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The term Deepwater refers to a collection of more than a dozen Coast Guard acquisition
programs for replacing and modernizing the service’s aging fleet of deepwater-capable ships and
aircraft. Until April 2007, the Coast Guard had pursued these programs as a single, integrated
acquisition program that was known as the Integrated Deepwater System (IDS) program or
Deepwater program for short. The now-separated Deepwater acquisition programs include plans
for, among other things, 91 new cutters, 124 new small boats, and 247 new or modernized
airplanes, helicopters, and unmanned aerial vehicles (UAVs).
The Coast Guard, which is part of the Department of Homeland Security (DHS), is requesting
$1,051.5 million in FY2010 acquisition funding for Deepwater programs, including $305.5
million for aircraft, $591.4 million for surface ships and boats, and $154.6 million for other items.
The year 2007 was a watershed year for Deepwater acquisition. The management and execution
of what was then the single, integrated Deepwater program was strongly criticized by various
observers. House and Senate committees held several oversight hearings on the program. Bills
were introduced to restructure or reform the program in various ways. Coast Guard and industry
officials acknowledged certain problems in the program’s management and execution and
defended the program’s management and execution in other respects. The Coast Guard
announced a number of reform actions that significantly altered the service’s approach to
Deepwater acquisition (and to Coast Guard acquisition in general).
In April 2009, the Government Accountability Office (GAO) testified that:
At the individual Deepwater asset level, the Coast Guard has improved and begun to apply
the disciplined management process found in its Major Systems Acquisition Manual, but did
not meet its goal of complete adherence to this process for all Deepwater assets by the
second quarter of fiscal year 2009. For example, key acquisition management activities—
such as operational requirements documents and test plans—are not in place for assets with
contracts recently awarded or in production, placing the Coast Guard at risk of cost overruns
or schedule slips.
Due in part to the Coast Guard’s increased insight into what it is buying, the anticipated cost,
schedules, and capabilities of many of the Deepwater assets have changed since the
establishment of the $24.2 billion baseline in 2007. Coast Guard officials have stated that
this baseline reflected not a traditional cost estimate but rather the anticipated contract costs
as determined by ICGS. As the Coast Guard has developed its own cost baselines for some
assets, it has become apparent that some of the assets it is procuring will likely cost more
than anticipated. Information to date shows that the total cost of the program may grow by
$2.1 billion. As more cost baselines are developed and approved, further cost growth may
become apparent. In addition, while the Coast Guard plans to update its annual budget
requests with asset-based cost information, the current structure of its budget submission to
Congress does not include certain details at the asset level, such as estimates of total costs
and total numbers to be procured. The Coast Guard’s reevaluation of baselines has also
changed its understanding of the delivery schedules and capabilities of Deepwater assets.”
This report will be updated as events warrant.
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Introduction ..................................................................................................................................... 1
Background ..................................................................................................................................... 2
Deepwater Missions .................................................................................................................. 2
Origin of Deepwater Acquisition Effort.................................................................................... 2
Structure of Deepwater Acquisition Effort................................................................................ 2
Structure Until 2007............................................................................................................ 2
Revised Structure Since 2007 ............................................................................................. 3
Deepwater Assets Planned for Acquisition ............................................................................... 4
Acquisition Program Baseline ............................................................................................ 4
2009 Fleet Mix Analysis ..................................................................................................... 6
Examples of Deliveries of Deepwater Assets ........................................................................... 6
Deepwater Acquisition Funding................................................................................................ 7
Prior-Year Funding.............................................................................................................. 7
FY2010 Funding Request ................................................................................................... 7
Criticism of Deepwater Management in 2007 .......................................................................... 8
Coast Guard Reform Actions in 2007 ....................................................................................... 9
Justice Department Investigation .............................................................................................. 9
Oversight Issues for Congress ....................................................................................................... 10
Overall Management ............................................................................................................... 10
Coast Guard Perspective ................................................................................................... 10
GAO Perspective .............................................................................................................. 12
Potential for Cost Growth ....................................................................................................... 16
Coast Guard Perspective ................................................................................................... 16
GAO Perspective .............................................................................................................. 17
Reporting of Costs and Planned Procurement Quantities ....................................................... 19
National Security Cutter (NSC) .............................................................................................. 19
Coast Guard Perspective ................................................................................................... 20
GAO Perspective .............................................................................................................. 22
Sentinel Class Fast Response Cutter (FRC)............................................................................ 25
Coast Guard Perspective ................................................................................................... 26
GAO Perspective .............................................................................................................. 27
110/123-Foot Patrol Boat Modernization................................................................................ 29
Revolving Door and Potential for Conflicts of Interest .......................................................... 30
Potential Options for Congress...................................................................................................... 31
Legislative Activity for FY2010.................................................................................................... 31
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Table 1. Deepwater Assets Planned for Acquisition........................................................................ 5
Table 2. Prior-year Deepwater Acquisition Funding ....................................................................... 7
Table 3. FY2008-FY2013 Deepwater Acquisition Funding............................................................ 8
[GAO Report] Table 4.No.] 1: Cost Growth for NSC 1 -3 (Dollars in millions) .......................... 23
Table A-1. Action on FY2009 Acquisition Funding Request ........................................................ 32
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Appendix A. Legislative Activity in 110th Congress ..................................................................... 32
Appendix B. Criticism of Deepwater Management in 2007 ......................................................... 49
Appendix C. Coast Guard Reform Actions in 2007 ...................................................................... 53
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Author Contact Information .......................................................................................................... 56
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The term Deepwater refers to a collection of more than a dozen Coast Guard acquisition
programs for replacing and modernizing the service’s aging fleet of deepwater-capable ships and
aircraft. Until April 2007, the Coast Guard had pursued these programs as a single, integrated
acquisition program that was known as the Integrated Deepwater System (IDS) program or
Deepwater program for short. The now-separated Deepwater acquisition programs include plans
for, among other things, 91 new cutters, 124 new small boats, and 247 new or modernized
airplanes, helicopters, and unmanned aerial vehicles (UAVs).
The Coast Guard, which is part of the Department of Homeland Security (DHS), is requesting
$1,051.5 million in FY2010 acquisition funding for Deepwater programs, including $305.5
million for aircraft, $591.4 million for surface ships and boats, and $154.6 million for other items.
The year 2007 was a watershed year for Deepwater acquisition. The management and execution
of what was then the single, integrated Deepwater program was strongly criticized by various
observers. House and Senate committees held several oversight hearings on the program. Bills
were introduced to restructure or reform the program in various ways. Coast Guard and industry
officials acknowledged certain problems in the program’s management and execution and
defended the program’s management and execution in other respects. The Coast Guard
announced a number of reform actions that significantly altered the service’s approach to
Deepwater acquisition (and to Coast Guard acquisition in general).
In April 2009, the Government Accountability Office (GAO) testified that:
The Coast Guard has assumed the role of systems integrator for the overall Deepwater
Program by reducing the scope of work on contract with ICGS and assigning these functions
to Coast Guard stakeholders. As part of its systems integration responsibilities, the Coast
Guard has undertaken a fundamental reassessment of the capabilities, number, and mix of
assets it needs; according to an official, it expects to complete this analysis by the summer of
2009.At the individual Deepwater asset level, the Coast Guard has improved and begun to
apply the disciplined management process found in its Major Systems Acquisition Manual,
but did not meet its goal of complete adherence to this process for all Deepwater assets by
the second quarter of fiscal year 2009. For example, key acquisition management activities—
such as operational requirements documents and test plans—are not in place for assets with
contracts recently awarded or in production, placing the Coast Guard at risk of cost overruns
or schedule slips.
Due in part to the Coast Guard’s increased insight into what it is buying, the anticipated cost,
schedules, and capabilities of many of the Deepwater assets have changed since the
establishment of the $24.2 billion baseline in 2007. Coast Guard officials have stated that
this baseline reflected not a traditional cost estimate but rather the anticipated contract costs
as determined by ICGS. As the Coast Guard has developed its own cost baselines for some
assets, it has become apparent that some of the assets it is procuring will likely cost more
than anticipated. Information to date shows that the total cost of the program may grow by
$2.1 billion. As more cost baselines are developed and approved, further cost growth may
become apparent. In addition, while the Coast Guard plans to update its annual budget
requests with asset-based cost information, the current structure of its budget submission to
Congress does not include certain details at the asset level, such as estimates of total costs
and total numbers to be procured. The Coast Guard’s reevaluation of baselines has also
changed its understanding of the delivery schedules and capabilities of Deepwater assets.”
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One reason the Coast Guard sought a systems integrator from outside the Coast Guard was
because it recognized that it lacked the experience and depth in workforce to manage the
acquisition internally. The Coast Guard acknowledges that it still faces challenges in hiring
and retaining qualified acquisition personnel and that this situation poses a risk to the
successful execution of its acquisition programs. According to human capital officials in the
acquisition directorate, as of April 2009, the acquisition branch had 16 percent of positions
unfilled, including key jobs such as contracting officers and systems engineers. Even as it
attempts to fill its current vacancies, the Coast Guard plans to increase the size of its
acquisition workforce significantly by the end of fiscal year 2011. While the Coast Guard
may be hard-pressed to fill these positions, it has made progress in identifying the broader
challenges it faces and is working to mitigate them. In the meantime, the Coast Guard has
been increasing its use of support contractors.1
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The Coast Guard performs a variety of missions in the deepwater environment, which generally
refers to waters more than 50 miles from shore. These missions include search and rescue, drug
interdiction, alien migrant interdiction, fisheries enforcement, marine pollution law enforcement,
enforcement of lightering (i.e., at-sea cargo-transfer) zones, the International Ice Patrol in
northern waters, overseas inspection of foreign vessels entering U.S. ports, overseas maritime
intercept (sanctions-enforcement) operations, overseas port security and defense, overseas
peacetime military engagement, and general defense operations in conjunction with the Navy.
Deepwater-capable assets are also used closer to shore for various operations.
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The Coast Guard initiated the Deepwater acquisition effort in the late 1990s, following a
determination by the Coast Guard that many of its existing (i.e., “legacy”) deepwater-capable
legacy assets were projected to reach their retirement ages within several years of one another.
The Coast Guard’s legacy assets at the time 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.
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Until 2007, the Coast Guard pursued Deepwater acquisition through a single, performance-based,
system-of-systems acquisition program that used a private-sector lead system integrator (LSI):
1 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and
Acquisition Workforce, GAO-09-620T, April 22, 2009, summary page.
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• System-of-Systems Acquisition. Rather than replacing its deepwater-capable
legacy assets through a series of individual acquisition programs, the Coast
Guard initially decided to pursue the Deepwater acquisition effort as an
integrated, system-of-systems acquisition, under which a combination of new and
modernized cutters, patrol boats, aircraft, along with associated C4ISR2 systems
and logistics support, would be procured as a single, integrated package (i.e., a
system of systems). The Coast Guard believed that a system-of-systems approach
would permit Deepwater acquisition to be optimized (i.e., made most cost
effective) at the overall Deepwater system-of-systems level, rather than
suboptimized at the level of individual Deepwater platforms and systems.
• Private-Sector 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 met the
Coast Guard’s projected deepwater operational requirements at the lowest
possible cost.3 The Coast Guard decided to use a private-sector LSI in part
because the size and complexity of the Deepwater program was thought to be
beyond the system-integration capabilities of the Coast Guard’s then-relatively
small in-house acquisition work force.
• Performance-Based Acquisition. The Coast Guard initially pursued the
Deepwater program as a performance-based acquisition, meaning that the Coast
Guard set performance requirements for the program and permitted the private-
sector LSI some latitude in determining how the various elements of the
Deepwater system would meet those requirements.
The Coast Guard conducted a competition to select the private-sector LSI for the Deepwater
program. 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 included a five-year baseline term that
ended in June 2007, and five potential additional award terms of up to five years (60 months)
each. On May 19, 2006, the Coast Guard announced that it was awarding ICGS a 43-month first
additional award term, reflecting good but not excellent performance by ICGS. With this
additional award term, the contract has been extended to January 2011.
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In 2007, as the Coast Guard’s management and execution of the then-integrated Deepwater
program was being strongly criticized by various observers, the Coast Guard announced a number
of reform actions that significantly altered the service’s approach to Deepwater acquisition (and
to acquisition in general). As a result of these reforms, the Coast Guard, among other things,
stopped pursuing Deepwater acquisition through a single, performance-based, system-of-systems
acquisition program that used a private-sector LSI, and began pursuing Deepwater acquisition as
2 C4I stands for command, control, communications, computers, intelligence, surveillance, and reconnaissance.
3 For more on private-sector LSIs, see CRS Report RS22631, Defense Acquisition: Use of Lead System Integrators
(LSIs)—Background, Oversight Issues, and Options for Congress, by Valerie Bailey Grasso.
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a collection of individual, defined-based acquisition programs, with the Coast Guard assuming
the lead role as systems integrator for each:
• Individual Programs. Although Deepwater acquisition programs still appear in
the budget under the common heading IDS, the Coast Guard is now pursuing
Deepwater acquisition programs as individual programs, rather than as elements
of a single, integrated program. The Coast Guard states that it is still using a
systems approach to optimizing its acquisition programs, including the
Deepwater acquisition programs, but that the system being optimized is now the
Coast Guard as a whole, as opposed to the Deepwater subset of programs.
• Coast Guard as System Integrator. The Coast Guard announced in April 2007
that, among other things, it would assume the lead role as systems integrator for
all Coast Guard Deepwater assets (as well as other major Coast Guard
acquisitions as appropriate). The Coast Guard is phasing out its reliance on ICGS
as a private-sector LSI for Deepwater acquisition, and shifting system-integration
responsibilities to itself. To support this shift, the Coast Guard is increasing its in-
house system-integration capabilities.
• Defined-Based Acquisition. The Coast Guard has decided to shift from
performance-based acquisition to the use of more-detailed specifications of the
capabilities that various Deepwater assets are to have. The Coast Guard states
that although this new approach involves setting more-detailed performance
specifications, it does not represent a return to minutely-detailed specifications
such as the Military Specification (MilSpec) system once used in Department of
Defense (DOD) acquisition programs. The Coast Guard refers to its new
approach as defined-based acquisition.
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Table 1 shows the Deepwater assets planned for acquisition under a November 2006 Deepwater
Acquisition Program Baseline (APB), and the acquisition cost of these assets in then-year dollars
as estimated at that time. As shown in the table, the total acquisition cost of these assets was
estimated at the time at $24.23 billion in then-year dollars. Acquisition funding for Deepwater
assets were scheduled at the time to be completed in FY2025, and the buildout of the assets was
scheduled at the time to be completed in 2027.
4 Additional background information on Deepwater acquisition programs is available at the Coast Guard’s acquisition
website at http://www.uscg.mil/acquisition/.
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Table 1. Deepwater Assets Planned for Acquisition
(with acquisition costs in millions of then-year dollars, as estimated at the time the Acquisition Program
Baseline was published)
Qty. Item
Cost
Air assets
6
Missionized HC-130J Long Range Surveillance (LRS) aircraft (cost of missionization)
11
16 Modernized and upgraded HC-130H LRS aircraft (cost of modernization and upgrading)
610
36 New HC-144A Medium Range Surveillance (MRS) aircraft (also called Maritime Patrol Aircraft, or
1,706
MPA) based on the European Aeronautic Defence and Space Company (EADS)/CASA CN-235
Persuader MPA aircraft design
42 Modernized and upgraded MH-60T Medium Range Recovery (MRR) helicopters (cost of
451
modernization and upgrading)
102 Modernized and upgraded HH-65C Multi-Mission Cutter Helicopters (MCHs) (cost of
741
modernization and upgrading)
45 New vertical take-off unmanned aerial vehicles (VUAVs), also called unmanned aircraft systems
503
(UASs)
Subtotal air assets 4,022
Surface assets
8
New National Security Cutters, or NSCs, displacing about 4,000 tons each (i.e., ships analogous to
3,450
today’s high-endurance cutters)
25 New Offshore Patrol Cutters, or OPCs, displacing about 3,200 tons each (i.e., ships analogous to
8,098
today’s medium-endurance cutters)
46 New Fast Response Cutters—Class A (FRC-As) displacing roughly 200 tons each, to replace most
2,613
of the Coast Guard’s existing 110-foot Island-class patrol boats
12 New Fast Response Cutters—Class B (FRC-Bs) displacing roughly 200 tons each, to replace the
593
rest of the Coast Guard’s existing 110-foot Island-class patrol boats
27 Medium Endurance Cutters (MECs) upgraded with a Mission Effectiveness Project (MEP) (cost of
317
upgrading)
17 Patrol boats (PBs) upgraded with a MEP (cost of upgrading)
117
124 New small boats for Deepwater cutters, including 33 Long-Range Interceptors (LRIs) and 91 Short-
110
Range Prosecutors (SRPs)
8
110-foot Island-class PBs converted into 123-foot PBs (cost of conversion; program not successful
95
and halted after 8 boats)
Subtotal surface assets 15,393
C4ISR systems
— Common operational picture
1,071
— Shore
systems
102
— Cutter
upgrades
180
Subtotal C4ISR systems 1,353
Integration and oversight
— System engineering and oversight
1,118
— Government
program
management
1,518
— Technology obsolescence prevention
345
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Qty. Item
Cost
—
Logistics and infrastructure upgrades
481
Subtotal integration and oversight 3,462
TOTAL 24,230
Source: Deepwater Acquisition Program Baseline (APB) approved November 7, 2006.
