Coast Guard Deepwater Acquisition
Programs: Background, Oversight Issues, and
Options for Congress

Ronald O'Rourke
Specialist in Naval Affairs
September 20, 2011
Congressional Research Service
7-5700
www.crs.gov
RL33753
CRS Report for Congress
Pr
epared 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. Since April 2007, the Coast Guard has pursued them as separate acquisition programs.
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 reporting of information to Congress
on Deepwater programs; cost growth in, and budget planning for, Deepwater acquisition
programs; a Coast Guard fleet mix analysis that could lead to changes in planned Deepwater asset
quantities; and execution of individual 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 $975.5 million in acquisition funding for
Deepwater programs, including $289.9 million for aircraft, $512.0 million for surface ships and
boats, and $173.6 million for other items.

Congressional Research Service

Coast Guard Deepwater Acquisition Programs

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
2006 Deepwater Acquisition Program Baseline........................................................................ 3
Criticism of Deepwater Management in 2007........................................................................... 5
Coast Guard Reform Actions in 2007........................................................................................ 6
Examples of Deepwater Deliveries and Other Milestones ........................................................ 6
Deepwater Acquisition Funding ................................................................................................ 7
Prior-Year Funding.............................................................................................................. 7
FY2012 Acquisition Funding Requests............................................................................... 8
Oversight Issues for Congress ....................................................................................................... 10
Overall Management of Deepwater Acquisition Programs ..................................................... 10
Coast Guard Perspective ................................................................................................... 10
GAO Perspective............................................................................................................... 13
Reporting of Information to Congress..................................................................................... 14
GAO Perspective............................................................................................................... 14
Cost Growth, Schedule Delays, and Budget Planning ............................................................ 16
Coast Guard Perspective ................................................................................................... 16
GAO Perspective............................................................................................................... 16
Fleet Mix Analysis................................................................................................................... 21
GAO Perspective............................................................................................................... 21
National Security Cutter (NSC)............................................................................................... 24
Coast Guard Perspective ................................................................................................... 24
GAO Perspective............................................................................................................... 24
Offshore Patrol Cutter (OPC) .................................................................................................. 25
Coast Guard Perspective ................................................................................................... 25
GAO Perspective............................................................................................................... 26
Fast Response Cutter (FRC).................................................................................................... 27
Coast Guard Perspective ................................................................................................... 27
GAO Perspective............................................................................................................... 27
June 2011 Press Report ..................................................................................................... 28
Potential Options for Congress ...................................................................................................... 29
Legislative Activity in 112th Congress ........................................................................................... 29
Summary of Appropriations Action on FY2012 Funding Requests........................................ 29
FY2012 DHS Appropriations Bill (H.R. 2017)....................................................................... 31
House................................................................................................................................. 31
Senate ................................................................................................................................ 36
Coast Guard and Maritime Transportation Act of 2011 (H.R. 2838) ...................................... 42

Congressional Research Service

Coast Guard Deepwater Acquisition Programs

Tables
Table 1. Deepwater Assets Planned for Acquisition (2006 Baseline).............................................. 4
Table 2. Prior-Year Acquisition Funding For Deepwater Programs ................................................ 7
Table 3. FY2012 Acquisition Funding Requested for Deepwater Programs ................................... 9
Table 4. Appropriations Action on FY2012 Acquisition Funding Requests.................................. 30

Appendixes
Appendix A. Criticism of Deepwater Management in 2007.......................................................... 43
Appendix B. Coast Guard Reform Actions in 2007 ...................................................................... 47
Appendix C. 110/123-Foot Patrol Boat Modernization................................................................. 50
Appendix D. Revolving Door and Potential for Conflicts of Interest ........................................... 53

Contacts
Author Contact Information........................................................................................................... 54

Congressional Research Service

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
$975.5 million in acquisition funding for Deepwater programs, including $289.9 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
Congressional Research Service
1

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 continued
(until the FY2012 budget submission) to appear in the budget under the common

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.
Congressional Research Service
2

Coast Guard Deepwater Acquisition Programs

heading IDS, the Coast Guard since April 2007 has been pursuing Deepwater
acquisition programs as individual programs, rather than as elements of a single,
integrated program. The Coast Guard states that it is still using a systems
approach to optimizing its acquisition programs, including the Deepwater
acquisition programs, but that the system being optimized is now the Coast
Guard as a whole, as opposed to the Deepwater subset of programs.
Coast Guard as System Integrator. The Coast Guard announced in April 2007
that, among other things, it would assume the lead role as systems integrator for
all Coast Guard Deepwater assets (as well as other major Coast Guard
acquisitions as appropriate). The Coast Guard is phasing out its reliance on ICGS
as a private-sector LSI for Deepwater acquisition, and shifting system-integration
responsibilities to itself. To support this shift, the Coast Guard is increasing its in-
house system-integration capabilities.
Defined-Based Acquisition. The Coast Guard 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
2006 Deepwater Acquisition Program Baseline
Table 1 shows 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

3 (Department of Homeland Security, United States Coast Guard, Fiscal Year 2012 Congressional Justification, pp.
CG-AC&I-3 and CG-AC&I-13)
Congressional Research Service
3

Coast Guard Deepwater Acquisition Programs

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 mil ions of then-year dol ars, as estimated at the time the Acquisition Program
Baseline was published)
Qty. Item
Cost
Air assets
6
Missionized HC-130J Long Range Surveillance (LRS) aircraft (cost of missionization)
11
16
Modernized and upgraded HC-130H LRS aircraft (cost of modernization and upgrading)
610
36
New HC-144A Medium Range Surveillance (MRS) aircraft (also called Maritime Patrol Aircraft, or
1,706
MPA) based on the European Aeronautic Defence and Space Company (EADS)/CASA CN-235
Persuader MPA aircraft design
42
Modernized and upgraded MH-60T Medium Range Recovery (MRR) helicopters (cost of
451
modernization and upgrading)
102
Modernized and upgraded HH-65C Multi-Mission Cutter Helicopters (MCHs) (cost of
741
modernization and upgrading)
45
New vertical take-off unmanned aerial vehicles (VUAVs), also called unmanned aircraft systems
503
(UASs)
Subtotal air assets
4,022
Surface assets
8
New National Security Cutters, or NSCs, displacing about 4,000 tons each (i.e., ships analogous to
3,450
today’s high-endurance cutters)
25
New Offshore Patrol Cutters, or OPCs, displacing about 3,200 tons each (i.e., ships analogous to
8,098
today’s medium-endurance cutters)
46
New Fast Response Cutters—Class A (FRC-As) displacing roughly 200 tons each, to replace most
2,613
of the Coast Guard’s existing 110-foot Island-class patrol boats
12
New Fast Response Cutters—Class B (FRC-Bs) displacing roughly 200 tons each, to replace the
593
rest of the Coast Guard’s existing 110-foot Island-class patrol boats
27
Medium Endurance Cutters (MECs) upgraded with a Mission Effectiveness Project (MEP) (cost of
317
upgrading)
17
Patrol boats (PBs) upgraded with a MEP (cost of upgrading)
117
124
New smal boats for Deepwater cutters, including 33 Long-Range Interceptors (LRIs) and 91 Short-
110
Range Prosecutors (SRPs)
8
110-foot Island-class PBs converted into 123-foot PBs (cost of conversion; program not successful
95
and halted after 8 boats)
Subtotal surface assets 15,393
C4ISR systems

Common operational picture
1,071
— Shore
systems
102
— Cutter
upgrades
180
Subtotal C4ISR systems
1,353
Integration and oversight
Congressional Research Service
4

Coast Guard Deepwater Acquisition Programs

Qty. Item
Cost

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 the Department of Homeland Security (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).4
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),5 the Government Accountability Office (GAO),6 the

4 Government Accountability Office, Coast Guard[:] Update on Deepwater Program Management, Cost, and
Acquisition Workforce
, GAO-09-620T, April 22, 2009, p. 4.
5 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).
6 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.
Congressional Research Service
5

Coast Guard Deepwater Acquisition Programs

Defense Acquisition University (DAU) (whose analysis was requested by the Coast Guard),7
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, and several Members of Congress
strongly criticized the management and execution of the program. Criticism focused on overall
management of the program, and on problems in three cutter acquisition efforts—the NSC, the
modernization of the 110-foot patrol boats, and the FRC. For a more detailed discussion, see
Appendix A.
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 B.
Examples of Deepwater Deliveries and Other Milestones8
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, was delivered to the Coast Guard on September 2, 2011.
Fabrication of the fourth NSC, Hamilton, began on August 29, 2011, and the
Coast Guard awarded a contract for the construction of the fifth NSC on
September 9, 2011.
OPC: The Coast Guard released the draft specification for the OPC on May 2,
2011.
FRC: The first FRC was launched (meaning that it was put into the water for the
final phase of its construction) on April 21, 2011. The Coast Guard testified in
April 2011 that “delivery of the first FRC is scheduled for the fall of 2011.”9 The
second FRC was launched on August 18, 2011, and will be commissioned into
service in 2012. The third FRC is tentatively scheduled (as of August 19, 2011) to
be launched on November 10, 2011.
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 12th HC-

7 Defense Acquisition University, Quick Look Study, United States Coast Guard Deepwater Program, February 2007.
8 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).
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.
Congressional Research Service
6

Coast Guard Deepwater Acquisition Programs

144A was delivered on July 29, 2011, and three more were under contract as of
August 12, 2011.
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 May 31, 2011, new surface search radars
had been installed on 23 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 August 17, 2011, 21 of
42 had been upgraded with new avionics suites and Airborne Use of Force (AUF)
equipment kits, and 18 of 42 MH-60Ts had also been upgraded with an enhanced
electro-optic/infrared sensor system.
MH-65C/D: The Coast Guard received its first MH-65C Multi-Mission Cutter
Helicopter (MCH) in October 2007. As of September 7, 2011, the Coast Guard
had configured and delivered 85 MH-65Cs. The 17th MH-65D was delivered on
September 2, 2011.
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 FY11
Request n/a
320.2
500.0
500.0
678
966.0
934.4
836.9
990.4
1,051.5
1,112.5
Appropriation n/a 320.2 478.0 668.2 724.0 933.1 1065.9 783.3 1034.0 1,123.0 1,266.5
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 1,266.5
Source: Prepared by CRS using Coast Guard data provided on January 29, 2007 (FY2007 and prior years), and
FY2008-FY2011 appropriations acts. 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

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.
Congressional Research Service
7

Coast Guard Deepwater Acquisition Programs

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.
FY2012 Acquisition Funding Requests
Table 3 shows acquisition funding requested for Deepwater programs for FY2012. 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….
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, Table 3 arranges the FY2012 requests for Deepwater acquisition
programs in the Deepwater budget-presentation format used in FY2011 and prior years.

