Order Code RL33753
Coast Guard Deepwater Program: Background,
Oversight Issues, and Options for Congress
Updated April 30, 2007
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 converted airplanes, helicopters, and
unmanned aerial vehicles (UAVs). The Deepwater program has received a total of
about $4.4 billion through FY2007, including about $1.14 billion in FY2007. The
Coast Guard’s proposed FY2008 budget requests $836.9 million for the program.
The management and execution of the Deepwater program has been strongly
criticized in recent months by the Department of Homeland Security Inspector
General (DHS IG), the Defense Acquisition University (DAU), the Government
Accountability Office (GAO), several Members of Congress from committees and
subcommittees that oversee the Coast Guard, and other observers. House and Senate
committees and subcommittees have conducted several oversight hearings this year
devoted partly or entirely to problems and concerns regarding the management and
execution of the program.
On April 17, 2007, the Coast Guard announced a series of actions to reform the
management of the Deepwater program. Among other things, the Coast Guard
announced it will assume the role of lead system integrator (LSI) for the program.
Since 2002, the LSI role had been performed by Integrated Coast Guard Systems
(ICGS) — an industry team led by Lockheed Martin and Northrop Grumman Ship
Systems (NGSS).
On April 18, 2007, it was reported that the Justice Department is conducting an
investigation of the Deepwater program. Justice reportedly notified Lockheed,
Northrop, and certain other firms involved in the Deepwater program of the
investigation on December 13, 2006, and directed the firms to preserve all documents
relating to the program.
Legislation that would significantly restructure Coast Guard contracting and the
Deepwater program in various ways, and place various new requirements and
conditions on the Deepwater program, includes the following:
! Sections 4402 and 4405 of the conference report (H.Rept. 110-107
of April 24, 2007) on H.R. 1591, the FY2007 emergency
supplemental appropriations act;
! S. 924, the Integrated Deepwater Program Reform Act; and
! S. 889, the Deepwater Accountability Act.
In addition, Section 4404(b)(1) of the conference report on H.R. 1591
appropriates $30 million in additional appropriations to procure four new coastal
patrol boats so as to mitigate the Coast Guard’s patrol boat operational gap. This
report will be updated as events warrant.
Contents
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Coast Guard Deepwater Missions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Legacy Deepwater-Capable Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
System-Of-Systems (SOS) Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Lead Systems Integrator (LSI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ICGS Contract Award And Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Revised Implementation Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Systems To Be Procured Or Converted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Program Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Earlier Interest In Potential For Program Acceleration . . . . . . . . . . . . . . . . . 6
Congressional Oversight Hearings Held This Year . . . . . . . . . . . . . . . . . . . . 6
Problems In Program Management And Execution . . . . . . . . . . . . . . . . . . . . 7
Problems In Cutter Acquisition Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 7
Overall Management Of The Program . . . . . . . . . . . . . . . . . . . . . . . . . 10
Coast Guard Management Reforms Announced April 17, 2007 . . . . . . . . . 12
Other Announced Coast Guard Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Justice Department Investigation Of Program . . . . . . . . . . . . . . . . . . . . . . . 15
Oversight Issues for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Coast Guard’s Announced Management Reforms . . . . . . . . . . . . . . . . . . . . 16
Execution Of FY2007 Funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Revolving Door And Potential For Conflicts Of Interest . . . . . . . . . . . . . . 17
Potential Options for Congress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Legislative Activity in 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
FY2007 Emergency Supplemental Appropriations Act (H.R. 1591) . . . . . 20
House . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Senate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Conference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Integrated Deepwater Program Reform Act (S. 924) . . . . . . . . . . . . . . . . . . 28
Deepwater Accountability Act (S. 889) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Appendix A. DAU Quick Look Study, February 2007 . . . . . . . . . . . . . . . . . . . . 36
Appendix B. DHS IG Testimony And Reports . . . . . . . . . . . . . . . . . . . . . . . . . . 40
March 8, 2007, and February 14, 2007, Testimony . . . . . . . . . . . . . . . . . . . 40
January 2007 Report on NSC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
February 2007 Report on 110-Foot Modernization . . . . . . . . . . . . . . . . . . . 46
December 2006 Report On DHS Management Challenges . . . . . . . . . . . . . 47
August 2006 Report On Deepwater IT . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Appendix C. GAO Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
March 8, 2007, and February 14, 2007, Testimony . . . . . . . . . . . . . . . . . . . 49
Appendix D. Coast Guard Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
February 14, 2007, Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Appendix E. NGSS Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
February 14, 2007, Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
Appendix F. Lockheed Martin Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
February 14, 2007, Testimony . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
List of Tables
Table 1. Deepwater Program Funding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
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 converted airplanes, helicopters, and
unmanned aerial vehicles (UAVs). The Deepwater program has received a total of
about $4.4 billion through FY2007, including about $1.14 billion in FY2007. The
Coast Guard’s proposed FY2008 budget requests $836.9 million for the program.
The management and execution of the Deepwater program has been strongly
criticized in recent months by the Department of Homeland Security Inspector
General (DHS IG), the Defense Acquisition University (DAU), the Government
Accountability Office (GAO), several Members of Congress from committees and
subcommittees that oversee the Coast Guard, and other observers. House and Senate
committees and subcommittees have conducted several oversight hearings this year
devoted partly or entirely to problems and concerns regarding the management and
execution of the program.
On April 17, 2007, the Coast Guard announced a series of actions to reform the
management of the Deepwater program. Among other things, the Coast Guard
announced it will assume the role of lead system integrator (LSI) for the program.
Since 2002, the LSI role had been performed by Integrated Coast Guard Systems
(ICGS) — an industry team led by Lockheed Martin and Northrop Grumman Ship
Systems (NGSS).
On April 18, 2007, it was reported that the Justice Department is conducting an
investigation of the Deepwater program. Justice reportedly notified Lockheed,
Northrop, and certain other firms involved in the Deepwater program of the
investigation on December 13, 2006, and directed the firms to preserve all documents
relating to the program.
Congress has several potential options it may consider for improving
management and execution of the Deepwater program. Congress’s decisions
regarding the Deepwater program could significantly affect Coast Guard capabilities,
Coast Guard funding requirements, and federal acquisition practices.
CRS-2
Background1
Coast Guard Deepwater Missions
The Coast Guard performs a variety of missions in the deepwater environment,
which generally means waters more than 50 miles from shore. These mission include
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.
Deepwater-capable 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.
System-Of-Systems (SOS) Acquisition
Rather than replacing its various deepwater-capable cutters, patrol boats, and
aircraft through a series of individual procurement programs, the Coast Guard
decided to pursue a system-of-systems (SOS) acquisition, under which a combination
of new and modernized cutters, patrol boats, aircraft, along with associated C4ISR
systems2 and logistics support, would be procured as a single, integrated package.
The Coast Guard believes that a system-of-systems approach permits 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.
Lead Systems Integrator (LSI)
To execute this system-of-systems acquisition approach, the Coast Guard
initially decided to use a private-sector lead system integrator (LSI) — an industry
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 initially decided to use
a private-sector LSI to execute the Deepwater program in part because the size and
complexity of the project was thought to be beyond the system-integration
1 For additional background information on the Deepwater program on the internet, log onto
[http://www.uscg.mil/deepwater/] and [http://www.teamdeepwater.com].
2 C4I stands for command, control, communications, computers, intelligence, surveillance,
and reconnaissance.
CRS-3
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).3
ICGS 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 Ship Systems (NGSS). ICGS was awarded an indefinite
delivery, indefinite quantity (ID/IQ) contract for the Deepwater program that includes
a five-year baseline term ending 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 first additional award term,
reflecting good but not excellent performance by ICGS. With this additional award
term, the contract would extend to January 2011.
Revised Implementation Plan
The original (1998) Deepwater implementation plan reflected a pre-9/11
analysis of Coast Guard mission demands. On March 25, 2005, the Coast Guard
submitted to Congress a revised Deepwater implementation plan reflecting an
analysis of the Coast Guard’s expanded post-9/11 missions. The revised
implementation plan increased the capabilities to be acquired under the Deepwater
program. Primarily because of the increase in capabilities to be acquired, the
Deepwater program’s estimated acquisition cost increased from $17 billion to $24
billion, and the program’s acquisition period increased from about 20 years to 25
years.
Some observers have expressed concern that the Deepwater program’s estimated
total acquisition cost has increased from $17 billion to $24 billion. An April 2006
Government Accountability Office (GAO) report stated the following:
The revised Deepwater implementation plans change the balance between
new and legacy assets, alter the delivery schedule for some assets, lengthen the
overall acquisition schedule by 5 years, and increase the projected program cost
from $17 billion to $24 billion. The higher cost generally relates to upgrading
assets to reflect added homeland security mission requirements. Upgrades to
vessels account for the single largest area of increase; with upgrades to the
command, control, communications and other capabilities being second highest.
In contrast, because the revised plans upgrade rather than replace most legacy
aircraft and reduce the number of unmanned aircraft, the cost for Deepwater
aircraft drops. The revised plans, like the original plan, are heavily dependent
3 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. For more on LSIs
in general, see CRS Report RS22631, Defense Acquisition: Use of Lead System Integrators
(LSIs) — Background, Oversight Issues, and Options for Congress, by Valerie Bailey
Grasso.
CRS-4
on receiving full funding each year. Coast Guard officials state that a shortfall
in funding in any year could substantially increase total costs.4
Some observers expected the revised Deepwater implementation plan to include
more ships and aircraft than the original (1998) Deepwater plan. A 2004 RAND
Corporation report recommended substantially increasing the numbers of cutters and
aircraft to be acquired under the original plan.5 The revised implementation plan,
however, did not substantially increase ship and aircraft numbers. The Coast Guard
says the revised force would have considerably more capability than the 1998-
planned force because the ships and aircraft would be individually more capable than
under the 1998 plan. Coast Guard officials have also acknowledged, however, that
the revised force would not have enough capacity to meet long-term (FY2005-
FY2009) Government Performance and Review Act (GPRA) goals. An April 2006
GAO report concluded that
The Coast Guard’s analytical methods were appropriate for determining if
the revised asset mix would provide greater mission performance and whether
the mix is appropriate for meeting Deepwater missions. GAO and other
independent experts found the Coast Guard’s methods were reliable for assessing
the effects of changing the asset mix and a Department of Defense review board
facilitated accreditation of the Coast Guard’s approach.”6
Systems To Be Procured Or Converted
The revised implementation plan includes the acquisition 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;
4 Government Accountability Office: Coast Guard[:] Changes to Deepwater Plan Appear
Sound, and Program Management Has Improved, but Continued Monitoring Is Warranted,
GAO-06-546, June 2006.
5 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.
6 Government Accountability Office: Coast Guard[:] Changes to Deepwater Plan Appear
Sound, and Program Management Has Improved, but Continued Monitoring Is Warranted,
GAO-06-546, June 2006.
For further discussion regarding the adequacy of proposed Deepwater assets, 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.
CRS-5
! 33 new Long Range Interceptor (LRI) craft displacing 15 tons each;
and
! 91 new Short Range Prosecutor (SRP) craft displacing 9 tons each.
Aircraft:
! 6 missionized HC-130J and 16 converted HC-130H Long Range
Search (LRS) aircraft;
! 36 new HC-144A Medium Range Maritime Patrol Aircraft (MPA)
based on the European Aeronautic Defence and Space Company
(EADS) CASA HC-235 Persuader MPA aircraft design;
! 42 converted HH-60J Medium Range Recovery (MRR) helicopters;
! 95 converted 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).
In addition to the above items, the Deepwater program included the conversion
of the Coast Guard’s existing 49 Island-class 110-foot patrol boats into modernized,
123-foot patrol boats, so that these boats could remain in service until the delivery
of replacement FRCs.
Program Funding
Table 1 below shows funding for the Deepwater program. As can be seen in
the table, the program has received a total of about $4.4 billion through FY2007,
including $1,144.6 million in FY2007. The Coast Guard’s proposed FY2008 budget
requests $836.9 million for the program.
Table 1. Deepwater Program Funding
(in millions of dollars, rounded to nearest tenth)
Priora
FY02
FY03
FY04
FY05
FY06
FY07
FY08
Request
n/a
320.2
500.0
500.0
678
966.0
934.4
836.9
Appropriation
n/a
320.2
478.0
668.2
724.0
933.1
1,065.9
Rescissions
n/a
3.1
57.6
38.9
98.7
Transfers
n/a
49.7
77.8
78.7
Supplemental approps
n/a
124.2
Totalb
117.0
320.2
474.9
610.6
734.8
1,036.4
1,144.6
Cumulative totalb
117.0
437.2
912.1
1,522.7
2,257.5
3,293.9
4,438.5
Source: Prepared by CRS using Coast Guard data provided on January 29, 2007, and proposed Coast
Guard FY2008 budget.
n/a = not available
a. Pre-award funding prior to 2002.
b. Excludes HC-130J funding prior and airborne use-of-force funding prior to FY2007.
CRS-6
Earlier Interest In Potential For Program Acceleration
Prior to recent strong criticisms regarding management and execution of the
Deepwater program, some Members of Congress expressed interest 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. Some of these Members expressed
disappointment that the Coast Guard’s revised implementation plan lengthened the
program’s acquisition period from about 20 years to 25 years. Compressing the
Deepwater program’s acquisition period to 15 or 10 years could reduce total
Deepwater acquisition costs but would require substantially increasing annual
Deepwater acquisition funding levels.7
A 2004 RAND Corporation report, using the original (pre-2005) Deepwater
implementation plan, concluded that “the shipbuilding and air vehicle industrial
bases could produce the USCG’s Deepwater assets on either the 15-year or the
10-year schedule. Manufacturers would require no major facility upgrades to
accommodate acceleration.”8 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.
Congressional Oversight Hearings Held This Year
House and Senate committees and subcommittees have conducted several
oversight hearings this year devoted partly or entirely to problems and concerns
regarding the management and execution of the program. Examples of such hearings
include:
! a January 30, 2007, hearing before the Coast Guard and Maritime
Transportation subcommittee of the House Transportation and
Infrastructure Committee;
! February 6 and 15, 2007, hearings before the Homeland Security
subcommittee of the House Appropriations Committee
! a February 8, 2007, hearing before the House Committee on
Oversight and Government Affairs;
7 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 from 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 period FY2005-FY2011 by about $7.4 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.)
8 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.
CRS-7
! a February 14, 2007, hearing before the Oceans, Atmosphere,
Fisheries, and Coast Guard subcommittee of the Senate Commerce,
Science and Transportation Committee;
! a March 8, 2007, hearing before the Coast Guard and Maritime
transportation subcommittee of the House Transportation and
Infrastructure Committee.
! an April 18, 2007 hearing before the full House Transportation and
Infrastructure Committee; and
! an April 18, 2007 hearing before the Oceans, Atmosphere, Fisheries,
and Coast Guard subcommittee of the Senate Commerce, Science,
and Transportation Committee.
Problems In Program Management And Execution
The management and execution of the Deepwater program has been strongly
criticized in recent months by the Department of Homeland Security Inspector
General (DHS IG), the Defense Acquisition University (DAU), the Government
Accountability Office (GAO), several Members of Congress from committees and
subcommittees that oversee the Coast Guard, and other observers.
Criticism of the management and execution of the program has focused on
problems in three cutter acquisition efforts, and on overall management of the
program. Each of these is discussed below.
Problems In Cutter Acquisition Efforts. The Deepwater cutter acquisition
efforts that have experienced problems are the new National Security Cutter (NSC),
the 110-foot patrol boat modernization effort, and the new Fast Response Cutter
(FRC).
National Security Cutter (NSC). A DHS IG report released in January 2007
strongly criticized the NSC program, citing design flaws in the ship and the Coast
Guard’s decision to start construction of NSCs in spite of early internal notifications
about these flaws. The DHS IG report also noted considerable growth in the cost to
build the first two NSCs, and other issues.9
110-Foot Patrol Boat Modernization. As mentioned earlier, as part of the
Deepwater program, the Coast Guard originally planned to modernize its 49 existing
Island-class 110-foot patrol boats so as to improve their capabilities and extend their
lives until their planned eventual replacement with new Deepwater Fast Response
Cutters (FRCs) starting in 2018. Among other things, the modernization lengthened
9 Department of Homeland Security, Office of Inspector General, Acquisition of the National
Security Cutter, OIG -07-23, January 2007. The report is available online at
[http://www.dhs.gov/xoig/assets/mgmtrpts/OIG_07-23_Jan07.pdf].
CRS-8
the boats to 123 feet. The program consequently is referred to as the 110-foot or 123-
foot modernization program.
Eight of the boats were modernized at a total cost of $87 million to $100 million
(sources quote different figures). The first was delivered in March 2004. Structural
problems were soon discovered in them. In June 2005, the Coast Guard stopped the
modernization effort at eight boats after determining that they 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 four other problems with the 110-foot patrol boat modernization effort.10
The engineer had previously presented these problems to the DHS IG, and a February
2007 report from the DHS IG confirmed two of the four problems.11
On November 30, 2006, the Coast Guard announced that it was suspending
operations of the 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.12
On April 17, 2007, the Coast Guard announced that it would permanently
decommission the eight converted boats and strip them of equipment and
components that might be reused on other Coast Guard platforms. The Coast Guard
estimates the total value of the recovered equipment at $30 million to $60 million,
depending on how much can be reused.13 In announcing the decision, the Admiral
Thad Allen, the Commandant of the Coast Guard, stated:
10 Patricia Kime, “Video Alleges Security Problems With Converted U.S. Coast Guard
Cutters,” DefenseNews.com, August 7, 2006. See also Griff Witte, “On YouTube, Charges
Of Security Flaws,” Washington Post, August 29, 2006. The video is posted on the Internet
at [http://www.youtube.com/watch?v=qd3VV8Za04g].
11 Department of Homeland Security, Office of Inspector General, 110'/123' Maritime Patrol
Boat Modernization Project, OIG -07-27, January 2007. The report is available online at
[http://www.dhs.gov/xoig/assets/mgmtrpts/OIG_07-27_Feb07.pdf].
12 “Coast Guard Statement on Suspension of Converted Patrol Boat Operations,”
InsideDefense.com, November 30, 2006; Patricia Kime, “U.S. Coast Guard Pulls 123s Out
of Service,” DefenseNews.com, November 30, 2006; Calvin Biesecker, “Coast Guard
Suspends 123-Foot Patrol Boat Operations,” DefenseDaily, December 1, 2006; Robert
Block, “Coast Guard Fleet Cuts Could Hurt Border Patrols,” Wall Street Journal, December
1, 2006; Renae Merle, “Coast Guard Finds Flaws In Converted Patrol Boats,” Washington
Post, December 2, 2006; Renae Merle and Spencer S. Hsu, “Costly Fleet Update Falters,”
Washington Post, December 8, 2006.
13 Geoff Fein, “Coast Guard Nixes 123-Foot Patrol Boat, Assumes Lead of Deepwater
Effort,” Defense Daily, April 18, 2007;Patricia Kime, “Coast Guard To Decommission
Troubled 123s,” NavyTimes.com, April 18, 2007.
CRS-9
A significant step in changing the course of Deepwater is resolving
outstanding issues within the program, so let me begin this morning by
announcing my decision to permanently decommission the eight 123' patrol boats
converted under the Deepwater program.
Multiple extensive studies and analyses by both Coast Guard engineers and
third-party naval architects and marine engineers over many months have
described the failures in these vessels. They have been unable to determine a
single definitive root cause for the 123-foot patrol boat structural problems.
We believe the design of the 123-foot patrol boat reduced the structural
cross section necessary to support the added weight distribution following the
conversion. Our analysis has been complicated, however, by the fact that we’ve
observed permanent deformations of each hull in slightly different ways.
Based on this analysis, any strategy to permanently repair these cutters and
return them to service would require an iterative, phased approach over a long
period of time with uncertain costs and outcome. Initial estimates indicate it
could cost well over $50 million.
The excessive cost and time associated with continuing to pursue an
uncertain resolution to these structural problems has convinced me, with the
recommendation of my chief engineer, that permanently removing these cutters
from service while recouping any residual value and redirecting funds to other
programs is in the best interest of the government.
We will continue to mitigate the loss of these patrol boat hours through our
ongoing efforts and strategies (such as multi-crewing 110-foot patrol boats and
an extension of the memorandum of understanding for three Navy 179-foot patrol
craft) while we work toward acquiring a new platform as soon as we can to
replace our entire fleet of 110-foot patrol boats.
We will pursue all viably available contractual, legal or other options for
recouping any funds that might be owed the government as a result of the loss of
these hulls.14
Fast Response Cutter (FRC). As a result of the problems in the 110-foot
patrol boat modernization project, the Coast Guard accelerated the FRC design and
construction effort by 10 years. Problems, however, were discovered in the FRC
design, and the Coast Guard in February 2006 suspended work on the design.
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 (which the Coast Guard calls a “parent
craft” design), and 46 subsequent FRC-As, which are to be based on a fixed version
of the new FRC design. The Coast Guard by mid-November 2006 reportedly had
looked at 27 candidate designs submitted by 19 manufacturers for the FRC-B effort.
14 Coast Guard Press Release dated April 17, 2007, entitled “Statement by Adm. Thad Allen
on the Converted 123-Foot Patrol Boats and Changes to the Deepwater Acquisition
Program.”
CRS-10
In December 2006, the Coast Guard issued a Request for Proposals (RFP) to ICGS
for the FRC-B.