Although Table 1 shows 12 FRCs and 46 FRC-Bs, the Coast Guard’s Request for Proposals
(RFP) for the FRC-B program includes options for building up to 34 FRC-Bs (which, if
exercised, would reduce the number of FRC-As to as few as 24). The Coast Guard has also stated
that if the FRC-Bs fully meet the requirements for the FRC, all 58 of the FRCs might be built to
the FRC-B design.
A version of the baseline approved by DHS in May 2007 shows some different quantities
compared to those shown above—specifically, 20 patrol boats upgraded with a MEP (rather than
the 17 shown above); a figure to be determined for an unmanned aerial system (UAS) (rather than
45 VUAVs shown above); and no 110/123-foot modernized Island class patrol boats (rather than
the 8 shown above).5
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As a consequence of assuming the role of lead system integrator for Deepwater acquisition
programs, the Coast Guard is currently performing a fleet mix analysis to review its requirements
for Deepwater assets. The analysis, which is to be completed by summer 2009, could lead to
changes in the planned mix of Deepwater assets.6
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Examples of deliveries and other milestones for Deepwater assets include the following:
• The Coast Guard commissioned the first NSC, Bertholf, into service on August 4,
2008. The second, Waesche, was 78% complete as of March 20, 2009, and is
scheduled for delivery in late 2009. The third, Stratton, has begun fabrication. It
was 7% complete as of March 20, 2009, and its keel laying is scheduled for
summer 2009.
• The first HC-144A Ocean Sentry MPA aircraft was accepted by the Coast Guard
on March 10, 2008. As of April 2009, a total of seven had been delivered, and
four more were on order. On February 6, 2009, an HC-144A officially stood
5 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and
Acquisition Workforce, GAO-09-620T, April 22, 2009, p. 4.
6 Rebekah Gordon, “Coast Guard Conducting Fleet-Mix Analysis for Deepwater Assets,” Inside the Navy, April 6,
2009.
7 Information in this section is taken from the Coast Guard Acquisition Directorate’s web page on acquisition programs
and projects http://www.uscg.mil/acquisition/programs/acquisitionprograms.asp, and Statement of Admiral Thad W.
Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions before the Committee on
Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22 April 2009.
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watch for the first time on a scheduled operational patrol. The aircraft achieved
Initial Operational Capability (IOC) on April 2, 2009.
• The first missionized HC-130J LRS aircraft was accepted by the Coast Guard on
February 29, 2008. As of April 2009, mission equipment had been installed on
three HC-130Js, and two more were in modification.
• As of April 2009, new surface search radars had been installed on five HC-130H
LRS aircraft.
• The Coast Guard’s Helicopter Interdiction Tactical Squadron (HITRON) received
its first MH-65C helicopter in October 2007. As of April 2009, the Coast Guard
had configured and delivered 35 MH-65Cs, which include the installation of
Airborne Use of Force (AUF) equipment kits.
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Table 2 below shows prior-year acquisition funding for Deepwater acquisition programs. As can
be seen in the table, the programs have received a net total of about $6.1 billion in acquisition
funding through FY2009, including $1,034.0 million in FY2009.
Table 2. Prior-year Deepwater Acquisition Funding
(in millions of dollars, rounded to nearest tenth)
Priora FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09
Request
n/a 320.2 500.0 500.0 678 966.0 934.4 836.9 990.4
Appropriation
n/a 320.2 478.0 668.2 724.0 933.1 1065.9 783.3 1034.0
Rescissions n/a
3.1
57.6
38.9
98.7
132.4
Transfers n/a
49.7
77.8
78.7
Supplemental
n/a
124.2
appropriations
Totalb
117.0 320.2 474.9 610.6 734.8 1036.4 1144.6 650.8 1034.0
Cumulative totalb
117.0 437.2 912.1 1522.7 2257.5 3293.9 4438.5 5089.3 6123.3
Source: Prepared by CRS using Coast Guard data provided on January 29, 2007 (FY2007 and prior years), and
FY2008 and FY2009 appropriations bills for FY2008 and FY2009. Totals may not add due to rounding.
Note: 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.
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Table 3 shows acquisition funding requested for the Deepwater program for FY2010, along with
FY2009 funding. As shown in the table, the Coast Guard has requested $1,051.5 million in
FY2010 acquisition funding for Deepwater programs, including $305.5 million for aircraft,
$591.4 million for surface ships and boats, and $154.6 million for other items.
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Table 3. FY2008-FY2013 Deepwater Acquisition Funding
(in millions of dollars, rounded to nearest tenth; as shown in FY2009 budget)
Program
FY09 enacted
FY10 requested
Maritime Patrol Aircraft (MPA)
86.6
175.0
HH-60 Conversion Projects
52.7
45.9
HH-65 Conversion/Sustainment Projects
64.5
38.0
HC-130H Conversion/Sustainment Projects
24.5
45.3
HC-130J Fleet Introduction
13.3
1.3
Umanned aircraft system (UAS)
3.0
0
Subtotal aircraft
244.6
305.5
National Security Cutter (NSC)
353.7
281.5
Offshore Patrol Cutter (OPC)
3.0
9.8
Fast Response Cutter (FRC)
115.3
243.0
Deepwater small boats
2.4
3.0
Medium-endurance cutter sustainment
35.5
31.1
Patrol boats sustainment
30.8
23.0
Polar icebreaker sustainment
30.3a 0
Subtotal surface ships
571.0
591.4
Government program management
58.0
45.0
Systems engineering and integration
33.1
35.0
C4ISRb 88.1
35.0
Deepwater logistics
37.7
37.7
Technology obsolescence prevention
1.5
1.9
Subtotal other
218.4
154.6
TOTAL 1,034.0
1,051.5
Source: U.S. Coast Guard Posture Statement With [FY] 2009 Budget in Brief, p. 49 (Table 4). Totals may not
add due to rounding.
a. The Coast Guard states that “Polar icebreaker sustainment is not a Deepwater program but is displayed to
align with the FY2009 Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, P.L.
110-329.”
b. Command and control, communications, computers, intelligence, surveillance and reconnaissance.
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The management and execution of the then-integrated Deepwater program was strongly criticized
in 2007 by the DHS Inspector General (IG),8 GAO,9 the Defense Acquisition University (DAU)
8 See, for example, 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, “Deepwater: 120-Day Update,” June 12, 2007; as well as Department of Homeland Security,
Office of Inspector General, Acquisition of the National Security Cutter, OIG -07-23, January 2007 (available online at
(continued...)
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(whose analysis was requested by the Coast Guard),10 several Members of Congress from
committees and subcommittees that oversee the Coast Guard, and other observers. House and
Senate committees held several oversight hearings on the program, at which non-Coast Guard,
non-ICGS witnesses, as well as several Members of Congress, strongly criticized the
management and execution of the program. Criticism focused on overall management of the
program, and on problems in three cutter acquisition efforts—the NSC, the modernization of the
110-foot patrol boats, and the FRC. For a more detailed discussion, see Appendix B.
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In 2007, as the Coast Guard’s management and execution of the then-integrated Deepwater
program was being strongly criticized by various observers, the Coast Guard announced a number
of reform actions that significantly altered the service’s approach to Deepwater acquisition (and
to Coast Guard acquisition in general). For a more detailed discussion, see Appendix C.
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On April 18, 2007, it was reported that the Justice Department was conducting an investigation of
the Deepwater program. Press reports at the time stated that investigation centered on
communications systems, the conversion of the Coast Guard’s 110-foot patrol boats, and the
National Security Cutter (NSC). The Justice Department 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.11
(...continued)
http://www.dhs.gov/xoig/assets/mgmtrpts/OIG_07-23_Jan07.pdf); Department of Homeland Security, Office of
Inspector General, 110’/123’ Maritime Patrol Boat Modernization Project, OIG -07-27, January 2007 (available online
at http://www.dhs.gov/xoig/assets/mgmtrpts/OIG_07-27_Feb07.pdf); 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); and 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).
9 See, for example, Government Accountability Office, Coast Guard[:] Challenges Affecting Deepwater Asset
Deployment and Management and Efforts to Address Them, GAO-07-874, June 2007; 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; and 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.
10 Defense Acquisition University, Quick Look Study, United States Coast Guard Deepwater Program, February 2007.
11 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.
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Potential oversight issues for Congress include but are not necessarily limited to the Coast
Guard’s overall management of Deepwater acquisition, potential cost growth, the status of certain
individual Deepwater acquisition programs, and the so-called revolving door issue.
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The Coast Guard testified in April 2009 that:
Efforts to consolidate the Coast Guard Acquisition Directorate, assume Lead System
Integrator responsibilities, and implement the [Coast Guard’s] Blueprint for Acquisition
Reform [document] have left us better equipped to manage costs, schedules and performance.
These business improvements have led to a number of high profile project successes.
Consider the recent award of the Fast Response Cutter (FRC) Sentinel-class patrol boat.
Initially planned as part of the Deepwater program, to be delivered through Integrated Coast
Guard Systems (ICGS), we took this project back within the Coast Guard to ensure full and
open competition and responsible program management. We have followed our reformed
acquisition processes, conducting a deliberative proposal review and award determination
with integrated participation from technical authorities and the operational community. The
FRC’s proven parentcraft design will minimize cost and schedule risk and mitigate the patrol
boat hour gap in the shortest time possible. Neither ICGS nor the Coast Guard’s pre-
modernized acquisition program could have accomplished this feat as efficiently or
effectively, and I am confident we will build on this record of advances for future
acquisitions programs as well....
Today, I am pleased to discuss our wholly reformed acquisition organization, an organization
with processes and procedures in place to ensure successful program management and
oversight. I expect further challenges, but I have the utmost confidence that the processes
now in place allow us to address those challenges head-on and facilitate delivery of assets
and systems with capabilities to meet the mission needs of today and tomorrow.
The most pointed example of the success of our reformed acquisition processes is Fast
Response Cutter Sentinel-class patrol boat. With a total potential contract value of more than
$1 billion, it was a highly competitive process, and our selection survived two post-award
protests, demonstrating that our robust acquisition process was beyond reproach.
As the yard stick by which to measure the success of our reformed acquisition enterprise, the
Sentinel project provides a number of assurances - all built on the cornerstones for successful
acquisition - for its own and future acquisition management successes, including:
• Establishment and maintenance of a direct Coast Guard relationship with the contractor,
rather than through a separate lead systems integrator;
• Development of detailed technical requirements, and firm adherence to those requirements
throughout the proposal design evaluation process and construction;
• Classification of cutters to established and recognized standards (i.e., American Bureau of
Shipping and High Speed Naval Vessel Rules);
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• Use of parent craft designs where applicable, with parent craft designer and builder co-
located on engineering team;
• On-site government staff at production facilities;
• Fixed price contract structure;
• Extensive involvement of technical authority throughout acquisition and delivery process;
• Independent validation (i.e., independent cost estimates and design assessments);
• Leveraging Navy and other government partnerships; and,
• Ability to re-compete thru options for data and licensing.
The Sentinel project has become the model for all current and future Coast Guard acquisition
programs. By adopting needed reforms, and guided by this Subcommittee, we’ve
demonstrated the right way to develop and manage an acquisition project. With those
reforms solidly in place, the foundation for continued success is firm....
As acquisition policy and process improvements have promoted project successes, one
persistent set of challenges has been the recruitment, development, and retention of a highly
qualified acquisition workforce. We have accomplished much in our reforms of contracting,
business and financial management, program management, systems engineering and other
key disciplines. But, like other federal agencies, we must work hard to attract and retain the
best and brightest in a highly competitive market.
In the 1990s, the level of investment in Coast Guard acquisition was approximately $200
million. In FY 2009, we were appropriated nearly $1.5 billion for our recapitalization
programs. This growth in investment has required our professional workforce to grow to
ensure adequate program management and contractor oversight and management. We have
worked hard to build capacity. Today the Acquisition Directorate has 855 military and
government civilian personnel, and is continuing to grow—including 104 added positions in
2008 and another 65 positions in 2009.
With many agencies competing for qualified acquisition professionals, it is critically
important for the Coast Guard to remain competitive in the labor market. The Coast Guard
must be able to use all hiring and workforce management tools effectively and expeditiously.
Once hired, however, another challenge is ensuring the appropriate training, skills, and
career progression for our workforce. As a government manager, I have an obligation to
properly equip my personnel with the skills and tools they need to accomplish their missions.
One of the areas where we have placed enormous pressure is on our training and certification
programs. A couple of years ago we had a lot of people who might have had the right
experience but had not completed required training or certification, so it was difficult to see
standardized skills across projects. We have addressed this challenge. Today, of the 14 Level
I investments in our acquisition portfolio (valued at greater than $1 billion total life cycle
cost), 100 percent are led by DHS Level III (the highest level) certified program managers.
We have also developed a new Human Capital Strategic Plan that outlines several goals
aimed at improving the skills of our workforce. An overarching objective is to raise the
profile of Coast Guard acquisition as a profession with well-defined career paths for both
uniformed and civilian employees. That strategy sets goals for training and educational
opportunities, using internal resources as well as reaching out to third parties, such as the
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Defense Acquisition University and the Naval Postgraduate School, to provide additional
support.
The goal in these efforts is to improve the career path that can be followed by uniformed and
civilian employees, ultimately narrowing the gap between the complexity of acquisition tasks
and the availability of skilled workers to accomplish them....
With acquisition reform firmly taking root, the future of Coast Guard acquisition is bright.
We have learned from the past, but our focus remains on the future. Reformed processes
have already led to acquisition success, but I am confident our greatest successes lay ahead,
if we remain committed to the foundational principles and acquisition cornerstones that have
driven our reforms. As the Coast Guard’s mission support organization is established fully,
those principles will become further engrained in our mission support and acquisition
culture.
The future will see new requirements for ever new assets and systems. In fact, we will soon
begin the largest single acquisition project in our history—the Off-Shore Patrol Cutter. Now
that our reforms are in place, I am confident that this and other future projects will be
managed effectively and efficiently.12
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GAO for several years has been assessing, providing reports and testimony on, and making
recommendations for Coast Guard management of Deepwater acquisition. The Coast Guard has
implemented many of GAO’s recommendations. The extent to which the Coast Guard has
implemented GAO recommendations has been a topic of congressional oversight for Deepwater
acquisition.
GAO testified in April 2009 that:
In deciding to take over the systems integrator role from ICGS, the Coast Guard has taken
steps to increase government control and accountability by, among other things, applying the
disciplined program management processes in its Major Systems Acquisition Manual
(MSAM) to Deepwater assets. The MSAM requires documentation and approval of
acquisition decisions at key points in a program’s life-cycle by designated officials at high
levels. The Coast Guard has established a number of goals and deadlines for completing
these activities in its Blueprint for Acquisition Reform, which was initially released in July
2007 and was last updated in July 2008.
The Coast Guard has taken three major steps to become the systems integrator for the
Deepwater Program. It has defined and assigned systems integrator functions to Coast Guard
stakeholders, begun to reassess the capabilities and mix of assets it requires, and significantly
reduced the contractual responsibilities of ICGS. While the Coast Guard has made progress
in applying the disciplined MSAM acquisition process to its Deepwater assets, it did not
meet its goal of being fully compliant by the second quarter of fiscal year 2009. In the
meantime, the Coast Guard continues with production of certain assets and award of new
contracts in light of what it views as pressing operational needs....
12 Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions
before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22
April 2009, pp. 2-3, 8-11.