11 (Department of Homeland Security, United States Coast Guard, Fiscal Year 2012 Congressional Justification, pp.
CG-AC&I-3 and CG-AC&I-13)
Congressional Research Service
8

Coast Guard Deepwater Acquisition Programs

Table 3. FY2012 Acquisition Funding Requested for Deepwater Programs
(in millions of dollars, rounded to nearest tenth)
Program FY12
requesteda
Maritime Patrol Aircraft (MPA)
129.5
HH-60 Conversion Projects
74.4b
HH-65 Conversion/Sustainment Projects
24.0
HC-130H Conversion/Sustainment Projects
62.0
HC-130J Fleet Introduction
0
Subtotal aircraft
289.9
National Security Cutter (NSC)
77.0
Offshore Patrol Cutter (OPC)
25.0
Fast Response Cutter (FRC)
358.0
Deepwater smal boats
5.0
Medium-endurance cutter sustainment
47.0
Patrol boats sustainment
0
Subtotal surface ships
512.0
Government program management
35.0
Systems engineering and integration
17.1
C4ISR 34.5
Deepwater logistics
87.0c
Technology obsolescence prevention
0
Subtotal other
173.6
TOTAL 975.5
Source: Table prepared by CRS based on Coast Guard FY2012 budget submission. 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
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. Includes $56.1 million for HH-60 conversion projects and $18.3 million for a project called CGNR 6017 to
convert a retired Navy SH-60F helicopter into a Coast Guard MH-60T helicopter, so as to replace a Coast
Guard MH-60T lost in a crash in 2010.
c. 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).
Congressional Research Service
9

Coast Guard Deepwater Acquisition Programs

Oversight Issues for Congress
Deepwater acquisition programs have been a focus of congressional oversight for several years.
In support of this oversight activity, GAO for several years has been assessing, providing reports
and testimony on, and making recommendations for Coast Guard management and execution of
Deepwater acquisition programs. The Coast Guard has implemented many of GAO’s
recommendations.
Specific Deepwater oversight issues have evolved over time in response to developments in
Deepwater acquisition programs. Below are some current Deepwater oversight issues,
particularly as detailed in recent GAO reporting.
Overall Management of Deepwater Acquisition Programs
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
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-
Congressional Research Service
10

Coast Guard Deepwater Acquisition Programs

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.
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.
Congressional Research Service
11

Coast Guard Deepwater Acquisition Programs

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.
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.
Congressional Research Service
12

Coast Guard Deepwater Acquisition Programs

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....
The motto of the Coast Guard’s Acquisition Directorate states, “Mission execution begins
here.” Our job is to recapitalize the Coast Guard, and we are tasked with the responsibility of
delivering the highest level of readiness in a sustainable manner. The dedicated efforts of our
acquisition workforce, combined with guidance from DHS, the Administration and
Congress, have had a lasting impact on Coast Guard men and women serving in the field.
We have processes and procedures in place to ensure successful program management and
oversight, and we have demonstrated their effectiveness. By adhering to and improving upon
what we now have in place, we will be able to successfully meet and address any future
challenges and deliver assets and systems with capabilities to meet our evolving mission
needs.12
GAO Perspective
The July 2011 GAO report states:
The Coast Guard continues to strengthen its acquisition management capabilities in its role
of lead systems integrator and decision maker for Deepwater acquisitions. We recently
reported that the Coast Guard updated its Major Systems Acquisition Manual in November
2010 to better reflect best practices, in response to our prior recommendations, and to more
closely align its policy with the DHS Acquisition Management Directive 102-01. We also
reported that according to the Coast Guard, it currently has 81 interagency agreements,
memorandums of agreement, and other arrangements in place, primarily with DOD agencies,
which helps programs leverage DOD expertise and contracts. To further facilitate the
acquisition process, the Coast Guard’s Acquisition Directorate has increased the involvement
of the Executive Oversight Council as 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.
In addition to these efforts to strengthen its management capabilities, the Coast Guard has
significantly reduced its relationship with ICGS. ICGS’s remaining responsibilities include
completing construction of the third NSC and a portion of the C4ISR project. In moving
away from ICGS, the Coast Guard has awarded fixed-price contracts directly to prime
contractors. For example, since our last report in July 2010, the Coast Guard: (1) awarded a
sole source fixed price contract for the fourth NSC and long lead materials for the fifth NSC
to Northrop Grumman Shipbuilding Systems, (2) exercised fixed price options for four
additional FRCs on the contract with Bollinger Shipyards, and (3) awarded a fixed price
contract to EADS for three MPAs with options for up to six additional aircraft, following a
limited competition in which EADS made the only offer. In addition, the Coast Guard has
developed acquisition strategies intended to inject competition into future procurements
where possible. For example, the Coast Guard is planning to buy a “reprocurement data
licensing package” from Bollinger Shipyards. This information package, according to project
officials, is expected to provide the Coast Guard with the specifications to allow full and

12 [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, 6, 12.
Congressional Research Service
13

Coast Guard Deepwater Acquisition Programs

open competition of future FRCs. Our previous work has shown that when the government
owns technical specifications, its does not need to rely on one contractor to meet
requirements. As part of its acquisition strategy for the OPC, the Coast Guard plans to award
multiple preliminary design contracts and then select the best value contract design for a
detailed design and production contract. This planned acquisition strategy will also include
an option for a data and licensing package, similar to the FRC. In May 2011, the Coast
Guard released a draft of the OPC specifications for industry review in advance of releasing
a request for proposals, currently planned to occur in the fall of 2011. Lastly, the Coast
Guard is in the process of holding a competition for the over-the-horizon cutter small boat
through a small business set-aside acquisition approach.13
Reporting of Information to Congress
GAO Perspective
The July 2011 GAO report stated:
As part of its role in program execution, the Coast Guard is gaining a better understanding of
each asset’s cost, schedule, and technical risks, but not all of this information is transparent
to Congress. The Coast Guard maintains two different quarterly reports to track information
on its major acquisitions, including narrative and mitigation actions pertaining to risks, and
Coast Guard officials told us that the same database is used to populate both reports. One is
the Quarterly Project Report which is an internal acquisition report used by Coast Guard
program managers. The other, known as the Quarterly Acquisition Report to Congress
(QARC), was required by various appropriations laws to be submitted to the congressional
appropriations committees and to rank on a relative scale the cost, schedule, and technical
risks associated with each acquisition project. We found that this statutory requirement is no
longer in effect. However, the Coast Guard and DHS continue to submit the QARC pursuant
to direction in committee and conference reports and the Coast Guard’s Major Systems
Acquisition Manual. These committee and conference reports generally reiterate an
expectation that the Coast Guard submit the QARC by the 15th day of the fiscal quarter.
We found that the Coast Guard’s fiscal year 2010 QARCs did not always include risks
identified in the Quarterly Project Reports. The Coast Guard’s Major Systems Acquisition
Manual
states that the QARC incorporates the Quarterly Project Report for each major
acquisition project. The Quarterly Project Report includes, among other things, the top three
project risks. In comparing both sets of reports—the Quarterly Project Report and the
QARC—from fiscal year 2010, we found that over 50 percent of medium and high risks
identified in the internal Quarterly Project Reports were not included in the QARC. For
example, the Coast Guard reported to Congress that the OPC program had no risks in fiscal
year 2010, but several were identified in the internal report—including concerns about
affordability. In addition, for all of fiscal year 2010, the Coast Guard reported no risks for the
MPA project in the QARC even though several were identified in the internal report.
Before transmittal to Congress, the QARCs are reviewed by officials within the Coast
Guard’s resource directorate, the DHS Chief Financial Officer’s office, and the Office of
Management and Budget. Resource directorate officials told us they do not include risks in
the QARC if those risks contradict the Coast Guard’s current budget request. For example,
the resource directorate did not include the risk related to spare parts for the MPA in the

13 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, pp. 28-29.
Congressional Research Service
14

Coast Guard Deepwater Acquisition Programs

fiscal year 2010 reports to Congress because the Coast Guard did not request funding for
spare parts. DHS officials told us that they do not remove medium and high risks from the
report. Office of Management and Budget officials stated that they will discuss several items
with the Coast Guard, including factors that the agency may want to consider with regard to
the medium and high risks identified in their draft submissions, but that the Office of
Management and Budget does not direct the Coast Guard to remove medium or high risks
from the reports before they are transmitted. We could not obtain documentation to
determine at what point in the review process the decision is made to not include risks.
For all four quarters of fiscal year 2010, the QARC was submitted consistently late. And as
of May 2011, the Coast Guard had not submitted the first quarter fiscal year 2011 report to
Congress—a delay of at least 4 months—but the second quarter fiscal year 2011 internal
report was already complete. According to senior Coast Guard acquisition directorate
officials, the QARC is intended to be the program manager’s communication with Congress
about risks. However, when risks are not included, the Coast Guard is not presenting to
Congress a complete and timely picture of the risks some assets face. 14
The report also states:
To help ensure that Congress receives timely and complete information about the Coast
Guard’s major acquisition projects, we recommend that the Commandant of the Coast Guard
and the Secretary of the Department of Homeland Security:
• include in the project risk sections of the Quarterly Acquisition Report to Congress the
top risks for each Coast Guard major acquisition, including those that may have future
budget implications such as spare parts; and
• submit the Quarterly Acquisition Report to Congress by the 15th day of the start of each
fiscal quarter. 15
The report also states:
To help ensure that it receives timely and complete information about the Coast Guard’s
major acquisition projects, Congress should consider enacting a permanent statutory
provision that requires the Coast Guard to submit a quarterly report within 15 days of the
start of each fiscal quarter on all major Coast Guard acquisition projects and require the
report to rank for each project the top five risks and, if the Coast Guard determines that there
are no risks for a given project, to state that the project has no risks. In addition, Congress
should consider restricting the availability of the Coast Guard’s Acquisition, Construction
and Improvements appropriation after the 15th day of any quarter of any fiscal year until the
report is submitted.16

14 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, pp. 43-44.
15 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, p. 50.
16 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, p. 51.
Congressional Research Service
15

Coast Guard Deepwater Acquisition Programs

Cost Growth, Schedule Delays, and Budget Planning
Coast Guard Perspective
Regarding estimated costs for its various acquisition programs (not just Deepwater acquisition
programs), the Coast Guard testified in April 2011 that:
The [Coast Guard’s] Capital Investment Plan (CIP) estimates Acquisition, Construction and
Improvement (AC&I) funding levels from FY 2012 through FY 2016 for the program of
record for each acquisition project. The plan includes the President’s Request for FY 2012,
the estimated cost of completion (identified as the Total Acquisition Cost), estimated funding
levels for fiscal years 2013 through 2016, and estimated completion dates. The Total
Acquisition Costs and estimated completion date identified in the CIP are based upon the
cost estimates and schedules associated with the latest DHS-approved project-specific
Acquisition Program Baseline (APB) when available, or the Integrated Deepwater System
APB for acquisitions that do not yet have a DHS-approved project APB.
Funding levels included in the CIP are subject to change based upon adjustments to fiscal
guidance, congressional action, changes to the Coast Guard’s strategic plan, as well as
direction provided by DHS leadership, including Future Years Homeland Security Programs
(FYHSP)....
As the Coast Guard faces obsolenscence across its fleet of aging air and surface assets,
C4ISR, and shore infrastructure, the Coast Guard must carfully manage resources to ensure
funding is allocated toward its highest priority requirements. The Coast Guard has establisted
a senior level governance body, known as the Executive Oversight Council, to provide
guidance and direction to ensure acquisition resources target the Service’s highest priority
recapitalization needs and are leveraged to best achieve cost, schedule, and performance
objectives.17
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:
“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
GAO Perspective
The July 2011 GAO report states that

17 [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. 4, 12.
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.
Congressional Research Service
16

