Order Code RL33753
Coast Guard Deepwater Program: Background,
Oversight Issues, and Options for Congress
December 18, 2006
Ronald O’Rourke
Specialist in National Defense
Foreign Affairs, Defense, and Trade Division

Coast Guard Deepwater Program: Background,
Oversight Issues, and Options for Congress
Summary
The Integrated Deepwater Systems (IDS) program, or Deepwater program for
short, is a $24-billion, 25-year project to replace and modernize the Coast Guard’s
aging fleet of deepwater-capable ships and aircraft. It is the largest and most
complex acquisition effort in Coast Guard history, encompassing 91 new cutters, 124
new small surface craft, and 244 new or modernized airplanes, helicopters, and
unmanned aerial vehicles (UAVs). The issue for Congress is whether to approve,
reject, or modify the Administration’s annual funding requests and overall approach
for the program.
The Coast Guard is pursuing the Deepwater program as a system-of-systems
acquisition project, under which a combination of cutters, patrol boats, aircraft, and
supporting assets is to be procured as a single, integrated package. To execute this
system-of-systems acquisition approach, the Coast Guard is using a lead system
integrator (LSI) — a private-sector entity responsible for designing, building, and
integrating the various elements of the package.
On June 25, 2002, the Coast Guard awarded the Deepwater LSI role to
Integrated Coast Guard Systems (ICGS) — an industry team led by Lockheed Martin
and Northrop Grumman’s Ship Systems division. ICGS was awarded a contract that
includes a five-year baseline term and five potential additional award terms of up to
five years (60 months) each. On May 19, 2006, the Coast Guard announced that it
was awarding ICGS a 43-month first additional award term.
Some observers have strongly criticized the Coast Guard’s management of the
Deepwater program, particularly regarding the decision to use an LSI and the
execution of the project for modernizing existing 110-foot patrol boats and keeping
them in service until they are replaced by new Fast Response Cutters (FRCs). Some
other Members are interested in accelerating procurement of Deepwater assets and
thereby compressing the Deepwater acquisition period to 15 or 10 years.
Potential options for Congress regarding the Deepwater program include but
are not limited to the following: continuing with the program as currently planned;
instituting additional or stricter reporting requirements; compressing the acquisition
period from 25 years to 15 or 10 years; replacing ICGS as the LSI; dropping the use
of an LSI in favor of direct Coast Guard management and integration of the program;
and replacing the Deepwater program with a series of separate procurement programs
for replacing individual classes of cutters, boats, and aircraft.
The Coast Guard’s FY2007 budget requested $934.431 million for the
Deepwater program. The conference report (H.Rept. 109-699 of September 28,
2006) on H.R. 5441/P.L. 109-295, the FY2007 Department of Homeland Security
(DHS) appropriations act
, provides a total $1,144.566 million in FY2007 funds for
the Deepwater program. H.R. 889/P.L. 109-241, the Coast Guard and Maritime
Transportation Act of 2006
, establishes certain reporting requirements for the
Deepwater program. This report will be updated as events warrant.

Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Deepwater Missions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Legacy Deepwater-Capable Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Deepwater Acquisition Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
System-of-Systems Acquisition With Lead System Integrator (LSI) . . 2
Contract Award and Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Systems to Be Procured or Modernized . . . . . . . . . . . . . . . . . . . . . . . . . 3
Potential Oversight Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Program Cost Growth and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Use of a Lead System Integrator (LSI) . . . . . . . . . . . . . . . . . . . . . . . . . . 3
110-Foot Modernization Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Fast Response Cutter (FRC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
National Security Cutter (NSC) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Overall Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Program Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Potential Options for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Legislative Activity in 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
H.R. 5681 (FY2007 Coast Guard Authorization Bill) . . . . . . . . . . . . . . . . . . 8
H.R. 889/P.L. 109-241 (Coast Guard and Maritime Transportation Act
of 2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
H.R. 5441/P.L. 109-295 (FY2007 DHS Appropriations Act) . . . . . . . . . . . . 9
House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Senate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Coast Guard Deepwater Program:
Background, Oversight Issues, and Options
for Congress
Introduction
The Integrated Deepwater Systems (IDS) program, or Deepwater program for
short, is a $24-billion, 25-year project to replace and modernize the Coast Guard’s
aging fleet of deepwater-capable ships and aircraft. It is the largest and most
complex acquisition effort in Coast Guard history, encompassing 91 new cutters, 124
new small surface craft, and 244 new or modernized airplanes, helicopters, and
unmanned aerial vehicles (UAVs). The issue for Congress is whether to approve,
reject, or modify the Administration’s annual funding requests and overall approach
for the program.
This report supersedes an earlier CRS report on the Deepwater program.1
The Coast Guard’s FY2007 budget requested $934.431 million for the
Deepwater acquisition program. The conference report (H.Rept. 109-699 of
September 28, 2006) on H.R. 5441/P.L. 109-295, the FY2007 Department of
Homeland Security (DHS) appropriations act, provides a total $1,144.566 million in
FY2007 funds for the Deepwater program.
Background2
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-
1 CRS Report RS21019, Coast Guard Deepwater Program: Background and Issues for
Congress
, by Ronald O’Rourke.
2 For additional background information on the Deepwater program on the internet, log onto
[http://www.uscg.mil/deepwater/] and [http://www.teamdeepwater.com].

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sea cargo-transfer) zones, and overseas inspection of foreign vessels entering U.S.
ports. Deepwater assets are also used closer to shore for various operations.
Legacy Deepwater-Capable Assets
When the Deepwater program began in the late 1990s, the Coast Guard’s
existing (i.e., “legacy”) assets for performing deepwater missions included 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 Acquisition Program
System-of-Systems Acquisition With Lead System Integrator (LSI).
Rather than replacing its aging deepwater-capable cutters, patrol boats, and aircraft
on a piecemeal, class-by-class basis, the Coast Guard decided to pursue the
Deepwater effort as a system-of-systems acquisition, under which a combination of
new and modernized cutters, patrol boats, aircraft, along with associated C4I
systems3 and logistics support, is to be procured as a single, integrated package. To
execute this system-of-systems acquisition approach, the Coast Guard is using a lead
system integrator (LSI) — a private-sector entity responsible for designing, building,
and integrating the various elements of the package so that it meets the Coast Guard’s
projected deepwater operational requirements at the lowest possible cost.
The Coast Guard believed that a system-of-systems approach would permit the
Deepwater project to be optimized (i.e., made cost effective) at the overall, system-
of-systems level, rather than suboptimized at the level of individual platforms and
systems. The Coast Guard decided on using an LSI to execute the program in large
part because the size and complexity of the project could have strained the
management and system-integration capabilities of the Coast Guard’s relatively small
in-house acquisition work force. Another major acquisition effort being pursued as
a system-of-systems acquisition with an LSI is the Army’s Future Combat System
(FCS).4
Contract Award and Extension. The Coast Guard ran a competition for the
Deepwater LSI role. Three industry teams competed, and on June 25, 2002, the
Coast Guard awarded the role to Integrated Coast Guard Systems (ICGS) — an
industry team led by Lockheed Martin and Northrop Grumman’s Ship Systems
division. ICGS was awarded an indefinite delivery, indefinite quantity contract for
the Deepwater program that includes a five-year baseline term that ended in June
2007 and five potential additional award terms of up to five years (60 months) each.
On May 19, 2006, the Coast Guard announced that it was awarding ICGS a 43-month
3 C4I stands for command, control, communications, computers, and intelligence.
4 For more on the FCS program, see CRS Report RL32888, The Army’s Future Combat
System (FCS): Background and Issues for Congress
, by Andrew Feickert.