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In 2008, the Coast Guard acknowledged that in order to assume the role of systems
integrator, it needed to define systems integrator functions and assign them to Coast Guard
stakeholders. Through codified changes to internal relationships, policies, and contractual
arrangements, the Coast Guard has done so. For example, the Coast Guard formally
designated certain directorates as technical authorities to establish, monitor, and approve
technical standards for Deepwater assets related to design, construction, maintenance,
logistics, C4ISR, and life-cycle staffing and training. The Coast Guard’s capabilities
directorate determines operational requirements and the asset mix to satisfy those
requirements and establishes priorities. This directorate is expected to collaborate with the
technical authorities to ensure that the Coast Guard’s technical standards are incorporated
during the requirements development process. Further, the acquisition directorate’s program
and project managers are to be held accountable for ensuring that the assets it procures fulfill
operational requirements and the technical authority standards....
When it contracted with ICGS, the Coast Guard had limited insight into how the contractor’s
proposed solution would meet overall mission needs, limiting its ability to justify the
proposed solution and make informed decisions about possible trade-offs. To improve its
insight, the capabilities directorate has initiated a fundamental reassessment of the
capabilities and mix of assets the Coast Guard needs to fulfill its Deepwater missions. The
goals of this fleet mix analysis include validating mission performance requirements and
revisiting the number and mix of all assets that are part of the Deepwater Program. A specific
part of the study will be to analyze alternatives and quantities for the Offshore Patrol Cutter,
an asset which accounts for a projected $8 billion of the total Deepwater costs. According to
an official, the results of this analysis are expected in the summer of 2009. Coast Guard
leadership plans to assess the results and make future procurement decisions based on the
analysis.
In conjunction with its assuming the role of systems integrator, the Coast Guard has
significantly reduced the scope of work on contract with ICGS. In March 2009, the Coast
Guard issued a task order to ICGS limited to tasks such as data management and quality
assurance for assets currently under contract with ICGS including C4ISR, the Maritime
Patrol Aircraft (MPA), and the National Security Cutter (NSC). The Coast Guard is currently
developing plans to transition these functions from ICGS to the Coast Guard or an
independent third party by February 2011 when this task order expires. For assets procured
or planned to be procured outside of the ICGS contract such as the Offshore Patrol Cutter,
systems engineering and program management functions are expected to be carried out by
the Coast Guard with support from third parties and contractors. According to officials, the
Coast Guard has no plans to award additional orders to ICGS for systems integrator
functions within the current award term or for any work after the award term expires in
January 2011.
Since our June 2008 report on the Deepwater Program, and taking into account our
recommendation, the Coast Guard has improved its MSAM process. For example, the
process now dictates that the acquisition project and program managers work collaboratively
with the technical authorities as described above. The MSAM process was revised to require
acquisition planning and an analysis of alternatives for procurement to start at an earlier
stage, which is intended to help inform the budget and planning processes. Other
improvements include the adoption of our recommendation for a formal design review,
Milestone 2A, before authorizing low-rate initial production.
Because the Coast Guard previously exempted Deepwater from the MSAM process, assets
were procured without following a disciplined program management approach. Recognizing
the importance of ensuring that each acquisition project is managed through sustainable and
repeatable processes and wanting to adhere to proven acquisition procedures, in July 2008,
the Coast Guard set a goal of completing the MSAM acquisition management activities for
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all Deepwater assets by the second quarter of fiscal year 2009. However, of the 12
Deepwater assets in the concept and technology development phase or later, 9 are behind
plan in terms of MSAM compliance. In the meantime, the Coast Guard has proceeded with
production and awarded new contracts without all of the knowledge it needs to ensure that
the capabilities it is buying will meet Coast Guard needs within cost and schedule
constraints.
For assets already in production, such as the MPA and the NSC, the Coast Guard has made
some progress in the past year in retroactively developing acquisition documentation with
the intent of providing the traceability from mission needs to operational performance that
was previously lacking. For example, the Coast Guard approved an operational requirements
document for the MPA in October 2008 to establish a formal performance baseline and
identify attributes for testing. Through this process, the Coast Guard discovered that ICGS’s
requirement for operational availability (the amount of time that an aircraft is available to
perform missions) was excessive compared to the Coast Guard’s own standards. According
to a Coast Guard official, the ICGS requirement would have needlessly increased costs to
maintain and operate the aircraft.
Even as the Coast Guard gains this additional knowledge about MPA requirements, it is
continuing with this procurement despite not having completed operational testing.
According to the MSAM, testing in an operational environment should be completed with
the initial production variants of an asset to demonstrate that capabilities meet requirements
before committing to larger purchases. An approved test plan helps ensure that the tests
conducted are clearly linked to requirements and mission needs. While the MPA began an
operational assessment in July 2008, the Coast Guard still lacked, as of March 2009, a test
plan approved by DHS and endorsed by its independent test authority, the Navy’s
Commander Operational Testing and Evaluation Force. With 11 of 36 MPAs already on
contract, the Coast Guard has completed the operational assessment but does not plan to
complete operational testing until the fiscal year 2011 time frame. Similarly, according to
Coast Guard officials, operational testing of the NSC, also conducted by the Coast Guard’s
independent test authority, has begun in the absence of an approved test plan, which is now
expected in July 2009. By the time testing is scheduled to be completed in 2011, the Coast
Guard plans to have six of eight NSCs either built or on contract.
According to the MSAM process, operational requirements must be approved before
procuring an asset. However, since committing to the MSAM process, the Coast Guard has
awarded new contracts for assets without having all required acquisition documentation in
place, due to its determination that the need for these capabilities is pressing. This situation
puts the Coast Guard at risk of cost overruns and schedule slips if it turns out that what it is
buying does not meet requirements.
• In September 2008, after conducting a full and open competition, the Coast Guard awarded
an $88.2 million contract for the design and construction of a lead Fast Response Cutter.
However, the Coast Guard does not have an approved operational requirements document or
test plan for this asset. Recognizing the risks inherent in this approach, the Coast Guard
developed a basic requirements document and an acquisition strategy based on procuring a
proven design. These documents were reviewed and approved by the Coast Guard’s
capabilities directorate, the engineering and logistics directorate, and chief of staff before the
procurement began. According to a Coast Guard official, the Coast Guard intends to have an
approved operational requirements document before procuring additional ships.
• In February 2009, the Coast Guard issued a $77.7 million task order to ICGS for a second
segment of C4SIR design and development, before developing its requirements for
performance. Design and development costs for the first segment increased from $55.5
million to $141.3 million. According to Coast Guard officials, this increase was due in part
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to the structure of the ICGS contract under which the Coast Guard lacked visibility into the
software development processes and requirements. Furthermore, ICGS’s C4ISR solution for
the Deepwater Program contains proprietary software. The Coast Guard has acquired data
rights to the software and, according to Coast Guard officials, has determined that the
capabilities it is buying meet Coast Guard technical standards for maintenance, logistics, and
interoperability.13
Regarding the Coast Guard’s acquisition workforce, GAO testified in April 2009 that:
One reason the Coast Guard originally sought a systems integrator was because it recognized
that it lacked the experience and depth in its workforce to manage the acquisition internally.
Now that the Coast Guard has taken control of the Deepwater acquisition, it acknowledges
that it faces challenges in hiring and retaining qualified acquisition personnel and that this
situation poses a risk to the successful execution of its acquisition programs. According to
human capital officials in the acquisition directorate, as of April 2009, the acquisition branch
had funding for 855 military and civilian personnel and had filled 717 of these positions—
leaving 16 percent unfilled. The Coast Guard has identified some of these unfilled positions
as core to the acquisition workforce, such as contracting officers and specialists, program
management support staff, and engineering and technical specialists. Even as it attempts to
fill its current vacancies, the Coast Guard plans to increase the size of its acquisition
workforce significantly by the end of fiscal year 2011.
To supplement and enhance the use of its internal expertise, the Coast Guard has increased
its use of third-party, independent experts outside of both the Coast Guard and existing
Deepwater contractors. For example, a number of organizations within the Navy provided
independent views and expertise on a wide range of issues, including testing and safety. In
addition, the Coast Guard will use the American Bureau of Shipping, an independent
organization that establishes and applies standards for the design and construction of ship
and other marine equipment, as an advisor and independent reviewer on the design and
construction of the Fast Response Cutter. The Coast Guard has also begun a relationship
with a university-affiliated research center to augment its expertise as it executes its fleet mix
analysis.
In addition to third party experts, the Coast Guard has been increasing its use of support
contractors. Currently, there are approximately 200 contractor employees in support of the
acquisition directorate—representing 24 percent of its total acquisition workforce—a number
that has steadily increased in recent years. These contractors are performing a variety of
services—some of which support functions the Coast Guard has identified as core to the
government acquisition workforce—including project management support, engineering,
contract administration, and business analysis and management. While support contractors
can provide a variety of essential services, their use must be carefully overseen to ensure that
they do not perform inherently governmental roles. The Coast Guard acknowledges this risk
and is monitoring its use of support contractors to properly identify the functions they
perform, as well as developing a policy to define what is and what is not inherently
governmental.
While the Coast Guard may be hard-pressed to fill the government acquisition positions it
has identified both now and in the future, it has made progress in identifying the broader
challenges it faces and is working to mitigate them. The Coast Guard has updated two
documents key to this effort, the Blueprint for Acquisition Reform, now in its third iteration,
13 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and
Acquisition Workforce, GAO-09-620T, April 22, 2009, pp. 4-10.
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and the Acquisition Human Capital Strategic Plan, which is in its second iteration. Each
document identifies challenges the Coast Guard faces in developing and managing its
acquisition workforce and outlines initiatives and policies to meet these challenges. For
example, the Acquisition Human Capital Strategic Plan lays out three overall challenges and
outlines over a dozen strategies the Coast Guard is pursuing to address them in building and
maintaining an acquisition workforce. The discussion of strategies includes status indicators
and milestones to monitor progress, as well as supporting actions such as the formation of
partnerships with the Defense Acquisition University and continually monitoring turnover in
critical occupations. The Blueprint for Acquisition Reform supports many these initiatives
and provides deadlines for their completion. In fact, the Coast Guard has already completed a
number of initiatives including
• achieving and maintaining Level III program manager certifications,
• adopting a model to assess future workforce needs,
• incorporating requests for additional staff into the budget cycle,
• initiating tracking of workforce trends and metrics,
• expanding use of merit-based rewards and recognitions, and
• initiating training on interactions and relationships with contractors.14
The Coast Guard stated the following in concluding its April 2009 testimony:
In conclusion, I’d like to emphasize several key points as we continue to oversee the various
Coast Guard initiatives discussed today. It is important to recognize that Coast Guard
leadership has made significant progress in identifying and addressing the challenges in
taking on the role of systems integrator for the Deepwater Program. The Coast Guard is
continuing to build on this progress by starting to follow a disciplined program management
approach that improves its knowledge of what is required to meet its goals. An important
component of this approach is gaining realistic assessments of needed capabilities and
associated costs to enable the Coast Guard and Congress to better execute decision making
and oversight. The Coast Guard’s ability to build an adequate acquisition workforce is
critical, and over time the right balance must be struck between numbers of government and
contractor personnel. Until the Coast Guard gains a thorough understanding of what it is
buying and how much it will cost, and is able to put in place the necessary workforce to
manage the Deepwater Program, it will continue to face risks in carrying out this multibillion
dollar acquisition.15
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The Coast Guard testified in April 2009 that:
14 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and
Acquisition Workforce, GAO-09-620T, April 22, 2009, pp. 13-15.
15 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and
Acquisition Workforce, GAO-09-620T, April 22, 2009, pp. 15.
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[a] persistent challenge is controlling costs in complex, multiple-year projects – especially
those costs driven by economic factors outside the Coast Guard’s control, more specifically,
those types of cost increases recently impacting the National Security Cutter and Maritime
Patrol Aircraft projects. Current economic conditions have seen a steady six-month decline
in the cost of commodities such as nickel, steel and copper. However, when we award
production contracts, our contract price reflects commodity prices at the time of award.
In the case of the National Security Cutter we are executing production contracts for NSCs
two and three and the long lead time materials contract for NSC four that were priced based
on historically high commodity and fuel prices in effect during the summer of 2008.
Likewise, when current NSC and MPA contracts were awarded, the value of the U.S. dollar
was at a record low when compared to other foreign currencies, meaning all foreign
components necessary for production were more expensive.
While the government will never be able to eliminate these types of cost changes completely,
we have taken steps to minimize their impact within Coast Guard acquisitions. Once again,
by building on the cornerstones for acquisition success, we have established a firm
commitment to independent cost estimates within each project to validate projected program
costs. We have initiated more rigorous government oversight of contractor performance and
cost accounting, including renewed emphasis on Earned Value Management data. And we
continue to work with industry to balance risk and ensure affordable acquisition programs at
best value for the government.16
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Regarding the potential for cost growth in Deepwater acquisition programs, GAO testified in
April 2009 that:
Since the establishment of the $24.2 billion baseline for the Deepwater program in 2007, the
anticipated cost, schedules, and capabilities of many of the Deepwater assets have changed,
in part due to the Coast Guard’s increased insight into what it is buying. The purpose of the
2007 baseline was to establish cost, schedule, and operational requirements for the
Deepwater system as a whole; these were then allocated to the major assets. Coast Guard
officials have stated that this baseline reflected not a traditional cost estimate but rather the
anticipated contract costs as determined by ICGS. Furthermore, the Coast Guard lacked
insight into how ICGS arrived at some of the costs for Deepwater assets.
As the Coast Guard has assumed greater responsibility for management of the Deepwater
Program, it has begun to improve its understanding of costs by establishing new baselines for
individual assets based on its own cost estimates. These baselines begin at the asset level and
are developed by Coast Guard project managers, validated by a separate office within the
acquisition branch and, in most cases, are reviewed and approved by DHS. The estimates use
common cost estimating procedures and assumptions, and may account for costs not
previously captured. Beginning in September 2008 the Coast Guard began submitting new
baselines to DHS. To date, 10 asset baselines have been submitted to DHS and 4 have been
approved. These new baselines are formulated using various sources of information
depending on the acquisition phase of the asset. For example, the baseline for the NSC was
updated using the actual costs of material, labor, and other considerations already in effect at
the shipyards. The baselines for other assets, like the MPA, were updated using independent
16 Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions
before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22
April 2009, pp. 17-18.
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cost estimates. As the Coast Guard approaches major milestones, such as the decision to
enter low-rate initial production or begin system development, officials have stated that the
cost estimates for all assets will be reassessed and revalidated.
As the Coast Guard has developed its own cost baselines for Deepwater assets, it has become
apparent that some of the assets it is procuring will likely cost more than anticipated. While
the Coast Guard is still in the process of communicating the effect and origin of these cost
issues to DHS, information available to date for assets shows that the total cost of the
program will likely exceed $24.2 billion, with potential cost growth of approximately $2.1
billion through the life of the Deepwater Program. As more baselines are approved by DHS,
further cost growth may become apparent. Table 2 provides the estimates of asset costs
available as of April 2009. It does not reflect the roughly $3.6 billion in other Deepwater
costs, such as program management, that the Coast Guard states do not require a new
baseline.17
GAO testified that the cost of the NSC program was estimated in April 2009 at
$4,749 million in then-year dollars – an increase of $1,299 million, or about 38%,
from the 2007 baseline estimate of $3,450 million, and that the cost of the MPA
program was estimated in April 2009 at $2,223 million in then-year dollars – an
increase of $517 million, or about 30%, from the 2007 baseline estimate of $1,706
million. Cost growth on the NSC and MPA programs accounts for $1,816 million of
the $2,053 million in cost growth identified by GAO as of April 2009. GAO testified
that
The effort by the Coast Guard to develop new baselines provides not only a better
understanding of the costs of the Deepwater assets, but also insight into the drivers of any
cost growth. For example, the new NSC baseline attributes a $1.3 billion rise in cost to a
range of factors, from the additional costs to correct fatigue issues on the first three cutters to
the rise in commodity and labor prices. The additional $517 million needed to procure all 36
MPA is attributed primarily to items that were not accounted for in the previous baseline,
including a simulator to train aircrews, facility improvements, and adequate spare parts. By
understanding the reasons for cost growth, the Coast Guard may be able to better anticipate
and control costs in the future.