On March 14, 2007, the Coast Guard announced that it intends to procure the
12 FRC-B cutters directly from the manufacturer, rather than through ICGS.15
Overall Management Of The Program. Some observers believe the
problems experienced in the three cutter acquisition efforts are the product of broader
problems in the Coast Guard’s overall management of the Deepwater program. A
February 2007 DAU “quick look study,”16 as well as reports from the DHS IG and
GAO, have expressed serious concerns about the Coast Guard’s overall management
of the Deepwater program. These reports, as well as Members of Congress and other
observers, have raised concerns about a number of actual or alleged problems.
Some observers have expressed the view that using an LSI to implement the
Deepwater program made a complex program more complex, and set the stage for
waste, fraud, and abuse by effectively outsourcing oversight of the program to the
private sector and by creating a conflict of interest for the private sector in executing
the program.
Other observers, including the DAU and GAO, have expressed the view that the
LSI approach is basically valid, but that the contract used to implement the approach
for the Deepwater program was flawed in various ways, undermining the Coast
Guard’s ability to assess contractor performance, control costs, ensure accountability,
and conduct general oversight of the program.17
Observers have raised various issues about the Deepwater contract. Among
other things, they have expressed concern that the contract is an indefinite delivery,
indefinite quantity (ID/IQ) contract, which, they say, can be an inappropriate kind of
contract for a program like the Deepwater program. Observers have also expressed
concern that the contract:
! transferred too much authority to the LSI for defining performance
specifications, for subsequently modifying them, and for making
technical judgements;
15 Coast Guard press release, “Coast Guard Reassigns Deepwater Replacement Patrol Boast
Acquisition Project,” March 14, 2007; Calvin Biesecker, “Coast Guard Strips FRC-B Patrol
Boat Acquisition From ICGS,” Defense Daily, March 15, 2007; Renae Merle, “Coast Guard
Cancels Contract,” Washington Post, March 15, 2007; and David Stout, “Coast Guard
Cancels Contract For Vessel,” New York Times, March 15, 2007.
16 Defense Acquisition University, Quick Look Study, United States Coast Guard Deepwater
Program, February 2007.
17 For additional discussion about LSIs in general, see CRS Report RS22631, Defense
Acquisition: Use of Lead System Integrators (LSIs) — Background, Oversight Issues, and
Options for Congress, by Valerie Bailey Grasso.
CRS-11
! permitted the LSI to certify that certain performance goals had been
met — so-called self-certification, which, critics argue, can equate
to no meaningful certification;
! provided the Coast Guard with insufficient authority over the LSI for
resolving technical disputes between the Coast Guard and the LSI;
! was vaguely worded with regard to certain operational requirements
and technical specifications, reducing the Coast Guard’s ability to
assess performance and ensure that the program would achieve
Coast Guard goals;
! permitted the firms making up the LSI to make little use of
competition between suppliers in selecting products to be used in the
Deepwater program, to tailor requirements to fit their own products,
and consequently to rely too much on their own products, as
opposed to products available from other manufacturers;
! permitted the LSI’s performance during the first five-year period to
be scored in a way that did not sufficiently take into account recent
problems in the cutter acquisition efforts;
! permitted award fees and incentive fees (i.e., bonuses) to be paid to
the LSI on the basis of “attitude and effort” rather than successful
outcomes; and
! lacked sufficient penalties and exit clauses.
Observers have also expressed concern that the Coast Guard does not have
enough in-house staff and in-house expertise in areas such as program management,
financial management, and system integration, to properly oversee and manage an
acquisition effort as large and complex as the Deepwater program, and that the Coast
Guard did not make sufficient use of the Navy or other third-party, independent
sources of technical expertise, advice, and assessments. They also have expressed
concern that the Coast Guard, in implementing the Deepwater program, has placed
a higher priority on meeting a schedule as opposed to ensuring performance.
In addition, observers have stated that the Coast Guard proceeded with
construction of the first NSCs in spite of early internal warnings about flaws in the
NSC design, failed to report problems about the NSC effort to Congress on a timely
basis, resisted efforts by the DHS IG to investigate the NSC effort, and appears to
have altered briefing slides on the NSC effort so as to downplay the design flaws to
certain audiences.
For additional information on the issues discussed above, see the reprinted
portions of reports and testimony in the appendices to this report.
CRS-12
Coast Guard Management Reforms Announced April 17, 2007
On April 17, 2007, the Coast Guard announced a series of actions to reform the
management of the Deepwater program. Among other things, the Coast Guard
announced it will assume the role of lead system integrator (LSI) for the program.
Since 2002, the LSI role had been performed by Integrated Coast Guard Systems
(ICGS) — an industry team led by Lockheed Martin and Northrop Grumman Ship
Systems (NGSS). In announcing the actions, Admiral Thad Allen, the Commandant
of the Coast Guard, stated in part:
As many of you know, I met with the Lockheed Martin CEO Robert
Stevens and Northrop Grumman CEO Ronald Sugar in January to determine near
and long-term objectives and goals for the Deepwater program. Since then we’ve
spoken frequently, as both the Coast Guard and our industry partners have taken
a number of steps to improve the management, oversight and performance of the
Deepwater program. More recently, we reached agreement on six fundamental
principles that we have begun implementing to ensure that the government’s
interests are fully and fairly achieved in acquiring and fielding assets and
capabilities being developed and produced under the Integrated Deepwater
System.
These principles will guide us as we seek to obtain the best value for the
government through robust competition and vigilant contract oversight and
management.
Working together with industry, the Coast Guard will make the following
six fundamental changes in the management of our Deepwater program:
The Coast Guard will assume the lead role as systems integrator for all
Coast Guard Deepwater assets, as well as other major acquisitions as appropriate.
I have already begun building my organic staff in the fiscal year 2008 budget
request, and will combine that with other government assets as we transition to
this new role.
The Coast Guard will take full responsibility for leading the management
of all life cycle logistics functions within the Deepwater program under a an
improved logistics architecture established with the new mission support
organization.
The Coast Guard will expand the role of the American Bureau of Shipping,
or other third-parties as appropriate, for Deepwater vessels to increase assurances
that Deepwater assets are properly designed and constructed in accordance with
established standards.
The Coast Guard will work collaboratively with Integrated Coast Guard
Systems to identify and implement an expeditious resolution to all outstanding
issues regarding the national security cutters.
The Coast Guard will consider placing contract responsibilities for
continued production of an asset class on a case-by-case basis directly with the
prime vendor consistent with competition requirements if: (1) deemed to be in
the best interest of the government and (2) only after we verify lead asset
performance with established mission requirements.
CRS-13
Finally, I will meet no less than quarterly with my counterparts from
industry until any and all Deepwater program issues are fully adjudicated and
resolved. Our next meeting is to be scheduled within a month.
These improvements in program management and oversight going forward
will change the course of Deepwater.
By redefining our roles and responsibilities, redefining our relationships
with our industry partners, and redefining how we assess the success of
government and industry management and performance, the Deepwater program
of tomorrow will be fundamentally better than the Deepwater program of
today....
As many of you know, I have directed a number of significant organizational
changes [to the Coast Guard], embedded within direction and orders, to better
prepare the Coast Guard to meet and sustain mission performance long into the
future as we confront a broad range of converging threats and challenges to the
safety, security and stewardship of America’s vital maritime interests.
What’s important to understand here is that these proposed changes in
organizational structure, alignment and business processes, intended to make the
Coast Guard more adaptive, responsive and accountable, are not separate and
distinct from what we have been doing over the past year to improve Deepwater.
In fact, many of these initiatives can be traced directly to challenges we’ve
faced, in part, in our Deepwater program. Consequently, we will be better
organized, better trained, and better equipped to manage large, complex
acquisitions like Deepwater in the coming days, weeks, months and years as we
complete these service-wide enhancements to our mission support systems,
specifically our acquisition, financial and logistics functions. That is the future
of the Coast Guard, and that is the future of Deepwater.
To be frank, I am tired of looking in the rearview mirror - conducting what
has been the equivalent of an archaeological dig into Deepwater. We already
understand all too well what has been ailing us within Deepwater in the past five
years:
We’ve relied too much on contractors to do the work of government as a
result of tightening AC&I budgets, a dearth of contracting personnel in the
federal government, and a loss of focus on critical governmental roles and
responsibilities in the management and oversight of the program.
We struggle with balancing the benefits of innovation and technology
offered through the private sector against the government’s fundamental reliance
on robust competition.
Both industry and government have failed to fully understand each other’s
needs and requirements, all too often resulting in both organizations operating
at counter-odds to one another that have benefited neither industry nor
government.
And both industry and government have failed to accurately predict and
control costs.
CRS-14
While we can — and are — certainly learning from the past, we ought to
be about the business of looking forward — with binoculars even — as we seek
to see what is out over the horizon so we can better prepare to anticipate
challenges and develop solutions with full transparency and accountability.
That is the business of government. And it’s the same principle that needs to
govern business as well.
And it’s precisely what I intend to do: with the changes in management and
oversight I outlined for you here today, with the changes we are making in the
terms and conditions of the Deepwater contract, and with the changes we will
make in our acquisition and logistics support systems throughout the Coast
Guard. If we do, I have no doubt in my mind that we will exceed all expectations
for Deepwater....
The Deepwater program of tomorrow will be fundamentally better than the
Deepwater program of today.
The Coast Guard has a long history of demonstrating exceptional stewardship
and care of the ships, aircraft and resources provided it by the public, routinely
extending the life of our assets far beyond original design specifications to meet
the vital maritime safety, security and stewardship needs of the nation....
Knowing that to be the case, I am personally committed to ensuring that our
newest ships, aircraft and systems acquired through the Coast Guard’s Integrated
Deepwater System are capable of meeting our mission requirements from the
moment they enter service until they are taken out of service many, many years
into the future....
As I’ve said many times in the past, the safety and security of all Americans
depends on a ready and capable Coast Guard, and the Coast Guard depends on
our Deepwater program to keep us ready long into the future.
The changes to Deepwater management and oversight I outlined here for
you today reflect a significant change in the course of Deepwater. I will
vigorously implement these and other changes that may be necessary to ensure
that our Coast Guard men and women have the most capable fleet of ships,
aircraft and systems they need to do the job I ask them to do each and every day
on behalf of the American people.18
Coast Guard officials state that the Coast Guard intends to proceed with the 43-
month award term with ICGS and use the contract to complete Deepwater acquisition
efforts that are already underway. Coast Guard official state that task orders that the
Coast Guard issues under the 43-month award term will be for performance periods
of 18 to 24 months, with the aim of closing out efforts already underway.19
18 Coast Guard Press Release dated April 17, 2007, entitled “Statement by Adm. Thad Allen
on the Converted 123-Foot Patrol Boats and Changes to the Deepwater Acquisition
Program.”
19 See, for example, the spoken testimony of Admiral Thad Allen, Commandant of the Coast
Guard, before the Oceans, Atmosphere, Fisheries, and Coast Guard subcommittee of the
Senate Commerce, Science, and Transportation Committee on April 18, 2007.
CRS-15
Other Announced Coast Guard Actions
In addition to the April 17 Coast Guard announcement about Deepwater
management reforms and the March 14 Coast Guard announcement concerning the
FRC-Bs, the Coast Guard in recent weeks has done the following:
! announced a reorganization of certain Coast Guard commands that
is intended in part to strengthen the Coast Guard’s ability to manage
acquisition projects, including the Deepwater program;
! stated that it is making additional internal changes specifically
targeted at improving its ability to manage the Deepwater program;
! stated that it plans to alter the terms of the Deepwater contract for
the 43-month award term that commences in mid-2007 so as to
address concerns raised about the current Deepwater contract;
! stated that it is hiring additional people with acquisition experience,
so as to strengthen its in-house capability for managing the
Deepwater program and other Coast Guard acquisition efforts;
! acted to resolve differences between the Coast Guard and ICGS
regarding the fatigue life of the NSC;
! stated that it concurs with many of the recommendations made in the
DHS IG reports, and is moving to implement them;
! stated that it is weighing the recommendations of the DAU quick
look study; and
! stated that it has also implemented many recommendations
regarding Deepwater program management that have been made by
GAO.
Justice Department Investigation Of Program
On April 18, 2007, it was reported that the Justice Department is conducting an
investigation of the Deepwater program. The investigation reportedly centers on
communications systems, the conversion of the Coast Guard’s 110-foot patrol boats,
and the National Security Cutter (NSC). Justice reportedly notified Lockheed,
Northrop, and certain other firms involved in the Deepwater program of the
investigation on December 13, 2006, and directed the firms to preserve all documents
relating to the program.20
20 Ana Radelat, “Justice Investigating Deepwater Contractors,” NavyTimes.com, April 18,
2007; Chris Strohm, “Deepwater Contractors Face Justice Probe” GovExec.com, April 19,
2007; Patricia Kime, “Justice Investigating Deepwater Contract,” NavyTimes.com, April 20,
2007.
CRS-16
Oversight Issues for Congress
Coast Guard’s Announced Management Reforms
In light of the Deepwater management reforms announced by the Coast Guard
on April 17, 2007, potential oversight questions for Congress regarding management
and execution of the Deepwater program include the following:
! Are the Coast Guard’s announced reforms appropriate? Are they
insufficient, excessive, or about right? Do they properly address all
concerns regarding the management and execution of the Deepwater
program?
! Has the Coast Guard developed a detailed plan for transferring the
Deepwater LSI role from ICGS to the Coast Guard? Which specific
system-integration responsibilities, if any, will continue to be
performed by ICGS?
! Does the Coast Guard have enough in-house technical and program-
management expertise to take on the role of Deepwater LSI? Will
the Coast Guard be able to expand its in-house expertise quickly
enough to meet the added demand for such expertise that will result
from taking on the LSI role? To what degree will the Coast Guard
need to obtain technical and program-management support from the
Navy or other third parties? Does the Coast Guard have a detailed
plan for expanding its in-house technical and program-management
staff and for obtaining assistance from third parties?
! Has the Coast Guard established milestones that Congress can use
to assess the success of the Coast Guard’s announced management
reforms? If so, what are the milestones, and how were they
determined? If not, does the Coast Guard plan to develop such
milestones?
! What implications, if any, does the Coast Guard’s decision to
perform the Deepwater LSI role have for the concept of using
private-sector LSIs on other federal acquisition programs?21
Execution Of FY2007 Funds
The pace at which prior-year funding for a program is obligated and expended
is one measure by which Congress assesses the readiness of the program to receive
additional funding in future fiscal years. On March 12, 2007, it was reported that a
21 For more on LSIs in general, see CRS Report RS22631, Defense Acquisition: Use of Lead
System Integrators (LSIs) — Background, Oversight Issues, and Options for Congress, by
Valerie Bailey Grasso.
CRS-17
large percentage of FY2007 funding for the Deepwater program had not yet been
obligated.22
Revolving Door And Potential For Conflicts Of Interest
The so-called revolving door, which refers to the movement of officials between
positions in government and industry, can create benefits for government and
industry in terms of allowing each side to understand the other’s needs and concerns,
and in terms of spreading best practices from one sector to the other. At the same
time, some observers have long been concerned that the revolving door might create
conflicts of interest for officials carrying out their duties while in government
positions. A March 25, 2007, news article stated in part:
Four of the seven top U.S. Coast Guard officers who retired since 1998
took positions with private firms involved in the Coast Guard’s troubled $24
billion fleet replacement program, an effort that government investigators have
criticized for putting contractors’ interests ahead of taxpayers’.
They weren’t the only officials to oversee one of the federal government’s
most complex experiments at privatization, known as Deepwater, who had past
or subsequent business ties to the contract consortium led by industry giants
Northrop Grumman and Lockheed Martin.
The secretary of transportation, Norman Y. Mineta, whose department
included the Coast Guard when the contract was awarded in 2002, was a former
Lockheed executive. Two deputy secretaries of the Department of Homeland
Security, which the Coast Guard became part of in 2003, were former Lockheed
executives, and a third later served on its board.
Washington’s revolving-door laws have long allowed officials from
industry giants such as Lockheed, the nation’s largest defense contractor, to
spend parts of their careers working for U.S. security agencies that make huge
purchases from those companies, though there are limits.
But Deepwater dramatizes a new concern, current and former U.S. officials
said: how dwindling competition in the private sector, mushrooming federal
defense spending and the government’s diminished contract management skills
raise the stakes for potential conflicts of interest.23
22 Patricia Kime, “Unspent Funds Are Bulk of Deepwater Budget,” DefenseNews.com,
March 12, 2007.
23 A 2002 CRS report on shipyard mergers stated in part:
Movement of senior-level employees between DoD and the defense
industry is common and can be beneficial in terms of improving DoD
understanding of industry concerns, importing efficient industry business
practices into DoD, and improving industry understanding of DoD goals,
procedures, and concerns. It also, however, has the potential to create questions
regarding potential conflicts of interest for senior DoD officials involved in
making decisions about major weapon acquisition programs or regulatory issues
(continued...)
CRS-18
Deepwater also illustrates how federal ethics rules carve out loopholes for
senior policymakers to oversee decisions that may benefit former or prospective
employers. These include outsourcing strategies under which taxpayers bear
most of the risks for failure, analysts said.
There is no sign that any of the retired admirals or former Lockheed
officials did anything illegal.
But the connections between the agencies and the contractors have drawn
the attention of the DHS inspector general, Richard L. Skinner. “That is on our
radar screen,” he said. “It’s something we are very sensitive to.”24
23 (...continued)
that affect the defense industry, particularly if those officials are potential
candidates for post-DoD employment with a defense firm.
Shipyard mergers since 1995 have contributed to the general consolidation
of defense firms and have reduced in particular the number of major defense
firms that might hire a former DoD or Navy official specifically on account of
that person’s background in Navy shipbuilding programs. Until 1995, for
example, a DoD or Navy official with such a background who was anticipating
or hoping for a post-DoD/Navy career in the private sector knew there were 6
major naval shipbuilding firms (plus several other major contractors involved in
shipbuilding programs) available as potential employers. Now, in contrast, there
are only two firms that own shipyards that build major ships for the Navy (GD
and NOC) and a smaller number of other major defense contractors involved in
shipbuilding programs (e.g., Lockheed Martin and Raytheon).
A potential issue for Congress is whether and how shipyard mergers since 1995, by
reducing the number of potential post-DoD/Navy employers for persons with shipbuilding
backgrounds, might affect decisions made by current senior DoD and Navy officials with
responsibility for Navy shipbuilding programs or regulatory issues affecting the shipyards.
With fewer firms available as potential post-DoD/Navy employers, will DoD/Navy officials
involved in shipbuilding programs be willing to make decisions that might strongly
disappoint one or more of those firms?
(CRS Report RL31400, Navy Shipbuilding: Recent Shipyard
Mergers — Background and Issues for Congress, by Ronald
O’Rourke.)
24 Spencer S. Hsu and Renae Merle, “Coast Guard’s Purchasing Raises Conflict-Of-Interest
Flags,” Washington Post, March 25, 2007.
CRS-19
Potential Options for Congress
Potential options for Congress regarding the Deepwater program — some of
which might have the effect of legislatively mandating reforms that the Coast Guard
announced on April 17, 2007 — include but are not limited to the following:
! track and assess the changes that the Coast Guard has stated it will
implement regarding management and execution of the Deepwater
program;
! institute additional or stricter reporting requirements for the
Deepwater program;
! encourage or require the Coast Guard to implement
recommendations for the Deepwater program made by the DAU, the
DHS IG, and GAO that the Coast Guard has not already agreed to
implement;
! encourage or require the Coast Guard to make greater use of the
Navy or other third-party, independent sources of expertise to help
the Coast Guard manage the program;
! encourage or require the Coast Guard to cancel its 43-month award
period to the current LSI and to hold a new competition, open to all
bidders, for the LSI role;
! encourage or require the Coast Guard to reduce the role of the LSI
to that of a coordinator of Deepwater program efforts managed and
executed by various firms acting as prime contractors for their
various efforts;
! encourage or require the Coast Guard to end the use of a private-
sector LSI in favor of direct Coast Guard management and
integration of the program;
! encourage or require the Coast Guard to replace the Deepwater
program with a series of separate procurement programs for
replacing individual classes of cutters, boats, and aircraft; and
! prohibit the obligation or expenditure of some or all FY2008
funding for the Deepwater program until the Coast Guard or DHS
takes certain actions or makes certain certifications regarding the
Deepwater program.
CRS-20
Legislative Activity in 2007
FY2007 Emergency Supplemental
Appropriations Act (H.R. 1591)
House. Sections 4403 and 4404 of the House-passed version of H.R. 1591
state:
SEC. 4403. (a) IN GENERAL- Any contract, subcontract, or task order described
in subsection (b) shall contain the following:
(1) A requirement for a technical review of all designs, design changes, and
engineering change proposals, and a requirement to specifically address all
engineering concerns identified in the review before the obligation of further
funds may occur.
(2) A requirement that the Coast Guard maintain technical warrant holder
authority, or the equivalent, for major assets.
(3) A requirement for independent cost estimates of major changes.
(4) A requirement for measurement of contractor and subcontractor performance
based on the status of all work performed.
(b) CONTRACTS, SUBCONTRACTS, AND TASK ORDERS COVERED-
Subsection (a) applies to —
(1) any major procurement contract entered into by the Coast Guard;
(2) any subcontract entered into under such a contract; and
(3) any task order issued pursuant to such a contract or subcontract.
