Coast Guard Deepwater Acquisition
Programs: Background, Oversight Issues, and
Options for Congress
Ronald O'Rourke
Specialist in Naval Affairs
April 14, 2011
Congressional Research Service
7-5700
www.crs.gov
RL33753
CRS Report for Congress
P
repared for Members and Committees of Congress
Coast Guard Deepwater Acquisition Programs
Summary
The term Deepwater refers to more than a dozen separate 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 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 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). Among these was the change
from a single, integrated Deepwater acquisition program to a collection of separate acquisition
programs.
The Coast Guard’s management of Deepwater acquisition programs, including implementation of
recommendations made by the Government Accountability Office (GAO), is a topic of continuing
congressional oversight. Additional oversight issues include cost growth in Deepwater acquisition
programs.
The Coast Guard’s proposed FY2012 budget submission states that it “proposes the elimination
of the Integrated Deepwater System (IDS) sub-appropriation and disaggregation of the IDS
construct from the Coast Guard’s Acquisition, Construction and Improvement (AC&I)
appropriation…. Consistent with the dissolution of Integrated CG Systems and the disaggregation
of the Deepwater Acquisition into asset-based Acquisition Program Baselines, the proposed
changes align projects that were formerly grouped under Integrated Deepwater Systems (IDS)
with the existing authorized structure for Vessels, Aviation, Shore, Other Equipment, and
Personnel and Management.”
The Coast Guard’s FY2012 budget appears to request $957.2 million in acquisition funding for
Deepwater programs, including $271.6 million for aircraft, $512.0 million for surface ships and
boats, and $173.6 million for other items.
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Contents
Introduction ................................................................................................................................ 1
Background ................................................................................................................................ 1
Deepwater Missions.............................................................................................................. 1
Origin of Deepwater Acquisition Effort ................................................................................. 1
Structure of Deepwater Acquisition Effort ............................................................................. 1
Structure Until 2007........................................................................................................ 1
Revised Structure Since 2007 .......................................................................................... 2
Deepwater Assets Planned for Acquisition............................................................................. 4
2006 Acquisition Program Baseline................................................................................. 4
Fleet Mix Analysis .......................................................................................................... 5
Examples of Deepwater Deliveries and Other Milestones ...................................................... 6
Deepwater Acquisition Funding ............................................................................................ 7
Prior-Year Funding.......................................................................................................... 7
FY2011 and FY2012 Funding Requests .......................................................................... 7
Criticism of Deepwater Management in 2007........................................................................ 9
Coast Guard Reform Actions in 2007 .................................................................................. 10
Justice Department Investigation......................................................................................... 10
Oversight Issues for Congress ................................................................................................... 10
Management of Deepwater and Other Acquisition Programs in General .............................. 10
Coast Guard Perspective ............................................................................................... 10
GAO Perspective .......................................................................................................... 13
Cost Growth and Budget Planning....................................................................................... 16
Coast Guard Perspective ............................................................................................... 16
GAO Perspective .......................................................................................................... 17
Fleet Mix Analysis .............................................................................................................. 19
Reporting of Costs and Planned Procurement Quantities ..................................................... 21
National Security Cutter (NSC)........................................................................................... 21
Coast Guard Perspective ............................................................................................... 21
GAO Perspective .......................................................................................................... 23
Sentinel Class Fast Response Cutter (FRC) ......................................................................... 24
Coast Guard Perspective ............................................................................................... 24
GAO Perspective .......................................................................................................... 26
110/123-Foot Patrol Boat Modernization............................................................................. 26
Revolving Door and Potential for Conflicts of Interest......................................................... 27
Potential Options for Congress .................................................................................................. 28
Legislative Activity in 112th Congress ....................................................................................... 29
FY2012 Funding Requests .................................................................................................. 29
Tables
Table 1. Deepwater Assets Planned for Acquisition (2006 Baseline) ............................................ 4
Table 2. Prior-Year Acquisition Funding For Deepwater Programs .............................................. 7
Table 3. FY2010, FY2011, and FY2012 Acquisition Funding for Deepwater Programs................ 8
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Table A-1. Summary of Appropriations Action on FY2011 Deepwater Acquisition
Funding Requests................................................................................................................... 30
Appendixes
Appendix A. Legislative Activity in 111th Congress ................................................................... 30
Appendix B. Criticism of Deepwater Management in 2007 ....................................................... 45
Appendix C. Coast Guard Reform Actions in 2007.................................................................... 49
Contacts
Author Contact Information ...................................................................................................... 52
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Coast Guard Deepwater Acquisition Programs
Introduction
This report provides background information and oversight issues for Congress on the Coast
Guard’s Deepwater acquisition programs for replacing and modernizing the service’s aging fleet
of deepwater-capable ships and aircraft. The Coast Guard’s FY2012 budget appears to request
$957.2 million in acquisition funding for Deepwater programs, including $271.6 million for
aircraft, $512.0 million for surface ships and boats, and $173.6 million for other items.
Congress’s decisions on Deepwater acquisition programs could substantially affect Coast Guard
capabilities and funding requirements, as well as contractors involved in these programs.
Background
Deepwater Missions
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.
Origin of Deepwater Acquisition Effort
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.
Structure of Deepwater Acquisition Effort
Structure Until 2007
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):
• 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
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Coast Guard Deepwater Acquisition Programs
modernized cutters, patrol boats, and aircraft, along with associated C4ISR1
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.2 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.
Revised Structure Since 2007
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
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
1 C4I stands for command, control, communications, computers, intelligence, surveillance, and reconnaissance.
2 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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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.
Reflecting the 2007 change to a collection of separate acquisition programs, the Coast Guard’s
FY2012 budget submission
proposes the elimination of the Integrated Deepwater System (IDS) sub-appropriation and
disaggregation of the IDS construct from the Coast Guard’s Acquisition, Construction and
Improvement (AC&I) appropriation. Enacting this proposal will further enhance acquisition
management and accountability by aligning the appropriations structure with how the
projects are managed. This initiative also enhances accountability by establishing a stronger
linkage between appropriations and specific asset acquisition projects, promotes better
alignment with the authorized appropriation structure, and is a natural outcome of the Coast
Guard’s ongoing efforts to reform acquisition management and oversight….
Consistent with the dissolution of Integrated CG Systems and the disaggregation of the
Deepwater Acquisition into asset-based Acquisition Program Baselines, the proposed
changes align projects that were formerly grouped under Integrated Deepwater Systems
(IDS) with the existing authorized structure for Vessels, Aviation, Shore, Other Equipment,
and Personnel and Management.3
3 (Department of Homeland Security, United States Coast Guard, Fiscal Year 2012 Congressional Justification, pp.
CG-AC&I-3 and CG-AC&I-13)
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Deepwater Assets Planned for Acquisition4
2006 Acquisition Program Baseline
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 was 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.
Table 1. Deepwater Assets Planned for Acquisition (2006 Baseline)
(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 cal ed 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 smal boats for Deepwater cutters, including 33 Long-Range Interceptors (LRIs) and 91 Short-
110
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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Qty. Item
Cost
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
—
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 included 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
Fleet Mix Analysis
As a consequence of assuming the role of lead system integrator for Deepwater acquisition
programs, the Coast Guard is performing a fleet mix analysis to review its requirements for
Deepwater assets. The analysis could lead to changes in the planned mix of Deepwater assets.6
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.
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Examples of Deepwater Deliveries and Other Milestones7
Examples of deliveries and other milestones for Deepwater assets include the following:
• NSC: The Coast Guard commissioned the first and second NSCs, Bertholf and
Waesche, into service on August 4, 2008, and May 7, 2010, respectively. The
third, Stratton, had its keel laying on July 20, 2009, and was 78% complete as of
March 30, 2011.
• OPC: The Coast Guard testified in April 2011 that it is “continuing pre-
acquisition work for the 25-cutter OPC class. The Operational Requirements
Document was approved by DHS in August 2010 and work continues on
developing total acquisition and lifecycle cost estimates for the project. We have
directly engaged with industry throughout the early stages of the design process,
including an industry day held in Tampa, Fla., on November 4, 2010. We
anticipate that a draft Request for Proposal (RFP) will be released soon, with a
pre-solicitation conference for industry to follow.”8
• FRC: As of December 22, 2010, the first six FRCs were 85%, 68%, 55%, 37%,
12%, and 1% complete, respectively. The Coast Guard testified in April 2011 that
“delivery of the first FRC is scheduled for the fall of 2011.”9
• HC-144A: The first HC-144A Ocean Sentry MPA aircraft was accepted by the
Coast Guard on March 10, 2008. On February 6, 2009, an HC-144A officially
stood watch for the first time on a scheduled operational patrol. The HC-144A
achieved Initial Operational Capability (IOC) on April 22, 2009. The 11th HC-
144A was delivered on October 5, 2010. The 12th HC-144A Mission System
Pallet (MSP) was delivered on December 20, 2010.
• HC-130J/H: The first missionized HC-130J LRS aircraft was accepted by the
Coast Guard on February 29, 2008; the sixth was accepted on May 18, 2010. Two
more HC-130Js are on order. 10 As of March 10, 2011, new surface search radars
had been installed on 21 of 23 HC-130H aircraft.
• MH-60T: The first production MH-60T Jayhawk Medium Range Recovery
Helicopter was delivered on June 3, 2009, and the MH-60T achieved Initial
Operational Capability (IOC) on October 1, 2009. As of March 21, 2011, 17 had
been delivered to the Coast Guard.
7 Except where indicated, 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).
8 [Statement of] Vice Admiral John P. Currier, Deputy Commandant for Mission Support, Before the [House]
Committee [on] Transportation & Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, April 13,
2011, pp. 6-7.
9 [Statement of] Vice Admiral John P. Currier, Deputy Commandant for Mission Support, Before the [House]
Committee [on] Transportation & Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, April 13,
2011, p. 7.
10 [Statement of] Vice Admiral John P. Currier, Deputy Commandant for Mission Support, Before the [House]
Committee [on] Transportation & Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, April 13,
2011, p. 8.
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• MH-65C/D: The Coast Guard received its first MH-65C Multi-Mission Cutter
Helicopter (MCH) in October 2007. As of March 25, 2011, the Coast Guard had
configured and delivered 74 MH-65Cs and six MH-65Ds.
Deepwater Acquisition Funding
Prior-Year Funding
Table 2 below shows prior-year acquisition funding for Deepwater acquisition programs.
Table 2. Prior-Year Acquisition Funding For Deepwater Programs
(in millions of dollars, rounded to nearest tenth)
Priora FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10
Request
n/a 320.2
500.0
500.0 678 966.0 934.4 836.9 990.4 1,051.5
Appropriation n/a 320.2 478.0 668.2 724.0 933.1 1065.9 783.3 1034.0 1,123.0
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 1,123.0
Source: Prepared by CRS using Coast Guard data provided on January 29, 2007 (FY2007 and prior years),
FY2008 and FY2009 appropriations bills for FY2008 and FY2009, and (for FY2010) Coast Guard FY2011 budget
submission. 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. The figure for FY2010
excludes $4.0 million funding for High Endurance Cutter sustainment and $27.3 million in funding for polar
icebreaker sustainment. Although these funds were appropriated in FY2010 under the surface category of
the Integrated Deepwater System (IDS), the Coast Guard, as part of its FY2011 budget display of its
Acquisition, Construction and Improvement (AC&I) account, shows these two line items outside the IDS
collection of line items.