The Coast Guard has structured some of the new baselines to show how cost growth could be
controlled by making trade-offs in asset quantities and/or capabilities. For example, the new
MPA baseline provides cost increments that show the acquisition may be able to remain
within its initial allotment of the overall $24.2 billion if 8 fewer aircraft are acquired. Coast
Guard officials have stated that other baselines currently under review by DHS present
similar cost increments. This information, if combined with data from the fleet mix study to
show the effect of quantity or capability reductions on the system-of-systems as a whole,
offers a unique opportunity to the Coast Guard for serious discussions of trade-offs.
The Coast Guard’s reevaluation of baselines has also changed its understanding of the
delivery schedules and capabilities of Deepwater assets. According to the new baselines, a
number of assets will be available for operational use later than originally anticipated. This
includes a 12-month delay for the NSC to reach its initial operating capability and an 18-
month delay for the MPA. Coast Guard officials stated that the restructuring of the
unmanned aircraft and small boat projects has delayed the deployment of these assets with
17 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and
Acquisition Workforce, GAO-09-620T, April 22, 2009, pp. 10-11.
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the NSC and affects the ship’s anticipated capabilities in the near term. We plan to report
later this summer on the operational effect of the delays in the NSC project.18
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Regarding Coast Guard reporting of costs and planned procurement quantities for Deepwater
acquisition programs, GAO testified in April 2009 that:
While the Coast Guard plans to update its annual budget requests with asset-based cost
information, the current structure of its budget submission could limit Congress’s
understanding of details at the asset level. The budget submission presents total acquisition
costs only at the overall Deepwater system level ($24.2 billion), and the description of
funding for individual assets does not include key information such as costs beyond the
current 5-year capital investment plan, i.e., life-cycle costs, or the total quantities of assets
planned. For example, while the justification of the NSC request includes an account of the
capabilities the asset is expected to provide, how these capabilities link to the Coast Guard’s
missions, and details on what activities past appropriations have funded, it does not include
estimates of total program cost, future award or delivery dates of remaining assets, or even
the total number of assets to be procured.
Our past work has emphasized that one of the keys to a successful capital acquisition, such
as the multibillion-dollar ships and aircraft the Coast Guard is procuring, is budget
submissions that clearly communicate needs. A key part of this communication is to provide
decision makers with information about cost estimates, risks, and the scope of a planned
project before committing substantial resources to it. Good budgeting also requires that the
full costs of a project be considered upfront when decisions are made. Other agencies within
the federal government that acquire systems similar to those of the Coast Guard capture these
elements in justifications of their requests....
While the Coast Guard does include some of this information in its asset-level Quarterly
Acquisition Reports to Congress and the Deepwater Program Expenditure Report, these
documents are provided only to the appropriations committees, and the information is
restricted due to acquisition sensitive material.19
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Oversight issues concerning the NSC program include whether the original design for the NSC
was rugged enough to ensure that the ships could be operated for their full 30-year intended
service lives; whether the electronic systems on the ship met technical standards (including some
referred to as TEMPEST) for information assurance (or IA—the ability of the ship’s various
electronic systems to protect classified data); and cost growth in building the ships.
18 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and
Acquisition Workforce, GAO-09-620T, April 22, 2009, pp. 11-12. See also Rebekah Gordon, “Blore: Deepwater Costs
Rise by $2 Billion, Greater GrowthPossible,” Inside the Navy, March 30, 2009; Calvin Biesecker, “Deepwater Asset
Costs Exceed $24 Billion Program Baseline By $2 Billion, Rep. Cummings Says,” Defense Daily, March 25, 2009: 7-
8.
19 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and
Acquisition Workforce, GAO-09-620T, April 22, 2009, pp. 12-13.
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The Coast Guard testified in April 2009 that:
We have been actively running Bertholf through her paces during the operational test and
evaluation process now underway and have received very positive feedback from her crew
and the Coast Guard’s operational community. Of particular note, Bertholf has conducted her
first operational patrols and completed flight deck dynamic interface testing and attained
interim flight deck certification. Additionally, Bertholf recently conducted towing exercises
with CGC [Coast Guard cutter] Morgenthau, a fueling at sea evolution with USNS [U.S.
naval ship] Kaiser, and testing of the 57mm deck gun and close-in weapon system against
high-speed maneuvering surface targets and unmanned aerial vehicles....
We continue to see real progress in the areas of Information Assurance, which includes
TEMPEST, on the NSC. Our technical authority, with support from the Command, Control,
Communications, Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) and
NSC project managers, conducted TEMPEST certification inspections prior to preliminary
acceptance of Bertholf in May 2008. Those pre-delivery inspections have contributed to
building a TEMPEST baseline, which will serve as a reference point for all future
TEMPEST-related activities. Using the test-fix-test methodology, we now have resolved all
122 visual TEMPEST discrepancies identified during that pre-acceptance process. We are
conducting additional instrumented TEMPEST surveys using a National Security Agency
(NSA) approved contractor to prepare for final TEMPEST testing, which is scheduled to be
conducted by SPAWAR [the Navy’s Space and Naval Warfare Systems Command] and in
April 2009.
We continue to build on lessons learned and are making some significant improvements to
the Stratton, including construction process efficiencies, enhanced functionality and better
hull design. One of the most notable process improvements is a significant reduction in the
number of grand blocks—multiple units stacked together in large assembly halls away from
the waterfront—used to assemble the ships hull. We used 29 grand blocks to assemble
Bertholf, but expect to use as few as 14 to assemble Stratton. This will enable more sub-
assembly work in each grand block in a controlled environment and potentially lead to fewer
construction hours compared to the process for Bertholf.
Other improvements include an enhanced replenishment at sea station, which incorporates a
redesigned refueling area that will be more efficient and ergonomic for cutter personnel. We
are also improving the gas turbine removal route, which will make it easier to remove and
repair the gas turbine modules that power the cutter. And we have enhanced the hull fatigue
design on Stratton, ensuring she will achieve a 30-year fatigue life.
We are currently working toward production award for the fourth NSC, Hamilton. In line
with accomplished acquisition reforms and our efforts to become the lead systems integrator,
the production award for Hamilton will occur outside the Integrated Coast Guard Systems
(ICGS) LSI construct and include a fixed price contract structure.20
The Coast Guard also testified in April 2009 that:
20 Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions
before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22
April 2009, pp. 13-14.
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our reform efforts are facilitating the successful resolution of past and current project
challenges.
One such challenge is the fatigue lifespan of the National Security Cutter—which the Coast
Guard insists be at least 30 years—meaning at least 30 years before the onset of major
repairs due to normal mission use. In 2007, in accordance with the acquisition success
cornerstones and working through our technical authority for engineering and logistics, the
Coast Guard arranged to work with the Navy’s Naval Surface Warfare Center, Carderock
Division to provide independent third party analysis of fatigue design solutions developed by
Coast Guard naval engineers. Using the newest available computer fatigue modeling
software, Carderock reached two main conclusions in its final report, presented to the Coast
Guard earlier this year.
First, Carderock determined Coast Guard-developed design fatigue enhancements for the
hulls of NSCs three through eight will achieve the desired 30-year fatigue life, while also
recommending monitoring of localized stress in several structural details. Second, the report
identifies major improvements with fatigue life after completing identified modifications to
hulls one and two, but the Carderock transmittal letter recommends more data be gathered
for several areas which are still modeling a less-than 30-year fatigue life.
We agree with Carderock’s assessments. In fact, we have already outfitted CGC Bertholf
with strain gauge sensors to measure actual encountered stresses and collect data to enable
more precise design modeling. Our technical authority is also reviewing each area identified
by Carderock, based on Coast Guard missions and the planned operational profile of the
NSC, and will develop a plan to address those concerns prior to implementing any related
design fix. Plans are to gather data and modify design enhancements over a span of multiple
years, even after NSCs one and two transition to full operations, as the upgrades are
completed over potentially several future yard availabilities. We plan to continue to
collaborate with Carderock to conduct further analysis, including possible re-validation of
changes to the proposed design as a result of the recommendations in their report.
Another persistent challenge is controlling costs in complex, multiple-year projects –
especially those costs driven by economic factors outside the Coast Guard’s control, more
specifically, those types of cost increases recently impacting the National Security Cutter and
Maritime Patrol Aircraft projects. Current economic conditions have seen a steady six-month
decline in the cost of commodities such as nickel, steel and copper. However, when we
award production contracts, our contract price reflects commodity prices at the time of
award.
In the case of the National Security Cutter we are executing production contracts for NSCs
two and three and the long lead time materials contract for NSC four that were priced based
on historically high commodity and fuel prices in effect during the summer of 2008.
Likewise, when current NSC and MPA contracts were awarded, the value of the U.S. dollar
was at a record low when compared to other foreign currencies, meaning all foreign
components necessary for production were more expensive.21
21 Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions
before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22
April 2009, pp. 17-18. See also Calvin Biesecker, “Coast Guard’s NSC Fleet Cost Estimates Rise Due To Labor,
Commodity Issues,” Defense Daily, February 6, 2009: 2-3; Bettina H. Chavanne, “National Security Cutter Hulls
Below Fatigue Life Requirements,” Aerospace Daily & Defense Report, February 10, 2009: 1-2; Rebekah Gordon,
“First Two National Security Cutters Still Face Fatigue-Life Issues,” Inside the Navy, February 9, 2009.
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As mentioned earlier, the Coast Guard testified in April 2009 that the cost of the NSC program
was estimated in April 2009 at $4,749 million in then-year dollars—an increase of $1,299
million, or about 38%, from the 2007 baseline estimate of $3,450 million, and that the Coast
Guard attributes the increase “to a range of factors, from the additional costs to correct fatigue
issues on the first three cutters to the rise in commodity and labor prices.”22
In June 2008, GAO reported the following regarding the status of the NSC program:
The NSC’s projected costs have increased greatly compared to the initial baseline.
Requirements changes to address post-9/11 needs are one of the main reasons for the cost
increases. Hurricane Katrina was another contributing factor, but Coast Guard actions also
contributed to the increases, such as the decision to proceed with production before resolving
fatigue life concerns. Fatigue is physical weakening because of age, stress, or vibration. A
U.S. Navy analysis done for the Coast Guard determined that the ship’s design was unlikely
to meet fatigue life expectations. The Coast Guard ultimately decided to correct the structural
deficiencies for the first two National Security Cutters at scheduled points after construction
is completed to avoid stopping the production lines, and to incorporate structural
enhancements into the design and production for future ships. In August 2007, the Coast
Guard and ICGS agreed to a consolidated contracting action to resolve the contractor’s
request for equitable adjustment of $300 million, stemming from ICGS’s contention that the
Coast Guard had deviated from a very detailed contractor implementation plan on which
pricing was based. This negotiation also converted the second NSC from a fixed-price to a
cost plus incentive fee contract.
A Coast Guard official stated that the first NSC is nearing completion with more than 98
percent of the ship constructed and machinery, builders, and acceptance trials have been
completed. Delivery of the ship to the Coast Guard occurred on May 8, 2008; however, the
contractor is still in the process of submitting certifications and resolving issues found in
testing including these with the propulsion system and communications equipment. A Coast
Guard official stated that the second NSC is 50 percent complete and long lead materials and
production contracts have been awarded for the third ship. The Coast Guard plans to award
the production contract for the fourth NSC in fiscal year 2009, with a contract for long lead
materials for that ship planned for the summer of 2008.
A Coast Guard official stated that some issues with the first NSC will remain at delivery,
including issues with classified communications systems. Officials told us that they are in the
process of determining how to most cost effectively address these issues. ICGS will continue
to perform work on the first NSC after it leaves the shipyard, including certain repairs that
fall under the ship’s warranty.23
In March 2008, GAO reported the following regarding the status of the NSC program:
Changes to the NSC have had cost, schedule, and performance ramifications.
22 Government Accountability Office, Coast Guard[:]Update on Deepwater Program Management, Cost, and
Acquisition Workforce, GAO-09-620T, April 22, 2009, p. 11.
23 Government Accountability Office, Coast Guard[:] Change in Course Improves Deepwater Management and
Oversight, but Outcome Still Uncertain, GAO-08-745, June 2008, p. 36.
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The estimated costs for the first three ships have generally doubled from the initial projected
costs due to a number of contributing factors, including requirements changes as a result of
September 11, Hurricane Katrina damages, and some program management actions by the
Coast Guard.
Delivery of the ship could be delayed. An aggressive trial schedule leaves little time for
dealing with the unexpected, and most certifications have yet to be completed.
Coast Guard officials expect the ship to meet all performance parameters, but will not know
for certain until the ship undergoes trials. Further, Coast Guard engineers have concerns that
most of the ship’s available weight margin has been consumed during construction, meaning
that subsequent changes to the ship will require additional redesign and engineering to offset
the additional weight.24
The GAO report also stated:
The NSC’s projected costs have increased compared to the initial baseline, as shown in
[GAO Report] Table [No.] 1.
[GAO Report] Table 4.No.] 1: Cost Growth for NSC 1 -3 (Dollars in millions)
NSC 1
NSC 2
NSC 3
Design $67.7
—
—
Build 264.4
$200.7
$189.2
Govt. Furnished equipment (GFE)
52.8
50.0
40.0
Initial projected costs (2002)
$384.9
$250.7
$229.2
Requirements changes
75.9
60.0
60.0
Hurricane Katrina
40.0
44.4
38.7
Economic changes
58.3
69.9
86.8
Structural enhancements
40.0
30.0
16.0
Other GFE
41.5
40.7
73.9
Current projected costs (2008)
$640.7
$495.7
$504.6
Source: Coast Guard.
Note: Economic changes include, for example, escalation of material/labor and some costs associated with
settling the REA. Other GFE includes certifications, tests, and training. For NSC 3, other GFE also includes
additional government oversight.
Requirements changes to address post-9/11 needs are one of the main reasons for the cost
increases. The new requirements include
• expanded interoperability with the Department of Defense, DHS, and local first responders;
• increased self-defense and survivability, including chemical, biological, and radiological
measures;
24 Government Accountability Office, Status of Selected Aspects of the Coast Guard’s Deepwater Program, GAO-08-
270R, March 11, 2008, pp. 2-3.
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• increased flight capability via longer and enhanced flight deck;
• upgraded weapon systems; and
• improved classified communication capabilities.
Another contributing factor was Hurricane Katrina, which not only caused considerable
damage to the shipyard, including tooling, equipment, shops, and other facilities, but also
caused an exodus of the experienced workforce. The overall number of shipworkers declined
significantly, causing the contractor to use more overtime hours. The loss of workers, in turn,
considerably disrupted the ship’s learning curve, which normally results in greater
efficiencies in production of subsequent ships.
However, some of the increase can be attributed to Coast Guard actions. For example, the
contractor used the Coast Guard’s failure to precisely execute the contract according to the
implementation plan as basis for requesting an equitable adjustment. Furthermore, even
though the Coast Guard’s own technical staff raised fatigue life concerns—later confirmed
by a U.S. Navy study—during the design phase, the decision was made to proceed with
production of the first two NSCs and enhance the structure later.25
With regard to the delivery schedule for NSC-1, the same GAO report stated:
The first NSC was initially projected for delivery in 2006, but slipped to August 2007 after
the 9/11 requirements changes. However, delivery was again delayed until April 2008. It is
uncertain at this time whether the new delivery date will be met due to several factors
involving testing, certifications, and other areas of technical risk.
Machinery trials occurred in early December and builder’s trials occurred February 8 -11,
2008. The current schedule leaves little margin for delay. Acceptance trials are scheduled to
begin April 7, 2008. The contract requires 30 days between acceptance trials and ship
delivery, but the scheduled dates for these events are about 3 weeks apart. The Coast Guard
and the contractor are aware of the discrepancy; however, no decision has been made on how
to resolve this issue. The Coast Guard will have to either extend the delivery date of the ship
to meet the requirement or waive it. Our prior work has shown that event-driven rather than
schedule-driven decisions are preferable, thus it may be in the best interest of the Coast
Guard to delay acceptance of the first NSC until a number of these issues are resolved.
Of the 987 certification standards, ICGS was to submit documentation on 892 for review and
acceptance by the Coast Guard Technical Authority. Almost all remain outstanding. In
addition, the Coast Guard and contractor differed in their understanding of the number of
certifications for which ABS was responsible. Northrop Grumman had contracted with ABS
to certify 60 standards; however, the Coast Guard believed ABS was responsible for 84.
According to Coast Guard officials, the issue has been resolved and ABS will now be
responsible for 86 certifications. Further, for NSC 3 and later ships, ABS will be responsible
for about 200 certifications. Other third parties will certify 11 of the standards.