(c) PLAN FOR EXPENDITURE OF DEEPWATER FUNDS- The funds
appropriated in Public Law 109-295 for the Integrated Deepwater Systems
program may not be obligated until the Committees on Appropriations of the
Senate and the House of Representatives receive and approve a plan for
expenditure that —
(1) defines activities, milestones, yearly costs, and lifecycle costs for each
procurement of a major asset, including an independent cost estimate for each;
(2) identifies lifecycle staffing and training needs of Coast Guard project
managers and of procurement and contract staff;
(3) identifies all Integrated Product Teams that are not chaired by Coast Guard
personnel and explains why the Coast Guard does not chair;
(4) identifies competition to be conducted in each procurement;
(5) does not rely on a single industry entity or contract;
CRS-21
(6) contains very limited indefinite delivery/indefinite quantity contracts and
explains the need for any indefinite delivery/indefinite quantity contracts;
(7) complies with all applicable acquisition rules, requirements, and guidelines,
and incorporates the best systems acquisition management practices of the
Federal Government;
(8) complies with the capital planning and investment control requirements
established by the Office of Management and Budget, including circular A-11,
part 7;
(9) includes a certification by the Chief Procurement Officer of the Department
of Homeland Security that the Coast Guard has established sufficient controls
and procedures to comply with all contracting requirements and that any apparent
conflicts of interest have been sufficiently addressed;
(10) includes a description of the process used to act upon deviations from the
contractually specified performance requirements and clearly explains the
actions taken on such deviations; and
(11) is reviewed by the Government Accountability Office.
SEC. 4404. (a) IN GENERAL- With respect to contracts entered into after May
1, 2007, and except as provided in subsection (b), no entity performing lead
system integrator functions in the acquisition of a major system by the
Department of Homeland Security may have any direct financial interest in the
development or construction of any individual system or element of any system
of systems.
(b) EXCEPTION- An entity described in subsection (a) may have a direct
financial interest in the development or construction of an individual system or
element of a system of systems if —
(1) the Secretary of Homeland Security certifies to the Committees on
Appropriations of the Senate and the House of Representatives and the House
Committee on Homeland Security that —
(A) the entity was selected by the Department of Homeland Security as a
contractor to develop or construct the system or element concerned through the
use of competitive procedures; and
(B) the Department took appropriate steps to prevent any organizational conflict
of interest in the selection process; or
(2) the entity was selected by a subcontractor to serve as a lower-tier
subcontractor, through a process over which the entity exercised no control.
(c) CONSTRUCTION- Nothing in this section shall be construed to preclude an
entity described in subsection (a) from performing work necessary to integrate
two or more individual systems or elements of a system of systems with each
other.
CRS-22
(d) REGULATIONS UPDATE- Not later than May 1, 2007, the Secretary of
Homeland Security shall update the acquisition regulations of the Department of
Homeland Security in order to specify fully in such regulations the matters with
respect to lead system integrators set forth in this section. Included in such
regulations shall be (1) a precise and comprehensive definition of the term `lead
system integrator’, modeled after that used by the Department of Defense, and
(2) a specification of various types of contracts and fee structures that are
appropriate for use by lead system integrators in the production, fielding, and
sustainment of complex systems.
With regard to these two sections, the House report on the bill (H.Rept. 110-060
of March 20, 2007) states:
The Committee includes a provision [Section 4403] tightening Coast Guard
procurement practices. Numerous studies, including one by the Defense
Acquisition University, have recommended changes to Coast Guard procurement
procedures and contracting practices in order to control costs and procure
equipment that works. The most recent failure in procurement resulted in eight
Coast Guard cutters that are currently grounded due to hull buckling problems.
In order to ensure that Coast Guard quickly reforms its major procurement
systems, the Committee has included bill language mandating: technical reviews
of design and design changes; independent cost estimates of major changes; and
Coast Guard maintaining technical warrant holder equivalent authority and
measuring contractor performance on all work performed. In addition, the
provision requires a robust expenditure plan that is reviewed by the Government
Accountability Office for Coast Guard’s Deepwater program before any 2007
Deepwater funding is obligated.
The Committee includes a provision [Section 4404] limiting the use of lead
system integrator contracts, similar to requirements in law for the Department of
Defense.
Senate. Section 3402 of the Senate-passed version of H.R. 1591 states:
SEC. 3402. INTEGRATED DEEPWATER SYSTEM. (a) COMPETITION FOR
ACQUISITION AND MODIFICATION OF ASSETS-
(1) IN GENERAL- The Commandant of the Coast Guard shall utilize full and
open competition for any contract entered into after the date of enactment of this
Act that provides for the acquisition or modification of assets under, or in
support of, the Integrated Deepwater System Program of the Coast Guard.
(2) EXCEPTIONS- Paragraph (1) shall not apply to the following:
(A) The acquisition or modification of the following asset classes for which
assets of the class and related systems and components under the Integrated
Deepwater System are under a contract for production:
(i) National Security Cutter;
(ii) Maritime Patrol Aircraft;
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(iii) Deepwater Command, Control, Communications, Computer, Intelligence,
Surveillance, and Reconnaissance (C4ISR) System; and
(iv) HC-130J Fleet Introduction.
(B) The modification of any legacy asset class under the Integrated Deepwater
System Program being performed by a Coast Guard entity.
(b) CHAIR OF PRODUCT AND OVERSIGHT TEAMS- The Commandant of
the Coast Guard shall assign an appropriate officer or employee of the Coast
Guard to act as chair of each of the following:
(1) Each integrated product team under the Integrated Deepwater System
Program.
(2) Each higher-level team assigned to the oversight of a product team referred
to in paragraph (1).
(c) LIFE-CYCLE COST ESTIMATE- The Commandant of the Coast Guard may
not enter into a contract for lead asset production under the Integrated Deepwater
System Program until the Commandant obtains an independent estimate of
life-cycle costs of the asset concerned.
(d) REVIEW OF ACQUISITIONS AND MAJOR DESIGN CHANGES-
(1) IN GENERAL- With the exception of assets covered under (a)(2) of this
section, the Commandant of the Coast Guard may not carry out an action
described in paragraph (2) unless an independent third party with no financial
interest in the development, construction, or modification of any component of
the Integrated Deepwater System Program, selected by the Commandant for
purposes of the subsection, determines that such action is advisable.
(2) COVERED ACTIONS- The actions described in the paragraph are as
follows:
(A) The acquisition or modification of an asset under the Integrated Deepwater
System Program.
(B) The implementation of a major design change for an asset under the
Integrated Deepwater System Program.
(e) LINKING OF AWARD FEES TO SUCCESSFUL ACQUISITION
OUTCOMES- The Commandant of the Coast Guard shall require that all
contracts under the Integrated Deepwater System Program that provide award
fees link such fees to successful acquisition outcomes (which shall be defined in
terms of cost, schedule, and performance).
(f) CONTRACTUAL AGREEMENTS-
(1) IN GENERAL- The Commandant of the Coast Guard may not award or issue
any contract, task or delivery order, letter contract modification thereof, or other
similar contract, for the acquisition or modification of an asset under the
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Integrated Deepwater System Program unless the Coast Guard and the contractor
concerned have formally agreed to all terms and conditions.
(2) EXCEPTION- A contract, task or delivery order, letter contract, modification
thereof, or other similar contract described in paragraph (1) may be awarded or
issued if the head of contracting activity of the Coast Guard determines that a
compelling need exists for the award or issue of such instrument.
(g) DESIGNATION OF TECHNICAL AUTHORITY- The Commandant of the
Coast Guard shall designate the Assistant Commandant of the Coast Guard for
Engineering and Logistics as the technical authority for all engineering, design,
and logistics decisions pertaining to the Integrated Deepwater System Program.
(h) REPORT ON PERSONNEL REQUIRED FOR ACQUISITION
MANAGEMENT- Not later than 30 days after the date of the enactment of this
Act, the Commandant of the Coast Guard shall submit to the Committees on
Appropriations of the Senate and the House of Representatives; the Committee
on Commerce, Science and Transportation of the Senate; and the Committee on
Transportation and Infrastructure of the House of Representatives a report on the
resources (including training, staff, and expertise) required by the Coast Guard
to provide appropriate management and oversight of the Integrated Deepwater
System Program.
(i) COMPTROLLER GENERAL REPORT ON PROGRESS- Not later than 60
days after the date of enactment of this Act, the Comptroller General of the
United States shall submit to the Committees on Appropriations of the Senate
and the House of Representatives; the Committee on Commerce, Science and
Transportation of the Senate; and the Committee on Transportation and
Infrastructure of the House of Representatives a report describing and assessing
the progress of the Coast Guard in complying with the requirements of this
section.
Conference. The conference report (H.Rept. 110-107) on H.R. 1591 was
submitted on April 24, 2007.
Section 4402. Section 4402 of the conference report states:
SEC. 4402. (a) IN GENERAL. — Any contract, subcontract, task or delivery
order described in subsection (b) shall contain the following:
(1) A requirement for a technical review of all designs, design changes, and
engineering change proposals, and a requirement to specifically address all
engineering concerns identified in the review before the obligation of further
funds may occur.
(2) A requirement that the Coast Guard maintain technical warrant holder
authority, or the equivalent, for major assets.
(3) A requirement that no procurement subject to subsection (b) for lead asset
production or the implementation of a major design change shall be entered into
unless an independent third party with no financial interest in the development,
construction, or modification of any component of the asset, selected by the
Commandant, determines that such action is advisable.
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(4) A requirement for independent life-cycle cost estimates of lead assets and
major design and engineering changes.
(5) A requirement for the measurement of contractor and subcontractor
performance based on the status of all work performed. For contracts under the
Integrated Deepwater Systems program, such requirement shall include a
provision that links award fees to successful acquisition outcomes (which shall
be defined in terms of cost, schedule, and performance).
(6) A requirement that the Commandant of the Coast Guard assign an appropriate
officer or employee of the Coast Guard to act as chair of each integrated product
team and higher-level team assigned to the oversight of each integrated product
team.
(7) A requirement that the Commandant of the Coast Guard may not award or
issue any contract, task or delivery order, letter contract modification thereof, or
other similar contract, for the acquisition or modification of an asset under a
procurement subject to subsection (b) unless the Coast Guard and the contractor
concerned have formally agreed to all terms and conditions or the head of
contracting activity for the Coast Guard determines that a compelling need exists
for the award or issue of such instrument.
(b) CONTRACTS, SUBCONTRACTS, TASK AND DELIVERY ORDERS
COVERED. — Subsection (a) applies to —
(1) any major procurement contract, first-tier subcontract, delivery or task order
entered into by the Coast Guard;
(2) any first-tier subcontract entered into under such a contract;
(3) any task or delivery order issued pursuant to such a contract or subcontract.
(c) EXPENDITURE OF DEEPWATER FUNDS. — Of the funds available for
the Integrated Deepwater Systems program, $650,000,000 may not be obligated
until the Committees on Appropriations of the Senate and the House of
Representatives receive an expenditure plan directly from the Coast Guard that
—
(1) defines activities, milestones, yearly costs, and life-cycle costs for each
procurement of a major asset, including an independent cost estimate for each;
(2) identifies life-cycle staffing and training needs of Coast Guard project
managers and of procurement and contract staff;
(3) identifies competition to be conducted in each procurement;
(4) describes procurement plans that do not rely on a single industry entity or
contract;
(5) contains very limited indefinite delivery/indefinite quantity contracts and
explains the need for any indefinite delivery/indefinite quantity contracts;
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(6) complies with all applicable acquisition rules, requirements, and guidelines,
and incorporates the best systems acquisition management practices of the
Federal Government;
(7) complies with the capital planning and investment control requirements
established by the Office of Management and Budget, including circular A — 11,
part 7;
(8) includes a certification by the head of contracting activity for the Coast Guard
and the Chief Procurement Officer of the Department of Homeland Security that
the Coast Guard has established sufficient controls and procedures and has
sufficient staffing to comply with all contracting requirements, and that any
conflicts of interest have been sufficiently addressed;
(9) includes a description of the process used to act upon deviations from the
contractually specified performance requirements and clearly explains the
actions taken on such deviations;
(10) includes a certification that the Assistant Commandant of the Coast Guard
for Engineering and Logistics is designated as the technical authority for all
engineering, design, and logistics decisions pertaining to the Integrated
Deepwater Systems program; and
(11) identifies progress in complying with the requirements of subsection (a).
(d) REPORTS. — (1) Not later than 30 days after the date of enactment of this
Act, the Commandant of the Coast Guard shall submit to the Committees on
Appropriations of the Senate and the House of Representatives; the Committee
on Commerce, Science and Transportation of the Senate; and the Committee on
Transportation and Infrastructure of the House of Representatives: (i) a report
on the resources (including training, staff, and expertise) required by the Coast
Guard to provide appropriate management and oversight of the Integrated
Deepwater Systems program; and (ii) a report on how the Coast Guard will
utilize full and open competition for any contract that provides for the acquisition
or modification of assets under, or in support of, the Integrated Deepwater
Systems program, entered into after the date of enactment of this Act; and (2)
within 30 days following the submission of the expenditure plan required under
subsection (c), the Government Accountability Office shall review the plan and
brief the Committees on Appropriations of the Senate and the House of
Representatives on its findings.
Section 4404(b)(1). Section 4404(b)(1) of the conference report appropriates
$30 million in additional appropriations to procure four new coastal patrol boats so
as to mitigate the Coast Guard’s patrol boat operational gap. In discussing this
appropriation, the conference report states:
to address an urgent operational need, the conferees provide $30,000,000 for
Coast Guard “Acquisition, Construction, and Improvements” to help mitigate the
patrol boat operational gap. No additional appropriation was included in either
the House or Senate bills. The Coast Guard is currently operating 25,000 hours,
or twenty-five percent, short of its needed patrol boat mission hours. This “gap”
means that undocumented migrants, drugs, and other unlawful activity are less
likely to be intercepted by the Coast Guard. Funding provided in this section is
to be used to acquire four new Coastal Patrol Boats, as was requested by the
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Department of Homeland Security via official correspondence on March 11,
2007. This includes the production, warranty, training, spares, outfitting and
project management costs for all four patrol boats. The Coast Guard has
indicated these new Coastal Patrol Boats will partially relieve the burden on
existing 110' patrol boats until a replacement patrol boat can be placed in service.
Currently, Florida-based 110' patrol boats average more than 5,500 mission hours
annually which can be performed by the smaller 87' Coastal Patrol Boats
operating out of the three primary Florida ports of Tampa, Miami and Key West.
This will allow the 110' patrol boats currently operating in these areas to be
utilized farther south where undocumented migrant traffic and drug smuggling
are more prevalent.
Section 4405. Section 4405 of the conference report states:
SEC. 4405. (a) IN GENERAL. — With respect to contracts entered into after
June 1, 2007, and except as provided in subsection (b), no entity performing lead
system integrator functions in the acquisition of a major system by the
Department of Homeland Security may have any direct financial interest in the
development or construction of any individual system or element of any system
of systems.
(b) EXCEPTION. — An entity described in subsection (a) may have a direct
financial interest in the development or construction of an individual system or
element of a system of systems if —
(1) the Secretary of Homeland Security certifies to the Committees on
Appropriations of the Senate and the House of Representatives, the Committee
on Homeland Security of the House of Representatives, the Committee on
Transportation and Infrastructure of the House of Representatives, the
Committee on Homeland Security and Governmental Affairs of the Senate, and
the Committee on Commerce, Science and Transportation of the Senate that —
(A) the entity was selected by the Department of Homeland Security as a
contractor to develop or construct the system or element concerned through the
use of competitive procedures; and (B) the Department took appropriate steps to
prevent any organizational conflict of interest in the selection process; or (2) the
entity was selected by a subcontractor to serve as a lower-tier subcontractor,
through a process over which the entity exercised no control.
(c) CONSTRUCTION. — Nothing in this section shall be construed to preclude
an entity described in subsection (a) from performing work necessary to integrate
two or more individual systems or elements of a system of systems with each
other.
(d) REGULATIONS UPDATE. — Not later than June 1, 2007, the Secretary of
Homeland Security shall update the acquisition regulations of the Department of
Homeland Security in order to specify fully in such regulations the matters with
respect to lead system integrators set forth in this section. Included in such
regulations shall be (1) a precise and comprehensive definition of the term “lead
system integrator,” modeled after that used by the Department of Defense, and
(2) a specification of various types of contracts and fee structures that are
appropriate for use by lead system integrators in the production, fielding, and
sustainment of complex systems.
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Integrated Deepwater Program Reform Act (S. 924)
This bill was introduced on March 20, 2007. On April 25, 2007, the Senate
Commerce, Science, and Transportation Committee ordered the bill to be reported
favorably with an amendment in the nature of a substitute. The text of the bill below
is the version introduced on March 20. (The text of the version reported on April 25
was not posted on LIS as of mid-afternoon on April 30.)
Section 1 provides a short title for the bill and a table of contents. The
remaining sections of the bill are as follows:
SEC. 2. PROCUREMENT STRUCTURE.
(a) In General-
(1) USE OF LEAD SYSTEMS INTEGRATOR- Except as provided in
subsection (b), the United States Coast Guard may not use a private sector entity
as a lead systems integrator for procurements under, or in support of, the
Integrated Deepwater Program after the date of enactment of this Act.
(2) FULL AND OPEN COMPETITION- The United States Coast Guard shall
utilize full and open competition for any other procurement for which an outside
contractor is used under, or in support of, the Integrated Deepwater Program after
the date of enactment of this Act.
(b) Exceptions-
(1) COMPLETION OF PROCUREMENT BY LEAD SYSTEMS
INTEGRATOR- Notwithstanding subsection (a), the Coast Guard may use a
private sector entity as a lead systems integrator —
(A) to complete, without modification, any delivery order or task order that was
issued to the lead systems integrator on or before the date of enactment of this
Act;
(B) for procurements of —
(i) the HC-130J and the C41SR, and
(ii) National Security Cutters or Maritime Patrol Aircraft under contract or order
for construction as of the date of enactment of this Act,
if the requirements of subsection (c) are met with respect to such procurements;
and
(C) for the procurement of additional National Security Cutters or Maritime
Patrol Aircraft if the Commandant determines, after conducting the analysis of
alternatives required by section 3, that —
(i) the justifications of FAR 6.3 are met;
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(ii) the procurement and the use of a private sector entity as a lead systems
integrator for the procurement is in the best interest of the Federal Government;
and
(iii) the requirements of subsection (c) are met with respect to such procurement.
(2) REPORT ON DECISION-MAKING PROCESS- If the Coast Guard
determines under paragraph (1) that it will use a private sector lead systems
integrator for a procurement, the Commandant shall transmit a report to the
Senate Committee on Commerce, Science, and Transportation and the House of
Representatives Committee on Transportation and Infrastructure notifying the
Committees of its determination and explaining the rationale for the
determination.
(c) LIMITATION ON LEAD SYSTEMS INTEGRATORS- Neither an entity
performing lead systems integrator functions for a procurement under, or in
support of, the Integrated Deepwater Program, nor a Tier 1 subcontractor, for any
procurement described in subparagraph (B) or (C) of subsection (b)(1) may have
a financial interest below the tier 1 subcontractor level unless —
(1) the entity was selected by the Coast Guard through full and open competition
for such procurement;
(2) the procurement was awarded by the lead systems integrator or a
subcontractor through full and open competition; or
(3) the procurement was awarded by a subcontractor through a process over
which the lead systems integrator or a Tier 1 subcontractor exercised no control.
SEC. 3. ANALYSIS OF ALTERNATIVES.
(a) IN GENERAL- Except with respect to a procurement described in
subparagraph (A) or (B) of section 2(b)(1) of this Act, no procurement may be
awarded under the Integrated Deepwater Program until an analysis of alternatives
has been conducted under this section.
(b) INDEPENDENT ANALYSIS- Within 30 days after the date of enactment of
this Act, the Commandant shall execute a contract for an analysis of alternatives
with a Federally Funded Research and Development Center, an appropriate entity
of the Department of Defense, or a similar independent third party entity that has
appropriate acquisition expertise for independent analysis of all of the proposed
procurements under, or in support of, the Integrated Deepwater Program,
including procurements described in section 2(b)(1)(B), and for any future major
changes of such procurements. The Commandant may not contract under this
subsection for such an analysis with any entity that has a substantial financial
interest in any part of the Integrated Deepwater Program as of the date of
enactment of this Act or in any alternative being considered.
(c) ANALYSIS- The analysis of alternatives provided pursuant to the contract
under subsection (b) shall include —
(1) a discussion of capability, interoperability, and other advantages and
disadvantages of the proposed procurements;
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(2) an examination of feasible alternatives;
(3) a discussion of key assumptions and variables, and sensitivity to changes in
such assumptions and variables;
(4) an assessment of technology risk and maturity; and
(5) a calculation of costs, including life-cycle costs.
(d) REPORT TO CONGRESS- As soon as possible after an analysis of
alternatives has been completed, the Commandant shall develop a plan for the
procurements addressed in the analysis and shall transmit a report describing the
plan to the Senate Committee on Commerce, Science, and Transportation and the
House of Representatives Committee on Transportation and Infrastructure.
SEC. 4. CERTIFICATION.