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first additional award term, reflecting good but not excellent performance by ICGS.
With this additional award term, the contract will extend to January 2011.
Systems to Be Procured or Modernized. The revised Deepwater
implementation plan, submitted on March 25, 2005, includes the acquisition or
modernization over a 25-year period, at an estimated cost of $24 billion, of the
following:
Ships, boats, and surface craft:
! 8 new National Security Cutters, or NSCs, displacing about 4,000
tons each (i.e., ships analogous to today’s high-endurance cutters);
! 25 new Offshore Patrol Cutters, or OPCs, displacing about 3,200
tons each (i.e., ships analogous to today’s medium-endurance
cutters);
! 58 new Fast Response Cutters (FRCs) displacing 200 tons each;
! 33 new Long Range Interceptor (LRI) craft displacing 15 tons each;
and
! 91 new Short Range Prosecutor (SRP) craft displacing 9 tons each.
Aircraft:
! 22 modernized HC-130H/J Long Range Search (LRS) aircraft;
! 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).
Potential Oversight Issues for Congress
Program Cost Growth and Management
Some observers have expressed concern that the estimated total acquisition cost
of the Deepwater program has grown over time from $17 billion to $24 billion. They
have also strongly criticized the Coast Guard’s management of the Deepwater
program, particularly regarding the decision to use an LSI and the execution of
project for modernizing the service’s 49 Island-class 110-foot patrol boats and
keeping them service until they are replaced by the 58 planned FRCs.
Use of a Lead System Integrator (LSI). Some observers oppose the use
of LSIs in general, arguing that they transfer too much responsibility from

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government to the private sector, reduce the government’s visibility into program
costs, system tradeoffs, and contractor performance, and create a potential for
conflicts of interest on the part of the LSI in executing the program. Other observers
support the concept of using LSIs — because they offer potential advantages in
permitting industry to design the most cost-effective system possible and because the
government in some cases does not have sufficient in-house program-management
and system-integration capability to take on the role itself — but argue that the Coast
Guard in the case of the Deepwater effort has not implemented the concept well.
Still other observers believe that using an LSI on a large system-of-systems
acquisition program is a relatively new approach for the government and that the
Coast Guard’s implementation of the strategy, while not perfect, is improving.5
110-Foot Modernization Program. The program to modernize the 110-foot
patrol boats lengthens them to 123 feet. The first of the modernized 123-foot boats
was delivered in March 2004.
Structural problems were soon discovered in the modernized boats. In June
2005, the Coast Guard stopped the modernization effort at eight boats after
determining that the modernized boats lacked capabilities needed for meeting post-
9/11 Coast Guard operational requirements.
In August 2006, a former Lockheed engineer posted on the Internet a video
alleging significant other problems with the modernization effort.6
On November 30, 2006, the Coast Guard announced that it was suspending
operations of eight modernized 123-foot patrol boats (which were assigned to Coast
Guard Sector Key West, FL), due to the discovery of additional structural damage to
their hulls. The suspension prompted expressions of concern that the action could
reduce the Coast Guard’s border-enforcement capabilities in the Caribbean. The
Coast Guard said it was exploring options for addressing operational gaps resulting
from the decision.7
5 For further discussion of the LSI issue as it relates to the Deepwater program, 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. 12-15.
6 Patricia Kime, “Video Alleges Security Problems With Converted U.S. Coast Guard
Cutters,” DefenseNews.com, Aug. 7, 2006. See also Griff Witte, “On YouTube, Charges Of
Security Flaws,” Washington Post, Aug. 29, 2006. The video is posted on the Internet at
[http://www.youtube.com/watch?v=qd3VV8Za04g].
7 “Coast Guard Statement on Suspension of Converted Patrol Boat Operations,”
InsideDefense.com, Nov. 30, 2006; Patricia Kime, “U.S. Coast Guard Pulls 123s Out of
Service,” DefenseNews.com, Nov. 30, 2006; Calvin Biesecker, “Coast Guard Suspends 123-
Foot Patrol Boat Operations,” DefenseDaily, Dec. 1, 2006; Robert Block, “Coast Guard
Fleet Cuts Could Hurt Border Patrols,” Wall Street Journal, Dec. 1, 2006; Renae Merle,
“Coast Guard Finds Flaws In Converted Patrol Boats,” Washington Post, Dec. 2, 2006;
Renae Merle and Spencer S. Hsu, “Costly Fleet Update Falters,” Washington Post, Dec. 8,
2006.