The Coast Guard has identified 13 issues pertaining to C4ISR and Hull, Mechanical, and
Electrical as risk areas, 8 of which have moderate to high risk of occurrence or impact if not
resolved. One of these relates to the results of the July 2007 visual TEMPEST inspection,
conducted by a team of Coast Guard officials. The team reported hundreds of discrepancies,
over 40 percent of which pertain to cable grounding and separation, such as cables intended
25 Ibid, Objective #3 (page 4).
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for classified information not being adequately separated from those intended for
nonclassified information. Coast Guard officials told us that they requested the test be done
earlier than usual so that issues could be identified and corrected sooner.
Coast Guard and Navy personnel noted that having open issues with a ship—particularly for
the first in class—at the time of delivery is normal. After acceptance, the Coast Guard plans
to conduct operational testing at sea for approximately 2 years, during which time open
issues can be resolved. The ship will officially become operational thereafter, which, based
on the current schedule, will be March 2010.26
With regard to performance parameters for the NSC, the same GAO report stated:
Key performance parameters for the NSC were first defined in the Acquisition Program
Baseline submitted for DHS approval in November 2006. Coast Guard officials explained
that the key performance parameters were derived from performance specification
requirements that had been in place before contract award....
The key performance parameters have not been changed due to post-9/11 mission
requirements. Coast Guard officials expect the NSC to meet the current threshold
parameters, but they will not know for certain until the ship undergoes sea trials.
However, the Coast Guard’s Engineering Logistics Center officials expressed concern about
the ship’s weight margin. Ship designs typically include a margin for additional weight to
accommodate service enhancements during the ship’s service life. The officials noted that
most of the available weight margin has already been consumed during construction—not
including the fatigue life structural enhancements. The officials further noted that subsequent
changes to the ship will cost more than they would have otherwise due to additional redesign
and engineering that may be necessary to offset the additional weight. Coast Guard officials
noted, however, that a mitigation strategy is in place and adjustments are being made that
will increase the service life weight margin.27
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On March 14, 2007, the Coast Guard announced that it intended to procure the 12 FRC-B cutters,
also known as the Sentinel class, directly from the manufacturer, rather than through ICGS.28 On
June 22, 2007, the Coast Guard issued a Request for Proposals (RFP) for the FRC-B, with
submissions from industry due November 19, 2007. In February 2008, it was reported that the
contract to be awarded by the Coast Guard could be valued at up to $1.7 billion for 34 FRC-Bs, if
all options are executed.29 On September 26, 2008, the Coast Guard announced that it had
awarded an $88-million contract to Bollinger Shipyards for the design and construction of the
FRC-B, which the Coast Guard now refers to as the Sentinel class. On October 7, 2008, the
26 Ibid, Objective #3 (page 5).
27 Ibid, Objective #3 (page 6).
28 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.
29 Andrea Shalal-Esa, “US Cost Guard Sees Patrol Boat Award in May or June,” Reuters, February 11, 2008. See also
Stew Magnuson, “Not So Fast on Fast Response Cutters, Coast Guard Says,” National Defense Magazine, February
2008.
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shipbuilding firm Marinette Marine filed a protest with GAO of the Coast Guard’s contract award
to Bollinger.30 On January 12, 2009, GAO denied the protest.31 On February 9, 2009, Marinette
Marine notified the Justice Department of its intent to file a second protest, but on February 17,
2009, it was reported that Marinette had withdrawn the second protest.32
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As stated earlier, the Coast Guard testified in April 2009 that:
business improvements have led to a number of high profile project successes. Consider the
recent award of the Fast Response Cutter (FRC) Sentinel-class patrol boat. Initially planned
as part of the Deepwater program, to be delivered through Integrated Coast Guard Systems
(ICGS), we took this project back within the Coast Guard to ensure full and open
competition and responsible program management. We have followed our reformed
acquisition processes, conducting a deliberative proposal review and award determination
with integrated participation from technical authorities and the operational community. The
FRC’s proven parentcraft design will minimize cost and schedule risk and mitigate the patrol
boat hour gap in the shortest time possible. Neither ICGS nor the Coast Guard’s pre-
modernized acquisition program could have accomplished this feat as efficiently or
effectively, and I am confident we will build on this record of advances for future
acquisitions programs as well....
The most pointed example of the success of our reformed acquisition processes is Fast
Response Cutter Sentinel-class patrol boat. With a total potential contract value of more than
$1 billion, it was a highly competitive process, and our selection survived two post-award
protests, demonstrating that our robust acquisition process was beyond reproach.
As the yard stick by which to measure the success of our reformed acquisition enterprise, the
Sentinel project provides a number of assurances - all built on the cornerstones for successful
acquisition - for its own and future acquisition management successes, including:
• Establishment and maintenance of a direct Coast Guard relationship with the contractor,
rather than through a separate lead systems integrator;
• Development of detailed technical requirements, and firm adherence to those requirements
throughout the proposal design evaluation process and construction;
• Classification of cutters to established and recognized standards (i.e., American Bureau of
Shipping and High Speed Naval Vessel Rules);
• Use of parent craft designs where applicable, with parent craft designer and builder co-
located on engineering team;
• On-site government staff at production facilities;
• Fixed price contract structure;
30 Rebekah Gordon, “Marinette Marine Files Protest Over Coast Guard’s FRC Award,” Inside the Navy, October 13,
2009.
31 Rebekah Gordon, “GAO Denies Protest of Coast Guard Award to Bollinger for FRC,” Inside the Navy, January 19,
2009.
32 Amy McCullough, “Marinette Withdraws Patrol Boast Protest,” NavyTimes.com, February 17, 2009.
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• Extensive involvement of technical authority throughout acquisition and delivery process;
• Independent validation (i.e., independent cost estimates and design assessments);
• Leveraging Navy and other government partnerships; and,
• Ability to re-compete thru options for data and licensing.
The Sentinel project has become the model for all current and future Coast Guard acquisition
programs.33
The Coast Guard also testified in April 2009 that:
our reform efforts are directly measured in the recent contract award for the critically needed
Fast Response Cutter Sentinel-class patrol boat. Initially planned as part of the Deepwater
program, to be delivered through Integrated Coast Guard Systems, we took this project back
within the Coast Guard to ensure full and open competition and responsible program
management. We have abided strictly to our reformed acquisition processes, conducting a
deliberative proposal review and award determination with integrated participation from
technical authorities and the operational community. Based on the cornerstones for
successful acquisition, this project also adheres to MSAM guidelines, full reporting,
independent assessment and validation, leveraging internal and external partnerships, and
robust departmental oversight.34
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In June 2008, GAO reported the following regarding the status of the FRC-B program:
In February 2006, the Coast Guard suspended work on the FRC design proposed by the
system integrator to assess and mitigate technical risks. This design was known as the FRC-
A. The Commandant of the Coast Guard officially terminated FRC-A design efforts in
February 2008 after approximately $35 million had been obligated to ICGS. To meet an
aggressive schedule, the FRC-A was initiated as an undefinitized contract action (UCA),
meaning that the contractor was authorized to begin work and incur costs before a final
agreement on contract terms and conditions, including price, was reached. Under UCAs, the
government risks paying increased costs because the contractor has little incentive to control
costs. The UCA was expected to be definitized in January 2006, but this has not yet
occurred; Coast Guard officials anticipate its happening soon.
Over the past 2 years, the Coast Guard has pursued acquisition of a modified commercially
available patrol boat with similar performance capabilities to the FRC-A, termed the FRC-B.
The Coast Guard issued a request for proposals for the FRC-B and is currently reviewing
contractor responses. Coast Guard officials told us there was sufficient competition, and they
plan to award the contract in July 2008. The first FRC-B is scheduled to be delivered in
2010. The contract is for the design and production of up to 34 cutters. The Coast Guard
intends to acquire 12 FRCs by 2012 for an estimated cost of $593 million, or $49.4 million
33 Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions
before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22
April 2009, pp. 2-3, 8-9.
34 Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions
before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22
April 2009, pp. 15-16.
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per cutter. Coast Guard officials told us they are pursuing this 12-boat acquisition strategy to
help fill the current patrol boat operational gap. They plan to assess the capabilities of the
FRC-B before exercising options for additional cutters. The officials told us they have not
updated the acquisition program baseline for this asset, and they do not plan to update cost
estimates until the contract is awarded.35
In March 2008, GAO reported that:
The Coast Guard obligated approximately $35 million on the ICGS design for the FRC, but
concerns prompted officials to put the acquisition on hold. To fill its urgent need for patrol
boats, the Coast Guard plans to award a contract for a commercially available design of the
FRC. Coast Guard officials said this approach will help ensure competition and meet their
tight time frames. The new requirements for this design of the FRC have some differences.
These include a top speed that is 2 knots slower—28 instead of 30 knots—and allowance of
a manual small-boat launch and recovery system that Coast Guard officials said is not as safe
and requires more crew to operate than the preferred stern ramp system.36
The same GAO report also stated:
FRC-A Design Efforts Remain Suspended
Since the FRC-A acquisition effort began, the Coast Guard obligated approximately $35
million to ICGS for the design of this asset, but a viable design has not been produced. Coast
Guard officials told us that at this time design efforts remain suspended; they do not expect
to incur any additional costs related to the FRC-A. The original estimate for the fleet of 58
FRC-As was approximately $3.2 billion.
Due to high risk and uncertain cost savings, Coast Guard officials recommended to the
Commandant that the Coast Guard not pursue acquisition of an FRC-A design that includes
unproven composite hull technology. The officials told us this recommendation was largely
based on a third-party analysis that found the composite technology unlikely to meet the
desired 35-year service life under the Coast Guard’s operational conditions. Therefore,
officials believe that the use of the proposed composite materials would not offset high initial
acquisition costs, as ICGS had initially proposed.
Cost, Schedule, and Performance of FRC-B
In June 2007, the Coast Guard issued an RFP for the design, construction, and delivery of a
modified commercially available patrol boat for the FRC-B. The Coast Guard estimated, in
late 2006, that the total acquisition cost for 12 FRC-Bs would be $593 million. Coast Guard
officials do not plan to update cost estimates for the FRC-B until after the contract is
awarded. The Coast Guard is currently evaluating proposals and expects to award the FRC-B
contract in the third quarter of fiscal year 2008, with the lead cutter to be delivered in 2010.
Coast Guard officials stated that their goal is still to acquire 12 FRC-Bs by 2012. The
contract will include a 2-year base period for the design and production of the lead cutter and
six 1-year option periods. The first option period includes 3 low-rate initial production
cutters, and the subsequent five option periods include an option of 4 or 6 cutters each. The
35 Government Accountability Office, Coast Guard[:] Change in Course Improves Deepwater Management and
Oversight, but Outcome Still Uncertain, GAO-08-745, June 2008, p. 37.
36 Government Accountability Office, Status of Selected Aspects of the Coast Guard’s Deepwater Program, GAO-08-
270R, March 11, 2008, p. 2.
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Coast Guard intends to award a fixed price contract for design and construction of the FRC-
B, with the potential to acquire a total of 34 cutters.
Regarding performance, there are some key differences in the FRC-B, as outlined in the
RFP, compared with the requirements for the FRC-A. One difference is speed—the Coast
Guard lowered the minimum requirement for sprint speed from 30 knots for the FRC-A to 28
for the FRC-B. Another pertains to onboard small boat launch-and-recovery mechanisms: the
initial design for the FRC-A included a stern ramp launch. This capability is not required on
the FRC-B. However, Coast Guard officials expressed a preference for the stern ramp
launch-and-recovery system because it would be safer and require fewer crew to operate than
a manual alternative. Coast Guard officials said that eliminating these design requirements
would ensure more competition on the open market and meet their urgent need for patrol
boats.37
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As an earlier part of the Deepwater program, the Coast Guard initiated an effort to modernize its
existing 110-foot Island class patrol boats, so that they could remain in service pending the
delivery of replacement Deepwater craft. Among other things, the modernization increased the
length of the boats to 123 feet. The effort is thus referred to variously as the 110-foot
modernization program, the 123-foot modernization program, or the 110/123-foot modernization
program.
The initial eight boats in the program began to develop significant structural problems soon after
completing their modernizations. The Coast Guard removed the boats from service and canceled
the program, having spent close to $100 million on it. On May 17, 2007, the Coast Guard issued a
letter to ICGS revoking its previous acceptance of the eight modernized boats—an action
intended to facilitate Coast Guard attempts to recover from ICGS funds that were spent on the
eight converted boats.38 On January 7 and 8, 2008, it was reported that the Coast Guard was
seeking a repayment of $96.1 million from ICGS for the patrol boats and had sent a letter to
ICGS on December 28, 2007, inviting ICGS to a negotiation for a settlement of the issue.39 Some
observers questioned the strength of the government’s legal case, and thus its prospects for
recovering the $96.1 million or some figure close to that.40
The Coast Guard testified in April 2009 that:
With regard to the 123-foot patrol boats, the Department of Justice and the DHS-OIG [the
DHS Office of the Inspector General] continue their investigation into the project. The qui
tam [legal] action involving the patrol boats is still on-going. The Department of Justice has
37 Ibid, Objective #2 (page 3).
38 Dan Caterinicchia, “Coast Guard Wants Refund For Ships,” Associated Press, May 17, 2007; Renae Merle, “Coast
Guard Seeks Deepwater Refund,” Washington Post, May 18, 2007: D3.
39 See Andrea Shalal-Esa, “Lockheed, Northrop Asked To Pay $96 Mln For Bad Boats,” Reuters, January 7, 2008;
Geoff Fein, “Coast Guard Invites ICGS To Negotiate A Settlement Over 123-Foot Boat Issue,” Defense Daily, January
8, 2008; Dan Caterinicchia, “Gov’t Wants $96M Refund For Faulty Ships,” Business Week, January 8, 2008. See also
Emelie Rutherford, “Coast Guard Wants $96 Million From Deepwater Team For Bad Ships,” Inside the Navy, January
14, 2008.
40 See, for example, Geoff Fein, “Coast Guard Invites ICGS To Negotiate A Settlement Over 123-Foot Boat Issue,”
Defense Daily, January 8, 2008. See also Geoff Fein, “Rep. Taylor Chides Coast Guard Over Effort To Recoup Cutter
Conversion Funds,” Defense Daily, February 27, 2008.
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not yet made yet made a determination whether it will intervene in that action. The Coast
Guard continues its support of the DOJ and DHS-OIG investigation.
Simultaneous to our support of the DOJ investigation, we have also undertaken an
independent engineering analysis through the Navy’s Naval Sea Systems Command, which
we expect to be completed sometime this summer. Additionally, we are working with the
Department of Justice to release five of the eight patrol boats to salvage systems, equipment
and parts still of value to the Coast Guard. The remaining three cutters would remain
untouched for evidence purposes in support of the ongoing investigations.41
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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.
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.
41 Statement of Admiral Thad W. Allen, Commandant [of the Coast Guard], on the Coast Guard and Acquisitions
before the Committee on Appropriations Subcommittee on Homeland Security, U.S. House of Representatives, 22
April 2009, p. 18. See also Bettina H. Chavanne, “Lawmakers Still Pressing USCG On Patrol Boat Conversion,”
Aerospace Daily & Defense Report, March 25, 2009: 3.
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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.”42
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In addition to approving or modifying the Coast Guard’s requests for FY2010 acquisition funding
Deepwater programs, potential options for Congress regarding the Deepwater program include
but are not limited to the following:
• continue to track the Coast Guard’s management and execution of Deepwater
acquisition, including implementation of reform actions announced by the Coast
Guard itself or recommended by GAO;
• modify reporting requirements for the Deepwater program;
• prohibit the obligation or expenditure of some or all FY2010 funding for
Deepwater acquisition programs until the Coast Guard or DHS takes certain
actions or makes certain certifications regarding the Deepwater program; and
• pass legislation to codify Deepwater acquisition reforms that the Coast Guard has
already announced, or to change Deepwater acquisition in other ways.
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The proposed FY2010 budget for the Coast Guard, including Deepwater acquisition, was
submitted to Congress in early May 2009. The budget requests $1,051.5 million in FY2010
acquisition funding for Deepwater programs, including $305.5 million for aircraft, $591.4 million
for surface ships and boats, and $154.6 million for other items.
Legislation relating to Coast Guard acquisition, including Deepwater acquisition, introduced in
the 111th Congress includes H.R. 1665, the Coast Guard Acquisition Reform Act of 2009.
