Order Code RS21019
Updated May 19, 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 Coast
Guard’s proposed FY2006 budget requests $966 million for the program. On March 25,
2005, the Coast Guard submitted to Congress a revised implementation plan for the
program. Some Members of Congress have criticized the plan on several grounds. On
May 17, 2005, the House passed, 424-1, H.R. 2360, the FY2006 Department of
Homeland Security (DHS) appropriations bill. The bill reduces the Deepwater funding
request to $500 million. 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 Integrated Coast Guard Systems (ICGS) — an industry
team led by Lockheed Martin and Northrop Grumman’s Ship Systems division — was
the winner of the Deepwater competition. IGCS was awarded a $16.95-billion, 20-year
contract. 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.
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 National Security Cutters, or NSCs (also called Large
Maritime Security Cutters, or WMSLs), displacing about 4,000 tons each
(i.e., ships analogous to today’s high-endurance cutters);
! 25 new Offshore Patrol Cutters, or OPCs (also called Medium Maritime
Security Cutters, or WMSMs), 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.

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Issues for Congress
Program Scope and Schedule. One potential 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 how quickly legacy Coast Guard assets are wearing out), is adequate in terms of
program scope and schedule. 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 have 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 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 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 on
multiple occasions expressed concerns about the Coast Guard’s ability to manage the
Deepwater program, in part because of the potential risks to the government of the
Deepwater acquisition strategy, under which an industry team (i.e., ICGS) acts as the lead
integrator for the entire project.5 A November 2004 report by the DHS Inspector General
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.)
4 See, for example, Kathy A. Gambrell, “Lawmakers Fault Changes In Coast Guard Acquisition
Program,” GovExec.com, Mar. 30, 2005; Calvin Biesecker, “Collins, Lieberman Blast Revised
Deepwater Plan,” Defense Daily, Mar. 30, 2005; Caitlin Harrington, “Senators Drop Anchor on
Coast Guard’s Fleet Rebuilding Pace,” CQ Homeland Security, Mar. 28, 2005; Dave Ahearn,
“Collins, Lieberman Flail DHS For Weak Support of Deepwater Program,” Defense Today
Instant Update, Mar. 28, 2005.
5 See Government Accountability Office, COAST GUARD[:] Preliminary Observations on the
Condition of Deepwater Legacy Assets and Acquisition Management Challenges, GAO-05-307T,
Apr. 20, 2005; Government Accountability Office, Coast Guard[:] Observations on Agency
Priorities in Fiscal Year 2006 Budget Request, GAO-05-364T, Mar. 2005; General Accounting
Office, Contract Management: Coast Guard’s Deepwater Program Needs Increased Attention
to Management and Contractor Oversight, GAO-04-380, Mar. 2004; and General Accounting
(continued...)

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also expressed concern for the program, particularly with regard to plans for maintaining
legacy deepwater-capable assets until they are replaced by new assets.6
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.7
Legislative Activity in 2005
H.R. 2360, FY2006 DHS Appropriations Bill. On May 17, 2005, the House
passed, 424-1, H.R. 2360, the FY2006 DHS appropriations bill. The bill reduces the
Deepwater funding request to $500 million, a $466-million reduction. The report on the
bill (H.Rept. 109-79 of May 13, 2005) states:
The Committee is wholly disappointed in the Coast Guard’s management of this
program and its utter disregard for the legislative direction included in P.L. 108-334,
intended to clarify the program’s total cost, acquisition timeline, and implementation
schedule. Since the Coast Guard has failed to submit an updated plan that sufficiently
justifies the entire Deepwater program, the Committee is providing an appropriation
consistent with the original and previously approved, 20-year plan. While the
Committee remains supportive of the replacement of the Coast Guard’s aging cutters
and aircraft, it is not confident in the Deepwater programmatic model as means to
achieve this goal at this point in time.