(a) IN GENERAL- A contract, delivery order, or task order for procurement
under, or in support of, the Coast Guard’s Integrated Deepwater Program may
not be executed by the Coast Guard until the Commandant certifies that —
(1) appropriate market research has been conducted prior to technology
development to reduce duplication of existing technology and products;
(2) the technology has been demonstrated in a relevant environment;
(3) the technology demonstrates a high likelihood of accomplishing its intended
mission;
(4) the technology is affordable when considering the per unit cost and the total
procurement cost in the context of the total resources available during the period
covered by the Integrated Deepwater Program;
(5) the technology is affordable when considering the ability of the Coast Guard
to accomplish its missions using alternatives, based on demonstrated technology,
design, and knowledge;
(6) reasonable cost and schedule estimates have been developed to execute the
product development and production plan for the technology;
(7) funding is available to execute the product development and production plan
for the technology; and
(8) the technology complies with all relevant policies, regulations, and directives
of the Coast Guard.
(b) REPORT TO CONGRESS- The Commandant shall transmit a copy of each
certification required under subsection (a) to the Senate Committee on
Commerce, Science, and Transportation and the House of Representatives
Committee on Transportation and Infrastructure within 30 days after the
completion of the certification.
SEC. 5. CONTRACT REQUIREMENTS.
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The Commandant shall ensure that any contract, delivery order, or task order for
procurement under, or in support of, the Integrated Deepwater Program executed
by the Coast Guard —
(1) incorporates provisions that address the recommendations related to award
fee determination and award term evaluation made by the Government
Accountability Office in its March, 2004, report entitled Coast Guard’s
Deepwater Program Needs Increased Attention to Management and Contractor
Oversight, GAO-04-380, and any subsequent Government Accountability Office
recommendations relevant to the contract terms issued before the date of
enactment of this Act, including that any award or incentive fee is tied to
program outcomes;
(2) provides that certification of any Integrated Deepwater Program procurement
for performance, safety, and any other relevant factor will be conducted by an
independent third party;
(3) does not include —
(A) for any contract extending the existing Integrated Deepwater Program
contract term, minimum requirements for the purchase of a given or determinable
number of specific assets;
(B) provisions that commit the Coast Guard without express written approval by
the Coast Guard;
(C) any provision allowing for equitable adjustment that differs from the Federal
Acquisition Regulations; and
(4) for any contract extending the existing Integrated Deepwater Program
contract term, is reviewed by, and addresses recommendations made by, the
Under Secretary of Defense for Acquisition, Technology, and Logistics through
the Defense Acquisition University.
SEC. 6. IMPROVEMENTS IN COAST GUARD MANAGEMENT.
(a) IN GENERAL- As soon as practicable after the date of enactment of this Act,
the Commandant shall take action to ensure that —
(1) the measures contained in the Coast Guard’s report entitled Coast Guard:
Blue Print for Acquisition Reform are implemented fully;
(2) any additional measures for improved management recommended by the
Defense Acquisition University in its Quick Look Study of the United States
Coast Guard Deepwater Program, dated February 5, 2007, are implemented;
(3) integrated product teams, and all higher-level teams that oversee integrated
product teams, are chaired by Coast Guard personnel; and
(4) the Assistant Commandant for Engineering and Logistics is designated as the
Technical Authority for all design, engineering, and technical decisions for the
Integrated Deepwater Program.
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(b) TRANSFER-
(1) IN GENERAL- Section 93(a) of title 14, United States Code, is amended —
(A) by striking ‘and’ after the semicolon in paragraph (23);
(B) by striking ‘appropriate.’ in paragraph (24) and inserting ‘appropriate; and’;
and
(C) by adding at the end thereof the following:
‘(25) notwithstanding any other provision of law, in any fiscal year transfer funds
made available for personnel, compensation, and benefits from the appropriation
account ‘Acquisition, Construction, and Improvement’ to the appropriation
account ‘Operating Expenses’ for personnel compensation and benefits and
related costs necessary to execute new or existing procurements of the Coast
Guard.’
(2) NOTIFICATION- Within 30 days after making a transfer under section
93(a)(25) of title 14, United States Code, the Commandant shall notify the Senate
Committee on Commerce, Science, Transportation and Infrastructure, the Senate
Committee on Appropriations, the House Committee on Transportation and
Infrastructure, and the House Committee on Appropriations.
SEC. 7. PROCUREMENT AND REPORT REQUIREMENTS.
(a) SELECTED ACQUISITION REPORTS- The Commandant shall submit to
the Senate Committee on Commerce, Science, and Transportation and the House
of Representatives Committee on Transportation and Infrastructure reports on the
Integrated Deepwater Program that contain the same type of information with
respect to that Program, to the greatest extent practicable, as the Secretary of
Defense is required to provide to the Congress under section 2432 of title 10,
United States Code, with respect to major defense procurement programs.
(b) UNIT COST REPORTS- Each Coast Guard program manager under the
Coast Guard’s Integrated Deepwater Program shall provide to the Commandant,
or the Commandant’s designee, reports on the unit cost of assets acquired or
modified that are under the management or control of the Coast Guard program
manager on the same basis and containing the same information, to the greatest
extent practicable, as is required to be included in the reports a program manager
is required to provide to the service procurement executive designated by the
Secretary of Defense under section 2433 of title 10, United States Code, with
respect to a major defense procurement program.
(c) REPORTING ON COST OVERRUNS AND DELAYS- Within 30 days after
the Commandant becomes aware of a likely cost overrun or scheduled delay, the
Commandant shall transmit a report to the Senate Committee on Commerce,
Science, and Transportation and the House of Representatives Committee on
Transportation and Infrastructure that includes —
(1) a description of the known or anticipated cost overrun;
(2) a detailed explanation for such overruns;
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(3) a detailed description of the Coast Guard’s plans for responding to such
overrun and preventing additional overruns; and
(4) a description of any significant delays in procurement schedules.
SEC. 8. GAO REVIEW AND RECOMMENDATIONS.
(a) AWARD FEE AND AWARD TERM CRITERIA- The Coast Guard may not
execute a new contract, delivery order, or task order, nor agree to extend the term
of an existing contract, with a prime contractor for procurement under, or in
support of, the Integrated Deepwater Program until the Commandant has
consulted with the Comptroller General to ensure that the Government
Accountability Office’s recommendations, in its March, 2004, report entitled
Coast Guard’s Deepwater Program Needs Increased Attention to Management
and Contractor Oversight, GAO-04-380, and any subsequent Government
Accountability Office recommendations issued before the date of enactment of
this Act, with respect to award fee and award term criteria have been fully
addressed.
(b) OTHER RECOMMENDATIONS- The Commandant shall ensure that all
other recommendations in that report, and any subsequent recommendations
issued before the date of enactment of this Act, are implemented to the maximum
extent practicable by the Coast Guard within 1 year after the date of enactment
of this Act. The Commandant shall report to the Senate Committee on
Commerce, Science, and Transportation and the House of Representatives
Committee on Transportation and Infrastructure on the Coast Guard’s progress
in implementing such recommendations.
(c) GAO REPORTS ON IMPLEMENTATION- Beginning 6 months after the
date of enactment of this Act, the Comptroller General shall submit an annual
report to the Senate Committee on Commerce, Science, and Transportation and
the House of Representatives Committee on Transportation and Infrastructure on
the Coast Guard’s progress in implementing the Government Accountability
Office’s recommendations, in its March, 2004, report entitled Coast Guard’s
Deepwater Program Needs Increased Attention to Management and Contractor
Oversight, GAO-04-380, and any subsequent Government Accountability Office
recommendations issued before the date of enactment of this Act, in carrying out
this Act.
SEC. 9. DEFINITIONS.
In this Act:
(1) COMMANDANT- The term `Commandant’ means the Commandant of the
United States Coast Guard.
(2) INTEGRATED DEEPWATER PROGRAM- The term `Integrated Deepwater
Program’ means the Integrated Deepwater Systems Program described by the
Coast Guard in its Report to Congress on Revised Deepwater Implementation
Plan, dated March 25, 2005, including any subsequent modifications, revisions,
or restatements of the Program.
(3) PROCUREMENT- The term `procurement’ includes development,
production, sustainment, modification, conversion, and missionization.
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Deepwater Accountability Act (S. 889)
Ths bill was introduced on March 15, 2007. Section 1 provides a short title for
the bill. The remaining sections of the bill are as follows:
SEC. 2. IMPROVEMENT OF ACQUISITION UNDER THE DEEPWATER
PROGRAM OF THE COAST GUARD.
(a) Competition Requirements for Future Acquisitions-
(1) REQUIREMENT- The Secretary of Homeland Security shall, upon reaching
the end of the period of performance currently under contract with Integrated
Coast Guard Systems in June 2007 under the Deepwater program of the Coast
Guard, acquire the completion, delivery, and acceptance of all assets under that
contract through new contracts solicited under the full and open competition
requirements of section 6.1 of the Federal Acquisition Regulation.
(2) PROHIBITION ON USE OF LEAD SYSTEMS INTEGRATOR- The
Secretary shall not utilize the services of a lead systems integrator in any manner
to acquire the completion, delivery, or acceptance of assets under this subsection.
(b) Exception-
(1) IN GENERAL- Notwithstanding subsection (a), the Secretary may enter into
a new contract with Integrated Coast Guard Systems for the completion, delivery,
and acceptance of assets for which construction has commenced, but not been
completed, under the contract referred to in that subsection as of the date of the
enactment of this Act if the Secretary certifies that —
(A) the completion, delivery, and acceptance of such assets under a contract
other than with Integrated Coast Guard Systems would pose an immediate or
near-term risk to the national security interests of the United States; or
(B) the cost of the completion, delivery, and acceptance of such assets under a
contract with other than Integrated Coast Guard Systems would exceed the cost
of the completion, delivery, and acceptance of such assets under a contract with
Integrated Coast Guard Systems.
(2) REPORTS TO CONGRESS- If the Secretary determines under paragraph (1)
to acquire the completion, delivery, and acceptance of assets under a contract
with Integrated Coast Guard Systems, the Secretary shall, not later than 180 days
after the date of such determination and every 180 days thereafter until the
completion, delivery, and acceptance of such assets, submit to Congress a report
on the current construction status of such assets.
(c) Report on Proposed Acquisition to Acquire Completion, Delivery, and
Acceptance of Assets- Not later than 30 days after the date of the enactment of
this Act, the Secretary shall submit to Congress a report on the acquisition of
assets under the Deepwater program. The report shall set forth the following:
(1) A list of each asset under the Deepwater program that has not been
completed, delivered, and accepted as of the date of such report.
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(2) A list of each such asset of which the Secretary proposes to acquire
completion, delivery, and acceptance under contracts entered into under
subsection (a).
(3) A list of each such asset of which the Secretary proposes to acquire
completion, delivery, and acceptance under a contract under subsection (b) with
Integrated Coast Guard Systems.
(d) Inspector General Review of Deepwater Program- Not later than 180 days
after the date of the enactment of this Act, the Inspector General of the
Department of Homeland Security shall submit to the Secretary, and to Congress,
a report on the acquisition of assets under the Deepwater program. The report
shall include —
(1) a description of each decision, if any, of the Coast Guard or Integrated Coast
Guard Systems relating to the acquisition of assets under the Deepwater program
that directly or indirectly resulted in cost overruns or program cost increases to
the United States;
(2) an assessment whether any decision covered by paragraph (1) violated the
terms of the contract of Integrated Coast Guard Systems for the Deepwater
program;
(3) an assessment of how much program costs under the Deepwater program
have increased as a result of any such decision;
(4) an assessment of whether the Coast Guard or Integrated Coast Guard Systems
is responsible for the payment of any cost overruns associated with any such
decision.
(e) Definitions- In this section:
(1) The term `asset’ means any product to be acquired under the contract of the
Coast Guard for the Deepwater program referred to in subsection (a), including
vessels, fixed-wing aircraft, and rotary-wing aircraft, and any component thereof.
(2) The term `Integrated Coast Guard Systems’ means the joint venture,
commonly referred to as `Integrated Coast Guard Systems’ or `ICGS’ between
Lockheed Martin Corporation and Northrop Grumman Corporation for the
purposes of completing and delivering assets to the Coast Guard under the
Deepwater program.
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Appendix A. DAU Quick Look Study, February 2007
The executive summary of the DAU “quick look” study on the Deepwater
program25 states:
25 Defense Acquisition University, Quick Look Study, United States Coast Guard Deepwater
Program, February 2007.
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Appendix B. DHS IG Testimony And Reports
March 8, 2007, and February 14, 2007, Testimony
At a March 8, 2007, hearing on the Coast Guard’s proposed FY2008 budget
before the Coast Guard and Maritime Transportation subcommittee of the House
Transportation and Infrastructure Committee, and at a February 14, 2007 hearing on
the Deepwater program before the Oceans, Atmosphere, Fisheries, and Coast Guard
subcommittee of the Senate Commerce, Science and Transportation Committee, the
DHS IG testified in part:
We have completed audits of the 110-foot/123-foot Modernization Project;
the National Security Cutter, the information technology systems; and the
re-engining of the HH-65 helicopters. Common themes and risks emerged from
these audits, primarily the dominant influence of expediency, flawed contract
terms and conditions, poorly defined performance requirements, and inadequate
management and technical oversight. These deficiencies contributed to schedule
delays, cost increases, and asset designs that failed to meet minimum Deepwater
performance requirements.
Lead Systems Integrator Approach
The route the Coast Guard took to outsource program management to the
systems integrator has presented challenges in implementation. The Deepwater
contract essentially empowered the contractor with authority for
decision-making. Therefore, the Coast Guard was reluctant to exercise a
sufficient degree of authority to influence the design and production of its own
assets. Specifically, under the contract ICGS was the Systems Integrator and
assigned full technical authority over all asset design and configuration
decisions; while the Coast Guard’s technical role was limited to that of an expert
“advisor.” However, there is no contractual requirement that the Systems
Integrator accept or act upon the Coast Guard’s technical advice, regardless of
its proven validity. Furthermore, there are no contract provisions ensuring
government involvement into subcontract management and “make or buy”
decisions. The systems integrator decides who is the source of the supply. Also,
as the primary management tool for the Coast Guard to contribute its input on the
development of Deepwater assets, the effectiveness of the contractor-led
Integrated Product Teams (IPTs) in resolving the Coast Guard’s technical
concerns has been called into question by both the GAO and my office.
Contractor Accountability
Our reviews have raised concerns with the definition and clarity of
operational requirements, contract requirements and performance specifications,
and contractual obligations. For example, in our report of the NSC, we reported
the Coast Guard and the American Bureau of Shipping (ABS) jointly developed
standards that would govern the design, construction, and certification of all
cutters acquired under the Deepwater Program. These standards were intended
to ensure that competing industry teams developed proposals that met the Coast
Guard’s unique performance requirements. Prior to the Phase 2 contract award,
the Coast Guard provided these design standards to the competing industry
teams. Based on their feedback, the Coast Guard converted the majority of the
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standards (85% of the 1,175 standards) to guidance and permitted the industry
teams to select their own alternative standards. Without a contractual mechanism
in place to ensure that those alternative standards met or exceeded the original
guidance standards, the competing teams were allowed to select cutter design
criteria.
Additionally, the Deepwater contract gives the Systems Integrator the
authority to make all asset design and configuration decisions necessary to meet
system performance requirements. This condition allowed ICGS to deviate
significantly from a set of cutter design standards originally developed to support
the Coast Guard’s unique mission requirements, and ICGS was further permitted
to self-certify compliance with those design standards. As a result, the Coast
Guard gave ICGS wide latitude to develop and validate the design of its
Deepwater cutters, including the NSC.
Deepwater Performance Requirements Are Ill-Defined
A lack of clarity in the Deepwater contract’s terms and conditions have also
compromised the Coast Guard’s ability to hold the contractor accountable by
creating situations where competing interpretations of key provisions exist. For
example, the performance specifications associated with upgrading the
information systems on the Coast Guard’s 123' Island Class Patrol Boats did not
have a clearly defined expected level of performance. Also, in our review of the
HITRON lease, we determined that a similar lack of clarity in the asset’s
contractual performance requirements challenged the Coast Guard’s ability to
effectively assess contractor performance. On the NSC acquisition, the cutter’s
performance specifications were so poorly worded that there were major
disagreements within the Coast Guard as to what the NSC’s performance
capabilities should actually be.
Deepwater Cost Increases
The cost of NSCs 1 and 2 is expected to increase well beyond the current
$775 million estimate, as this figure does not include a $302 million Request for
Equitable Adjustment (REA) submitted to the Coast Guard by ICGS on
November 21, 2005. The REA represents ICGS’s re-pricing of all work
associated with the production and deployment of NSCs 1 and 2 caused by
adjustments to the cutters’ respective implementation schedules as of January 31,
2005. The Coast Guard and ICGS are currently engaged in negotiations over the
final cost of the current REA, although ICGS has also indicated its intention to
submit additional REAs for adjusted work schedules impacting future NSCs,
including the additional cost of delays caused by Hurricane Katrina.
The current $775 million estimate also does not include the cost of
structural modifications to be made to the NSC as a result of its known design
deficiencies. In addition, future REAs and the cost of modifications to correct
or mitigate the cutter’s existing design deficiencies could add hundreds of
millions of dollars to the total NSC acquisition cost. We remain concerned that
these and other cost increases could result in the Coast Guard acquiring fewer
NSCs or other air and surface assets under the Deepwater contract.
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Impact on Coast Guard Operational Capabilities — Short and Long Term
The Deepwater record of accomplishment has been disappointing to date.
For example, while the re-engining of the HH-65 Bravo helicopters has resulted
in an aircraft with significantly improved capabilities, the program has
experienced schedule delays and cost increases. For example, the delivery
schedule calls for the HH-65 re-engining project to be completed by November
2007 or 16 months beyond the Commandant’s original July 2006 deadline.
Extending the delivery schedule has exposed HH-65B aircrews to additional risk
due to the tendency of the aircraft to experience loss of power mishaps. It also
delays the replacement of the eight Airborne Use of Force-equipped MH-68
helicopters that are being leased to perform the Helicopter Interdiction
(HITRON) mission at a cost in excess of $20 million per year.
There are also problems with Coast Guard’s acquisition of the Vertical
take-off and landing unmanned aerial vehicle (VUAV). VUAVs have the
potential to provide the Coast Guard flight-deck-equipped cutters with air
surveillance, detection, classification, and identification capabilities. Currently,
the VUAV acquisition is over budget and more than 10 months behind schedule.
The Commandant of the Coast Guard recently testified that the VUAV
acquisition was under review. The Commandant indicated that the Coast Guard
Research and Development Center is conducting a study and will provide
recommendations for the way ahead with the VUAV. A decision by the Coast
Guard to stop work on the VUAV project would significantly impact the
operational capability of the NSC and OPC by limiting their ability to provide
long-range surveillance away from the parent cutter. The Coast Guard’s Revised
Deepwater Implementation Plan, 2005 calls for the acquisition of 45 VUAVs at
a total cost of approximately $503.3 million. As of December 31, 2006, Coast
Guard had obligated $108.4 million (73%) of the $147.7 million funded for the
project.
The increased cost, schedule delays, and structural design problems
associated with the 123-foot patrol boat and the FRC have further exacerbated
the Coast Guard’s patrol boat operational hour and capability gap. The Coast
Guard is attempting to mitigate the problem by re-negotiating an agreement with
the U.S. Navy to continue the operation of the 179-foot “Cyclone” class patrol
boats, and to extend the operational capability of the 110-foot Island Class fleet
through the use of multiple crews. While the increased operations tempo this
will help in the short term, it will also increase the wear and tear on these aging
patrol boats in the long term.
The structural design issues associated with the NSC could have the
greatest impact on Coast Guard operational capabilities in both the near and long
term. This is due to cost increases that far exceed the cost of inflation even when
the post 9/11 engineering change proposals and the costs increases associated
with hurricane Katrina are left out of the equation. These cost increases are
largely due to: (1) existing and future Requests for Equitable adjustment that the
Coast Guard expects to receive from ICGS; (2) the cost of NSC “structural
enhancements,” the number, type, scope, and cost of which have yet to be
determined; and (3) the schedule delays and lost operational capability, that are
expected during the modification to NSCs 1-8....
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Conclusion
The Coast Guard recognizes these challenges and is taking aggressive
action to strengthen program management and oversight-such as technical
authority designation; use of independent, third party assessments; consolidation
of acquisition activities under one directorate; and redefinition of the contract
terms and conditions, including award fee criteria. Furthermore, and most
importantly, the Coast Guard is increasing its staffing for the Deepwater
program, and reinvigorating its acquisition training and certification processes
to ensure that staff have the requisite skills and education needed to manage the
program. The Coast Guard is also taking steps to improve the documentation of
key Deepwater related decisions. If fully-implemented, these steps should
significantly increase the level of management oversight exercised over the air,
surface, and C4ISR assets that are acquired or modernized under the Deepwater
Program. We look forward to working closely with the Coast Guard to continue
the improvement of the efficiency, effectiveness, and economy of the Deepwater
Program.26
January 2007 Report on NSC
A January 2007 DHS IG report on the NSC effort states in part:
The NSC, as designed and constructed, will not meet performance
specifications described in the original Deepwater contract. Specifically, due to
design deficiencies, the NSC’s structure provides insufficient fatigue strength to
be deployed underway for 230 days per year over its 30-year operational service
life under Caribbean (General Atlantic) and Gulf of Alaska (North Pacific) sea
conditions. Coast Guard technical experts believe the NSC’s design deficiencies
will also increase the cutter’s maintenance costs and reduce its service life. To
mitigate the effects of these deficiencies, the Coast Guard intends to modify the
NSC’s design to support an operational profile of 170 to 180 days underway per
year in the North Pacific region, lower than the 230-day performance standard
required by the Deepwater contract.