42 Spencer S. Hsu and Renae Merle, “Coast Guard’s Purchasing Raises Conflict-Of-Interest Flags,” Washington Post,
March 25, 2007.
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Laws and bills in the 110th Congress relating to Deepwater acquisition include the following:
• H.R. 2638/P.L. 110-329 of September 30, 2008, an FY2009 consolidated
appropriations act that incorporated the FY2009 DHS appropriations act;
• H.R. 2764/P.L. 110-161 of December 26, 2007, an FY2008 consolidated
appropriations act that incorporated the FY2008 DHS appropriations act;
• H.R. 2206/P.L. 110-28 of May 25, 2007, the U.S. Troop Readiness, Veterans’
Care, Katrina Recovery, and Iraq Accountability Appropriations Act of 2007;
• H.R. 2830/S. 1892, the Coast Guard Authorization Act of 2008;
• H.R. 6999, the Integrated Deepwater Program Reform Act of 2008;
• H.R. 2722/S. 924, the Integrated Deepwater Program Reform Act; and
• S. 889, the Deepwater Accountability Act.
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Table A-1 summarizes action on the FY2009 acquisition funding request for Deepwater
acquisition programs.
Table A-1. Action on FY2009 Acquisition Funding Request
(in millions of dollars, rounded to nearest tenth)
Appropriation
House
Senate
House change Senate change
Compromise
(H.R. from
(S.
from Compromise change from
Request
6947) request 3181) request (H.R. 2638)
request
Air assets
Maritime Patrol Aircraft
86.6
86.6
0
86.6
0
86.6
0
HH-60 Conversion
52.7
52.7
0
52.7
0
52.7
0
HH-65 Conv./Sust.a
64.5 64.5 0 64.5 0
64.5
0
HC-130H Conv./Sust.a 24.5 24.5 0 24.5 0
24.5
0
HC-130J Fleet Intro.a 0 0 0 23.7
23.7 13.3
13.3
Armed Helo Equip.a 0 0 0 0 0 0
0
UASa 3.0
0
-3.0
3.0
0
3.0
.0
Subtotal aircraft
231.3
228.3
-3.0
255.0
23.7
244.6
13.3
Surface assets
NSC
353.7 300.0 -53.7 353.7 0
353.7
0
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Appropriation
House
Senate
House change Senate change
Compromise
(H.R. from
(S.
from Compromise change from
Request
6947) request 3181) request (H.R. 2638)
request
OPC 3.0
3.0
0
3.0
0
3.0
0
FRC-B 115.3
115.3
0
115.3
0
115.3
0
Deepwater small boats
2.4
2.4
0
2.4
0
2.4
0
WMEC sustainmenta 35.5 35.5 0 35.5 0 35.5
0
Patrol boats
30.8 30.8 0 30.8 0
30.8
0
sustainment
FRC-A 0
0
0
0
0
0
0
Polar icebreaker sust.
0
0
0
0
0
30.3
30.3
Subtotal surface ships
540.7
487.0
-53.7
540.7
0
571.0
30.3
Other
Govt. program mgt.
58.0
58.0
0
58.0
0
58.0
0
Systems eng. and int.a
33.1 33.1 0 33.1 0
33.1
0
C4ISR 88.1
88.1
0
88.1
0
88.1
0
Deepwater logistics
37.7
37.7
0
37.7
0
37.7
0
Tech. Obsol. Prev.a 1.5
1.5
0 1.5 0 1.5
0
Subtotal other
218.4
218.4
0
218.4
0
218.4
0
TOTAL FY2008
990.4
933.7
-56.7
1,014.1
23.7
1034.0
43.6
Rescissions of prior-year funding
UAVs 0
-20.0
-20.0
0
0
0
0
Subtotal rescissions
0
-20.0
-20.0
0
0
0
0
NET TOTAL
990.4
913.7
-76.7
1,041.1
23.7
1034.0
43.6
Sources: U.S. Coast Guard Posture Statement With [FY] 2009 Budget in Brief, p. 49 (Table 4); H.Rept. 110-862
of September 18, 2008 on H.R. 6947; and S.Rept. 110-396 of June 23, 2008 on S. 3181. Totals may not add due
to rounding.
a. Conv./Sust. is Conversion/Sustainment Projects; Fleet Intro. is Fleet Introduction; Armed Helo. Equip. is
Armed Helicopter Equipment (Airborne Use of Force); UAS is Unmanned Aircraft System; WMEC is
medium-endurance cutter; eng. and int. is engineering and integration; Tech. Obsol. Prev. is Technology
Obsolescence Prevention.
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The House Appropriations Committee, in its report (H.Rept. 110-862 of September 18, 2008) on
the FY2009 DHS Appropriations bill (H.R. 6947), recommended reducing the Coast Guard’s
FY2009 acquisition funding request for Deepwater programs by $56.7 million, including a $3.0-
million reduction to Unmanned Aircraft Systems (UAS) and a $53.7 million reduction to the
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NSC. The report also recommended rescinding $20.0 million in prior-year appropriations for
unmanned air vehicles (UAV).
H.R. 6947 states, in the section on the Coast Guard’s Acquisition, Construction, and
Improvements (AC&I) account, that:
$933,744,000 shall be available until September 30, 2013, for the Integrated Deepwater
Systems program: Provided, That of the funds made available for the Integrated Deepwater
Systems program, $228,300,000 is for aircraft and $487,003,000 is for surface ships:
Provided further, That $500,000,000 of the funds provided for the Integrated Deepwater
Systems program may not be obligated until the Committees on Appropriations of the Senate
and the House of Representatives receive directly from the Coast Guard and approve a plan
for expenditure that—
(1) defines activities, milestones, yearly costs, and lifecycle costs for each new 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
procurement and contract staff;
(3) identifies competition to be conducted in, and summarizes the approved acquisition
strategy for, each procurement;
(4) includes a certification by the Chief Human Capital Officer of the Department of
Homeland Security that current human capital capabilities are sufficient to execute the plan;
(5) includes an explanation of each procurement that involves an indefinite
delivery/indefinite quantity contract and explains the need for such contract;
(6) identifies individual project balances by fiscal year, including planned carryover into
fiscal year 2009 by project;
(7) identifies operational gaps by asset and explains how funds provided in this Act address
the shortfalls between current operational capabilities and requirements;
(8) includes a listing of all open Government Accountability Office and Office of Inspector
General recommendations related to the program and the status of Coast Guard actions to
address the recommendations, including milestones for fully addressing them;
(9) includes a certification by the Chief Procurement Officer of such Department that the
program has been reviewed and approved in accordance with the investment management
process of the Department, and that the process fulfills all capital planning and investment
control requirements and reviews established by the Office of Management and Budget,
including Circular A-11, part 7;
(10) identifies use of the Defense Contract Audit Agency;
(11) identifies the use of independent validation and verification; and
(12) is reviewed by the Government Accountability Office:
Provided further, That no funding may be obligated for low rate initial production or initial
production of any Integrated Deepwater Systems program asset until Coast Guard revises its
Major Systems Acquisition Manual procedures to require a formal design review prior to the
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authorization of low rate initial production or initial production; Provided further, That the
Secretary of Homeland Security shall submit to the Committees on Appropriations of the
Senate and the House of Representatives, in conjunction with the President’s fiscal year 2010
budget, a review of the Revised Deepwater Implementation Plan that identifies any changes
to the plan for the fiscal year; an annual performance comparison of Integrated Deepwater
Systems program assets to pre-Deepwater legacy assets; a status report of legacy assets; a
detailed explanation of how the costs of legacy assets are being accounted for within the
Integrated Deepwater Systems program; and the earned value management system gold card
data for each Integrated Deepwater Systems program asset: Provided further, That the
Secretary shall submit to the Committees on Appropriations of the Senate and the House of
Representatives a comprehensive review of the Revised Deepwater Implementation Plan
every five years, beginning in fiscal year 2011, that includes a complete projection of the
acquisition costs and schedule for the duration of the plan through fiscal year 2027...
Provided further,... That of amounts unexpended under this heading in P.L. 108-334 for
VTOL unmanned aerial vehicles (VUAV), $20,000,000 is rescinded: Provided further, That
subsections (a), and (b) of section 6402 of the U.S. Troop Readiness, Veterans’ Care, Katrina
Recovery, and Iraq Accountability Appropriations Act, 2007 (P.L. 110-28) shall apply to
fiscal year 2009.43
43 Section 6402 of P.L. 110-28 of May 25, 2007, the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery, and Iraq
Accountability Appropriations Act of 2007, is a general provision relating to DHS. Subsections (a), (b), and (d)(1) of
Section 6402 [(d)(1) was cited in Senate bill language; see subsequent footnote] state:
SEC. 6402. (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.
(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; and
(continued...)
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In its report (H.Rept. 110-862 of September 18, 2008) on H.R. 6947, the House Appropriations
Committee stated:
AVIATION MISSION HOUR GAP
The Committee is concerned about the significant shortfall of maritime patrol aircraft (MPA)
resource hours currently confronting Coast Guard, which estimates that it will be nearly 50
percent below its MPA resource hour needs in 2008. This gap is not expected to be
eliminated until 2015. One example of this gap is the absence of permanent maritime patrol
aircraft capability operating from Air Station Borinquen, Puerto Rico. The Committee is
concerned about the impact of this absence upon Coast Guard’s ability to patrol the highly
trafficked smuggling routes of the Caribbean Basin. Coast Guard is directed to report to the
Committee no later than February 16, 2009, on its plan to provide adequate resources for the
maritime surveillance mission needs in the Air Station Borinquen area of responsibility.
Coast Guard is in the process of analyzing short term, stop-gap measures to address its MPA
capability needs until its large-scale acquisitions are in full operation. The Committee has
included $10,000,000 to fund such stop-gap measures. Before this funding may be obligated,
Coast Guard shall submit an expenditure plan for approval to the Committees on
Appropriations.
LEGACY CUTTER SUSTAINMENT
The Committee is concerned about Coast Guard’s reliance upon high endurance and medium
endurance cutters that are rapidly aging, many of which have completed over 30 years of
service life, and the implications this has for the mission availability of these assets. As of
the end of fiscal year 2007, the 378-foot, 270-foot, and 210-foot cutters had a “percent time
fully mission capable” (PTFMC) combined average of only 58.3 percent, 33.7 percent below
the combined average PTFMC target for these cutters. These concerns are punctuated by
recent major causalities, crew habitability issues, and significant maintenance costs.
According to Coast Guard’s 2008 Revised Deepwater Implementation Plan, the 378-foot
cutter fleet will be operating through 2017; the 270-foot cutter fleet will be operating through
2027; and the 210-foot cutter fleet will be operating through 2022. In each case, the expected
operating life is much longer than forecast just two years ago. The Committee directs Coast
Guard to provide, no later than February 16, 2009, a detailed analysis of maintenance costs
for the 378-foot, 270-foot, and 210-foot classes of cutters, including: comparisons of pre and
post mission effectiveness projects (where applicable); examination of major engineering
causalities over the last three years; and an examination of the costs and benefits of an
intensive maintenance program upon availability through the remainder of the cutters’
remaining service lives, as per the forecasts contained in the 2008 Revised Deepwater
Implementation Plan....
(...continued)
(3) any task or delivery order issued pursuant to such a contract or subcontract....
(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....
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POLAR ICEBREAKING OPERATING AND MAINTENANCE COSTS AND
FUTURE POLAR NEEDS44
The Committee is concerned about Coast Guard’s ability to meet its polar operations mission
requirements and provide the United States with the capability to support national interests in
the polar regions. The Committee provides $200,000, as requested, to conduct an analysis of
national mission needs in the high latitude regions to inform the national polar policy debate.
In fiscal year 2006 the Committees on Appropriations approved an Administration request
for the National Science Foundation (NSF), the primary user of the three Coast Guard polar
icebreaker vessels, to fund the costs of operating and maintaining these aging vessels.
Because it has become more apparent that the national interest in the polar regions extends
beyond scientific research, the Committee questions whether this arrangement should
continue. Accordingly, the Committee directs Coast Guard and NSF to renegotiate the
existing agreement in order to return the budget for operating and maintaining these vessels
to Coast Guard for fiscal year 2010. This change is consistent with a new joint plan for Coast
Guard support of scientific research by NSF and other Federal agencies, which also is to be
included in the 2010 budget request. NSF shall retain responsibility for the contracting of
scientific support services that Coast Guard does not have the capability to perform or cannot
perform on a cost-competitive basis. The Committee is aware of a $4,000,000 funding
shortfall related to the caretaker status of the POLAR STAR, and directs Coast Guard to
address this shortfall within the amounts appropriated for fiscal year 2009....
DEEPWATER EXPENDITURE PLAN
Consistent with fiscal year 2008, the Committee includes bill language requiring Coast
Guard to submit a detailed expenditure plan. A total of $500,000,000 of this appropriation
shall remain unavailable until GAO reviews and the Committees on Appropriations approve
the plan. The expenditure plan must contain the following: lifecycle staffing and training
needs; identification of procurement competition, acquisition strategy, and an explanation for
indefinite delivery/indefinite quality contracts for each procurement; activities, milestones,
yearly costs, and lifecycle costs of each major asset, including independent cost estimates;
DHS Chief Human Capital Officer certification of sufficient human capital capabilities;
identification of project balances by fiscal year and operational gaps for each asset; DHS
Chief Procurement Officer (CPO) certification of investment management process
compliance; status of open OIG and GAO recommendations; and identification of the use of
the Defense Contract Audit Agency. GAO is directed to continue its oversight of the
Deepwater program, with a focus on reviewing the expenditure plan and assessment of the
operational gaps identified by Coast Guard and plans to address these gaps. In addition, no
funding may be obligated for low rate or initial production of a Deepwater asset until Coast
Guard revises its Major Systems Acquisition Manual procedures to require a formal design
review prior to the authorization of low rate initial production or initial production.
DEEPWATER
The Committee recommends $933,744,000 for Deepwater, $56,700,000 below the amount
requested and $150,478,000 above the amount provided in fiscal year 2008.
MARITIME PATROL AIRCRAFT (MPA)
44 For additional discussion of Coast Guard polar icebreakers, which previously were not funded under Deepwater
acquisition, see CRS Report RL34391, Coast Guard Polar Icebreaker Modernization: Background, Issues, and
Options for Congress, by Ronald O’Rourke.
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The Committee recommends $86,600,000 for two additional MPAs, the same as the amount
requested. To date, $570,035,000 has been appropriated for 12 MPAs. In April 2003, Coast
Guard informed the Committee that the requirements for the MPA were as follows: (1) the
ability to arrive on the scene of 90 percent of search and rescue emergencies within two
hours of initial notification; and (2) the ability to travel 300 nautical miles in 90 minutes (212
knot ground speed, with time to climb factored in), stay on scene for approximately four
hours, and return over 300 nautical miles with required fuel reserves. However, the
Committee understands that Coast Guard’s formal requirements for the MPA and a plan for
operational testing of those requirements have not been finalized yet. This is surprising since
the MPA entered the operational testing phase in March 2008. The Committee directs Coast
Guard to withhold obligation of 2009 MPA funding until its formal requirements for the
MPA and the MPA’s operational testing plan are provided to the Committee.
UNMANNED AIRCRAFT SYSTEMS
The Committee does not provide the $3,000,000 requested to study unmanned aerial vehicle
solutions for meeting Deepwater’s maritime surveillance requirements. Instead, funding is
provided for this study within the Research, Development, Test, and Evaluation account. The
Vertical Unmanned Aerial Vehicle (VUAV) was originally conceived to be launched off of
the National Security Cutters (NSC), enhancing the NSC’s operational effectiveness by
extending its surveillance range to approximately 100 nautical miles for up to twelve hours
per day. In fact, the number of planned NSCs was reduced from 12 to 8 in part due to this
anticipated extension of operational effectiveness. Unfortunately, the VUAV has not worked
as planned, and Coast Guard has nothing to show for the $114,550,590 it has obligated for
this project. Because some of this obligated amount has not yet been expended and Coast
Guard has no plans for its expenditure, the Committee rescinds $20,000,000 currently
unexpended for UAVs.
LONG RANGE SURVEILLANCE AIRCRAFT (HC—130J)
The first HC-130J was delivered in February 2008. However, due to parallel design and
installation activities resulting in rework, changes in aircraft power requirements, late
delivery of government-furnished equipment, and other changes, costs are likely to increase
by 10 to 20 percent and additional costs are currently unbudgeted. Coast Guard is directed to
provide the Committees on Appropriations with its finalized HC-130J Remediation Plan no
later than August 1, 2008, and to identify unobligated funding that can be used to missionize
all HC-130Js.