The Deepwater program was intended to be a departure from `traditional’ capital
acquisition and a move towards a more holistic, more integrated, and more efficient
process of recapitalization. In theory, the Deepwater concept is a very logical
approach for the Coast Guard — an operational, armed service whose current cutters
and aircraft are collectively reaching the end of their service lives at approximately
the same time. However, two events have stressed this program and moved it away
from its theoretical, network-based approach: (1) the events of September 11, 2001,
and the resulting mission focus upon homeland security and counter terrorism, and (2)
the increasingly rapid failure of legacy assets such as the HH-65 helicopters and
110-foot patrol boats.... Recognizing that Deepwater was at a crossroads and despite
ostensible reluctance by the Coast Guard, the Committee required the service to
re-baseline the entire program in the fiscal year 2005 appropriations bill (P.L.
108-334). The intent of the re-baselining requirement was not only to gather a more
firm understanding of the total cost and implementation plan of the Deepwater
program, but also to align the program’s modifications with the new and enhanced
mission capabilities required of the Coast Guard in the post-9/11 environment. The
Coast Guard’s failure to comply with this legislative directive suggests not only a
fundamental disregard for the Committee and Congress, but also brings into question
5 (...continued)
Office, Coast Guard: Deepwater Program Acquisition Schedule Update Needed, GAO-04-695,
June 2004.
6 Department of Homeland Security, Office of Inspector General, Major Management
Challenges Facing The Department of Homeland Security, Washington, 2004, p. 18.
7 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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how the Coast Guard itself is able to manage its own future. The Committee believes
this re-baselining to be both crucial in terms of Congressional oversight and essential
in terms of the Coast Guard’s acquisition management and operational planning. The
fact that the Coast Guard was over two months late in submitting a re-baselining and
that its content was totally insufficient and not in compliance with the specified
Congressional requirements, prohibits the Committee from considering such an
expansive request for this program for fiscal year 2006. In fact, the lack of
responsiveness by the Coast Guard prohibits the Committee from considering a major
departure from the previously approved plan and associated funding structure and
compels the Committee to take aggressive action to properly oversight this costly and
sprawling program. To date, the Committee has yet to receive a report that fully
satisfies the re-baselining requirements of P.L. 108-334. The Coast Guard has spent
considerable time and effort attempting to rationalize a flawed and incomplete
re-baseline plan, rather than adhering to the Congressional mandate and updating the
previously submitted and approved 20-year plan or providing any justification for why
such a re-baseline cannot be done.
The current state of the Deepwater program includes a myriad of questions
ranging from an absence of a cogent policy on the future of the Coast Guard’s patrol
boats to a lack of a definitive maritime patrol aircraft solution to an alarmingly high
increase in legacy asset sustainment.... The uncertainty surrounding [the 110-foot
Island Class patrol boats and the HH-65 helicopter engine replacements] — arguably
the most heavily used operational assets in the Coast Guard’s fleet — typifies why a
functional Deepwater solution is needed now....
The Coast Guard has expressed reservations about submitting a revised baseline
for the Deepwater program. The report that was submitted amounts to only a five-year
plan along with estimated ranges of total program cost and the total number of assets.
The Coast Guard has stated within this plan that it is uncertain as to the total number
of assets that will be needed because of the untested potential of C4ISR systems as
well as uncertainty of future funding. The Committee fails to understand how the
Coast Guard can so directly state that it will meet all required performance
requirements while, at the same time, providing only ranges of cost and asset totals.
The Committee also fails to understand why there is such a degree of uncertainty
about how new C4ISR systems will translate into performance capability, given the
Coast Guard’s operational experience and partnership with the Deepwater prime
integrator. In fact, the Committee believes that one of the primary tenets of the
Deepwater contract was to leverage the knowledge base of industry’s best and
brightest to formulate a robust, technically sophisticated 20-year plan. Given the
significant role and payment structure of the prime integrator within the Deepwater
program, the Committee believes the Coast Guard has a technically proficient
resource from which to project firm estimates for the entire span of the Deepwater
program. Since the Coast Guard had previously submitted a full, 20-year plan with the
original Deepwater proposal, the Committee believes it is more than reasonable to
require a revised and comprehensive plan that is predicated upon the new, post-9/11
environment.