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Fast Response Cutter (FRC). As a result of the problems in the 110-foot
boat modernization project, the Coast Guard accelerated by several years the planned
entry into service of the replacement FRCs. Problems, however, were discovered in
the FRC design, and the Coast Guard in February 2006 suspended work on the
design.
In a June 2006 report on the FRC, GAO stated that “The Coast Guard does not
have a formal, documented contingency plan should the FRC fail to meet
performance requirements. However, Coast Guard officials said it plans to pursue
certain mitigation strategies ... to keep the current [110-foot] patrol boats operating
longer.”8
The Coast Guard has now divided the 58-ship FRC effort into two classes —
12 FRC-Bs, which are to be procured as a near-term stop-gap measure and which are
to be based on an existing patrol boat design, and 46 subsequent FRC-As, which are
to be based on a fixed version of the new FRC design. The Coast Guard as of mid-
November 2006 reportedly had looked at 27 candidate designs submitted by 19
manufacturers for the FRC-B effort.9
National Security Cutter (NSC). On November 14, 2006, it was reported
that:
The Coast Guard withheld from Congress warnings raised more than two
years ago by its chief engineer about structural design flaws in its new National
Security Cutter....
The lack of full disclosure about that and other problems in the Coast
Guard’s $24 billion modernization effort, known as Deepwater, has created a
credibility gap that some members of Congress say now jeopardizes the
endeavor.
“The Coast Guard clearly does not understand that transparency and
accountability are essential to a program of this magnitude,” said Senator
Olympia J. Snowe, Republican of Maine, the chairwoman of the Senate panel
that oversees the service’s operations.
Ms. Snowe and other Congressional leaders said they were unaware until
this past week that the Coast Guard’s chief engineer, Rear Adm. Erroll Brown,
had written in March 2004 to the Coast Guard official in charge of the
Deepwater program, Rear Adm. Patrick M. Stillman, to warn him that the design
for the National Security Cutter had “significant flaws” and that construction
should not begin until they were addressed.
8 Government Accountability Office: COAST GUARD[:] Status of Deepwater Fast
Response Cutter Design Efforts
, GAO-06-764, June 2006.
9 Christopher P. Cavas, “USCG Starts Bid Process for New Cutter Design,”
DefenseNews.com, November 15, 2006; and Geoff Fein, “Deepwater Program Seeking
Designs For Coast Guard’s Fast response Cutter B-Class,” Defense Daily, November 16,
2006.

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“Importantly, several of these problems compromise the safety and viability
of the hull, possibly resulting in structural failure,” said the letter....
Representative Harold Rogers, Republican of Kentucky, who heads the
House panel that oversees the Coast Guard budget, said the lack of full disclosure
was distressing.
“Withholding information leads to poor decisions for the nation, as we are
witnessing now with this cutter modernization initiative,” Mr. Rogers said. Coast
Guard officials said Wednesday that they have tried to keep Congress fully
informed about progress on the Deepwater project, which is replacing or
rebuilding almost all of the service’s ships, planes and helicopters. “The Coast
Guard takes very seriously its obligation to keep its authorizers and appropriators
informed,” a spokesman, Cmdr. Jeffrey Carter, said.
Representative Bob Filner, Democrat of California, said the shortcomings
in the Deepwater program are so severe that the contract should be terminated....
“This has now threatened our national security,” said Mr. Filner, the
ranking Democrat on the House panel that oversees the Coast Guard. “After four
years and billions of dollars, we have nothing to show for it.”
Unless structural modifications are made, the [NSC] will be susceptible to
buckling of its superstructure, premature cracks in its hull and decks, and, in an
extreme case, the possible failure of the hull girder, which is a ship’s backbone,
said Chris Cleary, a senior naval architect at the Coast Guard.
An independent analysis by Navy engineers early this year has confirmed
that the ship, as designed, may be susceptible to premature fatigue cracking,
although top Coast Guard officials said they had been assured that the problems
would not present a safety hazard for the ship, which is to start sailing next year.
Coast Guard officials in the last year did tell some Congressional
committees that the service was addressing contractual issues with Northrop that
might require additional work to the first ship, staff members on the House and
Senate committees said.
During a June 2006 hearing on the Deepwater program, the Coast Guard
commandant, Adm. Thad Allen, briefly mentioned the difficulties, telling a
House panel that “there are some technical issues associated with the
construction that we will address in subsequent hulls.”
The Coast Guard intends to reinforce the first two versions of the National
Security Cutter and to change the design of the remaining six versions, a plan it
notified Congress of last week. The service has not disclosed how much the
repairs to the first two ships will cost or who will be responsible for the bill.
Coast Guard leaders said in interviews that any new class of ship has design
challenges that must be resolved. Given that the start of the National Security
Cutter construction had already been planned in 2004 — and that any delays