FY2011 and FY2012 Funding Requests
Table 3 shows acquisition funding requested for Deepwater programs for FY2011 and FY2012,
along with enacted FY2010 funding. As mentioned earlier, reflecting the 2007 change to a
collection of separate acquisition programs, the Coast Guard’s FY2012 budget submission
proposes the elimination of the Integrated Deepwater System (IDS) sub-appropriation and
disaggregation of the IDS construct from the Coast Guard’s Acquisition, Construction and
Improvement (AC&I) appropriation. Enacting this proposal will further enhance acquisition
management and accountability by aligning the appropriations structure with how the
projects are managed. This initiative also enhances accountability by establishing a stronger
linkage between appropriations and specific asset acquisition projects, promotes better
alignment with the authorized appropriation structure, and is a natural outcome of the Coast
Guard’s ongoing efforts to reform acquisition management and oversight….
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Consistent with the dissolution of Integrated CG Systems and the disaggregation of the
Deepwater Acquisition into asset-based Acquisition Program Baselines, the proposed
changes align projects that were formerly grouped under Integrated Deepwater Systems
(IDS) with the existing authorized structure for Vessels, Aviation, Shore, Other Equipment,
and Personnel and Management.11
As a matter of convenience for comparing FY2012 requests to FY2011 requests and FY2010-
enacted levels, Table 3 arranges the FY2012 requests for Deepwater acquisition programs in the
Deepwater budget-presentation format used in FY2011 and prior years.
Table 3. FY2010, FY2011, and FY2012 Acquisition Funding for Deepwater Programs
(in millions of dollars, rounded to nearest tenth)
Program
FY10 enacted
FY11 requested
FY12 requesteda
Maritime Patrol Aircraft (MPA)
138.5
40.0
129.5
HH-60 Conversion Projects
45.9
32.0
56.1
HH-65 Conversion/Sustainment Projects
38.0
0
24.0
HC-130H Conversion/Sustainment Projects
45.3
25.0
62.0
HC-130J Fleet Introduction
1.3
4.0
0
Subtotal aircraft
269.0
101.0
271.6
National Security Cutter (NSC)
389.5
538.0
77.0
Offshore Patrol Cutter (OPC)
9.8
45.0
25.0
Fast Response Cutter (FRC)
243.0
240.0
358.0
Deepwater smal boats
3.0
3.0
5.0
Medium-endurance cutter sustainment
31.1
30.0
47.0
Patrol boats sustainment
23.0
0
0
Subtotal surface ships
699.4
856.0
512.0
Government program management
45.0
45.0
35.0
Systems engineering and integration
35.0
29.0
17.1
C4ISR 35.0
30.5
34.5
Deepwater logistics
37.7
50.0
87.0b
Technology obsolescence prevention
1.9
1.0
0
Subtotal other
154.6
155.5
173.6
TOTAL 1,123.0c 1,112.5 957.2
Source: Table prepared by CRS based on Coast Guard FY2011 and FY2012 budget submissions. C4ISR means
Command and control, communications, computers, intelligence, surveillance and reconnaissance.
a. The Coast Guard’s FY2012 budget submission states: “The Coast Guard FY 2012 budget proposes the
elimination of the Integrated Deepwater System (IDS) sub-appropriation and disaggregation of the IDS
construct from the Coast Guard’s Acquisition, Construction and Improvement (AC&I) appropriation.
Enacting this proposal will further enhance acquisition management and accountability by aligning the
11 (Department of Homeland Security, United States Coast Guard, Fiscal Year 2012 Congressional Justification, pp.
CG-AC&I-3 and CG-AC&I-13)
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appropriations structure with how the projects are managed. This initiative also enhances accountability by
establishing a stronger linkage between appropriations and specific asset acquisition projects, promotes
better alignment with the authorized appropriation structure, and is a natural outcome of the Coast
Guard’s ongoing efforts to reform acquisition management and oversight…. Consistent with the dissolution
of Integrated CG Systems and the disaggregation of the Deepwater Acquisition into asset-based Acquisition
Program Baselines, the proposed changes align projects that were formerly grouped under Integrated
Deepwater Systems (IDS) with the existing authorized structure for Vessels, Aviation, Shore, Other
Equipment, and Personnel and Management.” (Department of Homeland Security, United States Coast Guard,
Fiscal Year 2012 Congressional Justification, pp. CG-AC&I-3 and CG-AC&I-13.)
b. The Coast Guard’s FY2012 budget submission states: “This is the first submission for CG-LIMS under the
post-Integrated Deepwater Systems construct. Previous work managed under this program was conducted
under the Deepwater Logistics Acquisition Project. Deepwater Logistics was disaggregated into CG-LIMS
within the “Other” sub-appropriation and Major Acquisition Systems Infrastructure (MASI) within the
‘Shore and Aids to Navigation’ subappropriation.” The requested FY2012 figure shown in this table for
Deepwater Logistics is the sum of the FY2012 funding requests for CG-LIMS ($6.5 million) and for MASI
projects relating to the NSC ($18 million), the FRC ($57 million), and the MPA ($5.5 million).
c. The total of $1,123.0 million for FY2010 excludes $4.0 million funding for High Endurance Cutter
sustainment and $27.3 million in funding for polar icebreaker sustainment. Although these funds were
appropriated in FY2010 under the surface category of the Integrated Deepwater System (IDS), the Coast
Guard, as part of its FY2011 budget display of its Acquisition, Construction and Improvement (AC&I)
account, shows these two line items outside the IDS collection of line items.
Criticism of Deepwater Management in 2007
The management and execution of the then-integrated Deepwater program was strongly criticized
in 2007 by the DHS Inspector General (IG),12 GAO,13 the Defense Acquisition University (DAU)
(whose analysis was requested by the Coast Guard),14 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
12 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 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).
13 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.
14 Defense Acquisition University, Quick Look Study, United States Coast Guard Deepwater Program, February 2007.
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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.
Coast Guard Reform Actions in 2007
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). Among these was the change from a single, integrated
Deepwater acquisition program to a collection of separate Deepwater acquisition programs. For a
more detailed discussion, see Appendix C.
Justice Department Investigation
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.15
Oversight Issues for Congress
The Coast Guard’s management of its Deepwater and other acquisition programs, including
implementation of recommendations made by the Government Accountability Office (GAO), is a
topic of continuing congressional oversight. Additional oversight issues include cost growth in
Deepwater acquisition programs and the execution of individual Deepwater acquisition efforts,
particularly those for surface ships.
Management of Deepwater and Other Acquisition Programs
in General
Coast Guard Perspective
The Coast Guard testified in April 2011 that:
In recent years, the Coast Guard has made significant changes to its acquisition enterprise to
increase the efficiency and efficacy of our programs. We have consolidated our acquisition,
contracting, foreign military sales, and research and development functions under the
Acquisition Directorate to support timely delivery of complex and interoperable cutters,
boats and aircraft to our frontline forces. The Coast Guard Acquisition Directorate has
15 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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reclaimed a leadership role in systems integration at all levels, and is now the Systems
Integrator for all major and non-major acquisition projects across the Service….
ACQUISITION TODAY
The Acquisition Directorate was established nearly four years ago through the integration of
programs previously governed under Integrated Deepwater Systems and the Service’s legacy
acquisition programs. Since then, we have progressed as an organization, and we are
implementing effective processes and improving our project management capability and
capacity.
The Acquisition Directorate established itself as a learning organization, building on our
experiences and incorporating relevant lessons learned and best practices from within and
outside of the Coast Guard. We are committed to sound management and comprehensive
oversight of all aspects of the acquisition process by leveraging the expertise of our
acquisition workforce, technical authorities and governmental partners. The acquisition
reform measures recently enacted in the Coast Guard Authorization Act of 2010 provide the
Coast Guard with the needed tools and authorities to build upon the efforts that were already
underway to enhance our acquisition programs. The Coast Guard has ensured that
compliance with the Act’s requirements is a priority, and we continue to make progress in
implementing these required programmatic changes.
The Coast Guard has always adapted to meet the needs of the nation, whether those needs are
well-known and long-standing—saving lives, enforcing federal law, protecting the marine
environment, and contributing to national security—or responding to emergent threats. We
have been, and will always be, America’s maritime guardians, safeguarding the nation’s
maritime interests. However, as we face new threats, we must be prepared to adapt our
tactics and processes to meet mission requirements. Recapitalization of our aging, costly-to-
maintain assets and infrastructure is critical to meeting current missions as well as ensuring
that we are ready for the future. Due in large part to this Subcommittee’s efforts, we are
creating a more unified and agile organization focused on the sustained delivery of mission
support to enhance mission execution.
The Acquisition Directorate is actively working with our mission support partners—who
also act as technical authorities for our ongoing acquisition programs—to provide efficient
and effective logistics and maintenance support to our assets in the field.
These organizational changes have come in concert with the significant changes in our
acquisition processes and project management, in which the Department of Homeland
Security (DHS) and this Subcommittee have played integral roles. Consolidation of the
Acquisition Directorate, assumption of the Systems Integrator responsibilities and
implementation of the recently released Blueprint for Continuous Improvement, Version 5.0,
have better equipped us to manage cost, schedules, and contractor performance. We have
achieved several accomplishments in key areas:
Coast Guard as the Systems Integrator
The Coast Guard Acquisition Directorate is now the Systems Integrator for all Coast
Guard acquisition projects. Our contract with Integrated Coast Guard Systems (ICGS), a
joint venture of Northrop Grumman and Lockheed Martin, expired in January 2011 and
will not be renewed. As Systems Integrator, the Coast Guard is responsible for all
phases in the lifecycle of its assets, from concept development to decommissioning.
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We are carrying out these responsibilities through active collaboration with our
technical authorities, who set technical standards for the projects, and project sponsors
who set the requirements.
The Asset Project Office (APO) was added to the Acquisition Directorate last year to
ensure new surface assets smoothly transition from acquisition to sustainment by
integrating life cycle support early in the acquisition process, and establishing a strong
link between the acquisition and maintenance communities.
Documentation
Major systems acquisitions are complex and require disciplined processes and
procedures. In 2010, the Acquisition Directorate completed a comprehensive revision of
the Coast Guard’s Major Systems Acquisition Manual (MSAM), which defines policies
and procedures for project managers to plan, coordinate and execute major systems
acquisition projects. The MSAM is closely aligned with DHS acquisition management
policy Directive 102-01. The revised MSAM ensures that uniform procedures for
acquisition planning and project management are applied to every major systems
acquisition, aligning the Coast Guard with the requirements of the Coast Guard
Authorization Act of 2010, our Department’s acquisition management policy and
processes, and federal acquisition rules and procedures. We have made significant
progress in ensuring that acquisition projects already underway comply with MSAM
policies.
In 2010 we also released an updated strategic plan, the Blueprint for Continuous
Improvement, Version 5.0—the top-level planning document for the Coast Guard’s
acquisition enterprise for the next two years. It builds on the action plans included in
previous versions by shifting toward a performance measurement and management
structure. Furthermore, this plan fits within a broader Mission Support plan, recently
signed, that addresses all aspects of support for our people, systems, and assets.