The NSC’s design and performance deficiencies are fundamentally the
result of the Coast Guard’s failure to exercise technical oversight over the design
and construction of its Deepwater assets. The Coast Guard’s technical experts
first identified and presented their concerns about the NSC’s structural design to
senior Deepwater Program management in December 2002, but this did not
dissuade the Coast Guard from authorizing production of the NSC in June 2004
or from awarding ICGS a contract extension in May 2006.
Since the Deepwater contract was signed in June 2002, the combined cost
of NSCs 1 and 2 has increased from $517 million to approximately $775 million,
resulting primarily from design changes necessary to meet post 9/11 mission
26 Statement of Richard L. Skinner, Inspector General, U.S. Department of Homeland
Security, Before the Committee on Transportation [and] Infrastructure, Subcommittee on
Coast Guard and Maritime Transportation, U.S. House of Representatives, March 8, 2007;
and Statement of Richard L. Skinner, Inspector General, U.S. Department of Homeland
Security, Before the Subcommittee on Oceans, Atmosphere, Fisheries and Coast Guard,
Committee on Commerce, Science, and Transportation, United States Senate, [hearing on]
The United States Coast Guard’s Deepwater Program, February 14, 2007.
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requirements and other government costs not included in the original contract
price. The $775 million estimate does not include costs to correct or mitigate the
NSC’s structural design deficiencies, additional labor and materials costs
resulting from the effects of Hurricane Katrina, and the final cost of a $302
million Request for Equitable Adjustment (REA) that the Coast Guard is
currently negotiating with ICGS....
Finally, we encountered resistance from the Coast Guard and ICGS in our
effort to evaluate the structural design and performance issues associated with
the NSC. The impediments we experienced in obtaining access to personnel,
information, and documentation associated with the NSC acquisition are
unacceptable in light of the statutory mandates of our office; the severity of the
NSC design and performance deficiencies; the importance of the NSC to the
Coast Guard’s national security and Deepwater missions; and the expenditure of
billions of taxpayer dollars that are being invested in this critical acquisition.
We are making five recommendations to the Coast Guard, and one to the
Department’s Chief Procurement Officer and Office of General Counsel. Our
recommendations are intended to: (1) ensure the National Security Cutter is
capable of fulfilling all performance requirements outlined in the Deepwater
contract; (2) improve the level of Coast Guard technical oversight and
accountability; and (3) ensure Office of Inspector General access to all records,
personnel, and contractors of the department during all current and future audits
and inspections.27
The report also stated:
The Deepwater contract gives the Systems Integrator the authority to make
all asset design and configuration decisions necessary to meet system
performance requirements. This condition allowed ICGS to deviate significantly
from a set of cutter design standards originally developed to support the Coast
Guard’s unique mission requirements, and ICGS was further permitted to
self-certify compliance with those design standards. As a result, the Coast Guard
gave ICGS wide latitude to develop and validate the design of its Deepwater
cutters, including the NSC.
Conversely, the Coast Guard chose to limit the technical oversight role of
the Systems Directorate on Deepwater to providing “expertise and credible
advice in core integrated engineering and logistics competencies.”... However,
the Deepwater contract does not require that ICGS or its subcontractors accept
or act upon the advice of the Coast Guard’s designated technical experts. As a
result of this relationship, the Coast Guard is limited in its ability to exercise
technical oversight over its assets acquired under the Deepwater contract. This,
in our opinion, is the primary factor contributing to the inclusion of the structural
deficiencies that currently compromise the NSC’s operational viability.
In contrast to the Coast Guard’s approach, the U.S. Navy retains technical
authority and accountability over the design and construction of its ships through
the institution of Technical Warrant Holder (TWH) authority....
27 Department of Homeland Security, Office of Inspector General, Acquisition of the
National Security Cutter, OIG -07-23, January 2007. The report is available online at
[http://www.dhs.gov/xoig/assets/mgmtrpts/OIG_07-23_Jan07.pdf].
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TWHs ensure that the technical aspects of Navy asset designs are given
independent consideration by providing technical authority that is separate from
program authority for cost, schedule, and performance. Navy surface asset
Program Managers yield to TWH decisions on technical issues and must secure
TWH approval for design changes. Efforts of the Coast Guard’s technical experts
to resolve their long-standing concerns with the NSC design were thwarted
because they lack a similar degree of authority on Deepwater.28
The report also stated that the Coast Guard and the American Bureau of
Shipping (ABS):
initially specified a certifying agent for each standard to ensure that all cutters
would be objectively evaluated for compliance. However, the Coast Guard
ultimately allowed the competing industry teams to determine the certifying
entity for any non-ABS standards it selected and, to the extent that it was
permitted, ICGS elected to self-certify compliance with these standards.20 This
decision to permit contractor self-certification contrasts sharply with the intended
role of an independent certifying authority, as articulated in the Deepwater
contract...
U.S. Navy and classification community subject matter experts expressed
similar opinions, that, “self-certification is no certification.” By allowing
contractor self-certification, the Coast Guard eliminated yet another oversight
tool for ensuring that cutter designs developed under the Deepwater Program
would meet both contractual and Deepwater mission performance requirements.29
The report also stated that:
the Coast Guard’s acquisition management capacity lacks the appropriate work
force, business processes, and management controls for executing a major
acquisition program such as the Integrated Deepwater System. Key positions are
still being identified and filled. The Coast Guard is still trying to come from
behind and create the organization needed to manage the program. That is why
we believe the Coast Guard needs to proceed with caution as it moves forward
with the implementation of the Integrated Deepwater System initiative.
Expediency and urgency should not drive the acquisition; instead, the Coast
Guard needs to ensure that it has the capacity to manage such an initiative. Then,
and only then, can it provide assurances that it is being a good steward of the
taxpayers’ dollar. Also, the Coast Guard needs to ensure performance
management systems and processes are in place and functioning. The design
flaws of the NSC, as well as the problems that the Coast Guard has experienced
with the System Integrator’s design of the Fast Response Cutters and the
123-Cutters, clearly demonstrate that improvements are needed. The Coast
Guard needs to build the management and oversight capacity that will allow it
to acquire the needs to build a performance management system that will ensure:
— Transparency — a clear roadmap on how the systems integrator plans to
meet the Coast Guard’s deepwater objectives.
— Visibility — a clear, open line of communications with all stakeholders on
the progress of the initiative.
28 Ibid., pp. 12-13.
29 Ibid., p. 14.
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— Accountability — the means to determine, on a real time basis, what is
working and what is not working.
— Oversight — including not only by the Coast Guard’s technical and
program management offices, but also by the OIG and the Congress.30
February 2007 Report on 110-Foot Modernization
The February 2007 DHS IG report on the 110-foot patrol boat modernization
program states in part:
On February 10, 2006, our office received a Hotline Complaint alleging that
the Coast Guard’s 123-foot Island Class Patrol Boats (123' cutter) and
short-range prosecutor (prosecutor) contained safety and security vulnerabilities.
The 123' cutter is a modification of the 110' Island Class patrol boat and was
phased into service as part of the Deepwater project. The original Deepwater
plan projected the conversion of forty-nine 110' patrol boats into 123' patrol
boats as a bridging strategy to meet patrol boat needs until the new Fast
Response Cutter was introduced. The prosecutor is a 24' 6" small boat that can
be deployed from the National Security Cutter, Fast Response Cutter, and
Offshore Patrol Cutter. The revised Deepwater Implementation Plan calls for the
acquisition of 91 prosecutors. The complaint said that these vulnerabilities were
the result of the contractor’s failure to comply with Command, Control,
Communications, Computer, Intelligence, Surveillance, and Reconnaissance
(C4ISR) design requirements as defined in the Deepwater contract. Specifically,
the complainant alleged that:
— The safety of the 123' cutter’s crew was compromised by the contractor’s
failure to utilize low smoke cabling;
— The contractor knowingly installed aboard the 123' cutter and prosecutor
external C4ISR equipment that did not meet specific environmental requirements
outlined in the Deepwater contract;
— The cable installed during the upgrade to the cutter’s C4ISR system
represented a security vulnerability; and,
—
The video surveillance system installed aboard the 123' cutter does not meet
the cutter’s physical security requirements.
Finally, the complainant provided information detailing his attempts, over
a 2 ½ year period, to compel the contractor to comply with Deepwater contract
requirements....
Aspects of the C4ISR equipment installed aboard the 123' cutters do not
meet the design standards set forth in the Deepwater contract. Specifically, two
of the four areas of concern identified by the complainant were substantiated and
are the result of the contractor not complying with the design standards identified
in the Deepwater contract. For example, the contractor did not install low smoke
cabling aboard the 123' cutter, despite a Deepwater contract requirement that
stated, “all shipboard cable added as a result of the modification to the vessel
shall be low smoke.” The intent of this requirement was to eliminate the
polyvinyl chloride jacket encasing the cables, which for years produced toxic
fumes and dense smoke during shipboard fire. Additionally, the contractor
installed C4ISR topside equipment aboard both the 123' cutters and prosecutors,
30 Ibid., pp. 35-36. Underlining as in the original.
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which either did not comply or was not tested to ensure compliance with specific
environmental performance requirements outlined in the Deepwater contract.
The remaining two areas of concern identified by the complainant were in
technical compliance with the Deepwater contract and deemed acceptable by the
Coast Guard. Specifically, while the type of cabling installed during the C4ISR
system upgrade to the 123' cutter was not high-grade braided cable; the type of
cable used met the Coast Guard’s minimum-security standards as required by the
Deepwater contract. Concerning the installation of the video surveillance system,
while the system did not provide 360 degrees of coverage, it met minimum
contract requirements.31
December 2006 Report On DHS Management Challenges
A December 2006 DHS IG report on major DHS management challenges stated:
USCG has also encountered a number of challenges in executing its
Deepwater Acquisition program despite the expenditure of more than $3 billion
over four years. This is particularly true within the Deepwater surface and air
domains. For example, the 110-foot patrol boat conversion project was curtailed
at eight cutters due to design, construction, performance, and cost concerns.
Further, strict operational restrictions have been imposed on these cutters until
additional structural analyses can be completed. In response to these challenges,
USCG accelerated plans to design, construct, and deploy the composite Fast
Response Cutter (FRC) by more than 10 years as a replacement for the 110-foot
patrol boat. However, an independent analysis confirmed that the FRC design
is outside patrol boat design parameters, i.e., too heavy, too overpowered, and
not streamlined enough to reduce resistance. These concerns led to USCG’s
April 2006 decision to suspend work on the FRC until these issues could be
resolved or an alternative commercial off-the-shelf design identified. In the
Deepwater air domain, the HH-65C helicopter7 and unmanned aerial vehicle
(VUAV) acquisitions have encountered schedule delays and cost increases.
These Deepwater design, construction, performance, scheduling, and cost issues
are expected to present significant challenges to USCG’s Deepwater Program
during FY 2007.32
August 2006 Report On Deepwater IT
An August 2006 report by the DHS Inspector General (IG) on the Coast Guard’s
acquisition of information technology (IT) for the Deepwater program stated:
We audited the Coast Guard’s efforts to design and implement command,
control, communications, computers, intelligence, surveillance, and
reconnaissance (C4ISR) systems to support the Integrated Deepwater System
program. As a result of our audit, we determined that the Coast Guard’s efforts
31 Department of Homeland Security, Office of Inspector General, 110'/123' Maritime Patrol
Boat Modernization Project, OIG -07-27, January 2007. The report is available online at
[http://www.dhs.gov/xoig/assets/mgmtrpts/OIG_07-27_Feb07.pdf].
32 U.S. Department of Homeland Security, Office of Inspector General, Major Management
Challenges Facing the Department of Homeland Security (Excerpts from the FY 2006 DHS
Performance and Accountability Report), December 2006. (OIG-07-12) p. 6.
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to develop its Deepwater C4ISR systems could be improved. Although Coast
Guard officials are involved in high-level Deepwater IT requirements definition
processes, they have limited influence over contractor decisions toward meeting
these requirements. A lack of discipline in requirements change management
processes provides little assurance that the requirements remain up-to-date or
effective in meeting program goals. Certification and accreditation of Deepwater
C4ISR equipment has been difficult to achieve, placing systems security and
operations at risk. Further, although the Deepwater program has established IT
testing procedures, the contractor has not followed them consistently to ensure
that C4ISR systems and the assets on which they are installed perform
effectively.
Additionally, the Coast Guard faces several challenges to implementing
effectively its Deepwater C4ISR systems. Due to limited oversight as well as
unclear contract requirements, the agency cannot ensure that the contractor is
making the best decisions toward accomplishing Deepwater IT goals.
Insufficient C4ISR funding has restricted accomplishing the “system-of-systems”
objectives that are considered fundamental to Deepwater asset interoperability.
Inadequate training and guidance hinder users from realizing the full potential
of the C4ISR upgrades. Instituting effective mechanisms for maintaining C4ISR
equipment have been equally challenging.33
A December 2006 DHS IG report on major DHS management challenges
reiterated these points.34
33 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) p. 1.
34 U.S. Department of Homeland Security, Office of Inspector General, Major Management
Challenges Facing the Department of Homeland Security (Excerpts from the FY 2006 DHS
Performance and Accountability Report), December 2006. (OIG-07-12) p. 13.
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Appendix C. GAO Testimony
March 8, 2007, and February 14, 2007, Testimony
At a March 8, 2007, hearing on the Coast Guard’s proposed FY2008 budget
before the Coast Guard and Maritime Transportation subcommittee of the House
Transportation and Infrastructure Committee, and at a February 14, 2007, hearing on
the Deepwater program before the Oceans, Atmosphere, Fisheries, and Coast Guard
subcommittee of the Senate Commerce, Science and Transportation Committee,
GAO provided its views on the Deepwater program. At the March 8, 2007, hearing,
GAO testified in part:
Summary
In 2001, we described the Deepwater program as “risky” due to the unique,
untried acquisition strategy for a project of this magnitude within the Coast
Guard. The Coast Guard used a system-of-systems approach to replace
deteriorating assets with a single, integrated package of aircraft, vessels, and
unmanned aerial vehicles to be linked through systems that provide command,
control, communications, computer, intelligence, surveillance, and
reconnaissance (C4ISR), and supporting logistics. In a system-of-systems, the
delivery of Deepwater assets are interdependent, thus schedule slippages and
uncertainties associated with potential changes in the design and capabilities of
any one asset increases the overall risk that the Coast Guard might not meet its
expanded homeland security missions within given budget parameters and
milestone dates. The Coast Guard also used a systems integrator — which can
give the contractor extensive involvement in requirements development, design,
and source selection of major system and subsystem subcontractors. The
Deepwater program is also a performance-based acquisition, meaning that it is
structured around the results to be achieved rather than the manner in which the
work is performed. If performance-based acquisitions are not appropriately
planned and structured, there is an increased risk that the government may
receive products or services that are over cost estimates, delivered late, and of
unacceptable quality.
In 2004 and in subsequent assessments in 2005 and 2006, we reported
concerns about the Deepwater program related to three main areas — program
management, contractor accountability, and cost control. The Coast Guard’s
ability to effectively manage the program has been challenged by staffing
shortfalls and poor communication and collaboration among Deepwater program
staff, contractors, and field personnel who operate and maintain the assets.
Despite documented problems in schedule, performance, cost control, and
contract administration, measures for holding the contractor accountable resulted
in an award fee of $4 million (of the maximum $4.6 million) for the first year.
Through the first 4 years of the Deepwater contract, the systems integrator
received award fees that ranged from 87 percent to 92 percent of the total
possible award fee (scores that ranged from “very good” to “excellent” based on
Coast Guard criteria), for a total of over $16 million. Further, the program’s
ability to control Deepwater costs is uncertain given the Coast Guard’s lack of
detailed information on the contractor’s competition decisions. While the Coast
Guard has taken some actions to improve program outcomes, our assessment of
the program and its efforts to address our recommendations continues, and we
plan to report on our findings later this year.
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Of the 10 classes of upgraded or new Deepwater aircraft and vessels, the
delivery record for first-in-class assets (that is, the first of multiple aircraft or
vessels to be delivered within each class) is mixed. Specifically, 7 of the 10 asset
classes are on or ahead of schedule. Among these, five first-in-class assets have
been delivered on or ahead of schedule; and two others remain on schedule but
their planned delivery dates are in 2009 or beyond. Three Deepwater asset
classes are currently behind schedule due to various problems related to designs,
technology, or funding. For example, the Fast Response Cutter (a new vessel),
which had been scheduled for first-in-class delivery in 2007, has been delayed
by at least 2 years in part because work on its design was suspended until
technical problems related to its hull and other issues can be addressed. The
Vertical Unmanned Aerial Vehicle (a new aircraft), which had also been
scheduled for delivery in 2007, has been delayed by 6 years due to evolving
technological developments, among other things. In addition, the Offshore Patrol
Cutter, which had a planned delivery date in 2010, has now been delayed by 5
years.
The Coast Guard is facing operational challenges because of performance
and design problems with Deepwater patrol boats. Specifically, the conversion
of legacy 110-foot patrol boats to upgraded 123-foot patrol boats was stopped at
eight hulls (rather than the entire fleet of 49) due to deck cracking, hull buckling,
and shaft alignment problems. These patrol boat conversion problems ultimately
led the Coast Guard to suspend all normal operations of the eight converted
123-foot patrol boats on November 30, 2006. The Coast Guard is now exploring
options to address the resulting short-term operational gaps. There have also been
design problems with the new Fast Response Cutter (FRC), intended to replace
all 110-foot and 123-foot patrol boats. In February 2006, the Coast Guard
suspended design work on the FRC due to design risks, such as excessive weight
and horsepower requirements.2 According to the Coast Guard, it has decided to
acquire two classes of FRCs in an effort to not delay delivery of the FRCs
further. One class is to be based on an adapted design from a patrol boat already
on the market and another class is to be redesigned to address the problems in the
original FRC design plans. As with the 123-foot patrol boats, the Coast Guard is
looking at options to address these long-term operational gaps....
Deepwater Indicative of Broader, Systematic Acquisition Challenges
Some of the problems the Coast Guard is experiencing with the Deepwater
program are similar to problems we have reported on in other complex,
developmental systems. These problems stem from:
• Program requirements that are set at unrealistic levels, then changed frequently
as recognition sets in that they cannot be achieved. As a result, too much time
passes; threats may change; and/or members of the user and acquisition
communities may simply change their minds. The resulting program instability
causes cost escalation, schedule delays, fewer quantities, and reduced contractor
accountability.
• Program decisions to move into design and production without adequate
standards or knowledge.
• Contracts, especially service contracts, that often do not have measures in place
at the outset in order to control costs and facilitate accountability.
• Contracts that typically do not accurately reflect the complexity of projects or
appropriately allocate risk between the contractors and the taxpayers.
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• Agency acquisition workforces that are challenged because of size, skills,
insufficient knowledge, and succession planning.
• Incentive and award fees that are often paid based on contractor efforts versus
positive results, such as cost, quality, and schedule.
• Inadequate government oversight that results in little to no accountability for
recurring and systemic problems.
Preliminary Observations on Deepwater Program Management, Contractor
Accountability, and Cost Control
Since the inception of the Deepwater program, we have expressed concerns
about the risks involved with the Coast Guard’s system-of-systems acquisition
approach and the Coast Guard’s ability to manage and oversee the program. Our
concerns have centered on three main areas: program management, contractor
accountability, and cost control through competition. We have made a number
of recommendations to improve the program — most of which the Coast Guard
has agreed with and is working to address. However, while actions are under
way, a project of this magnitude will likely continue to experience other
problems as more becomes known.
Program Management
In 2004, we reported that the Coast Guard had not effectively implemented
key components needed to manage and oversee the systems integrator.
Specifically, we reported at that time and subsequently on issues related to
integrated product teams (IPT), the Coast Guard’s human capital strategy, and
communication with field personnel (individuals responsible for operating and
maintaining the assets). Our preliminary observations on the Coast Guard’s
progress in improving these program management areas, based on our ongoing
work, follow.
Integrated Product Teams
In 2004, we found that IPTs, the Coast Guard’s primary tool for managing
the Deepwater program and overseeing the contractor, had not been effective due
to changing membership, understaffing, insufficient training, lack of authority
for decision making, and inadequate communication. We recommended the
Coast Guard take actions to address IPT effectiveness. We subsequently reported
that IPT decision-making was to a large extent stovepiped, and some teams
lacked adequate authority to make decisions within their realm of responsibility.8
Coast Guard officials stated that they believed collaboration among the
subcontractors was problematic and that the systems integrator wielded little
influence to compel decisions among them. For example, proposed design
changes to assets under construction were submitted as two separate proposals
from both subcontractors rather than one coherent plan. More recently, Coast
Guard performance monitors reported this approach complicated the government
review of design changes because the two proposals often carried overlapping
work items, thereby forcing the Coast Guard to act as the systems integrator in
those situations. Although some efforts have been made to improve the
effectiveness of the IPTs — such as providing them with more timely charters
and entry-level training — our preliminary observations are that more
improvements are needed.
