Martin and Northrop
Grumman’s Ship Systems division was the winner of the Deepwater competition and
awarded the team a $16.95-billion, 20-year contract. The contract included $11.04 billion
for the production of new ships, aircraft, and C4I equipment, and $5.91 billion for
operating, maintaining, and sustaining the new Deepwater fleet. The contract may be
extended up to 30 years, which would increase its value beyond $17 billion.
Systems to Be Procured or Modernized. On March 25, 2005, the Coast
Guard submitted to Congress a revised implementation plan for the Deepwater program
that alters the planned capabilities and numbers of Deepwater assets and the schedule for
acquiring or modernizing them. The revised implementation plan includes the acquisition
or modernization over a 20- to 25-year period of the following ships and aircraft:
Ships, boats, and surface craft:
! 6 to 8 new Large Maritime Security Cutters, or WMSLs (previously
called National Security Cutters, or NSCs), displacing about 4,000 tons
each (i.e., ships analogous to today’s high-endurance cutters);
! 25 new Medium Maritime Security Cutters, or WMSMs (previously called
Offshore Patrol Cutters, or OPCs), displacing about 3,200 tons each
(i.e., ships analogous to today’s medium-endurance cutters);
! 43 to 58 new Fast Response Cutters (FRCs) displacing 200 tons each;
! 31 to 33 Long Range Interceptor (LRI) craft displacing 15 tons each; and
! 74 to 91 Short Range Prosecutor (SRP) craft displacing 9 tons each.
Aircraft:
! 22 modernized HC-130H/J Long Range Search (LRS) aircraft;
! 20 to 36 new HC-235 Medium Range Search (MRS) aircraft, also known
as Maritime Patrol Aircraft (MPA), based on based on the European
Aeronautic Defence and Space Company (EADS) CASA HC-235
Persuader MPA aircraft design;
! 42 modernized HH-60J Medium Range Recovery (MRR) helicopters;
! 95 re-engined and modernized HH-65C Multi-Mission Cutter
Helicopters (MCHs);
! 45 new HV-911 Eagle Eye VTOL (vertical take-off or landing)
Unmanned Aerial Vehicles (VUAVs); and
! 4 leased RQ-4A Global Hawk High Altitude Endurance UAVs
(HAEUAVs).
Estimated Total Acquisition Cost and FY2006 Funding Request. The
Coast Guard estimates the total acquisition cost of the Deepwater program under the
revised implementation plan at $19 billion to $24 billion over 20 to 25 years. The Coast
Guard’s proposed FY2006 budget requests $966 million for the program. Among other

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things, the FY2006 request includes funding for production of the third WMSL, design
and acquisition of long-lead items for the first WMSM, initial operating capability of the
first FRC, 2 LRIs, C-130H upgrades, HH-60J upgrades, HH-65 re-enginings, and
production of the third VUAV.
Issues for Congress
Program Scope and Schedule. The Deepwater program as originally outlined
reflected a pre-9/11 analysis of the Coast Guard’s future mission requirements. As a
consequence, some observers argued that the Deepwater program would need to be
increased in scope to meet the Coast Guard’s post-9/11 mission requirements. A 2004
RAND Corporation report recommended substantially increasing the number of numbers
of cutters and aircraft to be acquired under the program.2 Other observers, including some
Members of Congress, argued that the original Deepwater program’s 20- to 22-year
acquisition schedule was economically inefficient and too leisurely to meet urgent post-
9/11 mission needs, and expressed interest in the idea of compressing the Deepwater
acquisition period to as few as 10 years.3
A potential key issue for Congress is whether the Coast Guard’s March 2005 revised
implementation plan, which is intended to reflect a post-9/11 analysis of future Coast
Guard mission requirements (as well as more up-to-date data on the pace at which legacy
Coast Guard assets are wearing out), is adequate in terms of program scope and schedule.
Rather than substantially increasing numbers of cutters and aircraft to be acquired to meet
the Coast Guard’s expanded post-9/11 mission demands, the revised implementation plan
increases the individual capability of the ships and aircraft while avoiding substantial
increases in quantity. In addition, while accelerating the planned acquisition of some
systems within the program, the revised implementation plan maintains the idea of
completing the program over a period of 20 or more years. Some Members of Congress
have criticized the revised implementation plan on the grounds that it does not provide
sufficient transparency, accountability, or predictability; that it increases funding to be
spent on modernizing legacy assets at the expense of acquiring new assets; and that it
2 John Birkler, et al. The U.S. Coast Guard’s Deepwater Force Modernization Plan: Can It Be
Accelerated? Will It Meet Changing Security Needs? RAND, National Security Research
Division, MG-114, 2004.
3 Coast Guard officials indicated that funding the Deepwater program in FY2005 at a level of
$1.1 billion would permit the Deepwater program to return to a 20-year schedule ending in 2022.
Continuing to fund the program at $1.1 billion per year, they indicated, would permit the program
to be completed in 14 years (i.e., by 2016). Section 888(i) of H.R. 5005/P.L. 107-296 directed
DHS to report to Congress on the idea of compressing the Deepwater program 20 years to 10
years. On March 12, 2003, the Coast Guard submitted the report, which concluded that
compressing the Deepwater acquisition period to 10 years was feasible, that it would increase
Deepwater acquisition costs over the five-year period FY2005-FY2011 by about $4.7 billion in
then-year dollars but reduce total Deepwater acquisition costs over the long run from $16.022
billion in then-year dollars to $11.473 billion in then-year dollars. (U.S. Coast Guard, Report to
Congress on the Feasibility of Accelerating the Integrated Deepwater System, 2003.)