Role of Governance and Oversight
The Coast Guard’s revitalized and improved acquisition organization has been informed
and aided by the support of this Subcommittee, DHS and the Government
Accountability Office. Effective oversight requires well-defined and repeatable
processes, and we have worked hard during the last few years to improve our
transparency to Congress and the public. In addition, this Subcommittee was closely
involved in developing reforms to our acquisition program that were enacted as part of
the Coast Guard Authorization Act of 2010. We are working diligently to institute these
reforms, which build on programmatic improvements that the Coast Guard had begun
implementing prior to the Act’s passage.
We have also benefited from the guidance provided by DHS as the Coast Guard’s
acquisition decision authority. The Department’s Acquisition Lifecycle Framework
provides the Coast Guard with a disciplined, phased acquisition approach and
governance by department-level Acquisition Review Boards, which evaluate the
direction of each program according to consistent criteria. This oversight function not
only ensures Coast Guard acquisition programs are soundly conceptualized, developed
and managed, but also fosters a strong collaborative component-department relationship.
The acquisition process support and clear guidance provided by the Department’s Office
of the Chief Procurement Officer and Acquisition Program Management Division have
played a considerable role in the maturation of the Coast Guard’s Acquisition
Directorate as a cost-conscious and milestone-driven acquisition organization.
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Organizational Realignment and Partnerships
A key component of the reorganized and revitalized acquisition organization is the
strong relationships forged with our technical authorities in the Coast Guard’s mission
support community, including Human Resources; Engineering and Logistics; and
Command, Control, Communications, Computers and Information Technology (C4IT).
We have institutionalized collaborative partnerships with these authorities in their roles
as our technical authorities for the platforms and mission systems the acquisition
enterprise produces and delivers.
We continue to benefit from a robust partnership with the U.S. Navy, leveraging its
expertise in acquisition processes, common systems planning, engineering, and testing.
While the Coast Guard maintains its position as the final authority for asset and system
certification, we are committed to seeking out independent validation by third-party
experts. These experts provide valuable input to the Coast Guard’s own certification
process, allowing our technical staff and other professionals to make better-informed
decisions regarding designs and operational capabilities of assets and systems….
ACQUISITION WORKFORCE
The Coast Guard has been able to make accomplishments in the acquisition field over the
past year due in large part to the quality of our people and the great work that they do. The
Acquisition Directorate has placed a tremendous emphasis on ensuring workforce quality
through professional development and retention, as well as enhancing training and
certification opportunities for our acquisition personnel. Project managers for all major
acquisition projects within the Acquisition Directorate have attained DHS Level III program
manager certification. Both military and civilian Level III program managers have risen
through the ranks of our acquisition organization, learning from their leaders, tapping into
previous experience in other programs, and increasing leadership continuity in the
acquisition enterprise.
In addition to maintaining a trained and certified workforce, the expedited hiring authority
provided in the Coast Guard Authorization Act of 2010 proved vital to filling many critical
civilian positions with individuals who have the appropriate acquisition experience and
capabilities. The Service is also establishing military and civilian career paths within the
acquisition enterprise to give members of our workforce the opportunity to establish
themselves in the acquisition field.16
GAO Perspective
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 continuing congressional oversight for
Deepwater acquisition.
16 [Statement of] Vice Admiral John P. Currier, Deputy Commandant for Mission Support, Before the [House]
Committee [on] Transportation & Infrastructure, Subcommittee on Coast Guard and Maritime Transportation, April 13,
2011, pp. 1-3 and 6.
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An April 2011 GAO report states:
Since 2001, we have reviewed Coast Guard acquisition programs and have reported to
Congress, DHS, and the Coast Guard on the risks and uncertainties inherent in its
acquisitions. In our June 2010 report on selected DHS major acquisitions, we found that
acquisition cost estimates increased by more than 20 percent in five of the Coast Guard’s six
major programs we reviewed. For example, the National Security Cutter’s acquisition cost
estimate grew from an initial figure of $3.45 billion to $4.75 billion from 2006 to 2009—a
38 percent increase. Moreover, five of six programs faced challenges due to unapproved or
unstable baseline requirements, and all six programs experienced schedule delays. The
Rescue 21 search-and-rescue program, for example, had both unapproved or unstable
baseline requirements and schedule delays.
Several of our reports have focused on the Coast Guard’s Deepwater acquisition program.
Most recently, in our July 2010 report on the program, we found that the Coast Guard had
generally revised its acquisition management policies to align with DHS directives, was
taking steps to address acquisition workforce needs, and was decreasing its dependence on
the Integrated Deepwater Systems contractor by planning for alternate vendors for some
assets, and to award and manage work outside of the Integrated Coast Guard Systems
contract for other assets. We also have ongoing work on the status of the Deepwater program
that is related but complementary to this report and will result in a separate published report
later this year.
The Coast Guard updated its overarching acquisition policy since we last reported in July
2010 to better reflect best practices and respond to our prior recommendations, and to more
closely align its policy with the DHS Acquisition Management Directive Number 102-01.
For example, in November 2010, the Coast Guard revised its Major Systems Acquisition
Manual, which establishes policy and procedures, and provides guidance for major
acquisition programs. Revisions included
•
a list of the Executive Oversight Council’s roles and responsibilities;
•
aligning roles and responsibilities of independent test authorities to DHS standards,
which satisfied one of our prior recommendations;
•
a formal acquisition decision event before a program receives approval for low-rate
initial production, which addresses one of our prior recommendations; and
•
a requirement to present an acquisition strategy at a program’s first formal acquisition
decision event.
The Coast Guard’s Blueprint for Continuous Improvement (Blueprint) was created after the
Coast Guard began realigning its acquisition function in 2007 and is designed to provide
strategic direction for acquisition improvements. The Blueprint uses GAO’s Framework for
Assessing the Acquisition Function at Federal Agencies and the Office of Federal
Procurement Policy’s Guidelines for Assessing the Acquisition Function as guidance, but
also includes quantitative and qualitative measures important to the acquisitions process.
Through these measures, the Coast Guard plans to gain a clearer picture of its acquisition
organization’s health. The Blueprint was revised in October 2010 to formalize the
acquisition directorate’s integration with the Coast Guard’s mission support structure and
includes plans to annually evaluate the Blueprint’s measures.
The Coast Guard developed the Blueprint as a top-level planning document to provide
acquisition process objectives and strategic direction as well as to establish action items, but
DHS’s Inspector General expressed concern that the agency did not prioritize action items
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and consider the effects of delayed completion of action items on subsequent program
outcomes. For example, the 2010 Inspector General report found that by the end of fiscal
year 2009, 23 percent of assigned action item completion dates slipped without determining
the effect on acquisition improvements. In response to the Inspector General’s report, the
Coast Guard has taken steps to prioritize its action items; however, it is too soon to tell the
outcome of these actions.
These policies were updated to align with DHS guidance and reflect best practices. Coast
Guard officials also attribute acquisition reforms to the Coast Guard’s efforts to assume
responsibilities for all major acquisition programs. We previously reported in 2009 that the
Coast Guard acknowledged its need to define systems integrator functions and assign them
to Coast Guard stakeholders as it assumed the systems integrator role. As a result, the Coast
Guard established new relationships among its directorates to assume control of key systems
integrator roles and responsibilities formerly carried out by the contractor. For example,
according to Coast Guard officials, the Coast Guard formally designated certain directorates
as technical authorities responsible for establishing, monitoring, and approving technical
standards for all assets related to design, construction, maintenance, logistics, C4ISR, life-
cycle staffing, and training. In addition, the Coast Guard is developing a Commandant’s
Instruction to further institutionalize the roles and responsibilities for Coast Guard’s
acquisition management.
Beyond updating its major acquisition policies and guidance, the Coast Guard Acquisition
Directorate also increased the involvement of its Executive Oversight Council to facilitate its
acquisition process. Coast Guard officials stated that the council, initially established in 2009
with an updated charter in November 2010, provides a structured way for flag-level and
senior executive officials in the requirements, acquisition, and resources directorates, among
others, to discuss programs and provide oversight on a regular basis. As the Coast Guard
began assuming the system integrator function from the Deepwater contractor in 2007, it
believed it needed a forum to make trade-offs and other program decisions especially in a
constrained budget environment; according to officials, the council was established in
response to that need. Coast Guard officials noted that major programs are now required to
brief the formalized council annually, prior to milestones, and on an ad hoc basis when major
risks are identified. According to Coast Guard documentation, from fiscal year 2010 through
the first quarter of fiscal year 2011, the council met over 40 times to discuss major programs.
For example, the council held more than five meetings to discuss the Offshore Patrol
Cutter’s life-cycle costs and system requirements, among other issues. The discussions are
captured at a general level in meeting minutes and sent to the Coast Guard Acquisition
Directorate for approval.
The Coast Guard has made progress in reducing its acquisition workforce vacancies since
April 2010. As of November 2010, the percentage of vacancies dropped from about 20
percent to 13 percent or from 190 to 119 unfilled billets out of 951 total billets. Acquisition
workforce vacancies have decreased, but program managers have ongoing concerns about
staffing program offices. For example, the HH-65 program office has funded and filled 10
positions out of an identified need for 33 positions. Although the program has requested
funding for an additional 8 billets for fiscal year 2012, due to the timing of the request, the
funding outcome is unknown as of April 2011. Similarly, the Interagency Operations Center
program is another office affected by acquisition workforce shortages. According to the
Coast Guard, as of March 2011, the program office has funded and filled 11 positions out of
the 27 needed. For some of these positions, the Interagency Operations Center program uses
staff from the Coast Guard’s Command, Control, and Communications Engineering Center
for systems engineering support; however, workforce shortages remain. Program officials
may face additional challenges in hiring staff depending on the location of the vacancies
within the program’s management levels. For example, a program official stated that vacant
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supervisory positions must be filled first before filling remaining positions because lower-
level positions would not have guidance for their activities....
We reported in January 2010 that the Coast Guard faces difficulty in identifying critical
skills, defining staffing levels, and allocating staff to accomplish its diverse missions. An
official Coast Guard statement from 2009 partially attributed the challenge of attracting staff
for certain positions to hiring competition with other federal agencies. In February 2010, we
reported on the Coast Guard’s long-standing workforce challenges and evaluated the
agency’s efforts to address these challenges. For example, we reported that while the Coast
Guard developed specific plans to address its human capital challenges, thefell short of
identifying gaps between mission areas and personn
The Coast Guard has taken steps to outline specific areas of workforce needs, including
developing a human-capital strategic plan and commissioning a human-capital staffing study
published in August 2010, but program managers continue to state concerns with the Coast
Guard’s ability to satisfy certain skill areas. For example, the August 2010 human-capital
staffing study stated that program managers reported concerns with staffing adequacy in
program management and technical areas. To make up for shortfalls in hiring systems
engineers and other acquisition workforce positions for its major programs, the Coast Guard
uses support contractors. As of November 2010, support contractors constituted 25 percent
of the Coast Guard’s acquisition workforce. While we have stated the risks in using support
contractors, we reported in July 2010 that the Coast Guard acknowledged the risks of using
support contractors and had taken steps to address these risks by training its staff to identify
potential conflicts of interest and by releasing guidance regarding the role of the government
and appropriate oversight of contractors and the work that they perform.