The confluence of issues surrounding Deepwater has made fiscal year 2006 the
tipping point for this program. Therefore, the Committee requires a completely
revised Deepwater implementation plan that includes: a comprehensive acquisition
timeline for the entire Deepwater program based upon the revised mission needs
statement that is compared against the original Deepwater timeline; an exhaustive
asset-by-asset breakdown of the entire program, aligned with the comprehensive
acquisition timeline and revised mission statement that clearly shows the details of the

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phase-out of legacy assets and the phase-in of new, replacement assets; an aggregate
total cost and timeline of the entire program that aligns with the acquisition timeline
and asset-by-asset breakdown; the revised, post-9/11 mission needs statement (MNS);
a detailed progress report of the C4ISR equipment upgrades that have been installed
on currently operational Deepwater assets and a complete, aggregate timeline for
when such equipment will be installed on all legacy Deepwater assets; and a detailed
projection of the remaining operational lifespan of every type of legacy cutter and
aircraft. The Committee believes this report to be essential to the fiscal year 2007
appropriations process, just as the previously requested re-baselining request was
inextricably linked to the fiscal year 2006 appropriation. The Committee restricts
$50,000,000 of funds available for obligation until a revised Deepwater
implementation plan, which fully complies with the outlined statutory requirements,
has been received. ...
The Committee is extremely concerned about the operational status and rapidly
increasing maintenance costs of Deepwater legacy assets.... The Committee requires
the Coast Guard to submit a legacy asset report not later than January 16, 2006, that
describes the remaining operational life span of each and every one of its legacy
cutters and aircraft that are part of the Deepwater program....
The 110-foot Island Class patrol boats serve as a major operational component
for the Coast Guard and are often referred to as the `workhorse’ of the cutter fleet.
However, the service life of these assets is rapidly diminishing due to significant hull
erosion and C4ISR obsolescence. To address this issue, the Coast Guard and its
Deepwater program integrator designed a 110-to-123 conversion program.... Through
the course of the first hull conversion on the USCGC MATAGORDA, it was revealed
that there was far greater hull damage than originally estimated. Since the completion
of the MATAGORDA conversion, the Coast Guard and its patrol boat contractor have
experienced repeated delays in this program and encountered significant hull
degradation on subsequent cutters. The Coast Guard has effectively halted the
conversion program by not obligating $83,999,942 in funds appropriated for this
purpose. While the Coast Guard has sped up the development and long-lead items
associated with the FRC and the conversion program idles, there appears to be a
significant capability gap emerging due to the absence of a definitive patrol boat
solution. This is further complicated by the fact that six 110-foot patrol boats are
operating overseas in support of the Global War on Terrorism with no clear
expectation of when they might return to domestic operations. To bridge this
capability gap, the Coast Guard has pointed to the recent acquisition of five, 179-foot
Cyclone Class patrol boats from the Navy and further emphasized the rapid
development of the FRC. The Committee is completely dissatisfied by this course of
action and is extremely concerned about the Coast Guard’s ability to execute its
missions without an effective patrol boat fleet.... the Coast Guard is approaching a
prolonged period where aging 110s will either not be refurbished to the extent
required or not be replaced by a newer, more capable asset. The Committee finds this
situation unacceptable and believes immediate action is necessary to avoid any loss
in the Coast Guard’s operational capability or in our nation’s maritime security. To
provide immediate action, the Committee includes a provision (Section 526)
rescinding unobligated funds in the amount of $83,999,942 that were appropriated for
the 110-to-123 conversions in fiscal years 2004 and 2005, and re-appropriating the
funds towards the purchase of new Island Class patrol boats or the major maintenance
availability of currently operating 110s....

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