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Despite changes to the metrics, the Coast Guard’s ability to assess IPT
performance continues to be problematic. Former assessments of IPT
effectiveness simply focused on measures such as frequency of meetings,
attendance, and training. As a result, IPTs received positive assessments while
the assets under their realm of responsibility — such as the National Security
Cutter — were experiencing problems. While the Coast Guard’s new IPT
measurements include outcome-based metrics, such as cost and schedule
performance of assets, Deepwater’s overall program management quarterly
reports, which are prepared by Coast Guard in collaboration with ICGS, show
that the connection between IPT performance and program results continues to
be misaligned. For example, the first quarterly report to incorporate the new
measurements, covering the period October to December 2006, indicates that the
IPTs’ performance for all domains is “on-schedule or non-problematic” even
while some assets’ cost or schedule performance is rated “behind schedule or
problematic.” Further, even though the Deepwater program is addressing
fundamental problems surrounding the 123-foot patrol boat and FRC, IPTs no
longer exist for these assets. In some cases, Coast Guard officials stated they
have established work groups outside of the existing IPT structure to address
identified issues and problems related to assets, such as the NSC.
Human Capital
We also reported in 2004 that the Coast Guard had not adequately staffed
its program management function for Deepwater. Although its Deepwater human
capital plan set a goal of a 95 percent or higher “fill rate” annually for both
military and civilian personnel, funded positions were below this goal. We
recommended that the Coast Guard follow the procedures in its Deepwater
human capital plan to ensure that adequate staffing was in place and that turnover
of Coast Guard military personnel was proactively addressed. The Coast Guard
subsequently revised its Deepwater human capital plan in February 2005 to
emphasize workforce planning, including determining needed knowledge, skills,
and abilities and developing ways to leverage institutional knowledge as staff
rotate out of the program. We reported in 2005 that the Coast Guard also took
some short-term steps to improve Deepwater program staffing, such as hiring
contractors to assist with program support functions, shifting some positions
from military to civilian to mitigate turnover risk, and identifying hard-to-fill
positions and developing recruitment plans specifically for them.
However, more recently we have learned that while the Coast Guard has
revised a human capital plan, key human capital management objectives outlined
in the revised plan have not been fully implemented. Thus, key human capital
management objectives outlined in the revised plan have not been accomplished
and the staffing levels needed to accomplish the known workload have not been
achieved. In one example, a manager cited the need for five additional staff per
asset under his domain to satisfy the current workload in a timely manner:
contracting officer’s technical representative, scheduler, cost estimator, analyst,
and configuration manager. Further, a February 2007 independent analysis found
that the Coast Guard does not possess a sufficient number of acquisition
personnel or the right level of experience needed to manage the Deepwater
program.11 The Coast Guard has identified an acquisition structure
re-organization that includes human capital as one component of the reform.
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Communication with Operations and Maintenance Personnel
In 2004, we found that the Coast Guard had not adequately communicated
to operations and maintenance personnel in field locations about decisions on
how the new and old assets were to be integrated during the transition and
whether Coast Guard or systems integrator personnel — or both — would be
responsible for maintenance. We recommended that the Coast Guard provide
timely information and training on the transition to Deepwater assets. In 2006,
we reported that the Coast Guard had taken some steps to improve
communications between Deepwater program and field personnel, including
having field personnel as members on some IPTs. However, we continued to
express concerns that field personnel were not receiving important information
regarding training, maintenance, and integration of new Deepwater assets.
During our ongoing work, the field personnel involved in operating and
maintaining the assets and Deepwater program staff we interviewed expressed
continued concern that maintenance and logistics plans had not been finalized.
Another official commented that there continues to be a lack of clarity defining
roles and responsibilities between the Coast Guard and systems integrator for
maintenance and logistics. Coast Guard officials stated in fall 2006 that the
systems integrator was contractually responsible for developing key documents
related to plans for the maintenance and logistics for the NSC and Maritime
Patrol Aircraft. However, Deepwater program officials stated that because the
Coast Guard was not satisfied with the level of detail provided in early drafts of
these plans, it was simultaneously developing “interim” plans that it could rely
on while the systems integrator continued to develop its own versions.
Concerns Remain with Holding Systems Integrator Accountable
Our 2004 review revealed that the Coast Guard had not developed
quantifiable metrics to hold the systems integrator accountable for its ongoing
performance. For example, the process by which the Coast Guard assessed
performance to make the award fee determination after the first year of the
contract lacked rigor. At that time, we also found that the Coast Guard had not
yet begun to measure contractor performance against Deepwater contract
requirements — the information it would need by June 2006 to decide whether
to extend the systems integrator’s contract award term by up to another 5 years.
Additionally, we noted that the Coast Guard needed to establish a solid baseline
against which to measure progress in lowering total ownership cost — one of the
three overarching goals of the Deepwater program. Furthermore, the Coast Guard
had not developed criteria for potential adjustments to the baseline.
Award Fee Criteria
In 2004 we found the first annual award fee determination was based
largely on unsupported calculations. Despite documented problems in schedule,
performance, cost control, and contract administration throughout the first year,
the program executive officer awarded the contractor an overall rating of 87
percent, which fell in the “very good” range as reported by the Coast Guard
award fee determining official. This rating resulted in an award fee of $4 million
of the maximum $4.6 million. The Coast Guard continued to report design, cost,
schedule, and delivery problems, and evaluation of the systems integrator’s
performance continued to result in award fees that ranged from 87 percent to 92
percent of the total possible award fee (with 92 percent falling into the
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“excellent” range), or $3.5 to $4.8 million annually, for a total of over $16
million the first 4 years on the contract.
The Coast Guard continues to refine the award fee criteria under which it
assesses the systems integrator’s performance. The current award fee criteria
demonstrate the Coast Guard’s effort to use both objective and subjective
measures and to move toward clarity and specificity with the criteria being used.
For example, the criteria include 24 specific milestone activities and dates to
which the systems integrator will be held accountable for schedule management.
However, we recently observed two changes to the criteria that could affect the
Coast Guard’s ability to hold the contractor accountable. First, the current award
fee criteria no longer contain measures that specifically address IPTs, despite a
recommendation we made in 2004 that the Coast Guard hold the systems
integrator accountable for IPT effectiveness. The Coast Guard had agreed with
this recommendation and, as we reported in 2005, it had incorporated award fee
metrics tied to the systems integrator’s management of Deepwater, including
administration, management commitment, collaboration, training, and
empowerment of the IPTs. Second, a new criterion to assess both schedule and
cost management states that the Coast Guard will not take into account milestone
or cost impacts determined by the government to be factors beyond the systems
integrator’s control. However, a Coast Guard official stated that there are no
formal written guidelines that define what factors are to be considered as being
beyond the systems integrator’s control, what process the Coast Guard is going
to use to make this determination, or who is ultimately responsible for making
those determinations.
Award Term Evaluation
The Deepwater program management plan included three overarching goals
of the Deepwater program: increased operational effectiveness, lower total
ownership cost, and customer satisfaction to be used for determining whether to
extend the contract period of performance, known as the award term decision.
We reported in 2004 that the Coast Guard had not begun to measure the systems
integrator’s performance in these three areas, even though the information was
essential to determining whether to extend the contract after the first 5 years.12
We also reported that the models the Coast Guard was using to measure
operational performance lacked the fidelity to capture whether improvements
may be due to Coast Guard or contractor actions, and program officials noted the
difficulty of holding the contractor accountable for operational effectiveness
before Deepwater assets are delivered. We made a recommendation to Coast
Guard to address these issues.
According to a Coast Guard official, the Coast Guard evaluated the
contractor subjectively for the first award term period in May 2006, using
operational effectiveness, total ownership costs, and customer satisfaction as the
criteria. The result was a new award term period of 43 of a possible 60 months.
To measure the system’s operational effectiveness, the Coast Guard has
developed models to simulate the effect of the Deepwater assets’ capabilities on
its ability to meet its missions and to measure the “presence” of those assets.
However, in its assessment of the contractor, the Coast Guard assumed full
operational capability of assets and communications and did not account for
actual asset operating data. Furthermore, the models still lacked the fidelity to
capture whether operational improvements are attributable to Coast Guard or
contractor actions. As a result the contractor received credit for factors that may
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have been beyond its control — although no formal process existed for
approving such factors. Total ownership cost was difficult to measure, thus the
contractor was given a neutral score, according to Coast Guard officials. Finally,
the contractor was rated “marginal” in customer satisfaction.
The Coast Guard has modified the award term evaluation criteria to be used
to determine whether to grant a further contract extension after the 43-month
period ends in January 2011. The new criteria incorporate more objective
measures.
• While the three overall Deepwater program objectives (operational
effectiveness, total ownership costs, and customer satisfaction) carried a weight
of 100 percent under the first award term decision, they will represent only about
a third of the total weight for the second award term decision. The criteria
include items such as new operational effectiveness measures that will include
an evaluation of asset-level key performance parameters, such as endurance,
operating range, and detection range.
• The new award term criteria have de-emphasized measurement of total
ownership cost, concentrating instead on cost control. Program officials noted
the difficulty of estimating ownership costs far into the future, while cost control
can be measured objectively using actual costs and earned value data. In 2004,
we recommended that the Coast Guard establish a total ownership cost baseline
that could be used to periodically measure whether the Deepwater
system-of-systems acquisition approach is providing the government with
increased efficiencies compared to what it would have cost without this
approach. Our recommendation was consistent with the cost baseline criteria set
forth in the Deepwater program management plan. The Coast Guard agreed with
the recommendation at the time, but subsequently told us it does not plan to
implement it.
Establishing Criteria and Documenting Changes to the Baseline
Establishing a solid baseline against which to measure progress in lowering
total ownership cost is critical to holding the contractor accountable. The Coast
Guard’s original plan, set forth in the Deepwater program management plan, was
to establish as its baseline the dollar value of replacing assets under a traditional,
asset-by-asset approach as the “upper limit for total ownership cost.” In practice,
the Coast Guard decided to use the systems integrator’s estimated cost of $70.97
billion plus 10 percent (in fiscal year 2002 dollars) for the system-of-systems
approach as the baseline. In 2004, we recommended that the Coast Guard
establish criteria to determine when the total ownership cost baseline should be
adjusted and ensure that the reasons for any changes are documented.
Since then, the Coast Guard established a process that would require DHS
approval for adjustments to the total ownership cost baseline. The Deepwater
Program Executive Officer maintains authority to approve baseline revisions at
the asset or domain level. However, depending on the severity of the change,
these changes are also subject to review and approval by DHS. In November
2005, the Coast Guard increased the total ownership cost baseline against which
the contractor will be evaluated to $304 billion. Deepwater officials stated that
the adjustment was the result of incorporating the new homeland security
mission requirements and revising dollar estimates to a current year basis.
Although the Coast Guard is required to provide information to DHS on causal
CRS-56
factors and propose corrective action for a baseline breach of 8 percent or more,
the 8 percent threshold has not been breached because the threshold is measured
against total program costs and not on an asset basis. For example, the decision
to stop the conversion of the 49 110-foot patrol boats after 8 hulls did not exceed
the threshold; nor did the damages and schedule delay to the NSC attributed to
Hurricane Katrina. During our ongoing work, Coast Guard officials
acknowledged that only a catastrophic event would ever trigger a threshold
breach. According to a Coast Guard official, DHS approval is pending on
shifting the baseline against which the systems integrator is measured to an asset
basis.
Limited Knowledge of Cost Control Achieved Through Competition
Our 2004 report also had recommendations related to cost control through
the use of competition. We reported that, although competition among
subcontractors was a key mechanism for controlling costs, the Coast Guard had
neither measured the extent of competition among the suppliers of Deepwater
assets nor held the systems integrator accountable for taking steps to achieve
competition. As the two first-tier subcontractors to the systems integrator,
Lockheed Martin and Northrop Grumman have sole responsibility for
determining whether to provide the Deepwater assets themselves or hold
competitions — decisions commonly referred to as “make or buy.” We noted that
the Coast Guard’s hands-off approach to make-or-buy decisions and its failure
to assess the extent of competition raised questions about whether the
government would be able to control Deepwater program costs.
The Coast Guard has taken steps to establish a reporting requirement for the
systems integrator to provide information on competition on a semi-annual basis.
The systems integrator is to provide detailed plans, policies, and procedures
necessary to ensure proper monitoring, reporting, and control of its
subcontractors. Further, reports are to include total procurement activity, the
value of competitive procurements, and the subcontractors’ name and addresses.
The systems integrator provided the first competition report in October 2006.
However, because the report did not include the level of detail required by Coast
Guard guidelines, a Coast Guard official deemed that the extent of competition
could not be validated by the information provided and a request was made to the
systems integrator for more information. We will continue to assess the Coast
Guard’s efforts to hold the systems integrator accountable for ensuring an
adequate degree of competition....
Performance and Design Problems Creating Operational Challenges
In addition to the overall management problems, there have been problems
with the performance and design of Deepwater patrol boats and its replacement
vessel, the FRC, that pose significant operational challenges for the Coast Guard.
Performance Problems with the Converted 123-foot Patrol Boats
Between January 2001 and November 2006, numerous events led up to the
failure of the Coast Guard’s bridging strategy to convert the legacy 110-foot
patrol boats into 123-foot patrol boats. In January 2001, an independent study
found that the 110-foot patrol boats based in south Florida and Puerto Rico were
experiencing severe hull corrosion and that their structural integrity was
deteriorating rapidly. To address these issues, the Coast Guard’s original (2002)
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Deepwater plan included a strategy to convert all 49 of the 110-foot patrol boats
into 123-foot patrol boats and to strengthen the hulls. Also, the plan was to
provide additional capabilities, such as stern launch and recovery capabilities and
enhanced C4ISR. While Coast Guard originally planned to convert all 49 of its
110-foot patrol boats to 123-foot patrol boats, it halted the patrol boat conversion
program after 8 boats because of continued deck cracking, hull buckling, and the
inability of these converted patrol boats to meet post-September 11, 2001
mission requirements. The Commandant then decided to remove these 8
converted boats from service on November 30, 2006 because of operational and
safety concerns.
The Coast Guard is taking actions to mitigate the operational impacts
resulting from the removal of the 123-foot patrol boats from service. Specifically,
in recent testimony, the Commandant of the Coast Guard stated that Coast Guard
has taken the following actions:
• multi-crewing certain 110-foot patrol boats with crews from the 123-foot patrol
boats that have been removed from service so that patrol hours for these vessels
can be increased;
• deploying other Coast Guard vessels to assist in missions formerly performed
by the 123-foot patrol boats; and
• securing permission from the U.S. Navy to continue using 179-foot cutters on
loan from the Navy for an additional 5 years (these were originally to be returned
to the Navy in 2008) to supplement the Coast Guard’s patrol craft.
Design Problems with the Fast Response Cutter
The FRC — which was intended as a long-term replacement for the legacy
110-foot patrol boats — has experienced design problems that have operational
implications. As we recently reported, the Coast Guard suspended design work
on the FRC due to design risks such as excessive weight and horsepower
requirements. Specifically, beginning in January 2005, Coast Guard engineers
raised concerns about the viability of the FRC design (which involved building
the FRC’s hull, decks, and bulkheads out of composite materials rather than
steel). Then, in February 2006, the Coast Guard suspended FRC design work
after an independent design review by third-party consultants demonstrated,
among other things, that the FRC would be far heavier and less efficient than a
typical patrol boat of similar length, in part, because it would need four engines
to meet Coast Guard speed requirements.
To address the design problems and schedule delays that have occurred
with the FRC, the Coast Guard is proceeding with a “dual-path approach” for
acquiring new patrol boats. The first component of the dual-path approach is to
have the Deepwater systems integrator purchase a commercial off-the-shelf
patrol boat design that can be adapted for Coast Guard use. The purpose of
designing the first class of FRCs based on an adaptation of a patrol boat already
on the market is to expedite delivery. According to Coast Guard officials, unlike
the original plans, this FRC class is not expected to meet all performance
requirements originally specified, but is intended as a way to field an FRC more
quickly than would otherwise occur and that can, therefore, serve as an interim
replacement for the deteriorating fleet of 110-foot patrol boats.
The second component of the dual-path approach would be to completely
redesign an FRC to address the problems in the original FRC design plans.
CRS-58
However, due to continuing questions about the feasibility of its planned
composite hull, the Coast Guard has delayed a decision about its development or
acquisition until it receives results from a business case analysis comparing the
use of composite versus steel hulls., as well as a study by DHS’s Science and
Technology Directorate on composite hull technology. Until recently, the Coast
Guard anticipated delivery of the redesigned FRC in 2010. However, the decision
to not request funding for this redesigned FRC in fiscal year 2008, and to await
the results of both studies before moving forward, will likely further delay
delivery of the redesigned FRC. In regard to the suspension of FRC design work,
as of our June 2006 report, Coast Guard officials had not yet determined how
changes in the design and delivery date for the FRC would affect the operations
of the overall system-of-systems approach.35
35 Government Accountability Office, Coast Guard[:] Status of Efforts to Improve
Deepwater Program Management and Address Operational Challenges, Statement of
Stephen L. Caldwell, Acting Director Homeland Security and Justice Issues, Testimony
Before the Subcommittee on Coast Guard and Maritime Transportation, Committee on
Transportation and Infrastructure, House of Representatives, GAO-07-575T, March 8,
2007. See also Government Accountability Office, Coast Guard[:] Coast Guard Efforts to
Improve Management and Address Operational Challenges in the Deepwater Program,
Statement of Stephen L. Caldwell, Acting Director Homeland Security and Justice Issues,
Testimony Before the Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard,
Committee on Commerce, Science and Transportation, U.S. Senate, GAO-07-460T,
February 14, 2007.
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Appendix D. Coast Guard Testimony
February 14, 2007, Testimony
At a February 14, 2007, hearing on the Deepwater program before the Oceans,
Atmosphere, Fisheries, and Coast Guard subcommittee of the Senate Commerce,
Science and Transportation Committee, the Coast Guard testified in part:
Despite the challenges that Deepwater has experienced, the Coast Guard
has been the beneficiary of significant program accomplishments, including:
— command, control and sensor (C4ISR) upgrades to all 39 medium and high
endurance cutters and at Communications Area Master Station Atlantic
(CAMSLANT);
— the December 2006 arrival of our first new HC-144A Maritime Patrol
Aircraft, currently undergoing installation of mission pallets in Elizabeth City,
NC, to be followed shortly by delivery and missionization of the second and third
airframes;
— commencement of our HC-130J missionization program, with scheduled
first delivery in 2007;
— upcoming ribbon cutting ceremonies for new Deepwater shore facilities,
including a surface ship training center in Petaluma, California, and a hangar to
house HC-144As in Mobile, Alabama; and
— continuation of the Mission Effectiveness Programs for 110' patrol boats
and for 270' and 210' medium endurance cutters, projects funded by Deepwater
and managed by the Coast Guard Acquisition Directorate.
Additional milestones include the launch and christening last fall of the first
of eight planned National Security Cutters, along with the keel authentication
ceremony for the second, which fittingly took place on September 11, 2006.
These particular achievements in shipbuilding are especially noteworthy in light
of the impacts of the 2005 hurricane season when Hurricanes Katrina and Rita
came ashore along the Gulf Coast, upending lives, severely damaging
shipbuilding facilities, and further challenging the program. Construction of the
NSCs continues and we appreciate the efforts of shipyard workers and Coast
Guard men and women in keeping production of these important vessels moving
forward. I firmly believe the NSC will provide a great contribution to the Coast
Guard and the nation.
Eighty-four of 95 HH-65 helicopters will have been re-engined and
converted to Charlie models by June 2007, enabling operators to routinely
perform missions they could not have attempted before, including remaining
aloft for longer periods and having the ability to carry greater loads as was
demonstrated during Hurricane Katrina rescues.
The Coast Guard and ICGS, Deepwater’s systems integrator, are leveraging
sound principles of systems engineering and integration to derive high levels of
sub-system and component commonality, improve interoperability with the U.S.
Navy and other agencies, and achieve significant cost avoidances and savings.
This approach conforms with and directly supports the National Fleet Policy.
Beginning in 2002, the Program Executive Officer of Deepwater formalized
a collaborative partnership with his Navy and Marine Corps counterparts in order
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to identify common systems, technologies and processes for improved
interoperability. By incorporating common and interoperable Navy systems into
Deepwater assets, the Coast Guard has also avoided paying unnecessary costs.
As examples, the National Security Cutter and Off-Shore Patrol Cutter will
use 75 percent of the Navy’s AEGIS Command and Decision System.
Deepwater assets also will incorporate Navy Type/Navy Owned systems,
including the 57-mm deck gun, selected for major Deepwater cutters and the
Navy’s Littoral Combat Ship and DD(X) programs. The Operation Center
Consoles on the NSC use 70 percent of the design of the Navy’s Display Systems
(AN/UYQ-70). And, by using more than 23,000 lines of software code from the
Navy’s Antisubmarine Warfare Improvement Program (AIP) in the CASA
Maritime Patrol Aircraft’s command and control systems, we are maximizing the
use of mission systems that are installed on more than 95 percent of the world’s
maritime surveillance aircraft. The CASA Maritime Patrol Aircraft will utilize
more than 50 percent of the functionality of the Navy’s P-3 AIP system. Navy
and Coast Guard personnel even train side-by-side at the Coast Guard’s training
facility in Petaluma, California.
We work closely with the Navy’s Operational Test and Evaluation Force
(COMOPTEVFOR). Currently, the Naval Air Systems Command staff is
assisting us in evaluating the way ahead for Deepwater’s VUAV project. We
routinely rely on the expertise of Naval Sea Systems Command for a variety of
assessments. Personnel from the Navy Supervisor of Shipbuilding Office
(SUPSHIP) are assigned to our Program Management Resident Office (PMRO)
in Pascagoula, MS, where they are supporting construction of the NSC at
Northrop Grumman Ship Systems.
Looking to the future, there are many other opportunities for the Coast
Guard and Navy to build on today’s rich partnership in the design and delivery
of the National Fleet in support of the National Strategy for Maritime Security.