The Coast Guard has also made progress ensuring that program management staff received
training and DHS certifications to manage major programs. For example, according to Coast
Guard officials, in December 2010, the Coast Guard was 100 percent compliant with DHS
personnel certification requirements for program-management positions. We have previously
reported that having the right people with the right skills is critical in ensuring that the
government achieves the best value for its spending.17
Cost Growth and Budget Planning
Coast Guard Perspective
An August 30, 2010, press report quoted Admiral Robert Papp, the Commandant of the Coast
Guard, as acknowledging that the Coast Guard’s ability to acquire Deepwater assets within
budgeted costs will depend in part on factors that the Coast Guard does not control:
17 Government Accountability Office, Coast Guard[:]Opportunities Exist to Further Improve Acquisition Management
Capabilities, GAO-11-480, April 2011, pp. 5-11. See also Government Accountability Office, Coast Guard[:]
Observations on Acquisition Management and Efforts to Reassess the Deepwater Program, GAO-11-535T, Statement
of John P. Hutton, Director, Acquisition and Sourcing Management, Testimony Before the Subcommittee on Coast
Guard and Maritime Transportation and Infrastructure, House of Representatives, April 13, 2011, 14 pp. Pages 1-2 of
this testimony states that is it “largely based” on GAO-11-480, and that it additionally draws on information in a July
2010 report (Government Accountability Office, Coast Guard[:] Deepwater Requirements, Quantities, and Cost
Require Revalidation to Reflect Knowledge Gained, GAO-10-790, July 2010, 38 pp.) and “related ongoing work that
we are conducting under the Comptroller General’s authority. Our ongoing work will be issued later this year.”
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“We can't control the ups and downs of the economy, the price of steel and other things, so
there could be [added] costs that occur,” he said. “A lot of acquisition pricing depends upon
a steady stream of funding. If you delay a ship or you delay the award of a contract for a year
or if you don't get the funding through Congress, it adds costs in the out years ... Maybe the
whole project doesn’t fit within that original advertised cost. We'll be working very hard to
bring it in within cost.”18
A July 2009 news report stated: “The total cost of the Coast Guard’s beleaguered Deepwater
acquisition program is a ‘moving target’ that could rise beyond the latest $26.3 billion price tag,
but the completion date for the purchases could come sooner than projected, the service’s top
officer testified last week.”19
The Coast Guard testified in April 2009 that:
[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.20
GAO Perspective
GAO testified in April 2011 that
the average annual budget plan [for Coast Guard Acquisition, Construction and
Improvements (AC&I) funding] from fiscal year 201through fiscal year 2016 is about $520
18 Cid Standifer, “Papp: Deepwater Cost Increases May Be Out Of Coast Guard’s Control,” Inside the Navy, August 30,
2010. Ellipses and bracketed material as in original.
19 Rebekah Gordon, “Coast Guard Commandant: Deepwater Price Tag A ‘Moving Target,’” Inside the Navy, July 13,
2009.
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. 17-18.
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million, or approximately 37percent, higher than the average Coast Guard acquisition
budgets previously appropriated or requested during the past 6 years.
To illustrate further, the Coast Guard plans to request $2.35 billion for acquisitions in fiscal
year 2015, but the Coast Guard has not received more than $1.54 billion for its yearly
acquisition budget in recent years. In fiscal year 2015, the Coast Guard is planning to request
funding for construction of three major Deepwater surface programs: National Security
Cutter, Offshore Patrol Cutter, and Fast Response Cutter. But the Coast Guard has never
requested funding for construction of three major Deepwater surface assets in the same year
before, and therefore this plan appears to be unrealistic. This is particularly true given the
rapidly building fiscal pressures facing our national government.21
A July 2010 GAO report states:
Currently, the Deepwater Program exceeds the 2007 cost and schedule baselines, and given
revisions to performance parameters for certain assets, it is unlikely to meet system-level
performance baselines. The asset-specific baselines that have been approved to date, while
providing greater insight into asset-level capabilities, place the total cost of Deepwater at
roughly $28 billion, or $3.8 billion over the $24.2 billion 2007 baseline. The revised
baselines also present life-cycle costs, which encompass the acquisition cost as well as costs
for operations and maintenance. While the revised baselines show a significant decrease in
life-cycle costs, due to changes to assumptions like shorter service lives for assets, the Coast
Guard’s understanding of them continues to evolve as the agency revisits its assumptions and
produces new cost estimates. Costs could continue to grow as four assets currently lack
revised cost baselines; among them is the largest cost driver in the Deepwater Program, the
Offshore Patrol Cutter. The asset-level baselines also indicate that schedules for some assets
are expected to be delayed by several years. Regarding system-level performance, the 2007
baseline may not be achievable, as the Coast Guard has redefined or eliminated key
performance indicators for many individual assets, while significant uncertainties surround
other assets. Further, a planned analysis to reassess the overall fleet mix for Deepwater was
not completed as planned, and a new analysis will include surface assets only. In the
meantime, the Coast Guard and DHS are proceeding with acquisition decisions on individual
assets.22
GAO testified in February 2010 that:
The Coast Guard has also made other improvements to its oversight and management of the
Deepwater program. Due in part to the Coast Guard’s increased insight into its purchases, the
anticipated cost, schedules, and capabilities of many Deepwater assets have changed since
the $24.2 billion baseline was established 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 developed its own cost baselines for some assets,
as of July 2009, it has become apparent that some of the assets it is procuring will likely cost
up to $2.7 billion more than anticipated. This represents about a 39 percent cost growth for
the assets under the revised cost estimates. According to Coast Guard, as more cost baselines
21 Government Accountability Office, Coast Guard[:] Observations on Acquisition Management and Efforts to
Reassess the Deepwater Program, GAO-11-535T, Statement of John P. Hutton, Director, Acquisition and Sourcing
Management, Testimony Before the Subcommittee on Coast Guard and Maritime Transportation and Infrastructure,
House of Representatives, April 13, 2011, pp. 7-8.
22 Government Accountability Office, Coast Guard[:] Deepwater Requirements, Quantities, and Cost Require
Revalidation to Reflect Knowledge Gained, GAO-10-790, July 2010, summary page.
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are developed and approved, further cost growth is likely. Updated baselines also indicate
that schedules have slipped for delivery of several of the assets. 23
Fleet Mix Analysis
Regarding the Coast Guard’s fleet mix analysis, GAO testified in April 2011 that
To support its role as systems integrator, the Coast Guard planned to complete a fleet mix
analysis in July 2009 to eliminate uncertainty surrounding future mission performance and to
produce a baseline for the Deepwater acquisition. We previously reported that the Coast
Guard expected this analysis to serve as one tool, among many, in making future capability
requirements determinations, including future fleet mix decisions. The analysis, which began
in October 2008 and is now termed fleet mix analysis phase 1, was led by the Coast Guard
directorate responsible for identifying and providing capabilities. In July 2010, we reported
that while the Coast Guard had not yet released the results, officials told us that the analysis
considered the 2007 Deepwater baseline to be the “floor” for asset capabilities and quantities
and did not impose financial constraints on the outcome. The Coast Guard initiated a second
phase of the analysis to impose cost constraints. We recommended in our July 2010 report
that since the 2007 DHS-approved baseline of $24.2 billion was no longer feasible because
of cost growth, the Coast Guard should conduct a comprehensive review of Deepwater cost,
schedule, quantities, and mix of assets needed to meet mission needs, identify trade-offs
given fiscal constraints, and report the results to Congress. The Coast Guard’s efforts to date
have not addressed this recommendation.
We recently obtained and analyzed the phase 1 fleet mix analysis. We found that to conduct
this analysis, the Coast Guard assessed asset capabilities and mission demands to identify a
fleet mix—referred to as the objective fleet mix—that would meet long-term strategic goals.
Given the significant increase in the number of assets needed for this objective fleet mix
from the approved Deepwater program of record—the $24.2 billion baseline—the Coast
Guard developed, based on risk metrics, incremental fleet mixes to bridge the two. Table 1
shows the quantities of assets for each incremental mix, according to the Coast Guard’s
analysis.
23 Government Accountability Office, Coast Guard[:] Observations on the Requested Fiscal Year 2011 Budget, Past
Performance, and Current Challenges, GAO-10-411T, February 25, 2010 (Testimony before the Subcommittee on
Coast Guard and Maritime Transportation, Committee on Transportation and Infrastructure, U.S. House of
Representatives), pp. 13-14.
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Phase 1 also analyzed the performance of these fleet mixes to gain insight into mission
performance gaps. However, the analysis was not cost constrained, as noted above. For
instance, the Coast Guard estimated that the costs associated with the objective fleet mix
could be as much as $65 billion. This is approximately $40 billion higher than the DHS-
approved $24.2 billion baseline. As a result, as we reported last year, Coast Guard officials
stated that they do not consider the results to be feasible because of cost and do not plan to
use them to provide recommendations on a baseline for fleet mix decisions.
In May 2010, the Coast Guard undertook phase 2, a cost-constrained fleet mix analysis.
Officials responsible for the analysis explained that it will primarily assess the rate at which
the Coast Guard could acquire the Deepwater program of record within a high and low
bound of annual acquisition cost constraints. They told us that the lower- and upper- bound
constraints are, respectively, $1.2 billion and $1.7 billion annually; however, the basis for
selecting these cost constraints is not documented. Based on our review of recent budget
data, this upper bound for Deepwater is more than Congress has appropriated for the Coast
Guard’s entire acquisition portfolio in recent years. Moreover, the Coast Guard officials
stated that this analysis will not reassess whether the current program of record is the
appropriate mix of assets to pursue and will not assess any mixes smaller than the current
program of record. Alternative fleet mixes will be assessed, but these mixes are based on
purchasing additional assets after the program of record is acquired, if funding remains
within the yearly cost constraints. Coast Guard officials stated that they are only analyzing
the program of record or a larger fleet mix because they found that the first phase of the
analysis validated pursuing, at the minimum, the program of record. The Coast Guard
expects to complete its phase 2 analysis in the summer of 2011. Because fleet mix analysis
phase 2 will not assess options lower than the program of record, it will not prepare the Coast
Guard to make the trade-offs that will likely be needed in the current fiscal climate.
Furthermore, it is our understanding that DHS is conducting a study examining the mix of
surface assets, which is expected to be completed later this year. As part of our ongoing
work, we will continue to monitor these efforts as they relate to the fleet mix analysis. 24
24 Government Accountability Office, Coast Guard[:] Observations on Acquisition Management and Efforts to
Reassess the Deepwater Program, GAO-11-535T, Statement of John P. Hutton, Director, Acquisition and Sourcing
Management, Testimony Before the Subcommittee on Coast Guard and Maritime Transportation and Infrastructure,
House of Representatives, April 13, 2011, pp. 9-11.
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Coast Guard Deepwater Acquisition Programs
Reporting of Costs and Planned Procurement Quantities
Regarding Coast Guard reporting of costs and planned procurement quantities for Deepwater
acquisition programs, a July 2009 GAO report stated:
The Coast Guard’s budget submission, as currently structured, limits Congress’s
understanding of details at the asset level in so far as it does not include key information
such as assets’ total acquisition costs or, for the majority of assets, the total quantities
planned. For example, while the justification of the NSC request includes a detailed
description of expected capabilities and how these capabilities link to the Coast Guard’s
missions and activities funded by past appropriations, 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 key 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.11 An important part of this communication is to provide
decision makers with information about cost estimates, risks, and the scope of a planned
project before substantial resources are committed. Good budgeting also requires that the full
costs of a project be considered upfront when decisions are made. Other federal agencies that
acquire systems similar to those of the Coast Guard, such as the Department of Defense,
capture these elements in justifications of their budget requests....