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would add to the ship’s cost — they decided to allow the first ship to be built,
while continuing to investigate their engineers’ reports of design flaws.10
Overall Project Management. In earlier reports and testimony, the
Government Accountability Office (GAO) expressed several concerns about the
Coast Guard’s ability to manage the program.11 In an April 2006 report, GAO stated:
Actions by the Coast Guard and the system integrator have fully
implemented three of the eight GAO [program-management] recommendations
that were not fully addressed during GAO’s review in 2005, and three more
recommendations appear to be nearly implemented. The remaining two have
unresolved concerns, but the Coast Guard is taking steps to resolve them. A
program of this size, however, will likely experience other challenges beyond
those that have emerged so far, making continued monitoring by the Coast Guard
important.12
An August 2006 report by the DHS Inspector General strongly criticized the
Coast Guard’s acquisition of Deepwater information technology (IT) systems.13
Program Acceleration
Some Members are interested in accelerating procurement of Deepwater assets
and thereby compressing the Deepwater acquisition period from 25 years to 15 or 10
years, so as to reduce total Deepwater acquisition costs and more quickly replace
legacy assets. GAO has cautioned that accelerating the Deepwater program could
increase program-management risks, but has also acknowledged that accelerating
selected parts of the program might be more feasible.14
10 Eric Lipton, “Lawmakers Say Coast Guard Withheld Warning Of Flaws In Cutter
Design,” New York Times, Dec. 14, 2006: 38.
11 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, March 2005;
General Accounting Office, Contract Management: Coast Guard’s Deepwater Program
Needs Increased Attention to Management and Contractor Oversight
, GAO-04-380, March
2004; and General Accounting Office, Coast Guard: Deepwater Program Acquisition
Schedule Update Needed
, GAO-04-695, June 2004.
12 Government Accountability Office, Coast Guard[:] Changes to Deepwater Plan Appear
Sound, and Program Management Has Improved, but Continued Monitoring Is Warranted
,
GAO-06-546, April 2006.
13 U.S. Department of Homeland Security, Office of Inspector General. Improvements
Needed in the U.S. Coast Guard’s Acquisition and Implementation of Deepwater
Information Technology Systems
, August 2006. (Office of Information Technology, OIG-06-
55) 45 pp.
14 See also 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. 6-9.

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Potential Options for Congress
Potential options for Congress regarding the Deepwater program include but are
not limited to the following, some of which might be combined:
! continuing with the program as currently planned;
! instituting additional or stricter reporting requirements;
! compressing the acquisition period from 25 years to 15 or 10 years;
! replacing ICGS as the LSI;
! dropping the use of an LSI in favor of direct Coast Guard
management and integration of the program; and
! replacing the Deepwater program with a series of separate
procurement programs for replacing individual classes of cutters,
boats, and aircraft.
Legislative Activity in 2006
H.R. 5681 (FY2007 Coast Guard Authorization Bill)
In its report (H.Rept. 109-614 of July 28, 2006) on H.R. 5681, the House
Transportation and Infrastructure Committee recommends authorizing a total of
$1,735.9 million for the Deepwater program for FY2007. Section 407 would require
the Coast Guard to use a competitive contracting procedure among U.S. shipyards
for acquiring the FRC. Section 408 requires DHS to submit a report on Coast Guard
plans for managing “the annual readiness gap of lost time for 110-foot patrol boats”
from FY2007 through FY2013. The report expresses strong concerns regarding the
increase of the Deepwater time line to 25 years and Coast Guard efforts to maintain
and replace its 110-foot patrol boats, and support for acquiring Deepwater assets as
soon as possible. The report recommends that the Coast Guard examine ways to
reduce costs for maintaining legacy assets and expresses support for acquiring new
assets in an expedited manner.
H.R. 889/P.L. 109-241 (Coast Guard and Maritime
Transportation Act of 2006)