Coast Guard Deepwater Acquisition Programs

The Deepwater Program as a whole continues to exceed the cost and schedule baselines
approved by DHS in May 2007, but several factors preclude a solid understanding of the true
cost and schedule of the program. The Coast Guard has developed baselines for some assets,
most of which have been approved by DHS, that indicate the estimated total acquisition cost
could be as much as $29.3 billion, or about $5 billion over the $24.2 billion baseline. But
additional cost growth is looming because the Coast Guard has yet to develop revised
baselines for all the Deepwater assets, including the Offshore Patrol Cutter (OPC)—the
largest cost driver in the Deepwater Program. In addition, the Coast Guard’s most recent 5-
year budget plan, included in DHS’s fiscal year 2012 budget request, indicates further cost
and schedule changes not yet reflected in the asset baselines. The reliability of the cost
estimates and schedules for selected assets is also undermined because the Coast Guard did
not follow key best practices for developing these estimates. Coast Guard and DHS officials
agree that the annual funding needed to support all approved Deepwater baselines exceeds
current and expected funding levels in this fiscal climate. This contributes to churn in
program baselines when programs are not able to execute schedules as planned. The Coast
Guard’s acquisition directorate has developed several action items to help address this
mismatch by prioritizing acquisition program needs, but these action items have not been
adopted across the Coast Guard.
The estimated total acquisition cost of the Deepwater Program, based on approved program
baselines as of May 2011, could be as much as approximately $29.3 billion, or about $5
billion more than the $24.2 baseline approved by DHS in 2007. This represents an increase
of approximately 21 percent. As of May 2011, DHS had approved eight revised baselines
from the 2007 program and the Coast Guard had approved two based on a delegation of
approval authority from DHS. The increase in acquisition cost for these programs alone is
about 43 percent. Table 2 compares each Deepwater asset’s acquisition cost estimate from
the 2007 program baseline with revised baselines, if available.
Congressional Research Service
17


Coast Guard Deepwater Acquisition Programs


As we reported last year, these revised baselines reflect the Coast Guard’s and DHS’s efforts
to understand acquisition costs of individual Deepwater assets, as well as insight into the
drivers of the cost growth. We previously reported on some of the factors contributing to
increased costs for the NSC, MPA, and FRC. For example, the Coast Guard has attributed
the more than $1 billion rise in FRC’s cost to a reflection of actual contract costs from the
September 2008 contract award and costs for shore facilities and initial spare parts not
included in the original baseline. More recently, DHS approved the revised baseline for the
C4ISR program in February 2011, 2 years after the Coast Guard submitted it to the
department. The revised baseline includes more than $1 billion in additional acquisition costs
to account for factors such as post-September 11 requirements and the need to maintain a
common core system design beyond the previously established fiscal year 2014 end date.
Additional cost growth is looming because the Coast Guard has yet to develop revised
baselines for all of the Deepwater assets and even the approved baselines do not reflect all
known costs. The Coast Guard has not submitted to DHS revised baselines for the OPC or
the UAS because these two projects are pre-ADE-2. These two assets combined accounted
for over 35 percent of the original baseline. The uncertainty regarding the OPC’s cost
estimate presents a key difficulty in determining what the Deepwater program may end up
costing. The original 2007 estimate for one OPC was approximately $320 million. However,
the Coast Guard’s fiscal years 2012-2016 capital investment plan cites a planned $640
Congressional Research Service
18

Coast Guard Deepwater Acquisition Programs

million in fiscal year 2015 for the lead cutter. Coast Guard resource and acquisition
directorate officials stated that this $640 million is a point estimate for the lead cutter, some
design work, and project management, but the estimate was not based on an approved life-
cycle cost estimate and the Coast Guard has identified affordability as this program
Coast Guard officials stated that some of the approved acquisition program baselines fall
short of the true funding needs. This not only exacerbates the uncertainty surrounding the
total cost of the Deepwater acquisition, but also contributes to the approved Deepwater
Program no longer being achievable. For example, the NSC program’s approved baseline
reflects a total acquisition cost of approximately $4.7 billion. However, Congress has already
appropriated approximately $3.1 billion for the program and the Coast Guard’s fiscal years
2012-2016 capital investment plan indicates an additional $2.5 billion is needed through
fiscal year 2016 for a total of $5.6 billion to complete the acquisition. This would represent
an increase of approximately 19 percent over the approved acquisition cost estimate for eight
NSCs. According to section 575 of Title 14 of the U.S. Code, the Commandant must submit
a report to Congress no later than 30 days after the Chief Acquisition Officer of the Coast
Guard becomes aware of a likely cost overrun for any level I or level II acquisition program
that will exceed 15 percent. If the likely cost overrun is greater than 20 percent, the
Commandant must include a certification to Congress providing an explanation for
continuing the project. Senior Coast Guard acquisition officials stated that they cannot
corroborate a total cost of $5.6 billion for the NSC program, or a cost increase of 19 percent,
because the Coast Guard has not yet completed a life-cycle cost analysis for the program.
However, these officials stated that a certification to Congress for the NSC program is
pending as well as one for the MPA program.
We previously reported several schedule delays for assets based on the revised baselines and
noted that as the Coast Guard reevaluates its baselines, it gains improved insight into the
final delivery dates for all of the assets. While the Coast Guard’s revised baselines identify
schedule delays for almost all of the programs, these baselines do not reflect the extent of
some of these delays as detailed in the Coast Guard’s fiscal years 2012-2016 capital
investment plan. For example, the MPA’s revised baseline has final asset delivery in 2020—
a delay of 4 years from the 2007 baseline—but the capital investment plan indicates final
asset delivery in 2025—an additional 5-year delay not reflected in the baseline. Coast Guard
resource officials responsible for preparing this plan acknowledged that the final asset
delivery dates in most of the revised baselines are not current. The forthcoming delays
identified in the fiscal years 2012-2016 capital investment plan indicate that the final asset
delivery dates approved in the 2007 Deepwater baseline are no longer achievable for most
assets.19
The report also states:
Coast Guard and DHS officials agreed that the annual funding needed to support all
approved Deepwater acquisition program baselines exceeds current and expected funding
levels, particularly in this constrained fiscal climate. For example, Coast Guard acquisition
officials stated that up to $1.9 billion per year would be needed to support the approved
Deepwater baselines, but they expect Deepwater funding levels to be closer to $1.2 billion
annually over the next several years. Therefore the Coast Guard is managing a portfolio—
which includes many revised baselines approved by DHS—that is expected to cost more
than what its annual budget will likely support. Our previous work on Department of
Defense (DOD) acquisitions shows that when agencies commit to more programs than

19 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, pp. 10-16.
Congressional Research Service
19

Coast Guard Deepwater Acquisition Programs

resources can support, unhealthy competition for funding is created among programs. This
situation can lead to inefficient funding adjustments, such as moving money from one
program to another or deferring costs to the future.
When a program’s projected funding levels are lower than what the program was previously
projected to receive, the program is more likely to have schedule breaches and other
problems, as the program can no longer remain on the planned schedule. From September-
October 2010, the Coast Guard reported potential baseline breaches to DHS for the C4ISR,
HC-130H, and HH-60 programs that were caused, at least in part, by reduced funding
profiles in the fiscal years 2011-2015 capital investment plan.22 For example, in the fiscal
years 2008 and 2009 capital investment plans, the Coast Guard had anticipated allocating 20-
27 percent of its planned $1.1 billion fiscal year 2011 Deepwater budget to its aviation
projects. In its actual fiscal year 2011 budget request, however, the Coast Guard only
allocated about 9 percent of the $1.1 billion to aviation projects. The percentage of dollars
allocated to surface projects increased—largely driven by an increase of dollars allocated to
the FRC program...
In the October 2010 Blueprint for Continuous Improvement (Blueprint), signed by the
Commandant, the Coast Guard’s Assistant Commandant for Acquisition identified the need
to develop and implement effective decision making to maximize results and manage risk
within resource constraints. The Blueprint outlines several action items, expected to be
completed by the end of fiscal year 2011, to accomplish this goal. The action items include:
• promoting stability in the Coast Guard’s capital investment plan by measuring the
percentage of projects stably funded year to year in the plan,
• ensuring acquisition program baseline alignment with the capital investment plan by
measuring the percentage of projects where the acquisition program baselines fit into the
capital investment plan, and
• establishing Coast Guard project priorities.
Acquisition officials responsible for implementing the Blueprint action items acknowledged
that successful implementation requires buy-in from leadership. Senior resource directorate
officials responsible for capital investment planning told us that the action items in the
Blueprint are “noble endeavors,” but that the directorates outside of the acquisition
directorate are not held responsible for accomplishing them. According to the Major Systems
Acquisition Manual
, the Component Acquisition Executive (Vice-Commandant), to whom
both the acquisition and resource directorates report, is responsible for establishing
acquisition processes to track the extent to which requisite resources and support are
provided to project managers.
In addition to the acquisition directorate’s recognition of the need to establish priorities to
address known upcoming resource constraints, in August 2010, the Coast Guard’s flag-level
Executive Oversight Council—chaired by the Assistant Commandant for Acquisition with
representatives from other directorates—tasked a team to recommend strategies to revise
acquisition program baselines to better align with annual budgets. This acknowledgment that
program baselines must be revised to fit fiscal constraints, however, is not reflected in the
Coast Guard’s most recent capital investment plan.... With the exception of fiscal year 2012,
the Coast Guard is planning for funding levels well above the expected funding level of $1.2
billion.
This outyear funding plan seems unrealistic, especially in light of the rapidly building fiscal
pressures facing our national government and DHS’s direction for future budget planning.
To illustrate, in fiscal year 2015, the Coast Guard plans to request funding for construction of
Congressional Research Service
20

Coast Guard Deepwater Acquisition Programs

three major Deepwater surface assets: NSC, OPC, and FRC, but the Coast Guard has never
requested funding for construction of three major Deepwater surface assets in the same year
before. In a recent testimony, the Commandant of the Coast Guard stated that the plan for
fiscal year 2015 reflects the Coast Guard’s actual need for funding in that year. If program
costs and schedules are tied to this funding plan and it is not executable, these programs will
likely have schedule and cost breaches. When a program has a breach, the program manager
must develop a remediation plan that explains the circumstances of the breach and propose
corrective action and, if required, revise the acquisition program baseline.20
The report also states:
To help the Coast Guard address the churn in the acquisition project budgeting process and
help ensure that projects receive and can plan to a more predictable funding stream, we
recommend that the Commandant of the Coast Guard take the following two actions:
• Implement GAO’s Cost Estimating and Assessment Guide’s best practices for cost
estimates and schedules as required by the Major Systems Acquisition Manual, with
particular attention to maintaining current cost estimates and ensuring contractor’s
schedules also meet these best practices.
• As acquisition program baselines are updated, adopt action items consistent with those
in the Blueprint related to managing projects within resource constraints as a Coast
Guard-wide goal, with input from all directorates. These action items should include
milestone dates as well as assignment of key responsibilities, tracking of specific
actions, and a mechanism to hold the appropriate directorates responsible for outcomes,
with periodic reporting to the Vice-Commandant.21
Fleet Mix Analysis
GAO Perspective
The July 2011 GAO report stated 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 concluded in December 2009, is termed fleet mix analysis phase 1.
Officials from the Coast Guard’s capabilities directorate comprised the majority of the
project team for the analysis, which also included contractor support to assist with the
analysis. As of May 2011, DHS had not yet released phase 1 to Congress. We received the
results of the analysis in December 2010.
To conduct the fleet mix analysis, the Coast Guard assessed asset capabilities and mission
demands in an unconstrained fiscal environment to identify a fleet mix—referred to as the

20 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, pp. 23-24, 26-27.
21 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, p. 50.
Congressional Research Service
21


Coast Guard Deepwater Acquisition Programs

“objective fleet mix”—that would meet long-term strategic goals. The objective fleet mix
resulted in a fleet that would double the quantity of assets in the program of record, the $24.2
billion baseline. For example, the objective fleet mix included 66 cutters beyond the program
of record. Given the significant increase in the number of assets needed for this objective
fleet mix, the Coast Guard developed, based on risk metrics, incremental fleet mixes to
bridge the objective fleet mix and the program of record. Table 5 shows the quantities of
assets for each incremental mix, according to the Coast Guard’s analysis.