While the Coast Guard’s asset-level Quarterly Acquisition Reports to Congress and the
annual Deepwater Program Expenditure Report include some information on total costs and
quantities, these documents are provided only to the appropriations committees, and they
contain selected information that is restricted due to acquisition sensitive material. The
budget justification prepared by the Coast Guard is a tool that Congress uses in its budget
and appropriations deliberations. Presentation of information on the full costs and quantities
of Deepwater assets in the Coast Guard’s budget submission can provide Congress greater
insights in fulfilling its roles of providing funding and conducting oversight.25
National Security Cutter (NSC)
Oversight issues concerning the NSC program have included 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.
Coast Guard Perspective
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
25 Government Accountability Office, Coast Guard[:]As Deepwater Systems Integrator, Coast Guard Is Reassessing
Costs and Capabilities but Lags in Applying Its Disciplined Acquisition Approach, GAO-09-682, July 2009, pp. 21-22.
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Coast Guard Deepwater Acquisition Programs
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.26
The Coast Guard also testified in April 2009 that:
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
26 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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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.27
GAO Perspective
A July 2009 GAO report states that the cost of the NSC program was estimated in June 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.28 The report states that the Coast Guard has
27 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.
28 Government Accountability Office, Coast Guard[:]As Deepwater Systems Integrator, Coast Guard Is Reassessing
Costs and Capabilities but Lags in Applying Its Disciplined Acquisition Approach, GAO-09-682, July 2009, p. 18.
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Coast Guard Deepwater Acquisition Programs
made a significant investment in the NSC program before completing operational testing to
demonstrate that the capabilities it is buying meet Coast Guard needs. While some testing of
the NSC has already taken place, the tests conducted to date do not substitute for the
complete scope of operational testing that should be the basis for further investment. For
example, COMOPTEVFOR completed an operational assessment of the NSC in 2007 to
identify risks to the program’s successful completion of operational testing. Before the first
NSC was delivered, it also underwent acceptance trials, conducted by the U.S. Navy Board
of Inspection and Survey, to determine compliance with contract requirements and to test
system capabilities. Since delivery of the first NSC, the Coast Guard has also conducted
flight deck and combat system certifications with the assistance of the Navy. While these
demonstrations and certifications provide evidence that the first NSC functions as intended,
they do not fully demonstrate the suitability and effectiveness of the ship for Coast Guard
operations. According to officials, a test plan to demonstrate these capabilities is expected to
be approved in July 2009, and COMOPTEVFOR may begin operational testing in March
2010. However, by the time full operational testing is scheduled to be completed in 2011, the
Coast Guard plans to have six of eight NSCs either built or under contract.29
Sentinel Class Fast Response Cutter (FRC)
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.30 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.31 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
shipbuilding firm Marinette Marine filed a protest with GAO of the Coast Guard’s contract award
to Bollinger.32 On January 12, 2009, GAO denied the protest.33 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.34
Coast Guard Perspective
The Coast Guard testified in April 2009 that:
29 Government Accountability Office, Coast Guard[:]As Deepwater Systems Integrator, Coast Guard Is Reassessing
Costs and Capabilities but Lags in Applying Its Disciplined Acquisition Approach, GAO-09-682, July 2009, pp. 14-15.
30 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.
31 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.
32 Rebekah Gordon, “Marinette Marine Files Protest Over Coast Guard’s FRC Award,” Inside the Navy, October 13,
2009.
33 Rebekah Gordon, “GAO Denies Protest of Coast Guard Award to Bollinger for FRC,” Inside the Navy, January 19,
2009.
34 Amy McCullough, “Marinette Withdraws Patrol Boast Protest,” NavyTimes.com, February 17, 2009.
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Coast Guard Deepwater Acquisition Programs
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;
• 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.35
35 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.
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Coast Guard Deepwater Acquisition Programs
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.36
GAO Perspective
A July 2009 GAO report stated:
Based on its determination that the need for the capabilities to be provided by the Fast
Response Cutter and C4ISR is pressing, the Coast Guard has contracted for these capabilities
without having in place all acquisition documentation required by the MSAM. This situation
puts the Coast Guard at risk for cost overruns and schedule slips if it turns out that what it is
buying does not meet its requirements. For example, in September 2008, after conducting a
full and open competition, the Coast Guard awarded an $88.2 million contract to Bollinger
Shipyards, Inc. for the design and construction of a lead Fast Response Cutter. Prior to the
award, however, the Coast Guard did not have an approved operational requirements
document or test plan for this asset as required by the MSAM process. 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. The Coast Guard’s next
acquisition decision event is scheduled for the first quarter of fiscal year 2010 to obtain DHS
approval for low-rate initial production. According to officials, the Coast Guard intends to
submit an operational requirements document and test plan to DHS for this acquisition
decision event. With plans to exercise contract options for hulls 2 through 8 in fiscal year
2010, the Coast Guard’s aggressive schedule leaves little room for unforeseen problems.
Program risks are compounded by the fact that the Coast Guard plans to have at least 12
cutters either delivered or under contract prior to the scheduled completion of operational
testing in fiscal year 2012, before it has certainty that what it is buying meets Coast Guard
needs.37
110/123-Foot Patrol Boat Modernization
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
36 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.
37 Government Accountability Office, Coast Guard[:]As Deepwater Systems Integrator, Coast Guard Is Reassessing
Costs and Capabilities but Lags in Applying Its Disciplined Acquisition Approach, GAO-09-682, July 2009, p. 15.
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Coast Guard Deepwater Acquisition Programs
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
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
Revolving Door and Potential for Conflicts of Interest
The so-called revolving door, which refers to the movement of officials between positions in
government and industry, can create benefits for government and industry in terms of allowing
each side to understand the other’s needs and concerns, and in terms of spreading best practices
from one sector to the other. At the same time, some observers have long been concerned that the
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.
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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Coast Guard Deepwater Acquisition Programs
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.
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
Potential Options for Congress
In addition to approving or modifying the Coast Guard’s requests for 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 programs, including implementation of reform actions announced by
the Coast Guard itself or recommended by GAO;
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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Coast Guard Deepwater Acquisition Programs
• modify reporting requirements for Deepwater acquisition programs;
• prohibit the obligation or expenditure of 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 acquisition reforms for Deepwater programs that the
Coast Guard has already announced, or to change acquisition policies and
practices for Deepwater acquisition programs in other ways.
Legislative Activity in 112th Congress
FY2012 Funding Requests
As shown in Table 3, the Coast Guard’s FY2012 budget appears to request $957.2 million in
acquisition funding for Deepwater programs, including $271.6 million for aircraft, $512.0 million
for surface ships and boats, and $173.6 million for other items.
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Appendix A. Legislative Activity in 111th Congress
FY2011 Funding Requests
The Coast Guard’s proposed FY2011 budget requested $1,112.5 million in acquisition funding for
Deepwater programs, including $101.0 million for aircraft, $856.0 million for surface ships and
boats, and $155.5 million for other items.
Summary of Appropriations Action on FY2011 Funding Requests
Table A-1 summarizes appropriations action on FY2011 acquisition funding requests for
Deepwater programs.
Table A-1. Summary of Appropriations Action on FY2011 Deepwater Acquisition
Funding Requests
(in millions of dollars, rounded to nearest tenth)
Program
Request
HACa
SAC
Finalb
Maritime Patrol Aircraft (MPA)
40.0
n/aa 49.0
40.0
HH-60 Conversion Projects
32.0
n/aa 32.0
32.0
HH-65 Conversion/Sustainment Projects
0
n/aa 0
0
HC-130H Conversion/Sustainment Projects
25.0
n/aa 25.0
25.0
HC-130J Fleet Introduction
4.0
n/aa 4.0
4.0
Unmanned Aircraft Systems
0
n/aa 2.0 0
Subtotal aircraft
101.0
n/aa
112.0
101.0
National Security Cutter (NSC)
538.0
n/aa 648.0
692.0
Offshore Patrol Cutter (OPC)
45.0
n/aa 45.0
45.0
Fast Response Cutter (FRC)
240.0
n/aa 240.0
240.0
Deepwater smal boats
3.0
n/aa 3.0
3.0
Medium-endurance cutter sustainment
30.0
n/aa 30.0
30.0
Patrol boats sustainment
0
n/aa 0
0
Subtotal surface ships
856.0
n/aa
966.0
1,010.0
Government program management
45.0
n/aa 45.0
45.0
Systems engineering and integration
29.0
n/aa 29.0
29.0
C4ISRc 30.5
n/aa 30.5
30.5
Logistics 50.0
n/aa 50.0
50.0
Technology obsolescence prevention
1
n/aa 1.0 1
Subtotal other
155.5
n/aa
155.5
155.5
TOTAL
1,112.5
n/aa
1,233.5
1,266.5
Sources: FY2011 Coast Guard budget submission, SAC report (S.Rept. 111-222 of July 19, 2010) on the FY2011
DHS appropriations bill (S. 3607 of the 11th Congress), and (for appropriations final) text of H.R. 1473 of 112th
Congress.
Note: HAC is House Appropriations Committee; SAC is Senate Appropriations Committee; n/a is not available.
a. The ful House appropriations Committee did not file an official, numbered report on the FY2011 DHS
appropriations bill.
b. The text of H.R. 1473 of the 112th Congress states that the total provided for Deepwater programs is
$1,266.5 million, including $101.0 million for aircraft and $1,010.0 million for surface ships. The text of the
bill also states that, within the total for surface ships, $692.0 million is provided for the NSC. These figures
are enough to deduce that the subtotal for “other” is $155.5 million and that, except for the increase to the
NSC, all the other line items in the table were funded at the requested level.
c. Command and control, communications, computers, intelligence, surveillance and reconnaissance.
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FY2011 DOD and Full-Year Continuing Appropriations Act (H.R.
1473)
The text of the FY2011 Department of Defense and Full-Year Continuing Appropriations Act
(H.R. 1473 of the 112th Congress, introduced on April 11, 2011) states that the total provided for
Deepwater programs is $1,266.5 million, including $101.0 million for aircraft and $1,010.0
million for surface ships. The text of the bill also states that, within the total for surface ships,
$692.0 million is provided for the NSC. These figures are enough to deduce that the subtotal for
“other” is $155.5 million and that, except for the $154-million increase to the NSC, all the other
line items in the table were funded at the requested level.
FY2011 DHS Appropriations Bill (S. 3607)
Senate
As shown in Table A-1, the Senate Appropriations Committee, in its report (S.Rept. 111-222 of
July 19, 2010) on S. 3607 of the 111th Congress, recommends a total of $1,233.5 million in the
Coast Guard’s AC&I account for Deepwater acquisition programs. The report states:
DEEPWATER FUNDING
The Committee recommends $1,233,502,000 for Deepwater, $121,000,000 above the
amount requested and $79,222,000 above the fiscal year 2010 level. Details of major
procurements under this program and other acquisitions are provided below.
MARITIME PATROL AIRCRAFT
The Committee recommends $49,000,000 for the Maritime Patrol Aircraft [MPA],
$9,000,000 above the budget request. Funds are recommended for the acquisition of one
aircraft (#15), which will provide an additional 1,200 hours to address the Coast Guard’s
MPA flight-hour gap. The amount above the request funds an additional mission system
pallet [MSP] and sparing. The Coast Guard is behind schedule in producing MSPs for its
fleet of MPAs. Closing this gap will accelerate the deployment of fully missionized aircraft
to the field.