This act can be viewed in part as the FY2006 Coast Guard authorization act.
Section 408(a) of the conference report (H.Rept. 109-413 of April 6, 2006) on the
act requires the Coast Guard to provide a detailed annual report on the
implementation of the Deepwater program. Section 408(b) requires a separate report
on accelerating the Deepwater acquisition period to 15 or 10 years. Section 408(c)
requires the Coast Guard, in consultation with GAO, to provide a third report on the
Coast Guard’s implementation of the recommendations made in GAO report
GAO-04-380. Section 408(d) permits the Coast Guard to conduct an analysis of all
or part of the Deepwater program and assess whether (1) the choice of assets and
capabilities selected as part of the program meets the Coast Guard’s goals for
performance and minimizing total ownership costs; or (2) additional or different
assets should be considered. Section 409 requires a study on the impact of requiring

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that helicopters, or major parts thereof, acquired by the Coast Guard, be U.S.-made,
including the contractual impact on the Deepwater program. The conference report
expresses strong concerns for the Coast Guard’s legacy deepwater vessels and
aircraft, particularly 110-foot patrol boats and HH-65 helicopters, and support for
accelerating the Deepwater program. The conference report also provides additional
discussion of what the conferees expect to see in the reports required by Section 408.
H.R. 5441/P.L. 109-295 (FY2007 DHS Appropriations Act)
House. The House-reported version of H.R. 5441 (H.Rept. 109-476 of May
22, 2006) recommended $892.64 million for the Deepwater program. The report
directed GAO to continue its oversight of the program and stated:
The Committee denies $41,580,000 for the production of the Fast Response
Cutter (FRC) requested by the President. This program is experiencing
substantial difficulties and the estimated delivery date of the first FRC has been
pushed back at least three fiscal years (2010). Until ongoing problems are
resolved, the Committee cannot continue to support a program that has so much
risk of failure that it may be terminated or substantially revised.... The Coast
Guard has $79,347,002 in unobligated balances available to the FRC and for
service life extensions of the 110-foot patrol boat. Bill language (Sec. 521) has
been included that reprograms these unobligated balances to the acquisition of
traditional patrol boats.... Also, funding may continue to be used for service life
extensions of the 110-foot patrol boat. Procuring new patrol boats and
completing service life extensions is even more critical now that the Navy has
informed the Coast Guard that they are not willing to extend the current
Memorandum of Agreement to permit the Coast Guard to continue operating the
Navy’s five 179-foot patrol boats past 2008.
Senate. The Senate-reported version of H.R. 5441 (S.Rept. 109-273 of June
29, 2006) recommended $993.631 million for the program. Section 533 rescinded
$20 million in unexpended balances for development of the Offshore Patrol Cutter.
The report “notes that $101,610,954 in carryover balances from prior-year
appropriations continue to be available” for the OPC, and stated:
The Committee notes a Government Accountability Office report
(GAO-06-546) states ‘changes to Deepwater plan appear sound, and program
management has improved, but continued monitoring is warranted.’ The
Committee agrees with these conclusions. The Deepwater program is critical to
the Coast Guard’s ability to address its homeland and maritime border security
mission, and therefore should be accelerated toward completion in 2016 rather
than 2026. The Committee encourages the Coast Guard to request sufficient
funding in the fiscal year 2008 budget request to accelerate the Deepwater
program accordingly.... The Committee recommendation includes $41,580,000,
as proposed in the budget, for the Fast Response Cutter program. This amount
shall be used to conduct a business case analysis on the cutter, develop a
proposal, and fund the preliminary design and contract design. The Committee
commends the Coast Guard for suspending the program to re-evaluate the design
to more accurately reflect the Coast Guard’s critical mission needs. However,
the Committee notes significant value in pursuing the Fast Response Cutter
program to address the Coast Guard’s long-term needs. In the short term, the
Committee is concerned with the current gap in patrol boat hours. To address