While the analysis provided insight on the performance of fleets larger than the program of
record, the analysis was not cost-constrained. The Coast Guard estimated the total
acquisition costs associated with the objective fleet mix could be as much as $65 billion—
about $40 billion higher than the 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 due
to cost and do not plan to use it to provide recommendations on a baseline for fleet mix
decisions. Since we last reported, Coast Guard officials stated that phase 1 supports
continuing to pursue the program of record.
Because the first phase of the fleet mix analysis was not cost constrained, it does not address
our July 2010 recommendation that the Coast Guard present to Congress a comprehensive
review of the Deepwater Program that clarifies the overall cost, schedule, quantities, and mix
of assets required to meet mission needs, including trade-offs in light of fiscal constraints
given that the currently approved Deepwater Program is no longer feasible. The Coast Guard
has undertaken what it refers to as a cost-constrained analysis, termed fleet mix analysis
phase 2; however, according to the capabilities directorate officials responsible for the
analysis, the study primarily assesses the rate at which the Coast Guard could acquire the
Deepwater program of record within a high ($1.7 billion) and low ($1.2 billion) bound of
annual acquisition cost constraints. These 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. Alternative fleet mixes are being
assessed, but only to purchase additional assets after the program of record is acquired, if
funding remains within the yearly cost constraints. The Coast Guard expects to complete its
phase 2 analysis in the summer of 2011. As we reported in April 2011, because 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.
Congressional Research Service
22

Coast Guard Deepwater Acquisition Programs

Further, despite Coast Guard statements that phase 2 was cost constrained, there is no
documented methodology for establishing the constraints that were used in the analysis, and
we found confusion about their genesis. The acquisition directorate, according to the study’s
charter, was to provide annual funding amounts, but Coast Guard officials responsible for
phase 2 told us that DHS’s Program Analysis & Evaluation office provided the lower bound
and the acquisitions directorate provided the upper bound. An official from the Program
Analysis & Evaluation office stated that DHS informally suggested using historical funding
levels of $1.2 billion to establish an average annual rate but was unaware that the Coast
Guard was using this number as the lower bound for the study. A senior Coast Guard
acquisition directorate official stated that the directorate agreed with using the $1.2 billion as
the lower constraint and had verbally suggested the upper bound of $1.7 billion. Based on
our review of historical budget data, $1.7 billion for Deepwater is more than Congress has
appropriated for the entire Coast Guard’s acquisition portfolio since 2007 and as such, is not
likely a realistic constraint. Coast Guard officials stated that the upper bound was not
necessarily a realistic level, rather an absolute upper bound to establish the range of possible
acquisition levels. In addition, the Coast Guard does not have documentation of the cost
constraints; according to a Coast Guard official, these cost constraints were verbally
communicated to the contractor.
In addition to the Coast Guard’s analysis, DHS’s Program Analysis & Evaluation office is
conducting a study, at the request of the Office of Management and Budget, to gain insight
into alternatives to the Deepwater surface program of record. Office of Management and
Budget officials told us that they recommended DHS conduct this study because DHS was in
a position to provide an objective evaluation of the program and could ensure that the
analysis of the trade-offs of requirements in a cost constrained environment would align with
the Department’s investment priorities. A DHS official involved in the study stated that the
analysis will examine performance trade-offs between the NSC, OPC, a modernized 270’
cutter, and the Navy’s Littoral Combat Ship.44 The official also explained that the analysis is
based on a current estimate of surface asset acquisition costs, which serves as a cap to guide
surface asset trade-offs. This cutter study is expected to be completed in the summer of 2011.
This official also stated that the cutter study is not expected to contain recommendations, but
Office of Management and Budget officials told us they plan to use the results to inform
decisions about the fiscal year 2013 budget. A DHS official responsible for this study stated
that this analysis and the Coast Guard’s fleet mix analysis will provide multiple data points
for considering potential changes to the program of record, including reductions in the
quantities planned for some of the surface assets. However, as noted above, Coast Guard
capabilities directorate officials have no intention of examining fleet mixes smaller than the
current, planned Deepwater program.22
The report also states:
To provide Congress with information needed to make decisions on budgets and the number
of assets required to meet mission needs within realistic fiscal constraints, we recommend
that the Secretary of Homeland Security develop a working group that includes participation
from DHS and the Coast Guard’s capabilities, resources, and acquisition directorates to
review the results of multiple studies—including fleet mix analysis phases 1 and 2 and
DHS’s cutter study—to identify cost, capability, and quantity trade-offs that would produce a
program that fits within expected budget parameters. DHS should provide a report to

22 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, pp. 45-48.
Congressional Research Service
23

Coast Guard Deepwater Acquisition Programs

Congress on the findings of the study group’s review in advance of the fiscal year 2013
budget submission.23
National Security Cutter (NSC)
Coast Guard Perspective
The Coast Guard testified in April 2011 that:
A critical element of our recapitalized fleet, the 418-foot Legend-class National Security
Cutter (NSC) is the largest and most technically advanced class of cutter in the Coast Guard.
The NSCs are replacing the capability of the Coast Guard’s aging and obsolete High
Endurance Cutters (WHECs) to execute today’s homeland security and maritime law
enforcement missions with agility and endurance.
BERTHOLF (NSC #1) attained “Ready for Operations” status in May 2010. During a 90-day
patrol that ended in November 2010, her crew interdicted approximately 12,400 kilograms of
cocaine worth nearly $400 million, detained nine persons suspected of illegal activity and
entered 27 associated smugglers into national databases. The BERTHOLF’s Sensitive
Compartmented Information Facility (SCIF) is proving integral to operations, providing real-
time tactical intelligence and classified information-sharing with our operational partners.
WAESCHE (NSC #2) was commissioned in May 7, 2010, with final acceptance in
November 2010. STRATTON (NSC #3) is nearly 75 percent complete and was christened
on July 23, 2010 by First Lady Michelle Obama in Pascagoula, MS. Delivery is scheduled
for later this year.
After nearly a year of negotiations, a fixed-price incentive contract for the production and
delivery of NSC 4 was awarded to Northrop Grumman Shipbuilding in November 2010,
allowing future costs for the NSC program to be much more predictable. Valued at $480
million, this was the first NSC production contract awarded directly to the shipbuilder and is
significantly lower than their original proposal. In January 2011, we awarded a firm fixed
price contract option to procure Long Lead Time Material for the fifth NSC. Negotiations for
the production and delivery option for NSC 5 are ongoing, with a contract to be awarded as
soon as full funding for this ship is received.24
GAO Perspective25
The July 2011 GAO report states

23 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, p. 49.
24 [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. 6.
25 Previous 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.
Congressional Research Service
24

Coast Guard Deepwater Acquisition Programs

During acceptance testing for the second NSC in October 2010, Coast Guard officials
identified five key issues, also identified on NSC 1 in an operational assessment completed
in September 2010:
• reliability and maintenance problems with the crane on the back of the cutter,
• an unsafe ammunition hoist for the main gun,
• instability with the side davit for small boat launch,
• insufficient power to a key system used for docking the cutter, and
• an impractical requirement for using the side rescue door in difficult sea conditions.
Senior acquisition directorate officials stated that there are currently workarounds for some
of these issues and the cutters do meet contractual requirements. Program officials added that
funding and design changes have yet to be finalized for these five issues and in some cases,
correcting these issues will likely require costly retrofits.
In January 2011, Coast Guard officials canceled the Aircraft Ship Integrated Secure and
Traverse (ASIST)—a system intended to automate the procedure to land, lock down, and
move the HH-65 helicopter from the deck to the hangar on the NSC—after significant
deficiencies were identified during testing conducted by the U.S. Naval Air Warfare Center.
Examples of deficiencies included increased pilot workload during landing, excessive stress
on the helicopter components as the aircraft moved across the deck into the hangar, and
failure to reduce the number of people needed to secure the helicopter as the system was
designed to do. In addition, testing officials determined that the system could cause injury to
the aircrew because the landing operator could not communicate with the pilot in a timely
manner, and the system demonstrated unpredictable failures to locate the aircraft while it was
hovering over the NSC’s flight deck. The ASIST system was identified by ICGS as a
solution to a Coast Guard requirement. Several Coast Guard officials told us that the Coast
Guard was aware of potential problems with ASIST as early as 2007, but the Coast Guard
moved forward with it until testing was complete. The Coast Guard invested approximately
$27 million to install the system on three NSCs, purchase long lead materials for the fourth
NSC, and modify one HH-65 helicopter for the test event. The Coast Guard is now exploring
solutions in use by the Navy to replace the system. For the two operational NSCs, officials
stated that operators secure the HH-65 using legacy cutter technology.26
Offshore Patrol Cutter (OPC)
Coast Guard Perspective
The Coast Guard testified in April 2011 that:
The Offshore Patrol Cutter (OPC) will replace the capability of our current fleet of 29 aging
Medium Endurance Cutters (WMECs). We are 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

26 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, pp. 39-40.
Congressional Research Service
25

Coast Guard Deepwater Acquisition Programs

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.27
GAO Perspective
The July 2011 GAO report stated that:
Important decisions remain to be made regarding the OPC, the largest cost driver in the
Deepwater program. DHS approved the OPC’s requirements document in October 2010
despite unresolved concerns about three key performance parameters—seakeeping, speed,
and range—that shape a substantial portion of the cutter’s design. For example, DHS
questioned the need for the cutter to conduct full operations during difficult sea conditions,
which impact the weight of the cutter and ultimately its cost. The Coast Guard has stated that
limiting the ability to conduct operations during difficult sea conditions would preclude
operations in key mission areas. While it approved the OPC requirements document, DHS at
the same time commissioned a study to further examine these three key performance
parameters. According to Coast Guard officials, the study conducted by the Center for Naval
Analysis found that the three key performance parameters were reasonable, accurate, and
adequately documented. By approving the operational requirements document before these
factors were resolved, DHS did not ensure that the cutter was affordable, feasible, and
unambiguous and required no additional trade-off decisions, as outlined in the Major
Systems Acquisition Manual. Our previous work on DHS acquisition management found
that the department’s inability to properly execute its oversight function has led to cost
overruns, schedule delays, and assets that do not meet requirements.
In addition to the three performance parameters discussed above, other decisions, with
substantial cost and capability implications for the OPC, remain unresolved. For example, it
is not known which C4ISR system will be used for the OPC, whether the cutter will have a
facility for processing classified information, and whether the cutter will have air search
capabilities. The Coast Guard’s requirements document addressed these capabilities but
allowed them to be removed if design, cost, or technological limitations warrant. According
to Coast Guard officials, remaining decisions must be made before the acquisition program
baseline is approved as part of the program’s combined acquisition decision event 2A/B and
the request for proposals is issued, both of which are planned for the fall of 2011. In addition,
following the approval of the requirements document, the Coast Guard formed a ship design
team tasked with considering the affordability and feasibility of the OPC.
This team has met with Assistant Commandants from across the Coast Guard on several
occasions to discuss issues that impact the affordability and feasibility of the cutter,
including, among others, the size of the living quarters, the aviation fuel storage capacity,
and the range of the cutter. The Coast Guard has stated that affordability is a very important
aspect of the OPC project and that the request for proposal process will inform the project’s
efforts to balance affordability and capability.28
The report also states:

27 [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.
28 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, pp. 36-37.
Congressional Research Service
26