UNMANNED AIRCRAFT SYSTEMS
In addition to funding included for the ship-based Unmanned Aircraft Systems [UAS]
project in the Committee’s recommendation for “Research, Development, Test, and
Evaluation,” the Committee includes $2,000,000 in this account to accelerate pre-acquisition
activities in accordance with the Coast Guard’s Major Systems Acquisition Manual
“Analyze/Select” Phase for the ship-based UAS.
NATIONAL SECURITY CUTTER
The recommendation includes $648,002,000 for the National Security Cutter [NSC]
acquisition, $110,000,000 above the budget request. The Committee disagrees with the
administration’s decision to delay funding for the 6th NSC. The NSC program, which is
already 2 years behind schedule, will be further delayed without additional funds. The 12
legacy cutters the NSC will replace are frequently out of service due to unscheduled
maintenance requirements. These 12 cutters lose an average of 250 operational days per year
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due to unplanned maintenance, which is directly impacting the Coast Guard’s ability to
perform its many missions. Funds are provided to complete production of NSC #5, as
requested, and for long lead-time materials for NSC #6, which avoids additional project costs
and recapitalization delays associated with a break in NSC production. Funding long lead-
time material for NSC #6 in conjunction with production funding for NSC #5 is consistent
with the Department of Homeland Security’s approved Acquisition Program Baseline for the
NSC program.
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.
FAST RESPONSE CUTTER
The Committee recommends $240,000,000 for the Coast Guard’s Fast Response Cutter
[FRC], as requested. This funding will allow the Coast Guard to acquire four FRC hulls (9-
12). The first FRC is scheduled for delivery in fiscal year 2011 and will be fully operational
in fiscal year 2012. The Committee expects the Coast Guard to continue quarterly briefings
to the Committee on the status of this procurement, including critical decision points and
dates; status of service life extensions of the existing 110-foot patrol boats; and patrol boat
operational metrics.
MEDIUM ENDURANCE CUTTER SUSTAINMENT
The recommendation includes $30,000,000 for the Medium Endurance Cutter [WMEC]
Sustainment Project, as requested. Funding will complete sustainment work on three 270-
foot cutters. This funding is intended to improve mission effectiveness of these vessels to
allow them to meet their goals for program availability through the remainder of their service
lives. This program has been successful in significantly reducing the number of major
equipment failures on these vessels resulting in a much higher percentage of time they are
fully mission capable. The Committee is concerned that the total funding in the fiscal year
2011-15 Capital Investment Plan for the WMEC Sustainment project is $20,700,000 less
than the project’s approved Acquisition Program Baseline cost estimate. Work items will be
scaled back and the last two 270-foot WMECs will not undergo the sustainment project.
Given the success of this program in mitigating fleet equipment failures and delays in
fielding a replacement asset (Offshore Patrol Cutter), the Committee encourages the Coast
Guard to reconsider this decision as it develops its fiscal year 2012 budget request.
PATROL BOAT SUSTAINMENT
No funding is identified in the fiscal year 2011-15 Capital Investment Plan for patrol boat
sustainment due to the administration’s decision to de-scope the project. This decision means
that 17 instead of 20 patrol boats will undergo sustainment. While the Coast Guard is in the
process of acquiring 58 FRCs to replace the legacy patrol fleet (which has well surpassed its
expected service life), only 22 are expected to be delivered by the end of fiscal year 2015.
This should reinforce the need to sustain the legacy fleet until replacements are deployed.
The Committee encourages the Coast Guard to reconsider this decision as it develops its
fiscal year 2012 budget request.
OFFSHORE PATROL CUTTER
The recommendation includes $45,000,000 for the Offshore Patrol Cutter [OPC], as
requested. Funding provides for pre-acquisition activities. The Committee expects the Coast
Guard to provide quarterly briefings to the Committee on the status of this procurement,
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including critical decision points and dates. Further, in accordance with section 511 of this
act, no funds may be used in contravention of the Buy American Act, including the
procurement of main propulsion engines for the OPC….
DEEPWATER EXPENDITURE PLAN
The Coast Guard is directed to brief the Committee on its fiscal year 2011 Deepwater
expenditure plan no later than 60 days after the date of enactment of this act. The briefing
shall be consistent with the Deepwater expenditure plan requirements set forth in Public Law
110–329.43
QUARTERLY ACQUISITION REPORTS
The Commandant is directed to continue to submit to the Committee quarterly acquisition
and mission emphasis reports consistent with deadlines articulated under section 360 of
division I of Public Law 108–7.44 The Coast Guard shall continue submitting these reports in
43 P.L. 110-329, a consolidated security, disaster assistance, and continuing appropriations act for FY2009, states, in the
paragraph that makes appropriations for the Coast Guard’s AC&I account, that the funds are made available, provided,
among other things,
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—
(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….
44 Section 360 of Division I of P.L. 108-7, a consolidated appropriations resolution for FY2003, states:
(continued...)
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the same format as required in fiscal year 2010. In addition, for each asset covered, the
reports should present the objective for operational hours the Coast Guard expects to
achieve, the gap between that objective and current capabilities, and how the acquisition of
the specific asset closes the gap. The information should include a discussion of how the
Coast Guard calculated the operational hours, an explanation on risks to mission
performance associated with the current shortfall, and the operational strategy to mitigate
such risks.
GAO DEEPWATER REVIEW
The GAO is directed to continue its oversight of the Deepwater program, including a
continued focus on acquisitions nearing critical decision points and Coast Guard progress in
functioning as the systems integrator. GAO has informed the Committee that the Coast
Guard has not completed its planned fleet mix analysis that was intended to revalidate the
quantities of assets needed to meet mission needs. The Coast Guard is to complete this
analysis and submit the results no later than 120 days after the date of enactment of this act.
GAO shall provide an assessment of the report as part of its annual review of the Deepwater
program. (Pages 84-87; material in brackets as in original)
The report also states:
The Committee understands a review of the Coast Guard’s Deepwater cutter fleet
recapitalization program is being conducted by the Office of the Chief Financial Officer’s
Program Analysis and Evaluation Division [PA&E]. PA&E shall brief the Committee on this
effort no later than 90 days after the date of enactment of this act. (Page 21; material in
brackets as in original)
The report also states:
REPORTING REQUIREMENTS WITHOLDING
In an effort to encourage timely submissions to the Committees of materials necessary for
robust and informed oversight, the Committee withholds $75,000,000 from obligation from
the Coast Guard’s “Headquarters Directorates” until the Quarterly Acquisition Report for the
second quarter of fiscal year 2011, Revised Deepwater Implementation Plan, and a
(...continued)
SEC. 360. None of the funds provided in this Act or prior Appropriations Acts for Coast Guard
`Acquisition, construction, and improvements’ shall be available after the fifteenth day of any
quarter of any fiscal year, unless the Commandant of the Coast Guard first submits to the House
and Senate Committees on Appropriations a quarterly report on the agency’s mission hour
emphasis and a quarterly report on all major Coast Guard acquisition projects including projects
executed for the Coast Guard by the United States Navy and vessel traffic service projects:
Provided, That such acquisition reports shall include an acquisition schedule, estimated current and
year funding requirements, and a schedule of anticipated obligations and outlays for each major
acquisition project: Provided further, That such acquisition reports shall rate on a relative scale the
cost risk, schedule risk, and technical risk associated with each acquisition project and include a
table detailing unobligated balances to date and anticipated unobligated balances at the close of the
fiscal year and the close of the following fiscal year should the Administration’s pending budget
request for the acquisition, construction, and improvements account be fully funded: Provided
further, That such acquisition reports shall also provide abbreviated information on the status of
shore facility construction and renovation projects: Provided further, That all information submitted
in such mission hour emphasis and acquisition reports shall be current as of the last day of the
preceding quarter.
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comprehensive 5-year Capital Investment Plan for fiscal years 2012-2016 have been
submitted. (Pages 80-81)
Coast Guard Authorization Act of 2010 (H.R. 3619/P.L. 111-281)
H.R. 3619 was passed by the House on October 23, 2009, and by the Senate on May 7, 2010. The
Senate-passed version substituted the text of S. 1194 as reported by the Senate Commerce,
Science, and Transportation Committee (see below), with modifications. The House and Senate
resolved their differences and passed the final version of the bill on September 29 and 30, 2010.
The bill was presented to the President on October 4, 2010, and signed into law as P.L. 111-281
on October 15, 2010.
House
In H.R. 3619 as reported by the House Transportation and Infrastructure Committee (H.Rept.
111-303 [Part 1] of October 16, 2009), Section 101(2)(b) would authorize $1,194.78 million in
Acquisition, Construction, and Improvements (AC&I) funding for Deepwater acquisition
programs. Section 1316 requires an assessment of needs for additional Coast Guard presence in
high-latitude regions, including, among other things, “an assessment of the high latitude operating
capabilities of all current Coast Guard assets, including assets acquired under the Deepwater
program.” Title V would reform Coast Guard acquisition, including Deepwater acquisition.
H.Rept. 111-303 (Part 1) discusses Title V on pages 86-90.
Senate
On May 7, 2010, the Senate passed S.Amdt. 3912, which amended H.R. 3619 by substituting the
text of S. 1194 as reported by the Senate Commerce, Science, and Transportation Committee (see
below), with modifications. The Senate then passed H.R. 3619 the same day.
Final Version
Section 101(2)(B) of H.R. 3619/P.L. 111-281 authorizes $1,233.502 million in Acquisition,
Construction, and Improvements (AC&I) funding for Deepwater acquisition programs. Section
402 includes a provision amending 14 U.S.C. 564 so that, among other things, the Coast Guard is
authorized to use a private sector entity as a lead systems integrator for “C4ISR projects directly
related to the Integrated Deepwater program, and National Security Cutters 2 and 3, if the
Secretary of the department in which the Coast Guard is operating certifies that—(A) the
acquisition is in accordance with Federal law and the Federal Acquisition Regulation; and (B) the
acquisition and the use of a private sector lead systems integrator for the acquisition is in the best
interest of the Federal Government.”
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Coast Guard Authorization Act for Fiscal Years 2010 and 2011 (S.
1194)
Senate
In S. 1194 as reported by the Senate Commerce, Science, and Transportation Committee S.Rept.
111-95 of October 30, 2009), Section 101(2) would authorize $1,383.98 million for the Coast
Guard’s Acquisition, Construction, and Improvements (AC&I) account, which funds both
Deepwater acquisition programs and other Coast Guard acquisition programs. Title V would
reform Coast Guard acquisition, including Deepwater acquisition. S.Rept. 111-95 discusses
Deepwater acquisition programs in general on pages 3-5, and Title V on pages 18-23.
On May 7, 2010, the Senate passed S.Amdt. 3912, which amended H.R. 3619 (see above) by
substituting the text of S. 1194 as reported by the Senate Commerce, Science, and Transportation
Committee, with modifications. The Senate then passed H.R. 3619 the same day.
Coast Guard Acquisition Reform Act of 2009 (H.R. 1665)
House
H.R. 1665, which was passed by the House on July 29, 2009, would reform Coast Guard
acquisition, including Deepwater acquisition. The House Transportation and Infrastructure
Committee’s report on the bill (H.Rept. 111-215 of July 20, 2009) discusses the Deepwater
program on pages 1-8.