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this gap, the recommendation rescinds $79,200,000 from balances in the Fast
Response Cutter program and reappropriates these funds for the purchase of
off-the-shelf replacement patrol boats to address the patrol boat gap as soon as
possible.
Conference. The conference report on H.R. 5441 (H.Rept. 109-699 of
September 28, 2006) provides $1,065.872 million in FY2007 funds for the
Deepwater program provided, among other things,
That the Secretary of Homeland Security shall submit... a review of the Revised
Deepwater Implementation Plan that identifies any changes to the plan for the
fiscal year; an annual performance comparison of Deepwater assets to
pre-Deepwater legacy assets; a status report of legacy assets; a detailed
explanation of how the costs of legacy assets are being accounted for within the
Deepwater program; a description of how the Coast Guard is planning for the
human resource needs of Deepwater assets; a description of the competitive
process conducted in all contracts and subcontracts exceeding $5,000,000 within
the Deepwater program; and the earned value management system gold card data
for each Deepwater asset: Provided further, That the Secretary shall submit ... a
comprehensive review of the Revised Deepwater Implementation Plan every five
years, beginning in fiscal year 2011, that includes a complete projection of the
acquisition costs and schedule for the duration of the plan through fiscal year
2027....
Section 521 rescinds $78.694 million in prior-year funds for the FRC and the
service 110-foot patrol boat service life extension program, and appropriates an equal
amount in new funding for the 110-foot patrol boat service life extension program
and acquisition of traditional patrol boats (making for a total FY2007 appropriation
of $1,144.566 million). Section 539 rescinds $20 million in prior-year funding for
the OPC. The report also provides $26.550 million “to acquire, repair, renovate, or
improve vessels, small boats, and related equipment,” $15 million “to increase
aviation capability,” and $119.823 million “for other equipment.” The report states:
The conferees remain concerned with the lack of Coast Guard leadership
in addressing the impending patrol boat crisis and note Coast Guard’s surface
ship management assessment is ‘red’ for cost, schedule and contract
administration. The Coast Guard has yet to decide the deployment profile,
dry-docking, service life, crewing, and concept of operations of the much needed
replacement patrol boat in part because the Coast Guard did not admit to the need
for a replacement patrol boat until recently despite repeated direction from the
conferees. Given the significant gap in patrol boat hours and the delays of the
Fast Response Cutter (FRC) program, the conferees strongly encourage the Coast
Guard to proceed expeditiously to evaluate replacement patrol boat designs and
conduct a proposal effort as early in 2007 as possible. The conferees provide
$126,693,508 for replacement patrol boats to address an immediate need. This
funding consists of a reappropriation of $78,693,508 as discussed in section 521
of this Act and a new appropriation of $48,000,000 as shown on the table above.
Any delay in this acquisition negates the purpose of this funding: to fill the gap
in patrol boat hours until the Fast Response Cutters are operational. This funding
may also be used for service life extensions of the existing 110-foot Island class
patrol boats, which become increasingly critical as replacement patrol boat
decisions are delayed. The conferees direct the Coast Guard to provide monthly
briefings on the patrol boat replacement effort and development of FRC, as well

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as a detailed plan for the replacement patrol boat, including critical decision
points and dates, and planned service life extensions of existing 110-foot patrol
boats, within two months after enactment of this Act.... Even though C4ISR is
pointed to by the Coast Guard as a Deepwater success due to new capabilities
like AIS and SIPRNET, Coast Guard listed C4ISR design efforts as over cost and
behind schedule in a report submitted to the Committees on Appropriations in
August 2006. The conferees understand a stop work order has been issued for
Increment 2 and this increment is being ‘rescoped’. The conferees are concerned
the Coast Guard needs to devote more management attention to resolving C4ISR
design problems and directs the Coast Guard to provide a briefing on its plan to
resolve them. Furthermore, the conferees direct the Coast Guard to improve the
linkage between C4ISR and demonstrate its value to operations. (Page 146)