Potential areas for future cooperation include the design of the offshore patrol
cutter, unmanned aerial vehicles, and common systems for weapons, sensors, and
propulsion. Evaluations of sub-systems should include both the equipment and
crewing support (e.g., crew composition aligned with capabilities required for a
deployment). The collaborative development of LCS mission modules for
coastal surveillance and port security missions also offers the potential for
greater partnership in an operational mission area shared by both services.
Challenges in Program Execution
The innovative Deepwater program is large and complex and we have faced
some challenges. Our performance-based acquisition strategy has created unique
contracting and management challenges for the Coast Guard and our industry
partners. In my view, some of these come from the need for an integrated Coast
Guard, that unifies our technical authority, requirements owner, and our
acquirers in a way that allows early and efficient adjudication of problems and
ensures transparency so that Coast Guard would be capable of working
successfully with ICGS on a simultaneous and complex acquisition of this size.
We knew early on that this acquisition would be transformational for our
Service, but we have to actively manage that transformation and not allow this
acquisition to manage us. We are aggressively tackling and correcting these
problems.
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And clearly, we have experienced some failures in the Deepwater Program.
The planned conversion of 110-foot patrol boats to 123 feet as a bridging strategy
until new assets came online to fill the patrol gap has failed. Early on, we
experienced hull problems with the first eight patrol boats that had been
converted and halted the project in May 2005. Technical problems continued in
spite of multiple attempts at repair.
Last November, new problems were discovered, and I made the decision to
suspend operation of our 123-foot patrol boats until we determine whether a
technical fix is possible and economically prudent. Removing these boats from
service was a difficult decision and has added to our critical gap in patrol boat
hours. I know that this is of great concern to each of you. I assure you that I,
too, am concerned - my highest priority is to mitigate and fill this gap as quickly
as possible with the most capable assets.
To that end, I have directed my senior staff to aggressively examine and
recommend ways we can use current resources to mitigate the loss of the
123-foot patrol boats. In response and as partial mitigation of the impact, we:
— began multi-crewing eight of our existing 110-foot patrol boats;
— increased their operational tempo;
— redeployed and surged assets to areas of greatest need, based upon risk;
— secured continued use of three PC 179s from the Navy;
— are aggressively examining the purchase of additional 87-foot patrol boats;
and
— are compressing the 110' WPB Mission Effectiveness Project (MEP)
schedule to reduce operational impacts.
The Coast Guard will do whatever is necessary to ensure that our maritime
borders are secure and we can respond to existing and emergent requirements.
The failure of the 123-foot patrol boat project is unacceptable. I have
established a group of legal, contracting, and engineering experts to examine the
process at all stages, from beginning design work until we tied up the boats. I
have directed this group to establish responsibility and propose measures to
prevent similar problems in the future. We will work aggressively with ICGS to
reach resolution and put this behind us.
When problems arose with the 123-foot patrol boats, the Coast Guard
realized a need for additional patrol boats sooner than the original plan called for.
After examining a series of options, we decided to move construction of the FRC
forward on the overall Deepwater timeline. However, early tank testing showed
technical risks with the initial FRC composite hull design; prudence required
suspending the design and development while we considered the way ahead.
Ultimately, we decided to implement a “dual path” approach to acquire a
fully capable patrol boat while expediting delivery. First, we took a step back
from the initial FRC design to more thoroughly examine both its design and the
composite hull technology that the design incorporated. We are completing a
bottom-up business case analysis on what we have termed the “FRC-A Class” to
provide an “apples to apples” look at composite versus steel hulls. Results from
this analysis should be available later this month. Additionally, we had a
technology readiness assessment performed to review critical technology
elements associated with a composite-hulled design. Initial findings from this
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assessment indicate that necessary critical technology elements do not yet
support immediate production of a composite-hulled patrol boat.
Clearly with this design review, the FRC-A Class path doesn’t get boats
into the fleet as quickly as needed. As an interim solution, the Coast Guard is
simultaneously working to acquire a “parent craft” design based on a vessel
already in operation; one that will require minimal modifications to meet our
basic mission requirements. We call this our Replacement Patrol Boat or
“FRC-B Class.” After a good, hard look at the market to determine whether
adequate boats exist to support a parent craft approach, we issued a Request for
Proposal for such a vessel to ICGS. We expect a design proposal no later than
March 31st of this year that will support delivery of the first FRC-B Class in the
first half of FY 2010.
Turning to the National Security Cutter (NSC), I would like to clarify
reports of structural problems. The DHS OIG recently concluded an audit of the
NSC which highlighted concerns with our approach to potential structural
integrity issues with the NSC hull. The issue here, which we have communicated
to DHS OIG and which we have been actively addressing for several years, is a
question of fatigue life over the course of the cutter’s 30-year service life. There
has never been a question of safety related to the ship’s structure, nor have we
ever anticipated any operational restrictions related to its design. As you are well
aware, we drive our ships hard, so service and fatigue life of new cutters is of
critical concern to us.
An early Coast Guard review of the design of the NSC indicated that the
ship might experience fatigue-level stresses sooner than anticipated. Because we
want to ensure that all of our ships meet the service and fatigue life requirements
our missions demand, we are implementing changes and enhancements to the
design of the NSC.
Some have wondered why we didn’t suspend construction of the first NSC
when we learned of these concerns. The Coast Guard’s decision to continue
production of the NSC reflects more than simply the naval engineering
perspective. They also encompass considerations of cost, schedule, and
performance. After extensive research and deliberation and with all of these
considerations in mind, the Coast Guard decided that the need for enhancements
to NSC #1 could be effectively addressed by later retrofits and did not justify the
schedule and cost risk associated with stopping the production line. These kinds
of issues are not unusual in production of a first-in-class vessel, and I believe the
decision to move forward was prudent. We will fix NSC #1 and 2 and design the
fix into future hulls’ production.
To minimize future delays and disruption resulting from these kinds of
design and technical concerns, I:
— reaffirmed in writing the role of the Coast Guard’s chief engineer as the
technical authority for all acquisition projects;
— directed independent, third-party design reviews as new assets are
developed or major modifications to assets are contemplated; and
— am working to expand our relationship with the Naval Sea and Air Systems
Commands to leverage outside technical expertise.
We’ve learned from this experience. Adjudication of technical concerns
within the Coast Guard could have been accomplished more efficiently. Existing
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organizational barriers made it harder for us to jointly address concerns and
develop mutually acceptable solutions. We also could have been more proactive
in informing Congress-and this Subcommittee-about fatigue concerns. One of
my axioms is that “transparency of information breeds self-correcting behavior;”
I assure you that as we move forward that transparency will be my watchword.
The Way Ahead
The Deepwater Program Executive Officer, Rear Admiral Gary Blore, has
already undertaken a number of independent reviews, including the
comprehensive business case analysis and technology readiness assessment for
the FRC-A Class just mentioned. Of particular note, we contracted with the
Defense Acquisition University (DAU) in 2006 to conduct a “quick-look” review
of Deepwater to examine the program’s key management and technical
processes, performance-based acquisition strategy, organizational structure and
our government/industry “partnership” contract. The USCG Research and
Development Center is conducting a study and will provide recommendations for
the way ahead on the planned Deepwater Vertical-Launch Unmanned Aerial
Vehicle (VUAV), and we’ve initiated an independent review of workload and
workforce management issues. Based on these findings and recommendations,
we will make “course corrections” where needed in order to lead an efficient
organization and guarantee successful execution of the Deepwater Program.
As I mentioned earlier, many of the challenges within the Deepwater
Program stem from the lack of an integrated Coast Guard acquisition program to
manage this system-of-systems acquisition, as well as to conduct effective of
oversight to Integrated Coast Guard Systems. We have developed an initial
Blueprint for Acquisition Reform, and in the coming months, you will see
significant changes inside the Coast Guard’s acquisition directorate to bring all
acquisition efforts — traditional as well as system-of-systems — under one
organization. Rear Admiral Blore will become the Coast Guard’s Chief
Acquisition Officer, with responsibility over all procurement projects. The
Program Executive Officer for Deepwater will work within the new organization.
I have directed Rear Admiral Ron Rabago, a naval engineer, former
Commanding Officer of the Coast Guard Yard, and a technical expert on naval
engineering issues to take Deepwater’s “helm.” Consolidating our acquisition
efforts will provide immediate benefits, including better allocation of contracting
officers and acquisition professionals, and an integrated product line approach
to our management of acquisitions, thereby allowing projects to be handled by
the same people, with the same expertise and the same linkages to the technical
authorities.
Additional efforts are underway within Deepwater and the Coast Guard to
develop more appropriate staffing in order to efficiently obligate program
funding and ensure successful delivery of needed assets to the fleet. We’re
reinvigorating our acquisition training and certification process to ensure that
Deepwater staff, program managers and contracting officers have the requisite
skills and education needed to manage this complex program. Our desired end
state is to become the model for mid-sized federal agency acquisition and
procurement, in full alignment with the Department of Homeland Security
acquisition activities.
DAU’s recent Quick Look Study of the Deepwater program concluded that our
initial Blueprint for Acquisition Reform “is comprehensive and responsive to the
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human capital, organization, process and governance related findings and
recommendations” in its report.
Cost Change and Contractor Oversight
In discussing these challenges and my actions to address them, I need to
mention two concerns raised in recent media coverage of the Deepwater
program: the first is cost growth, the second is contract oversight. Much of
what’s been reported in the press as “cost overruns” simply does not tell the full
story. There is obvious truth to claims of programmatic cost increases. As
noted, the original Deepwater plan was estimated to cost $17 billion and now
we’re projecting a $24 billion cost over 25 years. However, it is imperative to
understand that the main driver of these cost increases was the complete revision
of the original plan to meet post 9/11 mission requirements. New missions meant
that we needed more capable assets which cost more to acquire and build.
In addition to improved mission capabilities, Hurricanes Katrina and Rita
hit the Gulf Coast shipyard industry hard during production of the first National
Security Cutter, flooding the hull and causing extensive damage to the facility.
The impacts to industry - even just in terms of rebuilding a skilled, sufficient
workforce - should not be underestimated. The tragedy was real (I can
personally attest to this) and contributed to cost increases and some schedule
slippage for the cutter. That these impacts were not greater speaks volumes
about the dedication of the shipbuilding industry and its employees along the
Gulf Coast.
Of course, we must remain vigilant regarding cost growth. However, I am
committed to working with industry to develop and promote cost reduction
measures and am personally engaged with the CEO’s of Lockheed Martin and
Northrop Grumman regarding my concerns.
I’ve also read that the Coast Guard is not in control of the Deepwater
Program; that we’ve somehow abrogated our oversight responsibilities and
handed industry the “keys to the vault.” That is not true. The Coast Guard has
been and remains fully involved in the management of this program and has
made all final and critical decisions. When appropriate, the issues are briefed all
the way up the chain of command to me, and I make the decision myself. And
following recommendations from DHS auditors, we have taken steps to ensure
that we accurately and thoroughly document such decisions for future reference.
We’ve redefined our award term and award fee criteria, making them more
objective in order to improve contractor performance. As resources allow, the
Coast Guard will assume greater responsibility as the system integrator, a role
we now feel better positioned to take on.
It is critical that the senior leadership in each of our organizations meet
regularly to be informed of the progress of this program so we can provide
executive level oversight at all times, and specific direction when warranted. As
a result, I am personally committed to doing all that I can to make this a
successful starting point for further improvement in both the performance and
relationships that exist within the Deepwater program, which is so vital to Coast
Guard readiness.
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We’re on the Path to Change
In conclusion, we have learned some hard lessons and are implementing
recommendations from the GAO and OIG to keep Deepwater moving forward.
We are making significant progress and outfitting our fleet to meet 21st century
threats and requirements.
I am confident the NSC is on the correct course, I’m convinced our FRC
“dual path” approach is the best and fastest way to address the patrol boat gap,
and I’m pleased that our Deepwater aviation assets are already making real
contributions within the fleet. I look forward to the delivery of additional assets
and the operational capacity they will bring. They will close the existing aircraft
and patrol boat gaps so that we can best protect our maritime borders and tend
to the nation’s business at sea.
I know you’re anxious for results; I am too, and I assure you nobody is as
anxious as the men and women of the Coast Guard. We are on the path to
change, and we will not stop until Coast Guard has the tools it needs to protect
America.
I am the Commandant of the Coast Guard, I am responsible, I will do this
right.36
36 Department of Homeland Security, U.S. Coast Guard, Statement of Admiral Thad W.
Allen, Commandant, on the Recent Setbacks to the Coast Guard Deepwater Program, Before
The Subcommittee on Oceans, Atmosphere, Fisheries and Coast Guard, Committee on
Commerce, Science & Transportation, U.S. Senate, February 14, 2007.
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Appendix E. NGSS Testimony
February 14, 2007, Testimony
At a February 14, 2007, hearing on the Deepwater program before the Oceans,
Atmosphere, Fisheries, and Coast Guard subcommittee of the Senate Commerce,
Science and Transportation Committee, Northrop Grumman Ship Systems (NGSS),
one of the two firms involved in the joint venture that is the LSI for the Deepwater
program, testified in part:
Overall Deepwater Program Management: On June 25, 2002, the
Deepwater Program prime contract was awarded to ICGS. As program
requirements have changed since 9/11, the Deepwater prime contract has been
amended accordingly to accommodate the new requirements in support of
national security.
There has been an extraordinary level of transparency in program
management and execution between ICGS and the Coast Guard. The Coast
Guard has been involved in every aspect of the Program throughout its history.
Each Deepwater asset undergoes design reviews by government and contractor
technical experts at key points in the design life cycle, with questions and issues
adjudicated as part of the review process. Personnel from the Coast Guard,
Northrop Grumman, Lockheed Martin, various subcontractors and ICGS are
co-located at production sites around the country as well as in the Systems
Integration Program Office in Arlington, Virginia. Full participation by the
Coast Guard is built into every level and function within the ICGS team. With
respect to programmatic decision making, all major acquisition decisions are
made by the Coast Guard, after review and approval by Coast Guard senior
leadership through a series of cross-functional government teams. These include
reviews by subject matter experts from Engineering and Logistics, Electronics
& Communications, Human Resources, Intelligence, and the Programs & Budget
Directorate at the staff and flag level. Northrop Grumman and ICGS do not make
decisions in relation to what cutters and boats to buy-we make recommendations.
The U.S. Coast Guard is the decision making and contracting authority, and has
retained the traditional contract management functions, including the right to
issue unilateral change orders, to stop or terminate work, to order or not order
assets and supplies, and to accept or reject the work.
There is a lot of interest about the way forward for Deepwater. Leaders
within the highest levels of the Coast Guard, Northrop Grumman and Lockheed
Martin are committed and focused on the most important issues related to the
25-year, $24 billion acquisition program, including recent Coast Guard initiatives
to strengthen program management and oversight — such as technical authority
designation, use of independent (third party) assessments, and consolidation of
Coast Guard acquisition activities under one directorate. Objectives to achieve
the way forward include: (1) Capitalize on proven, first-article Deepwater
successes. (2) Sustain momentum in recapitalizing the Coast Guard through the
Deepwater program and (3) Resolve outstanding challenges associated with some
projects within Deepwater. The senior leadership in each of our organizations
is committed to meet regularly to review the progress of the program and provide
executive level oversight at all times, with specific direction when warranted.
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Competition is also an important component of the Deepwater team’s effort
to deliver “best value” to the Coast Guard. The tenet of competition within the
ICGS Deepwater program plan is an open business model that invites
participation and competition through the life of the program. Both contractors
have a Contractor Purchasing System that is patterned after the Federal
Acquisition Regulations. All Northrop Grumman purchases over $25K are
individually reviewed for compliance with purchasing guidelines, and the
purchasing system is audited (usually every three years) by the Defense Contract
Audit Agency (DCAA). A government sponsored third party review of
Deepwater acquisition practices found our statistics favorable compared to large
US Navy procurement programs. In addition, competition for subcontract
awards is encouraged via the annual Industry and Innovation Days where
suppliers and vendors have an opportunity to provide input on new or improved
products. ICGS to date has placed orders with more than 600 suppliers
representing more than 41 states and maintains an active database of over 3000
potential suppliers from which it draws to host annual supplier innovation and
industry days.
Patrol Boats are small naval ships, generally designed for coastal defense
duties, operated by a nation’s navy, coast guard or police force in marine - “blue
water” - and littoral and river - “brown water” - environments. They are
commonly found in various border protection roles, including anti-smuggling,
anti-piracy, fisheries patrols, immigration law enforcement and rescue
operations. Patrol boats usually carry a single artillery gun as main armament
with a variety of lighter secondary armament such as machine guns, and are
diesel-powered, with speeds generally in the 25-30 knot range. The above
definition aptly describes the 49 “Island Class” 110 foot patrol boats and the 123
foot conversions under the original Deepwater proposal.
The Coast Guard’s current 110 foot patrol boats were built in the 1980s and
early 1990s by Bollinger Shipyards, Inc. These boats have seen extensive duty
in support of the Coast Guard mission to save lives, interdict aliens and seize
drugs. ICGS and its teammate, Halter Bollinger Joint Venture (HBJV), proposed
to convert the 110 foot boats to 123 foot boats as an interim measure to improve
the capability and extend the life of this vessel until its FRC replacement entered
operation in 2018. ICGS proposed the conversion concept as the best means to
provide the Coast Guard with the necessary capability to continue to meet its
mission objectives while remaining within the confines of program funding
requirements. Deepwater competitors were required to propose a “system of
systems” solution that did not exceed the funding limitation of $500 million per
year. With new assets such as the National Security Cutter (NSC), Maritime
Patrol Aircraft (MPA) and the Vertical Unmanned Air Vehicle (VUAV) being
developed early in the program, it was not possible to design, develop and
construct new patrol boats at program inception while keeping within annual
funding limitations.
Bollinger had designed and built the original 110 foot boats and was very
familiar with their construction. Bollinger was awarded a contract for 16 110
Island class boats in August 1984 and another contract for 33 more boats in 1986.
The design of the 110 Island class was approximately 20 years old and was based
on an existing patrol boat developed by a British firm, Vosper Thornycroft (UK)
Ltd. The 110 Island Class boats were commissioned between November 1985
and 1992. Notably, after the first boats came into service, it was discovered that
the 110s suffered from hull problems when operated in heavy seas. As a
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correctional measure, heavier bow plating was added to hulls 17 through 49
during construction and additional stiffeners were retrofitted to earlier hulls.
Under the proposed Deepwater conversion plan, HBJV added a 13 foot
extension to the 110', which accommodated a stern ramp for the launch and
recovery of a small boat, used primarily to support boarding and rescue
operations. In addition, the conversion installed an improved pilot house,
enhanced Command, Control, Communications, Computers and Intelligence,
Surveillance and Reconnaissance (C4ISR) capabilities and tested, identified and
renewed hull plating in areas where an ultrasonic thickness inspection indicated
that the existing plating was deteriorated.
At the time the proposal was submitted, some general knowledge about the
condition of the 110s was available, and ICGS believed that replacement of the
hull plating would adequately address and offset their deteriorated condition.
This is consistent with the findings of the Coast Guard’s 110 WPB Service Life
Extension Board, published in March 2002, which recommended a program of
systematic hull repairs, predominantly in documented problem areas, to address
the hull deterioration problems that were impacting 110' WPB operational
availability.
After being awarded the patrol boat conversion work, ICGS engaged in a
rigorous design process that included extensive reviews with all stakeholders.
These programmatic reviews included a Preliminary Design Review, a Critical
Design Review and a Production Readiness Review all of which were conducted
with the Coast Guard before the actual conversion work began. Leading up to
each of these reviews, the evolving design, design drawings and calculations
were formally presented to the Coast Guard subject matter experts in increasing
detail for their review, comment and approval. During this series of reviews I am
not aware that structural, buckling or deformation concerns were raised as an
issue. In addition, during the conversion of the Matagorda, the American Bureau
of Shipping (ABS) examined the design of the hull extension and new deckhouse
and monitored key elements of the work being performed. At the conclusion of
the Matagorda work, they issued a letter of approval for the conversion work and
expressed no reservations with the feasibility of the conversion.
The Performance Specification requirement calls for the 123' to be capable
of unrestricted operation up through sea state 3, or seas averaging less than four
feet. Operation restrictions are imposed beginning at sea state four, or seas less
than eight feet, where the boats are to be able to sustain limited operations,
altering course or reducing speed as required to maintain a ride which does not
damage the boat or its machinery or overly fatigue the crew. The 123' is to be
able to survive sea state 5, or seas averaging between eight and 13 feet,
maneuvering as necessary to minimize damage or injury to the crew, and then be
capable of returning to port under its own power once the seas have subsided.
In September of 2004, after all 8 hulls had entered the conversion program
and the first 4 hulls had been delivered, the Matagorda was forced to conduct a
high speed transit to avoid Hurricane Ivan. This operational necessity forced the
Coast Guard to transit in a sea state and speed where the cutter was operating
near or above the design limits of the 123' conversion. Upon arrival at their
destination, the crew discovered buckling of the side shell and main deck on the
starboard side near midships. An engineering tiger team was formed consisting
of Coast Guard and NGSS personnel. This team was dispatched to investigate
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the problem where it was discovered that the Matagorda had an inherent
workmanship issue in the baseline 110' that existed prior to the conversion and
contributed to the hull buckling. Specifically, a hidden, unwelded aluminum
deck stringer was discovered immediately beneath the area where the failure
occurred. Other boats were examined, and this unwelded stringer was also found
on one additional hull undergoing conversion. When modeled using finite
element analysis, the stresses in the panels which failed on Matagorda were
significantly higher than the stresses shown when the model was run with this
stringer intact. Based on this finding, the team believed this to be the primary
cause of the buckling on Matagorda, and repairs were made accordingly.