Coast Guard Deepwater Acquisition Programs

Because DHS approved the OPC operational requirements document although significant
uncertainties about the program’s feasibility, capability, and affordability remained, we
recommend that the Secretary of DHS take the following two actions:
• ensure that all subsequent Coast Guard decisions regarding feasibility, capability, and
affordability of the OPC’s design are thoroughly reviewed by DHS in advance of the
program’s next acquisition decision event (ADE 2A/B); and
• determine whether a revised operational requirements document is needed before the
program’s next acquisition decision event (ADE 2A/B).29
Fast Response Cutter (FRC)
Coast Guard Perspective
The 154-foot Sentinel-class Fast Response Cutter (FRC) project will provide critically
needed patrol boats, helping to close an existing patrol boat operational gap and replace the
capabilities of the aging 110-foot Island-class patrol boat fleet.
The FRC project is using a proven, in-service parent craft design modified to meet Coast
Guard specifications and mission requirements, and that meets American Bureau of Shipping
design, build, and class standards. This allows the project to minimize cost and schedule risk
as well as deliver these cutters to the fleet quickly, where they are needed to perform
operations. Delivery of the first FRC is scheduled for the fall of 2011. 30
GAO Perspective
The July 2011 GAO report states:
The FRC program is planning to use the first cutter for initial operational test and evaluation.
The original delivery date for the lead cutter was scheduled for January 2011, but that date
has slipped to December 2011. Officials told us that the delay is due to a last minute design
change, directed by the Coast Guard’s engineering and logistics technical authority, to
enhance the structure of the cutter. An early operational assessment that reviewed design
plans for the FRC was completed in August 2009 and identified 74 design issues, 69 of
which were corrected during the assessment. Officials explained that they are confident in
the reliability of the FRC design and do not expect any major operational issues to arise
during initial operational testing and evaluation. In addition, program officials explained that
the Coast Guard has used a lead vessel for initial operational test and evaluation in the past
and is now also planning to conduct an operational assessment on the lead FRC to reduce
risk. Officials from the Navy’s Commander Operational Test and Evaluation Force,
however, stated that there are risks associated with using the first cutter for initial operational
test and evaluation; operators are not as familiar with the system, the logistics enterprise may

29 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, p. 50.
30 [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.
Congressional Research Service
27

Coast Guard Deepwater Acquisition Programs

not be fully operational to support the asset, and enough time may not have passed to collect
sufficient data on what operational issues need to be addressed prior to testing.31
June 2011 Press Report
A June 27, 2011, press report stated:
Structural modifications to the U.S. Coast Guard’s new Fast Response Cutters (FRC) have
pushed back delivery of the first units, but the service does not expect acquisition costs to
rise.
“Final cost and schedule impact for the cutters currently under construction are being
finalized,” the Coast Guard said in a June 22 statement to Defense News. “The total
acquisition cost of the FRC is not expected to increase. Funds set aside specifically for these
kinds of purposes will be used to pay for the structural solution.” The structural issues are
not the result of construction problems, but rather are due to a reassessment of the stresses
expected to be exerted on the cutters at certain speeds and sea states, the statement said.
Computer modeling performed by the Norwegian marine classification and analysis firm Det
Norsk Veritas identified specific locations on the main and 01 decks that could be
susceptible to stress. In January, “the Coast Guard decided to modify the prescribed design
safety margins of the FRC in these specific areas to achieve the prescribed 20-year service
life of the hull,” according to the service’s statement.
The changes were “not a result of a weakness in the design,” said Brian Olexy, a program
analyst with the acquisition directorate.
“The Coast Guard wanted to achieve more safety margin,” Olexy said. “The rest of the ship
met or exceeded the safety margins.” The fixes involve adding girders and bars to areas
around the main deck and the 01 level—the first superstructure deck above the main deck—
of the first six ships of the class, which are in various stages of completion. The changes will
be built in from the beginning, starting with the seventh ship.
The Bernard C. Webber, first of the FRCs, was launched by crane April 21 at Bollinger
Marine in Lockport, La. Delivery of the Webber was scheduled under the original contract
for April 2011, but the service has yet to establish a revised delivery date....
The FRCs are modified versions of the Damen 4708 design, a Dutch-built patrol boat that is
in service with several foreign coast guards. The U.S. version features several changes from
the basic Damen design, including the addition of a stern ramp to launch and recover a small
boat, and other internal changes.32

31 Government Accountability Office, Coast Guard[:] Action Needed As Approved Deepwater Program Remains
Unachievable
, GAO-11-743, July 2011, pp. 41-42.
32 Christopher P. Cavas, “Structural Changes Delay Cutter’s Completion,” Defense Daily, June 27, 2011: 19.
Congressional Research Service
28

Coast Guard Deepwater Acquisition Programs

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;
• 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
Summary of Appropriations Action on FY2012 Funding Requests
Table 4 summarizes appropriations action on the FY2012 acquisition funding requests for
Deepwater programs.
Congressional Research Service
29

Coast Guard Deepwater Acquisition Programs

Table 4. Appropriations Action on FY2012 Acquisition Funding Requests
(in millions of dollars, rounded to nearest tenth)
House
Senate
Appropriations Appropriations
Program Requesta
Committee
Committee Conference
Maritime Patrol Aircraft (MPA)
129.5
129.5
104.5

HH-60 Conversion Projects
74.4b 74.4b 74.4
HH-65 Conversion/Sustainment Projects
24.0
61.0
24.0

HC-130H Conversion/Sustainment Projects
62.0
62.0
62.0

Cutter unmanned aircraft systems (UAS)
0
2.0
0

Subtotal aircraft
289.9
328.9
264.9

National Security Cutter (NSC)
77.0
0
77.0

Offshore Patrol Cutter (OPC)
25.0
25.0
25.0

Fast Response Cutter (FRC)
358.0
240.0
358.0

Deepwater smal boats
5.0
5.0
5.0

Medium-endurance cutter sustainment
47.0
47.0
47.0

Subtotal surface ships
512.0
317.0
512.0

Government program management
35.0
30.0
30.0

Systems engineering and integration
17.1
17.1
17.1

C4ISR 34.5
44.5
34.5

Deepwater logistics
87.0c Not
cleard Not
cleard

Subtotal other
173.6
Not clear
Not clear

TOTAL
975.5
Not clear
Not clear

Source: Table prepared by CRS based on Coast Guard FY2011 and FY2012 budget submissions, H.Rept. 112-91
on H.R. 2017, and S.Rept. 112-74 on H.R. 2017. 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
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. Includes $56.1 million for HH-60 conversion projects and $18.3 million for a project called CGNR 6017 to
convert a retired Navy SH-60F helicopter into a Coast Guard MH-60T helicopter, so as to replace a Coast
Guard MH-60T lost in a crash in 2010. In H.R. 2017 as reported by the Senate Appropriations Committee,
the $18.3 million is provided in Section 565 of bill. Regarding this section, see S.Rept. 112-74 states that the
$18.3 million is provided “to replace a rotary wing airframe. The Coast Guard has lost four helicopters to
accidents over the past few years. This provision is designated as an emergency and is offset with
unobligated emergency balances.” (Page 162)
Congressional Research Service
30

Coast Guard Deepwater Acquisition Programs

c. 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).
d. H.Rept. 112-91 and S.Rept. 112-74 do not present a funding figure for this line item; see footnote c above.
FY2012 DHS Appropriations Bill (H.R. 2017)
House
Bill Language
The text of H.R. 2017 as reported by the House Appropriations Committee states in part that
funds are provided for the Coast Guard’s Operating Expenses (OE) account,
Provided further, That of the funds provided under this heading, $75,000,000 shall be
withheld from obligation for Coast Guard Headquarters Directorates until (1) a revised
future-years capital investment plan for fiscal years 2012 through 2016, as specified under
the heading `Coast Guard, Acquisition, Construction, and Improvements’ of this Act, that is
reviewed by the Comptroller General of the United States; (2) the fiscal year 2012 second
quarter acquisition report; and (3) the polar operations high latitude study are submitted to
the Committees on Appropriations of the Senate and the House of Representatives:…
The bill also states in part that funds are provided for the Coast Guard’s Acquisition,
Construction, and Improvements (AC&I) account,
Provided, That the Secretary of Homeland Security shall submit to the Committees on
Appropriations of the Senate and the House of Representatives, at the time that the
President’s budget is submitted each year under section 1105(a) of title 31, United States
Code, a future-years capital investment plan for the Coast Guard that identifies for each
requested capital asset—
(1) the proposed appropriations included in that budget;
(2) the total estimated cost of completion, including and clearly delineating the costs of
associated major acquisition systems infrastructure and transition to operations;
(3) projected funding levels for each fiscal year for the next five fiscal years or until
acquisition program baseline or project completion, whichever is earlier;
(4) an estimated completion date at the projected funding levels; and
(5) a current acquisition program baseline for each capital asset, as applicable, that—
(A) includes the total acquisition cost of each asset, subdivided by fiscal year and including a
detailed description of the purpose of the proposed funding levels for each fiscal year,
including for each fiscal year funds requested for design, pre-acquisition activities,
production, structural modifications, missionization, post-delivery, and transition to
operations costs;
Congressional Research Service
31

Coast Guard Deepwater Acquisition Programs

(B) includes a detailed project schedule through completion, subdivided by fiscal year, that
details—
(i) quantities planned for each fiscal year; and
(ii) major acquisition and project events, including development of operational requirements,
contracting actions, design reviews, production, delivery, test and evaluation, and transition
to operations, including necessary training, shore infrastructure, and logistics;
(C) notes and explains any deviations in cost, performance parameters, schedule, or
estimated date of completion from the original acquisition program baseline and the most
recent baseline approved by the Department of Homeland Security’s Acquisition Review
Board, if applicable;
(D) aligns the acquisition of each asset to mission requirements by defining existing
capabilities of comparable legacy assets, identifying known capability gaps between such
existing capabilities and stated mission requirements, and explaining how the acquisition of
each asset will address such known capability gaps;
(E) defines life-cycle costs for each asset and the date of the estimate on which such costs are
based, including all associated costs of major acquisitions systems infrastructure and
transition to operations, delineated by purpose and fiscal year for the projected service life of
the asset;
(F) includes the earned value management system summary schedule performance index and
cost performance index for each asset, if applicable; and
(G) includes a phase-out and decommissioning schedule delineated by fiscal year for each
existing legacy asset that each asset is intended to replace or recapitalize:
Provided further, That the Secretary shall ensure that amounts specified in the future-years
capital investment plan are consistent, to the maximum extent practicable, with proposed
appropriations necessary to support the programs, projects, and activities of the Coast Guard
in the President’s budget as submitted under section 1105(a) of title 31, United States Code,
for that fiscal year: Provided further, That any inconsistencies between the capital
investment plan and proposed appropriations shall be identified and justified:…
Section 517 of the bill states:
Sec. 517. Any funds appropriated to `Coast Guard, Acquisition, Construction, and
Improvements’ for fiscal years 2002, 2003, 2004, 2005, and 2006 for the 110-123 foot patrol
boat conversion that are recovered, collected, or otherwise received as the result of
negotiation, mediation, or litigation, shall be available until expended for the Fast Response
Cutter program.
Report Language
The House Appropriations Committee, in its report (H.Rept. 112-91 of May 26, 2011) on H.R.
2017, states:
Of the [operating expenses] funds recommended for the Coast Guard’s Headquarters
Directorates, $75,000,000 is withheld from obligation until the Commandant of the Coast
Guard submits the following to the Committees on Appropriations of the Senate and House
of Representatives: (1) a revised future-years Capital Investment Plan for fiscal years 2012
Congressional Research Service
32