FY2010 DHS Appropriations Act (H.R. 2892/P.L. 111-83)
House
In addition to making funding recommendations for FY2010, the House Appropriations
Committee’s report (H.Rept. 111-157 of June 16, 2009) on H.R. 2892 stated the following
regarding Deepwater acquisition programs:
QUARTERLY REPORTS ON ACQUISITION PROJECTS AND MISSION
EMPHASIS
The Committee continues to find Coast Guard’s quarterly acquisition reports and mission
emphasis reports extremely useful, and as such, directs Coast Guard to continue submitting
these comprehensive reports in a timely fashion. The Coast Guard is directed to continue to
include in the acquisition reports information on small boat purchases and leases made
within the Operating Expenses appropriation.
STATUTORY REPORTING REQUIREMENTS
The Committee is frustrated that the Coast Guard failed to provide several reports required in
law that were to accompany the 2010 budget request. Specifically, P.L. 110–329 requires the
Coast Guard to submit a Deepwater expenditure plan and a capital investment plan, yet
neither was received. While these are not simple documents, these are not new requests. The
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Coast Guard has been required to submit a capital investment plan every year since the
agency moved to DHS. Similarly, the Coast Guard has been required to submit an annual
expenditure plan using the fiscal year 2006 revised Deepwater Implementation Plan as the
base document since fiscal year 2007. These reports are critical because they provide the
Committee with needed data to assess the effectiveness of one of the country’s largest annual
investments in homeland security. The explanation provided in the budget justification for
the lack of data from a Capital Investment Plan is wholly inadequate in satisfying the
requirement. Although the Committee had chosen not to carry a withholding provision in the
bill this year out of consideration for possible dislocations in the reporting process due to the
transition of administrations, these documents should be provided to the Committee
immediately, or there is little question that the question of withholdings will be revisited.
DEEPWATER
The Committee recommends $1,014,980,000 for Deepwater, $36,500,000 below the amount
requested and $19,014,000 below the amount provided in fiscal year 2009.
MARITIME PATROL AIRCRAFT
The Maritime Patrol Aircraft (MPA) serves as the Coast Guard’s lead fixed-wing extended
surveillance and quick response platform. The Committee recommends $138,500,000 for
two additional MPAs, mission pallets, spares, and logistics support as requested. The
Committee does not include $36,500,000 requested for accelerating the purchase of a MPA
flight simulator ahead of its original schedule.
MARITIME SURVEILLANCE
The Committee has consistently voiced its concerns over the gap between the Coast Guard’s
stated mission hour needs for maritime surveillance and available resource hours of
surveillance assets. These concerns are based upon the Coast Guard’s quantitative analysis of
mission requirements and repeated testimony by operational personnel and security experts
on the need for increased maritime surveillance capabilities, especially in the source and
transit zones of the eastern Pacific Ocean and the Caribbean basin. The Committee is pleased
the fiscal year 2010 budget request partially addresses this issue through funding for aircraft
acquisition, conversion and sustainment. However, the Committee is concerned by the
absence of requested funding to support operational testing and evaluation of either land-
based or cutter-based unmanned aerial systems (UAS) in fiscal year 2010 given the
unrealized potential of such assets for enhanced maritime surveillance. Furthermore, the
Committee notes that even with these additional surveillance resources requested for fiscal
year 2010, the Coast Guard’s available maritime surveillance hours will only be at
approximately 65 percent of stated mission needs. The Coast Guard is directed to report to
the Committee no later than November 1, 2009, on its planned efforts to leverage available
interagency resources and other temporary surveillance capabilities, including the
operational testing and evaluation of UAS, in fiscal year 2010 to address the maritime
surveillance mission hour gap.
NATIONAL SECURITY CUTTER
The National Security Cutter (NSC) is the replacement for the 378-foot High Endurance
Cutter, and as such, is capable of worldwide operations, extended on-scene presence, long
transit and forward deployments. The Committee recommends $281,480,000 for the NSC as
requested, $72,220,000 below the amount provided in fiscal year 2009. The Committee does
this despite persistent concerns regarding cost controls and the production schedule for this
class of cutter. These concerns are predicated on the fact that the cost of the fourth NSC is
more than $73,700,000 and fourteen percent higher than the previous two cutters in this class
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and that the Coast Guard’s current schedule delays the award for the fifth NSC until 2011.
The Committee is troubled by a projected production schedule for the remaining NSCs that
delays fulfillment of known operational needs and appears to enable further cost growth and
delays in cutter delivery. These concerns are exacerbated by the absence of requested
funding for known, immediate maintenance needs of the legacy high endurance cutters
(HECs) in fiscal year 2010. The Committee views the confluence of the NSC’s extended
production schedule with the uncertain long-term availability of the legacy HEC fleet as a
detriment to offshore maritime security operations and directs the Coast Guard to: prioritize
maintenance needs of the HEC fleet, as addressed elsewhere in this report, and inform the
Committee no later than July 1, 2009, of its efforts to put in place a contractual structure for
the remaining NSCs that will provide expeditious delivery at the least cost and risk to the
taxpayer.
OFFSHORE PATROL CUTTER
The Offshore Patrol Cutter (OPC) is the replacement vessel for the current 210-foot and 270-
foot Medium Endurance cutters. The Committee provides the requested $9,800,000 to
complete alternatives analysis and required acquisition documentation for the OPC, as well
as beginning Phase I of preliminary design. The Committee understands from the Coast
Guard that this approach will help reduce the risk of program cost growth. Given that such
cost growth was behind the decision to stop work on the initial OPC, the Coast Guard is
directed to brief the Committee on the result of the requirements analysis prior to initiating
Phase I work on the new OPC.
FAST RESPONSE CUTTER
The Fast Response Cutter (FRC) is the more capable replacement for the Coast Guard’s
legacy 110-foot patrol boats. The Committee provides the requested $243,000,000 for full-
rate production of four FRCs, $127,700,000 above the amount provided in fiscal year 2009.
The Coast Guard is expected to take delivery of the first FRC in fiscal year 2010. The
Committee directs the Coast Guard to include in its quarterly briefings to the Committee on
the FRC’s progress information on the effectiveness of its various efforts to control cost
growth.
LEGACY CUTTER SUSTAINMENT
The Committee continues to be concerned about legacy cutter sustainment as new vessels are
being slowly brought into service. The Committee understands that the funding level in the
request for cutter sustainment allows for these programs to continue on schedule, with the
shipyards working at optimal capacity. The Committee is pleased by the increases in vessel
availability resulting from the sustainment programs in place for patrol boats and Medium-
Endurance Cutters. Coast Guard reporting indicates that the Medium Endurance Cutter
Sustainment Program has increased the fully-capable mission availability of 270-foot cutters
by 62 percent, and 210-foot cutters by 75 percent. Also, the Committee notes that attention to
critical maintenance needs in the 378-foot High Endurance Cutter fleet has resulted in more
marginal improvements in availability, and urges the Coast Guard to move ahead on a more
robust sustainment option for the High Endurance Cutter.
DEEPWATER REVIEW AND CAPITAL INVESTMENT PLAN
The Committee notes that neither the Secretary’s review of the Revised Deepwater
Implementation Plan nor the future-years capital investment plan mandated in P.L. 110–329
were provided with the budget request. The Committee strongly urges the Department to
produce those items expeditiously, and make sure that similar mandates carried in this
legislation are met. (Pages 81-84)
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Senate
In addition to making funding recommendations for FY2010, the Senate Appropriations
Committee’s report (S.Rept. 111-31 of June 18, 2009) on the FY2010 DHS appropriations bill (S.
1298) stated the following regarding Deepwater acquisition programs:
DEEPWATER FUNDING
The Committee recommends $1,194,780,000 for Deepwater, $143,300,000 above the
amount requested and $160,786,000 above the fiscal year 2009 level. Details of major
procurements under this program and changes to the request are provided below.
MARITIME PATROL AIRCRAFT
The Committee recommends $175,000,000 for the Maritime Patrol Aircraft [MPA], the same
level as proposed in the budget request. This funding will allow the Coast Guard to acquire 2
aircraft (13 and 14), mission systems, and a flight simulator. The funds will address the
Coast Guard’s MPA flight-hour gap by providing 2,400 additional MPA hours every year.
NATIONAL SECURITY CUTTER
The recommendation includes $389,480,000 for the National Security Cutter [NSC]
acquisition, $108,000,000 above the budget request. The Committee disagrees with the
administration’s decision to delay funding for the 5th NSC. The NSC program, which is
already 2 years behind schedule, will be further delayed without additional funds. The 12
legacy cutters the NSC will replace are frequently out of service due to unscheduled
maintenance requirements. These 12 cutters lose an average of 250 operational days per year
due to unplanned maintenance, which is directly impacting the Coast Guard’s ability to
perform its many missions. Funds are provided to complete production of NSC #4 and for
long-lead time materials for NSC #5, which ensures the Coast Guard is properly positioned
to negotiate a best-value, fixed-price contract for NSC #4 and avoids additional project costs
and recapitalization delays associated with a break in NSC production.
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.
FAST RESPONSE CUTTER
The Committee recommends $243,000,000 for the Coast Guard’s ‘‘Fast Response Cutter’’
[FRC–B], the same level as proposed in the budget request. This funding will allow the
Coast Guard to acquire four FRC–B hulls (5–8). The first FRC–B is scheduled for delivery
in the third quarter of fiscal year 2011 and will be fully operational in fiscal year 2012. The
Committee expects the Coast Guard to continue 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.
MISSION EFFECTIVENESS PROJECT
The recommendation includes $54,100,000 for the Mission Effectiveness Project, the same
level as proposed in the budget request. Of this amount, $31,100,000 is for sustainment of
three 270-foot and two 210-foot medium endurance cutters, and $23,000,000 is for
sustainment of three 110-foot legacy patrol boats. This funding is intended to improve
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mission effectiveness of these vessels to allow them to meet their goals for program
availability through the remainder of their service lives. This program has been successful in
significantly reducing the number of major equipment casualties on these vessels resulting in
a much higher percentage of time they are fully mission capable.
OFFSHORE PATROL CUTTER
The recommendation includes $9,800,000 for the Offshore Patrol Cutter [OPC], the same
level as proposed in the budget request. The Committee directs the Coast Guard to brief the
Committee by April 30, 2010, on the results of the alternatives analysis for the OPC....
POLAR ICEBREAKER SUSTAINMENT
The Committee recommends $32,500,000 above the budget request to complete the
reactivation and service life extension of Coast Guard Cutter Polar Star. Of this amount,
$5,200,000 is funded in the AC&I direct personnel costs PPA. Returning Polar Star to
operational status is vital to ensuring the U.S. Government has the ability to project U.S.
sovereignty and protect the broad range of security, economic, and environmental interests in
the Arctic and Antarctic. Within this amount, the Coast Guard shall begin survey and design
and conduct a business case analysis for either a new heavy polar icebreaker class or a major
service life extension project for existing heavy icebreakers. The only existing heavy polar
class icebreaker, the Polar Sea, has only 7 years remaining in its useful life....