NATIONAL SECURITY CUTTER
The Committee recommends $300,000,000 for the NSC, $53,700,000 below the amount
requested and $134,300,000 above the amount provided in fiscal year 2008. The request of
$353,700,000 is primarily for production of the fourth NSC. Technical reviews of the third
NSC’s fatigue enhancement design changes are being conducted by the Coast Guard
Technical Authority, which is employing the services and expertise of the Carderock
Division of the Naval Surface Warfare Center. Coast Guard anticipates completion of the
design and technical reviews of the third NSC by December 2008.
The Committee reduces NSC funding for two main reasons. First, the Committee believes
that construction of the fourth NSC likely will be delayed, since the design and technical
changes made to the fourth NSC will require another substantive technical review. Second,
GAO found that Coast Guard plans to proceed with issuance of a task order for long lead
materials on the fourth NSC despite not having reliable data on which to base an evaluation
of the contractor’s proposed price. GAO has pointed out to the Committee that because
Coast Guard lacks confidence in how the contractor is representing its cost and schedule
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performance on the NSC, Coast Guard is likely to be in the position of paying the contractor
for future projects without the understanding necessary to evaluate proposed prices. The
Committee directs Coast Guard to increase its visibility into the contractor’s earned value
management data before it enters into a contract to construct the fourth NSC. The Committee
expects this enhanced visibility to lead to cost reductions.
FAST RESPONSE CUTTER (FRC-B)/REPLACEMENT PATROL BOAT
The Committee provides the requested $115,300,000 for limited production of the FRC—
B/Replacement Patrol Boat. Coast Guard has proceeded with a competitive procurement for
the FRC-B, with award projected for July 2008. The lead cutter is expected to be delivered
two years later, in the second quarter of fiscal year 2010. The Committee is concerned that
this $115,300,000, when combined with the $41,580,000 in prior year funds that Coast
Guard plans to use for the FRC-B, results in an average cost for the three limited production
vessels of $52,000,000, well above earlier estimates provided by the Coast Guard. The
Committee understands that cost estimates for this cutter are based on limited data and
directs Coast Guard to take all steps necessary to control costs, including conducting a
formal design review to ensure that at least 90 percent of the design drawings are complete
by the critical design review stage.
OFFSHORE PATROL CUTTER (OPC)
The Committee recommends $3,003,000 for OPC requirements analysis, as requested. The
OPC is the replacement cutter for the current 210-foot and 270-foot Medium Endurance
cutters. In March 2006, after spending $19,758,000, Coast Guard suspended OPC design
efforts due to cost concerns. The Committee understands that in making a subsequent
decision to proceed with the OPC requirements analysis, the Coast Guard documented the
OPC’s expected capabilities, a draft concept of operations, and an initial assessment of cost
and schedule. Coast Guard is directed to provide this documentation to the Committees on
Appropriations by October 1, 2008. The Committee directs Coast Guard to plan for a full
and open competition for the OPC.
C4ISR
The Committee understands that Coast Guard does not have an approved acquisition strategy
for C4ISR. Coast Guard needs to develop an architecture with common components for use
on assets and to decide whether to acquire C4ISR on an asset-by-asset basis or at a system
level. The Committee understands that Coast Guard is revisiting the C4ISR approach
proposed by the Deepwater contractor and is analyzing requirements and architecture. The
Committee encourages such assessment and provides the $88,100,000 requested for C4ISR.
If not all of this funding is required for C4ISR, Coast Guard may use the remainder for
additional modeling and simulation activities that will help in determining the capabilities of
existing and planned assets and inform the number of Deepwater assets required....
PERSONNEL
The Committee recommends $95,572,000 for acquisition personnel, $12,852,000 above the
amount provided in fiscal year 2008. The total equals the amount requested for this purpose
when the budgets proposed in Operating Expenses and AC&I are combined. Coast Guard
faces at least three challenges as it seeks to improve its acquisition management and
oversight. The first is a shortage of civilian acquisition staff, with an almost 20 percent
vacancy rate. Coast Guard is directed to report to the Committees on any additional
authorities or bonuses needed to attract civilian acquisition expertise. The second is the lack
of acquisition career path for Coast Guard military personnel. Coast Guard is directed to
explore the establishment of a dedicated acquisition and finance career field for military
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personnel and to report to the Committee on the benefits and costs of this option. The third
challenge is Coast Guard’s reliance on contractors for technical and programmatic expertise.
The Committee is pleased to hear that Coast Guard is currently analyzing its workforce to
determine which roles are appropriate for contractors. Such analysis should be provided to
the Committee upon its completion.
UNMANNED AERIAL SYSTEMS
The Committee provides $3,000,000 [in the Coast Guard’s Research, Development, Test,
and Evaluation accuont] for Coast Guard’s efforts to examine effective unmanned aerial
systems (UAS) that pose low developmental risks and demonstrate cost-effectiveness. The
Committee is pleased that Coast Guard is working with the Department of Defense to
leverage UAS development, testing, and engineering efforts. Coast Guard is directed to
report to the Committee no later than February 16, 2009, on its findings to date on
determining the most effective UAS for maritime applications and for use with flight deck-
equipped cutters. (Pages 79-80, 82, 86-88, 89, and 91)
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The Senate Appropriations Committee, in its report (S.Rept. 110-396 of June 23, 2008) on the
FY2009 DHS Appropriations bill (S. 3181), recommended increasing the Coast Guard’s FY2009
acquisition funding request for Deepwater programs by $23.7 million, with the increase going to
HC-130J fleet introduction.
S. 3181 as reported by the Senate Appropriations Committee states, in the section on the Coast
Guard’s Acquisition, Construction, and Improvements (AC&I) account, that:
$1,014,144,000 shall be available until September 30, 2013, for the Integrated Deepwater
Systems program: Provided, That of the funds made available for the Integrated Deepwater
Systems program, $255,000,000 is for aircraft and $540,703,000 is for surface ships:
Provided further, That the Commandant shall submit a plan for expenditure to the
Committees on Appropriations of the Senate and House of Representatives within 60 days
after the date of enactment of this Act for funds made available for the Integrated Deepwater
Program, 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 competition to be conducted in each procurement;
(4) describes procurement plans that do not rely on a single industry entity or contract;
(5) includes a certification by the Chief Human Capital Officer of the Department that
current human capital capabilities are sufficient to execute the plans discussed in the report;
(6) contains very limited indefinite delivery/indefinite quantity contracts and explains the
need for any indefinite delivery/indefinite quantity contracts;
(7) identifies individual project balances by fiscal year, including planned carryover into
fiscal year 2010 by project;
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(8) identifies operational gaps by asset and explains how funds provided in this Act address
the shortfalls between current operational capabilities and requirements;
(9) includes a listing of all open Government Accountability Office and Office of Inspector
General recommendations related to the program and the status of Coast Guard actions to
address the recommendations, including milestones for fully addressing them;
(10) includes a certification by the Chief Procurement Officer of the Department that the
program has been reviewed and approved in accordance with the investment management
process of the Department, and that the process fulfills all capital planning and investment
control requirements and reviews established by the Office of Management and Budget,
including Circular A-11, part 7;
(11) identifies use of the Defense Contract Auditing Agency;
(12) includes a certification by the head of contracting activity for the Coast Guard and the
Chief Procurement Officer of the Department that the plans for the program comply with the
Federal acquisition rules, requirements, guidelines, and practices, and a description of the
actions being taken to address areas of non-compliance, the risks associated with them along
with plans for addressing these risks, and the status of their implementation;
(13) identifies the use of independent validation and verification; and
(14) is reviewed by the Government Accountability Office:
Provided further, That the Secretary of Homeland Security shall submit to the Committees
on Appropriations of the Senate and the House of Representatives, in conjunction with the
President’s fiscal year 2010 budget, a review of the Revised Deepwater Implementation Plan
that identifies any changes to the plan for the fiscal year; an annual performance comparison
of Deepwater assets to pre-Deepwater legacy assets; a status report of legacy assets; a
detailed explanation of how the costs of legacy assets are being accounted for within the
Deepwater program; and the earned value management system gold card data for each
Deepwater asset: Provided further, That the Secretary shall submit to the Committees on
Appropriations of the Senate and the House of Representatives a comprehensive review of
the Revised Deepwater Implementation Plan every 5 years, beginning in fiscal year 2011,
that includes a complete projection of the acquisition costs and schedule for the duration of
the plan through fiscal year 2027....
Section 522 states:
SEC. 522. Any funds appropriated to United States Coast Guard, `Acquisition, Construction,
and Improvements’ for fiscal years 2002, 2003, 2004, 2005, and 2006 for the 110-123 foot
patrol boat conversion that are recovered, collected, or otherwise received as the result of
negotiation, mediation, or litigation, shall be available until expended for the Replacement
Patrol Boat (FRC-B) program.
Section 530 states:
SEC. 530. Subsections (a), (b), and (d)(1) of section 6402 of the U.S. Troop Readiness,
Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (P.L.
110-28) shall apply to fiscal year 2009.45
45 See a previous footnote for a discussion of Subsections (a), (b), and (d)(1) of section 6402 of P.L. 110-28.
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Section 540 states:
SEC. 540. The Secretary of Homeland Security shall require that all contracts of the
Department of Homeland Security that provide award fees link such fees to successful
acquisition outcomes (which outcomes shall be specified in terms of cost, schedule, and
performance).
In its report (S.Rept. 110-396 of June 23, 2008) on S. 3181, the Senate Appropriations Committee
stated:
DEEPWATER FUNDING
The Committee recommends $1,014,144,000 for Deepwater, $23,700,000 above the amount
requested and $230,878,000 above the fiscal year 2008 level. Details of major procurements
under this program and changes to the request are provided below.
MARITIME PATROL AIRCRAFT
The recommendation includes $86,600,000 for the Maritime Patrol Aircraft, the same as the
level requested in the budget. This funding will allow the Coast Guard to acquire two aircraft
(13 and 14), mission systems, logistics and spare parts. Once fully missionized, these aircraft
will provide 2,400 annual maritime patrol hours.
NATIONAL SECURITY CUTTER
The recommendation includes $353,700,000 for the National Security Cutter [NSC], the
same as the budget request. Of this amount, $346,600,000 is for the production of NSC #4
and $7,100,000 is for the structural retrofit of NSC #1. On May 8, 2008, the first NSC was
accepted by the Coast Guard. NSC #1 has now entered a 22—24 month operation, test, and
evaluation period. The Coast Guard has highlighted Information Assurance as a significant
risk category. For example, the Coast Guard must meet TEMPEST certification to prevent
unintended information emanation, and in order to process classified information. This
certification has not occurred. The Coast Guard is to keep the Committee updated on
progress made to resolve ongoing information assurance issues, including TEMPEST
certification, in addition to the status of critical decision points and dates for all NSC’s.
The Committee strongly supports the procurement of one National Security Cutter per year
until all eight planned ships are procured. The continuation of production without a break
will ensure that these ships, which are vital to the Coast Guard’s mission, are procured at the
lowest cost and that they enter the Coast Guard fleet as soon as possible.
REPLACEMENT PATROL BOAT
The recommendation includes $115,300,000 for the Coast Guard’s replacement patrol boat
known as the “Fast Response Cutter” [FRC—B]. Of this amount, $94,000,000 is for
production of FRC-B #3 and #4 and $21,300,000 is for logistics (spares, program
management, and crew training). The FRC-B program is critical for the Coast Guard to close
the Coast Guard’s patrol boat hours gap, which is approximately 100,000 hours below the
desired level. The first FRC-B is scheduled for delivery during the fourth quarter of 2010 and
will be ready for mission status in 2012. The Committee directs the Coast Guard to provide
quarterly briefings on the status of this procurement, including critical decision points and
dates, planned service life extensions of the existing 110 foot patrol boats, and patrol boat
operational metrics.
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MISSION EFFECTIVENESS PROJECT
The recommendation includes $66,300,000 for the Mission Effectiveness Project, the same
as the budget request. Of this amount, $35,500,000 is for sustainment of two 270 feet and
three 210 feet medium endurance cutters, and $30,800,000 is for sustainment of three 110
feet legacy patrol boats. This funding will allow the Coast Guard to extend the operational
life of critical legacy cutters until Deepwater assets become available for missions.
C-130J MISSIONIZATION AND FLEET INTRODUCTION
The Committee recommends $23,700,000 to complete the missionization of aircraft 4
through 6, to include radars, sensors, identification systems, displays, antennas, and a
mission operator’s station. The request included no funding for this program. In November
2007, the Coast Guard reported the missionization project for the six C-130J’s in inventory
exceeded the estimated cost to complete by 15 to 20 percent, resulting in the missionization
of only aircraft 1 through 3. While the Committee remains concerned with the program’s
price escalation, missionizing aircraft 4 through 6 is critical to closing the shortfall of
maritime patrol resource hours, which is nearly 50 percent below its resource hour needs.
DEEPWATER EXPENDITURE PLAN
The Committee requires the Coast Guard to submit an expenditure plan for Deepwater that
contains the following: lifecycle staffing and training needs; identification of procurement
competition and procurement plans that do not rely on a single entity or contract and contain
only limited indefinite delivery, indefinite quantity contracts; activities, milestones, yearly
costs, and lifecycle costs of each major asset, including independent cost estimates; DHS
Chief Human Capital Officer certification of sufficient human capital capabilities;
identification of project balances by fiscal year and operational gaps for each asset; DHS
Chief Procurement Officer [CPO] certification of investment management process
compliance; DHS CPO certification of compliance with Federal acquisition rules and actions
taken to address areas of noncompliance; status of open Inspector General and Government
Accountability Office [GAO] recommendations; and identification of the use of the Defense
Contract Auditing Agency. GAO is directed to continue oversight of the Deepwater program,
with focus on review of the expenditure plan and assessment of the operational gaps
identified by the Coast Guard and the Coast Guard’s plans to address these gaps. The Coast
Guard is directed to brief the Committee on the process it will use to resolve deviations from
specified contract requirements and to promptly notify the Committee of specific
procurement contract deviations....
DEEPWATER HUMAN CAPITAL
In accordance with section 6402 of the fiscal year 2007 Supplemental Appropriations Act
(P.L. 110-28), the Coast Guard submitted a report on the resources (including training, staff,
and expertise) required to provide appropriate management and oversight of the Integrated
Deepwater Systems program. The report provided limited insight into the Coast Guard’s
human capital requirements, except to say that a workforce resource plan was being
developed that provides the framework for assessing current and future workforce needs.
Given the challenges this program has experienced and the Coast Guard’s intention to
assume the role of system integrator for all Deepwater assets, the Committee is concerned
with the lack of progress made in developing workforce estimates. The Coast Guard is to
brief the Committee by July 31, 2008, detailing the results of its workforce forecasting
process and plans to fill staffing shortfalls that will ensure a capable and productive
acquisition workforce now and in the future. (Pages 85-88)
S.Rept. 110-396 also states:
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TRANSFER ASSOCIATED WITH DEEPWATER MANAGEMENT
The Committee approves the request to transfer $3,859,000 from the Systems Engineering
and Integration PPA in the Acquisition, Construction, and Improvements [AC&I]
appropriation to the Operating Expenses appropriation for General Services Administration
[GSA] rent. This transfer is necessary to move all Government personnel and Government
support contractors to one location and is part of the Coast Guard’s strategy to shift
management and oversight responsibilities from Deepwater contractor to the Coast Guard.46
ACQUISITION PERSONNEL
Consistent with the budget request, the Committee transfers $82,215,000 and 652 FTE from
AC&I appropriation to OE appropriation to increase the oversight and ability to manage
multiple major acquisition projects. This transfer will improve the stewardship of major
systems acquisition, such as the Integrated Deepwater Systems Program. By transferring
AC&I funding to OE, personnel can be surged to and from AC&I projects where needed and
allow flexibility to match competencies to core requirements. The Committee recommends
$4,500,000 to hire 65 additional personnel to enhance the Coast Guard’s ability to perform
the systems integrator role for the Integrated Deepwater Program and to execute traditional
acquisition projects. The recommended level is $4,498,000 below the request. The
Committee fully supports the Coast Guard’s effort to be the systems integrator for the
Integrated Deepwater Program. However, the request included funds for “full-year” FTE,
which means the 65 new positions would need to be onboard by October 1, 2008. Given the
Coast Guard’s 18.5 percent vacancy rate for acquisition personnel, this is an unrealistic
proposal. Therefore, the Committee recommendation provides half-year funding for this
initiative. The Committee expects the Coast Guard to fully annualize the positions in fiscal
year 2010. (Page 77)47
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In lieu of a conference report, there was a compromise version of the FY2009 DHS
appropriations bill that was incorporated as Division D of H.R. 2638/P.L. 110-329 of September
30, 2008. (H.R. 2638, originally the FY2008 Department of Homeland Security appropriations
bill, was amended to become an FY2009 consolidated appropriations bill that included, among
other things, the FY2009 DHS appropriations bill.) The compromise version of H.R. 2638 was
accompanied by an explanatory statement. Section 4 of H.R. 2638 states that the explanatory
statement “shall have the same effect with respect to the allocation of funds and implementation
of this Act as if it were a joint explanatory statement of a committee of conference.”