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stretches the program out to as much as 25 years rather than compressing it to something
less than 20.4
Program Management. The Government Accountability Office (GAO) has long
expressed concerns about the Coast Guard’s ability to manage the Deepwater program.
On March 17, 2005, GAO testified that within the Coast Guard’s proposed FY2006
budget,
The Deepwater program, which would receive $966 million under the budget request,
appears to merit the most ongoing attention. GAO reviews of this program have
shown that the Coast Guard clearly needs new or upgraded assets, but the Coast
Guard’s contracting approach carries a number of inherent risks that, left unaddressed,
could lead to spiraling costs and slipped schedules. The Coast Guard is taking some
action in this regard, but GAO continues to regard this approach as carrying
substantial risk. Some expansion of cost and slippage in schedule has already
occurred.5
A March 2004 GAO report stated:
Over a year and a half into the Deepwater contract, the key components needed
to manage the program and oversee the system integrator’s performance have not been
effectively implemented. Integrated product teams, the Coast Guard’s primary tool for
overseeing the system integrator, have struggled to effectively collaborate and
accomplish their missions. They have been hampered by changing membership,
understaffing, insufficient training, and inadequate communication among members.
In addition, the Coast Guard has not adequately addressed the frequent turnover of
personnel in the program and the transition from existing to Deepwater assets.
The Coast Guard’s assessment of the system integrator’s performance in the first
year of the contract lacked rigor. For example, comments from the technical specialist
responsible for monitoring the design and delivery of ships were not included in the
evaluation scores. Further, the factors that formed the basis for the award fee
determination were unsupported by quantifiable metrics.... Further, the Coast Guard
has not yet begun to measure the system integrator’s performance on the three
overarching goals of the Deepwater program — operational effectiveness, total
ownership cost, and customer satisfaction. Its original plan of measuring progress on
an annual basis has slipped, and Coast Guard officials have not projected a time frame
for when they will be able to hold the contractor accountable for progress against
these goals....
4 See, for example, Kathy A. Gambrell, “Lawmakers Fault Changes In Coast Guard Acquisition
Program,” GovExec.com, March 30, 2005; Calvin Biesecker, “Collins, Lieberman Blast Revised
Deepwater Plan,” Defense Daily, March 30, 2005; Caitlin Harrington, “Senators Drop Anchor
on Coast guard’s Fleet Rebuilding Pace,” CQ Homeland Security, March 28, 2005; Dave Ahearn,
“Collins, Lieberman Flail DHS For Weak Support of Deepwater Program,” Defense Today
Instant Update, March 28, 2005.
5 U.S., Government Accountability Office, Coast Guard[:] Observations on Agency Priorities
in Fiscal Year 2006 Budget Request. Washington, 2005. (GAO-05-364T, Testimony Before the
Subcommittee on Fisheries and Coast Guard, Committee on Commerce, Science, and
Transportation, U.S. Senate, March 17, 2005.)