Coast Guard Deepwater Acquisition Programs

through 2016 that has been reviewed by GAO, as specified under the “Coast Guard
Acquisition, Construction, and Improvements” heading in this Act; (2) the fiscal year 2012
second quarter quarterly acquisition report; and (3) the polar operations high latitude
study….
MISSION REQUIREMENTS
The Coast Guard has not formally updated its mission requirements to the Committee since
the 2004 Mission Needs Study. The Coast Guard informed the Committee that it uses an
annual Standard Operational Planning Process (SOPP) to update current requirements;
however, a SOPP finding has never been submitted to the Committee nor has a change in an
acquisition program baseline or an operational requirement been justified before the
Committee as a result of a SOPP finding. Furthermore, the Coast Guard has stated that it has
been conducting a Fleet Mix Analysis since 2004 and the results of this analysis will inform
the fiscal year 2013 budget submission and fiscal years 2013 through 2017 Capital
Investment Plan. The Committee finds this protracted delay in updating mission
requirements for the Coast Guard’s post-Deepwater era to be a major impediment to
effective budget planning. The Coast Guard is directed to submit the most current Fleet Mix
Analysis to the Committees on Appropriations of the Senate and House of Representatives
and to brief the Committees on its process for formulating updated mission requirements no
later than 30 days after the date of enactment of this Act. (Pages 72-73)
The report also states:
The Committee removes the annual requirement for a Revised Deepwater Implementation
Plan due to the dissolution of the Deepwater initiative and directorate. The Committee
modifies and strengthens the requirements for the annual capital investment plan (CIP) and
requires the submittal of the CIP, as specified in the bill, in conjunction with the annual
budget submission….
QUARTERLY REPORTS ON ACQUISITION PROJECTS AND MISSION
EMPHASIS
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. The Coast Guard shall continue submitting these reports in
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, current capabilities, and stated mission
requirements, and how the acquisition of the specific asset closes the gap. The information
shall also 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.
CAPITAL INVESTMENT PLAN
The Committee directs the Commandant of the Coast Guard to revise and resubmit the fiscal
years 2012–2016 Capital Investment Plan as specified in the bill. The CIP submitted with the
fiscal year 2012 budget request fails to align capital investments to mission requirements;
does not include current acquisition program baselines for each capital asset; does not
include the associated infrastructure costs essential to the operation of each capital asset; and
contains no background information or justification regarding the future-years funding
assumptions. The Coast Guard is further directed to submit a CIP in accordance with the
specified requirements listed in the bill in conjunction with the budget submission for fiscal
year 2013 and thereafter. The Committee believes the CIP serves as the primary means of
Congressional Research Service
33

Coast Guard Deepwater Acquisition Programs

oversight for tracking the Coast Guard’s recapitalization efforts and therefore must be
substantially improved.
REVISED BUDGET STRUCTURE
The Committee has revised the Coast Guard’s budget structure for the Acquisition,
Construction, and Improvements account due to the dissolution of the Deepwater initiative
and directorate. The Committee appreciates the Coast Guard’s cooperation in aligning
previously appropriated funds with this new PPA structure and directs the Coast Guard to
submit both its fiscal year 2013 budget submission and revised and future CIPs in
accordance with this new budgetary display. The Committee’s standing reprogramming and
transfer guidelines contained in section 503 of this Act shall be applied to these new PPAs.
NATIONAL SECURITY CUTTER
The Committee denies the request for $77,000,000 for the closeout costs of the fifth National
Security Cutter (NSC) because these funds were provided in fiscal year 2011 along with
funding for the full production costs of the fifth NSC. The Coast Guard has not submitted a
budget amendment proposing to re-purpose these requested funds towards the pre-
acquisition and long-long material costs of the sixth NSC; has currently budgeted for the full
cost of the sixth NSC in fiscal year 2013, as per the capital investment plan submitted with
the fiscal year 2012 budget submission; and has not informed the Committee on whether the
Office of Management and Budget (OMB) would grant an exception from the full funding
policy contained in OMB Circular A–11 and allow for the application of incremental funding
(as has been done for the previous five NSCs).
Due to OMB’s application of this Circular A–11 full funding policy upon the acquisition of
NSCs five through eight, the entire NSC acquisition program baseline will be extended by
several years and the unit cost for NSCs six through eight will increase by an estimated
$45,000,000 to $60,000,000 per cutter (an estimated increase of six to eight percent to total
acquisition cost per cutter). The Committee believes the application of a policy that results in
higher costs and in the undue delay of critical operational capabilities to be illogical and
counterproductive to our Nation’s security needs as well as current budgetary realities.
Furthermore, delays in the acquisition of the NSC will exacerbate the already escalating
operating and maintenance costs of the Coast Guard’s aging High Endurance Cutter fleet.
Due to these undisputed adverse impacts, the Committee believes the Administration’s
management of the NSC acquisition program baseline to be failing in its responsibility to
deliver a cost-effective capability for maritime safety and security. The Committee directs
the Department’s Office of the Chief Financial Officer and the Coast Guard to brief the
Committee within 30 days of the date of enactment of this Act on a revised NSC acquisition
strategy that addresses all known adverse impacts resulting from the application of OMB’s
full funding requirements for the NSC pursuant to OMB Circular A–11.
FAST RESPONSE CUTTER
The Committee recommends $240,000,000 for the acquisition of four Fast Response Cutters
(FRCs), $118,000,000 below the amount requested and the same as the amount provided in
fiscal year 2011. Funding for two, additional FRCs is denied due to concerns regarding
structural deficiencies found during the production of the first FRC and the resulting delay in
delivery of the first FRC due to the required structural modifications. The Committee is also
very concerned that the Coast Guard is applying funds reserved for FRC antecedent
liabilities to address the costs of these structural modifications and that this decision will
likely result in future, unfunded liabilities. Because the Coast Guard has yet to conduct its
operational test and evaluation (OT&E) of the first FRC, the Committee believes it is
prudent to examine the empirical OT&E results before accelerating the acquisition of FRCs
Congressional Research Service
34

Coast Guard Deepwater Acquisition Programs

from four to six per year. The Committee also denies the request for the re-procurement
package and data rights (RDLP) at this time because, according to the Coast Guard’s fiscal
year 2012 budget submission, the RDLP option of the contract is not scheduled to be
executed until fiscal year 2013 and the current contract for FRC production does not expire
until the end of fiscal year 2014. The Committee remains committed to the FRC acquisition,
and believes replacement of the Coast Guard’s aging, 110-foot Island Class patrol boat fleet
to be among the Department’s highest acquisition priorities. The Committee will re-consider
the request for funding to support an increase in the annual production rate of FRCs and the
purchase of the RDLP once outstanding issues have been fully resolved….
MAJOR ACQUISITION SYSTEMS INFRASTRUCTURE
The Committee recommends $66,000,000 for major acquisition systems infrastructure,
$28,500,000 below the amount requested and $10,000,000 above the amount provided in
fiscal year 2011. The Committee denies the request for two of the FRC port upgrades due to
an insufficient budget justification; projected delays in FRC deliveries; the protracted delay
in the Coast Guard’s delivery of a revised FRC master schedule to the Committee; and due to
serious concerns regarding the significant cost per port upgrade that amount to nearly a 24
percent increase in the cost of each FRC. As previously stated and directed, the Coast Guard
shall include the associated costs of major acquisition systems infrastructure with each
capital asset, as applicable, in the CIP. Furthermore, the Coast Guard is directed to brief the
Committee no later than 45 days after the date of enactment of this Act on the cost control
and estimation tools it is employing to contain the costs of infrastructure modifications
needed to accommodate re-capitalized and new assets.
GOVERNMENT PROGRAM MANAGEMENT
The Committee recommends $30,000,000 for government program management, $5,000,000
below the amount requested and $15,000,000 below the amount provided in fiscal year 2011.
The Committee recommends this reduction due to the complete lack of detail provided by
the Coast Guard in their fiscal year 2012 Congressional budget justification for this function.
While Committee strongly supports the activities carried out within this function, the lack of
detail provided in the budget request is inadequate to warrant a recommendation for funding
the amount requested. The Coast Guard is directed to provide a detailed subdivision of
funding requested for government program management in its justification materials
accompanying the fiscal year 2013 budget submission.
COMMUNICATION UPGRADES OF LEGACY CUTTERS
The Committee recommends an additional $10,000,000 above the amount requested to
support the costs of installation of communications systems on legacy cutters. These
enhancements will improve surveillance, secure networking, and operational coordination
among Coast Guard and other blue force assets. Furthermore, this increase in funding is
consistent with recent DHS OIG recommendations to upgrade current maritime satellite
communication equipment to provide high-speed transmission capabilities to enable cutters
that interdict migrants to collect and screen certain biometric data.
HH–65 HELICOPTER RESET
The Committee recommends an additional $37,000,000 above the amount requested for the
acquisition of two, replacement HH–65 helicopters that were lost in the line of duty over the
past two years. The Coast Guard is directed to brief the Committee within 60 days of the date
of enactment of this Act on its reset plans for irrecoverable assets lost in the line of duty.
CUTTER-BASED UNMANNED AIRCRAFT SYSTEMS
Congressional Research Service
35

Coast Guard Deepwater Acquisition Programs

The Committee recommends an additional $2,000,000 above the amount requested for the
pre-acquisition activities for cutter-based unmanned aircraft systems (UAS). The Committee
supports the use of cutter-based UAS to maximize the surveillance and interdiction
capabilities of the Coast Guard’s cutters, but is concerned that the fiscal years 2012 through
2016 CIP submitted with the fiscal year 2012 budget request contains no funding for UAS.
In the justification materials accompanying the fiscal year 2013 budget submission, the
Coast Guard shall clearly outline its plans for further investment in the acquisition and
deployment of a cutter-based UAS, to include estimated acquisition costs and delivery
schedule. The Committee advises that any such plan should align with the Coast Guard’s
CIP and should clearly identify the costs of acquisition, cutter integration, and missionization
per asset, as well as a delivery and activation schedule of UAS capability per cutter. The
Coast Guard shall also include with its fiscal year 2013 budget submission a report to the
Committee on the impact of the absence of deployed UAS upon NSC capability and mission
performance.
LAND-BASED MARITIME UNMANNED AIRCRAFT SYSTEMS
The Committee commends CBP and the Coast Guard for its collaboration on the
development and deployment of a land-based, maritime unmanned aircraft system. However,
the Committee notes with concern the lack of progress on this interagency coordination or
subsequent acquisition of additional land-based, maritime UAS. In fact, the Coast Guard’s
fiscal years 2012 through 2016 Capital Investment Plan submitted with the fiscal year 2012
budget request includes no funding for land-based UAS. The Committee believes there is
considerable potential in the use of persistent surveillance tools in the maritime approaches
to the continental United States, namely in the Eastern Pacific and Caribbean basin. In the
justification materials accompanying the fiscal year 2013 budget submission, the Coast
Guard shall clearly outline its plans for further investment in the acquisition and deployment
of a land-based UAS in collaboration with CBP, to include estimated acquisition costs and
delivery schedule. The Committee advises that any such plan should align with the Coast
Guard’s CIP and should clearly identify the costs of acquisition, integration, and
missionization per asset, as well as a delivery and activation schedule of UAS capability.
LONG-RANGE SURVEILLANCE AIRCRAFT
The Committee has renamed and combined the PPAs for HC–130J introduction and HC–
130H refurbishment in order to allow the Coast Guard to leverage its limited funding for
these activities for the most cost-effective budgeting for Long Range Surveillance (LRS)
Aircraft. The Coast Guard is directed to brief the Committee no later than 45 days after the
date of enactment of this Act on its evaluation of options presented in the recently completed
Naval Air Systems Command business case analysis of the optimal mix of refurbished HC–
130Hs and new HC–130Js. (Pages 79-84)
Senate
Bill Language
The text of H.R. 2017 as reported by the Senate Appropriations Committee states in part that
funds are provided for the Coast Guard’s Operating Expenses (OE) account,
Provided further, That of the funds provided under this heading, $75,000,000 shall be
withheld from obligation for Headquarters Directorates until: (1) the fiscal year 2012 second
quarter acquisition report; and (2) the future-years capital investment plan for fiscal years
2013-2017, as specified under the heading Coast Guard, `Acquisition, Construction, and
Congressional Research Service
36