H.R. 2638/P.L. 110-329 states, in the section on the Coast Guard’s Acquisition, Construction, and
Improvements (AC&I) account, that:
$1,033,994,000 shall be available until September 30, 2013, for the Integrated Deepwater
Systems program: Provided, That of the funds made available for the Integrated Deepwater
Systems program, $244,550,000 is for aircraft and $571,003,000 is for surface ships:
Provided further, That $350,000,000 of the funds provided for the Integrated Deepwater
Systems program may not be obligated until the Committees on Appropriations of the Senate
and the House of Representatives receive directly from the Coast Guard and approve a plan
for expenditure that—
46 This transfer is also mentioned on page 84 of the report.
47 This transfer is also mentioned on page 89 of the report.
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(1) defines activities, milestones, yearly costs, and life cycle costs for each new 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
procurement and contract staff;
(3) identifies competition to be conducted in, and summarizes the approved acquisition
strategy for, each procurement;
(4) includes a certification by the Chief Human Capital Officer of the Department of
Homeland Security that current human capital capabilities are sufficient to execute the
expenditure plan;
(5) includes an explanation of each procurement that involves an indefinite
delivery/indefinite quantity contract and explains the need for such contract;
(6) identifies individual project balances by fiscal year, including planned carryover into
fiscal year 2010 by project;
(7) identifies operational gaps by asset and explains how funds provided in this Act address
the shortfalls between current operational capabilities and requirements;
(8) includes a listing of all open Government Accountability Office and Office of Inspector
General recommendations related to the program and the status of Coast Guard actions to
address the recommendations, including milestones for fully addressing them;
(9) includes a certification by the Chief Procurement Officer of the Department that the
program has been reviewed and approved in accordance with the investment management
process of the Department, and that the process fulfills all capital planning and investment
control requirements and reviews established by the Office of Management and Budget,
including Circular A-11, part 7;
(10) identifies use of the Defense Contract Audit Agency;
(11) includes a certification by the head of contracting activity for the Coast Guard and the
Chief Procurement Officer of the Department that the plans for the program comply with the
Federal acquisition rules, requirements, guidelines, and practices, and a description of the
actions being taken to address areas of non-compliance, the risks associated with them along
with plans for addressing these risks, and the status of their implementation;
(12) identifies the use of independent validation and verification; and
(13) is reviewed by the Government Accountability Office:
Provided further, That no funding may be obligated for low rate initial production or initial
production of any Integrated Deepwater Systems program asset until Coast Guard revises its
Major Systems Acquisition Manual procedures to require a formal design review prior to the
authorization of low rate initial production or initial production: Provided further, That the
Secretary of Homeland Security shall submit to the Committees on Appropriations of the
Senate and the House of Representatives, in conjunction with the President’s fiscal year 2010
budget, a review of the Revised Deepwater Implementation Plan that identifies any changes
to the plan for the fiscal year; an annual performance comparison of Integrated Deepwater
Systems program assets to pre-Deepwater legacy assets; a status report of legacy assets; a
detailed explanation of how the costs of legacy assets are being accounted for within the
Integrated Deepwater Systems program; and the earned value management system gold card
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data for each Integrated Deepwater Systems program asset: Provided further, That the
Secretary shall submit to the Committees on Appropriations of the Senate and the House of
Representatives a comprehensive review of the Revised Deepwater Implementation Plan
every 5 years, beginning in fiscal year 2011, that includes a complete projection of the
acquisition costs and schedule for the duration of the plan through fiscal year 2027...
Provided further, ... That subsections (a), and (b) of section 6402 of the U.S. Troop
Readiness, Veterans’ Care, Katrina Recovery, and Iraq Accountability Appropriations Act,
2007 (P.L. 110-28) shall apply to fiscal year 2009:48 Provided further, That notwithstanding
section 503 of this Act, amounts transferred from the `Operating Expenses’ appropriation for
personnel compensation and benefits and related costs to adjust personnel assignment to
accelerate management and oversight of new or existing projects may be transferred to the
`Operating Expenses’ appropriation to be merged with that appropriation, to be available
under the same terms and conditions for which that appropriation is available, when no
longer required for project acceleration or oversight, or to otherwise adjust personnel
assignment: Provided further, That the Committees on Appropriations of the Senate and the
House of Representatives shall be notified of each transfer within 30 days after it is executed.
Section 517 states:
SEC. 517. Any funds appropriated to United States Coast Guard, `Acquisition, Construction,
and Improvements’ for fiscal years 2002, 2003, 2004, 2005, and 2006 for the 110-123 foot
patrol boat conversion that are recovered, collected, or otherwise received as the result of
negotiation, mediation, or litigation, shall be available until expended for the Replacement
Patrol Boat (FRC-B) program.
Section 533 states:
SEC. 533. The Secretary of Homeland Security shall require that all contracts of the
Department of Homeland Security that provide award fees link such fees to successful
acquisition outcomes (which outcomes shall be specified in terms of cost, schedule, and
performance).
Section 551 states:
SEC. 551. From unobligated balances of prior year appropriations made available for Coast
Guard `Acquisition, Construction, and Improvements’, $20,000,000 are rescinded: Provided,
That no funds shall be rescinded from prior year appropriations provided for the National
Security Cutter or the Maritime Patrol Aircraft: Provided further, That the Coast Guard shall
submit notification in accordance with section 503 of this Act listing projects for which
funding will be rescinded.
The explanatory statement accompanying H.R. 2638 stated:
Polar Icebreakers
One of the Coast Guard’s missions is to provide the United States with the capability to
support national interests in the polar regions. In a report recently submitted, the Coast Guard
stated that the United States will need a maritime surface and air presence in the Arctic
sufficient to support prevention and response regimes as well as diplomatic objectives.
However, no funding has been requested for the Coast Guard’s aging icebreakers despite its
48 See earlier footnotes in this section for a discussion of subsections (a), and (b) of section 6402 of P.L. 110-28.
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inability to meet current and projected polar operations mission responsibilities. The Coast
Guard is directed to follow House report direction regarding the polar icebreaking operating
budget. The Coast Guard should work with the National Science Foundation in the coming
year to renegotiate the existing polar icebreaking agreement in order to return the budget for
operating and maintaining its polar icebreakers to the Coast Guard in fiscal year 2010. The
AC&I appropriation includes $30,300,000 to reactivate the USCGC POLAR STAR for an
additional 7-10 years of service life....
Deepwater
The bill provides $1,033,994,000 for the Integrated Deepwater System Program
(Deepwater). Of this amount, $350,000,000 is unavailable for obligation until the
Committees receive and approve a plan for expenditure, in accordance with the specified
legislative conditions. In submitting its mandated review of this expenditure plan to the
Committees, GAO is directed to provide an overall evaluation of the plan’s value to the
Coast Guard’s management of Deepwater, and a qualitative, descriptive assessment of the
degree with which the Coast Guard has complied with each legislative requirement.
Long Range Surveillance Aircraft (HC-130J)
The bill provides $13,250,000 to missionize three HC-130Js. The Coast Guard is directed to
provide its finalized HC-13OJ Remediation Plan to the Committees within 60 days after the
date of enactment of this Act.
National Security Cutter
The bill provides $353,700,000, as requested, for the National Security Cutter (NSC). It is
questionable whether this amount will be sufficient to purchase the fourth NSC, according to
recent information provided by the Coast Guard. This is a concern since, in August 2007, the
Coast Guard entered into a Consolidated Contract Action to resolve all outstanding cost
overruns incurred by the NSC contractor due to economic and customer changes that have
occurred over the past four years. No later than 30 days after the date of enactment of this
Act, the Coast Guard is directed to provide the Committees with detailed information on all
reasons why there may be nearly a 50 percent increase in the cost of this cutter and how it
plans to manage this procurement within the dollars provided. To improve its management of
this important program, the Coast Guard is directed to follow House report direction on the
visibility of the contractor’s earned value management system and Senate report direction
regarding information assurance and critical decision points and dates.
Replacement Patrol Boat/FRC-B
The bill provides $115,300,000, as requested, for limited production of the FRC-B. The
Coast Guard is directed to take all steps necessary to control costs for this procurement,
including conducting a formal design review to ensure that at least 90 percent of the design
drawings are complete by the critical design review stage. The projected award date for the
FRC-B has been delayed until the first quarter of 2009. The Coast Guard is directed to
provide quarterly briefings to the Committees on the status of this procurement, including
critical decision points and dates, planned service life extensions of existing 11O-foot patrol
boats, and patrol boat operational metrics.
Polar Icebreakers
The bill provides $30,300,000 for the Coast Guard to reactivate the USCGC POLAR STAR.
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An April 23, 2008, statement of Administration policy opposing passage of H.R. 2830 stated in
part:
As well, the Administration urges the House to delete those provisions of the bill that would
adversely affect Coast Guard missions. Specifically, the Administration urges the House to
delete those provisions that would:... (4) prescribe contracting and acquisition practices for
the Deepwater program, as these practices would increase the costs of, and add delay to, the
Deepwater acquisition process and circumvent review and approval authority of Coast Guard
technical authorities.49
49 Executive Office of the President, Office of Management and Budget, Statement of Administration Policy, H.R.
2830—Coast Guard Authorization Act of 2008, April 23, 2008, available online at http://www.whitehouse.gov/omb/
legislative/sap/110-2/saphr2830-h.pdf
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Many observers in 2007 believed the problems experienced in the three Deepwater cutter
acquisition efforts were the product of broader problems in the Coast Guard’s overall
management of the Deepwater program. Reports and testimony in 2007 and prior years from the
DHS IG and GAO, as well as a February 2007 DAU “quick look study” requested by the Coast
Guard50 expressed serious concerns about the Coast Guard’s overall management of the
Deepwater program.
Some observers expressed the view that using a private-sector 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 GAO and the
DAU, expressed the view that using a private-sector LSI is a basically valid approach, but that the
contract the Coast Guard 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.
Observers raised various issues about the Deepwater contract. Among other things, they
expressed concern that the contract was an indefinite delivery, indefinite quantity (ID/IQ)
contract, which, they said, can be an inappropriate kind of contract for a program like the
Deepwater program. Observers also expressed concern that the contract
• transferred too much authority to the private-sector LSI for defining performance
specifications, for subsequently modifying them, and for making technical
judgements;
• permitted the private-sector 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 private-sector LSI
for resolving technical disputes between the Coast Guard and the private-sector
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 private-sector 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;
50 Defense Acquisition University, Quick Look Study, United States Coast Guard Deepwater Program, February 2007.
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• permitted the private-sector 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 private-
sector LSI on the basis of “attitude and effort” rather than successful outcomes;
and
• lacked sufficient penalties and exit clauses.
Observers also expressed concern that the Coast Guard did 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
expressed concern that the Coast Guard, in implementing the Deepwater program, placed a higher
priority on meeting a schedule as opposed to ensuring performance.
In response to criticisms of the management and execution of the Deepwater program, Coast
Guard and industry officials acknowledged certain problems in the program’s management and
execution and defended the program’s management execution in other respects.51
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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 design flaws involved, among other things, areas in
the hull with insufficient fatigue life—that is, with insufficient strength to withstand the stresses
of at-sea operations for a full 30-year service life. The DHS IG report also noted considerable
growth in the cost to build the first two NSCs, and other issues.52
Observers in 2007 stated that the Coast Guard 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
appeared to have altered briefing slides on the NSC effort so as to downplay the design flaws to
certain audiences. On May 17, 2007, the DHS IG testified that the Coast Guard’s cooperation
with the DHS IG had substantially improved (though some issues remained), but that Deepwater
51 For examples of Coast Guard testimony, see Department of Homeland Security, U.S. Coast Guard, Statement of
Admiral Thad W. Allen, Commandant, on Deepwater: 120-Days Later, Before the Subcommittee on Coast Guard &
Maritime Transportation, Committee on Transportation & Infrastructure, U.S. House of Representatives, June 12,
2007; and Department of Homeland Security, U.S. Coast Guard, Statement of Rear Admiral Gary T. Blore and Captain
Steven Baynes on Deepwater: Charting a Course For Safer Waters, Before the Committee on Homeland Security, U.S.
House of Representatives, Subcommittees on Management, Investigations, and Oversight and Border, Maritime and
Global Counterterrorism, May 17, 2007.
For examples of industry testimony, see Statement for the Record, Mr. James E. Anton, Vice President Deepwater
Program, Northrop Grumman Ship Systems (NGSS), Testimony Before: The House Maritime and Global Counter-
Terrorism Subcommittee And The House Management, Investigations and Oversight Subcommittee, May 17, 2007;
and Testimony of Fred P. Moosally, President, Lockheed Martin Maritime Systems and Sensors, to The House
Committee on Homeland Security Subcommittee on Border, Maritime and Global Counterterrorism, May 17, 2007.
52 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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contractors had establishing unacceptable conditions for DHS IG to interview contractor
personnel about the program.
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The Coast Guard originally planned to modernize and lengthen 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 FRCs starting in 2018. The work lengthened the boats to 123 feet. The
program consequently is referred to as the 110-foot or 123-foot or 110/123 modernization
program.
Eight of the boats were modernized at a total cost of about $96 million. The first of the eight
modernized boats 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.53 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.54
On November 30, 2006, the Coast Guard announced that it was suspending operations of the
eight modernized boats (which were assigned to Coast Guard Sector Key West, FL) because of
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.55
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.56 The Coast Guard acknowledged in 2007 that the program was a failure.
53 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.
54 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.
55 “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.
56 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.” See also 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.
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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. The Coast Guard suspended work on the design in February 2006,
and then divided the FRC effort into two classes—the FRC-Bs, which are to be procured in the
near term, using an existing patrol boat design (which the Coast Guard calls a “parent craft”
design), and the subsequent FRC-As, which are to be based on a fixed version of the new FRC
design.
As mentioned earlier, although the November 2006 Deepwater APB calls for 12 FRCs and 46
FRC-Bs, the Coast Guard’s Request for Proposals (RFP) for the FRC-B program includes options
for building up to 34 FRC-Bs (which, if exercised, would reduce the number of FRC-As to as few
as 24). The Coast Guard has also stated that if the FRC-Bs fully meet the requirements for the
FRC, all 58 of the FRCs might be built to the FRC-B design.
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On April 17, 2007, the Coast Guard announced six changes intended to reform management of
the Deepwater program. In announcing the actions, Admiral Thad Allen, the Commandant of the
Coast Guard, stated in part:
Working together with industry, the Coast Guard will make the following six [6]
fundamental changes in the management of our Deepwater program:
[1] 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....
[2] 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.
[3] 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.
[4] 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.
[5] 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.
[6] 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
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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.
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....
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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.57
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The Coast Guard in 2007 also did the following:
• announced a reorganization of certain Coast Guard commands—including the
creation of a unified Coast Guard acquisition office—that is intended in part to
strengthen the Coast Guard’s ability to manage acquisition projects, including the
Deepwater program;
• stated that would alter the terms of the Deepwater contract for the 43-month
award term that commenced in June 2007 so as to address concerns raised about
the current Deepwater contract;
• announced that it intended to procure the 12 FRC-B cutters directly from the
manufacturer, rather than through ICGS;
• stated that it was 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;
• stated that it concurred with many of the recommendations made in the DHS IG
reports, and was moving to implement them;
• stated that it was weighing the recommendations of the DAU quick look study;
and
• stated that it had also implemented many recommendations regarding Deepwater
program management that have been made by GAO.
57 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.”
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Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610
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