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Competition is critical to controlling costs in the Deepwater program and a
guiding principle of Department of Homeland Security acquisitions. Concerns about
the Coast Guard’s ability to rely on competition as a means to control future costs
contributed to GAO’s description of the Deepwater program in 2001 as “risky.”
Three years later, the Coast Guard has neither measured the extent of competition
among suppliers of Deepwater assets nor held the system integrator accountable for
taking steps to achieve competition. Deepwater’s acquisition structure is such that the
two first-tier subcontractors have sole responsibility for determining whether to hold
competitions for assets or to provide these assets themselves. The Coast Guard has
taken a hands-off approach to “make or buy” decisions made at the subcontractor
level. As a result, questions remain about whether the government will be able to
control costs.6
A June 2004 GAO report stated:
The degree to which the Deepwater program is on track with its original 2002
integrated acquisition schedule is difficult to determine because the Coast Guard has
not updated the schedule. Coast Guard officials said they have not updated it because
of the numerous changes Deepwater experiences every year and the cost, personnel,
and time involved. However, in similar acquisitions — those of the Department of
Defense (DOD) — cost, schedule, and performance updates are fundamental to
congressional oversight.... Updating the acquisition schedule... on a more timely basis
is imperative so that annual Coast Guard budget submissions can allow Congress to
base decisions on accurate information.... The additional $168 million [provided by
Congress] in fiscal year 2004, while allowing the Coast Guard to conduct a number
of Deepwater projects that had been delayed or would not have been funded in fiscal
year 2004, will not fully return the program to its original 2002 acquisition schedule.
Reasons include all work originally planned for fiscal year 2004 was not funded and
some will have to be delayed to fiscal year 2005; delivery of some assets has fallen
so far behind schedule that ensuring their original delivery dates is impossible; and
nonfunding reasons have caused delays, such as greater than expected hull corrosion
of patrol boats delaying length extension upgrades.7
A November 2004 report by the DHS Inspector General stated:
Maintaining the operational readiness of critical legacy assets is a major challenge to
the Coast Guard.... The Coast Guard estimates that sustaining its deteriorating legacy
assets will escalate to $145 million in fiscal year 2005, further challenging the Coast
Guard to rethink plans and schedules for maintaining or replacing legacy assets.
Revisiting maintenance, upgrade, and replacement decisions for legacy assets may
disrupt the Deepwater contractor’s plans and schedules and, therefore, could greatly
increase future program costs.8
6 U.S. General Accounting Office, Contract Management: Coast Guard’s Deepwater Program
Needs Increased Attention to Management and Contractor Oversight, GAO-04-380, Mar. 2004.
7 U.S. General Accounting Office, Coast Guard: Deepwater Program Acquisition Schedule
Update Needed, GAO-04-695, June 2004.
8 U.S. Department of Homeland Security, Office of Inspector General, Major Management
Challenges Facing The Department of Homeland Security, Washington, 2004, (November 1,
2004) p. 18.

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Industrial Base. Accelerating and expanding procurement of NSCs and OPCs is
an option for bolstering the industrial base that builds surface combatants for the Navy.9
Legislative Activity in 2004
Coast Guard and Maritime Transportation Act of 2004 (H.R. 2443/P.L.
108-293). The conference report (H.Rept. 108-617 of July 20, 2004) on H.R. 2443 (P.L.
108-293 of August 9, 2004), which was previously known as the Coast Guard
authorization bill, authorizes $1.1 billion for the Deepwater program (Section 101);
permits the Coast Guard to consult with the Office of Naval Research and other federal
agencies on innovative construction alternatives for the program (Section 222), and
requires a report on prime contractor performance and Coast Guard management of the
Deepwater program (Section 621). (See pages 3-4, 14, 36-37, 65-66, 75, and 92 of the
conference report.)
FY2005 DHS Appropriations Act (H.R. 4567/P.L. 108-334). The conference
report (H.Rept. 108-774 of October 9, 2004) on the FY2005 DHS appropriations bill
(H.R. 4567/P.L. 108-334 of October 18, 2004) provides $723.95 million for the
Deepwater program (page 10; see pages 57-58 for line-item details), provided
That the Secretary of Homeland Security shall submit to the Congress, in conjunction
with the President’s fiscal year 2006 budget, a new Deepwater baseline that identifies
revised acquisition timelines for each asset contained in the Deepwater program; a
timeline and detailed justification for each new asset that is determined to be
necessary to fulfill homeland and national security functions or multi-agency
procurements as identified by the Joint Requirements Council; a detailed description
of the revised mission requirements and their corresponding impact on the Deepwater
program’s acquisition timeline; and funding levels for each asset, whether new or
continuing: (Page 10; see also page 58.)
The report directs the Coast Guard to report to the appropriations committees within
30 days of enactment on its plans for maintaining its legacy assets, and to submit quarterly
reports to the committees on this plan beginning in FY2006 (page 58). The report also
directs DHS, in conjunction with the Coast Guard, to provide an analysis of options
concerning the Coast Guard’s existing force of deepwater-capable patrol boats (pages 59-
60).
9 For additional discussion of this issue, see CRS Report RS21059, Navy DD(X) and CG(X)
Programs: Background and Issues for Congress, by Ronald O’Rourke and CRS Report
RL32109, Navy DD(X), CG(X), and LCS Ship Acquisition Programs: Oversight Issues and
Options for Congress, by Ronald O’Rourke.

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