In addition, a reconstruction of the engineering analysis of the 123'
structure was conducted. Based on this, it was also discovered that an early
calculation overstated the strength margin for the boat. A revised calculation
using a common, agreed to set of assumptions by the engineering team showed
the 123' would still meet the required operations defined in the Performance
Specification.
In an effort to further improve the structural integrity on the 123', three
stiffener bands were installed; one at the upper edge of the side shell, one below
this one and another on the edge of the main deck to increase the overall
structural strength. While the finite element analysis and conventional
calculations both agreed that the original hull, with the stringer under the deck
intact, should be sufficient throughout the operating range of the 123', these
additional stiffeners were considered to provide an added margin of strength.
In November 2004, ICGS received a contract modification that changed the
arrival schedule of hulls 9-12 to TBD. Long-lead time material for four
additional hulls had already been authorized and work continued on the 3
remaining hulls in process.
By March, 2005, 6 of the 123s had received the structural upgrade and had
been delivered. Certain operational restrictions imposed on these boats by the
Coast Guard following repairs to the Matagorda had been lifted. Then, during
a transit from Key West to Savannah, GA, the Nunivak experienced hull
deformation in an area aft of the new reinforcing straps. This deformation
occurred in a different area from that of the Matagorda. Further, this was not an
area which had indicated potential for high stresses under any conditions
modeled in the earlier finite element analysis.
An outside engineering firm, Designers and Planners, was contracted by the
Coast Guard to perform a more detailed finite element analysis of the 123' hull,
which showed that the overall hull structure design was adequate under all
expected operating conditions up to the worst operating condition modeled. The
analyses were not able to replicate the deformation seen on Nunivak. A more
detailed look at specific regions on the hull showed an area with high potential
for localized buckling in a section of the side shell where the original 110' hull
had been constructed of exceptionally thin four-pound plate. Despite this
finding, no actual failures had ever been experienced in this area on 110 or 123'
WPBs. As a precaution, this thin plate was replaced with heavier plating on
those cutters undergoing the Post Delivery Maintenance Availability, with plans
to eventually upgrade all the boats. Lastly, a metallurgical analysis of the deck
material determined that the particular grade of aluminum used on the 110s is
prone to corrosion and cracking in elevated heat and marine conditions.
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In July 2005, then Coast Guard Commandant Admiral Collins’ written
testimony before Congress outlined the twofold reason for stopping the
conversion process as follows: “As the first eight 110' to 123' conversions were
conducted, the Coast Guard found that the 110' WPB hulls were in much worse
condition than anticipated. This extended the conversion timeline and would
have increased projected costs for conversions after the first eight (the first eight
were negotiated under a firm-fixed-price contract). An operational analysis of
the 123' WPBs also identified high risks in meeting mission needs, particularly
in the post-9/11 environment.”
To date the problems associated with the 123' conversion include buckling
or hull deformation and shaft and propeller alignment problems. In addition to
the actions previously described, additional and substantial work has been (and
continues to be) done. In addition to the repairs and reviews of structural
calculations, we have continued the review process by conducting two
independent finite element analyses, modeling both the original and the upgraded
hull, and we completed metallurgical testing that revealed an issue in the main
deck which exists on both the 123' and across the legacy 110 fleet. Extensive
strain gage testing has been conducted on a 123' hull to validate the finite
element model and to identify potential problem areas which the model may not
show. The parent craft designer, Vosper Thornycroft, has been engaged to
evaluate the 123' hull and provide recommendations. Data is being collected on
shaft alignment and maintenance procedures both during the conversion and
since, so that the procedures for checking and correcting alignment can be
validated for both the 110' and the 123'. Elements of the 123' design, including
the propellers and the SRP stern-launch system are being reexamined and
validated.
We are committed and determined to identify the root cause of the
structural problems. Northrop Grumman and Coast Guard engineers are
currently reviewing and re-reviewing all available data on the 110' and 123'
patrol boats in an effort to better understand the cause or causes of both hull
buckling and shaft and propeller alignment problems. Depending on the outcome
of that analysis the possible outcomes range from removing the boats from
service to effecting repairs with testing followed by placing them back in service.
Until all analyses are complete, it is premature to speculate on the final cause and
the final way forward.
Fast Response Cutter Acceleration: Before Congress in July 2005, then
Coast Guard Commandant Collins testified: “A key component of the
Deepwater Program is the replacement of the Coast Guard’s 110' Island Class
Patrol Boat (WPB) fleet. The Island Class patrol boat is a Coast Guard
multi-mission workhorse and is rapidly approaching the end of its serviceable
life. Under the initial IDS proposal, the 49 110' Island Class WPBs were
scheduled to undergo a conversion to 123' WPBs by 2010 as a bridging strategy.
The 123' WPBs would then be replaced by the Fast Response Cutter (FRC)
starting in 2018. As the first eight 110' to 123' conversions were conducted, the
Coast Guard found that the 110' WPB hulls were in much worse condition than
anticipated. This extended the conversion timeline and would have increased
projected costs for conversions after the first eight (the first eight were negotiated
under a firm-fixed-price contract). An operational analysis of the 123 WPBs also
identified high risks in meeting mission needs, particularly in the post-9/11
environment. The Coast Guard recently decided to stop the conversion project
following the first eight conversions. Instead, the Coast Guard plans to advance
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the FRC design and construction by ten years, and is analyzing alternatives
methods for extending the life of the 110-foot fleet, as discussed above.”
Consistent with this testimony, the Coast Guard accelerated FRC design
and construction by ten years. The expanded set of post 9-11 requirements
produced a set of required capabilities that exceeded the traditional patrol boat
roles filled by the 110s and 123s and other similar worldwide patrol boat fleets.
A market study was conducted and concluded that none of the existing similar
sized patrol boats would meet these requirements. A series of business case
analyses, Total Ownership Cost (TOC) studies and preliminary design efforts
showed the benefits of using a composite hull form to meet this demanding set
of requirements with a potential to save over $1B in lifecycle cost. The
predominate savings came from the superior service life of composites. The
Design to Cost constraints restricted the vessel length to 140 feet. In order to
accommodate the added capability and equipment required to meet the post 9/11
mission requirements the resultant design was wider for its length than historical
and traditional patrol boat hull dimensions. Independent third party analysis by
John J. McMullen and Associates (JJMA) stated: “The review team believes that
the FRC does appear to meet or is capable of meeting the requirements” and
acknowledges that “The FRC preliminary design represents a design solution to
a challenging set of requirements.” Additionally, I would like to point out that,
contrary to what was reported in the press, the FRC-A did not fail a tank test - a
preliminary test was conducted improperly. When this test conducted properly,
the FRC-A met all requirements, as is confirmed in the final model test report.
The Coast Guard made the decision to suspend the FRC-A program, as the
all composite design is now called, and focus on a parent craft solution known
as the FRC-B. This decision seeks to ensure a proven solution to a lesser
requirements set. This will enable the additional time required to take the
FRC-A through a design spiral, and perform trade analyses to optimize
performance to cost including a robust operational test program for the fully
capable FRC. The Coast Guard is also performing an additional business case
analysis and a technology readiness assessment to confirm viability of the
composite approach.
The current patrol boat acquisition strategy includes two paths: FRC-A,
mentioned above and FRC-B. FRC-B will leverage existing patrol boat designs
to serve as a bridging strategy while the fully capable FRC-A is undergoing
design and development. The FRC-B program will select the candidate design
from a field of worldwide patrol boat providers and is expected to enter concept
design later this year.
I want to assure the Committee that Northrop Grumman will continue to
work with the Coast Guard in satisfying its patrol boat mission requirements
throughout the life of the Deepwater Program.
National Security Cutter (NSC) Structure and Cost Growth: Designed to
replace aging Hamilton Class High Endurance Cutters (WHEC) that have been
in service over 40 years, the National Security Cutter (NSC) is a modern,
well-armed, high-performance, 421-foot, 4000-ton frigate sized naval ship, with
manned and unmanned aircraft, stern-launched rigid inflatable boats and secure
communications facilities. It provides the Coast Guard with enhanced post 9/11
Homeland Security and core mission capabilities (drug interdiction, search &
rescue, economic zone & fisheries protection). The first of the 8 ship class
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(USCGC Bertholf) has been launched and will be delivered to the Coast Guard
in the fall of 2007. The second (USCGC Waesche) is also under construction
and is scheduled for delivery to the Coast Guard in early 2009.
With regard to the structure, we believe the NSC meets contract
requirements/specifications. The NSC design uses the same Data Design Sheet
(DDS) standards used in structural design of ships since WWII. The NSC is
designed to meet a 30 year service life and many of the structural items raised by
the Coast Guard have been addressed and were incorporated in the Bertholf and
Waesche (NSC 1 and 2) prior to production. For example, upgraded steel,
thicker steel, modifications to Fashion Plates and Re-entrant Corners, and the
addition of 2 longitudinal Hovgaard bulkheads to provide increased stiffness at
the stern were incorporated into the design.
With regard to NSC fatigue life, even the best engineers will have different
opinions. Analysis has been performed on the NSC utilizing a relatively new
model developed by Naval Surface Warfare Center, Carderock Division
(Carderock) utilizing two different approaches. The difference in the two
approaches is whether or not the model is benchmarked by calculating the fatigue
strength of proven ship designs with similar operational characteristics and hull
form that has been at sea for the desired time. This enables the calculation of
permissible stress levels that can be applied to test the new design. The results
of these two analyses have generated a responsible dialog between the engineers
which will lead to final agreement about enhancements to fatigue structure.
Northrop Grumman does not self-certify compliance with the structural
requirements in the contract. The Bertholf has and will undergo a
comprehensive internal and external certification process. The American Bureau
of Shipbuilding (ABS) certified 14 Systems Level drawings, including structural
design drawings. ABS will also certify 35 ship systems during this acceptance
process. These include; Command & Control Systems, Propulsion Plant,
Machinery Monitoring & Control, Fuel Systems, Anchoring Systems, and
Steering Systems. During the design process, there will be a total of 46
independent third party certifications prior to or as part of the USCGC Bertholf
(NSC 1) delivery process. These include; Final Aircraft Facilities, Flight Deck
Status and Signaling, Navigation Systems, Interior Communications Systems,
Guns and Ammunition Weapons System Safety, DoD Information Security and
Accreditation, and TEMPEST. The US Navy’s Board of Inspection and Survey
(INSURV) will conduct the Ship’s Acceptance Trials (AT) when the cutter gets
underway later this year.
Cost growth has also been mentioned in the media. Two elements have led
to the majority of cost growth on the NSC - increased post 9/11 requirements and
the impact of Hurricane Katrina. The NSC that will be delivered to the Coast
Guard this year is not the same ship that was first proposed in 1998. Today’s
NSC has greatly improved operational capabilities that address post 9/11
requirements including Chemical, Biological & Radiation (CBR) protection, a
Sensitive Compartmented Information Facility (SCIF) and more robust aviation
installations so that the NSC, in addition to its normal embarked Coast Guard
aviation complement, will be able to launch, recover and operate US Navy, US
Government Agency and partner nation manned and unmanned rotary wing
aircraft. These enhancements have added approximately 1000 tons to the
displacement, including a one third increase in electrical power systems, a
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tripling of air conditioning and ventilation capacity (HVAC), the addition of 25
antennas and a 26% growth in the size of the berthing spaces.
It is true that Katrina delayed the delivery of Bertholf by several months
and added cost to the program. Prior to Katrina, Bertholf was the best “first of
class” ship in the 70 years that warships have been built in Pascagoula. Even
taking into account Katrina, Bertholf continues to set new lead ship standards in
quality and efficiency with, higher performance to standards than both the first
or second Arleigh Burke Class (DDG 51) destroyer and labor utilization
measures that routinely out perform other programs in our shipyard.
Much of what has been done on the NSC program is being transitioned to the rest
of the shipyard to other construction programs. In addition to the specific actions
as they relate to the NSC program, we are investing $57.3 million dollars of our
own money in a new suite of management tools that will increase our visibility,
work sequencing capability, material and engineering modeling and capacity and
resource planning. These tools will enable the reduction in the number of units
we construct to build the NSC. Currently we build the vessel in 45 units and
integrate these sub assemblies into 29 erection lifts on the ship. The new tool set
will allow us to plan and construct the vessel in less lifts, our target is 16, and as
we know the less number of lifts the less cost. We are investing in our human
capital, process improvement, and our facilities to reduce the cost associated with
building future ships.37
37 Statement for the Record, Mr. Philip A. Teel, President, Northrop Grumman Ship Systems
(NGSS), Testimony Before The Senate Subcommittee on Oceans, Atmosphere, Fisheries,
and Coast Guard Senate Committee On Commerce, Science and Transportation, February
14, 2007.
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Appendix F. Lockheed Martin Testimony
February 14, 2007, Testimony
At a February 14, 2007, hearing on the Deepwater program before the Oceans,
Atmosphere, Fisheries, and Coast Guard subcommittee of the Senate Commerce,
Science and Transportation Committee, Lockheed Martin, one of the two firms
involved in the joint venture that is the LSI for the Deepwater program, testified in
part:
Overview
The Integrated Deepwater System program is delivering both new and
upgraded fixed wing and rotary wing aircraft; new communications systems that
are making a significant contribution to improved mission performance; and, the
logistics systems necessary to support fielded assets. We understand the
Integrated Deepwater System will continue to evolve. To meet this ongoing
challenge, Lockheed Martin is applying a disciplined system engineering
approach to the program. This will continue to be vital for achieving more robust
capabilities given fiscal realities - a one-asset-at-a-time recapitalization approach
would be unaffordable. Lockheed Martin is committed to providing our best
talent and capabilities for supporting the Coast Guard.
Lockheed Martin is primarily responsible for four Deepwater domains:
System Engineering & Integration, C4ISR (the command and control network),
Logistics and Aviation (refurbishment of existing assets and production of new
assets). Lockheed Martin’s goal is the full application of system engineering
methodologies to establish the best mix of assets and introduction of new
capabilities as well as implementation of the associated logistics systems. Most
important is maintaining emphasis on the implementation of the Deepwater
system-wide command and control network. C4ISR (Command & Control,
Computers, Communications, Intelligence, Surveillance and Reconnaissance) is
the network “glue” that permits various assets including ships, aircraft and shore
stations to work together to more effectively and efficiently achieve a common
purpose. Thus, the C4ISR domain is of particular importance as most modern
civil, commercial and military systems are dependent on the value delivered by
the integrating power of the network.
Key Achievements
We are making good progress and are delivering significant new and
upgraded capabilities. At the same time, we recognize the system level effects of
networking are essential to achieving the level of mission performance needed
by the Coast Guard. Lockheed Martin is accomplishing high rates of software
re-use as well as system commonality and integration by the rigorous application
of proven system engineering processes and capabilities. In addition, we are
managing implementation of support systems for all Deepwater program
domains. The Lockheed Martin team is working closely with our Integrated
Coast Guard Systems, LLC (ICGS) joint venture partner, Northrop Grumman,
to ensure that electronic equipment developed and produced under the
cognizance of the C4ISR domain is appropriately configured for installation on
the ships.
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Every one of the Coast Guard’s 12 high-endurance and 27
medium-endurance cutters have received not one but two command and control
system upgrades - giving the fleet markedly improved capability to seize drugs,
interdict migrants and save lives. As for shore sites, there are a total of 12 on
contract: two Communication Area Master Stations, eight Districts, one Sector
and Headquarters. Use and reuse of Commercial-Off-The-Shelf,
Government-Off-The Shelf and fielded maritime systems are being maximized
for commonality and interoperability. The application of off-the-shelf software
permits Deepwater to take advantage of the rapid changes in the commercial
market place and the investments which commercial firms make in their best of
class technologies. This will facilitate Coast Guard interoperability with civil and
international systems, a key consideration given their mission mix.
The National Security Cutter is using 75 percent of the U.S. Navy’s Open
Architecture Command & Decision System. The Command & Control System
for Maritime Patrol Aircraft employs more than 50 percent of the functionality
of the Navy’s P-3 Anti-Surface Warfare Improvement Program. The Operations
Center consoles on the National Security Cutter utilize more than 70 percent of
the design of the Navy’s UYQ-70 display systems. Use and reuse of available
software and systems is the key to commonality. In addition, this approach takes
greatest advantage of the work undertaken with the Navy to establish the best
Human System Interface including workspace ergonomics, viewing
characteristics, input devices and overall system architecture.
The first medium-range surveillance maritime patrol aircraft, the newly
designated HC-144, has been transferred to the Coast Guard. It arrived at
Elizabeth City, N.C., on December 20, 2006 and is now undergoing
missionization work that will be completed in April. The second aircraft was
accepted by the government on January 25, 2007 and the third aircraft is in flight
testing. The second aircraft will now be delivered to Elizabeth City for
missionization and two crews are already in training. At the same time, we are
working to complete re-engining and upgrading of HH-65 helicopters with 65 of
95 helicopters delivered to date. This project was part of the original Deepwater
program plan. However, at the direction of the Coast Guard, it was rapidly
accelerated due to safety of flight issues. Lockheed Martin and American
Eurocopter working with the Coast Guard Aircraft Repair and Supply Center are
now producing upgraded helicopters (“Charlies”) that can fly faster, twice as far
and with twice the payload.
Six long-range surveillance C-130J aircraft are undergoing missionization
and will be delivered within 15 months after receipt of the contract with fully
interoperable command, control and communications systems. The first aircraft
was inducted for missionization at Greenville, S.C., on December 19, 2006. In
addition, the service contract for the Helicopter Interdiction Tactical Squadron
(HITRON) based in Jacksonville, Fla., has been renewed for a fifth year. These
eight MH-68A helicopters are equipped with Airborne Use of Force and have
had a significant impact on illicit drug interdictions. The squadron celebrated its
100th interdiction last May.
Industry’s performance has been closely supervised by the Coast Guard
with additional oversight from the Department of Homeland Security, the
Congress and the Government Accountability Office. Each of the multiple
reviews has provided constructive recommendations as requirements and funding
levels continue to evolve. The results so far indicate that Deepwater has made a
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dramatic difference in the effectiveness of the Coast Guard with regard to the
numbers of drug seizures, migrant interdictions and lives saved. Coast Guard
statistics show double-and triple-digit percent improvements as Deepwater assets
and upgrades enter the fleet.
Strategic Context of ICGS
The Deepwater program is modernizing the Coast Guard by providing new
assets and expanding capabilities in aviation, ships, shore stations, logistics, and
command, control and communications systems. The ICGS joint venture between
Lockheed Martin and Northrop Grumman was designed as a low overhead
contracting vehicle. Its purpose is to provide for rapid parsing of work between
the two partners while at the same time achieving close collaboration and
cooperation. It is important to note what it is not. The ICGS joint venture is not
a replacement for Coast Guard decision-making. All designs and improvements
are based on trade studies, analyses, and technical considerations. But make no
question about it - the Coast Guard is the decision maker and contracting
authority and all major acquisition decisions are reviewed and approved by Coast
Guard senior leadership. ICGS utilizes the depth of capabilities and experience
of its partners to provide solutions in accordance with Coast Guard requirements.
The joint venture partners are utilizing more than 600 suppliers in 42 states plus
the District of Columbia. In addition, ICGS maintains an active database of more
than 3,000 supplier-product applications.
The Deepwater program began in 1997 as competing teams were
established to develop proposed solutions for bidding the program. In fact,
proposals were submitted to the government less than two weeks after 9/11.
Since then, the ICGS team was awarded the Deepwater program and successfully
accomplished a number of changes. Most significant were those resulting from
the dramatically increased Coast Guard operating tempo in the post-9/11
environment. This means that legacy equipment began to wear out far more
rapidly than had been projected. A good example is the HH-65 helicopters
mentioned above. While the ICGS team’s approach always included re-engining
of this equipment, the original plan was to be accomplished over a longer time
period. Nevertheless the team was able to process the urgent requirement for
re-engining and more than two-thirds of the fleet have already been upgraded and
returned to service. It is this inherent flexibility of the ICGS joint venture
stemming from the deep capabilities of its partners that will facilitate our
working with the new acquisition organization planned by the Coast Guard.
The Way Ahead
Our overarching goal is to provide more capability to the fleet, sooner. We
are dedicated to analyzing and recommending approaches for maximizing the
value delivered to the Coast Guard, in accordance with the customer’s view of
value, not that of industry. This requires the best talent from each corporation.
ICGS works closely with Coast Guard personnel to assure constant
communications and improved working relationships. The strategic policy
changes that have occurred since 9/11 must be factored into problem solving.
The Coast Guard and the Department of Homeland Security have needs that can
be satisfied by the Deepwater program and its approach to value delivery. The
way forward will be difficult, but given the capabilities of the participants and
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the strategic imperative to better outfit our Coast Guard so the safety and security
of our nation is improved, the Deepwater program is eminently achievable.38
38 Testimony before the U.S. the Senate Committee on Commerce, Science, and
Transportation, Oceans, Atmosphere, Fisheries and Coast Guard Subcommittee, February
14, 2007, Dr. Leo S. Mackay, Vice President and General Manager, Coast Guard Systems
Lockheed Martin Maritime Systems & Sensors.