HIGH ENDURANCE CUTTER SUSTAINMENT
Delays in the planned delivery of National Security Cutters have created a sustainment
problem for the Coast Guard in maintaining its fleet of legacy High Endurance Cutters. The
Committee is aware of efforts to assess the need and scope for a maintenance plan for the
378-foot High Endurance Cutter fleet. The Committee includes $8,000,000 above the request
for pre-acquisition survey and design to determine the requirements for a maintenance
effectiveness project. A similar program for the Medium Endurance Cutter fleet has been
highly successful in increasing its fully-capable mission availability. The Coast Guard shall
brief the Committee no later than 60 days after the date of enactment of this act on
preliminary plans for this effort.
AC&I PERSONNEL
The Committee provides $105,200,000 for personnel and related support, $5,200,000 above
the budget request. These additional FTEs are necessary for the Coast Guard to perform the
systems integrator role for the Deepwater Program and to execute traditional acquisition
projects. This amount also includes personnel related costs to reactivate the Polar Star.
The Committee is well aware of the limited pool of certified and experienced acquisition
professionals. Therefore, the Committee encourages the Coast Guard to work with the
appropriate authorizing committees to ensure that its hiring authorities are on par with those
of the other armed services.
According to recent testimony by the Government Accountability Office, “there are
approximately 200 contractor employees in support of the acquisition directorate—
representing 24 percent of its total acquisition workforce.” Some of these contractors are
performing core Government acquisition functions. The Coast Guard shall brief the
Committee no later than 60 days after the date of enactment of this act on efforts to reduce
reliance on contractors performing inherently governmental work....
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DEEPWATER EXPENDITURE PLAN
The Coast Guard is directed to brief the Committee on its fiscal year 2010 deepwater
expenditure plan not later than 60 days after the date of enactment of this act. The briefing
shall be consistent with the Deepwater expenditure plan requirements set forth in Public Law
110–329.
QUARTERLY ACQUISITION REPORTS
The Commandant is directed to continue to submit quarterly acquisition and mission
emphasis reports consistent with deadlines articulated under section 360 of division I of
Public Law 108–7 and the fiscal year 2008 joint explanatory statement. The Committee notes
that the Coast Guard has adopted the practice of comparing cost, schedule, and performance
estimates against the most recently approved baseline. This approach provides an incomplete
assessment of an acquisition’s progress against the original baseline. Therefore, the report
shall compare current estimates against the original baseline and the most recent baseline, if
available. This method is consistent with Department of Defense acquisition reporting policy
and is recommended by the Government Accountability Office. When reporting on “key
project documents,” it should be noted if approved documentation differs from that required
by the Major Systems Acquisition Manual or the Department’s Acquisition Review
guidance. The reports should also indicate if a test and evaluation master plan has been
approved for an asset. Finally, the acquisition reports shall include a “stoplight chart” that
tracks key performance parameters of each asset through developmental and operational
testing. Because the Coast Guard consistently fails to meet quarterly submission deadlines,
the Committee withholds $30,000,000 from Headquarter Directorates until the second
quarter report is submitted.
GAO DEEPWATER REVIEW
The GAO is directed to continue its oversight of the Deepwater program. GAO’s focus shall
include an assessment of the Coast Guard’s conversion projects for the HH–60 and HH–65
platforms. The Committee is concerned with the schedule for both programs. According to
the Coast Guard’s quarterly acquisition reports, the schedule for the HH–60 program is at
“significant risk” and is not expected to meet projected milestones. The same reports show a
moderate schedule risk for the HH–65 conversion program. Delays in the HH–65 conversion
program have resulted in an unobligated balance in excess of $100,000,000 and the Coast
Guard expects to carryover $58,729,000 into fiscal year 2010. (Pages 77-80)
Conference
In H.R. 2892/P.L. 111-83 of October 28, 2009 as reported by the conference committee (H.Rept.
111-298 of October 13, 2009), the paragraph that appropriates funds for the Coast Guard’s
Operating Expenses (OE) account states:
That of the funds provided under this heading, $50,000,000 shall be withheld from obligation
for Headquarters Directorates until: (1) the fiscal year 2010 second quarter acquisition report
required by Public Law 108–7 and the fiscal year 2008 joint explanatory statement
accompanying Public Law 110–161; (2) the Revised Deepwater Implementation Plan; and
(3) the future-years capital investment plan for fiscal years 2011–2015 are received by the
Committees on Appropriations of the Senate and the House of Representatives....
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The paragraph that appropriates funs for the Coast Guard’s Acquisition, Construction, and
Improvements (AC&I) account appropriated $1,154.28 million for Deepwater acquisition
programs,
Provided, That of the funds made available for the Integrated Deepwater Systems program,
$269,000,000 is for aircraft and $730,680,000 is for surface ships: 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 2011
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 such legacy assets;
a detailed explanation of how the costs of such 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, in conjunction with the fiscal year 2011 budget request, a comprehensive
review of the Revised Deepwater Implementation Plan, and every 5 years thereafter, that
includes a complete projection of the acquisition costs and schedule for the duration of the
plan.
In addition appropriating funding for Deepwater acquisition programs for FY2010, the
conference report states the following regarding Deepwater acquisition programs:
Comprehensive Review of the Revised Deepwater Implementation Plan
The conferees note with emphasis the legislative requirement for the Secretary to submit a
comprehensive review of the Revised Deepwater Implementation Plan (RDIP). The
longstanding requirements for this review are specific: a complete projection of the
acquisition costs and schedule for the duration of the RDIP. The conferees expect this review
to update the original RDIP estimated total cost of $24.2 billion and projected completion by
fiscal year 2027. Furthermore, the review should clearly and comprehensively display the
types and quantities of operational assets covered by the RDIP and the costs and schedule, by
fiscal year and by asset, for the replacement or phase-out of legacy assets through
refurbishment or acquisition. Since the recapitalization of the Coast Guard’s cutters, aircraft,
and C4ISR systems is a complex, multiyear, and integrated program, the conferees believe it
is imperative to evaluate the complete acquisition program baseline, by asset, through the
duration of the RDIP. Given that this RDIP review has been mandated in every annual
appropriations Act for DHS since the first RDIP was established in November 2006, the
conferees cannot foresee any justification for undue delay from DHS and the Coast Guard in
submitting a review that fully complies with the specified requirements, including complete
baseline costs. As noted previously in this statement, $50,000,000 is withheld from
obligation from Coast Guard Headquarters Directorates until this RDIP review is submitted
to the Committees, along with the Capital Investment Plan for fiscal years 2011–2015 and
the Quarterly Acquisition Report for the second quarter of fiscal year 2010....
Maritime Patrol Aircraft
The conference agreement provides $138,500,000 for the Maritime Patrol Aircraft
acquisition as proposed by the House instead of $175,000,000 as proposed by the Senate.
Funds are available for maritime patrol aircraft, mission pallets, simulator, and associated
project costs. The Coast Guard is to brief the Committees no later than 30 days after the date
of enactment of this Act on the planned distribution of these funds.
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National Security Cutter
The conference agreement provides $389,480,000 for the National Security Cutter (NSC)
acquisition as proposed by the Senate instead of $281,480,000 as proposed by the House.
These funds are to complete production of NSC #4 and for long lead-time materials for NSC
#5. The conferees direct the Coast Guard to finalize the integrated logistics plan for the NSC
and to brief the Committees on it within 60 days of the date of enactment of this Act.
Offshore Patrol Cutter
The conferees direct the Coast Guard to brief the Committees by March 15, 2010, on the
progress of its ongoing preliminary acquisition work on the Offshore Patrol Cutter, including
the results of the requirements and alternatives analyses.
Fast Response Cutter
The conferees expect the Coast Guard to continue quarterly briefings on the status of the Fast
Response Cutter procurement as outlined in the Senate report, including information on the
effectiveness of its efforts to control cost growth in the program.
Polar Icebreaker Sustainment
The conference agreement provides an additional $32,500,000 to complete the reactivation
and service life extension of the Coast Guard Cutter POLAR STAR as proposed by the
Senate. No additional funding for this activity was proposed by the House. Of this amount,
$5,200,000 is provided in the Acquisition, Construction, and Improvements direct personnel
costs PPA. Funds shall be applied as specified in the Senate report. The conferees believe
returning POLAR STAR to operational status is vital to national interests in the polar
regions. According to the Coast Guard the only existing operational heavy icebreaker, the
POLAR SEA, has only five years of service life remaining. The absence of requested
funding to complete fiscal year 2009 efforts to reactivate POLAR STAR, combined with the
lack of compliance with standing Congressional direction on the polar icebreaking budget,
implies a broader lack of commitment to sustaining polar capabilities and achieving
longterm, strategic objectives in the Arctic. The conferees direct the Coast Guard to brief the
Committees no later than December 15, 2009, on the program execution plan for reactivation
of POLAR STAR and the status of resources required to achieve mission requirements for
polar operations.
High Endurance Cutter Sustainment
The conference agreement provides $4,000,000 above the request for pre-acquisition survey
and design to determine the requirements for a maintenance effectiveness project for the
High Endurance Cutter, instead of the $8,000,000 as proposed by the Senate. No additional
funding for this activity was proposed by the House. The conferees direct the Coast Guard to
brief the Committees no later than 60 days after the date of enactment of this Act on
preliminary plans for this effort, as proposed by the Senate. (Pages 88-89)
The conference report also states:
Reporting Requirements Withholding
The conferees note that despite legislative mandates the Coast Guard has failed to produce an
expenditure plan for the Integrated Deepwater Systems program, a Capital Investment Plan,
or Quarterly Acquisition Reports in time to be of use during the fiscal year 2010
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appropriations process. In an effort to encourage timely submissions to the Committees of
materials necessary for robust and informed oversight, the conference report withholds
$50,000,000 from obligation from the Coast Guard’s Headquarters Directorates PPA
[program, project, or activity] until the Revised Deepwater Implementation Plan, a
comprehensive five-year Capital Investment Plan for fiscal years 2011–2015, and the
Quarterly Acquisition Report for the second quarter of fiscal year 2010 have been submitted
to the Committees. (Page 83)
The conference report also states:
Government Accountability Office Reviews
The conferees direct the GAO to continue its oversight of the Deepwater Program. In
addition to the programs highlighted in the Senate report, GAO should focus on programs
nearing critical decision points, such as the Fast Response Cutter, Maritime Patrol Aircraft,
and C4ISR, as well as continuing its ongoing work reviewing the acquisition of the NSC and
changes made to acquisition processes and policies at both the component and Departmental
level that will affect how the Coast Guard functions as systems integrator. The conferees
expect GAO to review Coast Guard expenditure plans once they are transmitted to the
Committees. (Pages 90-91)
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Appendix B. Criticism of Deepwater Management
in 2007
Overall Management of Program
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
Guard45 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;
45 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.46
National Security Cutter (NSC)
A DHS IG report released in January 2007 strongly criticized the NSC program, citing design
flaws in the ship and the Coast Guard’s decision to start construction of NSCs in spite of early
internal notifications about these flaws. The 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.47
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
46 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.
47 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.
110-Foot Patrol Boat Modernization
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.48 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.49
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.50
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.51 The Coast Guard acknowledged in 2007 that the program was a failure.
48 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.
49 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.
50 “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.
51 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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Fast Response Cutter (FRC)
As a result of the problems in the 110-foot patrol boat modernization project, the Coast Guard
accelerated the FRC design and construction effort by 10 years. Problems, however, were
discovered in the FRC design. 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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Appendix C. Coast Guard Reform Actions in 2007
Actions Announced in April 2007
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.52
Other Actions Announced in 2007
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.
52 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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Author Contact Information
Ronald O'Rourke
Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610
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