Coast Guard Deepwater Acquisition Programs

Improvements’ of this Act, are received by the Committees on Appropriations of the Senate
and the House of Representatives:…
The bill also states in part that funds are provided for the Coast Guard’s Acquisition,
Construction, and Improvements (AC&I) account,
Provided, That the funds provided by this Act shall be immediately available and allotted
to contract for long lead time materials, components, and designs for the sixth National
Security Cutter notwithstanding the availability of funds for production costs or post-
production costs: Provided further, That the Secretary of Homeland Security shall submit to
the Committees on Appropriations of the Senate and the House of Representatives, at the
time that the President’s budget is submitted each year under section 1105(a) of title 31,
United States Code, a future-years capital investment plan for the Coast Guard that identifies
for each requested capital asset—
(1) the proposed appropriations included in that budget;
(2) the total estimated cost of completion, including and clearly delineating the costs of
associated major acquisition systems infrastructure and transition to operations;
(3) projected funding levels for each fiscal year for the next 5 fiscal years or until acquisition
program baseline or project completion, whichever is earlier;
(4) an estimated completion date at the projected funding levels; and
(5) a current acquisition program baseline for each capital asset, as applicable, that—
(A) includes the total acquisition cost of each asset, subdivided by fiscal year and including a
detailed description of the purpose of the proposed funding levels for each fiscal year,
including for each fiscal year funds requested for design, pre-acquisition activities,
production, structural modifications, missionization, post-delivery, and transition to
operations costs;
(B) includes a detailed project schedule through completion, subdivided by fiscal year, that
details—
(i) quantities planned for each fiscal year; and
(ii) major acquisition and project events, including development of operational requirements,
contracting actions, design reviews, production, delivery, test and evaluation, and transition
to operations, including necessary training, shore infrastructure, and logistics;
(C) notes and explains any deviations in cost, performance parameters, schedule, or
estimated date of completion from the original acquisition program baseline and the most
recent baseline approved by the Department of Homeland Security’s Acquisition Review
Board, if applicable;
(D) aligns the acquisition of each asset to mission requirements by defining existing
capabilities of comparable legacy assets, identifying known capability gaps between such
existing capabilities and stated mission requirements, and explaining how the acquisition of
each asset will address such known capability gaps;
(E) defines life-cycle costs for each asset and the date of the estimate on which such costs are
based, including all associated costs of major acquisitions systems infrastructure and
Congressional Research Service
37

Coast Guard Deepwater Acquisition Programs

transition to operations, delineated by purpose and fiscal year for the projected service life of
the asset;
(F) includes the earned value management system summary schedule performance index and
cost performance index for each asset, if applicable; and
(G) includes a phase-out and decommissioning schedule delineated by fiscal year for each
existing legacy asset that each asset is intended to replace or recapitalize:
Provided further, That the Secretary of Homeland Security shall ensure that amounts
specified in the future-years capital investment plan are consistent, to the maximum extent
practicable, with proposed appropriations necessary to support the programs, projects, and
activities of the Coast Guard in the President’s budget as submitted under section 1105(a) of
title 31, United States Code, for that fiscal year: Provided further, That any inconsistencies
between the capital investment plan and proposed appropriations shall be identified and
justified:…
Section 517 of the bill states:
Sec. 517. Any funds appropriated to Coast Guard `Acquisition, Construction, and
Improvements’ for fiscal years 2002, 2003, 2004, 2005, and 2006 for the 110-123 foot patrol
boat conversion that are recovered, collected, or otherwise received as the result of
negotiation, mediation, or litigation, shall be available until expended for the Fast Response
Cutter program.
Section 565 of the bill states:
Sec. 565. (a) For an additional amount for Coast Guard `Acquisition, Construction, and
Improvements’, $18,300,000, to remain available until September 30, 2014, for aircraft
replacement.
(b) The following amounts are rescinded:
(1) $7,300,000 from unobligated balances made available for Coast Guard `Acquisition,
Construction, and Improvements’ in chapter 5 of title I of division B of P.L. 110-329.
(2) $7,000,000 from unobligated balances made available for `United States Citizenship and
Immigration Services’ in chapter 6 of title I of P.L. 111-212.
(3) $4,000,000 from unobligated balances made available for Transportation Security
Administration `Aviation Security’ in chapter 5 of title III of P.L. 110-28.
(c) The amount made available in subsection (a) is designated by Congress as being for an
emergency requirement pursuant to section 251(b)(2)(A)(i) of the Balanced Budget and
Emergency Deficit Control Act of 1985 (P.L. 99-177), as amended.
Report Language
The Senate Appropriations Committee, in its report (S.Rept. 112-74 of September 7, 2011) on
H.R. 2017, states:
HIGH-ENDURANCE CUTTERS
Congressional Research Service
38

Coast Guard Deepwater Acquisition Programs

In fiscal year 2010, the Committee appropriated $4,000,000 for the Coast Guard to assess the
High Endurance Cutter fleet to determine the most effective use of funds to operate the
vessels until replaced by National Security Cutters [NSC]. Unfortunately, minimal work has
been put into this effort with less than $500,000 of this funding being obligated since
October 2009. Given the additional delays in delivering the final NSC, as noted in the fiscal
year 2012 budget request (final NSC delivery in 2018 versus 2016), the Coast Guard is urged
to accelerate its work in this area. As part of its periodic acquisitions briefings to the
Committee, the Coast Guard is to provide an update on the progress made on this effort. The
Coast Guard’s update shall include a discussion of the potential need for a future sustainment
project to bridge operational gaps between full operating condition of the NSC fleet and the
decommissioning sequence for remaining HECs. (Page 89)
The committee’s 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 2012 and a comprehensive 5-year Capital Investment Plan for
fiscal years 2013–2017 have been submitted to the Committee. (Page 91)
The report also states:
NATIONAL SECURITY CUTTER
The Coast Guard operates a fleet of 378-foot high endurance cutters [HECs] that are over 43
years old on average, and are increasingly unreliable and expensive to maintain. By
comparison, the average Navy ship is 14 years old. The Coast Guard’s current plan is to
acquire eight National Security Cutters [NSCs] to replace 12 HECs (of which two have been
decommissioned with the arrival of the first two NSCs). To date, over $3,100,000,000 has
been appropriated for five NSCs, of which two have been delivered to the Coast Guard and
the third will be delivered by the end of fiscal year 2011. NSC–4 is under contract and is
expected to be delivered in 2014.
The request in fiscal year 2012 of $77,000,000 for NSC–5 has been superseded by the fact
that full funding was appropriated for the cutter in fiscal year 2011. Therefore, the
Committee redirects these funds to acquire long lead time materials necessary for production
of NSC–6. According to the Department, this will accelerate the production schedule for the
cutter and result in direct savings of $45,000,000 to $60,000,000 compared to delaying the
request for long lead acquisition to the fiscal year 2013 budget.
As noted in prior years, 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. The Committee is concerned that the administration’s current acquisition policy
requires the Coast Guard to attain total acquisition cost for a vessel, including long lead time
materials, production costs, and post production costs, before a production contract can be
awarded. This has the potential to create shipbuilding inefficiencies, forces delayed
obligation of production funds, and requires post production funds far in advance of when
they will be used. As the Secretary noted in her testimony before the Committee, “we fully
expect to build out the eight cutters.” The Department should therefore be in a position to
acquire NSCs in the most efficient manner within the guidelines of strict governance
measures. Therefore, the Committee includes language in the bill specifying that funds made
Congressional Research Service
39

Coast Guard Deepwater Acquisition Programs

available by this act shall be available to contract for long lead time materials for Coast
Guard vessels, notwithstanding the availability of funds for production costs or post-
production costs.
FAST RESPONSE CUTTER
The Committee recommends $358,000,000 for the Coast Guard’s Fast Response Cutter
[FRC], as requested. This funding will allow the Coast Guard to acquire six FRC hulls (13–
18). Procuring six Fast Response Cutters in fiscal year 2012 will maximize the production
line and generate cost savings of $5,000,000 per hull for a total savings to the taxpayers of
$30,000,000. Funding six boats instead of four will also allow the Coast Guard to
decommission two additional aging 110-foot Island Class Patrol Boats already beyond the
end of their projected service life and expensive to maintain. Each FRC will provide 2,500
annual operating hours and an improved sea keeping ability, resulting in better habitability
and full mission capability in higher sea states.
The Committee commends the Coast Guard’s due diligence in working with the Naval
Engineering Technical Authority to improve the structural design for the FRC hull to prevent
the potential need for any structural repairs prior to the end of the cutter’s 20-year service
life. Based on the continued involvement of the Coast Guard’s technical authorities and
consultation with third party independent classification societies, the identification and
improvement of the structural design prior to launching the first FRC prevented required
changes that would have been far more costly and impactful to operations than if they were
identified later in the lifecycle of the cutter class.
The recommendation also includes funding for Re-procurement Package and Data Rights, as
requested, which is necessary to support the planned re-competition of the next Fast
Response Cutter procurement. Not funding this effort in fiscal year 2012 would result in an
FRC production gap, driving up procurement costs and out-year operating and maintenance
costs of legacy assets well beyond their service life.
MEDIUM ENDURANCE CUTTER SUSTAINMENT
The recommendation includes $47,000,000 for the Medium Endurance Cutter Sustainment
Project, as requested. Funding will complete sustainment work on five 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.
OFFSHORE PATROL CUTTER
The recommendation includes $25,000,000 for the Offshore Patrol Cutter, as requested.
Funding is provided for pre-acquisition activities. The Committee expects the Coast Guard to
provide quarterly briefings to the Committee on the status of this procurement, including
critical decision points and dates.
ROTARY WING REPLACEMENT AIRCRAFT
Since September 2008, the Coast Guard has lost four helicopters in accidents. To date,
funding has been appropriated to replace only one of those assets. The recommendation
Congressional Research Service
40

Coast Guard Deepwater Acquisition Programs

includes $36,600,000, $18,300,000 above the request to replace two additional helicopters.
Funds for the second aircraft are provided in title V of the bill.33 The Coast Guard is to brief
the Committee no later than 60 days after the date of enactment of this act on its plans for
replacing lost rotary wing operational assets.
MARITIME PATROL AIRCRAFT
The Committee recommends $104,500,0034 for the Maritime Patrol Aircraft [MPA],
$25,000,000 below the budget request. Funds are recommended for the acquisition of two
aircraft (MPAs–16 & 17), which will provide an additional 2,400 hours to address the Coast
Guard’s MPA flight-hour gap. The Committee recognizes the importance of the mission
system pallet, which is the electronic equipment to collect, compile, interpret, and
disseminate data from the MPA’s sensors. However, the Coast Guard is no longer
purchasing these pallets from the original systems integrator and has not identified a new
acquisition strategy to purchase them, making it unlikely that any funding for pallets would
be obligated in fiscal year 2012. Therefore, the recommendation does not include funding for
this purpose.
UNMANNED AIRCRAFT SYSTEMS
The Committee is aware of efforts by the Coast Guard to evaluate both ship-based and land-
based Unmanned Aircraft Systems [UAS] for mission requirements. Both platforms have the
potential to enhance the Coast Guard’s capability to execute statutory requirements in the
maritime domain. A recent Coast Guard report concluded that upgraded sensors and greater
persistence could effectively extend a cutter’s immediate surveillance horizon by as much as
35 percent. This is why the Committee is concerned with the absence of funding in the
budget request and the long-term Capital Investment Plan for the acquisition of UAS. Prior
to the establishment of a UAS acquisition program, additional testing is necessary to
determine the viability of ship-based UAS systems on major Coast Guard cutters. Therefore,
the Committee includes $8,000,000 under “Research, Development, Test, and Evaluation”
for the shipboard ground control equipment necessary for ship-aircraft interface activities.
The Committee is also aware of $3,200,000 that remains available from Coast Guard prior
year appropriations for this purpose. (Pages 95-97)
The committee’s report also states:
FLEET MIX ANALYSIS
In July 2010, the Government Accountability Office [GAO] recommended that the Coast
Guard review the cost and mix of its assets and identify trade-offs given fiscal constraints.
According to GAO testimony in April 2011, “The Department of Homeland Security agreed
with the recommendation; however, the Coast Guard has not yet implemented it.” Since
2008, the Coast Guard has been conducting a study called the “Fleet Mix Analysis” to
analyze asset requirements and to validate and recommend fleet mix options to best execute
operational missions. Phase 1 of the analysis has been completed, but it was unconstrained
by cost considerations and led to unrealistic conclusions considering the current fiscal
environment. Phase 2 of the Fleet Mix Analysis is underway, which is examining
performance of alternative fleet mixes while applying fiscal constraints. The Coast Guard
expects to complete this study in fiscal year 2011. The Committee is also aware of a separate
Departmental study that is in the final stages of Departmental review called the “Cutter Fleet

33 This is a reference to Section 565.
34 The figure is $104.5 million; the omission of the final zero appears to be a printing error.
Congressional Research Service
41

Coast Guard Deepwater Acquisition Programs

Mix Analysis”. The Coast Guard shall submit both the “Fleet Mix Analysis” (Phases 1 and
2) and the “Cutter Fleet Mix Analysis” to the Committee and GAO once they are completed,
but no later than 30 days after the date of enactment of this act. GAO shall provide an
assessment of the results no later than 120 days following the submission of the report to the
Committee. (Pages 99-100)
Regarding Section 565 of the bill, the committee’s report states:
Section 565. The bill includes language that makes available an additional $18,300,000 for
Coast Guard to replace a rotary wing airframe. The Coast Guard has lost four helicopters to
accidents over the past few years. This provision is designated as an emergency and is offset
with unobligated emergency balances. (Page 162)
Coast Guard and Maritime Transportation Act of 2011 (H.R. 2838)
H.R. 2838 was introduced on September 2, 2011, and ordered to be reported (amended) on
September 8, 2011. Section 303 of the bill as introduced states:
SEC. 303. NATIONAL SECURITY CUTTERS.
(a) In General- Subchapter I of chapter 15 of title 14, United States Code is amended by
adding at the end the following new section:
`Sec. 569a. National security cutters
`The Commandant may not acquire a sixth national security cutter on any date before which
the Commandant--
`(1) has selected an offshore patrol cutter that meets at least the minimum operational
requirements set out in the Operational Requirements Document approved by the
Department in October 20, 2010;
`(2) has acquired a sufficient number of Long Range Interceptor II and Cutter Boat Over the
Horizon IV small boats for each of the first five national security cutters;
`(3) has achieved the goal of 225 days away from homeport for each of the first three
national security cutters; and
`(4) has submitted to the Committee on Commerce, Science, and Transportation of the
Senate and the Committee on Transportation and Infrastructure of the House of
Representatives a program execution plan detailing increased aerial coverage to support
national security cutter operations.'.
(b) Clerical Amendment- The analysis at the beginning of such chapter is amended by
adding at the end of the items relating to such subchapter the following:
`569a. National security cutters.'.
Congressional Research Service
42

Coast Guard Deepwater Acquisition Programs

Appendix A. 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
Guard35 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;

35 Defense Acquisition University, Quick Look Study, United States Coast Guard Deepwater Program, February 2007.
Congressional Research Service
43

Coast Guard Deepwater Acquisition Programs

• 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.36
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.37
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

36 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.
37 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.
Congressional Research Service
44

Coast Guard Deepwater Acquisition Programs

contractors had establishing unacceptable conditions for DHS IG to interview contractor
personnel about the program.
110/123-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.38 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.39
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.40
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.41 The Coast Guard acknowledged in 2007 that the program was a failure.

38 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.
39 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.
40 “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.
41 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.
Congressional Research Service
45

Coast Guard Deepwater Acquisition Programs

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.
Congressional Research Service
46

Coast Guard Deepwater Acquisition Programs

Appendix B. 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
Congressional Research Service
47

Coast Guard Deepwater Acquisition Programs

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....
Congressional Research Service
48

Coast Guard Deepwater Acquisition Programs

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.42
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.

42 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.”
Congressional Research Service
49

Coast Guard Deepwater Acquisition Programs

Appendix C. 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
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 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 the
110/123-foot modernization program, Deepwater communications systems, 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.43
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.44 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.45 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.46
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

43 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.
44 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.
45 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.
46 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.
Congressional Research Service
50

Coast Guard Deepwater Acquisition Programs

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.47
On August 17, 2011, the Department of Justice announced that it had filed suit against Bollinger
Shipyards for allegedly making material false statements to the Coast Guard regarding the
110/123-foot modernization program. The Department of Justice’s announcement stated:
The United States has filed suit in U.S. District Court in Washington, D.C., against Bollinger
Shipyards Inc., Bollinger Shipyards Lockport LLC and Halter Bollinger Joint Venture LLC,
the Justice Department announced. The suit alleges that Bollinger, which is headquartered in
Lockport, La., made material false statements to the Coast Guard under the Deepwater
Program.
The government’s complaint alleges that Bollinger proposed to convert existing 110-Ft
Patrol Boats (WPBs) into 123-Ft WPBs by extending the hulls 13 feet and making additional
improvements. As a result of Bollinger’s misrepresentations about the hull strength of the
converted vessels, the Coast Guard awarded a contract to convert eight Coast Guard 110 foot
cutters to 123 foot cutters. The first converted cutter, the Matagorda, suffered hull failure
when put into service. An investigation by the Coast Guard and the prime contractor,
Integrated Coast Guard Systems, concluded that the calculation of hull strength reported by
Bollinger to the Coast Guard prior to the conversion was false. Efforts to repair the
Matagorda and the other converted vessels were unsuccessful. The cutters are unseaworthy
and have been taken out of service.
“Companies which make false statements to win Coast Guard contracts do a disservice to the
men and women securing our borders,” said Tony West, Assistant Attorney General for the
Civil Division of the Department of Justice. “We will take action against those who
undermine the integrity of the public contracting process by providing substandard
equipment to our armed services personnel.”
The government’s suit seeks damages from Bollinger under the False Claims Act for the loss
of the eight now unseaworthy vessels. The investigation of the case was conducted by the
Department of Justice Civil Division, the Department of Homeland Security Office of the
Inspector General and the Coast Guard.48

47 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.
48 Department of Justice news release dated August 17, 2011, entitled “U.S. Files Lawsuit Against Bollinger Shipyards
for Material False Statements Made to the Coast Guard,” accessed at http://www.justice.gov/opa/pr/2011/August/11-
civ-1054.html. See also Calvin Biesecker, “DoJ Sues Bollinger Over Failed Coast Guard Cutter Conversion Program,”
Defense Daily, August 18, 2001: 1-2.
Congressional Research Service
51

Coast Guard Deepwater Acquisition Programs

An August 18, 2011, press report presented what it said was a statement from Bollinger Shipyards
Lockport LLC in response to the filing of the suit. According to the press report, the text of the
statement is as follows:
Since its founding, Bollinger Shipyards has operated on the principle that “quality is
remembered long after the price is forgotten.” Three generations of the Bollinger family have
earned a spotless record for honest and fair dealing with every customer, including the U.S.
Navy and Coast Guard, our largest client. Since 1984, Bollinger has built every patrol boat
the Coast Guard has purchased; to date some 122 have been delivered.
We are disappointed with the Department of Justice’s decision to file a complaint related to
work completed in 2006. Throughout this process, Bollinger has been open and cooperative
with the government, and we remain committed to providing the government all necessary
information and assistance to bring this matter to a close. Bollinger has tried to find a way to
resolve this matter short of litigation, but we are fully prepared to defend our good name
aggressively in a court of law.
As we have for the last 65 years, Bollinger will continue to deliver the highest quality and
contract-compliant products to the United States Coast Guard and to each and every
customer.49




49 Statement of Bollinger Shipyards Lockport, L.L.C., as presented in “Bollinger Responds to JOC Allegations,”
MarineLink.com, August 18, 2011, accessed September 2, 2011, at http://www.marinelink.com/news/allegations-
bollinger340029.aspx. When accessed on September 2, 2011, the website for Bollinger Shipyards new and resources
(http://www.bollingershipyards.com/news-resources) showed no statements or news releases dated after June 30, 2011.
Congressional Research Service
52

Coast Guard Deepwater Acquisition Programs

Appendix D. Revolving Door and Potential for
Conflicts of Interest

The so-called revolving door, which refers to the movement of officials between positions in
government and industry, can create benefits for government and industry in terms of allowing
each side to understand the other’s needs and concerns, and in terms of spreading best practices
from one sector to the other. At the same time, some observers have long been concerned that the
revolving door might create conflicts of interest for officials carrying out their duties while in
government positions. A March 25, 2007, news article stated in part:
Four of the seven top U.S. Coast Guard officers who retired since 1998 took positions with
private firms involved in the Coast Guard’s troubled $24 billion fleet replacement program,
an effort that government investigators have criticized for putting contractors’ interests ahead
of taxpayers’.
They weren’t the only officials to oversee one of the federal government’s most complex
experiments at privatization, known as Deepwater, who had past or subsequent business ties
to the contract consortium led by industry giants Northrop Grumman and Lockheed Martin.
The secretary of transportation, Norman Y. Mineta, whose department included the Coast
Guard when the contract was awarded in 2002, was a former Lockheed executive. Two
deputy secretaries of the Department of Homeland Security, which the Coast Guard became
part of in 2003, were former Lockheed executives, and a third later served on its board.
Washington’s revolving-door laws have long allowed officials from industry giants such as
Lockheed, the nation’s largest defense contractor, to spend parts of their careers working for
U.S. security agencies that make huge purchases from those companies, though there are
limits.
But Deepwater dramatizes a new concern, current and former U.S. officials said: how
dwindling competition in the private sector, mushrooming federal defense spending and the
government’s diminished contract management skills raise the stakes for potential conflicts
of interest.
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.”50


50 Spencer S. Hsu and Renae Merle, “Coast Guard’s Purchasing Raises Conflict-Of-Interest Flags,” Washington Post,
March 25, 2007.
Congressional Research Service
53

Coast Guard Deepwater Acquisition Programs

Author Contact Information

Ronald O'Rourke

Specialist in Naval Affairs
rorourke@crs.loc.gov, 7-7610


Congressional Research Service
54